Document:

Exhibit 10.1

    
      

    

    Exhibit
      10.1

    

    

    

    

    

    

    

    AMENDED
      AND RESTATED LOAN AGREEMENT

    

    

    between

    

    

    KEY
      TECHNOLOGY, INC.

    

    as
      Borrower

    

    and

    

    BANNER
      BANK

    

    as
      Lender

    

    

    

    

    

    

    __________________________________________________________________

    

    June
      6, 2005

    ___________________________________________________________________

     

    
      
        
          

          

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    TABLE
      OF CONTENTS

     

    Page

     

     

    ARTICLE
      1 DEFINITIONS

    Section
      1.1 Certain
      Defined Terms

    Section
      1.2 General
      Principles Applicable to Definitions

    Section
      1.3 Accounting
      Terms

    Section
      1.4 UCC
      Terms

     

    ARTICLE
      2 THE LOANS

    Section
      2.1 The
      Loans.

    (a) Revolving
      Credit Line

    (b) Term
      Loan

    Section
      2.2 Manner
      of Borrowing

    Section
      2.3 Repayment
      of Principal.

    (a) Revolving
      Credit Line

    (b) Term
      Loan

    Section
      2.4 Interest
      on Loans.

    (a) General
      Provisions

    (b) Selection
      of Alternative Rates.

    (c) Applicable
      Days for Computation of Interest

    (d) Unavailable
      LIBOR Rate

    (e) Increased
      Costs

    (f) Increased
      Capital Requirements

    (g) Illegality

    Section
      2.5 Notes;
      Recordation of Loans.

    (a) Notes

    (b) Recordation
      of Loans

    Section
      2.6 Manner
      of Payments.

    (a) Form
      and Place of Payment

    (b) Authorization
      to Charge Borrower’s Account

    (c) Non-Business
      Days

    Section
      2.7 Prepayments

    Section
      2.8 Application
      of Payments.

    (a) Payments
      Before Default

    (b) Payments
      After Default

    Section
      2.9 Unused
      Commitment Fees

     

    ARTICLE
      3 CONDITIONS TO LENDING

    Section
      3.1 Conditions
      to Initial Loan

    (a) Loan
      Documents

    (b) Borrower
      Authority

    (c) Certificate

    (d) Loan
      Fees

    (e) Evidence
      of Security

    (f) Evidence
      of Insurance

     

    
      
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    (g) Consents

    Section
      3.2 Conditions
      to All Loans

    (a) Prior
      Conditions

    (b) Notice
      of Borrowing

    (c) No
      Default

    (d) Other
      Information

     

    ARTICLE
      4 REPRESENTATIONS AND WARRANTIES

    Section
      4.1 Existence
      and Power

    Section
      4.2 Authorization

    Section
      4.3 Government
      Approvals, Etc.

    Section
      4.4 Binding
      Obligations, Etc.

    Section
      4.5 Litigation

    Section
      4.6 Financial
      Condition

    Section
      4.7 Title
      and Liens

    Section
      4.8 Intellectual
      Property

    Section
      4.9 Environmental
      Laws, Etc.

    Section
      4.10 Taxes

    Section
      4.11 Other
      Agreements

    Section
      4.12 Labor
      Matters

    Section
      4.13 Federal
      Reserve Regulations

    Section
      4.14 ERISA.

    Section
      4.15 Subsidiaries

    Section
      4.16 Not
      Investment Company, Etc.

    Section
      4.17 Representations
      as a Whole

     

    ARTICLE
      5 AFFIRMATIVE COVENANTS

    Section
      5.1 Use
      of Proceeds

    Section
      5.2 Payment

    Section
      5.3 Preservation
      of Corporate Existence, Etc.

    Section
      5.4 Visitation
      Rights

    Section
      5.5 Keeping
      of Books and Records

    Section
      5.6 Maintenance
      of Property, Etc.

    Section
      5.7 Compliance
      With Laws, Etc.

    Section
      5.8 Other
      Obligations

    Section
      5.9 Insurance

    Section
      5.10 Borrower
      Financial Information

    (a) Annual
      Audited Financial Statements

    (b) Monthly
      Unaudited Financial Statements

    (c) Monthly
      Compliance Certificates

    (d) Reports
      to Stockholders

    (e) Other

    Section
      5.11 Notification

    Section
      5.12 Payment
      of Expenses

    Section
      5.13 Additional
      Payments; Additional Acts

    Section
      5.14 Financial
      Covenants.

    (a) Debt
      to Tangible Net Worth Ratio

     

    
      
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    (b) Fixed
      Charge Coverage Ratio

    (c) Minimum
      Net Income

     

    ARTICLE
      6 NEGATIVE COVENANTS

    Section
      6.1 Dividends

    Section
      6.2 Liquidation,
      Merger, Sale of Assets

    Section
      6.3 Indebtedness

    Section
      6.4 Guaranties,
      Etc.

    Section
      6.5 Liens

    Section
      6.6 Investments

    Section
      6.7 Operations

    Section
      6.8 ERISA
      Compliance

    Section
      6.9 Accounting
      Change

     

    ARTICLE
      7 EVENTS OF DEFAULT

    Section
      7.1 Events
      of Default

    (a) Payment
      Default

    (b) Breach
      of Warranty

    (c) Breach
      of Certain Covenants

    (d) Breach
      of Other Covenants

    (e) Extraordinary
      Situation

    (f) Cross-default

    (g) Involuntary
      Bankruptcy, Etc.

    (h) Voluntary
      Bankruptcy, Etc.

    (i) Judgment

    (j) ERISA

    (k) Change
      in Ownership or Control

    (l) Condemnation

    (m) Governmental
      Approvals

    (n) Other
      Government Action

    (o) Failure
      of Security

    (p) Invalidity
      of Loan Documents

    Section
      7.2 Consequences
      of Default.

    (a) General

    (b) Cash
      Collateral

     

    ARTICLE
      8 MISCELLANEOUS

    Section
      8.1 No
      Waiver; Remedies Cumulative

    Section
      8.2 Governing
      Law

    Section
      8.3 Consent
      to Jurisdiction

    Section
      8.4 Waiver
      of Jury Trial

    Section
      8.5 Notices

    Section
      8.6 Borrower’s
      Indemnity

    Section
      8.7 Assignment

    Section
      8.8 Set-Off

    Section
      8.9 Severability

    Section
      8.10 Survival

     

    
      
        
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    Section
      8.11 Executed
      in Counterparts

    Section
      8.12 Conditions
      Not Fulfilled

    Section
      8.13 Entire
      Agreement; Amendment, Etc.

    Section
      8.14 Construction

    Section
      8.15 References
      to Loan Agreement

    Section
      8.16 USA
      Patriot Act Notice

    Section
      8.17 Oral
      Agreements Not Enforceable.

    

     

    SCHEDULES

     

    Schedule
      1 - Litigation

    Schedule
      2 - Liens

    Schedule
      3 - Intellectual
      Property Matters

    Schedule
      4 - Environmental
      Matters

    Schedule
      5 - Subsidiaries

    Schedule
      6 - Indebtedness

     

    EXHIBITS

     

    Exhibit
      A-1 - Revolving
      Note

    Exhibit
      A-2 - Term
      Note

    Exhibit
      B - Security
      Agreement

     

    

    
      
        
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    AMENDED
      AND RESTATED LOAN AGREEMENT

     

    THIS
      AMENDED AND RESTATED LOAN AGREEMENT (the “Agreement”)
      is made as of the 6th day of June, 2005, by and between KEY TECHNOLOGY, INC.,
      an
      Oregon corporation (the “Borrower”),
      and BANNER BANK, a Washington banking corporation (the “Lender”).

     

    RECITALS

     

    A. Borrower
      and Lender are parties to that certain Loan Agreement dated as of August 9,
      2002, as amended by that certain Amendment to Loan Documents dated as of
      December 11, 2002, by that certain Letter Agreement dated March 24,
      2003, by that certain Change In Terms Agreement dated May 1, 2003, by
      that
      certain Amendment to Loan Documents dated July 31, 2003, by that certain
      Letter Agreement dated July 26, 2004, by that certain Letter Agreement
      dated December 7, 2004, and by that certain Second Amendment to Loan
      Agreement dated March ___31___, 2005 (as amended, restated, supplemented or
      otherwise modified, the “Existing
      Agreement”),
      pursuant to which Lender agreed to make and has made revolving and term loans
      to
      Borrower.

     

    B. The
      revolving credit facility under the Existing Loan Agreement expired on
      April 10, 2005, and Borrower has requested Lender to extend the expiration
      date of such revolving credit facility until April 10, 2006, and to
      make
      certain other modifications to, and otherwise amend and restate the Existing
      Agreement in its entirety, which Lender has agreed to do so on the terms and
      conditions set forth in this Agreement.

     

    NOW,
      THEREFORE, the parties hereto hereby agree to amend and restate the Existing
      Agreement in its entirety as follows:

     

    ARTICLE
      1

     

    DEFINITIONS

     

    Section
      1.1 
Certain
      Defined Terms. 
      As used in this Agreement, the following terms have the following
      meanings:

     

    “Affiliate”
      means any Person who, directly or indirectly, controls or is controlled by
      or is
      under common control with such Person.

     

    “Agreement”
      means this Loan Agreement as it may be amended, restated, supplemented or
      otherwise modified from time to time.

     

    “Bankruptcy
      Code”
      means Title 11 of the United States Code entitled “Bankruptcy,” as amended from
      time to time.

     

    “Borrower”
      means Key Technology, Inc., an Oregon corporation, and any
      Successor.

     

    “Business
      Day”
      means any day other than Saturday, Sunday or other day on which banks are
      authorized or obligated to close in Walla Walla, Washington, except that in
      the
      context of the selection of a Loan accruing interest at the Revolving LIBOR
      Rate
      or the calculation of the

     

    
      
        
        

      

      
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     Revolving
      LIBOR Rate for any Interest Period, in which event “Business Day” means any day,
      other than Saturday, Sunday or other day on which banks are authorized or
      obligated to close in Walla Walla, Washington, and on which dealings are carried
      on in the London interbank market.

     

    “BV
      Credit Facility”
      means the credit facility made available by ABN AMRO Bank N.V. to Key Technology
      BV, a wholly-owned Subsidiary of Borrower, comprised of a revolving line of
      credit and a term loan, secured in each case by the assets and properties of
      Key
      Technology BV.

     

    “Capital
      Leases”
      means for any Person, all obligations of such Person under leases which shall
      have been, or in accordance with GAAP, should be recorded as capital
      leases.

     

    “Cash
      Equivalents”
      means for any Person, (i) marketable direct obligations issued or
      unconditionally guaranteed by the United States government or issued by any
      agency thereof and backed by the full faith and credit of the United States,
      in
      each case maturing within one year from the date of acquisition thereof;
      (ii) commercial paper maturing no more than one year from the date issued
      and, at the time of acquisition, having a rate of at least A-1 from Standard
      & Poor’s Rating Services or at least P-1 from Moody’s Investors Service,
      Inc.; (iii) certificates of deposit or bankers’ acceptances maturing within
      one year from the date of issuance thereof issued by, or overnight reverse
      repurchase agreements from any commercial bank organized under the laws of
      the
      United States or any state thereof or the District of Columbia having combined
      capital and surplus of not less than One Hundred Million Dollars ($100,000,000);
      (iv) time deposits maturing no more than thirty (30) days from the date
      of
      creation thereof and demand deposits with commercial banks having membership
      in
      the Federal Deposit Insurance Corporation in amounts not exceeding the lesser
      of
      One Hundred Thousand Dollars ($100,000) or the maximum amount of insurance
      applicable to the aggregate amount of such Person’s deposits at such
      institution; and (v) deposits or investments in mutual or similar funds
      offered or sponsored by brokerage or other companies having membership in the
      Securities Investor Protector Corporation investing only in obligations
      described in clauses (i) through (iv) above.

     

    “Code”
      means the Internal Revenue Code of 1986, as amended from time to
      time.

     

    “Collateral”
      means the property in which the Security Documents create or purport to create
      a
      security interest or other lien in favor of Lender.

     

    “Commitment”
      means Lender’s obligation to make Revolving Loans.

     

    “Controlled
      Group”
      means all members of a controlled group of corporations and all trades or
      businesses (whether or not incorporated) under common control which, together
      with Borrower, are treated as a single employer under Section 414(b)
      or
      414(c) of the Code.

     

    “Credit
      Utilization”
      means, as of any date of determination, the sum of (i) the aggregate
      principal amount of all outstanding Revolving Loans; plus
      (ii) the Letter of Credit Usage.

     

    “Current
      Balance Sheet”
      has the meaning given in Section
      4.6.

     

    “Default”
      means any event which but for the passage of time, the giving of notice, or
      both
      would be an Event of Default.

     

    
      
        
        

      

      
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    “EBITDA”
      means, for any period, for any Person, an amount equal to the net income of
      such
      Person for such period plus
      the sum of the following to the extent deducted in calculating such net income
      (i) interest expense (exclusive of interest income) of such Person
      (including capitalized interest) and the interest component of rentals paid
      or
      accrued under Capital Leases, (ii) income tax expense of such Person,
      (iii) depreciation, amortization and other non-cash charges to income
      and
      (iv) non-cash extraordinary, unusual or nonrecurring expenses or losses,
      in
      each case determined in accordance with GAAP for such period.

     

    “Environmental
      Laws”
      means all federal, state and local statutes, regulations, ordinances, and
      requirements, now or hereafter in effect, pertaining to environmental
      protection, contamination or cleanup, including without limitation (i) the
      Federal Resource Conservation and Recovery Act of 1976 (42 U.S.C. § 6901,
et
      seq.),
      (ii) the Federal Comprehensive Environmental Response, Compensation,
      and
      Liability Act (42 U.S.C. § 9601, et
      seq.),
      (iii) the Federal Hazardous Materials Transportation Control Act (49
      U.S.C.
§ 1801, et
      seq.),
      (iv) the Federal Clean Air Act (42 U.S.C. § 7401, et
      seq.),
      (v) the Federal Water Pollution Control Act, Federal Clean Water Act
      (33
      U.S.C. § 1251, et
      seq.),
      (vi) the Federal Insecticide, Fungicide, and Rodenticide Act, Federal
      Pesticide Act (7 U.S.C. § 136, et
      seq.),
      (vii) the Federal Toxic Substances Control Act (15 U.S.C. § 2601,
et
      seq.),
      (viii) the Federal Safe Drinking Water Act (42 U.S.C. § 300f,
et
      seq.),
      (ix) the Washington Model Toxics Control Act (RCW 70.105(d), et
      seq.),
      (x) the Washington Underground Petroleum Storage Tanks Act (RCW Chapter
      70.148, et
      seq.),
      (xi) Washington Water Pollution Control Act (RCW 90.48, et
      seq.),
      (xii) Washington Oil and Hazardous Substance Spill Prevention and Response
      Act, (RCW 90.56, et
      seq.),
      (xiii) Washington Clean Air Act (RCW 70.94, et
      seq.),
      (xiv) Washington Hazardous Waste Management Act (RCW 70.105, et
      seq.),
      (xv) State Environmental Policy Act (RCW 43.21C, et
      seq.),
      (xvi) Pollution Disclosure Act of 1971 (RCW 90.52, et
      seq.),
      (xvii) Hazardous Substances, Radiation Sources (ORS §§ 453.01, et
      seq.),
      (xviii) Solid Waste Control (ORS §§ 459.005, et
      seq.),
      (xix) Hazardous Waste and Hazardous Materials I (ORS §§ 465.003,
et
      seq.),
      (xx) Hazardous Waste and Hazardous Materials II (ORS §§ 466.005,
et
      seq.),
      (xxi) Air Quality (ORS §§ 468A.005, et
      seq.),
      (xxii) Water Quality (ORS §§ 468B.005, et
      seq.),
      (xxiii) Oregon Drinking Water Quality Act (ORS §§ 448.115,
et
      seq.)
      and (xxiv) Ground Water Act of 1955, ORS §§ 537.505, et
      seq.),
      all as now or hereafter amended.

     

    “ERISA”
      means the Employee Retirement Income Security Act of 1974, as amended from
      time
      to time.

     

    “Event
      of Default”
      has the meaning given in Section
      7.1.

     

    “Financial
      Transaction Liability”
      means (i) any overdraft on any account maintained by Borrower or any
      Subsidiary with Lender, (ii) liabilities owing by Borrower or any
      Subsidiary to Lender with respect to bank card services and
      (iii) liabilities incurred by Lender as a result of Automated Clearing
      House transactions for the account of Borrower or any Subsidiary.

     

    “Funded
      Debt”
      means, for any Person, without duplication (i) all indebtedness or
      liability of such Person for borrowed money or for the deferred purchase price
      of property (other than trade payables entered into in the ordinary course
      of
      business on ordinary terms), (ii) all non-contingent reimbursement or
      payment obligations with respect to letters of credit, bankers acceptances,
      surety bonds and similar instruments, (iii) all obligations of such
      Person
      with 

     

    
      
        
        

      

      
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    respect
      to Capital Leases that are capitalized in the balance sheet of such Person,
      (iv) all indebtedness or liability of such Person for the mandatory
      redemption of its preferred stock and (v) all indebtedness or liability
      for
      borrowed money or for the deferred purchase price of property (other than trade
      payables entered into in the ordinary course of business on ordinary terms)
      or
      for Capital Leases for which such Person is directly or contingently liable
      as
      obligor, guarantor, or otherwise, or in respect of which such Person otherwise
      assures a creditor against loss.

     

    “GAAP”
      shall have the meaning given in Section
      1.3.

     

    “Government
      Approval”
      means an approval, permit, license, authorization, certificate, or consent
      of
      any Governmental Authority.

     

    “Governmental
      Authority”
      means the government of the United States or any State or any foreign country
      or
      any political subdivision of any thereof or any branch, department, agency,
      instrumentality, court, tribunal or regulatory authority which constitutes
      a
      part or exercises any sovereign power of any of the foregoing.

     

    “Hazardous
      Substances”
      means any substance or material defined or designated as hazardous or toxic
      waste, hazardous or toxic material, a hazardous, toxic or radioactive substance,
      or other similar terms, by any federal, state or local environmental statute,
      regulation or ordinance presently in effect, including but not limited to the
      Environmental Laws.

     

    “Indebtedness”
      means, for any Person, without duplication:

     

    (a) all
      indebtedness for borrowed money;

     

    (b) all
      obligations issued, undertaken or assumed as the deferred purchase price of
      property or services (other than indebtedness or liability for borrowed money
      deferred for a period of more than six months from the date of incurrence or
      trade payables entered into in the ordinary course of business on ordinary
      terms);

     

    (c) all
      non-contingent reimbursement or payment obligations with respect to letters
      of
      credit, bankers acceptances, surety bonds and similar instruments;

     

    (d) all
      obligations evidenced by notes, bonds, debentures or similar instruments,
      including obligations so evidenced incurred in connection with the acquisition
      of property, assets or businesses;

     

    (e) the
      net obligations of such Person under an interest rate swap agreement or similar
      rate swap master agreement in an amount equal to (i) if such swap agreement
      has been closed out, the termination value thereof, or (ii) if such
      swap
      agreement has not been closed out, the mark-to-market value thereof determined
      on the basis of readily available quotations provided by any recognized dealer
      in such swap agreement;

     

    (f) all
      indebtedness created or arising under any conditional sale or other title
      retention agreement (excluding any operating lease), or incurred as financing,
      in either case with respect to property acquired by such Person (even though
      the
      rights and

     

    
      
        
        

      

      
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      remedies of the seller or bank under such agreement in the event of default
      are
      limited to repossession or sale of such property);

     

    (g) all
      obligations with respect to Capital Leases or Synthetic Leases;

     

    (h) all
      indebtedness referred to in clauses (a) through (g) above secured by
      (or
      for which the holder of such Indebtedness has an existing right, contingent
      or
      otherwise, to be secured by) any Lien upon or in property (including accounts
      and contracts rights) owned by such Person, even though such Person has not
      assumed or become liable for the payment of such Indebtedness; and

     

    (i) all
      liabilities in respect of indebtedness or obligations of others of the kinds
      referred to in clauses (a) through (h) above for which such Person is
      directly or contingently liable as obligor, guarantor, or otherwise, or in
      respect of which such Person otherwise assures a creditor against
      loss.

     

    For
      purposes of this Agreement, the Indebtedness of any Person shall include all
      recourse Indebtedness of any partnership or joint venture formed as a
      partnership where such Person is a general partner or is otherwise liable for
      the Indebtedness of such partnership or joint venture, unless such Indebtedness
      is expressly made non-recourse to such Person and except for customary
      exceptions acceptable to Lender.

     

    “Intellectual
      Property”
      means, as to any Person, all of the following:

     

    (a) all
      trademarks, service marks, designs, trade names, corporate names, company names,
      business names, fictitious business names, trade styles, trade dress, logos,
      other source or business identifiers owned or used by such Person in its
      business or hereafter adopted or acquired, all registrations and recordings
      thereof, and all registration and recording applications filed in connection
      therewith, including registrations and pending applications in the United States
      Patent and Trademark Office, any State of the United States or any similar
      offices in any other country or any political subdivision thereof, and all
      extensions or renewals thereof;

     

    (b) all
      letters patent of the United States or any other country or any political
      subdivision thereof, all registrations and recordings thereof, and all
      applications for letters patent of the United States or the equivalent thereof
      in any other country owned by such Persons, including registrations, recordings
      and pending applications in the United States Patent and Trademark Office or
      the
      equivalent thereof in any similar offices in any other country, and all
      reissues, continuations, divisions, continuations-inpart, renewals or extensions
      thereof, and the inventions disclosed or claimed therein, including the right
      to
      make, use and/or sell the inventions disclosed or claimed therein;

     

    (c) all
      computer programs, computer data bases, other computer software, trade secrets,
      trade secret rights, ideas, drawings, designs, schematics, algorithms, writings,
      techniques, processes and formulas owned or used by such Person in its business;
      and

     

    
      
        
        

      

      
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    (d) all
      copyright rights of such Person in any work subject to the copyright laws of
      the
      United States, any state thereof or any other country or any political
      subdivision thereof, whether registered or unregistered and whether published
      or
      unpublished, whether as author, assignee, transferee or otherwise, and all
      registrations and applications for registration of any such copyright in the
      United States, any state thereof or any other country or any political
      subdivision thereof, including registrations, recordings, supplemental
      registrations and pending applications for registration in the United States
      Copyright Office or in any similar offices in any other country.

     

    “Interest
      Period”
      means, with respect to any LIBOR Rate Loan, the period commencing on the first
      day Borrower elects to have such LIBOR Rate apply to such Loan and ending one
      (1), two (2) or three (3) months thereafter, as specified in the Interest Rate
      Notice given in respect of such Loan, or as otherwise determined pursuant to
      Section
      2.4(b);
      provided,
      however,
      that no Interest Period may be selected for any Loan if it extends beyond the
      Revolving Maturity Date.

     

    “Interest
      Rate Notice”
      has the meaning given in Section
      2.4(b).

     

    “Lender”
      means Banner Bank, a Washington banking corporation, and its
      Successors.

     

    “Letter
      of Credit”
      means any standby or commercial letter of credit issued by Lender for Borrower’s
      account.

     

    “Letter
      of Credit Application”
      means a letter of credit application in the standard form then used by Lender
      executed and delivered by Borrower in respect of a Letter of
      Credit.

     

    “Letter
      of Credit Usage”
      means, as of any date of determination, the sum of (i) the aggregate
      face
      amount of all outstanding unmatured Letters of Credit plus
      (ii) the aggregate amount of all payments made by Lender under Letters
      of
      Credit and not yet reimbursed by Borrower.

     

    “LIBOR
      Rate”
      means, for any Interest Period, the rate (expressed as a decimal) reported
      as
      the London Interbank Offered Rate as made available by the British Bankers
      Association (“BBA”)
      equal to the average per annum interest rate (rounded upward to the nearest
      1/100th of one percent) at which U.S. dollar deposits would be offered for
      such
      Interest Period by major banks in the London interbank market. The LIBOR rate
      is
      determined by the BBA on each Business Day at approximately 11:00 a.m. (London
      time). If the BBA ceases reporting London Interbank Offered Rates comparable
      to
      those currently reported, the LIBOR Rate shall be another reasonably comparable
      rate selected by Lender.

     

    “LIBOR
      Rate Loan”
      means any Revolving Loan (or portion thereof) bearing interest at the Revolving
      LIBOR Rate.

     

    “Lien”
      means, for any Person, any security interest, pledge, mortgage, charge,
      assignment, hypothecation, encumbrance, attachment, garnishment, execution
      or
      other voluntary or involuntary lien upon or affecting the revenues of such
      Person or any real or personal property in which such Person has or hereafter
      acquires any interest.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    “Loan
      Documents”
      means, collectively, this Agreement, the Notes, the Letter of Credit
      Applications and the Security Documents, as any thereof shall be amended,
      restated, supplemented or otherwise modified from time to time and all other
      certificates, instruments and other documents executed by Borrower in connection
      with this Agreement or the transactions contemplated hereby.

     

    “Loans”
      means, collectively, the Revolving Loans and the Term Loan, and “Loan”
      means any Revolving Loan or the Term Loan as the case may be.

     

    “Note”
      and “Notes”
      have the meanings given in Section
      2.5(a).

     

    “Notice
      of Borrowing”
      means a request for a Loan from Borrower delivered to Lender in the manner,
      at
      the time and containing the information required under Section
      2.2.

     

    “Officer’s
      Certificate”
      means a certificate executed and delivered on behalf of Borrower by a
      Responsible Officer.

     

    “PBGC”
      means the Pension Benefit Guaranty Corporation or any entity succeeding to
      any
      or all of its functions under ERISA.

     

    “Pension
      Plan”
      means an “employee pension benefit plan” (as such term is defined in ERISA) from
      time to time maintained by Borrower or a member of a Controlled
      Group.

     

    “Permitted
      Liens”
      means: (i) Liens securing Taxes which are not delinquent or which remain
      payable without penalty (excluding any Liens imposed pursuant to any of the
      provisions of ERISA) or the validity or amount of which is being contested
      in
      good faith by appropriate proceedings, so long as (A) adequate reserves
      or
      other appropriate provision, as shall be required in conformity with GAAP shall
      have been made therefor, and (B) in the case of a Lien against any of
      the
      Collateral, such contest proceedings operate to stay the sale of any portion
      of
      the Collateral to satisfy such Taxes; (ii) Liens imposed by law (such
      as
      mechanics’, processor’s, materialmen’s, carriers’, warehousemen’s and landlord’s
      liens) incurred in good faith in the ordinary course of business which are
      not
      delinquent or which remain payable without penalty or the validity or amount
      of
      which is being contested in good faith by appropriate proceedings, so long
      as
      (A) adequate reserves or other appropriate provision, as shall be required
      in conformity with GAAP shall have been made therefor, and (B) in the
      case
      of a Lien against any of the Collateral, such contest proceedings operate to
      stay the sale of any portion of the Collateral to satisfy the obligation secured
      by such Lien; (iii) Liens arising in connection with worker’s compensation,
      unemployment insurance, old age pensions and social security benefits which
      are
      not delinquent or which remain payable without penalty or the validity or amount
      of which is being contested in good faith by appropriate proceedings, so long
      as
      (A) adequate reserves or other appropriate provision, as shall be required
      in conformity with GAAP shall have been made therefor, and (B) in the
      case
      of a Lien against any of the Collateral, such contest proceedings operate to
      stay the sale of any portion of the Collateral to satisfy the obligation secured
      by such Lien; (iv) Liens incurred or deposits made in the ordinary course
      of business to secure the performance of bids, tenders, statutory obligations,
      fee and expense arrangements with trustees and fiscal agents (exclusive of
      obligations incurred in connection with the borrowing of money) and customary
      deposits granted in the ordinary course of business under operating
      leases;

     

    
      
        
        

      

      
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     (iv) Liens
      securing surety, indemnity, performance, appeal and release bonds;
      (v) customary rights of set off, revocation, refund or chargeback under
      deposit agreements or under the UCC in favor of banks or other financial
      institutions where Borrower or any Subsidiary maintains deposits in the ordinary
      course of business; (vi) Liens constituting encumbrances in the nature
      of
      zoning restrictions, condemnations, easements, encroachments, covenants, rights
      of way, minor defects, irregularities and rights or restrictions of record
      on
      the title or use of real property, which, in the reasonable judgment of Lender,
      do not materially detract from the value of such property or materially impair
      the use thereof in the business of Borrower or any Subsidiary; and
      (vii) judgment Liens that have been bonded or execution thereon stayed
      pending appeal.

     

    “Person”
      shall mean any natural person, corporation, unincorporated organization, trust,
      joint stock company, joint venture, association, company, limited liability
      company, partnership or government, or any agency or political subdivision
      of
      any government.

     

    “Plan”
      means, at any time, an employee pension benefit plan which is covered by
      Title IV of ERISA or subject to the minimum funding standards under
      Section 412 of the Code and is either (i) maintained by Borrower
      or
      any member of a Controlled Group for employees of Borrower or any member of
      a
      Controlled Group or (ii) maintained pursuant to a collective bargaining
      agreement or any other arrangement under which more than one employer makes
      contributions and to which Borrower or any member of a Controlled Group is
      then
      making or accruing an obligation to make contributions or has within the
      preceding five (5) plan years made contributions.

     

    “Prime
      Rate”
      means, on any day, the prime rate as published in The
      Wall Street Journal
      in its “Money Rates” section (or if The
      Wall Street Journal
      shall cease to be published or to publish such rates, in such other nationally
      recognized publication as Lender may, from time to time, specify) on such day,
      or if The
      Wall Street Journal
      is not published on such day, on the last day before such day on which
The
      Wall Street Journal
      is published, whether or not such rate is actually ever charged or paid by
      any
      Person. Any change in the Prime Rate shall take effect on the day such change
      is
      published in The
      Wall Street Journal.

     

    “Prime
      Rate Loan”
      means any Revolving Loan (or portion thereof) bearing interest at the Revolving
      Prime Rate and the Term Loan.

     

    “Purchase
      Money Lien”
      means a Lien securing Indebtedness incurred in connection with the acquisition
      of fixed or capital assets acquired after the date of this Agreement so long
      as
      (i) such Lien shall attach only to the property to be acquired, (ii) a
      description shall have been furnished to Lender for any item or group of items
      acquired in a single transaction or in a series of related transactions for
      which the purchase price is greater than Two Hundred Fifty Thousand Dollars
      ($250,000), and (iii) the Indebtedness incurred shall not exceed the
      purchase price of the item or items of fixed or capital assets
      purchased.

     

    “Responsible
      Officer”
      means any of the President, the Chief Executive Officer, the Chief Financial
      Officer or the Treasurer of Borrower.

     

    “Revolving
      Commitment Amount”
      means Ten Million Dollars ($10,000,000).

     

    “Revolving
      Commitment Period”
      has the meaning given in Section
      2.1(a).

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    “Revolving
      Interest Rate”
      means for each Revolving Loan (or portion of thereof) (i) the Prime
      Rate
minus
      one and one half percent (1.50%) or (ii) the LIBOR Rate plus
      one and one tenth percent (1.10%), in each case as designated by Borrower in
      an
      Interest Rate Notice given with respect to such Revolving Loan (or portion
      thereof) or as otherwise determined pursuant to Section
      2.4(b).

     

    “Revolving
      LIBOR Rate”
      has the meaning given in Section
      2.4(b).

     

    “Revolving
      Loans”
      has the meaning given in Section
      2.1(a).

     

    “Revolving
      Maturity Date”
      means April 10, 2006.

     

    “Revolving
      Note”
      has the meaning given in Section
      2.5(a).

     

    “Revolving
      Prime Rate”
      has the meaning given in Section
      2.4(b).

     

    “Security
      Agreement”
      means that certain Security Agreement dated as of August 9, 2002, executed
      by Borrower in favor of Lender substantially in the form of Exhibit B
      attached hereto, as such security agreement may be amended, restated,
      supplemented or otherwise modified from time to time.

     

    “Security
      Documents”
      means (i) the Security Agreement, (ii) all financing statements,
      fixture filings, landlord waivers and notices of security interests filed in
      connection with the Security Agreement, and (iii) all other documents
      and
      instruments executed by Borrower or any Subsidiary in connection
      therewith.

     

    “Subsidiary”
      means, for any Person, any corporation directly or indirectly controlled by
      such
      Person. For the purposes of this definition, “controlled by” shall mean the
      possession, directly or indirectly of the power to direct or cause the direction
      of the management or policies of such Subsidiary, whether through the ownership
      of voting securities, by contract, or otherwise. Unless otherwise specified,
      all
      references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a
      Subsidiary or Subsidiaries of Borrower.

     

    “Successor”
      means, for any corporation, partnership or banking association, any successor
      by
      merger or consolidation, or by acquisition of substantially all of the assets
      of
      the predecessor, or by conversion to another type of legal entity, or by
      continuation after and the occurrence of an event that would otherwise result
      in
      termination under applicable law but for such continuation.

     

    “Synthetic
      Lease”
      means (i) a so-called synthetic, off-balance sheet or tax retention
      lease,
      or (ii) an agreement for the use or possession of property creating
      obligations which do not appear on the balance sheet of such Person but which,
      upon the insolvency or bankruptcy of such Person, would be characterized as
      the
      Indebtedness of such Person (without regard to accounting
      treatment).

     

    “Tangible
      Net Worth”
      means, for any Person, the excess of total assets of such Person over total
      liabilities of such Person, excluding, however, from the determination of total
      assets (i) all assets which should be classified as intangible assets,
      (ii) treasury stock, (iii) cash held in a

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    sinking
      or other similar fund established for the purpose of redemption or other
      retirement of capital stock, (iv) to the extent not already deducted
      from
      total assets, reserves for depreciation, depletion, obsolescence or amortization
      of properties and other reserves or appropriations of retained earnings which
      have been or should be established in connection with the business conducted
      by
      such Person, and (v) any re-evaluation or other write-up in book value
      of
      assets subsequent to the fiscal year of such Person ending immediately prior
      to
      the date hereof.

     

    “Tax”
      means, for any Person, any tax, assessment, duty, levy, impost or other charge
      imposed by any Governmental Authority on such Person or on any property,
      revenue, income, or franchise of such Person and any interest or penalty with
      respect to any of the foregoing.

     

    “Term
      Loan”
      has the meaning given in Section
      2.1(b).

     

    “Term
      Loan Maturity Date”
      means July 31, 2007.

     

    “Term
      Note”
      has the meaning given in Section
      2.5(a).

     

    “UCC”
      shall have the meaning given in Section
      1.4.

     

    “Unfunded
      Capital Expenditures”
      means, for any period, for any Person, the aggregate amount of expenditures
      made
      by such Person during such period for the purchase or other acquisition of
      fixed
      or capital assets less
      an amount equal to the aggregate principal amount of all Indebtedness (including
      Capital Leases) other than Loans assumed or incurred by such Person during
      such
      period for the purpose of financing such capital expenditures.

     

    “Unfunded
      Vested Liabilities”
      means, with respect to any Plan at any time, the amount (if any) by which
      (a) the present value of all vested non forfeitable benefits under such
      Plan exceeds (b) the fair market value of all Plan assets allocable
      to such
      benefits, all determined as of the then most recent valuation date for such
      Plan, but only to the extent that such excess represents a potential liability
      of Borrower or any member of a Controlled Group to the PBGC or the Plan under
      Title IV of ERISA.

     

    “United
      States”
      and “U.S.”
      each means the United States of America.

     

    Section
      1.2    General
      Principles Applicable to Definitions. 
      Definitions
      given herein shall be equally applicable to both singular and plural forms
      of
      the terms therein defined and references herein to “he” or “it” shall be
      applicable to Persons whether masculine, feminine or neuter. References herein
      to any document including, but without limitation, this Agreement shall be
      deemed a reference to such document as it now exists, and as, from time to
      time
      hereafter, the same may be amended. References herein to any section,
      subsection, Schedule or Exhibit shall, unless otherwise indicated, be deemed
      a
      reference to sections and subsections within, and Schedules and Exhibits to,
      this Agreement.

     

    Section
      1.3    Accounting
      Terms.
       Except
      as otherwise provided herein, accounting terms not specifically defined shall
      be
      construed, and all accounting procedures shall be performed, in accordance
      with
      generally accepted United States accounting principles consistently applied
      from
      and after the date hereof (“GAAP”)
      and as in effect on the date of application.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    Section
      1.4    UCC
      Terms.
       Except
      as otherwise provided herein, terms used herein that are defined in the UCC
      have
      the meanings given to them in the Uniform Commercial Code (the “UCC”)
      as the same may, from time to time, be in effect in the State of
      Washington.

     

    ARTICLE
      2

    THE
      LOANS

     

    Section
      2.1    The
      Loans.  

     

    (a)    Revolving
      Credit Line.
       Subject
      to the terms and conditions of this Agreement, Lender agrees during the period
      from the date this Agreement is executed and delivered by the parties hereto
      until the Revolving Maturity Date (the “Revolving
      Commitment Period”)
      to make loans (the “Revolving
      Loans”)
      requested by Borrower in a Notice of Borrowing given under this Agreement;
      provided
      that, after giving effect to any such requested borrowing the Credit Utilization
      will not exceed the Revolving Commitment Amount. The Revolving Loans described
      in this Section
      2.1(a)
      constitute a revolving credit, and up to the Revolving Commitment Amount and
      during the Revolving Commitment Period, Borrower may pay, prepay and
      reborrow.

     

    (b)    Term
      Loan. 
      On or about August 9, 2002, Lender made a term loan to Borrower (the
      “Term
      Loan”)
      in the initial principal amount of Four Million Dollars
      ($4,000,000).

     

    Section
      2.2    Manner
      of Borrowing. 
      For each requested Revolving Loan, Borrower shall give Lender prior notice
      (a
“Notice
      of Borrowing”)
      specifying the date of a requested borrowing (which must be a Business Day)
      and
      the amount thereof. A Notice of Borrowing may be in writing or given orally
      by a
      Responsible Officer on the same day it wishes a Revolving Loan to be made;
      provided that said Notice of Borrowing is received by Lender no later than
      2:00
      p.m. (Walla Walla time) on the date of the requested borrowing; provided,
      further, that, any request given orally shall be confirmed by Borrower in a
      writing or by e-mail delivered to Lender not later than 2:00 p.m. (Walla Walla
      time) on the date such oral request is made. Each Notice of Borrowing shall
      be
      irrevocable and shall be deemed to constitute a representation and warranty
      by
      Borrower that (a) as of the date of such Notice of Borrowing the statements
      set forth in Article 4 are true and correct in all material respects (subject
      to
      any waivers of the terms thereof then in effect in accordance with the terms
      of
      this Agreement); and (b) no Default or Event of Default shall have occurred
      and is continuing or will result from disbursement of the requested Revolving
      Loan. Each Revolving Loan requested by Borrower under this Section
      2.2
      shall be in an amount that is an integral multiple of Five Thousand Dollars
      ($5,000) and not less than Twenty-five Thousand Dollars ($25,000). Upon
      fulfillment to Lender’s satisfaction of the applicable conditions set forth in
      this Section
      2.2
      and in Article 3,
      Lender will promptly make such funds available to Borrower by depositing them
      into an account maintained by Borrower at Lender’s main office, Walla Walla,
      Washington.

     

    Section
      2.3  
 Repayment
      of Principal.

     

    (a)    Revolving
      Credit Line.
       On
      each day that the Credit Utilization exceeds the Revolving Commitment Amount,
      Borrower shall repay Revolving Loans in such an amount

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    as
      is necessary to reduce the Credit Utilization to an amount equal to or less
      than
      the Revolving Commitment Amount, and, if, after repayment of all Revolving
      Loans, the Credit Utilization exceeds the Revolving Commitment Amount, Borrower
      shall deposit with or deliver to Lender and to grant to Lender, a security
      interest in deposit account balances held or maintained in blocked,
      non-interest-bearing deposit accounts at Lender to secure all advances to,
      and
      debts, liabilities, obligations, covenants and duties of Borrower arising under
      the Loan Agreement and each other Loan Document, including, without limitation,
      with respect to the Letters of Credit, pursuant to documentation in form and
      substance satisfactory to Lender. Borrower shall repay to Lender the outstanding
      principal balance of the Revolving Loans on or before the Revolving Maturity
      Date.

     

    (b)    Term
      Loan.
       Borrower
      shall repay to Lender the principal amount of Term Loan in consecutive quarterly
      installments commencing on November 1, 2002 and continuing on the first
      Business Day of each February, May, August and November thereafter in the amount
      of Two Hundred Thousand Dollars ($200,000) and shall repay the remaining
      principal amount of the Term Loan on the Term Loan Maturity Date.

     

    Section
      2.4 Interest
      on Loans.

     

    (a)    General
      Provisions.
       Borrower
      agrees to pay to Lender interest on the unpaid principal amount of each Loan
      from the date of such Loan until such Loan shall be due and payable at a per
      annum rate as follows: (i) for each Revolving Loan interest shall accrue
      at
      a per annum rate equal to the Revolving Interest Rate in effect from time to
      time with respect to such Revolving Loan (or portions thereof) and (ii) for
      the Term Loan interest shall accrue at a per annum rate equal to the Prime
      Rate
      (changing as such Prime Rate changes); provided,
      however,
      that after the occurrence and during the continuation of an Event of Default,
      Revolving Loan interest and Term Loan interest shall accrue at a per annum
      rate
      equal to three percent (3%) above the Prime Rate (changing as such Prime Rate
      changes). Accrued but unpaid interest on each Loan shall be paid in arrears
      as
      follows: (1) for each Revolving Loan (or portion thereof) bearing interest
      at the Revolving Prime Rate, on the first Business Day of each calendar month
      and at the Revolving Maturity Date, (2) for each Revolving Loan (or
      portion
      thereof) bearing interest at the Revolving LIBOR Rate, on the last day of the
      Interest Period and (3) for the Term Loan, on the first Business Day
      of
      each February, May, August and November and at the Term Loan Maturity Date.
      Accrued interest on any Loan shall be payable on demand after the occurrence
      of
      an Event of Default.

     

    (b)     Selection
      of Alternative Rates.

     

    (i)    Borrower
      may, subject to the requirements of this Section
      2.4(b),
      on two (2) Business Days’ prior notice, elect to have interest accrue on any
      Revolving Loan (or any portion thereof) at the rate of interest set forth in
      clause (ii) of the definition of Revolving Interest Rate (the “Revolving
      LIBOR Rate”)
      for an Interest Period. Such notice (herein, an “Interest
      Rate Notice”)
      shall be deemed delivered when received by Lender except that an Interest Rate
      Notice received by Lender after 11:00 a.m. (Walla Walla time) on any Business
      Day, shall be deemed to have been delivered or received on the immediately
      succeeding Business Day. All Interest Rate Notices shall be in writing. Each
      such Interest Rate Notice shall identify, subject to the conditions of this
      Section
      2.4(b),
      the Revolving Loan or portions thereof

     

    
      
        
        

      

      
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      to
        accrue interest at the Revolving LIBOR Rate and the Interest Period which
        Borrower selects. Each such Interest Rate Notice shall be irrevocable and
        shall
        constitute a representation and warranty by Borrower that (1) as of
        the
        date of such Interest Rate Notice, the representations and warranties set
        forth
        in Article 4
        hereof are true and correct in all material respects (subject to any waivers
        of
        the terms thereof then in effect in accordance with the terms of this Agreement)
        as of the date of such Interest Rate Notice unless such representation and
        warranty is made as of a specific date, and (2) no Default or Event
        of
        Default has occurred and is continuing.

    

     

    (ii)    Borrower’s
      right to select the Revolving LIBOR Rate to apply to a Revolving Loan (or any
      portion thereof) shall be subject to the following conditions: (1) the
      aggregate of all Revolving Loans of the same type or portions thereof to accrue
      interest at a particular Revolving LIBOR Rate for the same Interest Period
      shall
      be an integral multiple of Fifty Thousand Dollars ($50,000) and not less than
      Two Hundred Fifty Thousand Dollars ($250,000); (2) the Revolving LIBOR
      Rate
      may not be selected for any Revolving Loan (or portion thereof) which is already
      accruing interest at the Revolving LIBOR Rate unless such selection is only
      to
      become effective at the maturity of the Interest Period then in effect;
      (3) Lender shall not have given notice pursuant to Section
      2.4(e)
      that the selected Revolving LIBOR Rate is not available; and (4) no
      Default
      or Event of Default shall have occurred and be continuing.

