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<TITLE>COLLEGIATE FUNDING SERVICES, INC.</TITLE>
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<B><FONT size="2">As filed with the Securities and Exchange
Commission on April&nbsp;14, 2004</FONT></B>
</DIV>

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<B><FONT size="2">Registration No.&nbsp;333-</FONT></B>
</DIV>

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<B><FONT size="4">SECURITIES AND EXCHANGE COMMISSION</FONT></B>

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<B>Washington,&nbsp;D.C. 20549</B>
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<B><FONT size="5">Form S-1</FONT></B>

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<B>REGISTRATION STATEMENT</B>
</DIV>

<DIV align="center">
<B>UNDER</B>
</DIV>

<DIV align="center">
<B>THE SECURITIES ACT OF 1933</B>
</DIV>

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<B><FONT size="6">Collegiate Funding Services, Inc.</FONT></B>

<DIV align="center">
<I><FONT size="2">(Exact name of Registrant as Specified in its
Charter)</FONT></I>
</DIV>

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    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="28%"><FONT size="2">&nbsp;</FONT></TD>
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    <B><FONT size="2">Delaware</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <B><FONT size="2">6141</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <B><FONT size="2">04-3649118</FONT></B></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <I><FONT size="2">(State or Other Jurisdiction of<BR>
    Incorporation or Organization)</FONT></I></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <I><FONT size="2">(Primary Standard Industrial<BR>
    Classification Code Number)</FONT></I></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <I><FONT size="2">(I.R.S. Employer<BR>
    Identification Number)</FONT></I></TD>
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<B><FONT size="2">100 Riverside Parkway</FONT></B>

<DIV align="center">
<B><FONT size="2">Suite&nbsp;125</FONT></B>
</DIV>

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<B><FONT size="2">Fredericksburg, Virginia 22406</FONT></B>
</DIV>

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<B><FONT size="2">(540)&nbsp;374-1600</FONT></B>
</DIV>

<DIV align="center">
<I><FONT size="2">(Address,&nbsp;Including Zip Code, and
Telephone Number,&nbsp;Including Area Code, of Registrant&#146;s
Principal Executive Offices)</FONT></I>
</DIV>

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<B><FONT size="2">Charles L. Terribile</FONT></B>

<DIV align="center">
<B><FONT size="2">100 Riverside Parkway</FONT></B>
</DIV>

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<B><FONT size="2">Suite&nbsp;125</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">Fredericksburg, Virginia 22406</FONT></B>
</DIV>

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<B><FONT size="2">(540)&nbsp;374-1600</FONT></B>
</DIV>

<DIV align="center">
<I><FONT size="2">(Name, Address,&nbsp;Including Zip Code, and
Telephone Number,&nbsp;Including Area Code, of Agent For
Service)</FONT></I>
</DIV>

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<B><I><FONT size="2">With copies to:</FONT></I></B>
</DIV>

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    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="42%"><FONT size="2">&nbsp;</FONT></TD>
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    <TD align="center" valign="top">
    <B><FONT size="2">Michael D. Nathan, Esq.<BR>
    Simpson Thacher&nbsp;&#38; Bartlett LLP<BR>
    425 Lexington Avenue<BR>
    New&nbsp;York, New&nbsp;York 10017<BR>
    (212) 455-2000</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <B><FONT size="2">Luciana Fato,&nbsp;Esq.<BR>
    Davis Polk&nbsp;&#38; Wardwell<BR>
    450 Lexington Avenue<BR>
    New&nbsp;York, New&nbsp;York 10017<BR>
    (212) 450-4000</FONT></B></TD>
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<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;<B>Approximate date of
commencement of proposed sale to the public:</B> As soon as
practicable after the effective date of this Registration
Statement.
</FONT>
</DIV>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;If the securities being
registered on this form are being offered on a delayed or
continuous basis pursuant to Rule&nbsp;415 under the Securities
Act of 1933, check the following
box.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;</FONT>
</FONT>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;If this form is filed to
register additional securities for an offering pursuant to
Rule&nbsp;462(b) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;</FONT>
</FONT>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;If this form is a
post-effective amendment filed pursuant to Rule&nbsp;462(c)
under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier
effective registration statement for the same
offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;</FONT>
</FONT>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;If this form is a
post-effective amendment filed pursuant to Rule&nbsp;462(d)
under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier
effective registration statement for the same
offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;</FONT>
</FONT>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;If delivery of the
prospectus is expected to be made pursuant to Rule&nbsp;434
under the Securities Act, please check the following
box.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;</FONT>
</FONT>

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<B><FONT size="2">CALCULATION OF REGISTRATION FEE</FONT></B>

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    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
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    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="15%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="13%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="16%"><FONT size="2">&nbsp;</FONT></TD>
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    <TD colspan="9"></TD>
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    <TD colspan="3"></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Proposed Maximum</FONT></B></TD>
    <TD></TD>
    <TD></TD>
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<TR>
    <TD align="center" nowrap><B><FONT size="1">Title of Each Class</FONT></B></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Proposed Maximum</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Aggregate Offering</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Amount of</FONT></B></TD>
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    <TD align="center" nowrap><B><FONT size="1">of Securities to be Registered</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Amount to be Registered</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Offering Price Per Unit</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Price(1)</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Registration Fee</FONT></B></TD>
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    <TD colspan="9"></TD>
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    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common Stock, par value $0.001&nbsp;per share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">&#151;
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">&#151;
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">$172,500,000
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">$21,856.00
    </FONT></TD>
</TR>

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
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    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Estimated solely for the purpose of calculating
    the amount of the registration fee pursuant to Rule&nbsp;457(o).
    </FONT></TD>
</TR>

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<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;<B>The registrant hereby
amends this registration statement on such date or dates as may
be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that
this registration statement shall thereafter become effective in
accordance with Section&nbsp;8(a) of the Securities Act of 1933,
or until this registration statement shall become effective on
such date as the Securities and Exchange Commission, acting
pursuant to said Section&nbsp;8(a), may determine.</B>
</FONT>

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<TABLE width="100%" border="1" cellpadding="5"><TR><TD>
<FONT size="2" color="#E8112D">The information in this
preliminary prospectus is not complete and may be changed. The
securities may not be sold until the registration statement
filed with the Securities and Exchange Commission is effective.
This preliminary prospectus is not an offer to sell nor does it
seek an offer to buy these securities in any state where the
offer or sale is not permitted.
</FONT>
</TD></TR></TABLE>

<P align="center">
<FONT size="2"> <B><FONT color="#E8112D">Subject to Completion.
Preliminary Prospectus dated April&nbsp;14, 2004</FONT></B>
</FONT>

<P align="left">
<B><FONT size="2">PROSPECTUS</FONT></B>

<P align="center">
<FONT size="4">Shares
</FONT>

<P align="center">
<B><FONT size="5">Collegiate Funding Services, Inc.</FONT></B>

<P align="center">
<FONT size="4">Common Stock
</FONT>

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<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
is an initial public offering of shares of common stock of
Collegiate Funding Services, Inc. All of the shares of common
stock are being sold by us.
</FONT>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior
to this offering, there has been no public market for the common
stock. We currently estimate that the initial public offering
price per share will be between
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
We intend to list the common stock on
the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;under
the symbol
&#147;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#148;.
</FONT>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>See
&#147;Risk Factors&#148; beginning on page 10 to read about
factors you should consider before buying shares of the common
stock.</B>
</FONT>

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<TR>
    <TD width="70%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
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<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><FONT size="1">Per Share</FONT></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
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<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Initial public offering price
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Underwriting discount
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds, before expenses, to Collegiate Funding
    Services, Inc.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">To the extent that the underwriters sell more
than &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock, the underwriters have the option to purchase up
to an
additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
from us at the initial public offering price less the
underwriting discount.
</FONT>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Neither
the Securities and Exchange Commission nor any other regulatory
body has approved or disapproved of these securities or passed
upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.</B>
</FONT>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
shares will be ready for delivery on or
about &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2004.
</FONT>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<DIV>&nbsp;</DIV>

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<TR>
    <TD width="50%"></TD>
    <TD width="50%"></TD>
</TR>

<TR valign="top">
    <TD align="left"><B><FONT size="4">JPMorgan</FONT></B></TD>
    <TD align="right"><B><FONT size="4">Merrill Lynch&nbsp;&#38; Co.</FONT></B></TD>
</TR>

</TABLE>

<P align="center">
<FONT size="2">The date of this prospectus
is &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2004.
</FONT>

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<B><FONT size="2">TABLE OF CONTENTS</FONT></B>

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<TR>
    <TD width="90%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Page</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#101'>Prospectus Summary</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#102'>Risk Factors</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#103'>Cautionary Notice Regarding
    Forward-Looking Statements</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#104'>Use of Proceeds</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#105'>Dividend Policy</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#106'>Capitalization</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#107'>Dilution</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#108'>Selected Historical
    Consolidated Financial Data</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#109'>Management&#146;s Discussion
    and Analysis of Financial Condition and Results of Operations</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#111'>Industry Overview</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">46</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#112'>Business</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">52</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#113'>Management</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">62</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#114'>Principal Stockholders</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">69</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#115'>Certain Relationships and
    Related Transactions</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#116'>Description of Capital
    Stock</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">72</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#117'>Shares Eligible for Future
    Sale</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">77</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#118'>Certain United States Tax
    Consequences to Non-U.S.&nbsp;Holders</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">79</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#119'>Underwriting</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">82</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#120'>Legal Matters</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">86</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#121'>Experts</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">86</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#122'>Where You Can Find
    Additional Information</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">86</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&nbsp;<A HREF='#123'>Index to Financial
    Statements</A>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">You should rely only on the information contained
in this prospectus. We have not authorized anyone to provide you
with information different from that contained in this
prospectus. We are offering to sell, and seeking offers to buy,
shares of our common stock only in jurisdictions where offers
and sales are permitted. The information contained in this
prospectus is accurate only as of the date of this prospectus,
regardless of the time of delivery of this prospectus or of any
sale of our common stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">No action is being taken in any jurisdiction
outside the United States to permit a public offering of the
common stock or possession or distribution of this prospectus in
that jurisdiction. Persons who come into possession of this
prospectus in jurisdictions outside the United States are
required to inform themselves about and to observe any
restrictions as to this offering and the distribution of this
prospectus applicable to those jurisdictions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The product and service names and logos used in
this prospectus are service marks/ trademarks or registered
service marks/ trademarks of CFS or its affiliates. CFS,
Collegiate Funding Services, Collegexit, Collegexit.com, Real
World Loan and Dedicated to Students and Families are service
marks of Collegiate Funding Services,&nbsp;L.L.C. Other
products, services and company names mentioned in this
prospectus are the service marks/ trademarks of their respective
owners.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">This prospectus includes industry data and
forecasts that we obtained from industry publications and
surveys and internal company surveys. As noted in this
prospectus, the U.S.&nbsp;Department of Education and The
College Board were the primary sources for third-party industry
data and forecasts. Industry publications and surveys and
forecasts generally state that the information contained therein
has been obtained from sources believed to be reliable, but
there can be no assurance as to the accuracy or completeness of
included information. We have not independently verified any of
the data from third-party sources nor have we ascertained the
underlying economic assumptions relied upon therein. Statements
as to our market position relative to our competitors are based
on data provided by the Student Loan Servicing Alliance and the
U.S.&nbsp;Department of Education.
</FONT>

<P align="center"><FONT size="2">i
</FONT>
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<DIV align="left">
<A name='101'></A>
</DIV>

<!-- link1 "PROSPECTUS SUMMARY" -->

<P align="center">
<B><FONT size="2">PROSPECTUS SUMMARY</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">In this prospectus, unless the context
requires otherwise, &#147;Collegiate Funding Services,&#148;
&#147;CFS,&#148; &#147;we,&#148; &#147;us,&#148; &#147;our&#148;
and the &#147;Company&#148; refer to Collegiate Funding
Services, Inc., a Delaware corporation, and its subsidiaries,
including Collegiate Funding Services, LLC, our predecessor, and
not to the underwriters. This summary highlights selected
information contained elsewhere in this prospectus.</FONT></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">This summary does not contain all the
information you should consider before investing in shares of
our common stock. You should read this entire prospectus
carefully, including &#147;Risk Factors,&#148; &#147;Cautionary
Note Regarding Forward-Looking Statements&#148; and our
financial statements and the related notes, before making an
investment decision.</FONT></I>

<P align="left">
<B><FONT size="2">Our Company</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are a vertically integrated education finance
company that markets, originates, finances and services
education loans. We market education loans primarily through
direct-to-consumer, or DTC, programs, including targeted direct
mail, telemarketing and the Internet. Using our DTC marketing
platform and other distribution channels, we assist consumers in
financing and refinancing the cost of undergraduate, graduate,
professional, career and continuing education. We finance,
retain and service a substantial portion of the loans we
originate.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Since our inception in 1998, we have originated
or facilitated the origination of over $15&nbsp;billion in
education loans. We originated or facilitated the origination of
$4.2&nbsp;billion of education loans in 2003 and we believe we
are among the top five originators of federal and private
education loans in the United States. Of our total loan
originations in 2003, $4.0&nbsp;billion were federally
guaranteed consolidation student loans made through the Federal
Family Education Loan Program, which we refer to as the
FFEL&nbsp;Program or FFELP. Through the FFEL Program, an
eligible borrower with multiple federally guaranteed loans can
consolidate his or her loans after graduation into a single
loan. Beginning in May 2003, we increased our focus on private
education loans and, in that year, originated or facilitated the
origination of $199.6&nbsp;million of these loans. Private
loans, which do not have a federal guarantee, are credit-based
consumer loans used to pay for or refinance education-related
expenses. As of December&nbsp;31, 2003, we were servicing
approximately $8.9&nbsp;billion in student loans made to over
360,000&nbsp;customers, and were the seventh largest servicer of
FFELP loans in the United States, according to the Student Loan
Servicing Alliance. We currently have over 1,000&nbsp;employees.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have adapted a direct-to-consumer marketing
model developed in the consumer finance industry for use in
education-based lending. We believe our targeted DTC strategy
enables us to increase consumer awareness of the products we
offer and collect data useful in our product development and
marketing. Using a variety of internal and external databases
accumulated since our inception, we create marketing campaigns
to target consumers with products based on their specific
characteristics. We supplement our DTC strategy through
marketing relationships with membership organizations, alumni
associations and other entities in order to reach customers and
promote our products under our own label or under co-branded
offerings in partnership with other lenders. We are also
investing in the school-based loan origination channel, through
which we market our products to students by cooperative
arrangements with the financial aid offices of education
institutions. We currently have relationships with over
600&nbsp;schools and institutions including having our products
on 539&nbsp;preferred lender lists. Once we have originated a
FFELP loan, we either fund and retain that loan in our portfolio
or sell the originated loan application to a third-party lender.
With respect to private education loans, we either sell
completed loan applications upon origination, in the case of
private consolidation loans, or market loans for origination by
third parties, in the case of private in-school loans, which we
refer to as facilitating the origination of loans.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 2002, we launched our strategy of retaining in
our portfolio a percentage of the federally guaranteed loans we
originate. Prior to 2002, we sold substantially all of our
completed loan applications to third parties and received fees
for these applications at the time of sale. We retain in our
portfolio only
</FONT>

<P align="center"><FONT size="2">1
</FONT>

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<DIV align="left">
<FONT size="2">loans that are federally guaranteed for at least
98% of principal and interest. We believe that our current
strategy of retaining in our portfolio a portion of the loans we
originate and selling the remainder for a fee provides us with
several advantages, although our net income in current periods
has been lower than it would have been had we sold a larger
percentage of the FFELP loans we originate. Among the benefits
of retaining loans is our ability to take advantage of these
loans&#146; limited credit risk, their duration and other
characteristics and to benefit from a greater revenue stream
over the life of the loan. Selling the remainder of our
originated loan applications permits us to maintain a
diversified source of funding for loan processing and
origination and build our relationships with financial
institutions that purchase our loans. We retained approximately
50% and 21% of the FFELP loans we originated in 2003 and 2002,
respectively, and our portfolio of federally guaranteed loans
grew to $2.9&nbsp;billion as of December&nbsp;31, 2003 from
$973.1&nbsp;million as of December&nbsp;31, 2002. We do not fund
or retain any of the private loans we market or originate.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We also provide high quality loan servicing
through our wholly owned subsidiary, CFS-SunTech Servicing LLC
(&#147;SunTech&#148;). We acquired SunTech in April 2003. Prior
to the acquisition, SunTech had been servicing a significant
portion of the loans we originated since our formation in 1998.
Servicing loans provides us with an additional source of fee
income and enables us to retain a direct customer relationship
over the life of the loans, which we believe is a critical
element in establishing our brand. We service substantially all
the loans we hold in our portfolio as well as student loans held
by third-party lenders. We generally seek to retain the
servicing of a majority of the loan applications we sell, which
accounts for a significant portion of our third-party servicing
volume.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our multiple sources of revenue reflect the fact
that we market, originate, finance and service education loans.
They include fee income for selling completed loan applications
to third parties and facilitating the origination of loans for
lenders, net interest income earned on the loans we hold in our
portfolio and servicing fee income for the assets we service.
Fees on loan application sales and for facilitating the
origination of loans, which we refer to collectively as fees on
loan origination, accounted for approximately 75.7% of our net
revenue in 2003. Net interest income after provision for loan
losses, which is primarily comprised of the difference between
the yield we receive on our loan portfolio and the cost of
funding these loans, accounted for 16.6% of our net revenue in
2003. Servicing fees, earned since our acquisition of SunTech in
April 2003, accounted for 7.7% of our net revenue in 2003. Over
time, as we build our portfolio, we expect the percentage of our
net revenue earned from net interest income to increase and the
percentage of our net revenue earned from our fees on loan
origination to decrease.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We primarily finance the loans we retain in our
portfolio through asset-backed securitizations, which we record
as debt on our consolidated balance sheet. To date, we have
completed four securitizations that contributed
$2.9&nbsp;billion of funding, including two transactions for a
total of $1.9&nbsp;billion in 2003. We supplement our
asset-backed securitizations with $500&nbsp;million of secured
warehouse financing availability, which we believe allows us to
access the securitization market on a more timely and
cost-effective basis. In addition, we enter into forward
purchase agreements, under which several financial institutions
have agreed to purchase and, in certain cases, require that we
sell to them, a portion of the loan applications we originate
each year.
</FONT>

<P align="left">
<B><FONT size="2">Our Competitive Strengths</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe the following competitive strengths
distinguish us in the education finance industry:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <B><I><FONT size="2">Vertically integrated education finance
    platform.</FONT></I></B><FONT size="2"> We market, originate,
    finance and service education loans. Through our platform, we
    offer students and their families a suite of loan products,
    including federally guaranteed consolidation loans, other
    federally guaranteed loans and private loans. Once originated,
    we are able to finance and retain the loans or sell the
    originated loan applications. Our internal servicing capability
    allows us to service our student loan portfolio, rather than
    outsource this task to a third party. Our vertically integrated
    platform offers our customers the benefit of dealing with a
    single entity over the lives of their
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">2
</FONT>

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<TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT size="2">loans, from initial inquiry through origination
    and repayment. We believe the breadth of our capabilities in the
    various sectors of the education finance market and the scale of
    our platform is a competitive advantage over many of our peers.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <B><I><FONT size="2">Leading direct-to-consumer origination
    operation.</FONT></I></B><FONT size="2"> In 2003, we originated
    or facilitated the origination of $4.2&nbsp;billion of education
    loans, of which approximately 98% was originated through our
    direct-to-consumer channel. Our DTC model and our targeted
    marketing process give us the advantage of a direct relationship
    with customers, which permits us to tailor our products to their
    needs. We believe that we originated more consolidation loans
    through this channel than any other education finance company,
    when excluding consolidation of loans by lenders from their own
    portfolios.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <B><I><FONT size="2">Significant portfolio of federally
    guaranteed loans.</FONT></I></B><FONT size="2"> As of
    December&nbsp;31, 2003, all the loans we held in our portfolio
    were FFELP loans, which are federally guaranteed for at least
    98% of principal and accrued interest. Our portfolio of loans
    grew from $973.1&nbsp;million at the end of 2002 to
    $2.9&nbsp;billion at the end of 2003. We expect to continue our
    strategy of retaining a significant portion of the federally
    guaranteed loans we originate. The high credit quality and long
    duration of these loans provide us with a growing base of
    revenue. We do not currently intend to hold in our portfolio any
    private loans.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <B><I><FONT size="2">High quality servicing
    platform.</FONT></I></B><FONT size="2"> As the primary means of
    communication with our customers after their loans are
    originated and financed, our servicing operation provides our
    customers with consistent and seamless service. The quality of
    our servicing platform and its compliance with the rules set
    forth by the U.S.&nbsp;Department of Education, or DOE, is the
    primary determinant in preserving the federal guarantee on FFELP
    loans we service. Our servicing platform uses a system
    specifically designed to manage, adhere to and support the
    requirements of the Higher Education Act and other consumer
    lending regulations and laws. We believe SunTech&#146;s net
    claim reject rate by guaranty agencies due to servicer error of
    0.02% is among the lowest in the industry. Our continuing focus
    on maintaining this performance record will assist us in
    minimizing our credit risk and provide us with credibility as we
    securitize our portfolio of loans and seek third parties willing
    to use us as their loan servicer.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <B><I><FONT size="2">Experienced senior management
    team.</FONT></I></B><FONT size="2"> Our senior management team
    has an average of 19&nbsp;years of relevant industry experience
    from a broad range of education and consumer finance
    backgrounds. We believe this combination of education and
    consumer finance experience allows us to better serve our
    customers and maximizes our ability to develop and implement our
    strategy.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Our Strategy</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We intend to focus on marketing, originating,
financing and servicing federally guaranteed consolidation loans
and to leverage our market position and platform to build our
brand and diversify our product and service offerings, including
the expansion of private loan originations, by executing the
following strategy:
</FONT>
<P>