     

    (iii)    In
      the absence of an effective request and acceptance thereof for the application
      of a Revolving LIBOR Rate, the Revolving Loans (or remaining portions thereof)
      shall accrue interest at the rate of interest set forth in clause (i)
      of
      the definition of Revolving Interest Rate (the “Revolving
      Prime Rate”).
      Any Interest Rate Notice which specifies a Revolving LIBOR Rate but fails to
      identify an Interest Period shall be deemed to be a request for the designated
      Revolving LIBOR Rate for an Interest Period of one (1) month.

     

    (iv)    The
      Interest Rate Notice may be given with and contained in any Notice of
      Borrowing.

     

    (v)    If
      Borrower delivers an Interest Rate Notice with any Notice of Borrowing for
      a
      LIBOR Rate Loan and Borrower thereafter declines to take such LIBOR Rate Loan
      or
      a condition precedent to the making of such LIBOR Rate Loan is not satisfied
      or
      waived, then Borrower shall, upon demand by Lender, indemnify Lender for all
      losses and any costs which Lender may sustain as a consequence thereof. A
      certificate as to the amount of such losses and costs, submitted to Borrower
      by
      Lender, shall be conclusive and binding absent manifest error.

     

    (c)    Applicable
      Days for Computation of Interest.
       Computations
      of interest on Prime Rate Loans shall be made on the basis of a year of 365/366
      days, for the actual number of days (including the first day but excluding
      the
      last day) occurring in the period for which such interest is payable. All other
      computations of interest and all computations of fees shall be made on the
      basis
      of a year of 360 days, for the actual number of days (including the first day
      but excluding the last day) occurring in the period for which such interest
      or
      fees are payable.

     

    (d)    Unavailable
      LIBOR Rate.
       Notwithstanding
      any election to have interest accrue on any Revolving Loan at the Revolving
      LIBOR Rate for an Interest Period pursuant to Section
      2.4(b),
      if: (i) on or prior to the determination of the Revolving LIBOR Rate
      for
      such

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

     Revolving
      Loan, Lender determines (which determination shall be conclusive and binding)
      that quotations of interest rates for the relevant deposits are not being
      provided in the relevant market in the relevant amount and Interest Period;
      or
      (ii) on or prior to the first day of an Interest Period, Lender determines
      (which determination shall be conclusive and binding) that, as a result of
      conditions in or generally affecting the relevant market, the rates of interest
      on the basis of which the applicable LIBOR Rate is to be computed do not
      accurately reflect the cost to Lender of making or maintaining such Revolving
      Loan at the Revolving LIBOR Rate for such Interest Period; then Lender shall
      give Borrower prompt notice thereof by telephone and the request by Borrower
      to
      have interest accrue on such Revolving Loan at the Revolving LIBOR Rate for
      such
      Interest Period shall not be effective, and such request shall be deemed to
      be a
      request for interest to accrue on such Revolving Loan at the Revolving Prime
      Rate.

     

    (e)    Increased
      Costs.  If,
      due to either (i) the introduction after the date of this Agreement
      of or
      any change after the date of this Agreement (including any change by way of
      imposition or increase of reserve requirements or assessments) in or in the
      interpretation of any law or regulation or (ii) the compliance with
      any
      guideline or request issued or made after the date of this Agreement by any
      central bank or other governmental authority (whether or not having the force
      of
      law), there shall be any increase in the cost to Lender of making or maintaining
      LIBOR Rate Loans, then Borrower shall from time to time, upon demand by Lender,
      pay to Lender additional amounts sufficient to reimburse the Lender for all
      such
      increased costs. A certificate as to the amount of such increased costs,
      submitted to Borrower by Lender, shall be conclusive and binding absent manifest
      error.

     

    (f)    Increased
      Capital Requirements.
       If
      either, (i) the introduction after the date of this Agreement of, or
      the
      application after the date of this Agreement as a result of phase-in or
      transitional rules of, or any change after the date of this Agreement in or
      in
      the interpretation of, any law or regulation or (ii) compliance by the
      Lender with any guideline or request issued or made after the date of this
      Agreement or deemed applicable after the date hereof as a result of phase-in
      or
      transitional rules by any central bank or other governmental authority (whether
      or not having the force of law) affects the amount of capital required to be
      maintained by Lender and Lender determines that the amount of such capital
      is
      increased by or based upon the making of LIBOR Rate Loans pursuant to
Section
      2.4(b),
      then, upon demand by Lender, Borrower shall immediately pay to Lender, from
      time
      to time as specified by Lender, additional amounts sufficient to compensate
      Lender for the costs of maintaining such increased capital. A certificate as
      to
      such amounts submitted to Borrower by Lender, shall be conclusive and binding
      absent manifest error.

     

    (g)    Illegality.
       Notwithstanding
      any other provision of this Agreement, if the introduction of or any change
      in
      or in the interpretation of any law or regulation shall make it unlawful, or
      any
      central bank or other governmental authority shall assert that it is unlawful
      for Lender to make or maintain LIBOR Rate Loans, Lender may by notice to
      Borrower, suspend the right of the Borrower to elect to have interest accrue
      on
      any Revolving Loan at the Revolving LIBOR Rate and, if necessary in the
      reasonable opinion of Lender to comply with such law or regulation, convert
      all
      outstanding Revolving Loans bearing interest at the Revolving LIBOR Rate to
      Revolving Loans bearing interest at the Revolving Prime Rate, at the latest
      time
      permitted by the applicable law or regulation.

     

    
      
        
        

      

      
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    Section
      2.5    Notes;
      Recordation of Loans.

     

    (a)    Notes.
       The
      Loans made hereunder shall be evidenced by promissory notes of Borrower dated
      as
      of the date hereof payable to the order of Lender as follows: (i) the
      Revolving Loans by a promissory note substantially in the form attached hereto
      as Exhibit A-1
      in the face amount of the Revolving Commitment Amount (the “Revolving
      Note”);
      and (ii) the Term Loan by a promissory note substantially in the form
      attached hereto as Exhibit A-2
      in the face amount of Four Million Dollars ($4,000,000) (the “Term
      Note”).
      The Revolving Note and the Term Note are referred to herein each as a
“Note”
      and collectively as the “Notes.”

     

    (b)    Recordation
      of Loans.
       Lender
      is hereby authorized to record the date and amount of the Loans it makes, the
      Prime Rate, and the date and amount of each payment of principal and interest
      thereon on a schedule annexed to or kept in respect of any Note. Any such
      recordation by Lender shall constitute prima
      facie
      evidence of the accuracy of the information so recorded; provided,
      however,
      that the failure to make any such recordation or any error in any such
      recordation shall not affect the obligations of Borrower hereunder or under
      any
      Note.

     

    Section
      2.6    Manner
      of Payments.

     

    (a)    Form
      and Place of Payment.
       All
      payments of principal and interest on any Loan and all other amounts payable
      hereunder or under any other Loan Document by Borrower to Lender shall be made
      by paying the same in United States Dollars and in immediately available funds
      to Lender at its main office, Walla Walla, Washington, not later than 2:00
      p.m.
      (Walla Walla time) on the date on which such payment shall become due. If such
      payment is received after 2:00 p.m., then it will be deemed received on the
      next
      Business Day. All payments to be made by Borrower shall be made without set-off,
      recoupment or counterclaim.

     

    (b)    Authorization
      to Charge Borrower’s Account.
       On
      each date when the payment of any principal, interest or commitment fees are
      due
      hereunder or under any Note, Borrower agrees to maintain on deposit in an
      ordinary checking account maintained by Borrower with Lender (as such account
      shall be designated by Borrower in a written notice to Lender from time to
      time,
      the “Borrower
      Account”)
      an amount sufficient to pay such principal, interest or commitment fees in
      full.
      Borrower hereby authorizes Lender (i) to deduct automatically all
      principal, interest or commitment fees when due hereunder or under the Notes
      from the Borrower Account, and (ii) if and to the extent any payment
      under
      this Agreement or any other Loan Document is not made when due, to deduct
      automatically any such amount from any or all of the accounts of Borrower
      maintained with Lender. Lender agrees to provide timely notice to Borrower
      of
      any automatic deduction made pursuant to this Section
      2.6(b).

     

    (c)    Non-Business
      Days.
       Whenever
      any payment hereunder or under any other Loan Document shall be stated to be
      due
      on a day other than a Business Day, such payment shall be made on the next
      succeeding Business Day and such extension of time shall in such case be
      included in the computation and payment of interest or commitment fees, as
      the
      case may be. Notwithstanding the foregoing (i) any Interest Period that
      would otherwise end on a day that is not a Business Day shall be extended to
      the
      next succeeding Business Day unless, such Business Day falls in another calendar
      month, in which case such Interest Period shall end on the next

     

    
      
        
        

      

      
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    preceding
      Business Day and (ii) any Interest Period that begins on the last Business
      Day of a calendar month (or on a day for which there is no numerically
      corresponding day in the calendar month at the end of such Interest Period)
      shall end on the last Business Day of the calendar month at the end of such
      Interest Period. 

     

    Section 2.7    Prepayments.
       Prime
      Rate Loans may be repaid at any time without penalty or premium. Borrower
      acknowledges and agrees that payment of a LIBOR Rate Loan prior to the end
      of
      its Interest Period is prohibited. If, at Lender’s sole and absolute discretion,
      prepayment of a LIBOR Rate Loan is permitted, Borrower agrees to reimburse
      Lender for any costs incurred in breaking such LIBOR Rate Loan prior to the
      end
      of its Interest Period. A certificate as to such amounts submitted to Borrower
      by Lender, shall be conclusive and binding absent manifest error.

     

    Section
      2.8    Application
      of Payments.

     

    (a)    
      Payments
      Before Default.
       Payments
      made by Borrower in respect of amounts owing by it hereunder or under any other
      Loan Document shall be applied in the manner directed by Borrower and, in the
      absence of any such direction, such payments shall be applied first,
      against fees, expenses and indemnities due hereunder or under any other Loan
      Document; second,
      against any interest due on any Revolving Loan or the Term Loan; third,
      against any Term Loan principal then due; fourth,
      against any principal on the Revolving Loans bearing interest at the Revolving
      Prime Rate until all such Revolving Loans are paid in full; fifth,
      against any principal on the LIBOR Rate Loans until all such LIBOR Rate Loans
      are paid in full; and, thereafter, to Term Loan principal not then due (applied
      to Borrower’s obligations in the inverse order of maturity).

     

    (b)    
      Payments
      After Default.
       Any
      payments received by Lender by any means and from any source after the
      occurrence and during the continuation of an Event of Default shall be applied
      against any Financial Transaction Liability of Borrower and to such portions
      of
      Borrower’s obligations under the Loan Documents and in such order as Lender may
      elect in its sole discretion.

     

    Section
      2.9    Unused
      Commitment Fees.
       So
      long as Lender shall have any commitment to make Revolving Loans hereunder
      and,
      until payment in full of each Revolving Loan, Borrower agrees to pay to Lender,
      an unused commitment fee computed daily at a per annum rate equal to one eighth
      of one percent (0.125%) on the actual daily difference between the Credit
      Utilization and the Revolving Commitment Amount. Unused commitment fees shall
      be
      payable in arrears on the first Business Day following the last Business Day
      of
      each fiscal quarter of Borrower, on the Revolving Maturity Date, and on demand
      after the occurrence of an Event of Default.

     

    ARTICLE
      3

    CONDITIONS
      TO LENDING

     

    Section
      3.1    Conditions
      to Initial Loan.
       In
      addition to the conditions set forth in Section
      3.2,
      the obligation of Lender on or after the date of this Agreement to make the
      initial Loan hereunder is subject to fulfillment of the following conditions
      precedent:

     

    
      
        
        

      

      
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    (a)    Loan
      Documents.
       The
      Loan Documents shall have each been duly executed and delivered by the
      respective parties thereto, and shall be satisfactory to Lender in form and
      substance.

     

    (b)    Borrower
      Authority.
       Lender
      shall have received, in form and substance satisfactory to it, a certified
      copy
      of the Articles of Incorporation and Bylaws of Borrower and certified copies
      of
      resolutions adopted by the Board of Directors of Borrower authorizing the
      execution, delivery and performance of the Loan Documents to which it is a
      party, together with evidence that Borrower is in good standing in the states
      of
      Washington and Oregon and evidence of the authority and specimen signatures
      of
      the natural persons who have signed this Agreement and who will sign the other
      Loan Documents on behalf of Borrower and such other evidence of corporate
      authority as Lender shall reasonably require.

     

    (c)    Certificate.
       Lender
      shall have received an Officer’s Certificate from Borrower as to the accuracy of
      Borrower’s representations and warranties set forth in Article 4
      and as to the absence of any Default or Event of Default.

     

    (d)    Loan
      Fee.
       Lender
      shall have received from Borrower payment of a loan commitment fee in the amount
      of Twelve Thousand Five Hundred Dollars ($12,500) in respect of Lender’s
      agreement to enter into this Agreement. The loan fee payable under this
      subsection (d) shall be deemed fully earned when due and non-refundable
      when paid.

     

    (e) Evidence
      of Security

     

    .
      Lender shall have received evidence satisfactory to it that the security
      interests created by the Security Documents have been duly perfected by all
      such
      means as Lender may deem necessary or advisable to create a valid and perfected
      Lien in the Collateral enforceable against all third parties in all
      jurisdictions of the United States and Canada to secure all obligations of
      Borrower to Lender under this Agreement or the other Loan Documents. Lender
      shall have also received such evidence as it may require that its security
      interests in the Collateral have priority over any and all other security
      interests or other Liens therein and that the Collateral is free and clear
      of
      all Liens, except as expressly permitted by this Agreement.

     

    (f)    Evidence
      of Insurance.
       Lender
      shall have received evidence satisfactory to it that all insurance required
      by
      this Agreement or any Security Document is in full force and
      effect.

     

    (g)    Consents. 
      Lender
      shall have received evidence reasonably satisfactory to it that Borrower has
      obtained all consents, permits and Government Approvals from all Persons
      (including, without limitation, Governmental Authorities) which are parties
      to
      or the issuer of any material contract, lease, license or other Government
      Approval necessary or advisable to permit Lender following any Event of Default,
      to enjoy the practical realization of the rights and remedies provided in the
      Security Documents.

     

    Section
      3.2  
Conditions
      to All Loans.
       The
      obligation of Lender on or after the date of this Agreement to make any Loan
      is
      subject to fulfillment of the following conditions precedent:

     

    (a)    Prior
      Conditions.
       All
      of the conditions set forth in Section
      3.1
      shall have been satisfied.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    (b)    Notice
      of Borrowing.
       Lender
      shall have received a Notice of Borrowing in respect of such Loan.

     

    (c)    No
      Default.
       At
      the date of the Loan, no Default or Event of Default shall have occurred and
      be
      continuing or will have occurred as the result of the making of the Loan; and
      the statements set forth in Article 4
      hereof are true and correct in all material respects (subject to any waivers
      of
      the terms thereof then in effect in accordance with the terms of this Agreement)
      on and as of such date with the same force and effect as if made on and as
      of
      such date.

     

    (d)    Other
      Information.
       Lender
      shall have received such other statements, opinions, certificates, documents
      and
      information as it may reasonably request in order to satisfy itself that the
      conditions set forth in this Section
      3.2
      have been fulfilled.

     

    ARTICLE
      4

    REPRESENTATIONS
      AND WARRANTIES

     

    Borrower
      represents and warrants to Lender as follows:

     

    Section
      4.1    Existence
      and Power.
       Borrower
      is a corporation duly incorporated, validly existing under the laws of the
      State
      of Oregon. Borrower is duly qualified to do business in the State of Washington
      and each other jurisdiction where the failure to so qualify would be likely
      to
      have a material adverse effect on the business, operations, properties or
      financial condition of Borrower. Borrower has full corporate power, authority
      and legal right to carry on its business as presently conducted, to own and
      operate its properties and assets, and to execute, deliver and perform this
      Agreement and the other Loan Documents.

     

    Section
      4.2    Authorization.
       The
      execution, delivery and performance by Borrower of this Agreement and the other
      Loan Documents and any borrowing hereunder or thereunder have been duly
      authorized by all necessary corporate action of Borrower, do not require any
      shareholder approval or the approval or consent of any trustee or the holders
      of
      any Indebtedness of Borrower, except such as have been obtained (certified
      copies thereof having been delivered to Lender), do not contravene any law,
      regulation, rule or order binding on it or its Articles of Incorporation or
      Bylaws and do not contravene the provisions of or constitute a default under
      any
      material indenture, mortgage, contract or other agreement or instrument to
      which
      Borrower is a party or by which Borrower or any of its properties may be bound
      or affected, except that the leases listed on Part (b) of Schedule 2
      attached hereto restrict Borrower’s ability to permit liens or encumbrances on
      certain items, including, but not limited to, the premises, improvements, and
      the lease agreement.

     

    Section
      4.3    Government
      Approvals, Etc. 
       No
      Government Approval or filing or registration with any Governmental Authority
      is
      required for the making and performance by Borrower of the Loan Documents or
      in
      connection with any of the transactions contemplated hereby or thereby, except
      such as have been heretofore obtained and are in full force and effect
      (certified copies thereof having been delivered to Lender).

     

    Section
      4.4    Binding
      Obligations, Etc. 
      This Agreement has been duly executed and delivered by Borrower and constitutes,
      and the other Loan Documents when duly executed and

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    delivered
      will constitute, the legal, valid and binding obligations of Borrower
      enforceable against Borrower in accordance with their respective terms, except
      as enforceability may be limited by bankruptcy, insolvency, reorganization,
      similar laws affecting creditors’ rights generally or general principles of
      equity.

     

    Section
      4.5    Litigation.
       Except
      as specifically disclosed in Schedule 1
      attached hereto, there are no actions, proceedings, investigations, or claims
      against or affecting Borrower or any Subsidiary now pending before any court,
      arbitrator, or Governmental Authority (nor to the best of Borrower’s knowledge
      has any thereof been threatened nor does any basis exist therefor) which if
      determined adversely to Borrower or such Subsidiary would (a) have a
      material adverse effect on the financial condition or operations of Borrower,
      or
      Borrower and its Subsidiaries on a consolidated basis, (b) impair or
      defeat
      the Lien of Lender on any of the Collateral or any rights of Borrower therein,
      or (c) result in a judgment or order against Borrower or any Subsidiary
      (in
      excess of insurance coverage) for more than Two Hundred Fifty Thousand Dollars
      ($250,000) in any one case or Five Hundred Thousand Dollars ($500,000) in the
      aggregate.

     

    Section
      4.6    Financial
      Condition.
       The
      consolidated balance sheet of Borrower as at September 30, 2004 and
      the
      related statements of consolidated income and retained earnings of Borrower
      for
      the fiscal year then ended, and the consolidated balance sheet of Borrower
      as at
      March 31, 2005 (the “Current
      Balance Sheet”),
      and the related statements of consolidated income and retained earnings of
      Borrower for the two fiscal quarters then ended, copies of which have been
      furnished to Lender, fairly present the consolidated financial condition of
      Borrower as at such dates, all determined in accordance with GAAP. Neither
      Borrower nor any Subsidiary had on such dates any material contingent
      liabilities for Taxes, unusual forward or long-term commitments or material
      unrealized or anticipated losses from any unfavorable commitments, except as
      referred to or reflected or provided for in such balance sheet and in the
      related notes. Since March 31, 2002 there has been no material adverse
      change in the financial condition, operations, or business of Borrower, or
      Borrower and its Subsidiaries on a consolidated basis.

     

    Section
      4.7    Title
      and Liens.
       Borrower
      has good and marketable title to each of the properties and assets reflected
      in
      the Current Balance Sheet, except such as have been since sold or otherwise
      disposed of in the ordinary course of business. No assets or revenues of
      Borrower are subject to any Lien except as required or permitted by this
      Agreement or specifically disclosed in Schedule 2
      attached hereto.

     

    Section
      4.8    Intellectual
      Property.
       Borrower
      and each Subsidiary own or possesses all Intellectual Property and all licenses,
      franchises, permits and rights with respect to any Intellectual Property
      necessary to own and operate its respective properties and to carry on their
      respective businesses as presently conducted and presently planned to be
      conducted. Except as specifically disclosed in Schedule 3
      attached hereto, no claim or litigation regarding any such Intellectual Property
      or any such license, franchise, permit or other rights with respect thereto
      is
      pending (nor to the best of Borrower’s knowledge threatened) which if determined
      adversely to Borrower or any Subsidiary would have a material adverse effect
      on
      the business, operations or financial condition of Borrower, or Borrower and
      its
      Subsidiaries on a consolidated basis.

     

    Section
      4.9    Environmental
      Laws, Etc. 
      Except as specifically disclosed in Schedule 4
      attached hereto, all properties of Borrower and each Subsidiary and their use
      thereof

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    comply
      in all material respects with applicable zoning and use restrictions and with
      applicable laws and regulations relating to health, safety and the environment
      in all jurisdictions in which Borrower or such Subsidiary is doing business,
      except such non-compliance which (if enforced in accordance with applicable
      laws
      and regulations and determined adversely to Borrower or such Subsidiary) could
      not, individually or in the aggregate, reasonably be expected to give rise
      to
      legal liability in excess of Two Hundred Fifty Thousand Dollars ($250,000)
      (the
“Threshold
      Amount”).
      Without limiting the foregoing, except as specifically disclosed in Schedule 4
      attached hereto, no Hazardous Substances have been generated, manufactured,
      refined, transferred, stored, treated, transported, handled, managed, discharged
      or disposed of, whether by Borrower, any Subsidiary or, to the best of
      Borrower’s knowledge after investigation, by any other Person onto, upon, over,
      beneath or from any real property owned by Borrower or any Subsidiary or other
      premises owned, leased, operated, used or held at any time by Borrower or any
      Subsidiary or any of the ground water beneath any such premises (collectively,
      the “Premises”)
      which in any fashion might result in Borrower, any Subsidiary or Lender
      incurring or suffering at any time any loss, liability, damages, or obligations
      including liability for cleanup and recovery costs and expenses which,
      individually or in the aggregate, could reasonably be expected to exceed the
      Threshold Amount. Except as specifically disclosed in Schedule 4
      attached hereto, there are no underground storage tanks, whether in current
      use
      or not, at any of the Premises and to the best of Borrower’s knowledge, no such
      tanks have ever been maintained on the Premises. There are no past or present
      events, conditions, circumstances, activities, practices, incidents or actions
      at or in connection with the Premises which could reasonably be expected to
      interfere with or prevent continued compliance with any laws or regulations
      pertaining to underground storage tanks or any other laws or regulations
      relating to the emission, discharge, release or threatened release of Hazardous
      Substances into the environment or give rise to any legal liability or otherwise
      form the basis of any claim, action, suit, proceedings, hearing or investigation
      against or affecting Borrower or any Subsidiary under the Environmental Laws
      that could, individually or in the aggregate, reasonably be expected to give
      rise to legal liability in excess of the Threshold Amount. Except as
      specifically disclosed in Schedule 4
      attached hereto, there has been no disposal from the Premises by Borrower or
      any
      Subsidiary (or to the best of Borrower’s knowledge, by any other Person)
      directly or indirectly of any Hazardous Substances to, on or in any site
      currently listed or formally proposed to be listed on the National Priorities
      List under Superfund or any site listed on any priority cleanup list compiled
      by
      any state department of ecology or environmental quality. Except as specifically
      disclosed in Schedule
      4
      attached hereto, neither Borrower nor any Subsidiary has or will be involved
      in
      any operations at or near the Premises, which operations, when conducted in
      accordance with applicable law, could reasonably be expected to lead to:
      (a) the imposition of legal liability under Environmental Laws on Borrower,
      any Subsidiary or any subsequent owner of the Premises in excess of the
      Threshold Amount or (b) the creation of a Lien on the Premises under
      Environmental Laws, the creation of which could have an adverse effect upon
      the
      perfection or priority of any Lien granted under any of the Security
      Documents.

     

    Section
      4.10    Taxes.
       Borrower
      and each Subsidiary have each filed all tax returns and reports required of
      them, has paid all Taxes which are due and payable and before they have become
      delinquent, except for Taxes (a) whose amount is not individually or
      in the
      aggregate for Borrower or any Subsidiary, as applicable, a Material Amount,
      or
      (b) whose amount, applicability or validity is currently being contested
      in
      good faith by appropriate proceedings where reserves or other appropriate
      provisions required by GAAP shall have established

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    therefor.
      The charges, accruals and reserves on the books of Borrower and each Subsidiary
      in respect of Taxes for all fiscal periods to date are accurate in all material
      respects. There are no material questions or disputes between Borrower or any
      Subsidiary and any Governmental Authority with respect to any Taxes. As used
      in
      this Section
      4.10,
      “Material
      Amount”
      shall mean for any Person, an amount of Two Hundred Fifty Thousand Dollars
      ($250,000) or more or an amount otherwise material to the business, operations
      or financial condition of such Person.

     

    Section
      4.11    Other
      Agreements.
       Neither
      Borrower nor any Subsidiary is in breach of or default in any material respect
      under any material agreement to which it is a party or which is binding on
      it or
      any of its assets.

     

    Section
      4.12    Labor
      Matters.
       Neither
      Borrower nor any Subsidiary is involved in any labor controversy which has
      resulted in or, to Borrower’s knowledge, threatens to result in a strike which
      would have a material adverse effect on the business, operations or financial
      condition of Borrower, or Borrower and its Subsidiaries on a consolidated
      basis.

     

    Section
      4.13    Federal
      Reserve Regulations.
       Neither Borrower nor any Subsidiary is engaged principally or as one
      of
      its important activities in the business of extending credit for the purpose
      of
      purchasing or carrying any margin stock (within the meaning of Federal Reserve
      Regulation U), and no part of the proceeds of any Loan will be used to purchase
      or carry any such margin stock or to extend credit to others for the purpose
      of
      purchasing or carrying any such margin stock or for any other purpose that
      violates the applicable provisions of any Federal Reserve Regulation. Borrower
      will furnish to Lender on request a statement conforming with the requirements
      of Regulation U.

     

    Section
      4.14 ERISA.

     

    (a)    The
      present value of all benefits vested under all Pension Plans did not, as of
      the
      most recent valuation date of such Pension Plans, exceed the value of the assets
      of the Pension Plans allocable to such vested benefits by an amount which would
      represent a potential material liability of Borrower or affect materially the
      ability of Borrower to perform the Loan Documents.

     

    (b)    No
      Plan or trust created thereunder, or any trustee or administrator thereof,
      has
      engaged in a “prohibited transaction” (as such term is defined in Section 406 of
      ERISA or Section 4975 of the Code) which could subject such Plan or any other
      Plan, any trust created thereunder, or any trustee or administrator thereof,
      or
      any party dealing with any Plan or any such trust to the tax or penalty on
      prohibited transactions imposed by Section 502 of ERISA or Section 4975 of
      the
      Code.

     

    (c)    No
      Pension Plan or trust has been terminated, except in accordance with the Code,
      ERISA, and the regulations of the Internal Revenue Service and the PBGC as
      applicable to solvent plans in which benefits of participants are fully
      protected. No “reportable event” as defined in Section 4043 of ERISA has
      occurred for which notice has not been waived or for which alternative notice
      procedures are permitted.

     

    (d)    No
      Pension Plan or trust created thereunder has incurred any “accumulated funding
      deficiency” (as such term is defined in Section 302 of ERISA) whether or not
      waived, since the effective date of ERISA.

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    (e)    The
      required allocations and contributions to Pension Plans will not violate Section
      415 of the Code.

     

    (f)    Borrower
      has no withdrawal liability to any trust created pursuant to a multi-employer
      pension or benefit plan nor would it be subject to any such withdrawal liability
      in excess of Two Hundred Fifty Thousand Dollars ($250,000) if it withdrew from
      any such plan or if its participation therein were otherwise
      terminated.

     

    Section
      4.15    Subsidiaries.
       As
      of the date of this Agreement, Schedule 5
      attached hereto accurately sets forth each Subsidiary of Borrower, the type
      of
      legal entity of each such Subsidiary, its jurisdiction of incorporation or
      organization, and the ownership and percentage ownership of each such
      Subsidiary.

     

    Section
      4.16    Not
      Investment Company, Etc.  Borrower
      is not now, and after the application by Borrower of the proceeds of any Loan
      will not be, subject to regulation under the Investment Company Act of 1940,
      the
      Public Utility Holding Company Act of 1935, the Federal Power Act, the
      Interstate Commerce Act, any state public utilities code or any federal or
      state
      statute or regulation limiting its ability to incur Indebtedness.

     

    Section
      4.17    Representations
      as a Whole.
       This
      Agreement, the other Loan Documents, the financial statements referred to in
      Section
      4.6,
      and all other instruments, documents, certificates and statements furnished
      to
      Lender by or on behalf of Borrower, taken as a whole and as of the date given,
      do not contain any untrue statement of a material fact or omit to state any
      material fact necessary in order to make the statements contained herein or
      therein, in light of the circumstances under which they were made, not
      misleading. Borrower has disclosed to Lender in writing any and all facts known
      to Borrower which have a material adverse effect on the business, operations,
      properties, financial condition or prospects of Borrower or the ability of
      Borrower to perform its obligations under the Loan Documents. Without limiting
      the foregoing, each of the representations and warranties made by Borrower
      herein and in the other Loan Documents is true and correct in all material
      respects on and as of the date when made, on and as of the date hereof, and
      on
      and as of each date this representation is deemed made hereunder with the same
      force and effect as if made on and as of such dates.

     

    ARTICLE
      5

    AFFIRMATIVE
      COVENANTS

     

    So
      long as Lender shall have any Commitment hereunder and until payment in full
      of
      each Loan and performance of all other obligations of Borrower under this
      Agreement and the other Loan Documents, Borrower agrees to do all of the
      following unless Lender shall otherwise consent in writing.

     

    Section
      5.1    Use
      of Proceeds.
       The
      proceeds of the Revolving Loans and the Term Loan will be used solely to repay
      Indebtedness of Borrower arising under the Existing Credit Agreement and to
      fund
      Borrower’s working capital needs.

     

    Section
      5.2    Payment.
       Borrower
      will pay the principal of and interest on the Loans in accordance with the
      terms
      of this Agreement and the Notes and will pay when due all other amounts payable
      by Borrower hereunder and under any other Loan Document.

     

    
      
        
        

      

      
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    Section
      5.3    Preservation
      of Corporate Existence, Etc.  Borrower
      will, and will cause each Subsidiary to, preserve and maintain its corporate,
      limited liability company or partnership existence, rights, franchises and
      privileges in the jurisdiction of its incorporation or organization and qualify
      and remain qualified as a foreign corporation, limited liability company or
      partnership in each jurisdiction where such qualification is necessary or
      advisable in view of the business and operations of Borrower or such Subsidiary
      or the ownership of its properties.

     

    Section
      5.4    Visitation
      Rights.
       Borrower
      will permit Lender at any reasonable time, and from time to time, to examine
      and
      make copies of and abstracts from the records and books of account of and to
      visit the properties of Borrower and any Subsidiary and to discuss the affairs,
      finances and accounts of Borrower with any of its officers or
      directors.

     

    Section
      5.5    Keeping
      of Books and Records.
       Borrower
      will keep adequate records and books of account in which complete entries will
      be made, in accordance with GAAP, reflecting all financial transactions of
      Borrower.

     

    Section
      5.6    Maintenance
      of Property, Etc. 
       Borrower
      will, and will cause each Subsidiary to, maintain and preserve all of its
      material properties in good working order and condition, ordinary wear and
      tear
      excepted, and will from time to time make all needed repairs, renewals, or
      replacements so that the efficiency of such properties shall be fully maintained
      and preserved. Borrower will, and will cause each Subsidiary to, not take or
      fail to take any action, nor permit any action to be taken by others that are
      subject to Borrower’s or such Subsidiary’s control which would affect the
      validity and enforcement of its and their Intellectual Property, or impair
      the
      value of such Intellectual Property.

     

    Section
      5.7    Compliance
      With Laws, Etc. 
      Borrower will, and will cause each Subsidiary to, comply in all material
      respects with all laws, regulations, rules, and orders of Governmental
      Authorities applicable to Borrower, any Subsidiary or to its operations or
      property, except any thereof whose validity is being contested in good faith
      by
      appropriate proceedings, so long as (a) such contest proceedings operate
      to
      stay the execution of the enforcement thereof and (b) adequate reserves
      or
      other appropriate provision, as shall be required in conformity with GAAP shall
      have been made for the payment of any fines, charges, penalties or other costs
      in respect thereof in the event the contest is determined adversely to Borrower
      or such Subsidiary.

     

    Section
      5.8    Other
      Obligations.
       Borrower
      will pay and discharge and will cause each Subsidiary to pay and discharge
      before the same shall become delinquent all Indebtedness, Taxes, and other
      obligations for which Borrower or any Subsidiary is liable or to which its
      income or property is subject and all claims for labor and materials or supplies
      which, if unpaid, might become by law a lien upon assets of Borrower or any
      Subsidiary, except any thereof whose validity, applicability or amount is being
      contested in good faith by Borrower or such Subsidiary in appropriate
      proceedings, so long as adequate reserves or other appropriate provision, as
      shall be required in conformity with GAAP shall have been made for the payment
      thereof in the event the contest is determined adversely to Borrower or such
      Subsidiary.

     

    Section
      5.9    Insurance.
       Borrower
      will, and will cause each Subsidiary to, keep in force upon all of its and
      their
      properties and operations policies of insurance carried with

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    responsible
      companies in such amounts and covering all such risks as shall be customary
      in
      the industry and as shall be reasonably satisfactory to Lender. From time to
      time, on request, Borrower will furnish to Lender certificates of insurance
      or,
      at Lender’s request, duplicate policies evidencing such coverage.

     

    Section
      5.10    Borrower
      Financial Information.
       Borrower
      will deliver to Lender:

     

    (a)    Annual
      Audited Financial Statements.
       As
      soon as available and in any event within ninety (90) days after the end of
      each
      fiscal year of Borrower the consolidated financial statements of Borrower as
      of
      the end of such fiscal year, accompanied by an audit report thereon by
      independent certified public accountants selected by Borrower and reasonably
      satisfactory to Lender (which report shall be prepared in accordance with GAAP
      and shall not be qualified by reason of restricted or limited examination of
      any
      material portion of the records of Borrower and shall contain no disclaimer
      of
      opinion or adverse opinion).

     

    (b)    Monthly
      Unaudited Financial Statements.
       As
      soon as available and in any event within thirty (30) days after the end of
      each
      month, company prepared consolidated financial statements of Borrower as of
      the
      end of such month (including the fiscal year to the end of such month),
      accompanied by an Officer’s Certificate of Borrower certifying that such
      unaudited financial statements have been prepared in conformity with GAAP
      (subject to year-end audit adjustments and the absence of footnote disclosures)
      and, in all material respects, present fairly the consolidated financial
      position and the results of operations of Borrower as at the end of and for
      such
      month (subject to year-end audit adjustments) and identifying any material
      adverse changes in the financial condition or operations of Borrower that have
      occurred since the last delivered fiscal year-end report referred to in
      subsection (a) above.

     

    (c)    Monthly
      Compliance Certificates.
       Together
      with the delivery of the financial statements referred to in
      subsections (a) and (b) above, an Officer’s Certificate of Borrower
      (i) stating that as of the close of such fiscal year or month, as
      applicable, no Default or Event of Default had occurred and was continuing,
      and
      (ii) demonstrating with calculations in reasonable detail Borrower’s
      compliance as at that date with the provisions of Section
      5.14.

     

    (d)    Reports
      to Stockholders.
       As
      soon as available, all reports sent by Borrower to its stockholders generally
      and all quarterly and annual reports and registration statements filed by
      Borrower with the Securities and Exchange Commission.

     

    (e)    Other.
       All
      other statements, reports and other information as Lender may reasonably request
      concerning the financial condition and business affairs of
      Borrower.

     

    Section
      5.11    Notification.
       Promptly
      after learning thereof, Borrower shall notify Lender of (a) any action,
      proceeding, investigation or claim against or affecting Borrower or any
      Subsidiary instituted before any court, arbitrator or Governmental Authority
      or,
      to Borrower’s knowledge threatened to be instituted, which if determined
      adversely to Borrower or such Subsidiary would be likely to have a material
      adverse effect on the business, operations, properties, financial condition
      or
      prospects of Borrower, or Borrower and its Subsidiaries on a consolidated basis,
      or to impair or defeat the Lien of Lender on any Collateral or Borrower’s rights
      therein, or to result in a judgment or order against Borrower or any Subsidiary
      (in excess

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    of
      insurance coverage) for more than Fifty Thousand Dollars ($50,000); (b) any
      substantial dispute between Borrower or any Subsidiary and any Governmental
      Authority; (c) any labor controversy which has resulted in or, to
      Borrower’s knowledge, threatens to result in a strike which would materially
      affect the business operations of Borrower or any Subsidiary; (d) if
      Borrower or any member of a Controlled Group gives or is required to give notice
      to the PBGC of any “reportable event” (as defined in subsections (b)(1), (2),
      (5) or (6) of Section 4043 of ERISA) with respect to any Plan (or the Internal
      Revenue Service gives notice to the PBGC of any “reportable event” as defined in
      subsection (c)(2) of Section 4043 of ERISA and Borrower obtains knowledge
      thereof) which might constitute grounds for a termination of such Plan under
      Title IV of ERISA, or knows that the plan administrator of any Plan
      has
      given or is required to give notice of any such report-able event, a copy of
      the
      notice of such reportable event given or required to be given to the PBGC;
      (e) the occurrence of any Event of Default or Default; and (f) the
      occurrence of an event which results in a material adverse change in the
      business, operations, properties, financial condition or prospects of Borrower,
      or Borrower and its Subsidiaries on a consolidated basis. In the case of the
      occurrence of an Event of Default or Default or the occurrence of an event
      which
      results in a material adverse change in Borrower’s consolidated financial
      condition or operations, Borrower will deliver to Lender an Officer’s
      Certificate specifying the nature thereof, the period of existence thereof,
      if
      applicable, and what action Borrower proposes to take with respect
      thereto.

     

    Section
      5.12    Payment
      of Expenses.
       Borrower
      shall, on demand pay to Lender all costs, expenses and fees, including without
      limitation reasonable attorneys’ fees (including allocated costs of in-house
      counsel), incurred by Lender in connection with the negotiation and preparation
      of this Agreement and the other Loan Documents and any other document,
      agreement, opinion or certificate related to the foregoing.

     

    Section
      5.13    Additional
      Payments; Additional Acts.
       From
      time to time, Borrower will (a) pay or reimburse Lender on request for
      all
      Taxes (other than Taxes imposed on the net income or gross revenues of Lender)
      imposed on any Loan Document or payment and for all reasonable expenses,
      including legal fees (including allocated costs of in-house counsel), incurred
      by Lender in connection with the making or administering of the Loans,
      (b) pay or reimburse Lender on request for all reasonable expenses incurred
      by Lender in connection with conducting field audits or inspections of the
      Collateral; (c) pay or reimburse Lender for all reasonable expenses,
      including legal fees, incurred by Lender in connection with the enforcement,
      attempted enforcement, or preservation of any rights or remedies under this
      Agreement and each other Loan Document (including all such costs and expenses
      incurred during any “workout” or restructuring in respect of the Loans and
      during any legal proceeding, including any proceeding under the Bankruptcy
      Code
      or under any other applicable bankruptcy, insolvency or similar law affecting
      the rights of creditors generally of the United States or any State thereof;
      (d) if requested by Lender, obtain and promptly furnish to Lender evidence
      of all such Government Approvals as may be required to enable Borrower to comply
      with its obligations under the Loan Documents and to continue in business as
      conducted on the date hereof without material interruption or interference;
      (e) execute and deliver all such instruments and to perform all such
      other
      acts as Lender may reasonably request to carry out the transactions contemplated
      by this Agreement and the other Loan Documents and to maintain the continuous
      perfection and priority of Lender’s Lien on all Collateral. If Borrower shall
      default in its obligations to reimburse Lender, interest shall accrue on the
      unpaid amount thereof at a per

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    annum
      rate equal to five percent (5%) above the Prime Rate (changing as such Prime
      Rate changes) from the date Lender makes demand therefor until repaid in full
      by
      Borrower. The obligations of Borrower under this Section shall survive the
      payment of the Loans and the termination of this Agreement.

     

    Section
      5.14   Financial
      Covenants.

     

    (a)    Debt
      to Tangible Net Worth Ratio.
       Borrower
      shall maintain on a consolidated basis as of the end of each month, a ratio
      of
      Indebtedness to Tangible Net Worth equal to or less than 1.5 to 1.

     

    (b)    Fixed
      Charge Coverage Ratio.
       Borrower
      shall maintain on a consolidated basis, as of the end of each fiscal quarter
      of
      Borrower on which date Borrower holds cash and Cash Equivalents of less than
      Four Million Dollars ($4,000,000), a Fixed Charge Coverage Ratio equal to or
      greater than 2.0 to 1. As used herein, “Fixed
      Charge Coverage Ratio”
      shall mean, as of any date of determination, for the period of four consecutive
      fiscal quarters then ended, the ratio of (i) EBITDA of Borrower and
      its
      Subsidiaries for such period to (ii) the sum of (A) regularly
      scheduled principal payments required to be made by Borrower and its
      Subsidiaries on Funded Debt during such period, plus
      (B) interest expense (exclusive of interest income) of the Borrower
      and its
      Subsidiaries (including capitalized interest) and the interest component of
      rentals paid or accrued under Capital Leases for such period determined in
      accordance with GAAP plus
      (C) Unfunded Capital Expenditures made by the Borrower and its Subsidiaries
      during such period plus
      (D) dividends (except dividends payable in its capital stock) paid on
      any
      shares of any class of Borrower’s capital stock, in each case during such
      period.

     

    (c)    Minimum
      Net Income.
       Borrower
      shall maintain on a consolidated basis as of the end of each fiscal quarter
      of
      Borrower, net income of not less than Zero Dollars ($0) for the for the period
      of four (4) consecutive fiscal quarters then ended, in each case determined
      in
      accordance with GAAP for such period, excluding, to the extent deducted in
      determining such net income, any write-offs of goodwill during such
      period.

     

    ARTICLE
      6

    NEGATIVE
      COVENANTS

     

    So
      long as Lender shall have any Commitment hereunder and until payment in full
      of
      each Loan and performance of all other obligations of Borrower under this
      Agreement and the other Loan Documents, Borrower agrees that it will not do
      any
      of the following unless Lender shall otherwise consent in writing.

     

    Section
      6.1    Dividends.
       Borrower
      shall not, and shall cause each Subsidiary to not declare or pay any dividend
      (except dividends payable in its capital stock) on any shares of any class
      of
      Borrower’s or any Subsidiary’s capital stock or apply any assets to the
      purchase, redemption or other retirement of, or set aside any sum for the
      payment of any dividends on or for the purchase, redemption or other retirement
      of, or make any other distribution by reduction of capital or otherwise in
      respect of, any shares of any class of capital stock of Borrower or any
      Subsidiary, except (i) dividends and other distribution by any Subsidiary
      to Borrower or any wholly-owned Subsidiary of Borrower; and
      (ii) redemptions of Series B Preferred Stock and

     

    
      
        
        

      

      
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    warrants
      that, by their terms, can be put to Borrower for redemption not exceed the
      aggregate sum of Twelve Million Three Hundred Thousand Dollars
      ($12,300,000).

     

    Section
      6.2    Liquidation,
      Merger, Sale of Assets.
       Borrower
      shall not, and shall cause each Subsidiary to not, merge or liquidate, dissolve
      or enter into any consolidation, joint venture, partnership or other combination
      nor sell, lease or dispose of all or any portion of its assets or of any
      Collateral other than sales of inventory in the ordinary course of
      business.