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    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <B><I><FONT size="2">Expand the use and reach of our
    direct-to-consumer marketing platform.</FONT></I></B></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <I><FONT size="2">Federal consolidation
    loans.</FONT></I><FONT size="2"> We plan to continue to use our
    DTC channel to originate federal consolidation loans, to expand
    consumer awareness of consolidation loans and to establish our
    brand. We will continue to refine our approach to these products
    based on information we have gathered from our marketing and
    servicing operations. We believe that the education finance
    market will continue to benefit from direct marketing to
    consumers and we seek to use our expertise with this marketing
    strategy to increase our share of federal consolidation loan
    originations.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">3
</FONT>

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<TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <I><FONT size="2">Private loans.</FONT></I><FONT size="2">
    Beginning in May, 2003, we increased our focus on private
    education loans, and, in 2003, we originated or facilitated the
    origination of $199.6&nbsp;million of these loans. We intend to
    continue to use our expertise in the DTC channel to structure
    and market private loan products and to increase our
    originations and facilitation of the origination of private
    loans. We will utilize our expertise in the marketing of federal
    consolidation loans and mine the data we have generated in
    making and holding those loans to effectively market new private
    loan products.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <B><I><FONT size="2">Expand distribution channels.</FONT></I></B></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <I><FONT size="2">School-based
    channel.</FONT></I><FONT size="2"> To supplement our DTC
    channel, we will continue investing in the school-based channel
    to increase awareness among students and financial aid officers
    of our consolidation products. In addition, we will continue to
    broaden our product offerings of federal and private loans
    available to students still in school. We currently have
    relationships with over 600 schools and institutions, including
    having our products on 539 preferred lender lists. We have a
    national sales force of education industry professionals working
    directly with colleges and universities and we assist schools
    and financial aid offices by offering an internally-developed
    Internet-based debt and graduation counseling tool as well as
    software tools that aid schools in running their lender
    programs. We will continue our efforts to be added to
    schools&#146; preferred lender lists, which will provide a
    school-based origination channel to supplement our DTC
    origination channel, as well as greater awareness of our
    products and brand name among students and financial aid
    officers.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <I><FONT size="2">Affinity group
    marketing.</FONT></I><FONT size="2"> We have entered into
    marketing relationships with associations such as the American
    Medical Association, the American Dental Association and the
    American Bar Association, in order to promote our products to
    their membership and customer bases. We plan to continue
    developing more affinity relationships, which, through private
    label offerings and product endorsements, provide us with access
    to consumers in need of federal and private loans or
    consolidation of education loans.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <B><I><FONT size="2">Build our FFELP loan portfolio and balance
    our sources of revenue and
    funding.</FONT></I></B><FONT size="2"> Starting in 2002, we
    began holding a portion of the FFELP loans we originated. We
    plan on retaining a significant portion of the FFELP loans we
    originate in the future. Retaining these loans will give us the
    ability to recognize revenue from these assets over a long
    period of time, more fully utilize our servicing capabilities
    and help us to create a more robust customer information
    database for new and emerging products and services. We also
    intend to continue to sell a portion of the loan applications we
    originate. Our sales of originated loan applications allow us to
    maintain a balance in our sources of funding for loan processing
    and origination, provide us with a source of fee income and
    enable us to continue to build relationships and strategic
    partnerships with the financial institutions that acquire our
    loan applications.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <B><I><FONT size="2">Expand the origination capabilities of our
    servicer.</FONT></I></B><FONT size="2"> We intend to continue to
    expand the volume of loans we service for ourselves and for
    third-party lenders and to invest in the technology and
    infrastructure of our servicing operations to permit us to
    originate additional types of loans and increase our ability to
    provide private labeling capabilities to our clients. Through
    our servicer, we intend to extend the reach of our marketing,
    originate more loans and increase the volume of loans we
    service. We believe our enhanced servicing capabilities will
    enable us to support our growth in servicing and originations,
    increase our fee income from servicing and ensure that our
    customers have a favorable experience with CFS.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <B><I><FONT size="2">Seek out and make strategic
    acquisitions.</FONT></I></B><FONT size="2"> In 2003, we acquired
    and successfully integrated SunTech to provide our servicing
    operations. In the future, we will consider acquisitions of
    individual companies as well as loan and servicing portfolios
    that we believe have the potential to enhance the value of our
    company, expand our product reach and/or aid in executing our
    growth strategy.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">4
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">
<B><FONT size="2">Education Finance Industry</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The U.S.&nbsp;postsecondary education finance
market is large and growing. According to the DOE, in academic
year 2002-2003, expenditures for postsecondary education totaled
$331.9&nbsp;billion. The two main drivers of the size and growth
prospects of this market are enrollment population and cost of
attendance. The DOE estimates that college enrollment will grow
to 18&nbsp;million by 2013, up from an estimated 16&nbsp;million
in 2003. Between the 1993-1994 and 2003-2004 academic years, the
average amount of tuition and fees, which is the largest
component of the cost of attendance, increased on an
enrollment-weighted and constant-dollar basis by 47% at
four-year public institutions and 42% at four-year private
institutions. During the period from 1993 to 2002, median
household income grew only 11%, on a constant-dollar basis.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Of the $331.9&nbsp;billion spent on postsecondary
education in academic year 2002-2003, according to the College
Board, $105.1&nbsp;billion was provided by financial aid. Of
this amount, federal loans represented approximately 46.7%, or
$49.1&nbsp;billion, and private loans represented approximately
6.6%, or $6.9&nbsp;billion, while grants, education tax credits,
work study and other education loans made up the balance. The
DOE estimates that federal education loan volume, excluding
consolidation loans, is expected to increase to
$95.2&nbsp;billion in federal fiscal year 2011. We believe that
a significant portion of the remaining expenditures on
postsecondary education was comprised of other loan products
that are not characterized as traditional education loans.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Education loan consolidation has emerged over the
past few years as an important option for consumers. Federal
consolidation loans allow consumers to refinance and extend the
repayment term of existing education loan debt at a fixed rate
and with a single monthly payment that is generally lower than a
consumer would pay in the aggregate in monthly payments on the
replaced loans. There were $9.5&nbsp;billion of FFELP
consolidation loans disbursed in federal fiscal year 2001. This
grew to $23.2&nbsp;billion and $35.3&nbsp;billion in federal
fiscal year 2002 and 2003, respectively. The DOE, however,
projects that FFELP consolidation loan volume will decrease to
$25.9&nbsp;billion in federal fiscal year 2004 and to
$22.3&nbsp;billion in federal fiscal year 2005. Although the DOE
projections are the most widely accepted projections available,
we note that the DOE&#146;s projections for following-year FFELP
consolidation loan volumes have underestimated actual
consolidation loan volume in each of federal fiscal year 2003,
2002 and 2001 by $13.6&nbsp;billion, $8.9&nbsp;billion and
$2.0&nbsp;billion, respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">According to the College Board, private loan
volume, though small in comparison to federal loan volume, has
grown at a compounded annual rate of 26.8% in constant dollars,
from academic year 1995-1996 through academic year 2002-2003.
Total reported private loan volume reached approximately
$6.9&nbsp;billion in the 2002-2003 academic year, up from
$1.1&nbsp;billion in the 1995-1996 academic year. We believe the
growth of the private education loan market reflects an
increasing reliance on supplements to federal loans, under which
the amount that can be borrowed is capped, to bridge the
widening gap between the cost of higher education and the amount
of funding available to pay that cost through federal education
loans. In addition, we believe private education loans are
viewed as convenient and attractive financing alternatives by
the growing number of older non-traditional students who are
more familiar with other consumer finance alternatives.
</FONT>

<P align="center"><FONT size="2">5
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<FONT size="2">Total Expenditures for Postsecondary Education
</FONT>

<DIV align="center">
<FONT size="2">(dollars in billions)
</FONT>
</DIV>

<P align="center">
<IMG src="y95852y9585203.gif" alt="BAR CHART">

<P align="center">
<FONT size="2">Academic years (beginning)
</FONT>

<DIV align="center">
<FONT size="2">(Source: U.S.&nbsp;Department of Education)
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Higher Education Act of 1965, which governs
the FFEL Program, must be reauthorized by Congress every five
years, and, at such time, the FFEL Program may be amended. The
United States Congress is currently considering reauthorization
of the Higher Education Act. In connection with this
reauthorization, a number of proposals have been made to modify
the terms of the FFEL Program, some of which, if enacted, could
decrease the yield to lenders of, and borrower demand for
consolidation loans. See &#147;Risk Factors.&#148;
</FONT>

<P align="left">
<B><FONT size="2">Corporate Information</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We were founded in 1998 as Collegiate Funding
Services, LLC. Collegiate Funding Services, Inc. is a Delaware
corporation incorporated on April&nbsp;2, 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In May 2002, we were acquired by The Lightyear
Fund, L.P. and its affiliates, which we refer to as Lightyear,
and certain other investors. Lightyear is a private investment
firm based in New&nbsp;York City. Lightyear invests private
equity capital in leveraged buyout, recapitalization and growth
opportunities, primarily in the financial services area. Upon
completion of this offering, Lightyear will continue to own
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of our common
stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our principal executive offices are located at
100&nbsp;Riverside Parkway, Suite&nbsp;125, Fredericksburg,
Virginia 22406, and our telephone number is (866)&nbsp;697-6773.
We plan to relocate our principal executive offices to 10304
Spotsylvania Avenue, Suite&nbsp;100, Fredericksburg, Virginia
22408 in the third quarter of 2004. Our website is
<I>www.cfsloans.com.</I> Information contained on our web site
is not a part of this prospectus.
</FONT>

<P align="center"><FONT size="2">6
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">The Offering</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Common Stock offered by us
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Common Stock to be outstanding after this offering
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Use of proceeds
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">We will use
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
    the net proceeds from this offering to pay the liquidation
    preference of all shares of the preferred stock issued by our
    subsidiary,
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
    the net proceeds to repay all outstanding amounts under our
    revolving line of credit, and the remaining net proceeds to make
    potential acquisitions and for general corporate purposes.
    Lightyear, other investors and certain members of management
    will receive the net proceeds used to pay the liquidation
    preference of the preferred stock.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Proposed stock symbol
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
</TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The number of shares of common stock that will be
outstanding after this offering and all other information in
this prospectus, unless the context otherwise requires, gives
effect to the conversion of all shares of Class&nbsp;A Common
Stock and Class&nbsp;B Common Stock into a single class of
common stock and <BR>
 a &nbsp;-for-&nbsp;stock split to be effected immediately prior
to consummation of this offering and excludes:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">315,000&nbsp;shares of common stock subject to
    stock options outstanding as of December&nbsp;31, 2003, options
    for 56,700 of which were exercisable as of December&nbsp;31,
    2003, at a weighted average exercise price equal to $1.30;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">warrants to purchase an aggregate of
    1,000,000&nbsp;shares of common stock at an exercise price of
    $0.01&nbsp;per share;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock available for future grant or issuance under our
    stock incentive plans.
    </FONT></TD>
</TR>

</TABLE>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Unless otherwise indicated, all information in
this prospectus assumes that the underwriters do not exercise
the over-allotment option granted to purchase up
to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
shares of common stock in this offering from the Company.
</FONT>

<P align="center"><FONT size="2">7
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">Summary Consolidated Financial Data</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">You should read the summary consolidated
financial data set forth below in conjunction with
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations&#148; and our and our
predecessor&#146;s financial statements and the related notes
included elsewhere in this prospectus. We derived the financial
data as of December&nbsp;31, 2003, for the year ended
December&nbsp;31, 2003, and for the period May&nbsp;17 through
December&nbsp;31, 2002 from our financial statements included
elsewhere in this prospectus and we derived the financial data
for the period January&nbsp;1 through May&nbsp;16, 2002 and for
the year ended December&nbsp;31, 2001 from our
predecessor&#146;s financial statements included elsewhere in
this prospectus. Prior to 2002, our predecessor sold
substantially all of its originated loan applications to third
parties and received fees for the sale of these loan
applications at the time of sale. Since 2002, we have retained a
portion of the FFELP loans that we originate. We and our
predecessor retained approximately 50%, 21% and 4% of the FFELP
loans originated in 2003, 2002 and 2001, respectively.
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="44%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">(dollars in thousands, except per share data)</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">The Company</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Predecessor</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period May&nbsp;17</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">through</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">January 1</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">through May&nbsp;16,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Income statement data:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net interest income (expense)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,975</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,505</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,762</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(930</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Provision for loan losses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,357</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,270</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">752</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net interest income (expense) after provision for
    loan losses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,618</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,775</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,010</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(930</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fee income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">98,558</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84,396</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36,427</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">131,567</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net revenue
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">118,176</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">80,621</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38,437</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">130,637</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">119,568</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54,284</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,477</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68,825</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income (loss) before income taxes and accretion
    of dividends on preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,392</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26,337</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,960</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61,812</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income tax provision (benefit)<SUP>(1)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(196</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,726</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income (loss) before accretion of dividends
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,196</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,611</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,960</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61,812</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accretion of dividends on preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,255</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,929</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,451</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,682</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,960</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61,812</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Earnings (loss) per common share, basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.69</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.53</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Earnings (loss) per common share, diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.69</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.26</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average common shares outstanding, basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,783,059</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,300,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average common shares outstanding,
    diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,783,059</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,068,346</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="63%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As adjusted<SUP>(2)</SUP></FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Actual</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(dollars in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Balance sheet data:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,436</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Restricted cash
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">105,355</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Student loans, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,856,428</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">160,705</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,192,282</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Asset-backed notes and lines of credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,000,866</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other debt obligations, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,531</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,077,955</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock of consolidated subsidiary
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">89,136</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Stockholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,191</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">8
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="58%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year ended December&nbsp;31,<SUP>(3)</SUP></FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">(dollars in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Other data:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Originations:<SUP>(4)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">FFELP loans retained
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,977,934</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">824,337</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">150,222</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">FFELP loans sold<SUP>(5)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,988,910</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,042,144</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,411,336</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Private loans sold<SUP>(5)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">209,312</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">111,621</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">43,020</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total volume
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,176,156</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,978,102</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,604,578</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Average student loans<SUP>(6)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,621,625</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">485,847</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,536</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Average asset-backed notes and lines of credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,963,413</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">757,969</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">81,108</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Student loans serviced (at end of
    period)<SUP>(7)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,906,303</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="14"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Ratios:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net portfolio margin
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.62</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.27</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.44</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net claim reject rate by guaranty agencies due to
    servicer error<SUP>(8)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.02</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="15%" align="left" noshade>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(1)</FONT></SUP></TD>
    <TD align="left">
    <FONT size="2">Our predecessor operated as a limited liability
    company that was treated as a partnership for income tax
    purposes. As a result, our predecessor had no provision for
    income taxes.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(2)</FONT></SUP></TD>
    <TD align="left">
    <FONT size="2">As adjusted amounts give effect to our issuance
    and sale
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of
    common stock in this offering at an assumed initial public
    offering price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share, the midpoint of the range set forth on the cover page,
    and the application of the estimated net proceeds of this
    offering, after deducting the underwriting discount and
    estimated offering expenses payable by us, as set forth under
    &#147;Use of Proceeds&#148; and &#147;Capitalization.&#148;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(3)</FONT></SUP></TD>
    <TD align="left">
    <FONT size="2">Amounts for the year ended December&nbsp;31,
    2001, reflect information for our predecessor. Amounts for the
    year ended December&nbsp;31, 2002, reflect a combination of our
    information and information for our predecessor.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(4)</FONT></SUP></TD>
    <TD align="left">
    <FONT size="2">Reflects the principal balance of loans which we
    originate as well as the private education loans we market for
    origination by our lender partners, which we also refer to as
    facilitating for origination.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(5)</FONT></SUP></TD>
    <TD align="left">
    <FONT size="2">Reflects, with respect to FFELP and private
    consolidation loans, the principal balance of loans with respect
    to which we sold the originated applications, and, with respect
    to private in-school loans, the principal balance of loans which
    we facilitated for origination by other lenders.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(6)</FONT></SUP></TD>
    <TD align="left">
    <FONT size="2">Reflects principal balance of loans without
    adjustments for deferred loan costs which, as of
    December&nbsp;31, 2003, 2002 and 2001, totaled
    $26.4&nbsp;million, $12.5&nbsp;million and $1.0&nbsp;million,
    respectively. Amounts also do not reflect the allowance for loan
    losses of $4.1&nbsp;million, $1.9&nbsp;million and $0 as of
    December&nbsp;31, 2003, 2002 and 2001, respectively.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(7)</FONT></SUP></TD>
    <TD align="left">
    <FONT size="2">Prior to our acquisition of SunTech in April,
    2003, SunTech serviced $7.4&nbsp;billion and $6.2&nbsp;billion
    of loans at December&nbsp;31, 2002 and 2001, respectively.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(8)</FONT></SUP></TD>
    <TD align="left">
    <FONT size="2">Prior to our acquisition of SunTech in April,
    2003, SunTech had a net claim reject rate of 0.00% in 2002 and
    2001.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">9
</FONT>
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<DIV align="left">
<FONT size="2"> <A name='102'></A>
</FONT>
</DIV>

<!-- link1 "RISK FACTORS" -->

<P align="center">
<B><FONT size="2">RISK FACTORS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">You should carefully consider the following risk
factors and all other information contained in this prospectus
before investing in shares of our common stock. Investing in our
common stock involves a high degree of risk. If any of the
following risks actually occur, our business, financial
condition and results of operations could be materially and
adversely affected. In that event, the trading price of our
common stock could decline and you may lose part or all of your
investment.
</FONT>

<P align="center">
<B><FONT size="2">Risks Related to Our Industry and Our
Company</FONT></B>

<P align="left">
<B><FONT size="2">Changes in federal laws and regulations
relating to education loans, particularly legislation affecting
federally guaranteed consolidation loans, could materially
adversely affect our results of operations and
business.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Higher Education Act of 1965 must be
reauthorized by Congress every five years and the FFEL Program
is periodically amended. The United States Congress is currently
considering reauthorization of the Act, which is scheduled to
expire in 2004. Changes in the Higher Education Act made in the
two most recent reauthorizations have resulted in reductions in
education loan yields paid to lenders, increased fees paid by
lenders and a decreased level of federal guarantee. Federally
guaranteed consolidation loans made up 95.0% of our loan
originations and 99.9% of our loan portfolio as of
December&nbsp;31, 2003, and efforts underway to pass legislation
that affects federal consolidation loans would have a
significant impact on us. Some of the key changes that may be
considered in the reauthorization debate that could have a
negative effect on our business include:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Eliminating fixed-rate consolidation loans and
    requiring that all consolidation loans be made at a variable
    rate. </FONT></I><FONT size="2">If consolidation loans are
    required to be made at a variable rate rather than a fixed rate,
    as virtually all consolidation loans are currently made, it
    could reduce the amount of income we can earn on the loans we
    originate in the future and reduce the demand for consolidation
    loans.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Increasing access to extended repayment terms
    for Stafford loans. </FONT></I><FONT size="2">If the Stafford
    program, which currently allows loan repayment terms of ten
    years that cannot be extended unless the loans meet certain
    conditions, is changed to increase access to longer repayment
    terms on loans, students will be able to realize one of the key
    benefits of consolidation loans without having to consolidate
    their loans.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Permitting borrowers to refinance
    consolidation loans. </FONT></I><FONT size="2">If borrowers
    holding consolidation loans are permitted to refinance their
    consolidation loans under the FFEL Program, this would open the
    consolidation loans in our portfolio to refinancing.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Any of these legislative changes, if enacted,
could have a material adverse impact upon us.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, legislation has been introduced
proposing a number of initiatives aimed at supporting the
William D. Ford Federal Direct Loan Program, which we refer to
as the FDL Program or FDLP. Under the FDL Program, the DOE makes
loans directly to student borrowers through the educational
institutions they attend. If legislation promoting the FDL
Program to the detriment of the FFEL Program were to be enacted,
it could have a material adverse impact on us.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Further amendments, the nature of which we cannot
currently anticipate, could also hurt our business and our
results of operations. Moreover, there can be no assurance that
the provisions of the Higher Education Act will be reauthorized
this year. While Congress has consistently extended the
effective date of the Higher Education Act, it may elect not to
reauthorize the DOE&#146;s ability to provide interest subsidies
and federal guarantees for student loans. Such a failure to
reauthorize would reduce the number of federally guaranteed
student loans available for us to originate in the future and
could materially adversely affect us.
</FONT>

<P align="center"><FONT size="2">10
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, the DOE oversees and implements the
Higher Education Act and periodically issues regulations and
interpretations of that Act. Changes in such regulations and
interpretations could negatively impact our business.
</FONT>

<P align="left">
<B><FONT size="2">Significantly decreased demand for
consolidation loans would have a material adverse impact on our
business.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A combination of increased consumer awareness,
rising education debt volume and historically low interest rates
available to borrowers in the last three years has increased the
number of borrowers seeking to consolidate their variable-rate
education loans into one loan. Currently, the great majority of
our loan originations are consolidation loans. One of the
advantages of consolidation loans is that borrowers are able to
fix the interest rate on their variable rate student loans at
the then existing rate. If rates rise, students may have less
incentive to consolidate their loans at a fixed rate. Demand for
consolidation loans could also decrease in the future as a
result of a decrease in the pool of potential borrowers eligible
to consolidate their loans. The DOE projects that FFELP
consolidation loan volume will decrease from $35.3&nbsp;billion
in federal fiscal year 2003 to an estimated $25.9&nbsp;billion
in federal fiscal year 2004 and to $22.3&nbsp;billion in federal
fiscal year 2005. Demand for consolidation loans could also
decrease as a result of regulatory changes or if certain
legislative proposals described above are enacted. A significant
decrease in demand for consolidation loans would have a material
adverse effect upon our business.
</FONT>

<P align="left">
<B><FONT size="2">We must comply with governmental regulations
relating to our FFELP loans and guaranty agency rules and our
business and results of operations could be materially adversely
affected if we fail to meet these requirements.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our principal business is comprised of
originating, holding and servicing education loans made and
guaranteed pursuant to the FFEL Program. Most significant
aspects of our lines of business are governed by the Higher
Education Act. We must also meet various requirements of the
guaranty agencies, which are private not-for-profit
organizations or state agencies that have entered into federal
reinsurance contracts with the DOE, in order to maintain the
federal guarantee on our FFELP loans. These requirements
establish origination and servicing requirements and procedural
guidelines and specify school and borrower eligibility criteria.
The federal guarantee of FFELP loans is conditioned on
compliance with origination, servicing and collection standards
set by the DOE and guaranty agencies. FFELP loans that are not
originated, disbursed or serviced in accordance with DOE
regulations risk loss of their guarantee, in full or in part.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our failure to comply with the regulatory regimes
described above may arise from:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">breaches of our internal control system, such as
    a failure to adjust manual or automated servicing functions
    following a change in regulatory requirements;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">unintentional employee errors, such as inputting
    erroneous data or failure to adhere to established company
    processes;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">technological defects, such as a malfunction in
    or destruction of our computer systems;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">fraud by third parties who refer loan
    applications to us or from whom we acquire originated loan
    applications;&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">fraud by our employees or other persons in
    activities such as origination or borrower payment processing.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If we fail to comply with any of the above
requirements, we could incur penalties or lose the federal
guarantee on some or all of our FFELP loans. In addition, even
if we comply with the above requirements, a failure to comply by
third parties with whom we conduct business may be attributable
to us and result in us incurring penalties or losing the federal
guarantee on some or all of our FFELP loans. If we experience a
high rate of servicing deficiencies, we could incur costs
associated with remedial servicing, and, if we are unsuccessful
in curing such deficiencies, the eventual losses on the loans
that are not cured could be material. In addition, failure to
comply with these laws and regulations could result in our
liability to borrowers and potential class action suits.
</FONT>

<P align="center"><FONT size="2">11
</FONT>

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<P align="left">
<B><FONT size="2">We have only recently begun retaining a
significant portion of the loans we originate in our portfolio
and servicing loans.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We were formed in June 1998. Prior to 2002, we
did not retain in our portfolio a significant amount of the
loans we originated. We retained approximately 50% and 21% of
the FFELP loans we originated in 2003 and 2002, respectively.
Although we believe that the retained loans are valuable assets,
due to their long duration and high quality (due to the federal
guarantee), we cannot assure you that our predictions will
reflect actual experience. The loans retained in our portfolio
may be repaid prior to maturity and may have poor future
performance, which could have a material adverse effect on our
business.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, we only began servicing loans in
April 2003, following our acquisition of SunTech. Although
SunTech has been in business for more than 15&nbsp;years and has
serviced a significant portion of the loans we have originated
since our formation in 1998, we have operated as a vertically
integrated company offering loan servicing for only one year. If
SunTech does not perform at the level of its historical
performance, our business and results of operations could be
materially adversely affected.
</FONT>

<P align="left">
<B><FONT size="2">Our quarterly results of operations have
varied in the past and are expected to continue to do so, which
may cause our stock price to fluctuate.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our quarterly results of operations have varied
in the past and are expected to continue to do so in the future.
The market price of our common stock may decline significantly
if our future quarterly results of operations fall below the
expectations of securities or industry analysts or investors. A
number of factors outside of our control may cause our quarterly
results to fluctuate, including:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">seasonal patterns affecting loan originations,
    primarily an increase in consolidation activity during the
    summer and late fall and a decrease in consolidation activity
    during the rest of the year;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the amount and timing of loan sales;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the impact of general economic conditions;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">changes in interest rates;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our introduction of new products.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We forecast the volume and timing of our loan
originations for our operational and financial planning on the
basis of many factors and subjective judgments. Therefore,
failure to generate originations according to our expectations
in a particular quarter could have a material adverse effect on
our results of operations for that quarter and for future
periods.
</FONT>

<P align="left">
<B><FONT size="2">&#147;Do not call&#148; registries may limit
our ability to market our products and services.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our direct marketing operations are subject to
various federal and state &#147;do not call&#148; list
requirements and may become subject to additional state &#147;do
not call&#148; list requirements. The Federal Trade Commission
has recently amended its rules to provide for a centralized
national &#147;do not call&#148; registry. Under these new
federal regulations, consumers may have their phone numbers
added to the national &#147;do not call&#148; registry.
Generally, we are prohibited from calling anyone on that
registry unless we have an existing relationship with that
person. We also are required to pay a fee to access the registry
on a quarterly basis. Federal enforcement of the &#147;do not
call&#148; provisions began in the fall of 2003, and the rule
provides for fines of up to $11,000&nbsp;per violation and other
possible penalties. This rule may restrict our ability to market
effectively our products and services to new customers.
Furthermore, compliance with this new rule may prove difficult,
and we may incur penalties for improperly conducting our
marketing activities. In addition, failure to comply with the
terms of this new rule could have a negative impact on our
reputation.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Nineteen states continue to maintain state
&#147;do not call&#148; lists with varying penalties and fines
for noncompliance. Compliance and coordination with these state
lists and with federal lists may prove difficult and we may
incur additional penalties for failure to comply with any of
these lists, which could also have a negative impact on our
business.
</FONT>

<P align="center"><FONT size="2">12
</FONT>

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<P align="left">
<B><FONT size="2">Our inability to maintain relationships with
financial institutions that acquire our originated loan
applications, with our eligible lender or with lenders that
originate our private loans could have material adverse effect
on our ability to sustain or increase our business.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We enter into forward purchase agreements with
financial institutions who agree to purchase, and in certain
cases, require that we sell to them, a portion of the FFELP or
private consolidation loan applications we originate. Under
these contracts, which are typically one- to three-year
agreements, we generate loan applications that are then
forwarded to partnering financial institutions over
pre-determined periods of time and for agreed upon fees. If we
are unable to renew forward purchase agreements with these
institutions at rates or on terms that we deem acceptable, or
if, such contracts are terminated, we would have to find other
financial institutions to acquire our loan applications or we
would have to hold a larger portion of loans we originate in our
portfolio. Fees received from three customers under forward
purchase agreements each accounted for more than 10% of our net
revenue in 2003. We can provide no assurance that we will be
able to renew these contracts or that suitable replacements can
be found at acceptable rates or on acceptable terms.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, when we originate FFELP loans on our
own behalf or when we acquire FFELP loans from others, we engage
U.S. Bank National Association as our &#147;eligible
lender,&#148; as defined in the Higher Education Act, to act as
our trustee to hold title to all such originated and acquired
FFELP loans. This eligible lender trustee holds the legal title
to our FFELP loans, and we hold 100% of the beneficial interests
in those loans. If we are unable to renew our contract with U.S.
Bank, or if the contract is terminated, we would have to find
another institution to serve as our eligible lender. We can
provide no assurance that we will be able to renew this contract
or that a replacement eligible lender can be found at acceptable
rates or on acceptable terms.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Moreover, we have a relationship with a lender
for whom we market and facilitate the origination of private
in-school loans. The number of financial institutions willing to
originate and finance these private in-school loans will be a
significant factor in the growth of this market. As the market
is less mature than that for federally guaranteed loans, there
are, at present, fewer institutions originating and acquiring
these loans. Accordingly, we can provide no assurance that we
will be able to renew this contract or that suitable
replacements could be found or that we will find additional
lenders willing to finance the volume of private loans that we
may seek to market or originate.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Any failure to maintain or replace contractual
relationships with these financial institutions or lenders could
have a material adverse effect on our ability to sustain or
increase our business.
</FONT>

<P align="left">
<B><FONT size="2">If our strategies to grow our business are not
successful, our results of operations and business could be
materially adversely affected.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our strategy includes increasing the amount of
private loans we originate or whose origination we facilitate,
as well as expanding our channels of distribution. We have much
more limited experience in these products and channels than in
our business of marketing and originating FFELP consolidation
loans through our DTC channel. In connection with these
strategies, we have invested and will continue to invest
resources in market research and technology and have hired and
trained and will continue to hire and train additional
personnel, when necessary. If these strategies are not
successful, our results of operations and business could be
materially adversely affected.
</FONT>

<P align="left">
<B><FONT size="2">Our ability to operate our company effectively
could be impaired if we fail to attract and retain key
personnel.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our ability to operate our business and implement
our strategies effectively depends, in part, on the efforts of
our executive officers and other key employees. In addition, our
future success will depend on, among other factors, our ability
to attract and retain other qualified personnel. The loss of the
services of any of our key employees or the failure to attract
or retain other qualified personnel could have a material
adverse effect on our business.
</FONT>

<P align="center"><FONT size="2">13
</FONT>

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<P align="left">
<B><FONT size="2">We may not be able to successfully make
acquisitions or increase our profits from these
acquisitions.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We intend to pursue continued growth through
selected acquisitions. Such an acquisition strategy includes
certain risks. For example:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">we may be unable to identify strategic
    acquisition candidates, negotiate definitive agreements on
    acceptable terms or, as necessary, secure additional financing;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">we may encounter unforeseen expenses,
    difficulties, complications or delays in connection with the
    integration of acquired entities;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">we may fail to achieve acquisition synergies;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our acquisition strategy, including the focus on
    the integration of operations of acquired entities, may divert
    management&#146;s attention from the day-to-day operation of our
    businesses;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">acquired loan or servicing portfolios may have
    unforeseen problems;&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">key personnel at acquired companies may leave
    employment.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, we may compete for certain
acquisition targets with companies having greater financial
resources than us. We cannot assure you that we will be able to
successfully make future acquisitions or what effects those
acquisitions may have on our financial condition and results of
operations. Inherent in any future acquisition is the risk of
transitioning company cultures and facilities. The failure to
efficiently and effectively achieve such transitions could have
a material adverse effect on our financial condition and results
of operations, particularly during the period immediately
following any acquisitions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We anticipate that we would finance potential
acquisitions through cash provided by operating activities
and/or borrowings, which would reduce our cash available for
other purposes and our debt capacity, as well as our debt
service requirements. We cannot assure you, however, that we
would be able to obtain needed financing in the event strategic
acquisition opportunities are identified. We may also consider
financing acquisitions by issuing additional shares of common
stock, which would dilute your ownership.
</FONT>

<P align="left">
<B><FONT size="2">Our inability to maintain our relationships
with third parties for whom we service loans could have an
adverse impact on our business.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our inability to maintain strong relationships
with servicing customers could result in loss of loan servicing
volume generated by some of our loan servicing customers. We
cannot assure you that these relationships will continue. The
loss of such loan servicing volume could result in an adverse
effect on our business. As of December&nbsp;31, 2003,
approximately 69.4% of the loans we serviced were owned by third
parties. Of these, a majority are governed by agreements with
terms of three years or less. To the extent that our third-party
servicing clients reduce the volume of education loans that we
service on their behalf, our income would be reduced, and, to
the extent the related costs could not be reduced
correspondingly, our net income could be materially adversely
affected. We might lose third-party servicing volume for a
variety of reasons, including if our third-party servicing
clients begin or increase internal servicing activities, shift
volume to another service provider, exit the FFEL Program
completely or if we fail to comply with applicable laws and
regulations.
</FONT>

<P align="left">
<B><FONT size="2">If loan applications for federally guaranteed
loans that we sell are subsequently found to be ineligible for
the federal guarantee, we may be required to purchase such loans
and reimburse the DOE for certain fees.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pursuant to the terms of our forward purchase
agreements, FFELP loans that we originate must comply with all
applicable laws and regulations and must be eligible for federal
guarantee. A portion of the loan applications that we originate
and sell are generated by third-party marketing entities with
whom we have marketing contracts. If any of the loan
applications that we sell under our forward purchase agreements,
whether marketed by us or by a third-party marketer, are deemed
ineligible for federal guarantee by a guaranty agency, we may be
obligated to purchase those loans. We would also be required to
reimburse the DOE for fees associated with those loans. Prior to
2001, a portion of the loan applications
</FONT>

<P align="center"><FONT size="2">14
</FONT>

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<DIV align="left">
<FONT size="2">we originated were generated by referrals from
collection agencies, including approximately $3.9 million in
principal amount of loans generated by referrals from the Valley
Acceptance Corporation. Individuals associated with Valley
Acceptance have been charged with improper processing of loans,
including loan applications which we originated and sold to
third parties. To date, a small number of claims relating to
these loans have been rejected by the applicable guarantee
agency, and, accordingly, we may be required to purchase these
loans and reimburse the DOE for the associated fees. If other
loan applications which we originated are found to be ineligible
for federal guarantee after they are funded, including loans
referred by other third-party marketers, we may be required to
purchase additional loans in the future and reimburse the DOE
for the associated fees which could have an adverse effect on
our results of operations.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">We could experience cash flow problems if a
guaranty agency defaults on its guarantee obligation.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A deterioration in the financial status of
guaranty agencies, which are private not-for-profit
organizations or state agencies, or in their ability to honor
guarantee claims on defaulted student loans could result in a
failure of these guaranty agencies to make their guarantee
payments in a timely manner, if at all. If the DOE has
determined that a guaranty agency is unable to meet its
guarantee obligations, we may submit claims directly to the DOE,
and the DOE would be required to pay the full guarantee claim.
In such event, payment of the guarantee claims may not be made
in a timely manner, which could adversely affect our liquidity.
</FONT>

<P align="left">
<B><FONT size="2">Higher rates of prepayments of student loans
could reduce our profits.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pursuant to the Higher Education Act, borrowers
may prepay loans made under the FFEL Program at any time.
Prepayments may result from consolidating student loans, which
has historically tended to occur more frequently in low interest
rate environments, from borrower defaults, which will result in
the receipt of a guarantee payment and from voluntary full or
partial prepayments, among other things. The rate of voluntary
prepayments of student loans may be influenced by a variety of
economic, social and other factors affecting borrowers,
including interest rates, the availability of alternative
financing and legislative changes. Any legislation that permits
borrowers to refinance existing consolidation loans at possibly
lower interest rates could significantly increase the rate of
prepayments on our student loans. Our profits could be adversely
affected by higher prepayments, which would reduce the amount of
interest we receive and expose us to reinvestment risk.
</FONT>

<P align="left">
<B><FONT size="2">Fluctuations in interest rates may materially
and adversely affect our results of operations.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Because we expect to generate a significant
portion of our earnings from the difference, or spread, between
the yield we receive on our portfolio of loans and the cost of
financing these loans, changes in interest rates could have a
material effect on our results of operations. Substantially all
the loans in our portfolio are FFELP consolidation loans which
bear interest at a fixed rate, however, the yield we receive is
the higher of the fixed rate or a variable rate determined under
the FFEL Program. For consolidation loans currently in our
portfolio, the FFELP-determined variable rate is 2.64% over the
91-day financial commercial paper rate. Substantially all
interest costs on our debt obligations are determined based upon
LIBOR, commercial paper or the result of auctions. Using the
portfolio as of December&nbsp;31, 2003 and assuming normal
portfolio payment patterns for 2004, an increase in interest
rates of 200&nbsp;basis points would decrease our net interest
income by approximately $22.2&nbsp;million and an increase in
interest rates of 100&nbsp;basis points would decrease our net
interest income by approximately $14.5&nbsp;million, while a
corresponding decrease in these interest rates of 100&nbsp;basis
points would increase our net interest income by approximately
$22.4&nbsp;million. Changes in interest rates, the composition
of our loan portfolio and derivative instruments will impact the
effect of interest rates on our earnings, and we cannot predict
any such impact with any level of certainty. See
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Result of Operations&#151;Interest Rate Risk.&#148;
</FONT>

<P align="center"><FONT size="2">15
</FONT>

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<P align="left">
<B><FONT size="2">Our derivative instruments may not be
successful in managing our interest rate risk and failure of
counterparties to perform under certain derivative instruments
could harm our business.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">When we utilize derivative instruments, we
utilize them to manage our interest rate sensitivity. Although
we do not use derivative instruments for speculative purposes,
our derivative instruments do not meet the criteria set forth in
Statement of Financial Accounting Standards, or SFAS,
No.&nbsp;133, Accounting for Derivatives Instruments and Hedging
Activities, which allow offset of the changes in the fair value
of the derivative instrument against the effects of the changes
in the hedged item in the statement of income. Therefore, we
only mark-to-market the derivative instruments with changes
reflected in the income statement. The derivative instruments we
use are typically in the form of interest rate swaps and
interest rate caps, which have a duration of between twelve and
twenty four months. Our interest rate hedging strategy is
designed to address fluctuations in the short term, rather than
the long term. Developing an effective strategy for dealing with
movements in interest rates is complex, and no strategy can
completely insulate us from risks associated with such
fluctuations. In addition, a counterparty to a derivative
instrument could default on its obligation, thereby exposing us
to credit risk. Further, we may have to repay certain costs,
such as transaction fees or brokerage costs, if a derivative
instrument is terminated by us. As a result, we cannot assure
you that our economic hedging activities will not have an
adverse impact on our results of operations or financial
condition.
</FONT>

<P align="left">
<B><FONT size="2">If we fail to renew our warehouse facility and
revolving line of credit, our liquidity and results of
operations could be adversely affected.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our primary funding needs are those required to
finance our loan portfolio and satisfy our cash requirements for
acquisitions, operating expenses and technological development.
We rely upon a conduit warehouse facility to support our funding
needs on a short-term basis. The term of the facility is one
year, and it is renewable at the option of the lender and may be
terminated at any time for cause. Currently, the aggregate
short-term availability under our warehouse facility is
$1.0&nbsp;billion, which will be reduced to $500&nbsp;million in
May 2004. There can be no assurance that we will be able to
maintain such conduit facility, increase the availability under
such facility or find alternative funding, if necessary. Our
revolving line of credit may be terminated at any time upon the
occurrence of an event of default. Unavailability of warehouse
or revolving financing sources may subject us to the risk that
we may be unable to meet our financial commitments to borrowers
and creditors when due, unless we find alternative funding
mechanisms. If the availability under our warehouse facility
were to decrease or terminate, our ability to retain loans could
be adversely affected, which could adversely affect our results
of operation on a short- and/ or long-term basis.
</FONT>