     

    Section
      6.3    Indebtedness.
       Borrower
      shall not, and shall cause each Subsidiary to not create, incur or become liable
      for any Indebtedness except: (a) the Loans; (b) existing Indebtedness
      reflected on the Current Balance Sheet or specifically disclosed in Schedule 6
      attached hereto, including any renewal, extension, refinancing in whole or
      in
      part or replacement of any such Indebtedness; provided
      that (i) the maturity date is not earlier than the Indebtedness renewed,
      extended, refinanced or replaced, and (ii) the principal amount thereof
      is
      not increased; (c) current accounts payable or accrued expenses incurred
      by
      Borrower or such Subsidiary in the ordinary course of business;
      (d) Indebtedness for obligations under Capital Leases and Indebtedness
      secured by Purchase Money Liens not to exceed the aggregate principal amount
      of
      Five Hundred Thousand Dollars ($500,000) at any time outstanding;
      (e) Indebtedness permitted under Section
      6.4;
      (f) Indebtedness of Key Technology BV arising under the BV Credit Facility
      not to exceed the aggregate principal amount of Three Million Four Hundred
      Thousand Euros (€3,400,0000) at any time outstanding; (g) Indebtedness of
      Borrower or a Subsidiary with respect to which Borrower or such Subsidiary
      and
      the party to whom the Indebtedness is owed have executed and delivered a
      subordination agreement in favor of Lender in form and substance satisfactory
      to
      Lender; (h) inter-company Indebtedness owing by any Subsidiary to Borrower
      not to exceed the aggregate principal amount of Six Million Dollars
      ($6,000,000); and (i) other Indebtedness not to exceed the aggregate
      principal amount of Two Hundred Fifty Thousand Dollars ($250,000) at any time
      outstanding.

     

    Section
      6.4    Guaranties,
      Etc. 
      Borrower shall not, and shall cause each Subsidiary to not assume, guaranty,
      endorse or otherwise become directly or contingently liable for, nor obligated
      to purchase, pay or provide funds for payment of, any obligation or Indebtedness
      of any other Person, except: (a) by endorsement of negotiable instruments
      for deposit or collection or by similar transactions in the ordinary course
      of
      business; (b) with respect to customary indemnification obligations
      incurred in connection title insurance agreements; (c) guaranty obligations
      of Borrower with respect to customer deposits received by Borrower or a
      Subsidiary; provided
      that (i) the amount of any one guaranty does not exceed the amount of
      the
      customer deposit received by Borrower or such Subsidiary in connection with
      the
      sale for which such guaranty was made and (ii) the aggregate U.S. Dollar
      equivalent amount of all such guaranties does not exceed the principal amount
      of
      Five Hundred Thousand Dollars ($500,000) at any time outstanding; and
      (d) other contingent obligations that do not exceed the aggregate sum
      of
      One Hundred Thousand Dollars ($100,000) at any time outstanding.

     

    Section
      6.5    Liens.
       Borrower
      shall not, and shall cause each Subsidiary to not create, assume or suffer
      to
      exist any Lien on any of its assets except: (a) existing Liens reflected
      on
      the Current Balance Sheet or specifically disclosed in Schedule 2
      attached hereto; (b) Liens in favor of Lender arising pursuant to the
      Security Documents; (c) Permitted Liens; (d) Liens securing
      Indebtedness under Capital Leases and Purchase Money Liens securing
      Indebtedness, in each

     

    
      
        
        

      

      
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    case
      permitted under Section
      6.3;
      (e) Liens on the assets and properties of Key Technology BV securing
      Indebtedness of Key Technology BV permitted under Section
      6.3;
      (f) Liens on the assets and properties of Borrower or a Subsidiary with
      respect to which the holder of such Lien has executed and delivered a
      subordination agreement in favor of Lender in form and substance satisfactory
      to
      Lender; and (g) additional Liens which do not at any one time secure
      Indebtedness exceeding the aggregate sum of One Hundred Thousand Dollars
      ($100,000) outstanding at any time.

     

    Section
      6.6    Investments.
       Borrower
      shall not, and shall cause each Subsidiary to not make any loan or advance
      to
      any Person, establish any subsidiaries, or purchase or otherwise acquire the
      capital stock, assets or obligations of, or any interest in, any Person, except:
      (a) Cash Equivalents; (b) inter-company loans made by Borrower
      to any
      wholly-owned Subsidiary; provided
      that (i) the aggregate principal amount of all such loans does not exceed
      Six Million Dollars ($6,000,000) and (ii) such loans are evidenced by
      an
      instrument in which Lender has a first priority security interest, duly
      perfected by such means as any Lender may deem necessary or advisable;
      (c) acquisition by Borrower of its Series B Preferred Stock and warrants
      permitted under Section
      6.1
      and (d) other loans, advances and investments not to exceed One Hundred
      Thousand Dollars ($100,000) in the aggregate at any one time
      outstanding.

     

    Section
      6.7    Operations.
       Borrower
      shall not, and shall cause each Subsidiary to not engage in any activity which
      is substantially different from or unrelated to the present business activities
      of Borrower or such Subsidiary nor discontinue any portion of Borrower’s or any
      Subsidiary’s present business activities which constitutes a substantial portion
      thereof.

     

    Section
      6.8    ERISA
      Compliance.
       Neither
      Borrower nor any member of the Controlled Group nor any Plan of any of them
      will
      (a) engage in any “prohibited transaction” (as such term is defined in §
      406 of ERISA or § 4975 of the Code; (b) incur any “accumulated funding
      deficiency” (as such term is defined in § 302 of ERISA) whether or not
      waived; (c) terminate any Pension Plan in a manner which could result
      in
      the imposition of a Lien on any property of Borrower or any member of the
      Controlled Group pursuant to § 4068 of ERISA; or (d) violate state or
      federal securities laws applicable to any Plan.

     

    Section
      6.9    Accounting
      Change.
       Borrower
      shall maintain a fiscal year ending on September 30 and shall not make
      any
      significant change in accounting policies or reporting practices other than
      changes required by GAAP or otherwise required by law.

     

    ARTICLE
      7

    EVENTS
      OF DEFAULT

     

    Section
      7.1    Events
      of Default.
       The
      occurrence of any of the following events shall constitute an “Event of Default”
      hereunder.

     

    (a)    Payment
      Default.
       Borrower
      fails to pay (i) within three (3) Business Days after the same becomes
      due,
      any amount of principal of or interest on any Loan, or (ii) within five
      (5)
      Business Days after the same becomes due, any other amount payable hereunder
      or
      under any other Loan Document; or

     

    
      
        
        

      

      
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    (b)    Breach
      of Warranty.
       Any
      representation or warranty made or deemed made by Borrower under or in
      connection with any Loan Document shall prove to have been incorrect in any
      material respect when made or deemed made; or

     

    (c)    Breach
      of Certain Covenants.
       Borrower
      shall have failed to comply with Sections 5.3,
      5.7,
      5.9,
      5.11(e),
      5.14,
      or Article 6
      of this Agreement; or

     

    (d)    Breach
      of Other Covenants.
       Borrower
      shall fail to perform or observe any other covenant, obligation or term of
      this
      Agreement or any other Loan Document and such failure shall continue unremedied
      for a period of thirty (30) days after the earlier of (i) the date upon
      which written notice thereof shall have been given to Borrower by Lender or
      (ii) the date upon which a Responsible Officer of Borrower or any
      Subsidiary knew or reasonably should have known of such failure; or

     

    (e)    Extraordinary
      Situation.
       An
      event shall occur which results in a material adverse change in Borrower’s
      financial condition or operations or an extraordinary situation shall occur
      which gives Lender reasonable grounds to believe that Borrower may not, or
      will
      be unable to, perform or observe in the normal course its obligations under
      the
      Loan Documents; or

     

    (f)    Cross-default.
       Borrower
      or any Subsidiary shall fail (i) to pay when due (whether by scheduled
      maturity, required prepayment, acceleration, demand or otherwise) any
      Indebtedness or any interest or premium thereon in excess of Two Hundred Fifty
      Thousand Dollars ($250,000) and such failure shall continue without waiver
      after
      the applicable grace period, if any, specified in the agreement or instrument
      relating to such Indebtedness, or (ii) to perform any term or covenant
      on
      its part to be performed under any agreement or instrument relating to the
      Indebtedness described in clause (i) and required to be performed and
      such
      failure shall continue without waiver after the applicable grace period, if
      any,
      specified in such agreement or instrument, if the effect of such failure to
      perform is to accelerate or to permit the acceleration of the maturity of such
      Indebtedness, or (iii) any such Indebtedness shall be declared to be
      due
      and payable or required to be prepaid (other than by regularly scheduled
      required prepayment) prior to the stated maturity thereof; or

     

    (g)    Involuntary
      Bankruptcy, Etc. (i) A
      court of competent jurisdiction shall enter a decree or order for relief in
      respect of Borrower or any Subsidiary in an involuntary case under the
      Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar
      law now or hereafter in effect, or any other similar relief shall be granted
      under any applicable federal or state law, which decree or order is not stayed;
      or (ii) an involuntary case shall be commenced against Borrower or any
      Subsidiary under the Bankruptcy Code or under any other applicable bankruptcy,
      insolvency or similar law now or hereafter in effect; or a decree or order
      of a
      court having jurisdiction in the premises for the appointment of a receiver,
      liquidator, sequestrator, trustee, custodian or other officer having similar
      powers over Borrower or any Subsidiary, or over all or a substantial part of
      its
      property, shall have been entered; or there shall have occurred the involuntary
      appointment of an interim receiver, trustee or other custodian of Borrower
      or
      any Subsidiary for all or a substantial part of its property; or a warrant
      of
      attachment, execution or similar process shall have been issued against any
      substantial part of the

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

    property
      of Borrower or any Subsidiary, and any such event described in this
      clause (ii) shall continue for ninety (90) days without having been
      dismissed, bonded, discharged or stayed; or

     

    (h)    Voluntary
      Bankruptcy, Etc. (i) Borrower
      or any Subsidiary shall have an order for relief entered with respect to it
      or
      shall commence a voluntary case under the Bankruptcy Code or under any other
      applicable bankruptcy, insolvency or similar law now or hereafter in effect,
      or
      shall consent to the entry of an order for relief in an involuntary case, or
      to
      the conversion of an involuntary case to a voluntary case, under any such law,
      or shall consent to the appointment of or taking possession by a receiver,
      trustee or other custodian for all or a substantial part of its property; or
      Borrower or any Subsidiary shall make any assignment for the benefit of
      creditors; or (ii) Borrower or any Subsidiary shall be unable, or shall
      fail generally, or shall admit in writing its inability, to pay its debts as
      such debts become due; or the board of members of Borrower or any Subsidiary
      shall adopt any resolution or otherwise authorize any action to approve any
      of
      the actions referred to herein or in Section
      7.1(g);
      or

     

    (i)    Judgment.
       A
      final judgment or order for the payment of money in excess of Two Hundred Fifty
      Thousand Dollars ($250,000) not covered by insurance or which defeats the lien
      of Lender on any Collateral valued at One Hundred Thousand Dollars ($100,000)
      or
      Borrower’s rights therein shall be rendered against Borrower or any Subsidiary
      and such judgment or order shall continue without being discharged, vacated,
      bonded or execution thereon stayed pending appeal for a period of thirty (30)
      consecutive days; or

     

    (j)    ERISA.
       Borrower
      or any member of the Controlled Group shall fail to pay when due an amount
      or
      amounts aggregating in excess of Two Hundred Fifty Thousand Dollars ($250,000)
      which it shall have become liable to pay to the PBGC or to a Plan under Section
      515 of ERISA or Title IV of ERISA; or notice of intent to terminate a Plan
      or
      Plans (other than a multi-employer plan, as defined in Section 4001(3) of
      ERISA), having aggregate Unfunded Vested Liabilities in excess of Two Hundred
      Fifty Thousand Dollars ($250,000) shall be filed under Title IV of ERISA by
      Borrower, any member of the Controlled Group, any plan administrator or any
      combination of the foregoing; or the PBGC shall institute proceedings under
      Title IV of ERISA to terminate any such Plan or Plans; or

     

    (k)    Change
      in Ownership or Control.
       There
      occurs an event or series of events by which any “person” or “group” (as such
      terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of
      1934, as amended) other than a stockholder of Borrower as of the date of this
      Agreement or the spouse or lineal descendant of any such stockholder,
      (i) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5
      under the Securities Exchange Act of 1934) directly or indirectly, of more
      than
      thirty-five percent (35%) in the aggregate of the equity securities of Borrower
      entitled to vote for members of the board of directors of Borrower or
      (ii) to the knowledge of Borrower, becomes the “beneficial owner” (as
      defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934,
      except that a person or group shall be deemed to have “beneficial ownership” of
      all securities that such person or group has the right to acquire, whether
      such
      right is exercisable immediately or only after the passage of time), directly
      or
      indirectly, of more than thirty-five percent (35%) in the aggregate of the
      equity securities of Borrower entitled to vote for members of the board of
      directors of Borrower; or

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

     

    (l)    Condemnation.
       Such
      portion of the properties of Borrower as in the reasonable opinion of Lender
      constitutes a substantial portion thereof shall be condemned, seized or
      appropriated; or

     

    (m)    Governmental
      Approvals.
       Any
      Government Approval or registration or filing with any Governmental Authority
      now or hereafter required in connection with the performance by Borrower of
      its
      obligations set forth in the Loan Documents shall be revoked, withdrawn or
      withheld or shall fail to remain in full force and effect unless in the
      reasonable opinion of Lender, such revocation, withdrawal or withholding would
      not be likely to have a material adverse affect on the ability of Borrower
      to
      perform its obligations under the Loan Documents; or

     

    (n)    Other
      Government Action.
       Any
      act of any Governmental Authority shall, in the reasonable opinion of Lender,
      deprive Borrower of any substantial right, privilege, or franchise or
      substantially restrict the exercise thereof which deprivation would, in the
      reasonable opinion of Lender, be likely to have a material adverse effect on
      the
      financial condition or operations of Borrower and such act is not revoked or
      rescinded within sixty (60) days after it becomes effective or within thirty
      (30) days after notice from Lender, whichever first occurs; or

     

    (o)    Failure
      of Security.
       Any
      Security Document ceases to be in full force and effect, or is declared by
      a
      court of competent jurisdiction to be null and void, invalid or unenforceable
      in
      any respect; or Lender shall not have or shall cease to have a valid and
      perfected Lien of first priority (other than Liens expressly permitted to be
      prior to such Lien pursuant to the terms of this Agreement) in the Collateral
      purported to be covered thereby having a fair market value, individually or
      in
      the aggregate, exceeding One Hundred Thousand Dollars ($100,000), in each case
      for any reason other than (i) the agreement of Lender or the payment
      in
      full of each Loan, or (ii) an intentional act or omission of Lender
      or an
      agent of Lender (acting upon the instruction of Lender) or the failure of Lender
      to take any action within its exclusive control; or

     

    (p)    Invalidity
      of Loan Documents.
       Any
      other Loan Document or any provision thereof, at any time after its execution
      and delivery and for any reason other than the agreement of Lender or the
      payment in full of each Loan, ceases to be in full force and effect, or is
      declared by a court of competent jurisdiction to be null and void, invalid
      or
      unenforceable in any respect; or Borrower denies that it has any or further
      liability or obligation under any other Loan Document, or purports to revoke,
      terminate or rescind any Loan Document.

     

    Section
      7.2    Consequences
      of Default.

     

    (a)     
      General.
       If
      any of the Events of Default described in Section
      7.1(g)
      or Section
      7.1(h)
      shall occur, the Commitment shall immediately terminate and, if any Loans or
      Letters of Credit shall have been made or issued, the principal of and interest
      on the Loans, the face amounts of all issued and outstanding Letters of Credit,
      and all other sums payable by Borrower under this Agreement and the other Loan
      Documents shall become immediately due and payable all without protest,
      presentment, notice or demand, all of which Borrower expressly waives. If any
      other Event of Default shall occur and be continuing, then in any such case
      and
      at

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

     

    any
      time thereafter so long as any such Event of Default shall be continuing, Lender
      may at its option immediately terminate the Commitment and, if any Loans or
      Letters of Credit shall have been made or issued, Lender may at its option
      declare the principal of and interest on the Loans, the face amounts of all
      issued and outstanding Letters of Credit and all other sums payable by Borrower
      under this Agreement and the other Loan Documents to be immediately due and
      payable, whereupon the same shall become immediately due and payable all without
      protest, presentment, notice, or demand, all of which Borrower expressly waives.
      The rights and remedies set forth in this Section
      7.2
      shall be in addition to any and all rights and remedies set forth in the other
      Loan Documents.

     

    (b)    Cash
      Collateral.
       Regardless
      of whether Borrower’s obligations to repay the Loans and to pay the face amounts
      of the Letters of Credit have been accelerated pursuant to the preceding
      sentences, Lender may realize on any or all of the Collateral by exercising
      any
      remedies provided in the Security Documents. Amounts paid or received hereunder
      in respect of issued and outstanding Letters of Credit which exceed amounts
      paid
      by Lender under such Letters of Credit shall be held (and applied) as cash
      collateral to secure the performance of all obligations of Borrower owing to
      Lender under the Letter of Credit Applications and the other Loan
      Documents.

     

    ARTICLE
      8

    MISCELLANEOUS

     

    Section
      8.1    No
      Waiver; Remedies Cumulative.
       No
      failure by Lender to exercise, and no delay in exercising, any right, power
      or
      remedy under any Loan Document shall operate as a waiver thereof, nor shall
      any
      single or partial exercise of any right, power or remedy under any Loan Document
      preclude any other or further exercise thereof or the exercise of any other
      right, power, or remedy. The exercise of any right, power, or remedy shall
      in no
      event constitute a cure or waiver of any Event of Default or prejudice the
      rights of Lender in the exercise of any right hereunder or thereunder. The
      rights and remedies provided herein and therein are cumulative and not exclusive
      of any right or remedy provided by law.

     

    Section
      8.2    Governing
      Law.
       This
      Agreement and the other Loan Documents shall be governed by and construed in
      accordance with the laws of the State of Washington (excluding its conflict
      of
      laws rules) except in the case of the Security Documents, where the location
      of
      Collateral requires that the creation, validity, perfection, or enforcement
      of
      the security interests provided for herein be governed by the laws of the
      jurisdiction where such Collateral is located.

     

    Section
      8.3    Consent
      to Jurisdiction.
       Borrower
      hereby irrevocably submits to the non-exclusive jurisdiction of any state or
      federal court sitting in the City of Walla Walla, Walla Walla County,
      Washington, in any action or proceeding brought to enforce or otherwise arising
      out of or relating to this Agreement or any other Loan Document and irrevocably
      waives to the fullest extent permitted by law any objection which it may now
      or
      hereafter have to the laying of venue in any such action or proceeding in any
      such forum, and hereby further irrevocably waives any claim that any such forum
      is an inconvenient forum. Borrower agrees that a final judgment in any such
      action or proceeding shall be conclusive and may be enforced in any other
      jurisdiction by suit on the judgment or in any other manner provided by law.
      No
      provision of this Section
      8.3
      shall impair the right of Lender or the holder of any Note to bring any action
      or

     

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

     

    proceeding
      against Borrower or its property in the courts of any other jurisdiction, and
      Borrower irrevocably submits to the nonexclusive jurisdiction of the appropriate
      courts of the jurisdiction in which Borrower is incorporated or sitting in
      any
      place where property or an office of Borrower is located.

     

    Section
      8.4    Waiver
      of Jury Trial.
      THE PARTIES HERETO WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
      PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR RELATING TO THIS AGREEMENT
      OR ANY OTHER LOAN DOCUMENT, OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT
      DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR
      THEREWITH OR ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS
      AGREEMENT OR ANY OTHER LOAN DOCUMENT, AND AGREE THAT (A) ANY SUCH ACTION
      OR
      PROCEEDING SHALL NOT BE TRIED BEFORE A JURY AND (B) ANY PARTY HERETO
      MAY
      FILE AN ORIGINAL COUNTERPART OR COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
      EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RESPECTIVE
      RIGHTS TO A TRIAL BY JURY.

     

    Section
      8.5    Notices.
       All
      notices and other communications provided for in the Loan Documents shall be
      in
      writing or (unless otherwise specified) and shall be mailed (with first class
      postage prepaid) or sent or delivered to each party by facsimile or courier
      service at the address or facsimile number set forth below, or at such other
      address as shall be designated by such party in a written notice to the other
      parties.

     

    If
      to Lender:     Banner
      Bank

                1
      East Alder
      Avenue

                Walla
      Walla, WA
      99362

                Attn:     
      Matt
      Tucker

             
Senior
      Vice President

                Facsimile:   
      (509)
      526-8735

     

    If
      to Borrower:        Key
      Technology, Inc.

                150
      Avery
      Street

                Walla
      Walla, WA
      99362

                Attn:    Thomas
      C. Madsen

                    
      Chairman and CEO

                Facsimile: (509)
      522-3378

     

    With
      a copy to:                 Tonkon
      Torp LLP

         
      (notices in respect               
1600
      Pioneer Tower

               
      Article 7
      only)                  
      888
      SW Fifth Avenue

               Portland,
      OR
      97204

               Attn:    Ronald
      L. Greenman

               Facsimile: (503)
      972-3706

     

    Except
      as otherwise specified all notices sent by mail, if duly given, shall be
      effective three (3) Business Days after deposit into the mails, all notices
      sent
      by a nationally recognized

     

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

    
       

    

    courier
      service, if duly given, shall be effective one Business Day after delivery
      to
      such courier service, and all other notices and communications if duly given
      or
      made shall be effective upon receipt. Lender shall not incur any liability
      to
      Borrower for actions taken in reliance on any telephonic or electronic mail
      notice referred to in this Agreement which Lender believes in good faith to
      have
      been given by a Responsible Officer or other Person authorized to borrow or
      give
      such telephonic notice hereunder on behalf of Borrower.

     

    Section
      8.6    Borrower’s
      Indemnity.
       Whether
      or not the transactions contemplated hereby shall be consummated, Borrower
      shall
      pay, indemnify and hold Lender and its officers, directors, employees, counsel,
      agents and attorneys-in-fact (each, an “Indemnified
      Person”)
      harmless from and against any and all liabilities, obligations, losses, damages,
      penalties, actions, judgments, suits, costs, charges, expenses or disbursements
      (including reasonable attorney’s fees, which may include, without duplication,
      the allocated charges of internal legal counsel) of any kind or nature
      whatsoever with respect to any investigation, litigation or proceeding
      (including any insolvency proceeding or appellate proceeding) related to this
      Agreement or any other Loan Document or any actual or proposed use of proceeds
      of the Loans made hereunder, whether or not any Indemnified Person is a party
      thereto (all of the foregoing, collectively the “Indemnified
      Liabilities”);
      provided,
      that Borrower shall have no obligation hereunder to any Indemnified Person
      with
      respect to Indemnified Liabilities arising from the willful misconduct or gross
      negligence of such Indemnified Person. All amounts owing under this Section
      8.6
      shall be paid promptly upon demand. At the election of any Indemnified Person,
      Borrower shall defend such Indemnified Person in respect of any Indemnified
      Liabilities using legal counsel reasonably satisfactory to such Indemnified
      Person at the sole cost and expense of Borrower.

     

    Section
      8.7    Assignment.
       This
      Agreement shall be binding upon and inure to the benefit of the parties and
      their respective Successors and assigns, except that Borrower may not assign
      or
      otherwise transfer all or any part of its rights or obligations hereunder
      without the prior written consent of Lender, and any such assignment or transfer
      purported to be made without such consent shall be ineffective. Lender may
      at
      any time assign or otherwise transfer part of its interest under this Agreement
      and other Loan Documents (including assignments for security and sales of
      participations), and to the extent of any such assignment, the assignee shall
      have the same rights and benefits against Borrower and otherwise under this
      Agreement (including the right of setoff) as if such assignee were
      Lender.

     

    Section
      8.8    Set-Off.
       In
      addition to any rights and remedies of the Lender provided by law, if an Event
      of Default has occurred and is continuing, the Lender is authorized at any
      time
      and from time to time, without prior notice to the Borrower, any such notice
      being waived by the Borrower to the fullest extent permitted by law, to set-off
      and apply any and all deposits (general or special, time or demand, provisional
      or final) at any time held by, and other indebtedness at any time owing by,
      the
      Lender to or for the credit or the account of the Borrower against any and
      all
      obligations owing to the Lender, now or hereafter existing, irrespective of
      whether or not the Lender shall have made demand under this Agreement or any
      other Loan Document and although such obligations may be contingent or
      unmatured.

     

    Section
      8.9    Severability.
       Any
      provision of this Agreement or any other Loan Document which is prohibited
      or
      unenforceable in any jurisdiction shall as to such jurisdiction be ineffective
      to the extent of such prohibition or unenforceability without invalidating
      the

     

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    

     

    the
      remaining provisions hereof or affecting the validity or enforce-ability of
      such
      provision in any other jurisdiction. To the extent permitted by applicable
      law,
      the parties waive any provision of law which renders any provision hereof
      prohibited or unenforceable in any respect.

     

    Section
      8.10    Survival.
       The
      representations, warranties and indemnities of Borrower in favor of Lender
      shall
      survive indefinitely and, without limiting the foregoing, shall survive the
      execution and delivery of the Loan Documents, the making of any Loans, the
      expiration of the Commitment and the repayment of all amounts due under the
      Loan
      Documents.

     

    Section
      8.11    Executed
      in Counterparts.
       This
      Agreement and the other Loan Documents may be executed in any number of
      counterparts and by different parties in separate counterparts, each of which
      when so executed shall be deemed to be an original and all of which taken
      together shall constitute one and the same agreement.

     

    Section
      8.12    Conditions
      Not Fulfilled.
       If
      the Commitment is not borrowed owing to nonfulfillment of any condition
      precedent specified in Article 3,
      neither party hereto shall be responsible to any other party for any damage
      or
      loss by reason thereof, except that Borrower shall be in any event liable to
      pay
      the fees, Taxes, and expenses for which it is obligated hereunder.

     

    Section
      8.13    Entire
      Agreement; Amendment, Etc.  This
      Agreement and the other Loan Documents to which Borrower is a party comprise
      the
      entire agreement of the parties hereto and may not be amended or modified except
      by written agreement of Borrower and Lender. No provision of this Agreement
      or
      any other Loan Document may be waived except in writing and then only in the
      specific instance and for the specific purpose for which given.

     

    Section
      8.14    Construction.
       In
      the event of any conflict between the terms, conditions and provisions of this
      Agreement and those of any other Loan Document, the terms, conditions and
      provisions of this Agreement shall control.

     

    Section
      8.15    References
      to Loan Agreement.
       For
      each of the other Loan Documents, any and all references to the Existing
      Agreement, howsoever defined, shall be deemed to be a reference to this
      Agreement.

     

    Section
      8.16    USA
      Patriot Act Notice.
       Lender
      hereby notifies Borrower that pursuant to the requirements of the USA Patriot
      Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001))
      (the
“Patriot
      Act”),
      it is required to obtain, verify and record information that identifies the
      Borrower, which information includes the name and address of the Borrower and
      other information that will allow the Lender to identify the Borrower in
      accordance with the Patriot Act.

     

    Section
      8.17    Oral
      Agreements Not Enforceable.

     

    ORAL
      AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR
      FROM
      ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
      LAW.

     

    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
      by
      their respective officers or agents thereunto duly authorized as of the date
      first above written.

     

    BORROWER: KEY
      TECHNOLOGY, INC., an Oregon corporation

     

    By
      /s/
      RONALD W. BURGESS

    Its
      SVP
      & CFO

     

    LENDER: BANNER
      BANK, a Washington banking corporation

     

    By
/s/
      MATT TUCKER

    Its
Senior
      Vice President

     

     

    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

    

     

    SCHEDULE 1

     

    LITIGATION

     

    
      	
              1.

            	
              From
                time to time in the normal course of business, the Borrower is party
                to
                litigation concerning patent infringement or employment issues, either
                as
                claimant or defendant.

            

    

     

    

    
      
        
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          SEA
            1634275v7 58243-2 

        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    SCHEDULE 2

     

    LIENS

     

    Part
      (a). Equipment
      Leases.

     

    
      	 	
              Lessor/Lien
                Holder

               

            	
              Equipment/Collateral

               

            	
              Location

               

            	
              Inception
                Date

               

            
	
              1.

               

            	
              Celtic
                Leasing Corp

               

            	
              CNC
                laser cutting system

              4000
                Watt Bystar 3015

               

            	
              Avery
                Street

              Walla
                Walla, WA

               

            	
              October,
                2000

            
	
              2.

               

            	
              Parametric
                Technology Corporation

               

            	
              Pro-E
                / Acuity

               

            	
              Avery
                Street

              Walla
                Walla, WA

               

            	
              April,
                2002

               

            
	
              3.

               

            	
              S.E.
                Rentals Pty Limited

               

            	
              Printer
                / Copier

               

            	
              Melbourne,
                Australia

               

            	
              May,
                2002

               

            
	
              4.

               

            	
              S.E.
                Rentals Pty Limited

               

            	
              Phone
                System

               

            	
              Melbourne,
                Australia

               

            	
              May,
                2002

               

            
	
              5.

               

            	
              Microsoft
                Licensing, Inc.

               

            	
              Platform
                Enterprise Agreement

               

            	
              Avery
                Street

              Walla
                Walla, WA

               

            	
              December,
                2003

               

            

    

     

    Part
      (b).    Real
      Property Leases.

     

    
      	
              1.

            	
              Indenture
                of Lease dated December 30, 1999, as amended, between Borrower
                and
                John E. Mobley and Nancy L. Mobley, as assumed by Richard Lane and
                Lawrence Dozal

            

    

     

    
      	
              2.

            	
              Lease
                Agreement dated April 18, 1996 between Borrower and Port of
                Walla
                Walla, a municipal corporation in the state of
                Washington

            

    

     

    
      	
              3.

            	
              Lease
                Agreement dated October 17, 1989 between Borrower and Port
                of Walla
                Walla, a municipal corporation in the state of
                Washington

            

    

     

    
      	
              4.

            	
              Lease
                Agreement dated March 1, 2002 between Borrower and Regence
                Blue Cross
                Blue Shield of Oregon

            

    

     

    
      	
              5.

            	
              Lease
                Agreement dated May 1, 2004 between Borrower and Thomas F.
                Glynn and
                Winifred P Glynn, for office space in Dingley,
                Australia

            

    

     

    
      	
              6.

            	
              Lease
                Agreement dated November 1, 2004 between Borrower and Adrianna
                del
                Rio Gonzalez for office space in Santiago de Querétaro,
                Mexico.

            

    

     

    
      	
              7.

            	
              Lease
                Agreement dated April __, 2005 between Borrower and Freshpac
                Machines
                Pty. Ltd. in Sydney, Australia.

            

    

     

    Part
      (c).    Liens
      to be Released.

     

    
      	
              1.

            	
              The
                liens held by U.S. Bank National Association which are being released
                in
                connection with this transaction.

            

    

     

    
      
        
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            1634275v7 58243-2 

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    SCHEDULE 3

     

    INTELLECTUAL
      PROPERTY MATTERS

    No
      entries.

     

    
      
        
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    SCHEDULE 4

     

    ENVIRONMENTAL
      MATTERS

     

    
      	
              1.

            	
              Borrower
                uses argon gas and liquid nitrogen in its manufacturing process,
                which is
                delivered to and stored in large bulk tanks on the exterior of Borrower’s
                manufacturing facilities.

            

    

     

    
      	
              2.

            	
              The
                use and disposal of ordinary cleaning materials for the office and
                kitchen
                and ordinary office supplies.

            

    

     

    
      	
              3.

            	
              Borrower’s
                manufacturing process produces scrap metal for which it is required
                to
                file Toxic Release Inventory Reporting - Form R with the Environmental
                Protection Agency.

            

    

     

    
      
        
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          SEA
            1634275v7 58243-2 

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    SCHEDULE 5

     

    SUBSIDIARIES

     

    
      	 	
              Name

               

            	
              Type
                of Entity

               

            	
              Jurisdiction

               

            	
              Owner

               

            	
              Percentage

               

            
	
              1.

               

            	
              KTH
                USA, Inc.

               

            	
              Corporation

               

            	
              Oregon

               

            	
              Key
                Technology, Inc.

               

            	
              100%

               

            
	
              2.

               

            	
              Key
                Technology AMVC LLC

               

            	
              Limited
                Liability Company

               

            	
              Oregon

               

            	
              Key
                Technology, Inc.

               

            	
              100%

               

            
	
              3.

               

            	
              Key
                Technology Holdings USA LLC

               

            	
              Limited
                Liability Company

               

            	
              Oregon

               

            	
              Key
                Technology, Inc.

               

            	
              100%

               

            
	
              4.

               

            	
              Suplusco
                Holding B.V.

               

            	
              Corporation

               

            	
              Netherlands

               

            	
              Key
                Technology Holdings USA LLC

               

            	
              100%

               

            
	
              5.

               

            	
              Key
                Technology B.V.

               

            	
              Corporation

               

            	
              Netherlands

               

            	
              Suplusco
                Holding B.V.

               

            	
              100%

               

            
	
              6.

               

            	
              Key
                Technology Australia Pty. Ltd.

               

            	
              Corporation

               

            	
              Australia

               

            	
              Key
                Technology, Inc.

               

            	
              100%

               

            
	
              7.

               

            	
              Freshline
                Machines Pty. Ltd.

               

            	
              Corporation

               

            	
              Australia

               

            	
              Key
                Technology Australia Pty. Ltd.

               

            	
              100%

               

            
	
              8.

               

            	
              Productos
                Key Mexicana, S. de R.L. de CV

               

            	
              Corporation

               

            	
              Mexico

               

            	
              Key
                Technology, Inc.

               

            	
              100%

               

            

    

     

    
      
        
          1

          SEA
            1634275v7 58243-2 

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    SCHEDULE 6

     

    INDEBTEDNESS

     

    1.   See
      Schedule 2.

     

    
      	
              2.

            	
              Credit
                Agreement dated August 8, 2002 among Suplusco Holding B.V.,
                Key
                Technology B.V., as borrowers, and ABN AMRO Bank, N.V., as lender,
                for a
                total of approximately €3,400,000 (U.S. equivalent approximately
                $3,400,000) comprised of a revolving line of credit, a credit facility
                and
                a term loan, each secured by assets of Suplusco Holding B.V. and
                Key
                Technology BV.

            

    

     

    SEA 1634275v7 58243-2

    1EXHIBIT 4.1

                                                                EXECUTED VERSION

================================================================================

                                    INDENTURE

                                      among

                         SLC STUDENT LOAN TRUST 2005-1,
                                 as the Issuer,

                                 CITIBANK, N.A.,
                       not in its individual capacity but
                      solely as the Eligible Lender Trustee

                      WACHOVIA BANK, NATIONAL ASSOCIATION,
                       not in its individual capacity but
                         solely as the Indenture Trustee

                                       and

                                 CITIBANK, N.A.,
                       not in its individual capacity but
                      solely as the Indenture Administrator
                    acting as agent for the Indenture Trustee

                            Dated as of June 15, 2005

================================================================================

<PAGE>

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----
                                    ARTICLE I

                              DEFINITIONS AND USAGE

Section 1.1   Definitions and Usage..........................................2
Section 1.2   Incorporation by Reference of Trust Indenture Act..............2

                                   ARTICLE II

                                    THE NOTES

Section 2.1   Form...........................................................3
Section 2.2   Execution, Authentication and Delivery.........................3
Section 2.3   Temporary Notes................................................4
Section 2.4   Registration; Registration of Transfer and Exchange............4
Section 2.5   Mutilated, Destroyed, Lost or Stolen Notes.....................5
Section 2.6   Persons Deemed Owner...........................................6
Section 2.7   Payment of Principal and Interest; Note Interest Shortfall.....6
Section 2.8   Cancellation...................................................7
Section 2.9   Release of Collateral..........................................7
Section 2.10  Book-Entry Notes...............................................7
Section 2.11  Notices to Clearing Agency.....................................9
Section 2.12  Definitive Notes...............................................9
Section 2.13  Certain Tax Forms and Treatment................................9

                                   ARTICLE III

                           COVENANTS; REPRESENTATIONS

Section 3.1   Payments to Noteholders.......................................10
Section 3.2   Maintenance of Office or Agency...............................10
Section 3.3   Money for Payments to Be Held in Trust........................11
Section 3.4   Existence.....................................................12
Section 3.5   Protection of Indenture Trust Estate..........................13
Section 3.6   Opinions as to Indenture Trust Estate.........................13
Section 3.7   Performance of Obligations; Servicing of Trust Student
               Loans........................................................13
Section 3.8   Negative Covenants............................................16
Section 3.9   Annual Statement as to Compliance.............................17
Section 3.10  Issuer May Consolidate, etc., Only on Certain Terms...........17
Section 3.11  Successor or Transferee.......................................19
Section 3.12  No Other Business.............................................19

                                       -i-
<PAGE>

Section 3.13  No Borrowing..................................................19
Section 3.14  Obligations of Servicer and Administrator.....................19
Section 3.15  Guarantees, Loans, Advances and Other Liabilities.............19
Section 3.16  Capital Expenditures..........................................19
Section 3.17  Restricted Payments...........................................19
Section 3.18  Notice of Events of Default...................................20
Section 3.19  Further Instruments and Acts..................................20
Section 3.20  Taxes.........................................................20
Section 3.21  Representations of the Issuer Regarding the Indenture
               Trustee's Security Interest..................................21
Section 3.22  Covenants of the Issuer Regarding the Indenture Trustee's
               Security Interest............................................21

                                   ARTICLE IV

                           SATISFACTION AND DISCHARGE

Section 4.1   Satisfaction and Discharge of Indenture.......................22
Section 4.2   Application of Trust Money....................................23
Section 4.3   Repayment of Moneys Held by Paying Agent......................23
Section 4.4   Auction of Trust Student Loans................................23

                                    ARTICLE V

                                    REMEDIES

Section 5.1   Events of Default.............................................24
Section 5.2   Acceleration of Maturity; Rescission and Annulment............25
Section 5.3   Collection of Indebtedness and Suits for Enforcement by
               Indenture Trustee............................................26
Section 5.4   Remedies; Priorities..........................................28
Section 5.5   Optional Preservation of the Trust Student Loans..............29
Section 5.6   Limitation of Suits...........................................30
Section 5.7   Unconditional Rights of Noteholders to Receive Principal
               and Interest.................................................30
Section 5.8   Restoration of Rights and Remedies............................30
Section 5.9   Rights and Remedies Cumulative................................31
Section 5.10  Delay or Omission Not a Waiver................................31
Section 5.11  Control by Noteholders........................................31
Section 5.12  Waiver of Past Defaults.......................................31
Section 5.13  Undertaking for Costs.........................................32
Section 5.14  Waiver of Stay or Extension Laws..............................32
Section 5.15  Action on Notes...............................................32
Section 5.16  Performance and Enforcement of Certain Obligations............32

                                      -ii-
<PAGE>

                                   ARTICLE VI

                              THE INDENTURE TRUSTEE

Section 6.1   Duties of Indenture Trustee...................................33
Section 6.2   Rights of Indenture Trustee and Indenture Administrator.......34
Section 6.3   Individual Rights of Indenture Trustee and Indenture
               Administrator................................................36
Section 6.4   Disclaimer....................................................36
Section 6.5   Notice of Defaults............................................36
Section 6.6   Reports by Indenture Administrator to Noteholders.............36
Section 6.7   Compensation and Indemnity....................................37
Section 6.8   Replacement of Indenture Trustee..............................37
Section 6.9   Replacement of Indenture Administrator........................38
Section 6.10  Successor Indenture Trustee by Merger.........................39
Section 6.11  Appointment of Co-Trustee or Separate Trustee.................39
Section 6.12  Eligibility; Disqualification.................................41
Section 6.13  Preferential Collection of Claims Against the Issuer..........41

                                   ARTICLE VII

                         NOTEHOLDERS' LISTS AND REPORTS

Section 7.1   Issuer to Furnish Indenture Administrator and Indenture
               Trustee Names and Addresses of Noteholders...................41
Section 7.2   Preservation of Information; Communications to Noteholders....41
Section 7.3   Reports by Issuer.............................................42

                                  ARTICLE VIII

                      ACCOUNTS, DISBURSEMENTS AND RELEASES

Section 8.1   Collection of Money...........................................43
Section 8.2   Trust Accounts................................................43
Section 8.3   General Provisions Regarding Accounts.........................43
Section 8.4   Release of Indenture Trust Estate.............................44
Section 8.5   Opinion of Counsel............................................44

                                   ARTICLE IX

                             SUPPLEMENTAL INDENTURES

Section 9.1   Supplemental Indentures without Consent of Noteholders........45
Section 9.2   Supplemental Indentures with Consent of Noteholders...........46
Section 9.3   Execution of Supplemental Indentures..........................47
Section 9.4   Effect of Supplemental Indenture..............................47
Section 9.5   Conformity with Trust Indenture Act...........................48

                                      -iii-
<PAGE>

Section 9.6   Reference in Notes to Supplemental Indentures.................48

                                    ARTICLE X

                               REDEMPTION OF NOTES

Section 10.1  Redemption....................................................48
Section 10.2  Form of Redemption Notice.....................................48
Section 10.3  Notes Payable on Redemption Date..............................49

                                   ARTICLE XI

                                  MISCELLANEOUS

Section 11.1  Compliance Certificates and Opinions, etc.....................49
Section 11.2  Form of Documents Delivered to Indenture Trustee or
               Indenture Administrator......................................51
Section 11.3  Acts of Noteholders...........................................52
Section 11.4  Notices, etc..................................................52
Section 11.5  Notices to Noteholders; Waiver................................53
Section 11.6  Alternate Payment and Notice Provisions.......................53
Section 11.7  Conflict with Trust Indenture Act.............................54
Section 11.8  Effect of Headings and Table of Contents......................54
Section 11.9  Successors and Assigns........................................54
Section 11.10 Separability..................................................54
Section 11.11 Benefits of Indenture.........................................54
Section 11.12 Legal Holidays................................................54
Section 11.13 GOVERNING LAW.................................................54
Section 11.14 Counterparts..................................................55
Section 11.15 Recording of Indenture........................................55
Section 11.16 Trust Obligations.............................................55
Section 11.17 No Petition...................................................55
Section 11.18 Inspection....................................................55
Section 11.19 Indenture Administrator as Agent of Indenture Trustee.........56
Section 11.20 Payments of Taxes and Other Governmental Charges..............56

                                      -iv-
<PAGE>

                       APPENDICES, SCHEDULES AND EXHIBITS

APPENDIX A        Definitions and Usage

SCHEDULE A        Schedule of Trust Student Loans
SCHEDULE B        Location of Trust Student Loan Files

EXHIBIT A         Form of Note
EXHIBIT B         Form of Note Depository Agreement

                                       -v-
<PAGE>

            INDENTURE, dated as of June 15, 2005, among SLC STUDENT LOAN TRUST
2005-1, a Delaware statutory trust (the "Issuer"), CITIBANK, N.A., a national
banking association, not in its individual capacity but solely as eligible
lender trustee on behalf of the Issuer (in such capacity, the "Eligible Lender
Trustee"), WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association,
not in its individual capacity but solely as indenture trustee (in such
capacity, the "Indenture Trustee"), and CITIBANK, N.A., a national banking
association, not in its individual capacity but solely as indenture
administrator (in such capacity, the "Indenture Administrator").

            Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the holders of the Issuer's Student Loan
Asset-Backed Notes (the "Notes"):

                                 GRANTING CLAUSE

            The Issuer and, with respect to the Trust Student Loans, the
Eligible Lender Trustee hereby Grant to the Indenture Trustee, as trustee for
the benefit of the Noteholders, effective as of the Closing Date all of their
right, title and interest in and to the following:

            (a) the Trust Student Loans, and all obligations of the Obligors
thereunder including all moneys accrued and paid thereunder on or after the
Cutoff Date and all guaranties and other rights relating to the Trust Student
Loans;

            (b) the Servicing Agreement, including the right of the Issuer to
cause the Servicer to purchase Trust Student Loans from the Issuer under
circumstances described therein;

            (c) the Sale Agreement, including the right of the Issuer to cause
the Depositor to repurchase Trust Student Loans from the Issuer under the
circumstances described therein and including the rights of the Depositor under
the Purchase Agreements;

            (d) the Purchase Agreement, to the extent that the rights of the
Depositor thereunder have been assigned to the Issuer pursuant to the Sale
Agreement, including the right of the Depositor to cause SLC to repurchase Trust
Student Loans from the Depositor under the circumstances described in the
Purchase Agreement;

            (e) the Administration Agreement;

            (f) each Guarantee Agreement, including the right of the Issuer to
cause the related Guarantor to make Guarantee Payments in respect of the Trust
Student Loans;

            (g) the Trust Accounts and all funds on deposit from time to time in
the Trust Accounts, including the Reserve Account Initial Deposit, the
Capitalized Interest Account Initial Deposit and the Collection Account Initial
Deposit, if any, and all investments and proceeds thereof (including all income
thereon); and

            (h) all present and future claims, demands, causes and choses in
action in respect of any or all of the foregoing and all payments on or under
and all proceeds of every kind and nature whatsoever in respect of any or all of
the foregoing, including all proceeds of the

<PAGE>

conversion, voluntary or involuntary, into cash or other liquid property, all
cash proceeds, accounts, accounts receivable, notes, drafts, acceptances,
chattel paper, checks, general intangibles, deposit accounts, insurance
proceeds, condemnation awards, rights to payment of any and every kind and other
forms of obligations and receivables, instruments and other property which at
any time constitute all or part of or are included in the proceeds of any of the
foregoing (collectively, the "Collateral").

            The foregoing Grant is made in trust to secure the payment of
principal of and interest on, and any other amounts owing in respect of, the
Notes, equally and ratably without prejudice, priority or distinction, to secure
compliance with the provisions of this Indenture, all as provided in this
Indenture.

            The Indenture Trustee, as indenture trustee on behalf of the
Noteholders, acknowledges such Grant, accepts the trusts under this Indenture in
accordance with the provisions of this Indenture and agrees to perform its
duties required in this Indenture to the best of its ability to the end that the
interests of the Noteholders may be adequately and effectively protected.

                                    ARTICLE I

                              DEFINITIONS AND USAGE

            Section 1.1 Definitions and Usage. Except as otherwise specified
herein or as the context may otherwise require, capitalized terms used but not
otherwise defined herein are defined in Appendix A to this Indenture, which also
contains rules as to usage that shall be applicable herein.

            Section 1.2 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:

            "Commission" means the United States Securities and Exchange
Commission.

            "indenture securities" means the Notes.

            "indenture security holder" means a Noteholder.

            "indenture to be qualified" means this Indenture.

            "indenture trustee" or "institutional trustee" means the Indenture
Trustee.

            "obligor" on the indenture securities means the Issuer and any other
obligor on the indenture securities.

            All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by Commission rule
have the meaning assigned to them by such definitions.

                                       -2-
<PAGE>

                                   ARTICLE II

                                    THE NOTES

            Section 2.1 Form. The Notes, together with the Indenture
Administrator's certificate of authentication, shall be in substantially the
forms set forth in Exhibit A, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may, consistently herewith,
be determined by the Issuer, as evidenced by their execution of the Notes. Any
portion of the text of any Note may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Note.

            The Definitive Notes shall be typewritten, printed, lithographed or
engraved or produced by any combination of these methods (with or without steel
engraved borders), all as determined by the officers executing such Notes, as
evidenced by their execution of such Notes.

            The terms of the Notes set forth in Exhibit A are part of the terms
of this Indenture.

            Each class of Notes will be represented by interests in a book-entry
note certificate deposited on the Closing Date with the Indenture Administrator,
as custodian for DTC (the "DTC Custodian"), and registered in the name of Cede &
Co. as initial nominee for DTC.

            Section 2.2 Execution, Authentication and Delivery. The Notes shall
be executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be manual or
facsimile.

            Notes bearing the manual or facsimile signature of individuals who
were at any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.

            The Indenture Administrator shall upon receipt of an Issuer Order
authenticate and deliver Notes for original issue in an aggregate principal
amount of $2,084,738,000. The aggregate principal amount of Notes Outstanding at
any time may not exceed such amount except as provided in Section 2.5.

            Each Note shall be dated the date of its authentication. The Notes
shall be issuable as registered notes in minimum denominations of $100,000 and
additional increments of $1,000.

            No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Indenture Administrator by the manual signature of one of its
authorized signatories, and such certificate upon any Note shall be conclusive
evidence, and the only evidence, that such Note has been duly authenticated and
delivered hereunder.

                                       -3-
<PAGE>

            Section 2.3 Temporary Notes. Pending the preparation of Definitive
Notes, the Issuer may execute, and upon receipt of an Issuer Order the Indenture
Trustee shall authenticate and deliver, temporary Notes which are printed,
lithographed, typewritten, mimeographed or otherwise produced, of the tenor of
the Definitive Notes in lieu of which they are issued and with such variations
not inconsistent with the terms of this Indenture determined to be appropriate
by the Responsible Officer of the Issuer executing the temporary Notes, as
evidenced by his or her execution of such temporary Notes.

            If temporary Notes are issued, the Issuer will cause Definitive
Notes to be prepared without unreasonable delay. After the preparation of
Definitive Notes, the temporary Notes shall be exchangeable for Definitive Notes
upon surrender of the temporary Notes at the office or agency of the Issuer to
be maintained as provided in Section 3.2, without charge to the Noteholder. Upon
surrender for cancellation of any one or more temporary Notes, the Issuer shall
execute and the Indenture Administrator shall authenticate and deliver in
exchange therefor a like principal amount of Definitive Notes of authorized
denominations. Until so exchanged, the temporary Notes shall in all respects be
entitled to the same benefits under this Indenture as Definitive Notes.

            Section 2.4 Registration; Registration of Transfer and Exchange. The
Issuer shall cause to be kept a register (the "Note Register") in which, subject
to such reasonable regulations as it may prescribe, the Issuer shall provide for
the registration of Notes and the registration of transfers of Notes. The
Indenture Administrator shall be "Note Registrar" for the purpose of registering
Notes and transfers of Notes as herein provided. Upon any resignation of any
Note Registrar, the Issuer shall promptly appoint a successor or, if it elects
not to make such an appointment, assume the duties of Note Registrar.

            If a Person other than the Indenture Administrator is appointed by
the Issuer as Note Registrar, the Issuer shall give the Indenture Trustee and
the Indenture Administrator prompt written notice of the appointment of such
Note Registrar and of the location, and any change in the location, of the Note
Register, and the Indenture Trustee and the Indenture Administrator shall have
the right to inspect the Note Register at all reasonable times and to obtain
copies thereof, and the Indenture Administrator shall have the right to rely
upon a certificate executed on behalf of the Note Registrar by an Executive
Officer thereof as to the names and addresses of the Noteholders and the
principal amounts and number of such Notes.

            Upon surrender for registration of transfer of any Note at the
office or agency of the Issuer to be maintained as provided in Section 3.2, if
the requirements of Section 8-401(1) of the UCC are met, the Issuer shall
execute, and the Indenture Administrator shall authenticate and the Noteholder
shall obtain from the Indenture Administrator, in the name of the designated
transferee or transferees, one or more new Notes in any authorized denominations
and a like aggregate principal amount.

            At the option of the Noteholder, Notes may be exchanged for other
Notes in any authorized denominations and a like aggregate principal amount,
upon surrender of the Notes to be exchanged at such office or agency. Whenever
any Notes are so surrendered for exchange, the Issuer shall execute, and the
Indenture Administrator shall authenticate and the Noteholder

                                       -4-
<PAGE>

shall obtain from the Indenture Administrator, the Notes which the Noteholder
making the exchange is entitled to receive.

            All Notes issued upon any registration of transfer or exchange of
Notes shall be the valid obligations of the Issuer, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.

            Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by a written instrument of
transfer in form satisfactory to the Indenture Administrator duly executed by
the Noteholder thereof or such Noteholder's attorney duly authorized in writing,
with such signature guaranteed by an "eligible guarantor institution" meeting
the requirements of the Note Registrar, which requirements include membership or
participation in Securities Transfer Agent's Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Note Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Exchange Act.

            No service charge shall be made to a Noteholder for any registration
of transfer or exchange of Notes, but the Indenture Administrator may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any registration of transfer or exchange of
Notes, other than exchanges pursuant to Section 2.3 or 9.6 not involving any
transfer.

            The preceding provisions of this Section notwithstanding, the Issuer
shall not be required to make and the Note Registrar need not register transfers
or exchanges of Notes selected for redemption or of any Note for a period of 15
days preceding the due date for any payment with respect to the Note.

            Any transfer or assignment of any Note or any interest in any Note
that is not effected pursuant to the provisions of this Indenture, such as a
transfer or assignment not reflected on the Note Register, shall be null and
void and shall not be taken into account by, or be binding upon, the Indenture
Trustee or any other party.

            Section 2.5 Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
mutilated Note is surrendered to the Indenture Administrator, or the Indenture
Administrator receives evidence to its satisfaction of the destruction, loss or
theft of any Note, and (ii) there is delivered to the Issuer and the Indenture
Administrator such security or indemnity as may be required by each of them to
hold the Issuer and the Indenture Administrator harmless, then, in the absence
of notice to the Issuer, the Note Registrar or the Indenture Administrator that
such Note has been acquired by a bona fide purchaser, and provided that the
requirements of Section 8-405 of the UCC are met, the Issuer shall execute and
upon its request the Indenture Administrator shall authenticate and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen Note, a
replacement Note; provided, however, that if any such destroyed, lost or stolen
Note, but not a mutilated Note, shall have become or within 15 days shall be due
and payable, or shall have been called for redemption, instead of issuing a
replacement Note, the Issuer may pay such destroyed, lost or stolen Note when so
due or payable or upon the Redemption Date without surrender thereof. If, after
the delivery of such replacement Note or payment of a destroyed, lost or stolen
Note pursuant to the proviso to the preceding sentence, a bona fide purchaser of
the

                                       -5-
<PAGE>

original Note in lieu of which such replacement Note was issued presents for
payment such original Note, the Issuer, the Indenture Trustee and the Indenture
Administrator shall be entitled to recover such replacement Note (or such
payment) from the Person to whom it was delivered or any Person taking such
replacement Note from such Person to whom such replacement Note was delivered or
any assignee of such Person, except a bona fide purchaser, and shall be entitled
to recover upon the security or indemnity provided therefor to the extent of any
loss, damage, cost or expense incurred by the Issuer or the Indenture Trustee in
connection therewith.

            Upon the issuance of any replacement Note under this Section, the
Issuer may require the payment by the Noteholder thereof of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other reasonable expenses (including the fees and expenses of
the Indenture Trustee and the Indenture Administrator) connected therewith.

            Every replacement Note issued pursuant to this Section in
replacement of any mutilated, destroyed, lost or stolen Note shall constitute an
original additional contractual obligation of the Issuer, whether or not the
mutilated, destroyed, lost or stolen Note shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.

            The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes.

            Section 2.6 Persons Deemed Owner. Prior to due presentment for
registration of transfer of any Note, the Issuer, the Indenture Trustee, the
Indenture Administrator and any agent of the Issuer, the Indenture Trustee or
the Indenture Administrator may treat the Person in whose name any Note is
registered (as of the day of determination) as the owner of such Note for the
purpose of receiving payments of principal of, interest, if any, on such Note
and for all other purposes whatsoever, whether or not such Note be overdue, and
neither the Issuer, the Indenture Trustee nor any agent of the Issuer or the
Indenture Trustee shall be affected by notice to the contrary.

            Section 2.7 Payment of Principal and Interest; Note Interest
Shortfall. (a) The Notes shall accrue interest as provided in the forms of Notes
in Exhibit A and such interest shall be payable on each Distribution Date as
specified therein, subject to Section 3.1. Any installment of interest or
principal, if any, payable on any Note which is punctually paid or duly provided
for by the Issuer on the applicable Distribution Date shall be paid to the
Person in whose name such Note (or one or more Predecessor Notes) is registered
on the applicable Record Date by check mailed first-class, postage prepaid to
such Person's address as it appears on the Note Register on such Record Date (or
by wire transfer in immediately available funds to the account provided by such
Person), except that, unless Definitive Notes have been issued pursuant to
Section 2.12, with respect to Notes registered on the Record Date in the name of
the nominee of the applicable Clearing Agency, for the Notes (initially, such
nominee to be Cede & Co.), payment shall be made by wire transfer in immediately
available funds to the account designated by such nominee and except for the
final installment of principal payable with respect to such Note on a
Distribution Date or on the Note Final Maturity Date for such Note which shall

                                       -6-
<PAGE>

be payable as provided below. The funds represented by any such checks returned
undelivered shall be held in accordance with Section 3.3.

            (b) The principal amount of each class of Notes shall be payable in
installments on each Distribution Date as provided in the forms of Notes set
forth in Exhibit A. Notwithstanding the foregoing, the entire unpaid principal
amount of each class of the Notes shall be due and payable, if not previously
paid, on the Note Final Maturity Date for such class of Notes and on the date on
which an Event of Default shall have occurred and be continuing if the Indenture
Trustee or the Noteholders of the Notes representing at least a majority of the
Outstanding Amount of the Notes have declared the Notes to be immediately due
and payable in the manner provided in Section 5.2. All principal payments on the
Notes shall be made pro rata to the specific class of Noteholders entitled
thereto. The Indenture Administrator shall notify the Person in whose name a
Note is registered at the close of business on the Record Date preceding the
Distribution Date on which the Issuer expects that the final installment of
principal of and interest on such Note will be paid. Such notice shall be mailed
or transmitted by facsimile prior to such final Distribution Date and shall
specify that such final installment will be payable only upon presentation and
surrender of such Note and shall specify the place where such Note may be
presented and surrendered for payment of such installment. Notices in connection
with redemptions of Notes shall be mailed to Noteholders as provided in Section
10.2.

            (c) If the Issuer defaults in a payment of interest at the
applicable Note Rate on the Notes, the Issuer shall pay the resulting Note
Interest Shortfall on the following Distribution Date as provided in the
Administration Agreement.

            Section 2.8 Cancellation. All Notes surrendered for payment,
registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Indenture Administrator, be delivered to the Indenture
Administrator and shall be promptly cancelled by the Indenture Administrator.
The Issuer may at any time deliver to the Indenture Administrator for
cancellation any Notes previously authenticated and delivered hereunder which
the Issuer may have acquired in any manner whatsoever and all Notes so delivered
shall be promptly cancelled by the Indenture Administrator. No Notes shall be
authenticated in lieu of or in exchange for any Notes cancelled as provided in
this Section, except as expressly permitted by this Indenture. All canceled
Notes may be held or disposed of by the Indenture Administrator in accordance
with its standard retention or disposal policy as in effect at the time, unless
the Issuer shall direct by an Issuer Order that they be returned to it and so
long as such Issuer Order is timely and the Notes have not been previously
disposed of by the Indenture Administrator.

            Section 2.9 Release of Collateral. Subject to Section 11.1 and the
terms of the Basic Documents, the Indenture Trustee shall release property from
the lien of this Indenture only upon (i) delivery to each Rating Agency of a
written notice stating the reason for such release and (ii) receipt of an Issuer
Request accompanied by an Officers' Certificate of the Issuer, an Opinion of
Counsel and Independent Certificates in accordance with TIA ss.ss. 314(c) and
314(d)(1) or an Opinion of Counsel in lieu of such Independent Certificates to
the effect that the TIA does not require any such Independent Certificates.

            Section 2.10 Book-Entry Notes. The Notes, upon original issuance,
will be issued in the form of typewritten Notes representing the Book-Entry
Notes, to be delivered to

                                      -7-
<PAGE>

The Depository Trust Company, as initial Clearing Agency, by the Issuer, or on
behalf of the Issuer. Such Notes shall initially be registered on the Note
Register in the name of Cede & Co., the nominee of the initial Clearing Agency,
and no Note Owner shall receive a definitive, fully registered note (a
"Definitive Note") representing such Note Owner's interest in such Note, except
as provided in Section 2.12. Unless and until Definitive Notes have been issued
to Note Owners pursuant to Section 2.12:

            (i) the provisions of this Section shall be in full force and
      effect;

            (ii) the Note Registrar, the Indenture Administrator and the
      Indenture Trustee, and their respective directors, officers, employees and
      agents, may deal with the applicable Clearing Agency for all purposes
      (including the payment of principal of and interest and other amounts on
      the Notes) as the authorized representative of the Note Owners;

            (iii) to the extent that the provisions of this Section conflict
      with any other provisions of this Indenture, the provisions of this
      Section shall control;

            (iv) the rights of Note Owners shall be exercised only through the
      applicable Clearing Agency and shall be limited to those established by
      law and agreements between such Note Owners and the applicable Clearing
      Agency and/or the applicable Clearing Agency Participants pursuant to the
      Note Depository Agreement; and unless and until Definitive Notes are
      issued pursuant to Section 2.12, the initial Clearing Agency will make
      book-entry transfers among the applicable Clearing Agency Participants and
      receive and transmit payments of principal of and interest and other
      amounts on the Notes to such applicable Clearing Agency Participants;

            (v) whenever this Indenture requires or permits actions to be taken
      based upon instructions or directions of Noteholders of Notes evidencing a
      specified percentage of the Outstanding Amount of the Notes, the
      applicable Clearing Agency shall be deemed to represent such percentage
      only to the extent that it has received instructions to such effect from
      Note Owners and/or applicable Clearing Agency Participants owning or
      representing, respectively, such required percentage of the beneficial
      interest in the Notes and has delivered such instructions to the Indenture
      Administrator and the Indenture Trustee; and

            (vi) upon acquisition or transfer of a beneficial interest in any
      Book-Entry Note by, for or with the assets of, a Benefit Plan, such Note
      Owner shall be deemed to have represented that such acquisition or
      purchase will not constitute or otherwise result in: (i) in the case of a
      Benefit Plan subject to Section 406 of ERISA or Section 4975 of the Code,
      a prohibited transaction in violation of Section 406 of ERISA or Section
      4975 of the Code which is not covered by a class or other applicable
      exemption and (ii) in the case of a Benefit Plan subject to a
      substantially similar federal, state, local or foreign law, a non-exempt
      violation of such substantially similar law. Any transfer found to have
      been made in violation of such deemed representation shall be null and
      void and of no effect.

                                       -8-
<PAGE>

            Section 2.11 Notices to Clearing Agency. Whenever a notice or other
communication is required under this Indenture to be given to Noteholders,
unless and until Definitive Notes shall have been issued to Note Owners pursuant
to Section 2.12, the Indenture Administrator or the Indenture Trustee, as the
case may be, shall give all such notices and communications specified herein to
the applicable Clearing Agency.

            Section 2.12 Definitive Notes. If (i) the Administrator advises the
Indenture Administrator in writing that a Clearing Agency (a) is closed for
business for a continuous period of 14 days (other than by reason of holiday,
statutory or otherwise), (b) announces an intention to cease business
permanently (or does so and no alternative clearing system acceptable to the
Indenture Administrator is then available), or (c) at any time, is unwilling or
unable to continue as, or ceases to be, a clearing agency registered under all
applicable laws, and a successor clearing agency which is registered as a
clearing agency under all applicable laws is not appointed by the Administrator
within 90 days of such event, (ii) the Administrator at its option advises the
Indenture Administrator in writing that it elects to terminate the book-entry
system through that Clearing Agency or (iii) after the occurrence of an Event of
Default, a Servicer Default or an Administrator Default, Note Owners
representing beneficial interests aggregating at least a majority of the
Outstanding Amount of the applicable Notes advise the applicable Clearing Agency
(which shall then notify the Indenture Trustee) in writing that the continuation
of a book-entry system through such Clearing Agency is no longer in the best
interests of such Note Owners, then the Indenture Administrator shall cause such
Clearing Agency to notify all Note Owners cleared, through such Clearing Agency,
of the occurrence of any such event and of the availability of Definitive Notes
to Note Owners requesting the same. Upon surrender to the Indenture
Administrator of the typewritten Notes representing the Book-Entry Notes by a
Clearing Agency, accompanied by registration instructions, the Issuer shall
execute and the Indenture Administrator shall authenticate the Definitive Notes
in accordance with the instructions of such Clearing Agency, which shall
include, without limitation, the identity and payment instructions for all
Noteholders of the applicable Notes. None of the Issuer, the Note Registrar, the
Indenture Trustee or the Indenture Administrator shall be liable for any delay
in delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions. Upon the issuance of Definitive
Notes, the Indenture Trustee, the Indenture Administrator and the Note Registrar
shall recognize the holders of the Definitive Notes as Noteholders.

            Upon acquisition or transfer of a Definitive Note by, for or with
the assets of, a Benefit Plan, such Note Owner shall be deemed to have
represented that such acquisition or purchase will not constitute or otherwise
result in: (i) in the case of a Benefit Plan subject to Section 406 of ERISA or
Section 4975 of the Code, a prohibited transaction in violation of Section 406
of ERISA or Section 4975 of the Code which is not covered by a class or other
applicable exemption and (ii) in the case of a Benefit Plan subject to a
substantially similar law, a non-exempt violation of such substantially similar
law. Any transfer found to have been made in violation of such deemed
representation shall be null and void and of no effect.

            Section 2.13 Certain Tax Forms and Treatment. (a) Each Noteholder
and any beneficial owner of a Note, if required by law, shall timely furnish the
Issuer or its agents any U.S. federal income tax form or certification (such as
IRS Form W-8BEN (Certification of Foreign Status as Beneficial Owner), Form
W-8IMY (Certification of Foreign Intermediary

                                       -9-
<PAGE>

Status) with all appropriate attachments, IRS Form W-9 (Request for Taxpayer
Identification Number and Certification), or IRS Form W-8ECI (Certification of
Foreign Person's Claim for Exemption from Withholding on Income Effectively
Connected with Conduct of a U.S. Trade or Business) or any successors to such
IRS forms) that the Issuer or its agents may reasonably request and shall update
or replace such form or certification in accordance with its terms or its
subsequent amendments. The Noteholder understands that the Issuer may require
certification acceptable to it (i) to permit the Issuer to make payments to it
without, or at a reduced rate of, withholding or (ii) to enable the Issuer to
qualify for a reduced rate of withholding or back-up withholding in any
jurisdiction from or through which the Issuer receives payments on its assets.
The Noteholder agrees to provide any such certification that is requested by the
Issuer.

            (b) The Issuer, the Owner Trustee, the Depositor, the Indenture
Trustee and each Noteholder agree to treat such Notes as indebtedness for U.S.
federal, state and local income and franchise tax purposes and further agree not
to take any action inconsistent with such treatment, unless required by law.

            (c) It is intended that the Trust be classified for U.S. federal
income tax purposes as a grantor trust or an entity disregarded from its owner,
and not as an association (or publicly traded partnership) taxable as a
corporation. None of the Issuer, the Depositor, or the Indenture Trustee shall
cause the Trust to be treated as an association taxable as a corporation for
U.S. federal income tax purposes. No election shall be made to treat the Trust
as an association taxable as a corporation without the unanimous consent of all
Noteholders.

            (d) The Administrator shall on behalf of the Issuer prepare, execute
and timely file (or cause to be prepared, appropriately executed and timely
filed) all federal, state and local tax and information returns, reports,
information, statements and schedules required to be filed by or in respect of
the Issuer, in accordance with this Indenture and as may be required under
applicable tax laws.

                                   ARTICLE III

                           COVENANTS; REPRESENTATIONS

            Section 3.1 Payments to Noteholders. The Issuer shall duly and
punctually pay the principal and interest, if any, with respect to the Notes in
accordance with the terms of the Notes and this Indenture. Without limiting the
foregoing, the Issuer shall cause to be distributed to Noteholders in accordance
with the Administration Agreement that portion of the amounts on deposit in the
Trust Accounts on a Distribution Date (other than any Eligible Investments
deposited therein that will mature on the Business Day preceding a subsequent
Distribution Date) which the Noteholders are entitled to receive pursuant to
Sections 2.7 and 2.8 of the Administration Agreement. Amounts properly withheld
under the Code by any Person from a payment to any Noteholder of interest and/or
principal shall be considered as having been paid by the Issuer to such
Noteholder for all purposes of this Indenture.

            Section 3.2 Maintenance of Office or Agency. The Issuer shall
maintain in the Borough of Manhattan, The City of New York and in Ireland, so
long as any of the Notes are listed on the Irish Stock Exchange and the rules of
such exchange so require, or in such other

                                      -10-
<PAGE>

jurisdiction if any of the Notes are listed on another stock exchange of
international standing and the rules of such other exchange so require, an
office or agency where Notes may be surrendered for registration of transfer or
exchange, and where notices and demands to or upon the Issuer in respect of the
Notes and this Indenture may be served. The Issuer hereby initially appoints the
Indenture Administrator and McCann FitzGerald Listing Services Limited, Dublin,
Ireland, respectively, to serve as its agents for the foregoing purposes. The
Issuer shall give prompt written notice to the Indenture Trustee of the
locations, and of any change in the locations, of any such offices or agencies.
If at any time the Issuer shall fail to maintain any such offices or agencies or
shall fail to furnish the Indenture Trustee with the addresses thereof, such
surrenders, notices and demands may be made or served at the Corporate Trust
Office, and the Issuer hereby appoints the Indenture Trustee as its agent to
receive all such surrenders, notices and demands.

            Section 3.3 Money for Payments to Be Held in Trust. As provided in
Section 8.2(a) and (b), all payments of amounts due and payable with respect to
any Notes that are to be made from amounts distributed from the Collection
Account or the Reserve Account pursuant to Sections 2.7 and 2.8 of the
Administration Agreement shall be made on behalf of the Issuer by the Indenture
Administrator or by another Paying Agent, and no amounts so distributed from the
Collection Account for payments to Noteholders shall be paid over to the Issuer
except as provided in this Section.

            On or before the Business Day next preceding each Distribution Date
and Redemption Date, the Issuer shall distribute or cause to be distributed to
the Indenture Administrator (or any other Paying Agent) an aggregate sum
sufficient to pay the amounts then becoming due under the Notes, such sum to be
held in trust for the benefit of the Persons entitled thereto and shall promptly
notify the Indenture Trustee and (unless the Paying Agent is the Indenture
Trustee), the Indenture Administrator, of its action or failure so to act.

            The Issuer shall cause each Paying Agent other than the Indenture
Administrator and the Indenture Trustee to execute and deliver to the Indenture
Trustee an instrument in which such Paying Agent shall agree with the Indenture
Trustee (and if the Indenture Trustee acts as Paying Agent, it hereby so
agrees), subject to the provisions of this Section, that such Paying Agent will:

            (i) hold all sums held by it for the payment of amounts due with
      respect to the Notes in trust for the benefit of the Persons entitled
      thereto until such sums shall be paid to such Persons or otherwise
      disposed of as herein provided and pay such sums to such Persons as herein
      provided;

            (ii) give the Indenture Trustee notice of any default by the Issuer
      of which a Responsible Officer of the Paying Agent has actual knowledge
      (or any other obligor upon the Notes) in the making of any payment
      required to be made with respect to the Notes;

            (iii) at any time during the continuance of any such default, upon
      the written request of the Indenture Trustee, forthwith pay to the
      Indenture Trustee all sums so held in trust by such Paying Agent;

                                      -11-
<PAGE>

            (iv) immediately resign as a Paying Agent and forthwith pay to the
      Indenture Trustee all sums held by it in trust for the payments due under
      the Notes if at any time it ceases to meet the standards required to be
      met by a Paying Agent at the time of its appointment; and

            (v) comply with all requirements of the Code with respect to the
      withholding from any payments made by it on any Notes of any applicable
      withholding taxes imposed thereon and with respect to any applicable
      reporting requirements in connection therewith.

            The Indenture Administrator, as the initial Paying Agent, hereby
agrees to the provisions of clauses (i) through (v) above.

            The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by Issuer
Order direct any Paying Agent to pay to the Indenture Administrator all sums
held in trust by such Paying Agent, such sums to be held by the Indenture
Administrator upon the same trusts as those upon which the sums were held by
such Paying Agent; and upon such payment by any Paying Agent to the Indenture
Administrator, such Paying Agent shall be released from all further liability
with respect to such money.

            Subject to applicable laws with respect to escheat of funds, any
money held by the Indenture Administrator or any Paying Agent in trust for the
payment of any amount due with respect to any Note and remaining unclaimed for
two years after such amount has become due and payable shall be discharged from
such trust and be paid to the Issuer on Issuer Request or if the Issuer has been
terminated to the Depositor upon its written request; and the Noteholder thereof
shall thereafter, as an unsecured general creditor, look only to the Issuer for
payment thereof (but only to the extent of the amounts so paid to the Issuer),
and all liability of the Indenture Trustee, the Indenture Administrator or such
Paying Agent with respect to such trust money shall thereupon cease; provided,
however, that the Indenture Administrator or such Paying Agent, before being
required to make any such repayment, shall at the expense and direction of the
Issuer cause to be published once, in a newspaper published in the English
language, customarily published on each Business Day and of general circulation
in The City of New York, or in such other jurisdiction if any of the Notes are
listed on another stock exchange of international standing and the rules of such
other exchange so require, notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such publication, any unclaimed balance of such money then remaining
will be repaid to the Issuer. The Indenture Administrator shall also adopt and
employ, at the expense of the Issuer, any other reasonable means of notification
of such repayment (including mailing notice of such repayment to Noteholders
whose Notes have been called but have not been surrendered for redemption or
whose right to or interest in moneys due and payable but not claimed is
determinable from the records of the Indenture Trustee, the Indenture
Administrator or any Paying Agent, at the last address of record for each such
Noteholder).

            Section 3.4 Existence. The Issuer shall keep in full effect its
existence, rights and franchises as a statutory trust under the laws of the
State of Delaware (unless it becomes, or any successor Issuer hereunder is or
becomes, organized under the laws of any other State or of

                                      -12-
<PAGE>

the United States of America, in which case the Issuer shall keep in full effect
its existence, rights and franchises under the laws of such other jurisdiction)
and shall obtain and preserve its qualification to do business in each
jurisdiction in which such qualification is or shall be necessary to protect the
validity and enforceability of this Indenture, the Notes, the Collateral and
each other instrument or agreement included in the Indenture Trust Estate.

            Section 3.5 Protection of Indenture Trust Estate. The Issuer will
from time to time execute and deliver all such supplements and amendments
hereto, all such financing statements and continuation statements and will take
such other action necessary or advisable to:

            (i) maintain or preserve the lien and security interest (and the
      priority thereof) of this Indenture or carry out more effectively the
      purposes hereof;

            (ii) perfect, publish notice of or protect the validity of any grant
      made or to be made by this Indenture;

            (iii) enforce any of the Collateral; or

            (iv) preserve and defend title to the Indenture Trust Estate and the
      rights of the Indenture Trustee and the Noteholders in such Indenture
      Trust Estate against the claims of all persons and parties.

            The Issuer hereby designates the Indenture Administrator its agent
and attorney-in-fact to execute any financing statement, continuation statement
or other instrument required to be executed pursuant to this Section.

            Section 3.6 Opinions as to Indenture Trust Estate. (a) On the
Closing Date, the Issuer shall furnish to the Indenture Trustee and the
Indenture Administrator an Opinion of Counsel either stating that, in the
opinion of such counsel, such action has been taken with respect to the
recording and filing of this Indenture as is necessary to perfect and make
effective the lien and security interest of this Indenture and reciting the
details of such action, or stating that, in the opinion of such counsel, no such
action is necessary to make such lien and security interest effective.

            (b) On or before December 31 in each calendar year, beginning in
2005, the Issuer shall furnish to the Indenture Trustee and the Indenture
Administrator an Opinion of Counsel either stating that, in the opinion of such
counsel, such action has been taken with respect to the recording, filing,
re-recording and refiling of this Indenture and any indentures supplemental
hereto as is necessary to maintain the lien and security interest created by
this Indenture and relating the details of such action or stating that in the
opinion of such counsel no such action is necessary to maintain such lien and
security interest. Such Opinion of Counsel shall also describe the recording,
filing, recording and refiling of this Indenture and any indentures supplemental
hereto that will, in the opinion of such counsel, be required to maintain the
lien and security interest of this Indenture until December 31 in the following
calendar year.

            Section 3.7 Performance of Obligations; Servicing of Trust Student
Loans. (a) The Issuer will not take any action and will use its best efforts not
to permit any action to be taken by others that would release any Person from
any of such Person's material covenants or

                                      -13-
<PAGE>

obligations under any instrument or agreement included in the Indenture Trust
Estate or that would result in the amendment, hypothecation, subordination,
termination or discharge of, or impair the validity or effectiveness of, any
such instrument or agreement, except as expressly provided in this Indenture,
any other Basic Document or such other instrument or agreement.

            (b) The Issuer may contract with other Persons to assist it in
performing its duties under this Indenture, and any performance of such duties
by a Person identified to the Indenture Administrator and the Indenture Trustee
in an Officers' Certificate of the Issuer shall be deemed to be action taken by
the Issuer; provided, however, the Issuer shall not be liable for any acts of
Persons with whom the Issuer has contracted with reasonable care. Initially, the
Issuer has contracted with the Servicer and the Administrator to assist the
Issuer in performing its duties under this Indenture. The Issuer shall give
written notice to the Indenture Administrator, the Indenture Trustee and each
Rating Agency of any such contract with any other Person.

            (c) The Issuer shall punctually perform and observe all of its
obligations and agreements contained in this Indenture, the other Basic
Documents and the instruments and agreements included in the Indenture Trust
Estate, including filing or causing to be filed all UCC financing statements and
continuation statements prepared by the Issuer and required to be filed by the
terms of this Indenture and the Administration Agreement in accordance with and
within the time periods provided for herein and therein. Except as otherwise
expressly provided therein, the Issuer shall not waive, amend, modify,
supplement or terminate any Basic Document or any provision thereof without the
consent of the Indenture Trustee or the Noteholders of at least a majority of
the Outstanding Amount of the Notes. The Issuer shall give written notice to
each Rating Agency of any waiver, amendment, modification, supplement or
termination that requires the consent of the Indenture Trustee or the
Noteholders of at least a majority of the Outstanding Amount of the Notes.

            (d) If a Responsible Officer of the Issuer shall have knowledge of
the occurrence of a Servicer Default or an Administrator Default under the
Servicing Agreement or the Administration Agreement, respectively, the Issuer
shall promptly notify the Indenture Trustee, the Indenture Administrator and the
Rating Agencies thereof, and shall specify in such notice the action, if any,
the Issuer is taking with respect to such default. If a Servicer Default shall
arise from the failure of the Servicer to perform any of its duties or
obligations under the Servicing Agreement, or an Administrator Default shall
arise from the failure of the Administrator to perform any of its duties or
obligations under the Administration Agreement, as the case may be, with respect
to the Trust Student Loans, the Issuer shall take all reasonable steps available
to it to enforce its rights under the Basic Documents in respect of such
failure.

            (e) As promptly as possible after the giving of notice of
termination to the Servicer of the Servicer's rights and powers, pursuant to
Section 5.1 of the Servicing Agreement, or to the Administrator of the
Administrator's rights and powers, pursuant to Section 5.1 of the Administration
Agreement, the Issuer shall appoint a successor servicer (the "Successor
Servicer") or a successor administrator (the "Successor Administrator"),
respectively, and such Successor Servicer or Successor Administrator, as the
case may be, shall accept its appointment by a written assumption in a form
acceptable to the Indenture Administrator. In the event that a Successor
Servicer or Successor Administrator has not been appointed and accepted its

                                      -14-
<PAGE>

appointment at the time when the Servicer or Administrator, as the case may be,
ceases to act as Servicer or Administrator, respectively, the Indenture
Administrator without further action shall automatically be appointed the
Successor Servicer or Successor Administrator, as the case may be. The Indenture
Administrator may resign as the Successor Servicer or the Successor
Administrator by giving written notice of resignation to the Issuer and in such
event will be released from such duties and obligations, such release not to be
effective until the date a new servicer or a new administrator enters into an
agreement with the Issuer as provided below; provided, however, that nothing
herein shall require or permit the Indenture Administrator to act as Servicer,
or otherwise service the Trust Student Loans, in violation of the Higher
Education Act. Upon delivery of any such notice to the Issuer, the Issuer shall
obtain a new servicer as the Successor Servicer under the Servicing Agreement or
a new administrator as the Successor Administrator under the Administration
Agreement, as the case may be. Any Successor Servicer or Successor
Administrator, other than the Indenture Administrator, shall (i) be an
established institution (A) that satisfies any requirements of the Higher
Education Act applicable to servicers and (B) whose regular business includes
the servicing or administration of student loans and (ii) enter into a servicing
agreement or an administration agreement, respectively, with the Issuer having
substantially the same provisions as the provisions of the Servicing Agreement
and the Administration Agreement, as applicable. If within 30 days after the
delivery of the notice referred to above, the Issuer shall not have obtained
such a new servicer or new administrator, as the case may be, the Indenture
Administrator may appoint, or may petition a court of competent jurisdiction to
appoint, a Successor Servicer or Successor Administrator; provided, however,
that such right to appoint or to petition for the appointment of any such
successor shall in no event relieve the Indenture Administrator from any
obligations otherwise imposed on it under the Basic Documents until such
successor has in fact assumed such appointment. In connection with any such
appointment, the Indenture Administrator may make such arrangements for the
compensation of such successor as it and such successor shall agree, subject to
the limitations set forth below and in the Servicing Agreement or Administration
Agreement, as applicable, and in accordance with Section 5.2 of the Servicing
Agreement and Section 5.2 of the Administration Agreement, the Issuer shall
enter into an agreement with such successor for the servicing or administration
of the Trust Student Loans (such agreement to be in form and substance
satisfactory to the Indenture Trustee). If the Indenture Administrator shall
succeed as provided herein to the Servicer's duties as Servicer with respect to
the Trust Student Loans, or the Administrator's duties with respect to the
Issuer and the Trust Student Loans, as the case may be, it shall do so in its
individual capacity and not in its capacity as Indenture Administrator and,
accordingly, the provisions of Article VI hereof shall be inapplicable to the
Indenture Trustee in its duties as the successor to the Servicer or the
Administrator, as the case may be, and the servicing or administration of the
Trust Student Loans. In case the Indenture Administrator shall become successor
to the Servicer or the Administrator, the Indenture Administrator shall be
entitled to appoint as Servicer or as Administrator, as the case may be, any one
of its Affiliates, provided that such appointment shall not affect or alter in
any way the liability of the Indenture Administrator as Successor Servicer or
Successor Administrator, respectively, in accordance with the terms hereof.

            (f) Upon any termination of the Servicer's rights and powers
pursuant to the Servicing Agreement, or any termination of the Administrator's
rights and powers pursuant to the Administration Agreement, as the case may be,
the Issuer shall promptly notify the Indenture Administrator and each Rating
Agency. As soon as a Successor Servicer or a Successor

                                      -15-
<PAGE>

Administrator is appointed, the Issuer shall notify the Indenture Administrator
and each Rating Agency of such appointment, specifying in such notice the name
and address of such Successor Servicer or such Successor Administrator.

            (g) Without derogating from the absolute nature of the assignment
granted to the Indenture Trustee under this Indenture or the rights of the
Indenture Trustee hereunder, the Issuer agrees that it will not, without the
prior written consent of the Indenture Trustee or the Noteholders of at least a
majority in Outstanding Amount of the Notes, amend, modify, waive, supplement,
terminate or surrender, or agree to any amendment, modification, supplement,
termination, waiver or surrender of, the terms of any Collateral or the Basic
Documents, except to the extent otherwise provided in the Basic Documents, or
waive timely performance or observance by the Servicer, the Administrator, the
Depositor, SLC, the Issuer, the Owner Trustee, the Eligible Lender Trustee or
the Indenture Administrator under the Basic Documents; provided, however, that
no such amendment shall (i) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, distributions that are required to be made
for the benefit of the Noteholders, or (ii) reduce the aforesaid percentage of
the Notes which are required to consent to any such amendment, without the
consent of the Noteholders of all the Outstanding Notes. If any such amendment,
modification, supplement or waiver shall be so consented to by the Indenture
Trustee or such Noteholders, the Issuer shall give written notice thereof to
each Rating Agency and agrees, promptly following a request by the Indenture
Trustee to do so, to execute and deliver, in its own name and at its own
expense, such agreements, instruments, consents and other documents as the
Indenture Trustee may deem necessary or appropriate in the circumstances. The
Issuer shall be entitled to receive and rely upon an opinion of its counsel that
any such amendment or modification will not materially adversely affect the
rights or security of the Noteholders.

            Section 3.8 Negative Covenants. So long as any Notes are
Outstanding, the Issuer shall not:

            (i) except as expressly permitted by this Indenture or any other
      Basic Document, sell, transfer, exchange or otherwise dispose of any of
      the properties or assets of the Issuer, including those included in the
      Indenture Trust Estate, unless directed to do so by the Indenture
      Administrator;

            (ii) claim any credit on, or make any deduction from the principal
      or interest payable in respect of, the Notes (other than amounts properly
      withheld from such payments under the Code or applicable state law) or
      assert any claim against any present or former Noteholder by reason of the
      payment of the taxes levied or assessed upon any part of the Indenture
      Trust Estate; or

            (iii) (A) permit the validity or effectiveness of this Indenture to
      be impaired, or permit the lien of this Indenture to be amended,
      hypothecated, subordinated, terminated or discharged, or permit any Person
      to be released from any covenants or obligations with respect to the Notes
      under this Indenture except as may be expressly permitted hereby, (B)
      permit any lien, charge, excise, claim, security interest, mortgage or
      other encumbrance (other than the lien of this Indenture) to be created on
      or extend to or otherwise arise upon or burden the Indenture Trust Estate
      or any part thereof or any

                                      -16-
<PAGE>

      interest therein or the proceeds thereof (other than tax liens and other
      liens that arise by operation of law, and other than as expressly
      permitted by the Basic Documents) or (C) permit the lien of this Indenture
      not to constitute a valid first priority (other than with respect to any
      such tax or other lien) security interest in the Indenture Trust Estate.

            Section 3.9 Annual Statement as to Compliance. The Issuer will
deliver to the Indenture Trustee, the Indenture Administrator and each Rating
Agency, within 90 days after the end of each fiscal year of the Issuer
(commencing with the fiscal year ending December 31, 2005), an Officers'
Certificate of the Administrator stating that:

            (i) a review of the activities of the Issuer during such year and of
      performance under this Indenture has been made under the supervision of an
      Authorized Officer of the Administrator; and

            (ii) to the best of such Authorized Officer's knowledge, based on
      such review, the Issuer has complied with all conditions and covenants
      under this Indenture throughout such year, or, if there has been a default
      in the compliance of any such condition or covenant, specifying each such
      default known to such Authorized Officer and the nature and status
      thereof.

            Section 3.10 Issuer May Consolidate, etc., Only on Certain Terms.
(a) The Issuer shall not consolidate or merge with or into any other Person,
unless:

            (i) the Person (if other than the Issuer) formed by or surviving
      such consolidation or merger shall be a Person organized and existing
      under the laws of the United States of America or any State and shall
      expressly assume, by an indenture supplemental hereto, executed and
      delivered to the Indenture Trustee, in form satisfactory to the Indenture
      Trustee, the due and punctual payment of the principal of, and interest,
      if any, on all Notes and the performance or observance of every agreement
      and covenant of this Indenture and the other Basic Documents on the part
      of the Issuer to be performed or observed, all as provided herein;

            (ii) immediately after giving effect to such transaction, no Default
      shall have occurred and be continuing;

            (iii) the Rating Agency Condition shall have been satisfied with
      respect to such transaction;

            (iv) the Issuer shall have received an Opinion of Counsel (and shall
      have delivered copies thereof to the Indenture Trustee and the Indenture
      Administrator) to the effect that such transaction will not have any
      material adverse Federal or Delaware state tax consequence to the Issuer
      or any Noteholder;

            (v) any action as is necessary to maintain the lien and security
      interest created by this Indenture shall have been taken; and

            (vi) the Issuer shall have delivered to the Indenture Trustee (and
      shall have delivered a copy thereof to the Indenture Administrator) an
      Officers' Certificate of the

                                      -17-
<PAGE>

      Issuer and an Opinion of Counsel each stating that such consolidation or
      merger and such supplemental indenture comply with this Article III and
      that all conditions precedent herein provided for relating to such
      transaction have been complied with (including any filing required by the
      Exchange Act).