<P align="left">
<B><FONT size="2">Characteristics unique to asset-backed
securitizations pose risks to our continued liquidity and our
results of operations.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have begun to rely upon, and expect to rely
increasingly upon, asset-backed securitizations as our most
significant source of long-term funding for our loan portfolio.
Approximately $1.9&nbsp;billion and $500&nbsp;million of our
asset-backed securitizations were issued for the years ended
December&nbsp;31, 2003 and 2002, respectively. Our access to the
asset-backed securitization market is subject to conditions in
the asset-backed securitization market, over which we have no
control. If our access to the asset-backed securitization market
were to decrease, we would have to find other methods to finance
our loan originations on a long-term basis or be required to
sell a larger portion of our originated loan applications either
of which option, if available, may be less favorable than the
asset-backed securitization market has been historically. In
such event, our liquidity and results of operations could be
adversely affected on a short and/or long term basis.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As part of our securitization transactions in
2003 and 2002, we borrowed funds in excess of the principal
balance of the loans included in the applicable securitization
transactions. A portion of these additional funds was used to
repay other indebtedness and to fund our operations. We are also
entitled to receive excess spread from securitizations in the
future, generally after the principal balance of the loans and
restricted cash held in the securitizations equals the
outstanding indebtedness. However, our rights to
</FONT>

<P align="center"><FONT size="2">16
</FONT>
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<DIV align="left">
<FONT size="2">cash flow from securitized loans are subordinate
to noteholder interests and these loans may fail to generate any
cash flow beyond what is due to pay bondholders. Moreover, the
cash generated from these loans may be restricted by these
securitization vehicles for certain periods. Accordingly,
adverse developments in the performance of our current and
future securitizations could adversely affect our liquidity.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The interest rates on certain of our asset-backed
securities are set and periodically reset via a &#147;dutch
auction&#148; utilizing remarketing agents for varying intervals
ranging from seven to 91&nbsp;days. If there are insufficient
potential bid orders in the auctions to purchase all of the
notes offered for sale or being repriced, we could be subject to
interest costs substantially above the anticipated and
historical rates paid on these types of securities. A failed
auction or remarketing could also reduce the investor base of
our future securitizations and other financing and debt
instruments.
</FONT>

<P align="left">
<B><FONT size="2">Future losses due to defaults on loans held by
us present credit risk which could adversely affect our
earnings.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of December&nbsp;31, 2003, 100% our loan
portfolio was comprised of FFELP loans. These loans benefit from
a federal guarantee of 98% of their principal balance and
accrued interest. We bear full risk of losses experienced with
respect to the 2% non-guaranteed portion of the loans.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The performance of the FFELP loans in our
portfolio is affected by the economy and other factors outside
of our control, and a prolonged economic downturn may have an
adverse effect on the credit performance of these loans. While
we provide allowances estimated to cover losses that may be
experienced in our loans that are federally guaranteed under the
FFEL Program, there can be no assurance that such allowances
will be sufficient to cover actual losses in the future.
Increases in losses in excess of our allowance could adversely
affect our results of operations in the future.
</FONT>

<P align="left">
<B><FONT size="2">Access to alternative means of financing the
costs of education may reduce demand for government guaranteed
and private education loans.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The demand for government guaranteed and private
education loans could weaken if borrowers use other sources of
funds to finance their post-secondary education. These sources
include, among others:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">home equity loans or lines of credit, under which
    families borrow money based on the value of their real estate;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Federal Direct Loan Program loans, if the DOE or
    schools increase the education loans available through the FDL
    Program;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">pre-paid tuition plans, which allow students to
    pay tuition at today&#146;s rates to cover tuition costs in the
    future;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">529 plans, which are state-sponsored investment
    plans that allow a family to save funds for education
    expenses;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">education IRAs, now known as Coverdell Education
    Savings Accounts, under which a holder can make annual
    contributions for education savings.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If demand for government guaranteed or private
education loans weakens, we would experience reduced demand for
our products and services.
</FONT>

<P align="left">
<B><FONT size="2">Competition from other originators, lenders
and servicers and competition created by the Federal Direct Loan
Program may materially adversely impact our business.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We face significant competition from SLM
Corporation, the parent company of Sallie Mae. SLM Corporation
originated $15.2&nbsp;billion of education loans through its
preferred channel in 2003, services nearly half of all
outstanding FFELP loans and is the largest holder of education
loans, with a managed portfolio of approximately
$89&nbsp;billion as of December&nbsp;31, 2003. We also face
intense competition from
</FONT>

<P align="center"><FONT size="2">17
</FONT>

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<DIV align="left">
<FONT size="2">other education-related entities, such as
Education Lending Group and College Loan&nbsp;Corporation. As we
seek to further expand our business, we will face numerous other
competitors, many of which will be well established in the
markets we seek to penetrate. Some of our current and potential
competitors are much larger than we are, have better name
recognition than we do and have greater financial and other
resources than we do. Several of these competitors have large
market capitalizations or cash reserves and are better
positioned to acquire companies or portfolios in order to gain
market share than we are. Consequently, such competitors may
have more flexibility to address the risks inherent in the
education finance business. Finally, some of our competitors are
tax-exempt organizations that do not pay federal or state income
taxes. As a result of their tax-exempt status, these
organizations may have access to a lower cost of funding their
education loans than we do. These factors could give our
competitors significant advantages.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 1992, Congress created the William D. Ford
Federal Direct Loan Program, which we refer to as the FDL
Program or the FDLP. Under the FDL Program, the DOE makes loans
directly to student borrowers through the educational
institutions they attend. FDL loans are available to students
only if the institution they attend participates in the FDL
Program. The volume of student loans made under the FFEL Program
and available for us to originate may be reduced to the extent
loans are made to students under the FDL Program.
</FONT>

<P align="left">
<B><FONT size="2">Failures in our information technology system
could materially disrupt our business.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our servicing and operating processes are highly
dependent upon our information technology system infrastructure,
and we face the risk of business disruption if failures in our
information systems occur, which could have a material impact
upon our business and operations. We depend heavily on our own
computer-based data processing systems in servicing both our own
loans and those of third-party servicing customers. Problems or
errors may occur in the future in connection with the conversion
of newly originated and acquired loans to our platform. If
servicing errors do occur, they may result in a loss of the
federal guarantee on the FFELP loans that we service or in a
failure to collect amounts due on the student loans that we
service. A major physical disaster or other calamity that causes
significant damage to our information systems could adversely
affect our business. Additionally, loss of our information
systems for a sustained period of time could have a negative
impact on our performance and ultimately on our cash flow in the
event we were unable to process borrower payments.
</FONT>

<P align="left">
<B><FONT size="2">If we fail to comply with governmental
regulations relating to our private loan business, our business
and results of operations could be adversely affected.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are expanding our private loan business and
currently originate and facilitate the origination of private
loans for third parties. The origination of private loans is
subject to federal and state consumer protection laws and
regulations, including state usury and disclosure laws and
related regulations, and the Federal Truth in Lending Act. These
laws and regulations impose substantial requirements upon
lenders and their agents and servicers involved in consumer
finance. Failure to comply with these governmental regulations
could have an adverse effect on our business and results of
operations.
</FONT>

<P align="left">
<B><FONT size="2">If we become subject to the licensing laws of
any jurisdiction or any additional government regulation, our
compliance costs could increase significantly.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition to being subject to certain state and
federal consumer protection laws, which may change, we are
currently licensed as telemarketers in two states. We could also
become subject to other licensing laws due to changes in
existing federal and state regulations. As a result, we could be
required to (1)&nbsp;implement additional or different programs
and information technology systems, (2)&nbsp;meet new licensing
capital and reserve requirements or (3)&nbsp;incur additional
administrative, compliance and third-party service costs.
Furthermore, we could become subject to licensing laws in other
states if we engage in licensable activities in the future. This
includes the risk that even if we were not physically present, a
state could assert jurisdiction over our operations for services
we provide through the mail, by phone, through the Internet or
by other remote means. Our failure to comply with such
requirements could subject us to civil or criminal penalties and
could curtail our ability to continue to conduct business in
that jurisdiction.
</FONT>

<P align="center"><FONT size="2">18
</FONT>

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<DIV align="left">
<FONT size="2">Moreover, compliance with such requirements could
involve additional costs. Either of these consequences could
have a material adverse effect on our business.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Additionally, other organizations with which we
work are subject to licensing and extensive governmental
regulations, including truth-in-lending laws and other consumer
protection regulations. From time to time we have, and we may in
the future, become responsible for compliance with these
regulations under contractual arrangements with our clients. If
we fail to comply with these regulations, we could be subject to
civil or criminal penalties.
</FONT>

<P align="left">
<B><FONT size="2">Failure to comply with restrictions on
inducements under the Higher Education Act could harm our
business.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Higher Education Act generally prohibits a
lender from providing inducements to educational institutions or
individuals in order to secure applicants for FFELP loans.
However, the DOE permits de minimis gifts in connection with
advertising FFELP loans. If the DOE were to change its position
on these matters, this could potentially result in the DOE
imposing sanctions upon us if we fail to adapt our policies to
comply with the new guidelines, and such failure could impact
our business.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have also entered into various agreements to
use marketing lists of prospective borrowers from sources such
as associations. On occasion, we pay to acquire these lists and
for completed loan applications resulting from these lists. We
believe that such arrangements are permissible and do not
violate restrictions on inducements, as they fit within a
regulatory exception recognized by the DOE for generalized
marketing and advertising activities. The DOE has provided
subregulatory guidance that such arrangements do not raise any
improper inducement issues, since such arrangements fall within
the generalized marketing exception. If the DOE were to change
its position, this could hurt our reputation and potentially
result in the DOE imposing sanctions on us. These sanctions
could negatively impact our business.
</FONT>

<P align="center">
<B><FONT size="2">Risks Related to This Offering</FONT></B>

<P align="left">
<B><FONT size="2">Future sales of our common stock may depress
our stock price.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The market price of our common stock could
decline as a result of sales of substantial amounts of our
common stock in the public market after this offering or the
perception that these sales could occur. In addition, these
factors could make it more difficult for us to raise funds
through future equity offerings. There will
be &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock outstanding immediately after this offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">All of the shares of our common stock sold in
this offering will be freely transferable by persons other than
our affiliates without restriction or further registration under
the Securities Act of 1933. Substantially all of the remaining
shares of our outstanding common stock will be eligible for
immediate sale in the public market pursuant to Rule&nbsp;144
under the Securities Act of 1933 (other than shares of common
stock held by our affiliates, who after completion of this
offering will own approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of our outstanding common stock, which will be subject to volume
limitations) subject to 180-day lock-up agreements with the
underwriters described below. See &#147;Shares Eligible for
Future Sale.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We and our executive officers and directors and
our existing stockholders have entered into 180-day lock-up
agreements with the underwriters. The lock-up agreements
prohibit each of us from selling or otherwise disposing of
shares of common stock except in limited circumstances. The
lock-up agreements are only contractual agreements, and
J.P.&nbsp;Morgan Securities Inc. and Merrill Lynch, Pierce,
Fenner&nbsp;&#38; Smith Incorporated, at their discretion, can
waive the restrictions of any lock-up agreement at an earlier
time without prior notice or announcement and allow any of us to
sell shares of our common stock. If the restrictions in the
lock-up agreement are waived, shares of our common stock will be
available earlier for sale into the public market, subject to
applicable securities laws, which could reduce the market price
for shares of our common stock. While we will require executive
officers to maintain a certain level of ownership of our common
stock, we cannot assure you that our directors or stockholders
will maintain their ownership position of our common stock after
the end of the lock-up period. Under the terms of the
</FONT>

<P align="center"><FONT size="2">19
</FONT>

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<DIV align="left">
<FONT size="2">stockholders agreement, Lightyear, which will
beneficially own
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock, or &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%, after
this offering, will have the ability to require us to register
the resale of its shares. In addition, TCW, which will
beneficially own
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock, or &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%, after
this offering, will also have the ability to require us to
register the resale of its shares. Lightyear and certain other
investors will have the ability to exercise certain
&#147;piggyback&#148; registration rights in connection with
other registered offerings. See &#147;Shares Eligible for Future
Sale&#148; and &#147;Certain Relationships and Related
Transactions.&#148;
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, pursuant to our stock incentive
plan, we have granted options to purchase approximately
315,000&nbsp;shares of common stock. Of these, options to
purchase 56,700 shares are currently vested and exercisable. We
have reserved 385,000&nbsp;shares for future issuance under our
stock incentive plan and prior to the offering, we intend to
increase the number of shares of common stock available for
future issuance. In addition, we will have an additional
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
shares of common stock reserved for issuance pursuant to our
stock incentive plan. Following the consummation of this
offering, we intend to file one or more registration statements
on Form&nbsp;S-8 under the Securities Act to register the sale
of shares issued or issuable upon the exercise of stock options.
In the future, we may issue our common stock in connection with
acquisitions. The amount of such common stock issued could
constitute a material portion of our then outstanding common
stock. The issuance of additional shares of common stock could
result in dilution to our stockholders and a decline in the
market price of our common stock.
</FONT>

<P align="left">
<B><FONT size="2">Lightyear controls us and may have conflicts
of interest with us or you in the future.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to this offering, Lightyear beneficially
owned approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of our
outstanding shares of common stock, and, after giving effect to
this offering, Lightyear will beneficially
own &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of our common stock,
or &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% if the underwriters exercise
their over-allotment option in full. As a result, Lightyear will
have the ability to control the outcome of the election of our
directors, which may give Lightyear substantial influence over
our decisions to enter into any corporate transaction. Lightyear
also will have the ability to prevent any transaction that
requires the approval of stockholders, regardless of whether or
not other stockholders believe that any such transactions are in
their own best interests. For example, Lightyear could cause us
to make acquisitions that increase the amount of our
indebtedness. Additionally, Lightyear is in the business of
making investments in companies and may from time to time
acquire and hold interests in businesses that compete directly
or indirectly with our business. Lightyear may also pursue
acquisition opportunities that may be complementary to our
business, and, as a result, those acquisition opportunities may
not be available to us. So long as Lightyear continues to own a
significant amount of the outstanding shares of our common
stock, it will continue to be able to strongly influence or
effectively control our decisions.
</FONT>

<P align="left">
<B><FONT size="2">There is no existing market for our common
stock, and we do not know if one will develop to provide you
with adequate liquidity.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">There has not been a public market for our common
stock. We cannot predict the extent to which investor interest
in our company will lead to the development of a trading market
on
the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;or
otherwise or how liquid that market might become. The initial
public offering price for the shares will be determined by
negotiations between us and the representatives of the
underwriters and may not be indicative of prices that will
prevail in the open market following this offering.
</FONT>

<P align="left">
<B><FONT size="2">Provisions in our certificate of incorporation
and bylaws and Delaware corporate law may discourage a takeover
attempt.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Provisions contained in our certificate of
incorporation and bylaws and the corporate law of Delaware, the
state in which we are incorporated, could make it more difficult
for a third party to acquire us, even if doing so might be
beneficial to our stockholders. Provisions of our certificate of
incorporation and bylaws impose various procedural and other
requirements, which could make it more difficult for
stockholders to effect certain corporate actions.
</FONT>

<P align="center"><FONT size="2">20
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">These anti-takeover provisions, which may delay
or deter a change of control of the company, include the
following:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the board of directors is authorized to determine
    the rights, preferences, privileges and restrictions of unissued
    series of preferred stock, without any vote or action by our
    stockholders;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the board of directors is classified into three
    classes;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">stockholders may remove a director only for cause
    and only upon the affirmative vote of at least 80% of the then
    outstanding shares entitled to vote in the election of
    directors, voting together as a single class;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">vacancies on the board of directors may only be
    filled by the affirmative vote of a majority of the remaining
    directors;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">stockholder action by written consent is
    prohibited and special meetings of stockholders may only be
    called by our chief executive officer or board of
    directors;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">advance notice is required for stockholder
    proposals and director nominations.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">These provisions could limit the price that
certain investors might be willing to pay in the future for
shares of our common stock. See &#147;Description of Capital
Stock.&#148;
</FONT>

<P align="left">
<B><FONT size="2">The market price of our common stock may be
volatile, which could cause the value of your investment to
decline.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">After this offering, our stock price may vary
significantly from the initial offering price in response to the
risk factors described in this section and to the following
factors, some of which are beyond our control:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">failure of our operating results to meet the
    expectations of investors or security analysts;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">changes in investment recommendations by security
    analysts relating to our common stock;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">changes in market valuations of our competitors;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">announcements by us or our competitors of
    significant contracts, acquisitions, strategic partnerships,
    joint ventures or capital commitments;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">fluctuations in stock prices generally.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">The book value of shares of common stock
purchased in the offering will be immediately diluted.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our net tangible book value as of
December&nbsp;31, 2003 was negative $135.5&nbsp;million, or
negative $9.20 per share of common stock. Accordingly, investors
who purchase common stock in the offering will suffer immediate
dilution of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share in the pro forma net tangible book value per share. We
also have outstanding stock options and warrants representing
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of the outstanding
common stock with exercise prices that are below the estimated
initial public offering price of the common stock. To the extent
that these options or warrants are exercised, there will also be
dilution.
</FONT>

<P align="center"><FONT size="2">21
</FONT>

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<DIV align="left">
<A name='103'></A>
</DIV>

<!-- link1 "CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS" -->

<P align="center">
<B><FONT size="2">CAUTIONARY NOTICE REGARDING FORWARD-LOOKING
STATEMENTS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">This prospectus includes &#147;forward-looking
statements.&#148; Forward-looking statements include statements
concerning our plans, objectives, goals, strategies, future
events, future revenue or performance, future loan originations,
capital expenditures, financing needs, plans or intentions
relating to acquisitions, business trends and other information
that is not historical information and, in particular, appear
under the headings &#147;Summary,&#148; &#147;Management&#146;s
Discussion and Analysis of Financial Condition and Results of
Operations&#148; and &#147;Business.&#148; When used in this
prospectus, the words &#147;estimates,&#148;
&#147;expects,&#148; &#147;anticipates,&#148;
&#147;projects,&#148; &#147;plans,&#148; &#147;intends,&#148;
&#147;believes,&#148; &#147;forecasts,&#148; or future or
conditional verbs, such as &#147;will,&#148; &#147;should,&#148;
&#147;could&#148; or &#147;may,&#148; and variations of such
words or similar expressions are intended to identify
forward-looking statements. All forward-looking statements,
including, without limitation, management&#146;s examination of
historical operating trends and data are based upon our current
expectations and various assumptions. Our expectations, beliefs
and projections are expressed in good faith, and we believe
there is a reasonable basis for them. However, there can be no
assurance that management&#146;s expectations, beliefs and
projections will be achieved.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">There are a number of risks and uncertainties
that could cause our actual results to differ materially from
the forward-looking statements contained in this prospectus.
Important factors that could cause our actual results to differ
materially from the forward-looking statements we make in this
prospectus are set forth in this prospectus, including under the
heading &#147;Risk Factors.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">All forward-looking statements attributable to us
or persons acting on our behalf apply only as of the date of
this prospectus and are expressly qualified in their entirety by
the cautionary statements included in this prospectus. We
undertake no obligation to update or revise forward-looking
statements which may be made to reflect events or circumstances
that arise after the date made or to reflect the occurrence of
unanticipated events unless we have an obligation to do so under
the federal securities laws.
</FONT>

<P align="center"><FONT size="2">22
</FONT>
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<DIV align="left">
<FONT size="2"> <A name='104'></A>
</FONT>
</DIV>

<!-- link1 "USE OF PROCEEDS" -->

<P align="center">
<B><FONT size="2">USE OF PROCEEDS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We estimate that the net proceeds from the sale
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock being offered hereby at an assumed initial
public offering price per share of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
the midpoint of the range set forth on the cover page of this
prospectus, after deducting estimated underwriting discounts and
offering expenses, will be approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million.
We will use
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
the net proceeds from this offering to pay the liquidation
preference of all shares of the preferred stock issued by our
subsidiary,
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of
the net proceeds to repay all outstanding amounts under our
revolving line of credit and the balance of the net proceeds to
make potential acquisitions and for general corporate purposes.
Lightyear, other investors and certain members of management
will receive the net proceeds of the offering used to pay the
liquidation preference of the preferred stock.
</FONT>

<DIV align="left">
<A name='105'></A>
</DIV>

<!-- link1 "DIVIDEND POLICY" -->

<P align="center">
<B><FONT size="2">DIVIDEND POLICY</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We do not currently intend to pay any cash
dividends on our common stock and, instead, intend to retain
earnings, if any, for future operation and expansion. We are not
permitted to pay dividends on our common stock under the terms
of our revolving line of credit. Any decision to declare and pay
dividends in the future will be made at the discretion of our
board of directors and will depend on, among other things, our
results of operations, cash requirements, financial condition,
contractual restrictions and other factors that our board of
directors may deem relevant.
</FONT>

<P align="center"><FONT size="2">23
</FONT>

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<DIV align="left">
<A name='106'></A>
</DIV>

<!-- link1 "CAPITALIZATION" -->

<P align="center">
<B><FONT size="2">CAPITALIZATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth our capitalization
as of December&nbsp;31, 2003 on an actual basis and on an as
adjusted basis to reflect:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-for-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;split
    of our common stock prior to the completion of this offering;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the sale of
    approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of our common stock in this offering at an assumed public
    offering price per share of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    the midpoint of the range set forth on the cover page of this
    prospectus, after deducting estimated underwriting discounts and
    offering expenses;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the application of the estimated net proceeds
    therefrom as described under &#147;Use of Proceeds.&#148;
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">You should read the information in this table in
conjunction with &#147;Management&#146;s Discussion and Analysis
of Financial Condition and Results of Operations&#148; and our
consolidated financial statements and the consolidated financial
statements of our predecessor company included elsewhere in this
prospectus.
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="67%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">As of</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31, 2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Actual</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As adjusted</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(dollars in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Debt and Capital Lease Obligations:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Asset-backed notes and lines of credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,000,866</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other debt obligations, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,531</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Capital lease obligations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,896</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total debt and capital lease obligations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,043,293</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock of consolidated subsidiary
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">89,136</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Stockholders&#146; equity:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(107</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(509</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Additional paid-in capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,562</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Retained earnings
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,231</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total stockholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,191</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total capitalization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,157,620</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The table above excludes the following shares:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">315,000&nbsp;shares of common stock subject to
    stock options outstanding as of December&nbsp;31, 2003, options
    for 56,700 of which were exercisable as of December&nbsp;31,
    2003, at a weighted average exercise price equal to $1.30;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">warrants to purchase an aggregate of
    1,000,000&nbsp;shares of common stock at an exercise price of
    $0.01&nbsp;per share;&nbsp;and
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock available for future grant or issuance under our
    stock incentive plans.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">24
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<A name='107'></A>
</DIV>

<!-- link1 "DILUTION" -->

<P align="center">
<B><FONT size="2">DILUTION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If you invest in our common stock, your interest
will be diluted to the extent of the difference between the
initial public offering price per share of our common stock and
the adjusted net tangible book value per share of our common
stock immediately after this offering. Our net tangible book
value as of December&nbsp;31, 2003 was negative
$135.5&nbsp;million, or negative $9.20&nbsp;per share of common
stock. Net tangible book value per share is determined by
dividing our tangible net worth (total tangible assets less
total liabilities and subsidiary preferred stock) by the
aggregate number of shares of common stock outstanding.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Dilution is the amount by which the offering
price paid by the purchasers of the common stock to be sold in
this offering will exceed the net tangible book value per share
of common stock after the offering. After giving effect to the
sale of shares of common stock in this offering at an assumed
initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, the midpoint of the range set forth on the cover page of
this prospectus, and after deducting estimated underwriting
discounts and offering expenses and the application of the net
proceeds therefrom as described under &#147;Use of
Proceeds,&#148; our pro forma net tangible book value as of
December&nbsp;31, 2003 would have been
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
or
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share of common stock. This represents an immediate increase in
net tangible book value of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to existing stockholders and an immediate dilution in net
tangible book value of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to new investors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table illustrates this per share
dilution:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="74%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Per share</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Assumed initial public offering price per share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net tangible book value per share before this
    offering
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9.20</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Increase per share attributable to this offering
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pro forma net tangible book value per share after
    this offering
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Dilution per share to new investors
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table summarizes, on a pro forma
basis as of December&nbsp;31, 2003, the total number of shares
of common stock purchased from us, the total consideration,
including non-cash consideration, paid to us and the average
price per share paid by existing stockholders and by new
investors purchasing shares in this offering. The calculation
below is based on an assumed initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, which is the midpoint of the range listed on the cover
page of this prospectus, before deducting estimated underwriting
discounts and commissions and estimated offering expenses that
we must pay:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="39%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Shares Purchased</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Total Consideration</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Average Price</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percent</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amount</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percent</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Per Share</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Existing stockholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,734,311</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">New investors
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100.00</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100.00</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The tables and calculations above assume no
exercise of outstanding options or warrants. To the extent that
these options or warrants are exercised, there will also be
dilution to new investors. See &#147;Management&#151; Executive
Compensation&#148; and &#147;Description of Capital Stock.&#148;
</FONT>

<P align="center"><FONT size="2">25
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<A name='108'></A>
</DIV>

<!-- link1 "SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA" -->

<P align="center">
<B><FONT size="2">SELECTED HISTORICAL CONSOLIDATED FINANCIAL
DATA</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">You should read the summary consolidated
financial data set forth below in conjunction with
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations&#148; and our and our
predecessor&#146;s financial statements and the related notes
included elsewhere in this prospectus. We derived the financial
data as of December&nbsp;31, 2003 and 2002, for the year ended
December&nbsp;31, 2003 and for the period May&nbsp;17 through
December&nbsp;31, 2002 from our financial statements included
elsewhere in this prospectus. We derived the financial data for
the period January&nbsp;1 through May&nbsp;16, 2002 and for the
year ended December&nbsp;31, 2001 from our predecessor&#146;s
financial statements included elsewhere in this prospectus and
we derived the financial data as of December&nbsp;31, 2001, 2000
and 1999, for the years ended December&nbsp;31, 2000 and 1999
from our predecessor&#146;s financial statements not included
elsewhere in this prospectus. The historical results are not
necessarily indicative of the results to be expected for any
future period.
</FONT>

<P align="center"><FONT size="2">26
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="35%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="23"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><B><FONT size="1">(dollars in thousands, except per share data)</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">Predecessor</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">The Company</FONT></B></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period</FONT></B></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period May 17</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">January 1</FONT></B></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">through</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">through</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year ended December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">May&nbsp;16,</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1999</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Income statement data:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Net revenue:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61,846</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,804</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,454</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,623</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">143</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,871</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,309</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,692</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,553</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">163</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net interest income (expense)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,975</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,505</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,762</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(930</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(20</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(32</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Provision for loan losses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,357</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,270</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">752</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net interest income (expense)&nbsp;after
    provision for loan losses<SUP>(1)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,618</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,775</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,010</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(930</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(20</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(32</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fee income<SUP>(1)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">98,558</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84,396</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36,427</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">131,567</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">66,919</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,435</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net revenue<SUP>(1)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">118,176</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">80,621</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38,437</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">130,637</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">66,899</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,403</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Expenses:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Salaries and related benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54,640</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,601</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,819</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,863</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,499</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,167</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other selling, general and administrative
    expenses:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Marketing and mailing costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,006</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,164</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,613</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,365</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,408</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,941</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Communications and data processing
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,515</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,156</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,712</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,375</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,185</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">78</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Management and consulting fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,313</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,800</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,720</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,260</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Professional fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,315</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,608</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">603</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">710</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">359</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">164</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,328</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,244</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">754</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,094</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">459</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other general and administrative
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,326</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,261</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,176</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,698</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,379</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">523</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total other selling, general, and administrative
    expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54,803</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,683</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,658</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,962</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,050</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,955</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Swap interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,439</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Derivative mark-to-market
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,862</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Debt extinguishment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,824</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">119,568</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54,284</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,477</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68,825</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37,549</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,122</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income (loss) before income taxes and accretion
    of dividends on preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,392</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26,337</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,960</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61,812</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29,350</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">281</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income tax provision (benefit)<SUP>(2)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(196</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,726</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income (loss) before accretion of dividends
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,196</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,611</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,960</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61,812</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29,350</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">281</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accretion of dividends on preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,255</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,929</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,451</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,682</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,960</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61,812</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29,350</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">281</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Earnings (loss) per common share, basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.69</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.53</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Earnings (loss) per common share, diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.69</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.26</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average common shares outstanding, basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,783,059</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,300,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average common shares outstanding,
    diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,783,059</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,068,346</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">27
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="44%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="23"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><B><FONT size="1">(dollars in thousands)</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">The Company</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Predecessor</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As adjusted<SUP>(3)</SUP></FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1999</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Balance sheet data (at period end):</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,436</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32,535</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,182</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,227</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">297</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Restricted cash
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">105,355</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41,608</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">371,163</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Student loans, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,856,428</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">973,055</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">150,935</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">160,705</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">152,552</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,004</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,192,282</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,221,502</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">542,436</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,259</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,704</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Asset-backed notes and lines of credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,000,866</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,027,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">527,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other debt obligations, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,531</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">108,604</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,514</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,515</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">210</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,077,955</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,147,080</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">533,427</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,148</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,409</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock of consolidated subsidiary
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">89,136</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">50,262</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Stockholders&#146;/Members&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,191</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,160</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,009</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,111</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">295</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="15%" align="left" noshade>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(1)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Prior to 2002, our predecessor sold substantially
    all of our originated applications to third parties and received
    fees for the sale of these loan applications at the time of
    sale. Since 2002, we have retained an increasing portion of the
    FFELP loans we originate. We and our predecessor retained
    approximately 50%, 21% and 4% of the FFELP loans originated in
    2003, 2002 and 2001, respectively.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(2)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Our predecessor operated as a limited liability
    company that was treated as a partnership for income tax
    purposes. As a result, our predecessor had no provision for
    income taxes.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(3)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">As adjusted amounts give effect to our issuance
    and sale
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of common stock in this offering at an assumed initial public
    offering price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share, the midpoint of the range set forth on the cover page,
    and the application of the estimated net proceeds of this
    offering, after deducting the underwriting discount and
    estimated offering expenses payable by us, as set forth under
    &#147;Use of Proceeds&#148; and &#147;Capitalization.&#148;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">28
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<A name='109'></A>
</DIV>

<!-- link1 "MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" -->

<P align="center">
<B><FONT size="2">MANAGEMENT&#146;S DISCUSSION AND ANALYSIS
OF</FONT></B>

<DIV align="center">
<B><FONT size="2">FINANCIAL CONDITION AND RESULTS OF
OPERATIONS</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">The following discussion and analysis of our
results of operations and financial condition for the fiscal
years ended December&nbsp;31, 2003, 2002 and 2001 should be read
in conjunction with Selected Consolidated Financial Data and our
and our predecessor&#146;s audited consolidated financial
statements and the notes to those statements that are included
elsewhere in this prospectus. Our discussion contains
forward-looking statements based upon current expectations that
involve risks and uncertainties, such as our plans, objectives,
expectations and intentions. Actual results and the timing of
events could differ materially from those anticipated in these
forward-looking statements as a result of a number of factors,
including those set forth under the Risk Factors, Cautionary
Notice Regarding Forward-Looking Statements and Business
sections and elsewhere in this prospectus.</FONT></I>

<P align="left">
<B><FONT size="2">Overview</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are a vertically integrated education finance
company that markets, originates, finances and services
education loans. We originated or facilitated the origination of
$4.2&nbsp;billion in education loans in 2003 and we believe we
are among the top five originators of federal and private
education loans in the United States. Of our total loan
originations in 2003, $4.0&nbsp;billion were federally
guaranteed consolidation student loans made through the FFEL
Program. Beginning in May 2003, we increased our focus on
private education loans and, in 2003, we originated or
facilitated the origination of $199.6&nbsp;million of these
loans. As of December&nbsp;31, 2003, we also serviced
approximately $8.9&nbsp;billion in student loans made to over
360,000 customers.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We commenced operations in 1998 through a
predecessor company. On May&nbsp;17, 2002, Lightyear acquired
us. As a result of the acquisition, all of our assets and
liabilities were recorded at their estimated fair value. The
excess of the purchase price over the fair value of net assets
acquired of approximately $159.5&nbsp;million was recorded as an
increase of $7.0&nbsp;million to loan receivables,
$0.9&nbsp;million to debt discount and $151.6&nbsp;million to
goodwill. For purposes of analyzing the results of operations
for the year ended December&nbsp;31, 2002, we have added the
applicable amount for the periods prior to, and after, the date
of the acquisition by Lightyear.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 2002, we adopted a strategy of retaining a
larger portion of the federally guaranteed loans we originate,
which has resulted in our holding a portfolio of loans that has
grown from $973.1&nbsp;million at December&nbsp;31, 2002 to
$2.9&nbsp;billion at December&nbsp;31, 2003. Prior to 2002, we
sold substantially all of our completed loan applications to
third parties and received fees for those applications at the
time of sale.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe that retaining FFELP loans in our
portfolio benefits the Company because it generally provides
greater long-term value to the Company than selling these loans,
although our net income in current periods has been lower than
it would have been had we sold a larger percentage of the FFELP
loans we originate. We evaluate our originations on a
loan-by-loan basis and seek to retain loans that have
characteristics, such as balances, rates and terms that provide
us the greatest value. We have sold and will continue to sell a
portion of the FFELP loan applications we originate in order to
capitalize upon market opportunities, provide sources of funding
for loan processing and origination expenses and generate
additional operating cash flow. We will periodically review our
allocation between FFELP loan originations retained and loan
applications sold, and, accordingly, our allocation may change
from period to period. We do not currently fund or retain any
private loans.
</FONT>

<P align="center"><FONT size="2">29
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth for each of 2003,
2002 and 2001 our loan applications sold and retained and the
loans in our portfolio.
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="33%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="23"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><B><FONT size="1">Loan Originations and Portfolio</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Dollars</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">%</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Dollars</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">%</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Dollars</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">%</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="23"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><B><FONT size="1">(dollars in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">FFELP consolidation,<BR>
    PLUS, Stafford loans:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Sold<SUP>(1)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,988.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">50.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,042.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">78.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,411.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">95.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Retained
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,977.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">824.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">150.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total FFELP loans originated
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,966.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,866.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,561.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Private loans:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Sold<SUP>(2)(3)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">209.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">111.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">43.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Retained
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total private loans originated
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">209.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">111.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">43.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total loans originated
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,176.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,978.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,604.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Portfolio of loans (all FFELP):
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Monthly average for period<SUP>(4)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,621.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">485.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Period end<SUP>(4)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,834.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">962.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">150.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="15%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(1)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects the principal balance of loans with
    respect to which we sold the originated applications.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(2)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects the principal balance of loans with
    respect to which we facilitated the origination by third party
    lenders.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(3)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes Health Education Assistance
    consolidation loans which equaled $9.7&nbsp;million,
    $20.6&nbsp;million and $8.7&nbsp;million in 2003, 2002 and 2001,
    respectively.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(4)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Substantially all the loans in our portfolio are
    FFELP consolidation loans. Currently, our portfolio does not
    contain any private loans. Amounts reflect principal balance of
    loans without adjustments for deferred loan costs which, as of
    December&nbsp;31, 2003, 2002 and 2001, totaled
    $26.4&nbsp;million, $12.5&nbsp;million and $1.0&nbsp;million,
    respectively. Amounts also do not reflect the allowance for loan
    losses of $4.1&nbsp;million, $1.9&nbsp;million and $0 as of
    December&nbsp;31, 2003, 2002 and 2001, respectively.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In April 2003 we acquired SunTech and began
generating revenue from servicing activities. Prior to our
acquisition of SunTech, it serviced many of the loans we
originated, and we paid SunTech a fee for loans in our portfolio
serviced by them. We currently service substantially all the
loans in our portfolio, as well as loans held by third-party
lenders. We seek to obtain servicing for a majority of the loan
originations we sell, which accounts for a significant portion
of our third-party servicing volume.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We finance the loans in our portfolio through
asset-backed securitizations and a secured warehouse facility
and we record the obligations related to these facilities as
debt on our consolidated balance sheet. To date, we have
completed four securitizations that have provided
$2.9&nbsp;billion of funding, including two transactions for a
total of $1.9&nbsp;billion in 2003. We also have several forward
purchase agreements, under which financial institutions have
agreed to purchase, and, in certain circumstances, require that
we sell to them, a portion of the loans we market and originate.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We currently operate in two reportable segments
as follows:
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Loan
origination.</FONT></I></B><FONT size="2"> Includes marketing,
origination and financing of loans.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Loan
servicing.</FONT></I></B><FONT size="2"> Includes servicing for
our portfolio of loans and third-party loans.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to our acquisition of SunTech in April,
2003, we operated in a single segment, loan origination, and all
loans in our portfolio were serviced by third parties, including
SunTech. For additional information relating to our segments,
see note&nbsp;20 of the notes to our consolidated financial
statements.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We generate revenue primarily from three sources,
which are described in greater detail below. In our loan
origination segment, we generate revenue from fees we receive
from the sale of originated loan applications and for marketing
loans for third parties, which we refer to collectively as fees
on loan sales.
</FONT>

<P align="center"><FONT size="2">30
</FONT>

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<DIV align="left">
<FONT size="2">We also generate net interest income on our loan
portfolio and cash balances in our loan origination segment. In
our loan servicing segment, we primarily generate revenue from
fees we receive for disbursement on loan applications and for
servicing loans.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our revenue in any period is directly affected by
the amount of loans we originate and service, as well as the
percentage of those originated loan applications that we decide
to retain. We believe that a significant driver of the growth in
our consolidation loan originations during the past three years
has been the increased awareness of consolidation loans on the
part of many borrowers who have been out of school, as well as
of more recent graduates. This recent increase in awareness is a
result of extensive marketing efforts by us and other lenders in
this market, including Sallie Mae, coupled with the effects of
the recent low interest rate environment, that has heightened
interest in these products among both borrowers and lenders. As
an increasing percentage of the debt held by borrowers who have
been out of school for several years has been consolidated, we
expect that our consolidation loan originations will decline for
at least the next couple of years. However, we believe that the
consolidation of loans by recent graduates with increased debt
loads may mitigate the decline in consolidation loan
originations. In addition, we expect that as the demand grows
for financing to bridge the gap between the cost of higher
education and government-backed financial aid, the amount of
private loans we market or originate in the future will increase
through expanded use of our DTC marketing platform and our
initiative to market through school financial aid offices. The
volume of consolidation and other loans we originate, our
results of operations and our financial condition may also be
affected by changes in applicable laws and regulations relating
to the FFEL Program as well as other factors outside of our
control. See &#147;Risk Factors.&#148;
</FONT>

<P align="left">
<B><FONT size="2">Components of Net Revenue</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have two primary categories of revenue: net
interest income and fee income, which since April 2003 has
included servicing fee income.
</FONT>

<P align="left">
<B><FONT size="2">Net Interest Income</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We define net interest income to be the excess of
interest income we earn on our loan portfolio and cash balances
over our interest expense on the debt we incur to finance our
portfolio of loans and for general operating needs. We define
net portfolio margin as being equal to the weighted average
yield on our loans and restricted cash less the weighted average
interest expense on the debt we incur to finance our loans. The
current and future interest rate environment can and will affect
our net interest income and net spread. The effects of changing
interest rate environments are further outlined in
&#147;&#151;&nbsp;Interest Rate Risk&#148; below.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Interest
income.</FONT></I></B><FONT size="2"> Substantially all the
loans in our portfolio are FFELP consolidation loans which bear
interest at a fixed rate. The average yield on our portfolio of
student loans for the year ended December&nbsp;31, 2003 was
4.77%. In addition, in certain interest rate environments, we
receive a direct payment from the federal government based upon
a Special Allowance Payment, or SAP, formula with respect to
FFELP loans held in our portfolio. SAPs, with respect to our
FFELP consolidation loans, are generally paid whenever the
91-day financial commercial paper rate in a calendar quarter
plus a spread of 2.64% exceeds the rate of interest which the
borrower is obligated to pay. With respect to the Stafford and
PLUS loans in our portfolio, all of which were first disbursed
after January&nbsp;1, 2000, SAPs are generally paid whenever the
91-day financial commercial paper rate in a calendar quarter
plus a spread of 2.34% or 2.64%, respectively exceeds the
borrower rate. Due to the recent interest rate environment, we
have not received SAPs on any of the loans in our portfolio.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our interest income is presented net of
amortization of capitalized loan origination fees and the fees
we pay the DOE in connection with our FFELP loans. Those fees
include a one-time 0.50% fee on origination of consolidation,
Stafford and PLUS loans. We are also required to pay to the DOE
a monthly fee at a rate equal to 1.05%&nbsp;per annum on the
FFELP consolidation loans we hold. Our interest income will also
be reduced by incentives we offer to borrowers that are designed
to attract new borrowers and improve their payment behavior. One
incentive program reduces a borrower&#146;s interest rate by
0.25%&nbsp;per
</FONT>