            (b) The Issuer shall not convey or transfer all or substantially all
of its properties or assets, including those included in the Indenture Trust
Estate, to any Person, unless:

            (i) the Person that acquires by conveyance or transfer the
      properties and assets of the Issuer the conveyance or transfer of which is
      hereby restricted shall (A) be a United States citizen or a Person
      organized and existing under the laws of the United States of America or
      any State, (B) expressly assume, by an indenture supplemental hereto,
      executed and delivered to the Indenture Trustee and the Indenture
      Administrator, in form satisfactory to the Indenture Trustee and the
      Indenture Administrator, the due and punctual payment of the principal of,
      and interest, if any, on all Notes and the performance or observance of
      every agreement and covenant of this Indenture on the part of the Issuer
      to be performed or observed, all as provided herein, (C) expressly agree
      by means of such supplemental indenture that all right, title and interest
      so conveyed or transferred shall be subject and subordinate to the rights
      of Noteholders, (D) unless otherwise provided in such supplemental
      indenture, expressly agree to indemnify, defend and hold harmless the
      Issuer against and from any loss, liability or expense arising under or
      related to this Indenture and the Notes and (E) expressly agree by means
      of such supplemental indenture that such Person (or if a group of Persons,
      then one specified Person) shall make all filings with the Commission (and
      any other appropriate Person) required by the Exchange Act in connection
      with the Notes;

            (ii) immediately after giving effect to such transaction, no Default
      shall have occurred and be continuing;

            (iii) the Rating Agency Condition shall have been satisfied with
      respect to such transaction;

            (iv) the Issuer shall have received an Opinion of Counsel (and shall
      have delivered copies thereof to the Indenture Trustee and the Indenture
      Administrator) to the effect that such transaction will not have any
      material adverse Federal or Delaware state tax consequence to the Issuer
      or any Noteholder;

            (v) any action as is necessary to maintain the lien and security
      interest created by this Indenture shall have been taken; and

            (vi) the Issuer shall have delivered to the Indenture Trustee (and
      shall have delivered a copy thereof to the Indenture Administrator) an
      Officers' Certificate of the Issuer and an Opinion of Counsel each stating
      that such conveyance or transfer and such supplemental indenture comply
      with this Article III and that all conditions precedent herein provided
      for relating to such transaction have been complied with (including any
      filing required by the Exchange Act).

                                      -18-
<PAGE>

            Section 3.11 Successor or Transferee. (a) Upon any consolidation or
merger of the Issuer in accordance with Section 3.10(a), the Person formed by or
surviving such consolidation or merger (if other than the Issuer) shall succeed
to, and be substituted for, and may exercise every right and power of, the
Issuer under this Indenture with the same effect as if such Person had been
named as the Issuer herein.

            (b) Upon a conveyance or transfer of all the assets and properties
of the Issuer pursuant to Section 3.10(b), SLC Student Loan Trust 2005-1 will be
released from every covenant and agreement of this Indenture to be observed or
performed on the part of the Issuer with respect to the Notes immediately upon
the delivery by the Issuer of written notice to the Indenture Trustee and the
Indenture Administrator stating that SLC Student Loan Trust 2005-1 is to be so
released.

            Section 3.12 No Other Business. The Issuer shall not engage in any
business other than financing, purchasing, owning, selling and managing the
Trust Student Loans and the other assets of the Issuer and related proceeds in
the manner contemplated by this Indenture and the other Basic Documents and
activities incidental thereto.

            Section 3.13 No Borrowing. The Issuer shall not issue, incur,
assume, guarantee or otherwise become liable, directly or indirectly, for any
indebtedness except for the Notes.

            Section 3.14 Obligations of Servicer and Administrator. The Issuer
shall cause the Servicer to comply with Sections 3.1, 3.2 and 3.3 of the
Administration Agreement and Section 3.7 of the Servicing Agreement and the
Administrator to comply with Sections 2.11, 3.1, 3.2 and 3.3 of the
Administration Agreement.

            Section 3.15 Guarantees, Loans, Advances and Other Liabilities.
Except as contemplated by this Indenture and the other Basic Documents, the
Issuer shall not make any loan or advance or credit to, or guarantee (directly
or indirectly or by an instrument having the effect of assuring another's
payment or performance on any obligation or capability of so doing or
otherwise), endorse or otherwise become contingently liable, directly or
indirectly, in connection with the obligations, stocks or dividends of, or own,
purchase, repurchase or acquire (or agree contingently to do so) any stock,
obligations, assets or securities of, or any other interest in, or make any
capital contribution to, any other Person.

            Section 3.16 Capital Expenditures. The Issuer shall not make any
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personalty).

            Section 3.17 Restricted Payments. The Issuer shall not, directly or
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Owner Trustee or any owner of a beneficial interest in the
Issuer or otherwise with respect to any ownership or equity interest or security
in or of the Issuer or to the Servicer or the Administrator, (ii) redeem,
purchase, retire or otherwise acquire for value any such ownership or equity
interest or security or (iii) set aside or otherwise segregate any amounts for
any such purpose; provided, however, that the Issuer may make, or cause to be
made, distributions to the Servicer, the Owner Trustee, the Eligible Lender

                                      -19-
<PAGE>

Trustee, the Indenture Trustee, the Indenture Administrator, the Noteholders,
the Administrator and the Depositor as contemplated by, and to the extent funds
are available for such purpose under, this Indenture and the other Basic
Documents. The Issuer will not, directly or indirectly, make payments to or
distributions from the Collection Account except in accordance with this
Indenture and the other Basic Documents.

            Section 3.18 Notice of Events of Default. The Issuer shall give the
Indenture Trustee, the Indenture Administrator and the Rating Agencies prompt
written notice of each Event of Default hereunder. The Issuer shall give the
Indenture Trustee, the Indenture Administrator and the Rating Agencies prompt
written notice of each default on the part of (i) the Depositor of its
obligations under the Sale Agreement, (ii) SLC of its obligations under the
Purchase Agreement, (iii) the Servicer of its obligations under the Servicing
Agreement, or (iv) the Administrator of its obligations under the Administration
Agreement. In addition, the Issuer shall deliver to the Indenture Trustee, the
Indenture Administrator and each Rating Agency, within five days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
the Issuer of any event which with the giving of notice and the lapse of time
would become an Event of Default under Section 5.1(iii), its status and what
action the Issuer is taking or proposes to take with respect thereto.

            Section 3.19 Further Instruments and Acts. Upon request of the
Indenture Trustee and the Indenture Administrator, the Issuer will execute and
deliver such further instruments and do such further acts as may be reasonably
necessary or proper to carry out more effectively the purpose of this Indenture.

            Section 3.20 Taxes. (a) The Issuer shall file (or cause to be filed)
all material federal, state, county, local and foreign income, franchise and
other tax returns required to be filed by it, and shall pay all material taxes
reflected as due thereon. There is no pending dispute with any taxing authority
that, if determined adversely to the Issuer, would result in the assertion by
any taxing authority of any material tax deficiency, and the Issuer has no
knowledge of a proposed liability for any tax year to be imposed upon such
entity's properties or assets for which there is not an adequate reserve
reflected in such entity's current financial statements. Issuer is not aware of
any judgment or tax lien filings against Issuer.

            (b) The Issuer intends to treat the transactions contemplated by the
Sale Agreement as an absolute transfer, and not a pledge, of the Trust Student
Loans from the Depositor for financial accounting purposes. The Issuer and the
Depositor intend to treat the assets of the Issuer as assets owned by the
Depositor for U.S. federal income tax and financial accounting purposes.

            (c) Each grant of the Trust Student Loans (including all payments
due or to become due thereunder) by the Issuer pursuant to this Indenture is not
subject to and will not result in any tax, fee or governmental charge payable by
the Issuer or the Depositor to any federal, state or local government.

                                      -20-
<PAGE>

            Section 3.21 Representations of the Issuer Regarding the Indenture
Trustee's Security Interest. The Issuer hereby represents and warrants for the
benefit of the Indenture Trustee and the Noteholders as follows:

            (a) This Indenture creates a valid and continuing security interest
(as defined in the applicable UCC in effect in the State of New York) in the
Trust Student Loans in favor of the Indenture Trustee, 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 Issuer.

            (b) The Trust Student Loans constitute either "general intangibles"
or "instruments" within the meaning of the applicable UCC.

            (c) The Issuer owns and has good and marketable title to the Trust
Student Loans free and clear of any lien, charge, security interest, mortgage or
other encumbrance, claim or encumbrance of any Person.

            (d) The Issuer has caused or will have caused, within 10 days, the
filing of all appropriate financing statements in the proper filing office in
the appropriate jurisdictions under applicable law in order to perfect the
security interest in the Trust Student Loans granted to the Indenture Trustee
hereunder.

            (e) All executed copies of each promissory note that constitute or
evidence the Trust Student Loans have been delivered to the Indenture Trustee.

            (f) The Issuer has received a written acknowledgment from the
Custodian that such Custodian is holding the promissory notes that constitute or
evidence the Trust Student Loans solely on behalf of and for the benefit of the
Indenture Trustee.

            (g) Other than the security interest granted to the Indenture
Trustee pursuant to this Indenture, the Issuer has not pledged, assigned, sold,
granted a security interest in, or otherwise conveyed any of the Trust Student
Loans. The Issuer has not authorized the filing of and is not aware of any
financing statements against Issuer that include a description of collateral
covering the Trust Student Loans other than any financing statement relating to
the security interest granted to the Indenture Trustee hereunder or that has
been terminated. The Issuer is not aware of any judgment or tax lien filings
against the Issuer.

            Section 3.22 Covenants of the Issuer Regarding the Indenture
Trustee's Security Interest. The Issuer hereby covenants for the benefit of the
Indenture Trustee and the Noteholders as follows:

            (a) The representations and warranties set forth in Section 3.21
shall survive the termination of this Indenture.

            (b) The Indenture Trustee shall not waive any of the representations
and warranties set forth in Section 3.21 above.

                                      -21-
<PAGE>

            The Issuer shall take all steps necessary, and shall cause the
Servicer to take all steps necessary and appropriate, to maintain the perfection
and priority of the Indenture Trustee's security interest in the Trust Student
Loans.

                                   ARTICLE IV

                           SATISFACTION AND DISCHARGE

            Section 4.1 Satisfaction and Discharge of Indenture. This Indenture
shall cease to be of further effect with respect to the Notes except as to (i)
rights of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal thereof and interest thereon, (iv) Sections 3.3, 3.4, 3.5, 3.8,
3.10, 3.12 and 3.13, (v) the rights, obligations and immunities of the Indenture
Trustee and the Indenture Administrator hereunder (including, without
limitation, the rights of the Indenture Trustee and the Indenture Administrator
under Section 6.7 and the obligations of the Indenture Administrator under
Section 4.2) and (vi) the rights of Noteholders as beneficiaries hereof with
respect to the property so deposited with the Indenture Administrator payable to
all or any of them, and the Indenture Trustee, on demand of and at the expense
of the Issuer, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture with respect to the Notes, when:

            (a) either

            (1) all Notes theretofore authenticated and delivered (other than
(i) Notes that have been destroyed, lost or stolen and that have been replaced
or paid as provided in Section 2.5 and (ii) Notes for whose payment money has
theretofore been deposited in trust or segregated and held in trust by the
Issuer and thereafter repaid to the Issuer or discharged from such trust, as
provided in Section 3.3) have been delivered to the Indenture Administrator for
cancellation; or

            (2) all Notes not theretofore delivered to the Indenture
Administrator for cancellation

            (i) have become due and payable,

            (ii) will become due and payable at their respective Note Final
      Maturity Date, within one year, or

            (iii) are to be called for redemption within one year under
      arrangements satisfactory to the Indenture Administrator for the giving of
      notice of redemption by the Indenture Administrator in the name, and at
      the expense, of the Issuer, and the Issuer, in the case of (i), (ii) or
      (iii) above, has irrevocably deposited or caused to be irrevocably
      deposited with the Indenture Administrator on behalf of the Indenture
      Trustee cash or direct obligations of or obligations guaranteed by the
      United States of America (which will mature prior to the date such amounts
      are payable), in trust for such purpose, in an amount sufficient to pay
      and discharge the entire indebtedness on such Notes not theretofore
      delivered to the Indenture Administrator for cancellation when due to the
      Note Final Maturity Date;

                                      -22-
<PAGE>

            (b) the Issuer has paid or caused to be paid all other sums payable
hereunder by the Issuer; and

            (c) the Issuer has delivered to the Indenture Trustee and the
Indenture Administrator an Officers' Certificate of the Issuer, an Opinion of
Counsel and (if required by the TIA or the Indenture Trustee) an Independent
Certificate from a firm of certified public accountants, each meeting the
applicable requirements of Section 11.1(a) and, subject to Section 11.2, each
stating that all conditions precedent herein provided for relating to the
satisfaction and discharge of this Indenture have been complied with.

            Section 4.2 Application of Trust Money. All moneys deposited with
the Indenture Administrator pursuant to Section 4.1 hereof shall be held in
trust and applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent, as the
Indenture Trustee may determine, to the Noteholders of the particular Notes for
the payment or redemption of which such moneys have been deposited with the
Indenture Administrator, of all sums due and to become due thereon for principal
and interest; but such moneys need not be segregated from other funds except to
the extent required herein or in the Administration Agreement or required by
law.

            Section 4.3 Repayment of Moneys Held by Paying Agent. In connection
with the satisfaction and discharge of this Indenture with respect to the Notes,
all moneys then held by any Paying Agent other than the Indenture Administrator
under the provisions of this Indenture with respect to such Notes shall, upon
demand of the Issuer, be paid to the Indenture Administrator to be held and
applied according to Section 3.3 and thereupon such Paying Agent shall be
released from all further liability with respect to such moneys.

            Section 4.4 Auction of Trust Student Loans. If the Servicer has not
exercised its option to purchase or arrange for the purchase of the Trust Estate
as described in Section 6.1(a) of the Administration Agreement on the first
Distribution Date after the date on which the Pool Balance is equal to 10% or
less of the Initial Pool Balance, the Indenture Administrator will engage a
third-party financial advisor, which may be an Affiliate of the Servicer, an
underwriter of the Notes or the Administrator (the "Third-Party Financial
Advisor") to try to auction any Trust Student Loans remaining in the Trust on
the date (the "Trust Auction Date") that is three Business Days prior to the
next Distribution Date. An auction will be consummated only if the Servicer has
waived its option to purchase or arrange for the purchase of the Trust Estate.
The Servicer will be deemed to have waived such option if it fails to notify the
Eligible Lender Trustee, the Indenture Trustee and the Indenture Administrator
of its exercise thereof in writing prior to the Third-Party Financial Advisor
accepting a bid to purchase such Trust Student Loans. Only Persons that are not
Affiliates of the Servicer may purchase the Trust Student Loans on the Trust
Auction Date. If in connection with any auction of the Trust Student Loans at
least two bids are received, the Third-Party Financial Advisor, on behalf of the
Indenture Administrator, shall solicit and resolicit new bids from all
participating bidders until only one bid remains or the remaining bidders
decline to resubmit bids. The Third-Party Financial Advisor, on behalf of the
Indenture Administrator, shall accept the highest of such remaining bids if it
is equal to or in excess of the Minimum Purchase Amount. If at least two bids
are not received, or the highest bid after the resolicitation process is
completed is not equal to or in excess of the Minimum Purchase Amount, the
Third-Party Financial Advisor shall not consummate such sale. The

                                      -23-
<PAGE>

proceeds of any such sale will be paid at the time set forth in Section 2.6 of
the Administration Agreement and applied in the order of priority set forth in
Section 5.4(b) of this Indenture. If the sale is not consummated in accordance
with the foregoing, the Third-Party Financial Advisor, on behalf of the
Indenture Administrator, shall continue to solicit and re-solicit bids for sale
of the Trust Student Loans with respect to future Distribution Dates upon terms
similar to those described above, including the Servicer's waiver of its option
to purchase the Trust Estate in accordance with Section 6.1(a) of the
Administration Agreement with respect to each such future Distribution Date,
until the Third-Party Financial Advisor has received at least one bid that is
equal to or in excess of the Minimum Purchase Amount. The Indenture
Administrator and the Third-Party Financial Advisor shall be entitled to the
reimbursement of all of their and their respective agents' fees, expenses and
costs whether or not such auction sale is consummated from amounts held on
deposit in the Collection Account.

                                    ARTICLE V

                                    REMEDIES

            Section 5.1 Events of Default. "Event of Default," wherever used
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):

            (i) default in the payment of any interest on any Note when the same
      becomes due and payable, and such default shall continue for a period of
      five days; or

            (ii) default in the payment of the principal of any Note when the
      same becomes due and payable on the related Note Final Maturity Date; or

            (iii) default in the observance or performance of any covenant or
      agreement of the Issuer made in this Indenture (other than a covenant or
      agreement, a default in the observance or performance of which is
      elsewhere in this Section specifically dealt with), or any representation
      or warranty of the Issuer made in this Indenture or in any certificate or
      other writing having been incorrect in any material respect as of the time
      when made, such default or breach having a material adverse effect on the
      holders of the Notes, and such default or breach shall continue or not be
      cured, or the circumstance or condition in respect of which such
      misrepresentation or warranty was incorrect shall not have been eliminated
      or otherwise cured, for a period of 30 days after there shall have been
      given, by registered or certified mail, to the Issuer by the Indenture
      Trustee or the Indenture Administrator or to the Issuer and the Indenture
      Trustee by the Noteholders of at least 25% of the Outstanding Amount of
      the Notes, a written notice specifying such default or incorrect
      representation or warranty and requiring it to be remedied and stating
      that such notice is a notice of Default hereunder; or

            (iv) the filing of a decree or order for relief by a court having
      jurisdiction in the premises in respect of the Issuer or any substantial
      part of the Indenture Trust Estate in an involuntary case under any
      applicable Federal or state bankruptcy, insolvency or

                                      -24-
<PAGE>

      other similar law now or hereafter in effect, or appointing a receiver,
      liquidator, assignee, custodian, trustee, sequestrator or similar official
      of the Issuer or for any substantial part of the Indenture Trust Estate,
      or ordering the winding-up or liquidation of the Issuer's affairs, and
      such decree or order shall remain unstayed and in effect for a period of
      60 consecutive days; or

            (v) the commencement by the Issuer of a voluntary case under any
      applicable Federal or state bankruptcy, insolvency or other similar law
      now or hereafter in effect, or the consent by the Issuer to the entry of
      an order for relief in an involuntary case under any such law, or the
      consent by the Issuer to the appointment or taking possession by a
      receiver, liquidator, assignee, custodian, trustee, sequestrator or
      similar official of the Issuer or for any substantial part of the
      Indenture Trust Estate, or the making by the Issuer of any general
      assignment for the benefit of creditors, or the failure by the Issuer
      generally to pay its debts as such debts become due, or the taking of
      action by the Issuer in furtherance of any of the foregoing.

            Section 5.2 Acceleration of Maturity; Rescission and Annulment. If
an Event of Default should occur and be continuing, then and in every such case
the Indenture Trustee or the Noteholders representing at least a majority of the
Outstanding Amount of the Notes may declare all the Notes to be immediately due
and payable, by a notice in writing to the Issuer (and to the Indenture Trustee
if given by Noteholders), and upon any such declaration the unpaid principal
amount of such Notes, together with accrued and unpaid interest thereon through
the date of acceleration, shall become immediately due and payable, subject,
however, to Section 5.4 of this Indenture.

            At any time after such declaration of acceleration of maturity has
been made and before a judgment or decree for payment of the money due has been
obtained by the Indenture Trustee as hereinafter in this Article V provided, the
Noteholders of Notes representing at least a majority of the Outstanding Amount
of the Notes, by written notice to the Issuer and the Indenture Trustee, may
rescind and annul such declaration and its consequences if:

            (i) the Issuer has paid or deposited with the Indenture Trustee a
      sum sufficient to pay:

                  (a) all payments of principal of and interest on all Notes and
            all other amounts that would then be due hereunder or upon such
            Notes if the Event of Default giving rise to such acceleration had
            not occurred; and

                  (b) all sums paid or advanced by the Indenture Trustee or the
            Indenture Administrator hereunder and the reasonable compensation,
            expenses, disbursements and advances of the Indenture Trustee and
            the Indenture Administrator and their agents and counsel; and

            (ii) all Events of Default, other than the nonpayment of the
      principal of the Notes that has become due solely by such acceleration,
      have been cured or waived as provided in Section 5.12.

                                      -25-
<PAGE>

            No such rescission shall affect any subsequent default or impair any
right consequent thereto.

            Section 5.3 Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee. The Issuer covenants that if (i) default is made in the
payment of any interest on any Note when the same becomes due and payable, and
such default continues for a period of five days, or (ii) default is made in the
payment of the principal of any Note when the same becomes due and payable at
the related Note Final Maturity Date, the Issuer shall, upon demand of the
Indenture Trustee, pay to it, for the benefit of the Noteholders, the whole
amount then due and payable on such Notes for principal and interest, with
interest upon the overdue principal, and, to the extent payment at such rate of
interest shall be legally enforceable, upon overdue installments of interest, at
the rate specified in Section 2.7 and in addition thereto such further amount as
shall be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Indenture
Trustee and the Indenture Administrator and their agents and counsel.

            (a) In case the Issuer shall fail forthwith to pay such amounts upon
such demand, the Indenture Trustee, in its own name and as trustee of an express
trust, may institute a Proceeding for the collection of the sums so due and
unpaid, and may prosecute such Proceeding to judgment or final decree, and may
enforce the same against the Issuer or other obligor upon such Notes and collect
in the manner provided by law out of the property of the Issuer or other obligor
upon such Notes, wherever situated, the moneys adjudged or decreed to be
payable.

            (b) If an Event of Default occurs and is continuing, the Indenture
Trustee may, as more particularly provided in Section 5.4, in its discretion,
proceed to protect and enforce its rights and the rights of the Noteholders by
such appropriate Proceedings as the Indenture Trustee shall deem most effective
to protect and enforce any such rights, whether for the specific enforcement of
any covenant or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy or legal or
equitable right vested in the Indenture Trustee by this Indenture or by law.

            (c) In case there shall be pending, relative to the Issuer or any
other obligor upon the Notes or any Person having or claiming an ownership
interest in the Indenture Trust Estate, Proceedings under Title 11 of the United
States Code or any other applicable Federal or state bankruptcy, insolvency or
other similar law, or in case a receiver, assignee or trustee in bankruptcy or
reorganization, liquidator, sequestrator or similar official shall have been
appointed for or taken possession of the Issuer or its property or such other
obligor or Person, or in case of any other, comparable judicial Proceedings
relative to the Issuer or other obligor upon the Notes, or to the creditors or
property of the Issuer or such other obligor, the Indenture Trustee,
irrespective of whether the principal of any Notes shall then be due and
payable, as therein expressed or by declaration or otherwise and irrespective of
whether the Indenture Trustee shall have made any demand pursuant to the
provisions of this Section, shall be entitled and empowered, by intervention in
such proceedings or otherwise:

            (i) to file and prove a claim or claims for the whole amount of
      principal and interest owing and unpaid in respect of the Notes and to
      file such other papers or documents as may be necessary or advisable in
      order to have the claims of the Indenture

                                      -26-
<PAGE>

      Trustee (including any claim for reasonable compensation to the Indenture
      Trustee and the Indenture Administrator and each predecessor Indenture
      Trustee and Indenture Administrator, and their respective agents,
      attorneys and counsel, and for reimbursement of all expenses and
      liabilities incurred, and all advances made, by the Indenture Trustee and
      the Indenture Administrator and each predecessor Indenture Trustee and
      Indenture Administrator, except as a result of negligence or bad faith)
      and of the Noteholders allowed in such Proceedings;

            (ii) unless prohibited by applicable law and regulations, to vote on
      behalf of the Noteholders in any election of a trustee, a standby trustee
      or Person performing similar functions in any such Proceedings;

            (iii) to collect and receive any moneys or other property payable or
      deliverable on any such claims and to distribute all amounts received with
      respect to the claims of the Noteholders and the Indenture Trustee on
      their behalf; and

            (iv) to file such proofs of claim and other papers or documents as
      may be necessary or advisable in order to have the claims of the Indenture
      Trustee or the Noteholders allowed in any judicial proceedings relative to
      the Issuer, its creditors and its property;

            and any trustee, receiver, liquidator, custodian or other similar
official in any such Proceeding is hereby authorized by each of such Noteholders
to make payments to the Indenture Trustee, and, in the event that the Indenture
Trustee shall consent to the making of payments directly to such Noteholders to
pay to the Indenture Trustee and the Indenture Administrator such amounts as
shall be sufficient to cover reasonable compensation to the Indenture Trustee
and the Indenture Administrator, each predecessor Indenture Trustee and
Indenture Administrator and their respective agents, attorneys and counsel, and
all other expenses and liabilities incurred, and all advances made, by the
Indenture Trustee and the Indenture Administrator and each predecessor Indenture
Trustee and Indenture Administrator except as a result of negligence or bad
faith.

            (d) Nothing herein contained shall be deemed to authorize the
Indenture Trustee to authorize or consent to or vote for or accept or adopt on
behalf of any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Noteholder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any
Noteholder in any such proceeding except, as aforesaid, to vote for the election
of a trustee in bankruptcy or similar Person.

            (e) All rights of action and of asserting claims under this
Indenture, or under any of the Notes, may be enforced by the Indenture Trustee
without the possession of any of the Notes or the production thereof in any
trial or other Proceedings relative thereto, and any such action or Proceedings
instituted by the Indenture Trustee shall be brought in its own name as trustee
of an express trust, and any recovery of judgment, subject to the payment of the
expenses, disbursements and compensation of the Indenture Trustee, each
predecessor Indenture Trustee and their respective agents and attorneys, shall
be for the ratable benefit of the Noteholders.

                                      -27-
<PAGE>

            (f) In any Proceedings brought by the Indenture Trustee (and also
any Proceedings involving the interpretation of any provision of this Indenture
to which the Indenture Trustee shall be a party), the Indenture Trustee shall be
held to represent all the Noteholders, and it shall not be necessary to make any
Noteholder a party to any such Proceedings.

            Section 5.4 Remedies; Priorities. If an Event of Default shall have
occurred and be continuing, the Indenture Trustee may do one or more of the
following (subject to Section 5.5):

            (a) (i) institute Proceedings in its own name and as trustee of an
express trust for the collection of all amounts then payable on the Notes or
under this Indenture with respect thereto, whether by declaration or otherwise,
enforce any judgment obtained, and collect from the Issuer and any other obligor
upon such Notes moneys adjudged due;

            (ii) institute Proceedings from time to time for the complete or
      partial foreclosure of this Indenture, with respect to the Indenture Trust
      Estate;

            (iii) exercise any remedies of a secured party under the UCC with
      respect to the Trust Estate and take any other appropriate action to
      protect and enforce the rights and remedies of the Indenture Trustee and
      the Noteholders;

            (iv) sell the Indenture Trust Estate or any portion thereof or
      rights or interest therein, at one or more public or private sales called
      and conducted in any manner permitted by law; and/or

            (v) elect to have the Eligible Lender Trustee maintain ownership of
      the Trust Student Loans and continue to apply collections with respect to
      the Trust Student Loans as if there had been no declaration of
      acceleration;

provided, however, that the Indenture Trustee may not sell or otherwise
liquidate the Indenture Trust Estate following an Event of Default, other than
an Event of Default described in Section 5.1(i) (and such default shall continue
for a period of five days) or Section 5.1(ii), unless (A) the Noteholders of
100% of the Outstanding Amount of the Notes consent thereto, (B) the proceeds of
such sale or liquidation distributable to the Noteholders are sufficient to
discharge in full all amounts then due and unpaid upon such Notes for principal
and interest or (C) the Indenture Trustee determines that the Indenture Trust
Estate will not continue to provide sufficient funds for the payment of
principal of and interest on the Notes as would have become due if the Notes had
not been declared due and payable, and the Indenture Trustee obtains the consent
of Noteholders of 66-2/3% of the Outstanding Amount of the Notes. The Indenture
Trustee shall be reimbursed from amounts held in the Collection Account for any
amounts paid by the Indenture Trustee to such Independent investment banking
firm in respect of such Independent investment banking firm's expenses.

            (b) Notwithstanding the provisions of Section 8.2, following the
occurrence and during the continuation of an Event of Default specified in
Section 5.1(i), 5.1(ii), 5.1(iv) or 5.1(v) which has resulted in an acceleration
of the Notes, if the Indenture Trustee collects any money or property, it shall
pay out the money or property (and other amounts including amounts,

                                      -28-
<PAGE>

if any, held on deposit in each of the Trust Accounts) held as Collateral for
the benefit of the Noteholders, net of liquidation costs associated with the
sale of the assets of the Trust, in the following order:

            FIRST: to the Indenture Trustee and the Indenture Administrator for
amounts due under Section 6.7, to the Owner Trustee for all amounts due to it
under the Trust Agreement, and to the Eligible Lender Trustee for all amounts
due to it under the Eligible Lender Trust Agreements;

            SECOND: to the Servicer for due and unpaid Primary Servicing Fees;

            THIRD: to the Class A Noteholders for amounts due and unpaid on the
Class A Notes for interest, ratably, without preference or priority of any kind
among the classes of Class A Notes, according to the amounts due and payable on
the Class A Notes for such interest;

            FOURTH: to the Class A Noteholders for amounts due and unpaid on the
Class A Notes for principal, ratably, without preference or priority of any kind
among the classes of Class A Notes, according to the amounts due and payable on
the Class A Notes for principal;

            FIFTH: to the Class B Noteholders for amounts due and unpaid on the
Class B Notes for interest;

            SIXTH: to the Class B Noteholders for amounts due and unpaid on the
Class B Notes for principal;

            SEVENTH: to the Servicer, for any unpaid Carryover Servicing Fees;
and

            EIGHTH: to the holder of the Trust Certificate, for distribution in
accordance with the terms of the Administration Agreement and the Trust
Agreement.

            The Indenture Trustee may fix a record date and payment date for any
payment to Noteholders pursuant to this Section. At least 15 days before such
record date, the Indenture Trustee shall mail to each Noteholder and the Issuer
a notice that states the record date, the payment date and the amount to be
paid.

            Section 5.5 Optional Preservation of the Trust Student Loans. If the
Notes have been declared to be due and payable under Section 5.2 following an
Event of Default and such declaration and its consequences have not been
rescinded and annulled, the Indenture Trustee may, but need not, elect to
maintain possession of the Indenture Trust Estate. It is the desire of the
parties hereto and the Noteholders that there be at all times sufficient funds
for the payment of principal of and interest on the Notes, and the Indenture
Trustee shall take such desire into account when determining whether or not to
maintain possession of the Indenture Trust Estate. In determining whether to
maintain possession of the Indenture Trust Estate, the Indenture Trustee may,
but need not, obtain and rely upon an opinion of an Independent investment
banking or accounting firm of national reputation as to the feasibility of such
proposed action and as to the sufficiency of the Indenture Trust Estate for such
purpose.

                                      -29-
<PAGE>

            Section 5.6 Limitation of Suits. No Noteholder shall have any right
to institute any Proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:

            (i) such Noteholder has previously given written notice to the
      Indenture Trustee of a continuing Event of Default;

            (ii) the Noteholders of not less than 25% of the Outstanding Amount
      of the Notes have made written request to the Indenture Trustee to
      institute such Proceeding in respect of such Event of Default in its own
      name as Indenture Trustee hereunder;

            (iii) such Noteholder or Noteholders have offered to the Indenture
      Trustee indemnity reasonably satisfactory to the Indenture Trustee against
      the costs, expenses and liabilities to be incurred in complying with such
      request;

            (iv) the Indenture Trustee for 60 days after its receipt of such
      notice, request and offer of indemnity has failed to institute such
      Proceeding; and

            (v) no direction inconsistent with such written request has been
      given to the Indenture Trustee during such 60-day period by the
      Noteholders of at least a majority of the Outstanding Amount of the Notes;

it being understood and intended that no one or more Noteholders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this indenture to affect, disturb or prejudice the rights of any other
Noteholders or to obtain or to seek to obtain priority or preference over any
other Noteholders or to enforce any right under this Indenture, except in the
manner herein provided.

            In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Noteholders, each
representing less than a majority of the Outstanding Amount of the Notes, the
Indenture Trustee shall act at the direction of the group representing a greater
percentage of the Outstanding Amount of the Notes, or if both groups are equal,
the Indenture Trustee in its sole discretion may determine what action, if any,
shall be taken, notwithstanding any other provisions of this Indenture.

            Section 5.7 Unconditional Rights of Noteholders to Receive Principal
and Interest. Notwithstanding any other provisions in this Indenture, each
Noteholder shall have the right, which is absolute and unconditional, to receive
payment of the principal of and interest on its Note on or after the respective
due dates thereof expressed in such Note or in this Indenture (or, in the case
of redemption, on or after the Redemption Date) and to institute suit for the
enforcement of any such payment, and such right shall not be impaired without
the consent of such Noteholder.

            Section 5.8 Restoration of Rights and Remedies. If the Indenture
Trustee or any Noteholder has instituted any Proceeding to enforce any right or
remedy under this Indenture and such Proceeding has been discontinued or
abandoned for any reason or has been determined adversely to the Indenture
Trustee or to such Noteholder, then and in every such case the Issuer, the
Indenture Trustee and the Noteholders shall, subject to any determination in
such Proceeding,

                                      -30-
<PAGE>

be restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Indenture Trustee and the Noteholders
shall continue as though no such Proceeding had been instituted.

            Section 5.9 Rights and Remedies Cumulative. No right or remedy
herein conferred upon or reserved to the Indenture Trustee or to the Noteholders
is intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.

            Section 5.10 Delay or Omission Not a Waiver. No delay or omission of
the Indenture Trustee or any Noteholder to exercise any right or remedy accruing
upon any Default shall impair any such right or remedy or constitute a waiver of
any such Default or an acquiescence therein. Every right and remedy given by
this Article V or by law to the Indenture Trustee or to the Noteholders may be
exercised from time to time, and as often as may be deemed expedient, by the
Indenture Trustee or by the Noteholders, as the case may be.

            Section 5.11 Control by Noteholders. The Noteholders of at least a
majority of the Outstanding Amount of the Notes shall have the right to direct
the time, method and place of conducting any Proceeding for any remedy available
to the Indenture Trustee with respect to the Notes or exercising any trust or
power conferred on the Indenture Trustee; provided that

            (i) such direction shall not be in conflict with any rule of law or
      with this Indenture;

            (ii) subject to the express terms of Section 5.4, any direction to
      the Indenture Trustee to sell or liquidate the Indenture Trust Estate
      shall be by the Noteholders of not less than 100% of the Outstanding
      Amount of the Notes;

            (iii) if the conditions set forth in Section 5.5 have been satisfied
      and the Indenture Trustee elects to retain the Indenture Trust Estate
      pursuant to such Section, then any direction to the Indenture Trustee by
      Noteholders of less than 100% of the Outstanding Amount of the Notes to
      sell or liquidate the Indenture Trust Estate shall be of no force and
      effect; and

            (iv) the Indenture Trustee may take any other action deemed proper
      by the Indenture Trustee that is not inconsistent with such direction;

provided, however, that, subject to Section 6.1, the Indenture Trustee need not
take any action that it determines might involve it in liability or might
materially adversely affect the rights of any Noteholders not consenting to such
action.

            Section 5.12 Waiver of Past Defaults. Prior to the time a judgment
or decree for payment of money due has been obtained as described in Section
5.2, the Noteholders of at least a majority of the Outstanding Amount of the
Notes may waive any past Default and its consequences except a Default (a) in
payment when due of principal of or interest on any of the

                                      -31-
<PAGE>

Notes or (b) in respect of a covenant or provision hereof which cannot be
modified or amended without the consent of each Noteholder. In the case of any
such waiver, the Issuer, the Indenture Trustee and the Noteholders shall be
restored to their former positions and rights hereunder, respectively; but no
such waiver shall extend to any subsequent or other Default or impair any right
consequent thereto.

            Upon any such waiver, such Default shall cease to exist and be
deemed to have been cured and not to have occurred for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Default or
impair any right consequent thereto.

            Section 5.13 Undertaking for Costs. All parties to this Indenture
agree, and each Noteholder by such Noteholder's acceptance of any Note shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture, or in any suit
against the Indenture Trustee for any action taken, suffered or omitted by it as
Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to (a) any suit instituted by the
Indenture Trustee, (b) any suit instituted by any Noteholder, or group of
Noteholders, in each case holding in the aggregate more than 10% of the
Outstanding Amount of the Notes or (c) any suit Instituted by any Noteholder for
the enforcement of the payment of principal of or interest on any Note on or
after the respective due dates expressed in such Note and in this Indenture (or,
in the case of redemption, on or after the Redemption Date).

            Section 5.14 Waiver of Stay or Extension Laws. The Issuer covenants
(to the extent that it may lawfully do so) that it will not at any time insist
upon, or plead or in any manner whatsoever, claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, that may affect the covenants or the performance of this
Indenture; and the Issuer (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Indenture Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.

            Section 5.15 Action on Notes. The Indenture Trustee's right to seek
and recover judgment on the Notes or under this Indenture shall not be affected
by the seeking, obtaining or application of any other relief under or with
respect to this Indenture. Neither the lien of this Indenture nor any rights or
remedies of the Indenture Trustee or the Noteholders shall be impaired by the
recovery of any judgment by the Indenture Trustee against the Issuer or by the
levy of any execution under such judgment upon any portion of the Indenture
Trust Estate or upon any of the assets of the Issuer. Any money or property
collected by the Indenture Trustee shall be applied in accordance with Section
5.4(b).

            Section 5.16 Performance and Enforcement of Certain Obligations. (a)
Promptly following a request from the Indenture Trustee to do so and at the
Administrator's expense, the Issuer shall take all such lawful action as the
Indenture Trustee may request to compel or secure the performance and observance
by the Depositor, SLC, the Administrator and

                                      -32-
<PAGE>

the Servicer, as applicable, of each of their respective obligations to the
Issuer, whether directly or by assignment, under or in connection with the Sale
Agreement, the Purchase Agreement, the Administration Agreement and the
Servicing Agreement, respectively, in accordance with the terms thereof, and to
exercise any and all rights, remedies, powers and privileges lawfully available
to the Issuer under or in connection with the Sale Agreement, the Purchase
Agreement, the Administration Agreement and the Servicing Agreement, as the case
may be, to the extent and in the manner directed by the Indenture Trustee,
including the transmission of notices of default on the part of the Depositor,
SLC, the Administrator or the Servicer thereunder and the institution of legal
or administrative actions or proceedings to compel or secure performance by the
Depositor, SLC, the Administrator or the Servicer of each of their obligations
under the Sale Agreement, the Purchase Agreement, the Administration Agreement
and the Servicing Agreement, respectively.

            (b) If an Event of Default has occurred and is continuing, the
Indenture Trustee may, and at the written direction of the Noteholders of
66-2/3% of the Outstanding Amount of the Notes shall, exercise all rights,
remedies, powers, privileges and claims of the Issuer against the Depositor,
SLC, the Administrator or the Servicer under or in connection with the Sale
Agreement, the Purchase Agreement, the Administration Agreement and the
Servicing Agreement, respectively, including the right or power to take any
action to compel or secure performance or observance by the Depositor, SLC, the
Administrator or the Servicer of each of their obligations to the Issuer
thereunder, whether directly or by assignment, and to give any consent, request,
notice, direction, approval, extension or waiver under the Sale Agreement, the
Purchase Agreement, the Administration Agreement and the Servicing Agreement,
respectively, and any right of the Issuer to take such action shall be
suspended.

                                   ARTICLE VI

                              THE INDENTURE TRUSTEE

            Section 6.1 Duties of Indenture Trustee. (a) If an Event of Default
has occurred and is continuing, the Indenture Trustee shall exercise the rights
and powers vested in it by this Indenture and use the same degree of care and
skill in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.

            (b) Except during the continuance of an Event of Default, the
Indenture Trustee undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture and no implied covenants or obligations
shall be read into this Indenture against the Indenture Trustee.

            (c) The Indenture Administrator undertakes to perform such duties
and only such duties as are specifically set forth in this Indenture and no
implied covenants or obligations shall be read into this Indenture against the
Indenture Administrator.

            (d) In the absence of bad faith on its part, the Indenture Trustee
and the Indenture Administrator may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to them and conforming to the requirements of
this Indenture; provided, however, that the Indenture Trustee

                                      -33-
<PAGE>

and the Indenture Administrator, as the case may be, shall examine the
certificates and opinions to determine whether or not they conform to the
requirements of this Indenture.

            (e) Neither the Indenture Trustee nor the Indenture Administrator
may be relieved from liability for its own negligent action, its own negligent
failure to act or its own willful misconduct, except that:

            (i) this paragraph does not limit the effect of paragraph (b) or (e)
      of this Section;

            (ii) neither the Indenture Trustee nor the Indenture Administrator
      shall be liable in its individual capacity for any error of judgment made
      in good faith by a Responsible Officer unless it is proved that the
      Indenture Trustee or the Indenture Administrator, as the case may be, was
      negligent in ascertaining the pertinent facts; and

            (iii) neither the Indenture Trustee nor the Indenture Administrator
      shall be liable in its individual capacity with respect to any action it
      takes or omits to take in good faith in accordance with a direction
      received by it pursuant to Section 5.11.

            (f) Neither the Indenture Trustee nor the Indenture Administrator
shall be liable for interest on any money received by it except as the Indenture
Trustee or the Indenture Administrator, as the case may be, may agree in writing
with the Issuer.

            (g) Money held in trust by the Indenture Trustee or the Indenture
Administrator need not be segregated from other funds except to the extent
required by law or the terms of this Indenture or the other Basic Documents.

            (h) No provision of this Indenture shall require the Indenture
Trustee or the Indenture Administrator to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder or in the exercise of any of its rights or powers, if it shall have
reasonable grounds to believe that repayments of such funds or adequate
indemnity reasonably satisfactory to it against any loss, liability or expense
is not reasonably assured to it.

            (i) Except as expressly provided in the Basic Documents, neither the
Indenture Trustee nor the Indenture Administrator shall have any obligation to
administer, service or collect the Trust Student Loans or to maintain, monitor
or otherwise supervise the administration, servicing or collection of the Trust
Student Loans.

            (j) The rights and protections afforded to the Indenture Trustee and
the Indenture Administrator pursuant to this Indenture shall also be afforded to
any entity serving as Paying Agent or Note Registrar.

            (k) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Indenture Trustee
shall be subject to the provisions of this Section and to the provisions of the
TIA.

            Section 6.2 Rights of Indenture Trustee and Indenture Administrator.
(a) The Indenture Trustee and the Indenture Administrator may rely on any
document believed by it to

                                      -34-
<PAGE>

be genuine and to have been signed or presented by the proper Person. Neither
the Indenture Trustee nor the Indenture Administrator need investigate any fact
or matter stated in such document.

            (b) Before the Indenture Trustee or the Indenture Administrator acts
or refrains from acting, it may require and shall be entitled to receive an
Officers' Certificate of the Issuer and/or an Opinion of Counsel. Neither the
Indenture Trustee nor the Indenture Administrator shall be liable for any action
it takes or omits to take in good faith in reliance on such Officers'
Certificate or Opinion of Counsel.

            (c) The Indenture Trustee and the Indenture Administrator may
execute any of the trusts or powers hereunder or perform any duties hereunder
either directly or by or through agents or attorneys or a custodian or nominee,
and neither the Indenture Trustee nor the Indenture Administrator shall be
responsible for any misconduct or negligence on the part of, or for the
supervision of, any such agent, attorney, custodian or nominee appointed with
due care by it hereunder.

            (d) Neither the Indenture Trustee nor the Indenture Administrator
shall be liable for any action it takes or omits to take in good faith which it
believes to be authorized or within its rights or powers; provided, however,
that the Indenture Trustee's or the Indenture Administrator's, as the case may
be, conduct does not constitute willful misconduct, negligence or bad faith.

            (e) The Indenture Trustee and the Indenture Administrator may
consult with counsel, and the advice or opinion of counsel with respect to legal
matters relating to this Indenture and the Notes shall be full and complete
authorization and protection from liability in respect to any action taken,
omitted or suffered by it hereunder in good faith and in accordance with the
advice or opinion of such counsel.

            (f) Neither the Indenture Trustee nor the Indenture Administrator
shall be under any obligation to exercise any of the trusts or powers vested in
it by this Indenture or to institute, conduct or defend any litigation hereunder
or in relation hereto at the request, order or direction of any of the
Noteholders, pursuant to the provisions of this Indenture, unless such
Noteholders shall have offered security or indemnity reasonably satisfactory to
the Indenture Trustee or the Indenture Administrator, as applicable, against the
costs, expenses and liabilities which may be incurred therein or thereby.

            (g) Neither the Indenture Trustee nor the Indenture Administrator
shall be bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, approval, bond or other paper or document, unless
requested in writing to do so by the Noteholders; provided, however, that if the
payment within a reasonable time to the Indenture Trustee or the Indenture
Administrator Trustee, as applicable, of the costs, expenses or liabilities
likely to be incurred by it in the making of such investigation is, in the
opinion of the Indenture Trustee or the Indenture Administrator, as applicable,
not assured to it by the security afforded to it by the terms of this Indenture,
the Indenture Trustee or the Indenture Administrator, as applicable, may require

                                      -35-
<PAGE>

indemnity satisfactory to the Indenture Trustee or the Indenture Administrator,
as applicable, against such cost, expense or liability as a condition to taking
any such action.

            (h) The right of the Indenture Trustee or the Indenture
Administrator to perform any discretionary act enumerated in this Indenture
shall not be construed as a duty, and neither Indenture Trustee nor the
Indenture Administrator shall be answerable for other than its negligence or
willful misconduct in the performance of such act.

            (i) Neither the Indenture Trustee nor the Indenture Administrator
shall not be required to give any bond or surety in respect of the execution of
the Trust Accounts created hereby or in the Administration Agreement or the
powers granted hereunder or thereunder.

            Section 6.3 Individual Rights of Indenture Trustee and Indenture
Administrator. The Indenture Trustee and the Indenture Administrator in their
respective individual or any other capacity may become the owner or pledgee of
Notes and may otherwise deal with the Issuer or its Affiliates with the same
rights it would have if it were not Indenture Trustee or Indenture
Administrator. Any Paying Agent, Note Registrar, co-registrar or co-paying agent
may do the same with like rights. However, the Indenture Trustee must comply
with Sections 6.12 and 6.13.

            Section 6.4 Disclaimer. Neither the Indenture Trustee nor the
Indenture Administrator shall be responsible for and makes no representation as
to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Issuer's use of the proceeds from the Notes, and it shall
not be responsible for any statement of the Issuer in the Indenture or in any
document issued in connection with the sale of the Notes or in the Notes other
than the Indenture Administrator's certificate of authentication.

            Section 6.5 Notice of Defaults. If a Default occurs and is
continuing and if it is either actually known or written notice of the existence
thereof has been delivered to a Responsible Officer of the Indenture Trustee and
the Indenture Administrator, the Indenture Trustee shall mail notice of the
Default to each Noteholder within 90 days and to each Rating Agency as soon as
practicable within 30 days after it occurs. Except in the case of a Default in
payment of principal of or interest on any Note (including payments pursuant to
the mandatory redemption provisions of such Note), the Indenture Trustee may
withhold the notice if and so long as a committee of its Responsible Officers in
good faith determines that withholding the notice is in the interests of
Noteholders. Except as provided in the first sentence of this Section 6.5, in no
event shall the Indenture Trustee or the Indenture Administrator be deemed to
have knowledge of a Default or an Event of Default.

            Section 6.6 Reports by Indenture Administrator to Noteholders. The
Indenture Administrator shall deliver to each Noteholder (and to each Person who
was a Noteholder at any time during the applicable calendar year) such
information as may be required to enable such holder to prepare its Federal and
state income tax returns. Within 60 days after each December 31 beginning with
the December 31 following the date of this Indenture, the Indenture Trustee
shall mail to each Noteholder a brief report, prepared by the Indenture
Administrator, as of such December 31 that complies with TIA ss. 313(a) if
required by said section. The Indenture Trustee shall also comply with TIA ss.
313(b). A copy of each such report required pursuant to TIA

                                      -36-
<PAGE>

ss. 313(a) or (b) shall, at the time of such transaction to Noteholders, be
filed by the Indenture Administrator on behalf of the Indenture Trustee with the
Commission and with each securities exchange, if any, upon which the Notes are
listed, provided that the Issuer has previously notified the Indenture Trustee
of such listing.

            Section 6.7 Compensation and Indemnity. The Issuer shall cause the
Depositor to pay to the Indenture Trustee and the Indenture Administrator
reasonable compensation for their respective services in accordance with a
separate agreement between the Depositor, the Indenture Trustee and the
Indenture Administrator and shall cause the Depositor to reimburse the Indenture
Trustee and the Indenture Administrator for all reasonable out-of-pocket
expenses incurred or made by it as provided in such separate agreement. The
Indenture Trustee's and the Indenture Administrator's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The Issuer
shall cause the Administrator to indemnify the Indenture Trustee, the Indenture
Administrator and their respective directors, officers, employees and agents
against any and all loss, liability, claim or expense (including, without
limitation, costs and expenses of litigation and of investigation counsel fees,
damages, judgments and amounts paid in settlement) incurred by it in connection
with the administration of this trust and the performance of its duties
hereunder and under the other Basic Documents. The Indenture Trustee and the
Indenture Administrator shall notify the Issuer and the Administrator promptly
of any claim for which it may seek indemnity. Failure by the Indenture Trustee
or the Indenture Administrator, as the case may be, to so notify the Issuer and
the Administrator shall not relieve the Issuer or the Administrator of its
obligations hereunder and under the other Basic Documents. The Indenture Trustee
and the Indenture Administrator shall be entitled to separate counsel acceptable
to them in their sole discretion the reasonable fees and expenses of which shall
be paid by the Administrator on behalf of the Issuer. Neither the Issuer nor the
Administrator need reimburse any expense or indemnify against any loss,
liability or expense incurred by the Indenture Trustee and the Indenture
Administrator through the Indenture Trustee's or the Indenture Administrator's,
as the case may be, own willful misconduct, negligence or bad faith.

            The Issuer's payment obligations to the Indenture Trustee and the
Indenture Administrator pursuant to this Section shall survive the discharge of
this Indenture. When the Indenture Trustee and the Indenture Administrator incur
expenses after the occurrence of a Default specified in Section 5.1(iv) or (v)
with respect to the Issuer, the expenses are intended to constitute expenses of
administration under Title 11 of the United States Code or any other applicable
Federal or state bankruptcy, insolvency or similar law.

            Section 6.8 Replacement of Indenture Trustee. No resignation or
removal of the Indenture Trustee and no appointment of a successor Indenture
Trustee shall become effective until the acceptance of appointment by the
successor Indenture Trustee pursuant to this Section 6.8. The Indenture Trustee
may resign at any time by so notifying the Issuer and each Rating Agency. The
Noteholders of at least a majority in Outstanding Amount of the Notes may remove
the Indenture Trustee by so notifying the Indenture Trustee and each Rating
Agency and may appoint a successor Indenture Trustee. The Issuer shall remove
the Indenture Trustee (and provide notice to each Rating Agency) if:

            (i) the Indenture Trustee fails to comply with Section 6.12;

                                      -37-
<PAGE>

            (ii) an Insolvency Event occurs with respect to the Indenture
      Trustee;

            (iii) a receiver or other public officer takes charge of the
      Indenture Trustee or its property; or

            (iv) the Indenture Trustee otherwise becomes incapable of acting.

            If the Indenture Trustee resigns or is removed or if a vacancy
exists in the office of Indenture Trustee for any reason (the Indenture Trustee
in such event being referred to herein as the retiring Indenture Trustee), the
Issuer shall promptly appoint a successor Indenture Trustee.

            A successor Indenture Trustee shall deliver a written acceptance of
its appointment to the retiring Indenture Trustee and to the Issuer and each
Rating Agency. Thereupon the resignation or removal of the retiring Indenture
Trustee shall become effective, and the successor Indenture Trustee shall have
all the rights, powers and duties of the Indenture Trustee under this Indenture.
The successor Indenture Trustee shall mail a notice of its succession to
Noteholders. The retiring Indenture Trustee shall promptly transfer all property
held by it as Indenture Trustee to the successor Indenture Trustee.

            If a successor Indenture Trustee does not take office within 60 days
after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Issuer or the Noteholders of at least a majority in
Outstanding Amount of the Notes may petition any court of competent jurisdiction
for the appointment of a successor Indenture Trustee. The successor Indenture
Trustee shall give notice of its appointment as successor Indenture Trustee to
each Rating Agency.

            If the Indenture Trustee fails to comply with Section 6.12, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Indenture Trustee and the appointment of a successor Indenture Trustee.

            Notwithstanding the replacement of the Indenture Trustee pursuant to
this Section, the Issuer's and the Administrator's obligations under Section 6.7
shall continue for the benefit of the retiring Indenture Trustee.

            Section 6.9 Replacement of Indenture Administrator. No resignation
or removal of the Indenture Administrator and no appointment of a successor
Indenture Administrator shall become effective until the acceptance of
appointment by the successor Indenture Administrator pursuant to this Section
6.9. The Indenture Administrator may resign at any time by so notifying the
Issuer and each Rating Agency. The Noteholders of at least a majority in
Outstanding Amount of the Notes may remove the Indenture Administrator by so
notifying the Indenture Administrator and each Rating Agency and may appoint a
successor Indenture Administrator. The Issuer shall remove the Indenture
Administrator if:

            (i) an Insolvency Event occurs with respect to the Indenture
      Administrator;

            (ii) a receiver or other public officer takes charge of the
      Indenture Administrator or its property; or

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<PAGE>

            (iii) the Indenture Administrator otherwise becomes incapable of
      acting.

            If the Indenture Administrator resigns or is removed or if a vacancy
exists in the office of Indenture Administrator for any reason (the Indenture
Administrator in such event being referred to herein as the retiring Indenture
Administrator), the Issuer shall promptly appoint a successor Indenture
Administrator.

            A successor Indenture Administrator shall deliver a written
acceptance of its appointment to the retiring Indenture Administrator and to the
Issuer and each Rating Agency. Thereupon the resignation or removal of the
retiring Indenture Administrator shall become effective, and the successor
Indenture Administrator shall have all the rights, powers and duties of the
Indenture Administrator under this Indenture. The successor Indenture
Administrator shall mail a notice of its succession to Noteholders. The retiring
Indenture Administrator shall promptly transfer all property held by it as
Indenture Administrator to the successor Indenture Administrator.

            If a successor Indenture Administrator does not take office within
60 days after the retiring Indenture Administrator resigns or is removed, the
retiring Indenture Administrator, the Issuer or the Noteholders of at least a
majority in Outstanding Amount of the Notes may petition any court of competent
jurisdiction for the appointment of a successor Indenture Administrator. The
successor Indenture Administrator shall give notice of its appointment as
successor Indenture Administrator to each Rating Agency.

            Notwithstanding the replacement of the Indenture Administrator
pursuant to this Section, the Issuer's and the Administrator's obligations under
Section 6.7 shall continue for the benefit of the retiring Indenture
Administrator.

            Section 6.10 Successor Indenture Trustee by Merger. If the Indenture
Trustee consolidates with, merges or converts into, or transfers all or
substantially all of its corporate trust business or assets to, another
corporation or banking association, the resulting, surviving or transferee
corporation without any further act shall be the successor Indenture Trustee,
provided that such corporation or banking association shall be otherwise
qualified and eligible under Section 6.12. The Indenture Trustee shall provide
the Rating Agencies prior written notice of any such transaction.

            In case at the time such successor or successors by merger,
conversion or consolidation to the Indenture Trustee shall succeed to the trusts
created by this Indenture any of the Notes shall have been authenticated but not
delivered, any such successor to the Indenture Trustee may adopt the certificate
of authentication of any predecessor trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.

            Section 6.11 Appointment of Co-Trustee or Separate Trustee. (a)
Notwithstanding any other provisions of this Indenture, at any time, for the
purpose of

                                      -39-
<PAGE>

meeting any legal requirement of any jurisdiction in which any part of the
Indenture Trust Estate may at the time be located, the Indenture Trustee shall
have the power and may execute and deliver all instruments to appoint one or
more Persons to act as a co-trustee or co-trustees, or separate trustee or
separate trustees, of all or any part of the Indenture Trust Estate, and to vest
in such Person or Persons, in such capacity and for the benefit of the
Noteholders, such title to the Indenture Trust Estate, or any part hereof, and,
subject to the other provisions of this Section, such powers, duties,
obligations, rights and trusts as the Indenture Trustee may consider necessary
or desirable. No such appointment shall relieve the Indenture Trustee of its
obligations hereunder. No co-trustee or separate trustee hereunder shall be
required to meet the terms of eligibility as a successor trustee under Section
6.12 and no notice to Noteholders of the appointment of any co-trustee or
separate trustee shall be required under Section 6.8 hereof.

            (b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:

            (i) all rights, powers, duties and obligations conferred or imposed
      upon the Indenture Trustee shall be conferred or imposed upon and
      exercised or performed by the Indenture Trustee and such separate trustee
      or co-trustee jointly (it being understood that such separate trustee or
      co-trustee is not authorized to act separately without the Indenture
      Trustee joining in such act), except to the extent that under any law of
      any jurisdiction in which any particular act or acts are to be performed
      the Indenture Trustee shall be incompetent or unqualified to perform such
      act or acts, in which event such rights, powers, duties and obligations
      (including the holding of title to the Indenture Trust Estate or any
      portion thereof in any such jurisdiction) shall be exercised and performed
      singly by such separate trustee or co-trustee, but solely at the direction
      of the Indenture Trustee;

            (ii) no trustee hereunder shall be personally liable by reason of
      any act or omission of any other trustee hereunder; and

            (iii) the Indenture Trustee may at any time accept the resignation
      of or remove any separate trustee or co-trustee.

            (c) Any notice, request or other writing given to the Indenture
Trustee shall be deemed to have been given to each of the then separate trustees
and co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Indenture and
the conditions of this Article VI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Indenture Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every provision of this
Indenture relating to the conduct of, affecting the liability of, or affording
protection to, the Indenture Trustee. Every such instrument shall be filed with
the Indenture Trustee.

            (d) Any separate trustee or co-trustee may at any time constitute
the Indenture Trustee, its agent or attorney-in-fact with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect of this Indenture on its behalf and in its name. If

                                      -40-
<PAGE>

any separate trustee or co-trustee shall die, become incapable of acting, resign
or be removed, all of its estates, properties, rights, remedies and trusts shall
vest in and be exercised by the Indenture Trustee, to the extent permitted by
law, without the appointment of a new or successor trustee.

            Section 6.12 Eligibility; Disqualification. The Indenture Trustee
shall at all times satisfy the requirements of TIA ss. 310(a). The Indenture
Trustee shall have a combined capital and surplus of at least $50,000,000 as set
forth in its most recent published annual report of condition and it shall have
a long-term senior unsecured debt rating of not less than investment grade by
each of the Rating Agencies. The Indenture Trustee shall comply with TIA ss.
310(b); provided, however, that there shall be excluded from the operation of
TIA ss. 310(b)(1) any indenture or indentures under which other securities of
the Issuer are outstanding if the requirements for such exclusion set forth in
TIA ss. 310(b)(1) are met.

            Section 6.13 Preferential Collection of Claims Against the Issuer.
The Indenture Trustee shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). An Indenture Trustee who has resigned or
been removed shall be subject to TIA ss. 311(a) to the extent indicated.

                                   ARTICLE VII

                         NOTEHOLDERS' LISTS AND REPORTS

            Section 7.1 Issuer to Furnish Indenture Administrator and Indenture
Trustee Names and Addresses of Noteholders. The Issuer will furnish or cause to
be furnished to the Indenture Administrator and the Indenture Trustee (a) not
more than five days after the earlier of (i) each Record Date and (ii) three
months after the last Record Date, a list, in such form as the Indenture Trustee
and the Indenture Administrator may reasonably require, of the names and
addresses of the Noteholders as of such Record Date, and (b) at such other times
as the Indenture Trustee or the Indenture Administrator may request in writing,
within 30 days after receipt by the Issuer of any such request, a list of
similar form and content as of a date not more than 10 days prior to the time
such list is furnished; provided, however, that no such list shall be required
to be furnished if the Indenture Trustee or the Indenture Administrator is the
Note Registrar.

            Section 7.2 Preservation of Information; Communications to
Noteholders. The Indenture Administrator shall preserve, in as current a form as
is reasonably practicable, the names and addresses of the Noteholders contained
in the most recent list furnished to the Indenture Administrator as provided in
Section 7.1 and the names and addresses of Noteholders received by the Indenture
Administrator in its capacity as Note Registrar. The Indenture Administrator may
destroy any list furnished to it as provided in such Section 7.1 upon receipt of
a new list so furnished.

            (a) Noteholders may communicate pursuant to TIA ss. 312(b) with
other Noteholders with respect to their rights under this Indenture or under the
Notes. Upon receipt by the Indenture Trustee of any request by three or more
Noteholders or by one or more holders of Notes evidencing not less than 25% of
the Outstanding Amount of the Notes to receive a copy of the current list of
Noteholders (whether or not made pursuant to TIA ss. 312(b)), the Indenture

                                      -41-
<PAGE>

Trustee shall promptly notify the Administrator thereof by providing to the
Administrator a copy of such request and a copy of the list of Noteholders
produced in response thereto.

            (b) The Issuer, the Indenture Trustee, the Indenture Administrator
and the Note Registrar shall have the protection of TIA ss. 312(c).

            (c) On each Distribution Date the Indenture Administrator shall
provide to each Noteholder of record as of the related Record Date the
information provided by the Administrator to the Indenture Administrator on the
related Determination Date pursuant to Section 2.11 of the Administration
Agreement.

            (d) The Indenture Administrator shall furnish to the Noteholders
promptly upon receipt of a written request therefor, duplicates or copies of all
reports, notices, requests, demands, certificates, financial statements and any
other instruments furnished to the Indenture Trustee under the Basic Documents.
The Indenture Administrator shall furnish to the Noteholders promptly upon
receipt thereof from the Owner Trustee notice of any amendment of the
Administration Agreement pursuant to Section 8.5 of the Administration
Agreement.

            Section 7.3 Reports by Issuer. (a) The Issuer shall:

            (i) file with the Indenture Trustee, within 15 days after the Issuer
      is required to file the same with the Commission, copies of the annual
      reports and of the information, documents and other reports (or copies of
      such portions of any of the foregoing as the Commission may from time to
      time by rules and regulations prescribe) which the Issuer may be required
      to file with the Commission pursuant to Section 13 or 15(d) of the
      Exchange Act;

            (ii) file with the Indenture Trustee and the Commission in
      accordance with rules and regulations prescribed from time to time by the
      Commission such additional information, documents and reports with respect
      to compliance by the Issuer with the conditions and covenants of this
      Indenture as may be required from time to time by such rules and
      regulations; and

            (iii) supply to the Indenture Trustee (and the Indenture Trustee
      shall transmit by mail to all Noteholders described in TIA ss. 313(c))
      such summaries of any information, documents and reports required to be
      filed by the Issuer pursuant to clauses (i) and (ii) of this Section
      7.3(a) as may be required by rules and regulations prescribed from time to
      time by the Commission.

            (b) Unless the Issuer otherwise determines, the fiscal year of the
Issuer shall end on December 31 of each year.

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<PAGE>

                                  ARTICLE VIII

                      ACCOUNTS, DISBURSEMENTS AND RELEASES

            Section 8.1 Collection of Money. Except as otherwise expressly
provided herein, the Indenture Trustee and the Indenture Administrator may
demand payment or delivery of, and shall receive and collect, directly and
without intervention or assistance of any fiscal agent or other intermediary,
all money and other property payable to or receivable by the Indenture Trustee
pursuant to this Indenture. The Indenture Trustee and the Indenture
Administrator shall apply all such money received by it on behalf of Noteholders
or the Trust pursuant to the Administration Agreement as provided in this
Indenture. Except as otherwise expressly provided in this Indenture, if any
default occurs in the making of any payment or performance under any agreement
or instrument that is part of the Indenture Trust Estate, the Indenture Trustee
and the Indenture Administrator may take such action as may be appropriate to
enforce such payment or performance, including the institution and prosecution
of appropriate Proceedings. Any such action shall be without prejudice to any
right to claim a Default under this Indenture and any right to proceed
thereafter as provided in Article V.

            Section 8.2 Trust Accounts. (a) On or prior to the Closing Date, the
Issuer shall cause the Administrator to establish and maintain at the Indenture
Administrator, in the name of the Indenture Trustee, for the benefit of the
Noteholders and the Trust, the Trust Accounts as provided in Section 2.3 of the
Administration Agreement.

            (b) All Available Funds and amounts set forth in paragraph (a)(2) of
the definition of Available Funds with respect to the preceding Collection
Period will be deposited in the Collection Account as provided in Section 2.4 of
the Administration Agreement. On or before each Distribution Date and Monthly
Servicing Payment Date that is not a Distribution Date, the Indenture
Administrator (or any other Paying Agent) shall make the required deposits and
distributions as provided in Sections 2.7 and 2.8 of the Administration
Agreement.

            Section 8.3 General Provisions Regarding Accounts. (a) So long as no
Default shall have occurred and be continuing, all or a portion of the funds in
the Trust Accounts shall be invested in Eligible Investments and reinvested by
the Indenture Administrator pursuant to written instructions by the
Administrator in accordance with and subject to the provisions of Section 2.3(b)
of the Administration Agreement. All income or other gain from investments of
moneys deposited in the Trust Accounts shall be deposited by the Indenture
Administrator in the Collection Account, and any loss resulting from such
investments shall be charged to such Trust Account. The Issuer will not direct
the Indenture Administrator to make any investment of any funds or to sell any
investment held in any of the Trust Accounts unless the security interest
granted and perfected in such account will continue to be perfected in such
investment or the proceeds of such sale, in either case without any further
action by any Person, and, in connection with any direction to the Indenture
Administrator to make any such investment or sale, if requested by the Indenture
Administrator, the Issuer shall deliver to the Indenture Trustee an Opinion of
Counsel, acceptable to the Indenture Administrator, to such effect.

            (b) Subject to Section 6.1(e), the Indenture Trustee and the
Indenture Administrator shall not in any way be held liable for the selection of
Eligible Investments or by

                                      -43-
<PAGE>

reason of any insufficiency in any of the Trust Accounts resulting from any loss
on any Eligible Investment included therein except for losses attributable to
the Indenture Trustee's or the Indenture Administrator's failure to make
payments on such Eligible Investments issued by the Indenture Trustee or the
Indenture Administrator, as the case may be, in its commercial capacity as
principal obligor and not as trustee or indenture administrator, in accordance
with their terms.

            (c) If (i) the Administrator shall have failed to give investment
directions for any funds on deposit in the Trust Accounts to the Indenture
Trustee by 10:00 a.m. Eastern Time (or such other time as may be agreed by the
Issuer and Indenture Trustee) on any Business Day; or (ii) a Default shall have
occurred and be continuing with respect to the Notes but the Notes shall not
have been declared due and payable pursuant to Section 5.2, or, if such Notes
shall have been declared due and payable following an Event of Default, amounts
collected or receivable from the Indenture Trust Estate are being applied in
accordance with Section 5.5 as if there had not been such a declaration; then
the Indenture Trustee shall invest and reinvest funds in the Trust Accounts in
the Eligible Investments described in clause (d) of the definition thereof.

            Section 8.4 Release of Indenture Trust Estate. (a) Subject to the
payment of its fees and expenses pursuant to Section 6.7, the Indenture Trustee
may, and when required by the provisions of this Indenture shall, execute
instruments to release property from the lien of this Indenture, or convey the
Indenture Trustee's interest in the same, in a manner and under circumstances
that are not inconsistent with the provisions of this Indenture. No party
relying upon an instrument executed by the Indenture Trustee as provided in this
Article VIII shall be bound to ascertain the Indenture Trustee's authority,
inquire into the satisfaction of any conditions precedent or see to the
application of any moneys.

            (b) The Indenture Trustee shall, at such time as there are no Notes
Outstanding and all sums due the Indenture Trustee and the Indenture
Administrator pursuant to Section 6.7 have been paid, release any remaining
portion of the Indenture Trust Estate that secured the Notes from the lien of
this Indenture and release to the Issuer or any other Person entitled thereto
any funds then on deposit in the Trust Accounts. The Indenture Trustee shall
release property from the lien of this Indenture pursuant to this Section 8.4(b)
only upon receipt of an Issuer Request accompanied by an Officers' Certificate
of the Issuer, an Opinion of Counsel and (if required by the TIA) Independent
Certificates in accordance with TIA ss.ss. 314(c) and 314(d)(1) meeting the
applicable requirements of Section 11.1.

            (c) Each Noteholder, by the acceptance of a Note, acknowledges that
from time to time the Indenture Trustee shall release the lien of this Indenture
on any Trust Student Loan to be sold (i) to the Depositor in accordance with
Section 6 of the Sale Agreement, (ii) to the Servicer in accordance with Section
3.5 of the Servicing Agreement, (iii) to SLC in accordance with Section 3.11F of
the Servicing Agreement, (iv) to another eligible lender holding one or more
Serial Loans with respect to such Trust Student Loan or (v) to SLC in accordance
with Section 6 of the Purchase Agreement, and each Noteholder, by the acceptance
of a Note, consents to any such release.

            Section 8.5 Opinion of Counsel. The Indenture Trustee and the
Indenture Administrator shall receive at least seven days' notice when requested
by the Issuer to take any action pursuant to Section 8.4(a), accompanied by
copies of any instruments involved, and the

                                      -44-
<PAGE>

Indenture Trustee shall also require, except in connection with any action
contemplated by Section 8.4(c), as a condition to such action, an Opinion of
Counsel stating the legal effect of any such action, outlining the steps
required to complete the same, and concluding that all conditions precedent to
the taking of such action have been complied with and such action will not
materially and adversely impair the security for the Notes or the rights of the
Noteholders in contravention of the provisions of this Indenture; provided,
however, that such Opinion of Counsel shall not be required to express an
opinion as to the fair value of the Indenture Trust Estate. Counsel rendering
any such opinion may rely, without independent investigation, on the accuracy
and validity of any certificate or other instrument delivered to the Indenture
Trustee in connection with any such action.

                                   ARTICLE IX

                             SUPPLEMENTAL INDENTURES

            Section 9.1 Supplemental Indentures without Consent of Noteholders.
(a) Without the consent of any Noteholders but with prior notice to the Rating
Agencies, the Issuer, the Indenture Trustee and the Indenture Administrator,
when authorized by an Issuer Order, at any time and from time to time, may enter
into one or more indentures supplemental hereto (which shall conform to the
provisions of the Trust Indenture Act as in force at the date of the execution
thereof), in form satisfactory to the Indenture Trustee and the Indenture
Administrator, for any of the following purposes:

            (i) to correct or amplify the description of any property at any
      time subject to the lien of this Indenture, or better to assure, convey
      and confirm unto the Indenture Trustee any property subject or required to
      be subjected to the lien of this Indenture, or to subject to the lien of
      this Indenture additional property;

            (ii) to evidence the succession, in compliance with the applicable
      provisions hereof, of another person to the Issuer, and the assumption by
      any such successor of the covenants of the Issuer herein and in the Notes
      contained;

            (iii) to add to the covenants of the Issuer, for the benefit of the
      Noteholders, or to surrender any right or power herein conferred upon the
      Issuer;

            (iv) to convey, transfer, assign, mortgage or pledge any property to
      the Indenture Trustee;

            (v) to cure any ambiguity, to correct or supplement any provision
      herein or in any supplemental indenture which may be inconsistent with any
      other provision herein or in any supplemental indenture or to make any
      other provisions with respect to matters or questions arising under this
      Indenture or in any supplemental indenture; provided that such action
      shall not materially adversely affect the interests of the Noteholders;

            (vi) to evidence and provide for the acceptance of the appointment
      hereunder by a successor trustee with respect to the Notes and to add to
      or change any of the

                                      -45-
<PAGE>

      provisions of this Indenture as shall be necessary to facilitate the
      administration of the trusts hereunder by more than one trustee, pursuant
      to the requirements of Article VI; or

            (vii) to modify, eliminate or add to the provisions of this
      Indenture to such extent as shall be necessary to effect the qualification
      of this Indenture under the TIA or under any similar Federal statute
      hereafter enacted and to add to this Indenture such other provisions as
      may be expressly required by the TIA.

            Each of the Indenture Trustee and the Indenture Administrator is
hereby authorized to join in the execution of any such supplemental indenture
and to make any further appropriate agreements and stipulations that may be
therein contained.

            (b) The Issuer, the Indenture Trustee and the Indenture
Administrator, when authorized by an Issuer Order, may, also without the consent
of any of the Noteholders but with prior notice to the Rating Agencies, enter
into an indenture or indentures supplemental hereto for the purpose of adding
any provisions to, or changing in any manner or eliminating any of the
provisions of, this Indenture or of modifying in any manner the rights of the
Noteholders under this Indenture; provided, however, that such action shall not,
as evidenced by an Opinion of Counsel, adversely affect in any material respect
the interests of any Noteholder.

            Section 9.2 Supplemental Indentures with Consent of Noteholders. The
Issuer, the Indenture Trustee and the Indenture Administrator, when authorized
by an Issuer Order, also may, with prior notice to the Rating Agencies and with
the consent of the Noteholders of at least a majority of the Outstanding Amount
of the Notes, by Act of such Noteholders delivered to the Issuer and the
Indenture Trustee, enter into an indenture or indentures supplemental hereto for
the purpose of adding any provisions to, or changing in any manner or
eliminating any of the provisions of, this Indenture or of modifying in any
manner the rights of the Noteholders under this Indenture; provided, however,
that no such supplemental indenture shall, without the consent of the Noteholder
of each Outstanding Note affected thereby:

            (i) change the date of payment of any installment of principal of or
      interest on any Note, or reduce the principal amount thereof, the interest
      rate thereon or the Redemption Price with respect thereto, change the
      provisions of this Indenture relating to the application of collections
      on, or the proceeds of the sale of, the Indenture Trust Estate to payment
      of principal of or interest on the Notes, or change any place of payment
      where, or the coin or currency in which, any Note or the interest thereon
      is payable or impair the right to institute suit for the enforcement of
      the provisions of this Indenture requiring the application of funds
      available therefor, as provided in Article V, to the payment of any such
      amount due on the Notes on or after the respective due dates thereof (or,
      in the case of redemption, on or after the Redemption Date);

            (ii) reduce the percentage of the Outstanding Amount of the Notes,
      the consent of the Noteholders of which is required for any such
      supplemental indenture, or the consent of the Noteholders of which is
      required for any waiver of compliance with certain provisions of this
      Indenture or certain defaults hereunder and their consequences provided
      for in this Indenture;

                                      -46-
<PAGE>

            (iii) modify or alter the provisions of the proviso to the
      definition of the term "Outstanding";

            (iv) reduce the percentage of the Outstanding Amount of the Notes
      required to direct the Indenture Trustee to direct the Issuer to sell or
      liquidate the Indenture Trust Estate pursuant to Section 5.4;

            (v) modify any provision of this Section except to increase any
      percentage specified herein or to provide that certain additional
      provisions of this Indenture or the other Basic Documents cannot be
      modified or waived without the consent of the Noteholder of each
      Outstanding Note affected thereby;

            (vi) modify any of the provisions of this Indenture in such manner
      as to affect the calculation of the amount of any payment of interest or
      principal due on any Note on any Distribution Date (including the
      calculation of any of the individual components of such calculation) or to
      affect the rights of the Noteholders to the benefit of any provisions for
      the mandatory redemption of the Notes contained herein; or

            (vii) permit the creation of any lien ranking prior to or on a
      parity with the lien of this Indenture with respect to any part of the
      Indenture Trust Estate or, except as otherwise permitted or contemplated
      herein, terminate the lien of this Indenture on any property at any time
      subject hereto or deprive any Noteholder of any Note of the security
      provided by the lien of this Indenture.

            It shall not be necessary for any Act of Noteholders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.

            Promptly after the execution by the Issuer, the Indenture Trustee
and the Indenture Administrator of any supplemental indenture pursuant to this
Section, the Indenture Administrator shall mail to the Noteholders of the Notes
to which such amendment or supplemental indenture relates a notice setting forth
in general terms the substance of such supplemental indenture. Any failure of
the Indenture Administrator to mail such notice, or any defect therein, shall
not, however, in any way impair or affect the validity of any such supplemental
indenture.

            Section 9.3 Execution of Supplemental Indentures. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modifications thereby of the trusts created
by this Indenture, the Indenture Trustee and the Indenture Administrator shall
be entitled to receive, and subject to Sections 6.1 and 6.2, shall be fully
protected in relying upon, an Opinion of Counsel stating that the execution of
such supplemental indenture is authorized or permitted by this Indenture. The
Indenture Trustee and the Indenture Administrator may, but shall not be
obligated to, enter into any such supplemental indenture that affects the
Indenture Trustee's or the Indenture Administrator's own rights, duties,
liabilities or immunities under this Indenture or otherwise.

            Section 9.4 Effect of Supplemental Indenture. Upon the execution of
any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and be deemed

                                      -47-
<PAGE>

to be modified and amended in accordance therewith with respect to the Notes
affected thereby, and the respective rights, limitations of rights, obligations,
duties, liabilities and immunities under this Indenture of the Indenture
Trustee, the Issuer and the Noteholders shall thereafter be determined,
exercised and enforced hereunder subject in all respects to such modifications
and amendments, and all the terms and conditions of any such supplemental
indenture shall be and be deemed to be part of the terms and conditions of this
Indenture for any and all purposes.

            Section 9.5 Conformity with Trust Indenture Act. Every amendment of
this Indenture and every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the Trust Indenture Act as then
in effect so long as this Indenture shall then be qualified under the Trust
Indenture Act.

            Section 9.6 Reference in Notes to Supplemental Indentures. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee shall,
bear a notation in form approved by the Indenture Trustee as to any matter
provided for in such supplemental indenture. If the Issuer or the Indenture
Trustee shall so determine, new Notes so modified as to conform, in the opinion
of the Indenture Trustee and the Issuer, to any such supplemental indenture may
be prepared and executed by the Issuer and authenticated and delivered by the
Indenture Trustee in exchange for Outstanding Notes.

                                    ARTICLE X

                               REDEMPTION OF NOTES

            Section 10.1 Redemption. The Indenture Administrator shall, upon
receipt of written notice from the Servicer pursuant to Section 6.1(b) of the
Administration Agreement, give prompt written notice to the Noteholders of the
occurrence of such event. In the event that the assets of the Trust are sold
pursuant to Section 6.1(a) of the Administration Agreement, that portion of the
amounts on deposit in the Trust Accounts to be distributed to the Noteholders
shall be paid to the Noteholders as provided in Sections 2.7 and 2.8 of the
Administration Agreement. If amounts are to be paid to Noteholders pursuant to
this Section 10.1, the notice of such event from the Indenture Administrator to
the Noteholders shall include notice of the redemption of Notes by application
of such amounts on the next Distribution Date which is not sooner than 15 days
after the date of such notice (the "Redemption Date"), whereupon all such
amounts shall be payable on the Redemption Date.

            Section 10.2 Form of Redemption Notice. Notice of redemption under
Section 10.1 shall be given by the Indenture Administrator by first-class mail,
postage prepaid, or by facsimile, mailed or transmitted on or prior to the
applicable Redemption Date to each Noteholder, as of the close of business on
the Record Date preceding the applicable Redemption Date, at such Noteholder's
address or facsimile number appearing in the Note Register.

            All notices of redemption shall state:

            (i) the Redemption Date;

                                      -48-
<PAGE>

            (ii) the Redemption Price; and

            (iii) the place where such Notes are to be surrendered for payment
      of the Redemption Price (which shall be the office or agency of the Issuer
      to be maintained as provided in Section 3.2).

            Notice of redemption of the Notes shall be given by the Indenture
Administrator in the name and at the expense of the Issuer. Failure to give
notice of redemption, or any defect therein, to any Noteholder of any Note shall
not impair or affect the validity of the redemption of any other Note.

            Section 10.3 Notes Payable on Redemption Date. The Notes or portions
thereof to be redeemed shall on the Redemption Date become due and payable at
the Redemption Price and (unless the Issuer shall default in the payment of the
Redemption Price) no interest shall accrue on the Redemption Price for any
period after the date to which accrued interest is calculated for purposes of
calculating the Redemption Price.

                                   ARTICLE XI

                                  MISCELLANEOUS

            Section 11.1 Compliance Certificates and Opinions, etc. (a) Upon any
application or request by the Issuer to the Indenture Trustee or the Indenture
Administrator to take any action under any provision of this Indenture, the
Issuer shall furnish to the Indenture Trustee, the Indenture Administrator and
the Rating Agencies (i) an Officers' Certificate of the Issuer stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, (ii) an Opinion of Counsel stating that
in the opinion of such counsel all such conditions precedent, if any, have been
complied with and (iii) (if required by the TIA) an Independent Certificate from
a firm of certified public accountants meeting the applicable requirements of
this Section, except that, in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture, no additional certificate or opinion need be furnished.

            Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this indenture shall include:

            (i) a statement that each signatory of such certificate or opinion
      has read or has caused to be read such covenant or condition and the
      definitions herein relating thereto;

            (ii) a brief statement as to the nature and scope of the examination
      or investigation upon which the statements or opinions contained in such
      certificate or opinion are based;

                                      -49-

<PAGE>

            (iii) a statement that, in the opinion of each such signatory, such
      signatory has made such examination or investigation as is necessary to
      enable such signatory to express an informed opinion as to whether or not
      such covenant or condition has been complied with; and

            (iv) a statement as to whether, in the opinion of each such
      signatory, such condition or covenant has been complied with.

            (b) (i) Prior to the deposit of any Collateral or other property or
securities with the Indenture Administrator that is to be made the basis for the
release of any property or securities subject to the lien of this Indenture, the
Issuer shall, in addition to any obligation imposed in Section 11.1(a) or
elsewhere in this Indenture, furnish to the Indenture Trustee, the Indenture
Administrator and the Rating Agencies an Officers' Certificate of the Issuer
certifying or stating the opinion of each person signing such certificate as to
the fair value (within 90 days of such deposit) to the Issuer of the Collateral
or other property or securities to be so deposited.

            (ii) Whenever the Issuer is required to furnish to the Indenture
      Trustee, the Indenture Administrator and the Rating Agencies an Officers'
      Certificate of the Issuer certifying or stating the opinion of any signer
      thereof as to the matters described in clause (i) above, the Issuer shall
      also deliver to the Indenture Trustee and the Indenture Administrator an
      Independent Certificate as to the same matters, if the fair value to the
      Issuer of the securities to be so deposited and of all other such
      securities made the basis of any such withdrawal or release since the
      commencement of the then-current fiscal year of the Issuer, as set forth
      in the certificates delivered pursuant to clause (i) above and this clause
      (ii), is 10% or more of the Outstanding Amount of the Notes, but such a
      certificate need not be furnished with respect to any securities so
      deposited, if the fair value thereof to the Issuer as set forth in the
      related Officers' Certificate is less than $25,000 or less than one
      percent of the Outstanding Amount of the Notes.

            (iii) Other than any property released as contemplated by clause (v)
      below, whenever any property or securities are to be released from the
      lien of this Indenture, the Issuer shall also furnish to the Indenture
      Trustee and the Indenture Administrator an Officers' Certificate of the
      Issuer certifying or stating the opinion of each person signing such
      certificate as to the fair value (within 90 days of such release) of the
      property or securities proposed to be released and stating that in the
      opinion of such person the proposed release will not impair the security
      under this Indenture in contravention of the provisions hereof.

            (iv) Whenever the Issuer is required to furnish to the Indenture
      Trustee or the Indenture Administrator an Officers' Certificate of the
      Issuer certifying or stating the opinion of any signer thereof as to the
      matters described in clause (iii) above, the Issuer shall also furnish to
      the Indenture Trustee and the Indenture Administrator an Independent
      Certificate as to the same matters if the fair value of the property or
      securities and of all other property, other than property as contemplated
      by clause (v) below, or securities released from the lien of this
      Indenture since the commencement of the then-current calendar year, as set
      forth in the certificates required by clause (iii) above and this clause
      (iv), equals 10% or more of the Outstanding Amount of the Notes, but

                                      -50-
<PAGE>

      such certificate need not be furnished in the case of any release of
      property or securities if the fair value thereof as set forth in the
      related Officers' Certificate is less than $25,000 or less than one
      percent of the then Outstanding Amount of the Notes.

            (v) Notwithstanding Section 2.9 or any other provision of this
      Section, the Issuer may, without compliance with the requirements of the
      other provisions of this Section, (A) collect, liquidate, sell or
      otherwise dispose of Trust Student Loans as and to the extent permitted or
      required by the Basic Documents, (B) make cash payments out of the Trust
      Accounts as and to the extent permitted or required by the Basic Documents
      and (C) convey to the Depositor, the Servicer or another eligible lender
      those specified Trust Student Loans as and to the extent permitted or
      required by and in accordance with Section 8.4(c) hereof and Section 6 of
      the Sale Agreement, Section 3.5 of the Servicing Agreement or Section
      3.11E of the Servicing Agreement, respectively.

            Section 11.2 Form of Documents Delivered to Indenture Trustee or
Indenture Administrator. In any case where several matters are required to be
certified by, or covered by an opinion of, any specified Person, it is not
necessary that all such matters be certified by, or covered by the opinion of,
only one such Person, or that they be so certified or covered by only one
document, but one such Person may certify or give an opinion with respect to
some matters, and one or more other such Persons as to other matters, and any
such Person may certify or give an opinion as to such matters in one or several
documents.

            Any certificate or opinion of an Authorized Officer of the Issuer
may be based, insofar as it relates to legal matters, upon a certificate or
opinion of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate of an Authorized Officer or
Opinion of Counsel may be based, insofar as it relates to factual matters, upon
a certificate or opinion of, or representations by, an officer or officers of
the Servicer, the Depositor, the Issuer or the Administrator, stating that the
information with respect to such factual matters is in the possession of the
Servicer, the Depositor, the Issuer or the Administrator, unless such counsel
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to such matters are erroneous.

            Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.

            Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee or the Indenture Administrator,
it is provided that the Issuer shall deliver any document as a condition of the
granting of such application, or as evidence of the Issuer's compliance with any
term hereof, it is intended that the truth and accuracy, at the time of the
granting of such application or at the effective date of such certificate or
report (as the case may be), of the facts and opinions stated in such document
shall in such case be conditions precedent to the right of the Issuer to have
such application granted or to the sufficiency of such certificate or report.
The foregoing shall not, however, be construed to affect the Indenture

                                      -51-
<PAGE>

Trustee's or the Indenture Administrator's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Article VI.

            Section 11.3 Acts of Noteholders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Noteholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Noteholders in person or by agents duly appointed in writing; and except as
herein otherwise expressly provided such action shall become effective when such
instrument or instruments are delivered to the Indenture Trustee, and, where it
is hereby expressly required, to the Issuer. Such instrument or instruments (and
the action embodied therein and evidenced thereby) are herein sometimes referred
to as the "Act" of the Noteholders signing such instrument or instruments. Proof
of execution of any such instrument or of a writing appointing any such agent
shall be sufficient for any purpose of this Indenture and (subject to Section
6.1) conclusive in favor of the Indenture Trustee and the Issuer, if made in the
manner provided in this Section.

            (b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any manner that the Indenture Trustee
deems sufficient.

            (c) The ownership of Notes shall be proved by the Note Register.

            (d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by any Noteholder shall bind the Noteholder of every Note
issued upon registration of transfer thereof or in exchange therefor or in lieu
thereof, in respect of anything done, omitted or suffered to be done by the
Indenture Trustee or the Issuer in reliance thereon, whether or not notation of
such action is made upon such Note.

            Section 11.4 Notices, etc. , to Indenture Trustee, Indenture
Administrator, Issuer and Rating Agencies. Any request, demand, authorization,
direction, notice, consent, waiver or Act of Noteholders or other documents
provided or permitted by this Indenture shall be in writing and if such request,
demand, authorization, direction, notice, consent, waiver or Act of Noteholders
is to be made upon, given or furnished to or filed with:

            (a) The Indenture Trustee by any Noteholder, the Servicer, the
Administrator or by the Issuer shall be sufficient for every purpose hereunder
if made, given, furnished or filed in writing to or with the Indenture Trustee
at its Corporate Trust Office.

            (b) The Indenture Administrator by any Noteholder, the Servicer, the
Administrator, the Indenture Trustee or by the Issuer shall be sufficient for
every purpose hereunder if made, given, furnished or filed in writing to or with
the Indenture Administrator addressed to: Citibank, N.A., 388 Greenwich Street,
14th Floor, New York, New York 10013, Attention: Structured Finance Agency and
Trust - SLC Student Loan Trust 2005-1.

            (c) The Issuer by the Indenture Trustee, the Indenture Administrator
or by any Noteholder shall be sufficient for every purpose hereunder if in
writing and mailed, first-class, postage prepaid, to the Issuer addressed to:
SLC Student Loan Trust 2005-1, in care of Wilmington Trust Company, 1100 North
Market Street, Wilmington, Delaware 19890-0001, Attn: Corporate Trust
Administration; and the Administrator, The Student Loan Corporation,

                                      -52-
<PAGE>

750 Washington Boulevard, 9th Floor, Stamford, Connecticut 06901, Attention:
Daniel McHugh, or any other address previously furnished in writing to the
Indenture Trustee by the Issuer or the Administrator. The Issuer shall promptly
transmit any notice received by it from the Noteholders to the Indenture
Administrator.