<P align="center"><FONT size="2">31
</FONT>

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<DIV align="left">
<FONT size="2">annum for so long as the borrower makes monthly
payments through automatic deductions from his or her checking
or savings account. Approximately 30% of our borrowers currently
participate in this program. In addition, we offer FFELP
consolidation loan borrowers an on-time incentive program that
reduces their interest rates by 1.00%&nbsp;per annum for so long
as they make a specified number of their payments on time and
continue to make subsequent payments on time. Because we have
implemented our on-time payment program only recently, it has
not resulted to date in any reduction in interest income.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We also earn interest income from unrestricted
cash as well as restricted cash held in our special purpose
entities for our asset-backed securitizations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Interest
expense.</FONT></I></B><FONT size="2"> We have three categories
of interest expense: interest on our warehouse facility,
interest on our asset-backed securitizations and interest on our
other debt obligations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Interest on our warehouse facility is based on
the amount outstanding under the facility plus a fee on unused
capacity under the facility. The amount outstanding under the
warehouse facility is affected by the amount of loans we
originate in such period and the timing of securitizations.
Deferred financing costs associated with the warehouse facility
are amortized using a method that approximates the effective
interest method and are recorded as interest expense.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Interest on our asset-backed securitizations is
based on the principal amount of notes outstanding under the
facilities as well as the method of determining the interest
rate for each securitization tranche. All of our asset-backed
securitizations accrue interest at a variable rate. The rate
varies based upon when the notes were issued, the fixed spread
above an index, the index used and, in certain cases, auction
results. The relative proportion of our asset-back
securitizations that accrue interest based on auction rates and
on fixed spreads above an index will affect our cost of funds.
Broker-dealer fees incurred in connection with the periodic
auction for the auction rate notes are reflected in interest
expense. Deferred financing costs associated with issuing the
asset-backed notes are amortized using a method that
approximates the effective interest method and are recorded as
interest expense.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Interest expense on other obligations relates to
interest expense on items not associated with financing our loan
portfolio.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Net portfolio margin and net interest
income.</FONT></I></B><FONT size="2"> In certain interest rate
environments, part of our net portfolio margin includes fixed
rate floor income. Fixed rate floor income is the additional net
portfolio margin we receive as a result of a decline in
short-term interest rates from the rates used to fix the
borrower&#146;s rate on a consolidation loan. Fixed rate floor
income represents the amount by which interest income,
determined at the borrower&#146;s fixed rate, exceeds the amount
determined using the DOE computed variable rate. As a result of
the decline in short-term interest rates over the last three
years, we have earned fixed rate floor income during the past
three years. Fixed rate floor income is reduced, and can be
eliminated, in a rising interest rate environment. See
&#147;&#151;Net Portfolio Margin Analysis.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Provision for loan
losses.</FONT></I></B><FONT size="2"> We record periodic
provisions for loan losses to maintain an allowance for loan
losses which management believes is sufficient to cover probable
losses in the portfolio. The reserve is an estimate based on the
amount of loans subject to the 2% risk sharing, the historical
experience of losses and the delinquency rates on our portfolio.
Moreover, since our portfolio is relatively new, we also review
industry loss data in assessing probabilities of loan default.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The evaluation of the allowance for loan losses
is inherently subjective, as it requires material estimates that
may be subject to significant changes. The provision for loan
losses reflects the periodic income statement charges necessary
to maintain an allowance at a level that our management believes
is adequate to cover probable losses inherent in the loan
portfolio.
</FONT>

<P align="left">
<B><FONT size="2">Fee Income</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Fees on loan
sales.</FONT></I></B><FONT size="2"> In our loan origination
segment, we receive fees for selling FFELP consolidation and
private consolidation loan applications to third parties and for
marketing private in-school loans for third parties. We receive
a fixed fee for each completed FFELP application we sell to
third parties.
</FONT>

<P align="center"><FONT size="2">32
</FONT>

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<DIV align="left">
<FONT size="2">Generally, the amount of the fee is set forth in
forward purchase agreements with third parties which are
negotiated for between one- and three-year terms and apply to an
aggregate number of loan applications sold during each year of
the agreement. We also receive fee income from third parties to
whom we sell completed private consolidation loan applications
and for whom we market private in-school loans. Generally, the
fee is calculated based on a percentage of the funded amount of
the loan. This rate is set forth in agreements with the third
parties which have a term of one year, with respect to private
consolidation loans, and three years, with respect to private
in-school loans, and applies to an aggregate amount of loans
funded each year. We recognize revenue from fees on loan sales
when the loans are funded.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Fees for
servicing.</FONT></I></B><FONT size="2"> Since acquiring SunTech
in April 2003, we have received fee income for performing loan
servicing activities for third parties pursuant to servicing
agreements. Servicing fees under these agreements are calculated
based on the number of accounts serviced for each client and
specific activities such as disbursement or filing claims with
guarantee agencies. The fees are billed monthly. The terms of
the agreements vary from one year to the life of the applicable
loan portfolio. The intracompany servicing fees paid to our
servicer for servicing our own portfolio are eliminated in our
consolidated financial statements.
</FONT>

<P align="left">
<B><FONT size="2">Expenses</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The majority of our expenses consist of salaries
and related benefits and marketing expenses. Salaries and
related benefits include expenses related to granting incentive
stock options to our employees, which we expense in accordance
with SFAS&nbsp;No.&nbsp;123. Marketing expenses include the cost
of direct mail campaigns, postage, list development, collateral
printing, internet marketing, affinity partner fees and school
channel expenditures. The amount of marketing expenses and a
portion of the amount of the salaries and benefits is directly
affected by the scope of our marketing campaigns and the amount
of loans we originate or facilitate for origination by other
lenders. We increased our marketing expenses from
$10.4&nbsp;million for the first six months of 2003 to
$14.6&nbsp;million for the final six months of 2003. We expect
that we will incur marketing expenses in 2004 at a rate higher
than the rate at which we incurred marketing expenses for the
second half of 2003. In addition, our expenses include
communications and data processing expenses, professional fees,
management and consulting fees, depreciation and amortization
and other general and administrative expenses. For a description
of certain management and consulting agreements, see
&#147;Certain Relationships and Related Transactions.&#148; Our
expenses, primarily our salaries and related benefits and other
general and administrative expenses, increased in 2003 as a
result of our acquisition of SunTech in April 2003. We expect
that our expenses will increase as a result of becoming a public
company.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Debt extinguishment
expenses.</FONT></I></B><FONT size="2"> The costs associated
with obtaining financing are generally capitalized and recorded
as deferred financing costs, which are amortized over the life
of the related financing. If we repay the associated financing
prior to its anticipated repayment schedule, we are required to
write off the remaining deferred financing costs, which is
recorded as debt extinguishment expenses.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Derivatives.</FONT></I></B><FONT size="2">
In connection with financing our portfolio, we enter into
interest rate swap and cap agreements from time to time.
Generally, these agreements have maturities of no more than
24&nbsp;months. We record expenses relating to payments we make
under the swaps and caps and mark-to-market gains and losses
based on changes in their fair values from period to period.
These expenses and gains and losses are not reflected as part of
net interest income. See &#147;&#151;Critical Accounting
Policies&#151;Accounting for Derivatives&#148; and note&nbsp;8
to our consolidated financial statements.
</FONT>

<P align="left">
<B><FONT size="2">Quarterly Fluctuations</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our quarterly results of operations have varied
in the past and are expected to continue to vary in the future.
A number of factors outside of our control may cause our
quarterly results to fluctuate, including:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">seasonal patterns affecting loan originations,
    which correspond to an increase in consolidation activity in the
    period prior to, or immediately after, the July&nbsp;1 borrower
    rate reset in a rising or falling interest rate environment and
    also to the expiration of the six-month grace period or
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">33
</FONT>

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT size="2">payment of certain loans after graduation, which
    generally falls in December, and a decrease in consolidation
    activity during the rest of the year;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the amount and timing of loan sales;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the impact of general economic conditions;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">changes in interest rates;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the introduction of new product offerings.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Results of Operations</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For purposes of analyzing the results of
operations, for the year ended December&nbsp;31, 2002, we have
combined the applicable amounts for the periods prior to, and
after, the date of acquisition by Lightyear.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Year ended December&nbsp;31, 2003 compared
    to year ended December&nbsp;31, 2002</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Net revenue.</FONT></I></B><FONT size="2">
Net revenue was $118.2&nbsp;million in 2003, a decrease of 0.8%
from net revenue of $119.1&nbsp;million in 2002. The decrease in
net revenue was primarily the result of a decrease in fees from
loan sales offset by an increase in net interest income, in each
case, as a result of our decision to retain more loans in our
portfolio. Net revenue in 2003 also included servicing fee
income of $9.1&nbsp;million, due to the acquisition of SunTech.
</FONT>

<P align="left">
<B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B><I><FONT size="2">Net
interest income (expense).</FONT></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Interest income.</FONT></I><FONT size="2">
Interest income increased by $35.5&nbsp;million to
$61.8&nbsp;million in 2003 compared to $26.3&nbsp;million in
2002. This increase was the result of an increase in the average
balance of loans in our portfolio, which grew to
$1.6&nbsp;billion in 2003 from $489.3&nbsp;million in 2002, as
we continued to retain a greater portion of the federally
guaranteed consolidation loans we originated. The amount of loan
originations retained increased to $2.0&nbsp;billion in 2003
from $824.3&nbsp;million in 2002. The impact of our increased
portfolio was partially offset by changes in interest rates and
in the pricing characteristics of our loan assets. The average
yield on our loan portfolio decreased to 4.77% in 2003 from
5.79% in 2002 due to the addition of consolidation loans
originated with a fixed rate in the lower interest rate
environment during 2003. Amortization of the fair market value
adjustment of the loan portfolio from the Lightyear acquisition
increased $0.4&nbsp;million, or 80%, to $0.9&nbsp;million in
2003 compared to $0.5&nbsp;million in 2002, due to the timing of
the acquisition. Interest income on restricted cash decreased
$1.2&nbsp;million, or 29.3%, to $2.9&nbsp;million in 2003
compared to $4.1&nbsp;million in 2002 due to a decrease in the
amount of restricted cash and lower interest rates. The decline
in restricted cash was the result of more efficient transactions
where funds from asset-backed securitizations were more quickly
invested in loans. Other interest income increased
$0.5&nbsp;million to $0.7&nbsp;million in 2003 compared to
$0.2&nbsp;million in 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Interest expense.</FONT></I><FONT size="2">
Interest expense increased by $13.9&nbsp;million, or 53.5%, to
$39.9&nbsp;million in 2003 from $26.0&nbsp;million in 2002. Our
average debt balance under our warehouse and asset-backed
securitizations increased by $1.2&nbsp;billion to
$2.0&nbsp;billion in 2003 from $758.0&nbsp;million in 2002.
Interest expense on this debt increased $13.1&nbsp;million, or
78.9%, to $29.7&nbsp;million in 2003 compared to
$16.6&nbsp;million in 2002. The reduction in short-term interest
rates, together with a reduction in the portion of asset-backed
securitizations funded with auction rate notes, decreased our
average cost of funds to 1.53% in 2003 from 2.22% in 2002.
Interest expense on other indebtedness increased to
$10.2&nbsp;million in 2003 compared to $9.4&nbsp;million in
2002, primarily as a result of having higher average outstanding
other indebtedness for the full year because our senior notes
issued in the acquisition by Lightyear were outstanding for a
longer period in 2003 as compared to 2002. In October 2003, we
entered into a revolving line of credit and drew
$40.0&nbsp;million to repay our senior notes. As a result, our
other outstanding indebtedness and capital lease obligations
were reduced from $108.6&nbsp;million to $42.4&nbsp;million in
October 2003. The new revolving line of credit was at a
substantially lower interest rate than the senior notes.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Provision for loan
losses.</FONT></I><FONT size="2"> The provision for loan losses
for loans in our portfolio increased $0.4&nbsp;million, or
20.0%, to $2.4&nbsp;million in 2003 compared to
$2.0&nbsp;million in 2002. The increase resulted from the
increased loan balance, partially offset by a reduction in the
estimated amount of loans expected to default. After giving
effect to the provision for loan losses and the activity in the
allowance for loan
</FONT>

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<DIV align="left">
<FONT size="2">losses in 2003, our allowance for loan losses as
a percentage of outstanding loans at year end decreased to 0.14%
in 2003 from 0.20% in 2002.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Net portfolio margin and net interest income
(expense) after provision for loan
losses.</FONT></I><FONT size="2"> Net portfolio margin increased
to 1.62% in 2003 from 1.27% in 2002 due to lower rates of
interest on indebtedness used to finance our portfolio. As a
result of the foregoing, net interest income after provision for
loan losses increased by $21.4&nbsp;million to
$19.6&nbsp;million in 2003 compared to net interest expense
after provision for loan losses of $1.8&nbsp;million in 2002.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Fee income.</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Fees on loan sales.</FONT></I><FONT size="2">
Fees on loan sales decreased to $89.5&nbsp;million in 2003 from
$120.8&nbsp;million in 2002, primarily reflecting the lower
percentage of loans originated which were sold to third parties.
The amount of loans originated that were sold to, or marketed
for, third parties declined to $2.2&nbsp;billion in 2003 from
$3.2&nbsp;billion in 2002. Included in our fees on loan sales
were fees for marketing private in-school loans, which increased
to $5.3&nbsp;million in 2003 from no such fees in 2002. This
increase primarily reflected the launch in May 2003 of our
program for private loan products targeted at in-school students.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Fees for servicing.</FONT></I><FONT size="2">
We generated $9.1&nbsp;million in loan servicing fees on a
consolidated basis for the period from April through
December&nbsp;31, 2003 compared to none in 2002, the year prior
to our acquisition of SunTech. On a separate segment basis, we
recorded loan servicing fees for 2003 of $11.8&nbsp;million,
including $2.7&nbsp;million from the servicing of loans in our
portfolio. As of December&nbsp;31, 2003 SunTech serviced
$8.9&nbsp;billion of loans, an increase of 22.0% from the amount
of loans serviced at the close of the transaction earlier in the
year.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Expenses.</FONT></I></B><FONT size="2">
Total expenses increased $37.8&nbsp;million, or 46.2%, to
$119.6&nbsp;million in 2003 compared to $81.8&nbsp;million in
2002, primarily as a result of increased marketing expenses and
the acquisition of SunTech. See note&nbsp;20 to our consolidated
financial statement for expenses on a segment basis.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Salaries and benefits increased
$7.2&nbsp;million, or 15.2%, to $54.6&nbsp;million in 2003
compared to $47.4&nbsp;million in 2002, including salaries and
benefits in our loan servicing segment which increased by
$6.3&nbsp;million, as a result of the SunTech acquisition.
Salaries and benefits increased in our loan origination segment
by $0.9&nbsp;million as a result of the expansion of our sales
force and increased health care costs, although we also had a
reduction in other headcount in 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Marketing expenses increased $11.2&nbsp;million,
or 81.2%, to $25.0&nbsp;million in 2003 compared to
$13.8&nbsp;million in 2002 due to an increase in marketing
activities across all our product lines, including an increased
focus on marketing private loans. In addition, in anticipation
of the effects that the national &#147;do not call&#148; list
introduced in September 2003 would have on certain of our
marketing activities, we increased our marketing efforts in the
second half of 2003. Fees to affinity partners also increased as
we gained additional volume through this channel.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Communications and data processing expense
increased $0.6&nbsp;million, or 9.4%, in 2003 compared to 2002
primarily due to the acquisition of SunTech, offset in part by a
reduction in rates for these services. Management and consulting
fees decreased to $3.3&nbsp;million in 2003 from
$4.1&nbsp;million in 2002 primarily as a result of the
expiration of certain consulting agreements relating to the
Lightyear acquisition offset by new consulting agreements
relating to the SunTech acquisition. Professional fees increased
$4.1&nbsp;million to $6.3&nbsp;million in 2003 compared to
$2.2&nbsp;million in 2002 as a result of the engagement of
consultants for projects and pursuing acquisition opportunities.
Other general and administrative expenses increased
$2.9&nbsp;million, or 53.7%, in 2003 compared to 2002 as a
result of increased travel, franchise taxes and corporate
insurance. Depreciation and amortization increased
$2.3&nbsp;million to $4.3&nbsp;million in 2003 compared to
$2.0&nbsp;million in 2002, primarily as a result of the
acquisition of additional computer equipment, other property and
software in 2003, including $0.5&nbsp;million of amortization of
servicing rights related to the SunTech acquisition.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with the repayment of our senior
notes in 2003, we incurred non-cash debt extinguishment expenses
of $4.8&nbsp;million. We did not incur any debt extinguishment
expenses in 2002.
</FONT>

<P align="center"><FONT size="2">35
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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 2003, in connection with the financing of our
portfolio we entered into interest rate swaps and an interest
rate cap that resulted in swap interest expense of
$3.4&nbsp;million and a derivative mark-to-market expense of
$1.9&nbsp;million. We had no derivatives in 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Income tax expense
(benefit).</FONT></I></B><FONT size="2"> Income tax expense
decreased by $10.9&nbsp;million to a benefit of
$0.2&nbsp;million in 2003 compared to an expense of
$10.7&nbsp;million for the nearly seven months we operated as a
taxable corporation in 2002 due to the decrease in income before
taxes in 2003. Our effective tax rate was negative 14.1% for
2003 compared to 40.8% for the nearly seven months we operated
as a taxable corporation in 2002. Included in our net loss for
2003 were non-deductible expenses, which caused our 2003
effective tax rate to be at a rate below the statutory rate.
Because we operated as a limited liability company prior to May,
2002, we had no income tax expense for the period prior to
May&nbsp;17, 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Net income
(loss).</FONT></I></B><FONT size="2"> Net income (loss)
decreased to a net loss of $7.5&nbsp;million for 2003 from net
income of $23.6&nbsp;million for 2002, primarily as a result of
our decision to retain more loans in our portfolio, the increase
in marketing expenses and the change in tax status. This was
partially offset by the addition of income from our acquisition
of SunTech and the other factors described above.
</FONT>

<P align="left">
<B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Year ended
December&nbsp;31, 2002 compared to year ended December&nbsp;31,
2001</I></FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Net revenue.</FONT></I></B><FONT size="2">
Net revenue was $119.1&nbsp;million in 2002, a decrease of 8.8%
from net revenue of $130.6&nbsp;million in 2001. The decrease in
net revenue was primarily the result of a decrease in fees from
loan sales offset by an increase in net interest income, in each
case, as a result of our decision to retain more loans in our
portfolio.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <I><FONT size="2">Net interest income (expense).</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Interest income.</FONT></I><FONT size="2">
Interest income increased to $26.3&nbsp;million in 2002 compared
to $1.6&nbsp;million in 2001. This increase was the result of
our decision to retain in our portfolio a percentage of the
loans we originate. During 2002, we increased the average
balance of loans in our portfolio to $489.3&nbsp;million from
$11.6&nbsp;million in 2001 by retaining $824.3&nbsp;million of
loan originations in 2002. This increase was partially offset by
changes in the interest rates and in the pricing characteristics
of our loan assets. The average yield on our loan portfolio was
5.79% in 2002 compared to 6.02% in 2001 due to the addition of
consolidation loans originated with a fixed rate in the lower
interest rate environment during 2002. Amortization of the fair
market value adjustment of the loan portfolio from the Lightyear
acquisition was $0.5&nbsp;million in 2002 compared to $0 in
2001, due to the timing of the acquisition. Interest income on
restricted cash increased to $4.1&nbsp;million in 2002 compared
to $0.7&nbsp;million in 2001, due to an increase in restricted
cash as a result of our asset-backed financings. Other interest
income was $0.2&nbsp;million in both 2002 and 2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Interest expense.</FONT></I><FONT size="2">
Interest expense increased to $26.0&nbsp;million in 2002,
compared to $2.6&nbsp;million in 2001. Our asset-backed
securitizations increased $500.0&nbsp;million to
$1,027.2&nbsp;million at December&nbsp;31, 2002 from
$527.2&nbsp;million at December&nbsp;31, 2001. Interest expense
on this debt incurred to finance our portfolio of loans
increased $14.1&nbsp;million to $16.6&nbsp;million in 2002
compared to $2.5&nbsp;million in 2001. The reduction in
short-term interest rates decreased our average cost of funds to
2.22% in 2002 from 3.05% in 2001. Interest expense on other debt
increased $9.3&nbsp;million to $9.4&nbsp;million in 2002
compared to $0.1&nbsp;million in 2001, as a result of the debt
we incurred in connection with the acquisition of CFS.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Provision for loan
losses.</FONT></I><FONT size="2"> The provision for loan losses
for loans in our portfolio increased to $2.0&nbsp;million for
2002 from no provision in 2001. Our allowance for loan losses as
a percentage of outstanding loans at year end was 0.2% in 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Net interest income (expense)&nbsp;after
provision for loan losses.</FONT></I><FONT size="2"> As a result
of the foregoing, net interest expense after provision for loan
losses increased by $0.9&nbsp;million to $1.8&nbsp;million in
2002 compared to $0.9&nbsp;million in 2001.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <I><FONT size="2">Fee income.</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Fees on loan sales.</FONT></I><FONT size="2">
Fees on loan sales decreased to $120.8&nbsp;million in 2002 from
$131.6&nbsp;million in 2001, primarily reflecting the lower
percentage of loans originated which were sold to third parties.
The
</FONT>

<P align="center"><FONT size="2">36
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<DIV align="left">
<FONT size="2">amount of loans originated that were sold or
marketed for third parties declined to $3.2&nbsp;billion in 2002
from $3.5&nbsp;billion in 2001.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Servicing fees.</FONT></I><FONT size="2"> We
generated no servicing fee income in 2002 or 2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Expenses.</FONT></I></B><FONT size="2">
Total expenses increased $13.0&nbsp;million, or 18.9%, to
$81.8&nbsp;million in 2002 compared to $68.8&nbsp;million in
2001, primarily as a result of an increase in salaries and
benefits as well as communications and data processing.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Salaries and benefits increased
$6.5&nbsp;million, or 15.9%, to $47.4&nbsp;million in 2002
compared to $40.9&nbsp;million in 2001. The increase in salaries
and benefits is due to an expansion of our sales force and
increased health care costs.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Marketing expenses increased $1.4&nbsp;million,
or 11.3%, to $13.8&nbsp;million in 2002 compared to
$12.4&nbsp;million in 2001 due to an increase in consolidation
loan marketing activities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Communications and data processing expenses
increased $4.5&nbsp;million to $6.9&nbsp;million in 2002
compared to $2.4&nbsp;million in 2001 due to the expansion of
our telemarketing efforts. Management and consulting fees
decreased to $4.1&nbsp;million in 2002 from $6.7&nbsp;million in
2001 primarily as a result of decreased management fees paid to
our previous owners. Professional fees increased
$1.5&nbsp;million in 2002 compared to 2001 as a result of
additional legal and accounting fees primarily associated with
additional entities created in conjunction with our asset-backed
securitizations. Other general and administrative expenses
increased $0.7&nbsp;million, or 14.9%, to $5.4&nbsp;million in
2002 compared to $4.7&nbsp;million in 2001 as a result of
increased travel and corporate insurance. Depreciation and
amortization increased $0.9&nbsp;million, or 81.8%, to
$2.0&nbsp;million in 2002 compared to $1.1&nbsp;million in 2001.
This increase can be attributed to increased depreciation and
amortization of computer equipment, equipment, furniture,
leasehold improvements and software in 2002 compared to 2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Income tax
expense.</FONT></I></B><FONT size="2"> Income tax expense
increased to $10.7&nbsp;million for 2002 compared to no income
tax expense in 2001 due to the change from an LLC to a taxable
corporation in May 2002. Our effective tax rate was 40.8% for
the seven months we operated as a taxable corporation in 2002.
Because we operated as an LLC prior to the acquisition by
Lightyear, we had no tax expense in 2001, rather the LLC members
paid taxes on their share of taxable income.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Net income.</FONT></I></B><FONT size="2">
Net income decreased to $23.6&nbsp;million for 2002 from
$61.8&nbsp;million for 2001, primarily as a result of our
decision to retain more loans in our portfolio and the change in
tax status.
</FONT>

<P align="left">
<B><FONT size="2">Financial Condition</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total assets increased by $2.0&nbsp;billion to
$3.2&nbsp;billion at December&nbsp;31, 2003 from
$1.2&nbsp;billion at December&nbsp;31, 2002. This was due to an
increase in our loan portfolio of approximately
$1.9&nbsp;billion, to $2.9&nbsp;billion at December&nbsp;31,
2003 from $973.1&nbsp;million at December&nbsp;31, 2002. All of
the loans in our portfolio are FFELP loans and over 99% are
consolidation loans.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total liabilities increased by $1.9&nbsp;billion
to $3.1&nbsp;billion at December&nbsp;31, 2003 from
$1.2&nbsp;billion at December&nbsp;31, 2002. This growth in
liabilities was a result of an increase in debt incurred to
finance our loan portfolio.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Preferred stock of our consolidated subsidiary
increased by $38.8&nbsp;million to $89.1&nbsp;million at
December&nbsp;31, 2003 from $50.3&nbsp;million at
December&nbsp;31, 2002 as a result of the issuance of additional
preferred stock in 2003 to raise funds to acquire SunTech and to
repay indebtedness and of the accretion of dividends on the
preferred stock of $6.3&nbsp;million for 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Stockholders&#146; equity increased by
$1.0&nbsp;million to $25.2&nbsp;million at December&nbsp;31,
2003 from $24.2&nbsp;million at December&nbsp;31, 2002 primarily
as a result of the issuance of additional shares of common stock
for cash and the conversion of notes into common stock during
the year. This increase was offset by the net loss for 2003.
</FONT>

<P align="center"><FONT size="2">37
</FONT>

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<P align="left">
<B><FONT size="2">Liquidity and Capital Resources</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We finance our operations through operating cash
flow and borrowings under a warehouse facility, asset-backed
securitizations and a revolving line of credit. Operating
activities provided net cash of $20.8&nbsp;million in 2003, a
decrease of $13.1&nbsp;million from the net cash provided by
operating activities of $33.9&nbsp;million in 2002. The primary
reason for this decrease was the change in our business strategy
from selling substantially all of our FFELP loans to third
parties for fee income to retaining a significant percentage of
our FFELP loan originations in our portfolio and funding this
growth through secured financing arrangements, primarily
asset-backed securitizations. Net cash used in investing
activities increased to $1,908.6&nbsp;million in 2003 from
$985.2&nbsp;million in 2002 primarily as a result of the
increase in size of our retained portfolio. Net cash provided by
financing activities increased to $1,869.8&nbsp;million in 2003
from $976.7&nbsp;million in 2002, primarily as a result of the
increased financing for our retained portfolio. We believe that
the use of our warehousing capacity, continued access to the
asset-backed securitization market and forward purchase
agreements will provide adequate liquidity to fund our
operations, loan processing and originations and capital
expenditures for the foreseeable future.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On October&nbsp;30, 2003, we obtained a
three-year $45.0&nbsp;million revolving credit facility from two
national financial institutions. The amount of the facility was
reduced by $3.75&nbsp;million on December&nbsp;31, 2003 and will
be reduced by an additional $3.75&nbsp;million at the end of
each fiscal quarter going forward until the expiration date in
September, 2006. The revolving line of credit bears interest,
payable quarterly, at LIBOR plus 3.50%. We are also required to
pay a commitment fee of 0.50% on undrawn amounts under the
facility. The facility is secured by substantially all of our
non-student loan assets, including the outstanding capital stock
or membership interests of certain of our subsidiaries. The
credit facility contains certain mandatory prepayment and
commitment reduction provisions and event of default provisions
relating to a change of control, as well as restrictions
concerning the payment of dividends, incurrence of additional
debt and capital expenditures. In addition, we are subject to,
and in compliance with, certain financial covenants including
ratios related to fixed charges coverage, interest coverage and
leverage. Collegiate Funding Services, Inc. and certain of our
subsidiaries have guaranteed all of our obligations under the
credit agreement. We drew $40.0&nbsp;million initially under the
facility to retire a portion of the senior notes that had been
issued to help finance our acquisition by Lightyear in May,
2002. As of December&nbsp;31, 2003, approximately
$26.3&nbsp;million was outstanding on this revolving line of
credit. Upon completion of this offering, we intend to use a
portion of the net proceeds to repay any indebtedness
outstanding under the revolving line of credit.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In July, 2003, we obtained a one-year
$500.0&nbsp;million conduit warehouse financing facility,
through a special purpose company, to fund our loan
originations. In February, 2004, the facility was temporarily
expanded to $1.0&nbsp;billion through May, 2004, at which time
it will return to a $500.0&nbsp;million capacity. The ability to
draw on the facility expires in July, 2004 unless extended. It
must be repaid in full by July, 2006 unless extended. The
warehouse facility is provided by a commercial paper conduit
with liquidity support provided by a national financial
institution. We use the warehouse facility to fund our loan
originations until such time as we accumulate sufficient loans
to effectively access the asset-backed securitization market.
The facility is secured by our portfolio of loans financed under
the facility. The interest rate on funds advanced by the conduit
lender is calculated based on the commercial paper rate plus a
margin and for funds advanced by the liquidity provider at the
Eurodollar rate plus 1.0% or the alternate base rate. The
interest rate on amounts outstanding under the warehouse
facility on December&nbsp;31, 2003 was 1.52%. In addition we pay
a fee of 0.15%&nbsp;per annum on the unused portion of the
facility. As of December&nbsp;31, 2003, $144.8&nbsp;million was
outstanding under our warehouse facility. The conduit facility
contains certain affirmative and negative covenants as well as
reporting requirements and covenants relating to loan servicing.
The affirmative covenants require us to, among other things,
preserve the federal guarantee on our FFELP loan portfolio. An
event of default under the conduit facility will occur if, among
other things, the federal guarantee on FFELP loans is reduced,
the excess spread on the loans in our portfolio drops below a
certain rate or the default rate of loans in our portfolio
exceeds a certain percentage.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2003 and 2002, we issued $1.9&nbsp;billion
and $500.0&nbsp;million, respectively, of asset-backed
securities. These secured financings were issued primarily in
the domestic capital markets and are secured
</FONT>

<P align="center"><FONT size="2">38
</FONT>

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<DIV align="left">
<FONT size="2">by separate pools of FFELP loans. Securities
issued in our securitizations accrue interest based on a rate of
a spread to LIBOR or set under an auction procedure related to
the securities. As part of our securitization transactions, we
borrowed funds in excess of the principal balance of the loans
included in the applicable securitization transactions. A
portion of these additional funds was used to repay our other
indebtedness and fund our operations. We are also entitled to
receive excess spread from the securitization in the future,
subject to compliance with certain conditions, generally after
the principal balance of the loans and restricted cash held in
the securitization vehicles equals the outstanding indebtedness.
Our access to excess spread may also be affected by the amount
of loans in our portfolio in grace or deferment status or with
respect to which we have granted forbearance and the level of
delinquencies. As of December&nbsp;31, 2003 we had not received
any excess spread under any securitization. In 2003, we made
$45.9&nbsp;million in principal payments and in 2002, we made no
principal payments on our asset-backed securitizations. At
December&nbsp;31, 2003 and 2002, we held $105.4&nbsp;million and
$41.6&nbsp;million, respectively, of restricted cash, including
reserves, in the securitization entities. We anticipate
continuing to access the domestic asset-backed securitization
market in 2004 and subsequent years. The timing of future
issuances will depend on market conditions.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On May&nbsp;17, 2002, in connection with our
acquisition by Lightyear and its affiliates, CFSL Acquisition
Corp. issued a 4.47%&nbsp;subordinated note, due June&nbsp;30,
2007, in the principal amount of $15.0&nbsp;million to the
previous owners of the Company. The note may be redeemed at any
time at the option of the Company, and must be redeemed in the
event of a change of control of the Company.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following tables summarize our indebtedness
and capital leases outstanding as of December&nbsp;31, 2003 and
2002:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="35%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">As of December&nbsp;31, 2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Principal</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percent</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Interest</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">amount</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">of total</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">rate range</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Final maturity<SUP>(2)</SUP></FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">(dollars in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Warehouse facility
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">144.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.52%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">07/20/04&nbsp;- 07/18/06</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">(3)</FONT></SUP></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Asset-backed notes:<SUP>(1)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes based on LIBOR
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">897.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.23%&nbsp;- 1.47%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">03/01/12&nbsp;- 03/28/21</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes based on auction rates
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,959.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">64.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.18%&nbsp;- 1.33%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12/01/41&nbsp;- 12/01/43</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total asset-backed notes and warehouse facility
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,000.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">98.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Revolving line of credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.62%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">09/30/06</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fixed-rate notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">(4)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.47%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">06/30/07</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fixed-rate capital leases
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.34%&nbsp;- 7.82%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">04/01/08</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Convertible notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,043.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">39
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="35%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">As of December&nbsp;31, 2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Principal</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percent</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Interest</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">amount</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">of total</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">rate range</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Final maturity<SUP>(2)</SUP></FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">(dollars in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Warehouse facility
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Asset-backed notes:<SUP>(1)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes based on LIBOR
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes based on auction rates
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,027.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">90.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.58%&nbsp;- 1.67%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12/01/41&nbsp;- 07/01/42</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total asset-backed notes and warehouse facility
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,027.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">90.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Revolving line of credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fixed-rate notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">103.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">(4)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.47%&nbsp;- 11.00%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">03/31/07&nbsp;- 06/30/07</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fixed-rate capital leases
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Convertible notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.00%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">04/30/04</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,135.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="15%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(1)</FONT></SUP></TD>
    <TD align="left">
    <FONT size="2">Issued in securitization transactions.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(2)</FONT></SUP></TD>
    <TD align="left">
    <FONT size="2">The final maturity date is the stated legal
    maturity of the applicable class of notes. However, the
    principal of the notes is paid based on the receipt of principal
    payments under the applicable pools of loans and is expected to
    be paid prior to the final maturity date.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(3)</FONT></SUP></TD>
    <TD align="left">
    <FONT size="2">The warehouse facility may be drawn upon to
    July&nbsp;20, 2004, unless it is extended, and must be repaid by
    July&nbsp;18, 2006.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(4)</FONT></SUP></TD>
    <TD align="left">
    <FONT size="2">Balances are net of unamortized discount of
    $0.8&nbsp;million and $5.2&nbsp;million as of December&nbsp;31,
    2003 and 2002, respectively.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Payments on outstanding indebtedness and capital
and operating lease obligations are due after December&nbsp;31,
2003 in varying amounts as follows:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="33%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">&#60;1&nbsp;year</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1&nbsp;- 3&nbsp;years</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">4&nbsp;- 5&nbsp;years</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">&#62;&nbsp;5&nbsp;years</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">(dollars in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Warehouse facility
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">144.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">144.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Asset-backed notes<SUP>(1)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,856.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,856.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other indebtedness
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Capital lease obligations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Operating lease obligations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,047.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">161.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,856.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="15%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(1)</FONT></SUP></TD>
    <TD align="left">
    <FONT size="2">Principal on our asset-backed notes will be paid
    based on receipt of principal payments under the applicable
    pools of loans and is expected to be paid prior to final
    maturity date of the notes.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, we have forward purchase agreements
under which we are obligated to sell a minimum amount of FFELP
loans, refer a minimum of private in-school loan applications
and sell all of the private consolidation loan applications we
originate. These commitments generally run for between one and
three years. As of December&nbsp;31, 2003, 2002 and 2001, we
were obligated to sell $1.2&nbsp;billion, $606.0&nbsp;million
and $600.0&nbsp;million, respectively, in loan applications at
contractual rates under various agreements through
December&nbsp;31, 2004. See &#147;Business&#151;Products and
Service Offerings.&#148;
</FONT>

<P align="center"><FONT size="2">40
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">
<B><FONT size="2">Loan Portfolio</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The table below describes the components of our
loan portfolio as of December&nbsp;31, 2003, 2002 and 2001:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="12%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="35"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="35" align="center" nowrap><B><FONT size="1">As of December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="35" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Weighted</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Weighted</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Weighted</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">average</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">average</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">average</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percent</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">maturity</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percent</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">maturity</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percent</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">maturity</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Principal<SUP>(1)</SUP></FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">of total</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(yrs)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Principal<SUP>(1)</SUP></FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">of total</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(yrs)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Principal<SUP>(1)</SUP></FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">of total</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(yrs)</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="35"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="35" align="center" nowrap><B><FONT size="1">(dollars in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">FFELP loans:
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Consolidation
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2,830.9</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">99.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">%</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">22.8</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">960.4</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">99.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">%</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">23.1</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">150.0</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">100.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">%</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">21.7</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">PLUS
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2.9</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0.1</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">9.2</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2.1</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0.2</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">9.8</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Stafford
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0.3</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">13.9</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2,834.1</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">100.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">%</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">22.8</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">962.5</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">100.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">%</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">23.1</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">150.0</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">100.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">%</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">21.7</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(1)</FONT></SUP></TD>
    <TD align="left">
    <FONT size="2">Amounts reflect principal balance of loans
    without adjustments for deferred loan costs which, as of
    December&nbsp;31, 2003, 2002 and 2001, totaled
    $26.4&nbsp;million, $12.5&nbsp;million and $1.0&nbsp;million,
    respectively. Amounts also exclude the allowance for loan losses
    of $4.1&nbsp;million, $1.9&nbsp;million and $0 as of
    December&nbsp;31, 2003, 2002 and 2001, respectively.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The table below shows the repayment status of
loans and delinquency amounts as of December&nbsp;31, 2003, 2002
and 2001. Delinquencies have the potential to adversely impact
our earnings through increased servicing and collection costs
and write-offs.
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="18%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="1">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="35"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="35" align="center" nowrap><B><FONT size="1">As of December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="35" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percent</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percent</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percent</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percent</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percent</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percent</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">of</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">total</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">loans</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">total</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">loans</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">total</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">loans</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">loan</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">in</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">loan</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">in</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">loan</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">in</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Principal<SUP>(1)</SUP></FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">portfolio</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">repayment</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Principal<SUP>(1)</SUP></FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">portfolio</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">repayment</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Principal<SUP>(1)</SUP></FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">portfolio</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">repayment</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="35"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="35" align="center" nowrap><B><FONT size="1">(dollars in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Loan portfolio:
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Loans in school/ grace/ deferment<SUP>(2)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">275.7</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">9.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">%</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">78.8</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">8.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">%</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0.1</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">%</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Loans in forbearance<SUP>(3)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">167.4</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">5.9</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">58.8</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">6.1</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1.1</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0.7</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Loans in repayment status:
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Current
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2,276.7</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">80.3</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">95.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">%</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">780.6</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">81.1</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">94.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">%</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">148.8</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">99.2</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">100.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Delinquent 31-60&nbsp;days<SUP>(4)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">54.0</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1.9</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2.3</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">18.0</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1.9</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2.2</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Delinquent 61-90&nbsp;days
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">21.4</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0.8</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0.9</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">8.2</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">0.8</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1.0</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Delinquent over 90 days<SUP>(5)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">38.9</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1.4</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1.6</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">18.1</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">1.9</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2.2</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">&#151;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Total loans in repayment
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2,391.0</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">84.4</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">100.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">%</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">824.9</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">85.7</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">100.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">%</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">148.8</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">99.2</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">100.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="1">Total loan portfolio
    </FONT></DIV>
    </TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">2,834.1</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">100.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">%</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">962.5</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">100.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">%</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="1">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">150.0</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="1">100.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="1">%</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(1)</FONT></SUP></TD>
    <TD align="left">
    <FONT size="2">Amounts reflect principal balance of loans
    without adjustments for deferred loan costs, which, as of
    December&nbsp;31, 2003, 2002 and 2001, totaled
    $26.4&nbsp;million, $12.5&nbsp;million and $1.0&nbsp;million,
    respectively. Amounts also do not reflect the allowance for loan
    losses of $4.1&nbsp;million, $1.9&nbsp;million and $0 as of
    December&nbsp;31, 2003, 2002 and 2001, respectively.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(2)</FONT></SUP></TD>
    <TD align="left">
    <FONT size="2">Loans for borrowers who still may be attending
    school or engaging in other permitted educational activities and
    are not yet required to make payments on the loans, e.g.,
    residency periods for medical students or a grace period for bar
    exam preparation.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(3)</FONT></SUP></TD>
    <TD align="left">
    <FONT size="2">Loans for borrowers who have temporarily ceased
    making full payments due to hardship or other factors, according
    to a schedule approved by the servicer consistent with the
    established loan program servicing procedures and policies.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(4)</FONT></SUP></TD>
    <TD align="left">
    <FONT size="2">The period of delinquency is based on the number
    of days scheduled payments are contractually past due and relate
    to loans in repayment status, that is, receivables not charged
    off, and not in school, grace, deferment or forbearance.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(5)</FONT></SUP></TD>
    <TD align="left">
    <FONT size="2">Includes loans in claim status, which are loans
    that are over 270&nbsp;days past due which have gone into
    default and have been submitted to the guaranty agency for FFELP
    loans to process the claim for payment.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">41
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">
<B><FONT size="2">Net Portfolio Margin Analysis</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth the net portfolio
margin and average loans and restricted cash for the period
indicated. This table represents the margin on the assets
associated with our portfolio, specifically loans and restricted
cash, earned over the cost of funding the assets.
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="63%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year ended December 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">(dollars in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loan and restricted cash yield
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.18</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.34</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.78</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">DOE rebate<SUP>(1)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.91</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.72</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.16</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization<SUP>(2)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.12</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.13</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.01</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loan and restricted cash yield
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.49</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.61</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Asset-backed notes and lines of credit cost of
    funds
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.53</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.22</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3.05</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net portfolio margin
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.62</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.27</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.44</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Average loans and restricted cash
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,940,400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">747,891</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">80,549</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(1)</FONT></SUP></TD>
    <TD align="left">
    <FONT size="2">Reflects the 1.05% per annum rebate fee on FFELP
    consolidation loans.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(2)</FONT></SUP></TD>
    <TD align="left">
    <FONT size="2">Represents the amortization of capitalized
    origination costs and purchase accounting adjustments, including
    the 0.50% fee payable to the DOE on the origination of FFELP
    loans.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Interest Rate Risk</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Because we expect to generate a significant
portion of our earnings from the difference, or spread, between
the yield we receive on our loan portfolio of student loans and
the cost of financing these loans, our results of operations are
sensitive to interest rates. We fund our loan portfolio with
variable-rate debt. In the current low interest rate
environment, our loan portfolio is yielding excess income
primarily due to the reduction in interest rates on the
variable-rate liabilities funding loans from the fixed borrower
rate. See &#147;Risk Factors.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Therefore, absent utilizing derivative
instruments, in a low interest rate environment, a rise in
interest rates will have an adverse effect on our earnings and
fair values. In higher interest rate environments, where the
interest rate rises above the borrower rate and the fixed-rate
loans become variable rate and are effectively matched with
variable-rate debt, the impact of rate fluctuations is
substantially reduced.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">One objective when financing our loan portfolio
is to manage interest rate risk through:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">match-funding of loan assets with associated
    secured borrowings&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">utilizing interest rate swaps and other
    derivative instruments (described below) to minimize the adverse
    effect of interest rate fluctuations in the short term.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2003, we entered into certain derivative
instrument contracts to help manage our interest rate risk. The
table below summarizes the derivative instruments to which we
were a party at December&nbsp;31, 2003:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="16%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Notional</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pay-</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Receive-</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Maturity</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Fair</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Derivative type</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">amount</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">fixed rate</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">floating rate</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">date</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">value<SUP>(3)</SUP></FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">(dollars in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Swap<SUP>(1)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.89</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3-month LIBOR</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1/26/2005</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,070</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Swap<SUP>(1)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">225,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.64</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3-month LIBOR</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11/26/2004</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(606</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Swap<SUP>(1)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">225,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.64</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3-month LIBOR</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11/26/2004</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(606</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cap (sold)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">(2)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1/26/2005</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(328</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,610</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="18%" align="left" noshade>
</DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD valign="top">
    <SUP><FONT size="2">(1)</FONT></SUP></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Under the interest rate swaps, we agree to pay a
    fixed rate in exchange for a floating rate. The interest rate
    swap effectively converts a portion of our variable-rate debt to
    a fixed rate for a period of time thereby fixing the relative
    spread between a portion of our loan assets equal to the size of
    the swap notional amount.
    </FONT></TD>
</TR>