            Notices required to be given to the Rating Agencies by the Issuer,
the Owner Trustee, the Indenture Trustee or the Indenture Administrator shall be
in writing, personally delivered or mailed by certified mail, return receipt
requested, to (i) in the case of Moody's, at the following address: ABS
Monitoring Department, 99 Church Street, New York, New York 10007, (ii) in the
case of S&P, at the following address: 55 Water Street, New York, New York
10041-0003, Attention: Asset Backed Surveillance Department, 32nd Floor, and
(iii) in the case of Fitch, at the following address: One State Street Plaza,
New York, New York 10004, Attention: ABS Surveillance, or email to
abs.surveillance@fitchratings.com; or as to each of the foregoing, at such other
address as shall be designated by written notice to the other parties.

            Section 11.5 Notices to Noteholders; Waiver. Where this Indenture
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at his address as it appears on the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the giving
of such notice. In any case where notice to Noteholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in the manner herein
provided shall conclusively be presumed to have been duly given.

            Where this Indenture provides for notice in any manner, such notice
may be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Indenture
Trustee but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such a waiver.

            In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Noteholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Indenture Trustee shall be deemed to
be a sufficient giving of such notice.

            Where this Indenture provides for notice to the Rating Agencies,
failure to give such notice shall not affect any other rights or obligations
created hereunder, and shall not under any circumstance constitute a Default.

            Section 11.6 Alternate Payment and Notice Provisions.
Notwithstanding any provision of this Indenture or any of the Notes to the
contrary, the Issuer may enter into any agreement with any Noteholder providing
for a method of payment, or notice by the Indenture Trustee, the Indenture
Administrator or any Paying Agent to such Noteholder, that is different from the
methods provided for in this Indenture for such payments or notices. The Issuer
will furnish to the Indenture Trustee and the Indenture Administrator a copy of
each such agreement

                                      -53-
<PAGE>

and the Indenture Trustee and the Indenture Administrator will cause payments to
be made and notices to be given in accordance with such agreements.

            Section 11.7 Conflict with Trust Indenture Act. If any provision
hereof limits, qualifies or conflicts with another provision hereof that is
required to be included in this Indenture by any of the provisions of the Trust
Indenture Act, such required provision shall control.

            The provisions of TIA ss.ss. 310 through 317 that impose duties on
any Person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.

            Section 11.8 Effect of Headings and Table of Contents. The Article
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.

            Section 11.9 Successors and Assigns. All covenants and agreements in
this Indenture and the Notes by the Issuer shall bind its successor and assigns,
whether so expressed or not. All agreements of the Indenture Trustee and the
Indenture Administrator in this Indenture shall bind the successors, co-trustees
and agents (excluding any legal representatives or accountants) of the Indenture
Trustee and the Indenture Administrator, respectively.

            Section 11.10 Separability. In case any provision in this Indenture
or in the Notes shall be invalid, illegal or unenforceable, the validity,
legality, and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.

            Section 11.11 Benefits of Indenture. Nothing in this Indenture or in
the Notes, express or implied shall give to any person, other than the parties
hereto and their successors hereunder, the Noteholders, any other party secured
hereunder, and any other Person with an ownership interest in any part of the
Indenture Trust Estate, any benefit or any legal or equitable right, remedy or
claim under this Indenture.

            Section 11.12 Legal Holidays. In any case where the date on which
any payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.

            Section 11.13 GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS (OTHER THAN ss.5-1401 OF THE NEW YORK GENERAL
OBLIGATIONS LAW), AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

                                      -54-
<PAGE>

            Section 11.14 Counterparts. This Indenture may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.

            Section 11.15 Recording of Indenture. If this Indenture is subject
to recording in any appropriate public recording offices, such recording is to
be effected by the Issuer and at its expense accompanied by an Opinion of
Counsel (which may be counsel to the Indenture Trustee or any other counsel
reasonably acceptable to the Indenture Trustee) to the effect that such
recording is necessary either for the protection of the Noteholders or any other
Person secured hereunder or for the enforcement of any right or remedy granted
to the Indenture Trustee under this Indenture.

            Section 11.16 Trust Obligations. No recourse may be taken, directly
or indirectly, with respect to the obligations of the Issuer, the Depositor, the
Administrator, the Servicer, the Eligible Lender Trustee, the Indenture Trustee,
the Indenture Administrator or the Owner Trustee on the Notes or under this
Indenture or any certificate or other writing delivered in connection herewith
or therewith, against (i) the Indenture Trustee, the Indenture Administrator,
the Eligible Lender Trustee or the Owner Trustee in its individual capacity,
(ii) any owner of a beneficial interest in the Issuer or (iii) any partner,
owner, beneficiary, agent, officer, director or employee of the Indenture
Trustee, the Indenture Administrator, the Eligible Lender Trustee or the Owner
Trustee in its individual capacity, any holder or owner of a beneficial interest
in the Issuer, the Eligible Lender Trustee, the Indenture Trustee, the Indenture
Administrator or the Owner Trustee or of any successor or assign thereof in its
individual capacity, except as any such Person may have expressly agreed (it
being understood that the Indenture Trustee, the Indenture Administrator, the
Eligible Lender Trustee and the Owner Trustee have no such obligations in their
individual capacity) and except that any such partner, owner or beneficiary
shall be fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution or failure to pay any
installment or call owing to such entity. For all purposes of this Indenture, in
the performance of any duties or obligations of the Issuer hereunder, the Owner
Trustee shall be subject to, and entitled to the benefits of, the terms and
provisions of Articles VI, VII and VIII of the Trust Agreement.

            Section 11.17 No Petition. The Indenture Trustee and the Indenture
Administrator, by entering into this Indenture, and each Noteholder, by
accepting a Note, hereby covenant and agree that they shall not at any time
institute against the Depositor or the Issuer, or join in any institution
against the Depositor or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency, receivership or liquidation proceedings, or other
proceedings under any United States Federal or state bankruptcy or similar law
in connection with any obligations relating to the Notes, this Indenture or any
of the other Basic Documents. The foregoing shall not limit the rights of the
Indenture Trustee to file any claim in, or otherwise take any action with
respect to, any insolvency proceeding that was instituted against the Issuer by
any Person other than the Indenture Trustee.

            Section 11.18 Inspection. The Issuer agrees that, on reasonable
prior notice, it shall permit any representative of the Indenture Trustee or the
Indenture Administrator, during the Issuer's normal business hours, to examine
all the books of account, records, reports, and other papers of the Issuer, to
make copies and extracts therefrom, to cause such books to be

                                      -55-
<PAGE>

audited by Independent certified public accountants, and to discuss the Issuer's
affairs, finances and accounts with the Issuer's officers, employees, and
Independent certified public accountants, all at such reasonable times and as
often as may be reasonably requested. The Indenture Trustee or the Indenture
Administrator shall and shall cause its representatives to hold in confidence
all such information obtained from such examination or inspection except to the
extent disclosure may be required by law (and all reasonable applications for
confidential treatment are unavailing) and except to the extent that the
Indenture Trustee may reasonably determine that such disclosure is consistent
with its obligations hereunder.

            Section 11.19 Indenture Administrator as Agent of Indenture Trustee.
The parties hereto hereby acknowledge that the Indenture Administrator is acting
solely as an agent of the Indenture Trustee hereunder and shall have no
liability or obligation to the Noteholders whatsoever in connection with the
performance by it of its obligations hereunder.

            Section 11.20 Payments of Taxes and Other Governmental Charges. (a)
The Indenture Administrator shall request, and Noteholders shall provide, all
appropriate tax certifications and forms necessary to enable the Trust or its
agents, to determine their duties and liabilities with respect to any taxes or
other charges that they may be required to pay, deduct or withhold in respect of
the Notes under any present or future law or regulation of the United States or
any present or future law or regulation of any political subdivision thereof or
taxing authority therein or to comply with any reporting or other requirements
under any law or regulation, and to pay, deduct or withhold any such taxes or
charges and remit them to the relevant taxing authorities as required under law.
Such certification shall take the form of a correct, complete and executed U.S.
Internal Revenue Service Form W-9, W-8BEN, W-8ECI, or W-8IMY (or any successors
thereto), as applicable, with appropriate attachments, that identifies such
Noteholder.

            (b) If such forms are not provided or if any tax or other
governmental charge shall otherwise become payable by or on behalf of the
Indenture Administrator, including any tax or governmental charge required to be
withheld from any payment made by the Indenture Administrator under the
provisions of any applicable law or regulation with respect to the Notes, such
tax or governmental charge shall be payable by the Noteholder and may be
withheld by the Indenture Administrator. The Issuer and the Indenture
Administrator shall have the right to refuse the surrender, registration of
transfer or exchange of any Note with respect to which such tax or other
governmental charge shall be payable until such payment shall have been made by
the Noteholder.

                            [SIGNATURE PAGE FOLLOWS]

                                      -56-
<PAGE>

            IN WITNESS WHEREOF, the Issuer, the Eligible Lender Trustee, the
Indenture Trustee and the Indenture Administrator have caused this Indenture to
be duly executed by their respective officers, thereunto duly authorized and
duly attested, all as of the day and year first above written.

                                       SLC STUDENT LOAN TRUST 2005-1

                                       By:  WILMINGTON TRUST COMPANY,
                                       not in its individual capacity but solely
                                       as Owner Trustee

                                          By:/s/ Janel R. Havrilla
                                             ---------------------------------
                                             Name: Janel R. Havrilla
                                             Title: Financial Services Officer

                                       CITIBANK, N.A.,
                                       not in its individual capacity but solely
                                       as Eligible Lender Trustee

                                       By:/s/ Kristen Driscoll
                                          ------------------------------------
                                          Name: Kristen Driscoll
                                          Title: Vice President

                                       WACHOVIA BANK, NATIONAL
                                       ASSOCIATION,
                                       not in its individual capacity but solely
                                       as Indenture Trustee

                                       By:/s/ Patricia O'Neill-Manella
                                          ------------------------------------
                                          Name: Patricia O'Neill-Manella
                                          Title: Vice President

<PAGE>

                                       CITIBANK, N.A.,
                                       not in its individual capacity but solely
                                       as Indenture Administrator

                                       By:/s/ Kristen Driscoll
                                          --------------------------------------
                                          Name: Kristen Driscoll
                                          Title: Vice President

<PAGE>

                                                                      APPENDIX A

                              DEFINITIONS AND USAGE
                          SLC Student Loan Trust 2005-1

                                      Usage

            The following rules of construction and usage shall be applicable to
any instrument that is governed by this appendix (this "Appendix"):

            (a) All terms defined in this Appendix shall have the defined
      meanings when used in any instrument governed hereby and in any
      certificate or other document made or delivered pursuant thereto unless
      otherwise defined therein.

            (b) As used herein, in any instrument governed hereby and in any
      certificate or other document made or delivered pursuant thereto,
      accounting terms not defined in this Appendix or in any such instrument,
      certificate or other document, and accounting terms partly defined in this
      Appendix or in any such instrument, certificate or other document, to the
      extent not defined, shall have the respective meanings given to them under
      generally accepted accounting principles as in effect on the date of such
      instrument. To the extent that the definitions of accounting terms in this
      Appendix or in any such instrument, certificate or other document are
      inconsistent with the meanings of such terms under generally accepted
      accounting principles, the definitions contained in this Appendix or in
      any such instrument, certificate or other document shall control.

            (c) The words "hereof," "herein," "hereunder" and words of similar
      import when used in an instrument refer to such instrument as a whole and
      not to any particular provision or subdivision thereof; references in an
      instrument to "Article," "Section" or another subdivision or to an
      attachment are, unless the context otherwise requires, to an article,
      section or subdivision of or an attachment to such instrument; and the
      term "including" means "including without limitation."

            (d) The definitions contained in this Appendix are equally
      applicable to both the singular and plural forms of such terms and to the
      masculine as well as to the feminine and neuter genders of such terms.

            (e) Any agreement, instrument or statute defined or referred to
      below or in any agreement or instrument that is governed by this Appendix
      means such agreement or instrument or statute as from time to time
      amended, modified or supplemented, including (in the case of agreements or
      instruments) by assignment, assumption, waiver or consent and (in the case
      of statutes) by succession of comparable successor statutes and includes
      (in the case of agreements or instruments) references to all attachments
      thereto and instruments incorporated therein. References to a Person are
      also to its permitted successors and assigns.

                                  Appendix A-1
<PAGE>

                                   Definitions

            "Accrual Period" means, with respect to a Distribution Date, the
period from and including the immediately preceding Distribution Date to, but
excluding, the then-current Distribution Date, or in the case of the initial
such period, the period from and including the Closing Date to, and including,
August 14, 2005.

            "Act" means the Securities Act of 1933, as amended.

            "Actual/360" means that interest is calculated on the basis of the
actual number of days elapsed in a year of 360 days.

            "Adjusted Pool Balance" means, for any Distribution Date, (i) if the
Pool Balance as of the last day of the related Collection Period is greater than
40% of the Initial Pool Balance, the sum of such Pool Balance, the Capitalized
Interest Account Balance and the Specified Reserve Account Balance for such
Distribution Date, or (ii) if the Pool Balance as of the last day of the related
Collection Period is less than or equal to 40% of the Initial Pool Balance, the
sum of such Pool Balance and the Capitalized Interest Account Balance.

            "Administration Agreement" means the Administration Agreement, dated
as of June 15, 2005, among the Administrator, the Servicer and the Trust.

            "Administration Fees" has the meaning specified in Section 2.15 of
the Administration Agreement.

            "Administrator" means SLC, in its capacity as administrator of the
Trust in accordance with the Administration Agreement.

            "Administrator Default" has the meaning specified in Section 5.1 of
the Administration Agreement.

            "Administrator's Certificate" means an Officers' Certificate of the
Administrator delivered pursuant to Section 3.1(c) of the Administration
Agreement.

            "Administrator's Officers' Certificate" means an Officers'
Certificate of the Administrator delivered pursuant to Section 3.1(b) of the
Administration Agreement.

            "Affiliate" means, with respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect to
any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.

            "Authorized Officer" means (i) with respect to the Trust, the
Administrator, (ii) with respect to the Administrator, any officer of the
Administrator or any of its Affiliates who is authorized to act for the
Administrator in matters relating to itself or to the Trust and to be acted upon
by the Administrator pursuant to the Basic Documents and who is identified on
the

                                  Appendix A-2
<PAGE>

list of Authorized Officers delivered by the Administrator to the Indenture
Administrator on the Closing Date (as such list may be modified or supplemented
from time to time thereafter), (iii) with respect to the Depositor, any officer
of the Depositor or any of its Affiliates who is authorized to act for the
Depositor in matters relating to or to be acted upon by the Depositor pursuant
to the Basic Documents and who is identified on the list of Authorized Officers
delivered by the Depositor to the Indenture Administrator on the Closing Date
(as such list may be modified or supplemented from time to time thereafter) and
(iv) with respect to the Servicer, any officer of the Servicer who is authorized
to act for the Servicer in matters relating to or to be acted upon by the
Servicer pursuant to the Basic Documents and who is identified on the list of
Authorized Officers delivered by the Servicer to the Indenture Administrator on
the Closing Date (as such list may be modified or supplemented from time to time
thereafter).

            "Available Funds" means, as to a Distribution Date or any related
Monthly Servicing Payment Date, the sum of the following amounts received with
respect to the related Collection Period or, in the case of a Monthly Servicing
Payment Date, the applicable portion of these amounts:

            (a) all collections on the Trust Student Loans received by the
      Servicer on the Trust Student Loans, including any Guarantee Payments
      received on the Trust Student Loans, but net of:

                              (1) any collections in respect of principal on the
                        Trust Student Loans applied by the Trust to repurchase
                        guaranteed loans from the Guarantors under the Guarantee
                        Agreements, and

                              (2) amounts required by the Higher Education Act
                        to be paid to the Department or to be repaid to
                        borrowers, whether or not in the form of a principal
                        reduction of the applicable Trust Student Loan, on the
                        Trust Student Loans for that Collection Period, if any;

            (b) any Interest Subsidy Payments and Special Allowance Payments
      with respect to the Trust Student Loans during that Collection Period;

            (c) all Liquidation Proceeds from any Trust Student Loans which
      became Liquidated Student Loans during that Collection Period in
      accordance with the Servicer's customary servicing procedures, net of
      expenses incurred by the Servicer related to their liquidation and any
      amounts required by law to be remitted to the borrowers on the Liquidated
      Student Loans, and all Recoveries on Liquidated Student Loans which were
      written off in prior Collection Periods or during that Collection Period;

            (d) the aggregate Purchase Amounts received during that Collection
      Period for those Trust Student Loans repurchased by the Depositor or
      purchased by the Servicer or for Trust Student Loans sold to another
      eligible lender pursuant to Section 3.11E of the Servicing Agreement;

            (e) the aggregate Purchase Amounts received during that Collection
      Period for those Trust Student Loans repurchased by SLC;

                                  Appendix A-3
<PAGE>

            (f) the aggregate amounts, if any, received from any of SLC, the
      Depositor or the Servicer, as the case may be, as reimbursement of
      non-guaranteed interest amounts, or lost Interest Subsidy Payments and
      Special Allowance Payments, on the Trust Student Loans pursuant to the
      Sale Agreement or Section 3.5 of the Servicing Agreement, respectively;

            (g) amounts received by the Trust pursuant to Sections 3.1 and 3.13
      of the Servicing Agreement during that Collection Period as to yield or
      principal adjustments;

            (h) any interest remitted by the Administrator to the Collection
      Account prior to such Distribution Date or Monthly Servicing Payment Date;

            (i) Investment Earnings for that Distribution Date earned on amounts
      on deposit in each Trust Account;

            (j) amounts received by the Trust from SLC in respect of borrower
      benefits;

            (k) on the February 15, 2007 Distribution Date, all funds then on
      deposit in the Capitalized Interest Account that are transferred into the
      Collection Account on that Distribution Date;

            (l) amounts transferred from the Reserve Account in excess of the
      Specified Reserve Account Balance as of that Distribution Date; and

            (m) as to the first Distribution Date, the Collection Account
      Initial Deposit.

provided that if on any Distribution Date there would not be sufficient funds,
after application of Available Funds and application of amounts available from
the Capitalized Interest Account and the Reserve Account, to pay any of the
items specified in clauses (a) through (c) of Section 2.8 of the Administration
Agreement (or, if a Class B Interest Subordination Condition is in effect,
clauses (a) and (b) thereof from the Capitalized Interest Account and clauses
(a), (b) and (e) thereof from the Reserve Account) as set forth in Section 2.9
and 2.10 of the Administration Agreement, relating to such distributions, then
Available Funds for that Distribution Date will include, in addition to the
Available Funds as defined above, amounts on deposit in the Collection Account,
or amounts held by the Administrator, or which the Administrator reasonably
estimates to be held by the Administrator, for deposit into the Collection
Account on the related Determination Date which would have constituted Available
Funds for the Distribution Date succeeding that Distribution Date, up to the
amount necessary to pay such items, and the Available Funds for the succeeding
Distribution Date will be adjusted accordingly.

            "Basic Documents" means the Trust Agreement, the Indenture, the
Servicing Agreement, the Sub-Servicing Agreement, the Administration Agreement,
the Sale Agreement, the Purchase Agreement, the Guarantee Agreements, the Note
Depository Agreement, the Custody Agreement and other documents and certificates
delivered in connection with any such documents.

                                  Appendix A-4
<PAGE>

            "Benefit Plan" means (i) an employee benefit plan (as defined
in Section 3(3) of ERISA), whether or not subject to the provisions of Title I
of ERISA, (ii) a plan described in Section 4975(e)(1) of the Code, whether or
not subject to Section 4975 of the Code or (iii) any entity whose underlying
assets include plan assets by reason of a plan's investment in the entity.

            "Bill of Sale" has the meaning specified in either the
Purchase Agreement or the Sale Agreement, as applicable.

            "Book-Entry Note" means a beneficial interest in the Notes,
ownership and transfers of which shall be made through book entries by a
Clearing Agency as described in Section 2.10 of the Indenture.

            "Business Day" means (i) with respect to calculating LIBOR of
a specified maturity, any day on which banks in New York, New York and London,
England are open for the transaction of international business and (ii) for all
other purposes, any day other than a Saturday, a Sunday or a day on which
banking institutions or trust companies in New York, New York or Wilmington,
Delaware are authorized or obligated by law, regulation or executive order to
remain closed.

            "Capitalized Interest Account" means the account designated as
such, established and maintained pursuant to Section 2.3(a) of the
Administration Agreement.

            "Capitalized Interest Account Balance" means, for any
Distribution Date through and including the February 15, 2007 Distribution Date:

            (i) if neither of the Capitalized Interest Conditions are in
effect, the amount on deposit in the Capitalized Interest Account on the
Distribution Date following those distributions with respect to clauses (b) and
(c) (or clause (b) if a Class B Interest Subordination Condition is in effect)
under Section 2.8 of the Administration Agreement; or

            (ii) if either of the Capitalized Interest Conditions are in
effect, the excess, if any, of (x) the amount on deposit in the Capitalized
Interest Account on the Distribution Date following those distributions with
respect to clause (b) under Section 2.8 of the Administration Agreement, over
(y) the Class B Noteholders' Interest Distribution Amount.

            "Capitalized Interest Account Initial Deposit" means $35,000,000.

            "Capitalized Interest Conditions" means the following two
conditions:

            (1) on any Distribution Date following distributions applied
in accordance with clauses (a) through (j) under Section 2.8 of the
Administration Agreement to be made on that Distribution Date, the Outstanding
Amount of the Class A Notes, would be in excess of:

            (a) the outstanding principal balance of the Trust Student
Loans as of the last day of the related Collection Period plus

            (b) any accrued but unpaid interest on the Trust Student Loans
as of the last day of the related Collection Period plus

                                  Appendix A-5
<PAGE>

            (c) the balance of the Capitalized Interest Account on the
Distribution Date following those distributions made in accordance with clauses
(b) and (c) (or clause (b) if a Class B Interest Subordination Condition is in
effect) under Section 2.8 of the Administration Agreement plus

            (d) the balance of the Reserve Account on the Distribution
Date following those distributions made under clauses (a) through (j) under
Section 2.8 of the Administration Agreement minus

            (e) the Specified Reserve Account Balance for that Distribution
Date, or

            (2) an Event of Default described in Section 5.1(i) or (ii)
with respect to the Class A Notes or Section 5.1(iv) or (v) has occurred and is
continuing.

            "Carryover Servicing Fee" has the meaning specified in
Attachment A to the Servicing Agreement.

            "Class A Note" means a Class A-1 Note, Class A-2 Note, Class
A-3 Note or Class A-4 Note.

            "Class A Note Interest Shortfall" means, for any Distribution
Date, the excess of (i) the Class A Noteholders' Interest Distribution Amount on
the preceding Distribution Date, over (ii) the amount of interest actually
distributed to the Class A Noteholders on that preceding Distribution Date, plus
interest on the amount of that excess, to the extent permitted by law, at the
interest rate applicable for each such class of Notes from that preceding
Distribution Date to the current Distribution Date.

            "Class A Note Principal Shortfall" means, as of the close of
any Distribution Date, the excess of (i) the Class A Noteholders' Principal
Distribution Amount on that Distribution Date, over (ii) the amount of principal
actually distributed to the Class A Noteholders on such Distribution Date.

            "Class A Noteholder" means the Person in whose name a Class A
Note is registered in the Note Register.

            "Class A Noteholders' Distribution Amount" means, for any
Distribution Date, the sum of the Class A Noteholders' Interest Distribution
Amount and the Class A Noteholders' Principal Distribution Amount for that
Distribution Date.

            "Class A Noteholders' Interest Distribution Amount" means, for
any Distribution Date, the sum of: (1) the amount of interest accrued at the
Class A-1 Rate, the Class A-2 Rate, the Class A-3 Rate or the Class A-4 Rate, as
applicable, for the related Accrual Period on the Outstanding Amount of all
classes of Class A Notes on the immediately preceding Distribution Date(s) after
giving effect to all principal distributions to Class A Noteholders on that
preceding Distribution Date or, in the case of the first Distribution Date, on
the Closing Date, and (2) the Class A Note Interest Shortfall for that
Distribution Date.

                                  Appendix A-6
<PAGE>

            "Class A Noteholders' Principal Distribution Amount" means,
for any Distribution Date, the Principal Distribution Amount multiplied by the
Class A Percentage for that Distribution Date, plus any Class A Note Principal
Shortfall as of the close of business on the preceding Distribution Date;
provided that the Class A Noteholders' Principal Distribution Amount will not
exceed the Outstanding Amount of the Class A Notes. In addition, on the maturity
date for any class of Class A Notes, the principal required to be distributed to
the related Noteholders will include the amount required to reduce the
Outstanding Amount of that class to zero.

            "Class A Percentage" means 100% minus the Class B Percentage.

            "Class A-1 Maturity Date" means the February 15, 2018 Distribution
Date.

            "Class A-2 Maturity Date" means the November 15, 2021 Distribution
Date.

            "Class A-3 Maturity Date" means the February 18, 2025 Distribution
Date.

            "Class A-4 Maturity Date" means the February 15, 2045 Distribution
Date.

            "Class A-1 Noteholder" means a Person in whose name a Class A-1 Note
is registered in the Note Register.

            "Class A-2 Noteholder" means a Person in whose name a Class A-2 Note
is registered in the Note Register.

            "Class A-3 Noteholder" means a Person in whose name a Class A-3 Note
is registered in the Note Register.

            "Class A-4 Noteholder" means a Person in whose name a Class A-4 Note
is registered in the Note Register.

            "Class A-1 Notes" means the $722,000,000 Floating Rate Class A-1
Student Loan Asset-Backed Notes issued by the Trust pursuant to the Indenture,
substantially in the form of Exhibit A thereto.

            "Class A-2 Notes" means the $385,000,000 Floating Rate Class A-2
Student Loan Asset-Backed Notes issued by the Trust pursuant to the Indenture,
substantially in the form of Exhibit A thereto.

            "Class A-3 Notes" means the $384,000,000 Floating Rate Class A-3
Student Loan Asset-Backed Notes issued by the Trust pursuant to the Indenture,
substantially in the form of Exhibit A thereto.

            "Class A-4 Notes" means the $531,196,000 Floating Rate Class A-4
Student Loan Asset-Backed Notes issued by the Trust pursuant to the Indenture,
substantially in the form of Exhibit A thereto.

                                  Appendix A-7
<PAGE>

            "Class A-1 Rate" means, for any Accrual Period after the initial
Accrual Period, Three-Month LIBOR, as determined on the second Business Day
before the beginning of the applicable Accrual Period, plus 0.01%, based on an
Actual/360 accrual method. For the initial Accrual Period, the Class A-1 Rate
shall mean the Initial Accrual Rate plus 0.01%, based on an Actual/360 accrual
method.

            "Class A-2 Rate" means, for any Accrual Period after the initial
Accrual Period, Three-Month LIBOR, as determined on the second Business Day
before the beginning of the applicable Accrual Period, plus 0.08% based on an
Actual/360 accrual method. For the initial Accrual Period, the Class A-2 Rate
shall mean the Initial Accrual Rate plus 0.08%, based on an Actual/360 accrual
method.

            "Class A-3 Rate" means, for any Accrual Period after the initial
Accrual Period, Three-Month LIBOR, as determined on the second Business Day
before the beginning of the applicable Accrual Period, plus 0.10% based on an
Actual/360 accrual method. For the initial Accrual Period, the Class A-3 Rate
shall mean the Initial Accrual Rate plus 0.10%, based on an Actual/360 accrual
method.

            "Class A-4 Rate" means, for any Accrual Period after the initial
Accrual Period, Three-Month LIBOR, as determined on the second Business Day
before the beginning of the applicable Accrual Period, plus 0.15% based on an
Actual/360 accrual method. For the initial Accrual Period, the Class A-4 Rate
shall mean the Initial Accrual Rate plus 0.15%, based on an Actual/360 accrual
method.

            "Class B Interest Subordination Condition" means, if after giving
effect to all required distributions of principal and interest on the Notes on
any Distribution Date, the outstanding principal balance of the Trust Student
Loans as of the last day of the related Collection Period, plus accrued but
unpaid interest thereon as of the last day of the related Collection Period, and
amounts then on deposit in the Reserve Account in excess of the Specified
Reserve Account Balance as of such Distribution Date, would be less than the
Outstanding Amount of the Class A Notes.

            "Class B Maturity Date" means the February 15, 2045 Distribution
Date.

            "Class B Note Interest Shortfall" means, with respect to any
Distribution Date, the excess of (i) the Class B Noteholders' Interest
Distribution Amount on the preceding Distribution Date over (ii) the amount of
interest actually distributed to the Class B Noteholders on such preceding
Distribution Date, plus interest on the amount of such excess interest due to
the Class B Noteholders, to the extent permitted by law, at the Class B Rate
from such preceding Distribution Date to the current Distribution Date.

            "Class B Note Principal Shortfall" means, as of the close of any
Distribution Date, the excess of (i) the Class B Noteholders' Principal
Distribution Amount on such Distribution Date over (ii) the amount of principal
actually distributed to the Class B Noteholders on such Distribution Date.

            "Class B Noteholder" means the Person in whose name a Class B Note
is registered in the Note Register.

                                  Appendix A-8
<PAGE>

            "Class B Noteholders' Distribution Amount" means, for any
Distribution Date, the sum of the Class B Noteholders' Interest Distribution
Amount and the Class B Noteholders' Principal Distribution Amount for that
Distribution Date.

            "Class B Noteholders' Interest Distribution Amount" means, for any
Distribution Date, the sum of (1) the amount of interest accrued at the Class B
Rate for the related Accrual Period on the Outstanding Amount of the Class B
Notes on the immediately preceding Distribution Date(s) (or, in the case of the
first Distribution Date, the Closing Date), after giving effect to all principal
distributions to Class B Noteholders on that preceding Distribution Date, and
(ii) the Class B Note Interest Shortfall for that Distribution Date.

            "Class B Noteholders' Principal Distribution Amount" means, for any
Distribution Date, the Principal Distribution Amount multiplied by the Class B
Percentage for that Distribution Date, plus any Class B Note Principal Shortfall
as of the close of business on the preceding Distribution Date; provided that
the Class B Noteholders' Principal Distribution Amount will not exceed the
Outstanding Amount of the Class B Notes. In addition, on the Class B Maturity
Date, the principal required to be distributed to the Class B Noteholders will
include the amount required to reduce the Outstanding Amount of the Class B
Notes to zero.

            "Class B Percentage" means, with respect to any Distribution Date:

            (a) prior to the Stepdown Date or with respect to any Distribution
      Date on which a Trigger Event is in effect, zero; and

            (b) on and after the Stepdown Date and provided that no Trigger
      Event is in effect, a fraction expressed as a percentage, the numerator of
      which is the aggregate Outstanding Amount of the Class B Notes immediately
      prior to that Distribution Date and the denominator of which is the
      aggregate Outstanding Amount of all Notes, immediately prior to that
      Distribution Date.

            "Class B Notes" means the $62,542,000 Floating Rate Class B Student
Loan Asset-Backed Notes issued by the Trust pursuant to the Indenture,
substantially in the form of Exhibit A thereto.

            "Class B Rate" means, for any Accrual Period after the initial
Accrual Period, Three-Month LIBOR, as determined on the second Business Day
before the beginning of the applicable Accrual Period, plus 0.20% based on an
Actual/360 accrual method. For the initial Accrual Period, the Class B Rate
shall mean the Initial Accrual Rate plus 0.20%, based on an Actual/360 accrual
method.

            "Clearing Agency" means an organization registered as a
"clearing agency" pursuant to applicable law. The initial Clearing Agency shall
be DTC, and the initial nominee for such Clearing Agency shall be Cede & Co.

            "Clearing Agency Participant" means a broker, dealer, bank,
other financial institution or other Person for whom from time to time a
Clearing Agency effects book-entry transfers and pledges of securities deposited
with the Clearing Agency.

                                  Appendix A-9
<PAGE>

            "Closing Date" means June 15, 2005.

            "Code" means the Internal Revenue Code of 1986, as amended
from time to time, and Treasury Regulations promulgated thereunder.

            "Collateral" has the meaning specified in the Granting Clause
of the Indenture.

            "Collection Account" means the account designated as such,
established and maintained pursuant to Section 2.3(a) of the Administration
Agreement.

            "Collection Account Initial Deposit" means $0.

            "Collection Period" means, with respect to the first Distribution
Date, the period beginning on the Closing Date and ending on July 31, 2005, and
with respect to each subsequent Distribution Date the Collection Period means
the three calendar months immediately following the end of the previous
Collection Period.

            "Commission" means the United States Securities and Exchange
Commission.

            "Consolidation Loans" means the Student Loans made in accordance
with the Section 428C of the Higher Education Act.

            "Corporate Trust Office" means (i) with respect to the Indenture
Trustee, the principal office of the Indenture Trustee at which at any
particular time its corporate trust business shall be administered, which office
at the Closing Date is located at Wachovia Bank, National Association, 401 South
Tryon Street, Charlotte, NC 28288, Attention: Structured Finance Trust Services,
telephone: (800) 665-9359, facsimile: (704)383-2661, or at such other address as
the Indenture Trustee may designate from time to time by notice to the
Noteholders and the Depositor, or the principal corporate trust office of any
successor to the Indenture Trustee (the address of which the successor Indenture
Trustee will notify the Noteholders, the Administrator and the Depositor), (ii)
with respect to the Indenture Administrator, the principal corporate trust
office of the Indenture Administrator located at Citibank, N.A., 388 Greenwich
Street, 14th Floor, New York, New York 10013, Attention: Structured Finance
Agency and Trust - SLC Student Loan trust 2005-1, telephone: 800-422-2066,
facsimile: 212-816-5527, or at such other address as the Indenture Administrator
may designate by notice to the Depositor, or the principal corporate trust
office of any successor to the Indenture Administrator (the address of which the
successor to the Indenture Administrator will notify the Administrator and the
Depositor).and (iii) with respect to the Eligible Lender Trustee, the principal
corporate trust office of the Eligible Lender Trustee located at Citibank, N.A.,
388 Greenwich Street, 14th Floor, New York, New York 10013, Attention:
Structured Finance Agency and Trust - SLC Student Loan trust 2005-1, telephone:
800-422-2066, facsimile: 212-816-5527, or at such other address as the Eligible
Lender Trustee may designate by notice to the Depositor, or the principal
corporate trust office of any successor Eligible Lender Trustee (the address of
which the successor Eligible Lender Trustee will notify the Administrator and
the Depositor).

            "Custodian" means Citibank USA, National Association, a national
banking association.

                                 Appendix A-10
<PAGE>

            "Custody Agreement" means the Custody Agreement, dated as of June
15, 2005, among the Issuer, the Custodian, the Eligible Lender Trustee and the
Indenture Trustee.

            "Cutoff Date" means the Closing Date.

            "Default" means any occurrence that is, or with notice or the lapse
of time or both would become, an Event of Default.

            "Definitive Notes" has the meaning specified in Section 2.10 of the
Indenture.

            "Delaware Statutory Trust Act" or "Statutory Trust Act" means
Chapter 38 of Title 12, Part V of the Delaware Code, entitled "Treatment of
Delaware Statutory Trusts".

            "Delivery" means, when used with respect to Trust Account Property:

            (a) with respect to bankers' acceptances, commercial paper,
      negotiable certificates of deposit and other obligations that constitute
      "instruments" within the meaning of Section 9-102(a)(47) of the UCC and
      are susceptible of physical delivery, transfer thereof to the Indenture
      Trustee, the Indenture Administrator or their respective nominee or
      custodian by physical delivery to the Indenture Trustee, the Indenture
      Administrator or their respective nominee or custodian endorsed to, or
      registered in the name of, the Indenture Trustee, the Indenture
      Administrator or their respective nominee or custodian or endorsed in
      blank, and, with respect to a certificated security (as defined in Section
      8-102(a)(3) of the UCC) transfer thereof (i) by delivery of such
      certificated security endorsed to, or registered in the name of, the
      Indenture Trustee, the Indenture Administrator or their respective nominee
      or custodian or endorsed in blank to a securities intermediary (as defined
      in Section 8-102(a)(14) of the UCC) and the making by such securities
      intermediary of entries on its books and records identifying such
      certificated securities as belonging to the Indenture Trustee, the
      Indenture Administrator or their respective nominee or custodian and the
      sending by such securities intermediary of a confirmation of the purchase
      of such certificated security by the Indenture Trustee, the Indenture
      Administrator or their respective its nominee or custodian, or (ii) by
      delivery thereof to a "clearing corporation" (as defined in Section
      8-102(a)(5) of the UCC) and the making by such clearing corporation of
      appropriate entries on its books reducing the appropriate securities
      account of the transferor and increasing the appropriate securities
      account of a securities intermediary by the amount of such certificated
      security, the identification by the clearing corporation of the
      certificated securities for the sole and exclusive account of the
      securities intermediary, the maintenance of such certificated securities
      by such clearing corporation or the nominee of either subject to the
      clearing corporation's exclusive control, the sending of a confirmation by
      the securities intermediary of the purchase by the Indenture Trustee, the
      Indenture Administrator or their respective nominee or custodian of such
      securities and the making by such securities intermediary of entries on
      its books and records identifying such certificated securities as
      belonging to the Indenture Trustee, the Indenture Administrator or their
      respective nominee or custodian (all of the foregoing, but not including
      Trust Student Loans, "Physical Property"); and such additional or
      alternative procedures as may hereafter become appropriate to effect the
      complete transfer of

                                 Appendix A-11
<PAGE>

      ownership of any such Trust Account Property to the Indenture Trustee, the
      Indenture Administrator or their respective nominee or custodian,
      consistent with changes in applicable law or regulations or the
      interpretation thereof;

            (b) with respect to any security issued by the U.S. Treasury, the
      Government National Mortgage Association, the Federal Home Loan Mortgage
      Corporation or the Federal National Mortgage Association that is a
      book-entry security held at a Federal Reserve Bank pursuant to Federal
      book-entry regulations, the following procedures, all in accordance with
      applicable law, including applicable Federal regulations and Articles 8
      and 9 of the UCC: the crediting of such book-entry security to an
      appropriate book-entry account of the Indenture Trustee or its nominee or
      the custodian or securities intermediary at a Federal Reserve Bank,
      causing the custodian to continuously indicate by book-entry such
      book-entry security as credited to the relevant book-entry account, the
      continuous crediting of such book-entry security to a securities account
      of the custodian at such Federal Reserve Bank and the continuous
      identification of such book-entry security by the custodian as credited to
      the appropriate book-entry account; and

            (c) with respect to any item of Trust Account Property that is an
      uncertificated security under Article 8 of the UCC and that is not
      governed by clause (b) above, registration on the books and records of the
      issuer thereof in the name of the securities intermediary, the sending of
      a confirmation by the securities intermediary of the purchase by the
      Indenture Trustee or its nominee or custodian of such uncertificated
      security, the making by such securities intermediary of entries on its
      books and records identifying such uncertificated certificates as
      belonging to the Indenture Trustee or its nominee or custodian.

            "Department" means the United States Department of Education, an
agency of the Federal government.

            "Depositor" means SLC Student Loan Receivables I, Inc., a Delaware
corporation, and its successors and assigns.

            "Depository Agreement" means the Note Depository Agreement.

            "Determination Date" means, with respect to any Distribution
Date, the first Business Day preceding such Distribution Date.

            "Distribution Date" means, for any class of Notes, the 15th
day of each February, May, August and November, or, if such day is not a
Business Day, the immediately following Business Day, commencing on August 15,
2005.

            "DTC" means The Depository Trust Company, or any successor thereto.

            "Eligible Deposit Account" means either (a) a segregated
account with an Eligible Institution or (b) a segregated trust account with the
corporate trust department of a depository institution organized under the laws
of the United States of America or any one of the States or the District of
Columbia (or any domestic branch of a foreign bank), having corporate trust
powers and acting as trustee for funds deposited in such account, so long as any
of the securities

                                 Appendix A-12
<PAGE>

of such depository institution have a credit rating from Moody's, S&P, and, if
such institution is rated by Fitch, Fitch, in one of their generic rating
categories which signifies investment grade.

            "Eligible Institution" means a depository institution
organized under the laws of the United States of America or any one of the
States or the District of Columbia (or any domestic branch of a foreign bank)
(i) which has (A) either a long-term senior unsecured debt rating of "AAA" or a
short-term senior unsecured debt or certificate of deposit rating of "A-1+" or
better by S&P and (B)(1) a long-term senior unsecured debt rating of "A1" or
better and (2) a short-term senior unsecured debt rating of "P-1" or better by
Moody's, and (C) if such institution is rated by Fitch, a long-term senior
unsecured debt rating of "AA" or a short-term senior unsecured debt rating of
"F-1+," or any other long-term, short-term or certificate of deposit rating with
respect to which the Rating Agency Condition has been satisfied and (ii) whose
deposits are insured by the FDIC. If so qualified, the Owner Trustee, the
Indenture Trustee or the Indenture Administrator may be considered an Eligible
Institution.

            "Eligible Investments" means book-entry securities, negotiable
instruments or securities represented by instruments in bearer or registered
form which evidence:

            (a) direct obligations of, and obligations fully guaranteed as to
      timely payment by, the United States of America, the Government National
      Mortgage Association, the Federal Home Loan Mortgage Corporation, the
      Federal National Mortgage Association, the Student Loan Marketing
      Association (Sallie Mae), or any agency or instrumentality of the United
      States of America the obligations of which are backed by the full faith
      and credit of the United States of America; provided that obligations of,
      or guaranteed by, the Government National Mortgage Association (GNMA), the
      Federal Home Loan Mortgage Corporation (Freddie Mac), the Federal National
      Mortgage Association (Fannie Mae) or the Student Loan Marketing
      Association (Sallie Mae) shall be Eligible Investments only if, at the
      time of investment, they meet the criteria of each of the Rating Agencies
      for collateral for securities having ratings equivalent to the respective
      ratings of the Notes in effect at the Closing Date;

            (b) demand deposits, time deposits or certificates of deposit of any
      depository institution or trust company incorporated under the laws of the
      United States of America or any State (or any domestic branch of a foreign
      bank) and subject to supervision and examination by Federal or state
      banking or depository institution authorities (including depository
      receipts issued by any such institution or trust company as custodian with
      respect to any obligation referred to in clause (a) above or portion of
      such obligation for the benefit of the holders of such depository
      receipts); provided that at the time of the investment or contractual
      commitment to invest therein (which shall be deemed to be made again each
      time funds are reinvested following each Distribution Date), the
      commercial paper or other short-term senior unsecured debt obligations
      (other than such obligations the rating of which is based on the credit of
      a Person other than such depository institution or trust company) thereof
      shall have a credit rating from each of the Rating Agencies in the highest
      investment category granted thereby;

            (c) commercial paper having, at the time of the investment, a rating
      from each of the Rating Agencies in the highest investment category
      granted thereby;

                                 Appendix A-13
<PAGE>

            (d) investments in money market funds having a rating from each of
      the Rating Agencies in the highest investment category granted thereby
      (including funds for which the Indenture Trustee, the Administrator, the
      Owner Trustee or the Indenture Administrator or any of their respective
      Affiliates is investment manager or advisor);

            (e) bankers' acceptances issued by any depository institution or
      trust company referred to in clause (b) above;

            (f) repurchase obligations with respect to any security that is a
      direct obligation of, or fully guaranteed by, the United States of America
      or any agency or instrumentality thereof the obligations of which are
      backed by the full faith and credit of the United States of America, in
      either case entered into with a depository institution or trust company
      (acting as principal) described in clause (b) above;

            (g) asset-backed securities, including asset-backed securities
      issued by Affiliates, or entities formed by Affiliates, of SLC, but
      excluding mortgage-backed securities, that at the time of investment, have
      a rating in the highest investment category granted by each of the Rating
      Agencies, but not at a purchase price in excess of par; and

            (h) any other investment which would not result in the downgrading
      or withdrawal of any rating of the Notes by any of the Rating Agencies as
      affirmed in writing delivered to the Indenture Trustee.

      For purposes of the definition of "Eligible Investments" the phrase
      "highest investment category" means (i) in the case of Fitch, "AAA" for
      long-term investments (or the equivalent) and "F-1+" for short-term
      investments (or the equivalent), (ii) in the case of Moody's, "Aaa" for
      long-term investments (or the equivalent) and "P-1" for short-term
      investments (or the equivalent), and (iii) in the case of S&P, "AAA" for
      long-term investments (or the equivalent) and "A-1+" for short-term
      investments (or the equivalent). A proposed investment not rated by Fitch
      but rated in the highest investment category by Moody's and S&P shall be
      considered to be rated by each of the Rating Agencies in the highest
      investment category granted thereby.

            "Eligible Lender Trust Agreement (Depositor)" means the Eligible
Lender Trust Agreement, dated as of June 15, 2005, among the Eligible Lender
Trustee and the Depositor.

            "Eligible Lender Trust Agreement (Issuer)" means the Eligible Lender
Trust Agreement, dated as of June 15, 2005, among the Eligible Lender Trustee
and the Trust.

            "Eligible Lender Trust Agreements" means, collectively, the Eligible
Lender Trust Agreement (Depositor) and the Eligible Lender Trust Agreement
(Issuer).

            "Eligible Lender Trustee" means Citibank, N.A., a national banking
association, not in its individual capacity but solely as Eligible Lender
Trustee under the Eligible Lender Trust Agreements. "Eligible Lender Trustee"
shall also mean each successor to the Eligible Lender Trustee as of the
qualification of such successor as Eligible Lender Trustee under the Eligible
Lender Trust Agreements.

                                 Appendix A-14
<PAGE>

            "Eligible Loans" has the meaning specified in either the Purchase
Agreement or the Sale Agreement, as applicable.

            "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.

            "Event of Default" has the meaning specified in Section 5.1 of the
Indenture.

            "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

            "Executive Officer" means, with respect to any corporation, the
Chief Executive Officer, Chief Operating Officer, Chief Financial Officer,
President, any Executive Vice President, any Senior Vice President, any Vice
President, the Secretary or the Treasurer of such corporation; and with respect
to any partnership, any general partner thereof.

            "Expenses" means any and all liabilities, obligations, losses,
damages, taxes, claims, actions and suits, and any and all reasonable costs,
expenses and disbursements (including reasonable legal fees and expenses) of any
kind and nature whatsoever which may at any time be imposed on, incurred by, or
asserted against the Owner Trustee or any of its officers, directors or agents
in any way relating to or arising out of the Trust Agreement, the other Basic
Documents, the Trust Estate, the administration of the Trust Estate or the
action or inaction of the Owner Trustee under the Trust Agreement or the other
Basic Documents.

            "FDIC" means the Federal Deposit Insurance Corporation.

            "Federal Funds Rate" means the rate set forth for such day opposite
the caption "Federal Funds (effective)" in the weekly statistical release
designated H.15(519), or any successor publication, published by the Board of
Governors of the Federal Reserve System. If such rate is not published in the
relevant H.15(519) for any day, the rate for such day shall be the arithmetic
mean of the rates for the last transaction in overnight Federal Funds arranged
prior to 9:00 a.m. New York City time on that day by each of four leading
brokers in such transactions located in New York City selected by the
Administrator. The Federal Funds rate for each Saturday and Sunday and for any
other that is not a Business Day shall be the Federal Funds Rate for the
preceding Business Day as determined above.

            "FFELP" means Federal Family Education Loan Program.

            "Fitch" means Fitch, Inc., also known as Fitch Ratings, or any
successor rating agency.

            "Grant" means mortgage, pledge, bargain, sell, warrant, alienate,
remise, release, convey, assign, transfer, create and grant a lien upon and a
security interest in and right of set-off against, deposit, set over and confirm
pursuant to the Indenture. A Grant of the Collateral or of any other agreement
or instrument shall include all rights, powers and options (but none of the
obligations) of the Granting party thereunder, including the immediate and
continuing right to claim for, collect, receive and give receipt for principal
and interest payments in respect of the Collateral and all other moneys payable
thereunder, to give and receive notices and other communications, to make
waivers or other agreements, to exercise all rights and options, to bring

                                 Appendix A-15
<PAGE>

Proceedings in the name of the Granting party or otherwise and generally to do
and receive anything that the Granting party is or may be entitled to do or
receive thereunder or with respect thereto.

            "Guarantee Agreement" means any agreement between any Guarantor and
the Eligible Lender Trustee providing for the payment by the Guarantor of
amounts authorized to be paid pursuant to the Higher Education Act to holders of
qualifying Student Loans guaranteed in accordance with the Higher Education Act
by such Guarantor.

            "Guarantee Payment" means any payment made by a Guarantor pursuant
to a Guarantee Agreement in respect of a Trust Student Loan.

            "Guarantor" means any entity listed on Attachment B (as amended from
time to time) to the Sale Agreement or the Purchase Agreement, as applicable.

            "H.15(519)" means the weekly statistical release designated as such,
or any successor publication, published by the Board of Governors of the United
States Federal Reserve System.

            "H.15 Daily Update" means the daily update for H.15(519), available
through the world wide web site of the Board of Governors of the Federal Reserve
System at http://www.federalreserve.gov/releases/h15/update, or any successor
site or publications.

            "Higher Education Act" means the Higher Education Act of 1965, as
amended, together with any rules, regulations and interpretations thereunder.

            "Indenture" means the Indenture, dated as of June 15, 2005, among
the Trust, the Eligible Lender Trustee, the Indenture Trustee and the Indenture
Administrator.

            "Indenture Administrator" means Citibank, N.A., a national banking
association, not in its individual capacity but solely as indenture
administrator under the Indenture.

            "Indenture Trust Estate" means all money, instruments, rights and
other property that are subject or intended to be subject to the lien and
security interest of the Indenture for the benefit of the Noteholders (including
all Collateral Granted to the Indenture Trustee), including all proceeds
thereof.

            "Indenture Trustee" means Wachovia Bank, National Association, a
national banking association, not in its individual capacity but solely as
indenture trustee under the Indenture.

            "Indenture Trustee/Indenture Administrator/Eligible Lender Trustee
Fee" means $5,000 per annum.

            "Independent" means, when used with respect to any specified Person,
that the Person (a) is in fact independent of the Trust, any other obligor upon
the Notes, the Depositor and any Affiliate of any of the foregoing Persons, (b)
does not have any direct financial interest or any material indirect financial
interest in the Trust, any such other obligor, the Depositor or

                                 Appendix A-16
<PAGE>

any Affiliate of any of the foregoing Persons and (c) is not connected with the
Trust, any such other obligor, the Depositor or any Affiliate of any of the
foregoing Persons as an officer, employee, promoter, underwriter, placement
agent, trustee, partner, director or person performing similar functions.

            "Independent Certificate" means a certificate or opinion to be
delivered to the Indenture Trustee or the Indenture Administrator under the
circumstances described in, and otherwise complying with, the applicable
requirements of Section 11.1 of the Indenture, made by an Independent appraiser,
and such opinion or certificate shall state that the signer has read the
definition of "Independent" in the Indenture and that the signer is Independent
within the meaning thereof.

            "Index Maturity" means, with respect to any Accrual Period, a period
of time equal to three or four months, as applicable, commencing on the first
day of that Accrual Period.

            "Initial Accrual Rate" means, for each class of Notes and the
Accrual Period commencing on the Closing Date to, but excluding, the first
Distribution Date, the rate per annum as determined on the related Determination
Date, as follows:

                               X + 1/31 * (Y - X)

where:

                            X = Two-Month LIBOR, and
                             Y = Three-Month LIBOR.

            "Initial Pool Balance" means the Pool Balance as of the Cutoff Date,
which is $2,037,884,268.

            "Insolvency Event" means, with respect to a specified Person, (a)
the filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in an
involuntary case under any applicable Federal or state bankruptcy, insolvency or
other similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official for
such Person or for any substantial part of its property, or ordering the
winding-up or liquidation of such Person's affairs, which decree or order
remains unstayed and in effect for a period of 60 consecutive days; or (b) the
commencement by such Person of a voluntary case under any applicable Federal or
state bankruptcy, insolvency or other similar law now or hereafter in effect, or
the consent by such Person to the entry of an order for relief in an involuntary
case under any such law, or the consent by such Person to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official for such Person or for any substantial part of
its property, or the making by such Person of any general assignment for the
benefit of creditors, or the failure by such Person generally to pay its debts
as such debts become due, or the taking of action by such Person in furtherance
of any of the foregoing.

                                 Appendix A-17
<PAGE>

            "Interest Subsidy Payments" means payments, designated as such,
consisting of interest subsidies by the Department in respect of the Trust
Student Loans to the Eligible Lender Trustee or the Owner Trustee on behalf of
the Trust in accordance with the Higher Education Act.

            "Investment Earnings" means, with respect to any Distribution Date,
the investment earnings (net of losses and investment expenses) on amounts on
deposit in the Trust Accounts to be deposited into the Collection Account on or
prior to such Distribution Date pursuant to Section 2.3(b) of the Administration
Agreement.

            "Issuer" means the Trust and, for purposes of any provision
contained in the Indenture and required by the TIA, each other obligor on the
Notes.

            "Issuer Order" and "Issuer Request" means a written order or request
signed in the name of the Issuer by any one of its Authorized Officers and
delivered to the Indenture Trustee.

            "LIBOR" means Three-Month LIBOR or Two-Month LIBOR, as applicable.

            "LIBOR Determination Date" means, for each Accrual Period, the
second Business Day before the beginning of that Accrual Period.

            "Lien" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind, other than tax liens and any other liens, if any, which
attach to the respective Trust Student Loan by operation of law as a result of
any act or omission by the related Obligor.

            "Liquidated Student Loan" means any defaulted Trust Student Loan
liquidated by the Servicer (which shall not include any Trust Student Loan on
which Guarantee Payments are received) or which the Servicer has, after using
all reasonable efforts to realize upon such Trust Student Loan, determined to
charge off.

            "Liquidation Proceeds" means, with respect to any Liquidated Student
Loan which became a Liquidated Student Loan during the current Collection Period
in accordance with the Servicer's customary servicing procedures, the moneys
collected in respect of the liquidation thereof from whatever source, other than
Recoveries, net of the sum of any amounts expended by the Servicer in connection
with such liquidation and any amounts required by law to be remitted to the
Obligor on such Liquidated Student Loan.

            "Loan" has the meaning specified in Section 2 of the Purchase
Agreement.

            "Minimum Purchase Amount" means, for any Distribution Date, an
amount that would be sufficient to (i) reduce the Outstanding Amount of each
class of Notes on such Distribution Date to zero and (ii) pay to the respective
Noteholders the Class A Noteholders' Interest Distribution Amount and the Class
B Noteholders' Interest Distribution Amount payable on such Distribution Date.

                                 Appendix A-18
<PAGE>

            "Monthly Servicing Payment Date" means the 15th day of each calendar
month or, if such day is not a Business Day, the immediately following Business
Day, commencing on July 15, 2005.

            "Moody's" means Moody's Investors Service, Inc.

            "Note Depository Agreement" means the Letter of Representations,
dated June 15, 2005, by the Trust in favor of DTC.

            "Note Final Maturity Date" means, for a class of Notes, the Class
A-1 Maturity Date, the Class A-2 Maturity Date, the Class A-3 Maturity Date, the
Class A-4 Maturity Date or the Class B Maturity Date, as applicable.

            "Note Interest Shortfall" means the Class A Note Interest Shortfall,
if any, and/or the Class B Note Interest Shortfall, if any, as applicable.

            "Note Owner" means, with respect to a Book-Entry Note, the Person
who is the owner of such Book-Entry Note, as reflected on the books of the
applicable Clearing Agency, or on the books of a Person maintaining an account
with such Clearing Agency (directly as a Clearing Agency Participant or as an
indirect participant, in each case in accordance with the rules of such Clearing
Agency).

            "Note Pool Factor" means, as of the close of business on a
Distribution Date, a seven-digit decimal figure equal to the Outstanding Amount
of a class of Notes divided by the original Outstanding Amount of such class of
Notes. The Note Pool Factor for each class will be 1.0000000 as of the Closing
Date; thereafter, the Note Pool Factor for each class will decline to reflect
reductions in the Outstanding Amount of that class of Notes.

            "Note Rates" means, with respect to any Accrual Period, the Class
A-1 Rate, the Class A-2 Rate, the Class A-3 Rate, the Class A-4 Rate and the
Class B Rate for such Accrual Period, collectively.

            "Note Register" and "Note Registrar" have the respective meanings
specified in Section 2.4 of the Indenture.

            "Noteholder" means either a Class A Noteholder or a Class B
Noteholder, as the context requires.

            "Notes" means the Class A-1 Notes, the Class A-2 Notes, the Class
A-3 Notes, the Class A-4 Notes and the Class B Notes, collectively.

            "Obligor" on a Trust Student Loan means the borrower or co-borrowers
of such Trust Student Loan and any other Person who owes payments in respect of
such Trust Student Loan, including the Guarantor thereof and, with respect to
any Interest Subsidy Payment or Special Allowance Payment, if any, thereon, the
Department.

            "Officers' Certificate" means (i) in the case of the Trust, a
certificate signed by any two Authorized Officers of the Administrator, under
the circumstances described in, and

                                 Appendix A-19
<PAGE>

otherwise complying with, the applicable requirements of Section 11.1 of the
Indenture, and delivered to the Indenture Trustee or the Indenture
Administrator, and (ii) in the case of the Depositor, the Administrator or the
Servicer, a certificate signed by any two Authorized Officers of the Depositor,
the Administrator or the Servicer, as applicable.

            "Opinion of Counsel" means (i) with respect to the Trust, one or
more written opinions of counsel who may, except as otherwise expressly provided
in the Indenture, be employees of or counsel to the Owner Trustee, the Trust,
the Depositor or an Affiliate of the Depositor and who shall be satisfactory to
the Indenture Trustee and the Indenture Administrator, and which opinion or
opinions shall be addressed to the Indenture Trustee as Indenture Trustee and
the Indenture Administrator as Indenture Administrator, shall comply with any
applicable requirements of Section 11.1 of the Indenture and shall be in form
and substance satisfactory to the Indenture Trustee, and (ii) with respect to
the Depositor, the Administrator or the Servicer, one or more written opinions
of counsel who may be an employee of or counsel to the Depositor, the
Administrator or the Servicer, which counsel shall be acceptable to the
Indenture Trustee, the Indenture Administrator and the Owner Trustee.

            "Origination Fee" means any origination fee payable to the
Department by the lender with respect to any Trust Student Loan.

            "Outstanding" means, as of any date of determination, all Notes
theretofore authenticated and delivered under the Indenture except:

            (a) Notes theretofore cancelled by the Note Registrar or delivered
      to the Note Registrar for cancellation;

            (b) Notes or portions thereof, for which payment has been made to
      the applicable Noteholders in reduction of the outstanding principal
      balance thereof or for which money in the necessary amount has been
      theretofore deposited with the Indenture Administrator or any Paying Agent
      in trust for the Noteholders thereof (provided, however, that if such
      Notes are to be redeemed, notice of such redemption has been duly given
      pursuant to the Indenture); and

            (c) Notes in exchange for or in lieu of other Notes which have been
      authenticated and delivered pursuant to the Indenture unless proof
      satisfactory to the Indenture Trustee is presented that any such Notes are
      held by a bona fide purchaser; provided that in determining whether the
      Noteholders of the requisite Outstanding Amount of the Notes have given
      any request, demand, authorization, direction, notice, consent or waiver
      hereunder or under any other Basic Document, Notes owned by the Trust, any
      other obligor upon the Notes, the Depositor or any Affiliate of any of the
      foregoing Persons shall be disregarded and deemed not to be Outstanding,
      except that, in determining whether the Indenture Trustee shall be
      protected in relying upon any such request, demand, authorization,
      direction, notice, consent or waiver, only Notes that a Responsible
      Officer of the Indenture Trustee either actually knows to be so owned or
      has received written notice thereof shall be so disregarded. Notes so
      owned that have been pledged in good faith may be regarded as Outstanding
      if the pledgee establishes to the satisfaction of the Indenture Trustee
      the pledgee's right so to act with respect to such

                                 Appendix A-20
<PAGE>

      Notes and that the pledgee is not the Trust, any other obligor upon the
      Notes, the Depositor or any Affiliate of any of the foregoing Persons.

            "Outstanding Amount" means, as of any date of determination, the
aggregate principal balance of all the Notes or the applicable class or classes
of Notes, as the case may be, Outstanding at such date of determination.

            "Owner" means the Depositor and each of its successors in interest
as holder of the Trust Certificate issued by the Trust pursuant to Article III
of the Trust Agreement.

            "Ownership Percentage" means, with respect to an Owner, the
proportion (expressed as a percentage) of the beneficial interest in the assets
of the Trust held by such Owner.

            "Owner Trustee" means Wilmington Trust Company, a Delaware banking
corporation, not in its individual capacity but solely as owner trustee under
the Trust Agreement.

            "Owner Trustee Fee" means $4,000 per annum.

            "Paying Agent" means the Indenture Administrator or any other Person
that meets the eligibility standards for the Indenture Trustee specified in
Section 6.12 of the Indenture and is authorized by the Trust to make the
payments to and distributions from the Collection Account and payments of
principal of and interest and any other amounts owing on the Notes on behalf of
the Trust.

            "Person" means any individual, corporation, estate, partnership,
joint venture, association, joint stock company, trust (including any
beneficiary thereof), unincorporated organization, limited liability company,
limited liability partnership or government or any agency or political
subdivision thereof.

            "Physical Property" has the meaning assigned to such terms in the
definition of "Delivery" above.

            "Pool Balance" means, for any date, the aggregate principal balance
of the Trust Student Loans as of the close of business on that date, including
accrued interest that is expected to be capitalized.

            "Predecessor Note" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.5 of the Indenture and in lieu of a
mutilated, lost, destroyed or stolen Note shall be deemed to evidence the same
debt as the mutilated, lost, destroyed or stolen Note.

            "Primary Servicing Fee" for any Monthly Servicing Payment Date has
the meaning specified in Attachment A to the Servicing Agreement, and shall
include any such fees from prior Monthly Servicing Payment Dates that remain
unpaid.

                                 Appendix A-21
<PAGE>

            "Principal Distribution Amount" means, (i) as to the initial
Distribution Date, the amount by which the aggregate Outstanding Amount of all
the Notes exceeds the Adjusted Pool Balance as of the last day of the initial
Collection Period, and (ii) as to each subsequent Distribution Date, the amount
by which the Adjusted Pool Balance for the preceding Distribution Date exceeds
the Adjusted Pool Balance for such Distribution Date.

            "Proceeding" means any suit in equity, action at law or other
judicial or administrative proceeding.

            "Purchase Agreement" means the Master Terms Purchase Agreement,
dated as of June 15, 2005, among SLC, the Eligible Lender Trustee on behalf of
SLC, the Depositor and the Eligible Lender Trustee on behalf of the Depositor,
and the purchase agreement or agreements entered into thereunder.

            "Purchase Amount" means, with respect to any Trust Student Loan, the
amount required to prepay in full such Trust Student Loan under the terms
thereof including all accrued interest thereon.

            "Purchased Student Loan" means a Trust Student Loan which is, as of
the close of business on the last day of a Collection Period, purchased by the
Servicer pursuant to Section 3.5 of the Servicing Agreement or repurchased by
the Depositor pursuant to Section 6 of the Sale Agreement, repurchased by SLC
pursuant to Section 6 of the Purchase Agreement or sold to another eligible
lender holding one or more Serial Loans with respect to such Trust Student Loan
pursuant to Section 3.11E of the Servicing Agreement.

            "Rating Agency" means Moody's, S&P and Fitch. If any such
organization or successor thereto is no longer in existence, "Rating Agency"
with respect to such organization shall be a nationally recognized statistical
rating organization or other comparable Person designated by the Administrator,
notice of which designation shall be given to the Indenture Trustee, the
Indenture Administrator, the Owner Trustee and the Servicer.

            "Rating Agency Condition" means, with respect to any intended
action, that each Rating Agency then rating a class of Notes shall have been
given 10 days' prior written notice thereof and that each such Rating Agency
shall have notified the Administrator, the Servicer, the Owner Trustee, the
Indenture Trustee and the Indenture Administrator in writing that such proposed
action will not result in and of itself in the reduction or withdrawal of its
then current rating of any class of Notes.

            "Realized Loss" means the excess of the principal balance, including
any interest that had been or had been expected to be capitalized, of any
Liquidated Student Loan over Liquidation Proceeds for that Liquidated Student
Loan to the extent allocable to principal, including any interest that had been
or had been expected to be capitalized.

            "Record Date" means, with respect to a Distribution Date or
Redemption Date and for each class of Notes, the close of business on the day
preceding such Distribution Date or Redemption Date.

                                 Appendix A-22
<PAGE>

            "Recoveries" means moneys collected from whatever source with
respect to any Liquidated Student Loan which was written off in prior Collection
Periods or during the current Collection Period, net of the sum of any amounts
expended by the Servicer for the account of any Obligor and any amounts required
by law to be remitted to any Obligor.

            "Redemption Date" means, in the case of a payment to Noteholders
pursuant to Section 10.1 of the Indenture, the Distribution Date specified
pursuant to Section 10.1 of the Indenture.

            "Redemption Price" means an amount equal to the Outstanding Amount
of the Notes, plus accrued and unpaid interest thereon at the applicable Note
Rates to but excluding the Redemption Date.

            "Reference Banks" means four major banks in the London interbank
market, as selected by the Administrator.

            "Registrar" means the Note Registrar.

            "Reserve Account" means the account designated as such, established
and maintained pursuant to Section 2.3(a) of the Administration Agreement.

            "Reserve Account Balance" means the amount on deposit in the Reserve
Account as of the end of the applicable Collection Period.

            "Reserve Account Initial Deposit" means $5,093,782.

            "Responsible Officer" means, with respect to the Indenture Trustee,
the Indenture Administrator or the Paying Agent, any officer within the
Corporate Trust Office of the Indenture Trustee, the Indenture Administrator or
the Paying Agent, as the case may be, including any Vice President, Assistant
Vice President, Assistant Treasurer, Assistant Secretary, or any other officer
of the Indenture Trustee, the Indenture Administrator or the Paying Agent, as
the case may be, customarily performing functions similar to those performed by
any of the above designated officers, and also, with respect to a particular
matter, any other officer to whom such matter is referred because of such
officer's knowledge of and familiarity with the particular subject, in each case
having direct responsibility for the administration of the Indenture and the
other Basic Documents on behalf of the Indenture Trustee, the Indenture
Administrator or the Paying Agent, as the case may be.

            "S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc.

            "Sale Agreement" means the Master Terms Sale Agreement, dated as of
June 15, 2005, among the Trust, the Eligible Lender Trustee on behalf of the
Trust, the Depositor and the Eligible Lender Trustee on behalf of the Depositor,
and the sale agreement or agreements entered into thereunder.

                                 Appendix A-23
<PAGE>

            "Schedule of Trust Student Loans" means the listing of the Trust
Student Loans set forth in Schedule A to the Indenture and the Bill of Sale
(which Schedule may be in the form of microfiche).

            "Serial Loan" means an additional student loan other than a
Consolidation Loan, which is made to a borrower who is also a borrower under at
least one Trust Student Loan.

            "Servicer" means SLC, in its capacity as servicer of the Trust
Student Loans.

            "Servicer Default" means an event specified in Section 5.1 of the
Servicing Agreement.

            "Servicer Distribution Date" has the meaning specified in the
Servicing Agreement.

            "Servicer's Report" means any report of the Servicer delivered
pursuant to Section 3.1(a) of the Administration Agreement, substantially in the
form acceptable to the Administrator.

            "Servicing Agreement" means the Servicing Agreement, dated as of
June 15, 2005, among the Trust, the Servicer and the Administrator.

            "Servicing Fee" has the meaning specified in Attachment A to the
Servicing Agreement.

            "SLC" means The Student Loan Corporation.

            "SLS Loan" means a Trust Student Loan designated as such that is
made under the Supplemental Loans for Students Program in accordance with the
Higher Education Act.

            "Special Allowance Payments" means payments, designated as such,
consisting of effective interest subsidies by the Department in respect of the
Trust Student Loans to the Eligible Lender Trustee or the Owner Trustee on
behalf of the Trust in accordance with the Higher Education Act.

            "Specified Reserve Account Balance" means, for any Distribution
Date, the greater of:

            (a) 0.25% of the Pool Balance as of the close of business on the
      last day of the related Collection Period and

            (b) $3,056,269;

provided that in no event will that balance exceed the Outstanding Amount of the
Notes.

            "Stafford Loan" means a Trust Student Loan designated as such that
is made under the Stafford Loan Program in accordance with the Higher Education
Act.

                                 Appendix A-24
<PAGE>

            "State" means any one of the 50 States of the United States of
America or the District of Columbia.

            "Stepdown Date" means the earlier of (i) the Distribution Date in
November 2010 and (ii) the first date on which no Class A Notes remain
Outstanding.

            "Student Loans" means education loans to students and parents of
students under the Federal Family Education Loan Program.

            "Successor Administrator" has the meaning specified in Section
3.7(e) of the Indenture.

            "Successor Servicer" has the meaning specified in Section 3.7(e) of
the Indenture.

            "Third-Party Financial Advisor" has the meaning specified in Section
4.4 of the Indenture.

            "Three-Month LIBOR" or "Two-Month LIBOR" means, with respect to any
Accrual Period, the London interbank offered rate for deposits in U.S. Dollars
having the Index Maturity as such rate appears on Telerate Page 3750, Bloomberg
Page BBAM, or another page of these or any other financial reporting service in
general use in the financial services industry, as of 11:00 a.m. London time, on
the related LIBOR Determination Date. If no rate is so reported on the related
LIBOR Determination Date, the rate for that day will be determined on the basis
of the rates at which deposits in U.S. Dollars, having the Index Maturity and in
a principal amount of not less than U.S. $1,000,000, are offered at
approximately 11:00 a.m., London time, on that LIBOR Determination Date, to
prime banks in the London interbank market by the Reference Banks. The
Administrator will request the principal London office of each Reference Bank to
provide a quotation of its rate. If the Reference Banks provide at least two
quotations, the rate for that day will be the arithmetic mean of the quotations.
If the Reference Banks provide fewer than two quotations, the rate for that day
will be the arithmetic mean of the rates quoted by major banks in New York City,
selected by the Administrator, at approximately 11:00 a.m., New York time, on
that LIBOR Determination Date, for loans in U.S. Dollars to leading European
banks having the Index Maturity and in a principal amount of not less than U.S.
$1,000,000. If the banks selected as described above are not providing
quotations, Three-Month LIBOR or Two-Month LIBOR, as applicable, in effect for
the applicable Accrual Period will be Three-Month LIBOR or Two-Month LIBOR, as
the case may be, in effect for the previous Accrual Period.

            "Transfer Date" has the meaning specified in Section 5.2(a) of the
Administration Agreement.

            "Treasury Regulations" means regulations, including proposed or
temporary regulations, promulgated under the Code. References in any document or
instrument to specific provisions of proposed or temporary regulations shall
include analogous provisions of final Treasury Regulations or other successor
Treasury Regulations.

            "Trigger Event" means, on any Distribution Date, (i) while any of
the Class A Notes are Outstanding, that the aggregate Outstanding Amount of all
the Notes, after giving

                                 Appendix A-25
<PAGE>

effect to distributions to be made on such Distribution Date, exceeds the Pool
Balance plus the Reserve Account Balance as of the end of the related Collection
Period or (ii) if there has not been an optional purchase or sale of the Trust
Student Loans through an auction after the Pool Balance falls below 10% of the
initial Pool Balance.

            "Trust" means SLC Student Loan Trust 2005-1, a Delaware statutory
trust established pursuant to the Trust Agreement.

            "Trust Account Property" means the Trust Accounts, all cash and
investments held from time to time in any Trust Account (whether in the form of
deposit accounts, Physical Property, book-entry securities, uncertificated
securities or otherwise), including the Reserve Account Initial Deposit, the
Capitalized Interest Account Initial Deposit, the Collection Account Initial
Deposit and all earnings on and proceeds of the foregoing.

            "Trust Accounts" has the meaning specified in Section 2.3(b) of the
Administration Agreement.

            "Trust Agreement" means the Short-Form Trust Agreement, dated as of
June 1, 2005, between the Depositor and the Owner Trustee, as amended and
restated pursuant to an Amended and Restated Trust Agreement, dated as of June
15, 2005, among the Depositor and the Owner Trustee.

            "Trust Auction Date" has the meaning specified in Section 4.4 of the
Indenture.

            "Trust Certificate" means a certificate evidencing the Ownership
Percentage of an Owner in substantially the form as Exhibit A to the Trust
Agreement.

            "Trust Estate" means all right, title and interest of the Trust (or
the Eligible Lender Trustee on behalf of the Trust) in and to the property and
rights sold, transferred and assigned to the Trust pursuant to the Sale
Agreement, all funds on deposit from time to time in the Trust Accounts and all
other property of the Trust from time to time, including any rights of the
Eligible Lender Trustee and the Trust pursuant to the Trust Agreement, the
Administration Agreement and the Servicing Agreement.

            "Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939
as in force on the date hereof, unless otherwise specifically provided.

            "Trust Student Loan" means any student loan that is listed on the
Schedule of Trust Student Loans on the Closing Date plus any student loan that
is permissibly substituted for a Trust Student Loan by the Depositor pursuant to
Section 6 of the Sale Agreement or by the Servicer pursuant to Section 3.5 of
the Servicing Agreement, but shall not include any Purchased Student Loan
following receipt by or on behalf of the Trust of the Purchase Amount with
respect thereto or any Liquidated Student Loan following receipt by or on behalf
of the Trust of Liquidation Proceeds with respect thereto or following such
Liquidated Student Loan having otherwise been written off by the Servicer.

            "Trust Student Loan Files" means the documents specified in Section
2.1 of the Servicing Agreement.

                                 Appendix A-26
<PAGE>

            "Trustee Fees" means, collectively, the Indenture Trustee/Indenture
Administrator/Eligible Lender Trustee Fee and the Eligible Lender Trustee Fee.

            "UCC" means, unless the context otherwise requires, the Uniform
Commercial Code, as in effect in the relevant jurisdiction, as amended from time
to time.

                                 Appendix A-27
<PAGE>

                                                                      SCHEDULE A

                         Schedule of Trust Student Loans

                       [See Schedule A to the Bill of Sale
                      (Attachment C to the Sale Agreement)]

                                  Schedule A-1

<PAGE>

                                                                      SCHEDULE B

                      Location of Trust Student Loan Files

                  [See Attachment B to the Servicing Agreement]

                                  Schedule B-1

<PAGE>

                                                                       EXHIBIT A

                                     FORM OF

                                      NOTE

                       SEE REVERSE FOR CERTAIN DEFINITIONS

            Unless this Note is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer (as
defined below) or its agent for registration of transfer, exchange or payment,
and any Note issued is registered in the name of Cede & Co. or in such other
name as is requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.

            THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME
MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. THIS NOTE IS NOT
GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY.

NUMBER                                          PRINCIPAL AMOUNT:  $[_________]
[_________]                                             CUSIP NO.:  [_________]
                                                         ISIN No.:  [_________]
                                            [EUROPEAN COMMON CODE:  [_________]

                                   Exhibit A-1

<PAGE>

                          SLC STUDENT LOAN TRUST 2005-1

            FLOATING RATE CLASS [__] STUDENT LOAN ASSET-BACKED NOTES

            SLC Student Loan Trust 2005-1, a statutory trust organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to CEDE & CO., or
registered assigns, the principal sum of [_____________] ($[____________])
payable on each Distribution Date pursuant to Section 3.1 of the Indenture,
dated as of June 15, 2005 (the "Indenture"), among the Issuer, Citibank, N.A., a
national banking association, as Eligible Lender Trustee on behalf of the
Issuer, Wachovia Bank, National Association, a national banking association, as
Indenture Trustee (the "Indenture Trustee"), and Citibank, N.A., a national
banking association, as Indenture Administrator (the "Indenture Administrator")
(capitalized terms used but not defined herein being defined in Appendix A to
the Indenture, which also contains rules as to usage that shall be applicable
herein); provided, however, that the entire unpaid principal amount of this Note
shall be due and payable on the [________, 20__] Distribution Date (the "Class
[__] Maturity Date").

            The Issuer shall pay interest on this Note at the rate per annum
equal to the Class [__] Rate (as defined on the reverse hereof), on each
Distribution Date until the principal of this Note is paid or made available for
payment, on the principal amount of this Note outstanding on the preceding
Distribution Date (after giving effect to all payments of principal made on the
preceding Distribution Date), subject to certain limitations contained in
Section 3.1 of the Indenture. Interest on this Note shall accrue from and
including the immediately preceding Distribution Date (or, in the case of the
first Accrual Period, the Closing Date) to but excluding the following
Distribution Date (each an "Accrual Period"). Interest shall be calculated on
the basis of the actual number of days elapsed in each Accrual Period divided by
360. Such principal of and interest on this Note shall be paid in the manner
specified on the reverse hereof.

            The principal of and interest on this Note are payable in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.

            Reference is made to the further provisions of this Note set forth
on the reverse hereof, which shall have the same effect as though fully set
forth on the face of this Note.

            Unless the certificate of authentication hereon has been executed by
the Indenture Trustee whose name appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture referred to on the
reverse hereof, or be valid or obligatory for any purpose.

                                   Exhibit A-2
<PAGE>

            IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed, manually or in facsimile, as of the date set forth below.

                                       SLC STUDENT LOAN TRUST 2005-1

                                       By: WILMINGTON TRUST COMPANY
                                          not in its individual capacity but
                                          solely as Owner Trustee under the
                                          Trust Agreement

                                       By:____________________________________
                                                  Authorized Signatory

             INDENTURE ADMINISTRATOR'S CERTIFICATE OF AUTHENTICATION

            This is one of the Notes designated above and referred to in the
within-mentioned Indenture.

                                       CITIBANK, N.A.,
                                       not in its individual capacity but solely
                                       as Indenture Administrator

                                       By:____________________________________
                                                 Authorized Signatory

Dated:______June __, 2005

                                   Exhibit A-3
<PAGE>

                                [REVERSE OF NOTE]

            This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Floating Rate Class [__] Student Loan Asset-Backed Notes (the
"Class [__] Notes"), which, together with the other Class A Notes and Class B
Notes issued by the Issuer (collectively, the "Notes"), are issued under and
secured by the Indenture, to which Indenture and all indentures supplemental
thereto reference is hereby made for a statement of the respective rights and
obligations thereunder of the Issuer, the Indenture Trustee, the Indenture
Administrator and the Noteholders. The Notes are subject to all terms of the
Indenture.

            The Class [A][B] Notes are [senior][subordinate] to the Class [A][B]
Notes, as and to the extent provided in the Indenture.

            Principal of the Class [__] Notes shall be payable on each
Distribution Date in an amount described on the face hereof. "Distribution Date"
means the 15th day of each February, May, August and November or, if any such
date is not a Business Day, the next succeeding Business Day, commencing August
15, 2005.

            As described on the face hereof, the entire unpaid principal amount
of this Note shall be due and payable on the Class [__] Maturity Date.
Notwithstanding the foregoing, the entire unpaid principal amount of the Notes
shall be due and payable on the date on which (i) an Event of Default shall have
occurred and be continuing and (ii) the Indenture Trustee or the Noteholders
representing not less than a majority of the Outstanding Amount of the Notes
shall have declared the Notes to be immediately due and payable in the manner
provided in Section 5.2 of the Indenture. All principal payments on the Class
[__] Notes shall be made pro rata to the Noteholders entitled thereto.

            Interest on the Class [__] Notes shall be payable on each
Distribution Date on the principal amount outstanding of the Class [__] Notes
until the principal amount thereof is paid in full, at a rate per annum equal to
the Class [__] Rate. The "Class [__] Rate" for each Accrual Period, other than
the initial Accrual Period, shall be equal to Three-Month LIBOR as determined on
the second Business Day before the beginning of that Accrual Period plus [__]%.
The interest rate for the initial Accrual Period shall be as set forth in the
definition of Class [__] Rate contained in Appendix A to the Indenture.

            If Definitive Notes have been issued as of the applicable Record
Date, then payments of interest on this Note on each Distribution Date, together
with the installment of principal, if any, to the extent not in full payment of
this Note, shall be made by check mailed to the Person whose name appears as the
Registered Holder of this Note (or one or more Predecessor Notes) on the Note
Register on the Record Date. Such checks shall be mailed to the Person entitled
thereto at the address of such Person as it appears on the Note Register as of
the applicable Record Date without requiring that this Note be submitted for
notation of payment, and the mailing of such check shall constitute payment of
the amount thereof regardless of whether such check is returned undelivered.
With respect to Notes registered on the applicable Record Date in the name of
the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
unless Definitive Notes have been issued, payments shall be made by wire
transfer

                                   Exhibit A-4
<PAGE>

in immediately available funds to the account designated by such nominee. Any
reduction in the principal amount of this Note (or any one or more Predecessor
Notes) effected by any payments made on any Distribution Date shall be binding
upon all future Noteholders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof, whether
or not noted hereon. If funds are expected to be available, as provided in the
Indenture, for payment in full of the then remaining unpaid principal amount of
this Note on a Distribution Date, then the Indenture Administrator, in the name
of and on behalf of the Issuer, shall notify the Person who was the Noteholder
hereof as of the preceding Record Date by notice mailed no later than five days
prior to such Distribution Date and the amount then due and payable shall be
payable only upon presentation and surrender of this Note at the Indenture
Administrator's Corporate Trust Office or at the office of the Indenture
Administrator's agent appointed for such purposes located in the Borough of
Manhattan, The City of New York.

            The Issuer shall pay interest on overdue installments of interest on
this Note at the Class [__] Rate to the extent lawful.

            As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Administrator duly executed by, the Noteholder hereof or his attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in Securities Transfer Agent's
Medallion Program ("STAMP") or such other "signature guarantee program" as may
be determined by the Note Registrar in addition to, or in substitution for,
STAMP (all in accordance with the Exchange Act), and such other documents as the
Indenture Administrator may require, and thereupon one or more new Notes of
authorized denominations and in the same aggregate principal amount shall be
issued to the designated transferee or transferees. No service charge will be
charged for any registration of transfer or exchange of this Note, but the
transferor may be required to pay a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any such registration
of transfer or exchange.

            Each Noteholder or Note Owner, by acceptance of this Note or, in the
case of a Note Owner, a beneficial interest in this Note, covenants and agrees
that no recourse may be taken, directly or indirectly, with respect to the
obligations of the Issuer, the Indenture Trustee or the Indenture Administrator
on the Notes or under the Indenture or any certificate or other writing
delivered in connection therewith, against (i) the Indenture Trustee, the
Indenture Administrator, the Eligible Lender Trustee or the Owner Trustee in its
individual capacity, (ii) any owner of a beneficial interest in the Issuer or
(iii) any partner, owner, beneficiary, agent, officer, director or employee of
the Indenture Trustee, the Indenture Administrator, the Eligible Lender Trustee
or the Owner Trustee in its individual capacity, any holder or owner of a
beneficial interest in the Issuer, the Owner Trustee, the Indenture
Administrator, the Eligible Lender Trustee or the Indenture Trustee or of any
successor or assign thereof in its individual capacity, except as any such
Person may have expressly agreed (it being understood that the Indenture
Trustee, the Indenture Administrator, the Eligible Lender Trustee and the Owner
Trustee have no such obligations in their individual capacity) and except that
any such partner,

                                   Exhibit A-5
<PAGE>

owner or beneficiary shall be fully liable, to the extent provided by applicable
law, for any unpaid consideration for stock, unpaid capital contribution or
failure to pay any installment or call owing to such entity.

            Upon acquisition or transfer this Note or a beneficial interest in
this Note, as the case may be, by, for or with the assets of, a Benefit Plan,
such Note Owner shall be deemed to have represented that such acquisition or
purchase will not constitute or otherwise result in: (i) in the case of a
Benefit Plan subject to Section 406 of ERISA or Section 4975 of the Code, a
prohibited transaction in violation of Section 406 of ERISA or Section 4975 of
the Code which is not covered by a class or other applicable exemption and (ii)
in the case of a Benefit Plan subject to a substantially similar federal, state,
local or foreign law, a non-exempt violation of such substantially similar law.
Any transfer found to have been made in violation of such deemed representation
shall be null and void and of no effect.

            Each Noteholder or Note Owner, by acceptance of this Note or, in the
case of a Note Owner, a beneficial interest in this Note, covenants and agrees
that by accepting the benefits of the Indenture such Noteholder or Note Owner
will not at any time institute against the Depositor or the Issuer, or join in
any institution against the Depositor or the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency, receivership or liquidation proceedings
or other proceedings under any United States Federal or state bankruptcy or
similar law in connection with any obligations relating to the Notes, the
Indenture or the other Basic Documents.

            Prior to the due presentment for registration of transfer of this
Note, the Issuer, the Indenture Trustee, the Indenture Administrator and any
agent of the Issuer, the Indenture Trustee or the Indenture Administrator may
treat the Person in whose name this Note (as of the day of determination or as
of such other date as may be specified in the Indenture) is registered as the
owner hereof for all purposes whether or not this Note be overdue, and neither
the Issuer, the Indenture Trustee, the Indenture Administrator nor any such
agent shall be affected by notice to the contrary.

            The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Noteholders under the Indenture at any time by the
Issuer with the consent of the Noteholders representing a majority of the
Outstanding Amount of all Notes at the time outstanding. The Indenture also
contains provisions permitting the Noteholders representing specified
percentages of the Outstanding Amount of the Notes, on behalf of all the
Noteholders, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the holder of this Note (or any one or more
Predecessor Notes) shall be conclusive and binding upon such holder and upon all
future holders of this Note and of any Note issued upon registration of transfer
hereof or in exchange hereof or in lieu hereof whether or not notation of such
consent or waiver is made upon this Note. The Indenture also permits the
Indenture Trustee to amend or waive certain terms and conditions set forth in
the Indenture without the consent of holders of the Notes issued thereunder.

                                   Exhibit A-6
<PAGE>

            The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.

            The Issuer is permitted by the Indenture, under certain
circumstances, to merge or consolidate, subject to the rights of the Indenture
Trustee and the Noteholders under the Indenture.

            The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.

            This Note shall be construed in accordance with the laws of the
State of New York, without reference to its conflict of law provisions, and the
obligations, rights and remedies of the parties hereunder and thereunder shall
be determined in accordance with such laws.

            No reference herein to the Indenture and no provision of this Note
or of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency, herein prescribed.

            Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, neither the Indenture Administrator in its
individual capacity, any owner of a beneficial interest in the Issuer, nor any
of their respective partners, beneficiaries, agents, officers, directors,
employees or successors or assigns shall be personally liable for, nor shall
recourse be had to any of them for, the payment of principal of or interest on,
or performance of, or omission to perform, any of the covenants, obligations or
indemnifications contained in this Note or the Indenture; it being expressly
understood that said covenants, obligations and indemnifications have been made
by the Owner Trustee for the sole purposes of binding the interests of the Owner
Trustee in the assets of the Issuer. The Noteholder of this Note by the
acceptance hereof agrees that, except as expressly provided in the Basic
Documents, in the case of an Event of Default under the Indenture, the
Noteholder shall have no claim against any of the foregoing for any deficiency,
loss or claim therefrom; provided, however, that nothing contained herein shall
be taken to prevent recourse to, and enforcement against, the assets of the
Issuer for any and all liabilities, obligations and undertakings contained in
the Indenture or in this Note.

                                   Exhibit A-7
<PAGE>

                                   ASSIGNMENT

Social Security or taxpayer I.D. or other identifying number of assignee

________________________________________________________________________________

            FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto

________________________________________________________________________________
                         (name and address of assignee)

the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints

________________________________________________________________________________
attorney, to transfer said Note on the books kept for registration thereof, with
full power of substitution in the premises.

Dated:__________________

                                                   ___________________________*/
                                                         Signature Guaranteed:

                                                   ___________________________*/

-------------
*/ NOTICE: The signature to this assignment must correspond with the name of the
   registered owner as it appears on the face of the within Note in every
   particular, without alteration, enlargement or any change whatever. Such
   signature must be guaranteed by an "eligible guarantor institution" meeting
   the requirements of the Note Registrar, which requirements include membership
   or participation in STAMP or such other "signature guarantee program" as may
   be determined by the Note Registrar in addition to, or in substitution for,
   STAMP, all in accordance with the Securities Exchange Act of 1934, as
   amended.

                                  Exhibit A-8
<PAGE>

                                                                       EXHIBIT B

                        Form of Note Depository Agreement
                        for U.S. Dollar Denominated Notes

                                 [See Tab [___]]

                                   Exhibit B-1

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