<TR>
    <TD valign="top">
    <SUP><FONT size="2">(2)</FONT></SUP></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">The Company received $1.7&nbsp;million in
    proceeds from the sale of the cap on February&nbsp;28, 2003. The
    amount is recorded as a derivative liability and is marked to
    market over the term of the cap. Payments on the cap will be
    made only when the 91-day commercial paper rate exceeds 2.09%.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <SUP><FONT size="2">(3)</FONT></SUP></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Reflects the value to the Company of the interest
    rate swaps and the cap assuming the applicable swap or cap was
    terminated as of December&nbsp;31, 2003.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">42
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have not designated any of these derivative
instruments to meet the criteria for hedge accounting. See
&#147;&#151;Critical Accounting Policies&#151; Accounting for
Derivatives.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Interest rate sensitivity refers to the change in
earnings that may result from the changes in the level of
interest rates. Our net interest income is affected by changes
in various interest rates, including LIBOR and the commercial
paper rate. While the FFELP consolidation loan borrower pays a
fixed rate of interest, the yield we receive is the higher of
the fixed rate or a floating rate according to the terms of FFEL
Program. For FFELP consolidation loans currently in our
portfolio, the floating rate is 2.64% over the 91-day financial
commercial paper rate. Substantially all interest costs on our
debt obligations are determined based upon variable rates based
upon LIBOR, commercial paper or the result of auctions. As a
result of the decline in short-term interest rates over the last
three years, we have earned fixed rate floor income during the
past three years. Fixed rate floor income is reduced and can be
eliminated in a rising interest rate environment.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table shows the estimated change in
net interest income for a 12-month period based on an increase
or decrease in interest rates on January&nbsp;1, 2004 which is
maintained for the entire year applied to our interest-earning
assets and interest-bearing liabilities as of December&nbsp;31,
2003 and assuming normal portfolio payment patterns for 2004:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="46%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="25%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="25%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Estimated change in net interest income</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">over 12&nbsp;months</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Rate change (basis points)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(dollars in millions)</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="center" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">-100
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">+100
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="center" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">+200
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(22.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We hold four derivative contracts to help
mitigate the economic impact of changing interest rates. Because
the derivatives are not accounted for as accounting hedges under
SFAS No.&nbsp;133, we present their effect in a separate line
item, swap interest expense, in the income statement. Under our
existing swaps and cap, a decrease of 100&nbsp;basis points, an
increase of 100&nbsp;basis points and an increase of
200&nbsp;basis points would have the effect of increasing
(decreasing) swap interest expense by $8.0&nbsp;million,
$(8.0)&nbsp;million, and $(11.6)&nbsp;million, respectively.
</FONT>

<P align="left">
<B><FONT size="2">Critical Accounting Policies</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">This Management&#146;s Discussion and Analysis of
Financial Condition and Results of Operations discusses our
consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the
United States of America, or GAAP. The preparation of these
financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and the reported amounts of income and expenses
during the reporting periods. We base our estimates and
judgments on historical experience and on various other factors
that we believe are reasonable under the circumstances. Actual
results may differ from these estimates under varying
assumptions or conditions. Note&nbsp;2 of the notes to
consolidated financial statements includes a summary of the
significant accounting policies and methods used in the
preparation of our consolidated financial statements.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On an on-going basis, management evaluates its
estimates and judgments, particularly as they relate to
accounting policies that management believes are most
&#147;critical&#148;&#151; that is, they are most important to
the portrayal of our financial condition and results of
operations and they require management&#146;s most difficult,
subjective or complex judgments, often as a result of the need
to make estimates about the effect of matters that are
inherently uncertain. These accounting policies include
accounting for derivatives, determining the level of the
allowance for loan losses and accounting for business
combinations and goodwill.
</FONT>

<P align="left">
<B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B><I><FONT size="2">Accounting
for derivatives</FONT></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We account for derivative and certain financial
instruments in accordance with SFAS&nbsp;No.&nbsp;133,
Accounting for Derivative Instruments and Hedging Activities,
which requires that every derivative instrument, including
certain derivative instruments embedded in other contracts, be
recorded at fair value on the balance sheet as either an asset
or liability.
</FONT>

<P align="center"><FONT size="2">43
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">SFAS&nbsp;No.&nbsp;133 requires that changes in
the fair value of derivative instruments be recognized currently
in earnings unless specific hedge accounting criteria as
specified by SFAS&nbsp;No.&nbsp;133 are met. We believe that our
derivatives are effective economic hedges and they are a
critical element of our interest rate risk management strategy.
However, our derivative instruments do not meet the criteria to
qualify for hedge accounting pursuant to SFAS&nbsp;No.&nbsp;133,
and therefore the Company records changes in their value as
derivative mark-to-market expense on the statement of income.
The impact of the cash payments and accruals are reported as
swap interest expense on the statement of income. The fair value
of the derivatives is included with other accrued liabilities on
the balance sheet. There were no derivatives outstanding at
December&nbsp;31, 2002.
</FONT>

<P align="left">
<B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B><I><FONT size="2">Allowance
for loan losses</FONT></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The allowance for loan losses represents
management&#146;s estimate of probable losses on loans as of the
reporting date. This evaluation process is conducted
periodically and is subject to numerous estimates and judgments.
In making such estimates and judgments, management considers
such things as the general characteristics of loans outstanding,
including guarantees of at least 98% of the loan principal
balance, past loan loss experience of our loan portfolio,
changes to the Higher Education Act and general economic
conditions. Historical payment (e.g., delinquency) experience is
also considered when reviewing the current aging of the
portfolio, together with analyses that reflect current trends
and conditions. Moreover, since our portfolio is relatively new,
we also survey the loan loss information and portfolio trends of
other FFELP holders. The allowance is maintained at a level
management believes is adequate to provide for estimated
probable credit losses inherent in the loan portfolio. This
evaluation is inherently subjective, as it requires estimates
that may be susceptible to significant changes.
</FONT>

<P align="left">
<B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B><I><FONT size="2">Business
combinations and goodwill</FONT></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our predecessor was acquired in a business
combination by CFS. We acquired SunTech in April 2003. We may
make additional acquisitions in the future. We follow the
guidance in SFAS No.&nbsp;141, Business Combinations, in
accounting for business combinations. The standard requires that
the purchase price of a business be allocated to assets and
liabilities at their fair values, with any unallocated purchase
price being attributed to goodwill. Certain judgments and
estimates are required in the fair value measurement, for
example in our acquisition of SunTech we recorded fair value
adjustments to certain servicing rights and a servicing system.
In both the Lightyear acquisition of us and the acquisition of
SunTech, the majority of the purchase price was allocated to
goodwill. We had $160.7&nbsp;million in goodwill at
December&nbsp;31, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">SFAS No.&nbsp;142 is the standard we follow in
our accounting for goodwill. The standard requires that the we
perform annual impairment tests of our goodwill. The goodwill
impairment test is a two-step process. The first step is to make
an estimate of the fair value of each reporting unit and to
compare the valuation to the carrying values, including the
goodwill. We have used third parties to derive estimates of the
fair values used in our assessments. The result of our first
step has been that fair value exceeds the carrying amount of the
assets, thus there has been no impairment of any our goodwill
and we are not required to perform the step two computation of
the amount of impairment. We will continue to perform the
impairment assessment each year.
</FONT>

<P align="left">
<B><FONT size="2">Recent Accounting Pronouncements</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Consolidation of variable interest
    entities</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In January 2003, the FASB issued FIN No.&nbsp;46,
Consolidation of Variable Interest Entities. FIN No.&nbsp;46
clarifies the application of Accounting Research Bulletin
No.&nbsp;51, Consolidated Financial Statements, to certain
entities in which equity investors do not have the
characteristics of a controlling financial interest or do not
have sufficient equity at risk for the entity to finance its
activities without additional subordinated financial support
from other parties, which are referred to as variable interest
entities. Variable interest entities are required to be
consolidated by their primary beneficiaries. The
</FONT>

<P align="center"><FONT size="2">44
</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">primary beneficiary of a variable interest entity
is the party that absorbs a majority of the entity&#146;s
expected losses, receives a majority of its expected residual
returns, or both, as a result of holding variable interests. FIN
No.&nbsp;46 also requires new disclosures about variable
interest entities. On October&nbsp;31, 2003, the FASB issued an
exposure draft of a proposed interpretation modifying
Interpretation No.&nbsp;46. The proposed clarifications and
modifications would apply to periods ending after
December&nbsp;31, 2003. We do not believe that FIN No.&nbsp;46
will have a material effect on our financial position or results
of operations.
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Accounting for certain financial instruments
    with characteristics of both liabilities and equity</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In May 2003, the FASB issued SFAS&nbsp;No 150,
Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity.
SFAS&nbsp;No.&nbsp;150 establishes standards for how an issuer
classifies and measures certain financial instruments with
characteristics of both liabilities and equity. It requires that
an issuer classify a financial instrument that is within its
scope as a liability, or an asset in some circumstances.
SFAS&nbsp;No.&nbsp;150 is effective for financial instruments
entered into or modified after May&nbsp;31, 2003, and otherwise
is effective at the beginning of the first interim period
beginning after June&nbsp;15, 2003. We have adopted the standard
effective July&nbsp;1, 2003. The adoption of
SFAS&nbsp;No.&nbsp;150 did not have a significant impact on our
financial position or results of operations.
</FONT>

<P align="center"><FONT size="2">45
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<A name='111'></A>
</DIV>

<!-- link1 "INDUSTRY OVERVIEW" -->

<P align="center">
<B><FONT size="2">INDUSTRY OVERVIEW</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The U.S.&nbsp;postsecondary education finance
market is large and growing. According to the DOE, in academic
year 2002-2003, expenditures for postsecondary education totaled
$331.9&nbsp;billion. The two main drivers of the size and growth
prospects of this market are enrollment population and cost of
attendance. The DOE estimates that college enrollment will grow
to 18&nbsp;million by 2013, up from an estimated 16&nbsp;million
in 2003. Between the 1993-1994 and 2003-2004 academic years, the
average amount of tuition and fees, which is the largest
component of the cost of attendance, increased on an
enrollment-weighted and constant-dollar basis by 47% at
four-year public institutions and 42% at four-year private
institutions. During the period from 1993 to 2002, median
household income grew only 11%, on a constant-dollar basis.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Of the $331.9&nbsp;billion spent on postsecondary
education in academic year 2002-2003, according to the College
Board, $105.1&nbsp;billion was provided by financial aid. Of
this amount, federal loans represented approximately 46.7%, or
$49.1&nbsp;billion, and private loans represented approximately
6.6%, or $6.9&nbsp;billion, while grants, education tax credits,
work study and other education loans made up the balance. The
DOE estimates that federal education loan volume, excluding
consolidation loans, is expected to increase to
$95.2&nbsp;billion in federal fiscal year 2011. We believe that
a significant portion of the remaining expenditures on
postsecondary education was comprised of other loan products
that are not characterized as traditional education loans.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Education loan consolidation has emerged over the
past few years as an important option for consumers. Federal
consolidation loans allow consumers to refinance and extend the
repayment term of existing education loan debt at a fixed rate
and with a single monthly payment that is generally lower than a
consumer would pay in the aggregate in monthly payments on the
replaced loans. There were $9.5&nbsp;billion of FFELP
consolidation loans disbursed in federal fiscal year 2001. This
grew to $23.2&nbsp;billion and $35.3&nbsp;billion in federal
fiscal year 2002 and 2003, respectively. The DOE, however,
projects that FFELP consolidation loan volume will decrease to
$25.9&nbsp;billion in federal fiscal year 2004 and to
$22.3&nbsp;billion in federal fiscal year 2005. Although the DOE
projections are the most widely accepted projections available,
we note that the DOE&#146;s projections for following-year FFELP
consolidation loan volumes have underestimated actual
consolidation loan volume in each of federal fiscal year 2003,
2002 and 2001 by $13.6&nbsp;billion, $8.9&nbsp;billion and
$2.0&nbsp;billion, respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">According to the College Board, private loan
volume, though small in comparison to federal loan volume, has
grown at a compounded annual rate of 26.8% in constant dollars,
from academic year 1995-1996 through academic year 2002-2003.
Total reported private loan volume reached approximately
$6.9&nbsp;billion in the 2002-2003 academic year, up from
$1.1&nbsp;billion in the 1995-1996 academic year. We believe the
growth of the private education loan market reflects an
increasing reliance on supplements to federal loans, under which
the amount that can be borrowed is capped, to bridge the
widening gap between the cost of higher education and the amount
of funding available to pay that cost through federal education
loans. In addition, we believe private education loans are
viewed as convenient and attractive financing alternatives by
the growing number of older non-traditional students who are
more familiar with other consumer finance alternatives.
</FONT>

<P align="center"><FONT size="2">46
</FONT>

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<P align="center">
<FONT size="2">Total Expenditures for Postsecondary Education
</FONT>

<DIV align="center">
<FONT size="2">(dollars in billions)
</FONT>
</DIV>

<P align="center">
<IMG src="y95852y9585203.gif" alt="BAR CHART">

<P align="center">
<FONT size="2">Academic years (beginning)
</FONT>

<DIV align="center">
<FONT size="2">(Source: U.S.&nbsp;Department of Education)
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">There are three major federal education loan
programs:
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Federal Family Education Loan Program allows
private financial institutions to make loans that are guaranteed
by intermediary guaranty agencies that are, in turn, reinsured
by the federal government. The FFEL Program was originally
created by the Higher Education Act of 1965. The FFEL Program is
the single largest source of college financial assistance in the
United States.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The William D. Ford Federal Direct Student Loan
Program was enacted in 1993 and authorizes the DOE to lend funds
directly to students and parents from the U.S.&nbsp;Treasury for
financial aid purposes.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Perkins Loan program is a relatively small
program that provides capital to schools to help fund revolving
loan funds the schools can use to make loans to their students
who have exceptional financial need.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Together, the FFEL Program and FDL Program
accounted for 97% of all federal education loan volume in
academic year 2002-2003.
</FONT>

<P align="left">
<B><FONT size="2">The Federal Family Education Loan
Program</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The FFEL Program, the single largest source of
college financial assistance in the United States, is a
public-private partnership where lenders make guaranteed student
loans to students. FFELP loans offer below-market interest rates
and favorable repayment terms to students and parents. The FFEL
Program includes the following types of loans:
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Consolidation
loans.</FONT></I></B><FONT size="2"> Consolidation loans allow
student and parent borrowers to combine different federal loans
with various repayment schedules into one loan having a term of
up to 30&nbsp;years. The primary benefits are a fixed interest
rate, a single monthly payment and extended repayment terms. In
federal fiscal year 2003, $35.3&nbsp;billion of FFELP
consolidation loans were made according to the DOE.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Subsidized Stafford
loans.</FONT></I></B><FONT size="2"> Subsidized Stafford loans
have terms of up to 10&nbsp;years after the borrower leaves
school and are awarded to students on the basis of financial
need. The loans are referred to as subsidized because the
federal government pays the interest that accrues while students
are enrolled, for a six-month grace period after they leave
school and during certain authorized deferment periods. This loan
</FONT>

<P align="center"><FONT size="2">47
</FONT>
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<DIV align="left">
<FONT size="2">type is the largest component of the FFEL
Program. In federal fiscal year 2003, $17.8&nbsp;billion in
FFELP subsidized Stafford loans were made, according to the DOE.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Unsubsidized Stafford
loans.</FONT></I></B><FONT size="2"> Unsubsidized Stafford loans
have terms of up to 10&nbsp;years after a borrower leaves school
and are available to all students regardless of financial need.
They offer the same interest rate and six-month grace period as
subsidized Stafford loans, but interest on these loans accrues
while students are in school, grace or deferment. Students may
opt to make interest payments during those periods, or they may
choose to have the interest capitalized so that they pay it when
the loan is in repayment status. In federal fiscal year 2003,
$16.5&nbsp;billion in FFELP unsubsidized Stafford loans were
made, according to the DOE.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">PLUS loans.</FONT></I></B><FONT size="2">
PLUS loans have terms of up to 10&nbsp;years and allow parents
of dependent undergraduate students to borrow up to the total
cost of attendance at a low interest rate. Unlike student
borrowers, parents must pass a credit test to borrow under the
PLUS program. Through this program, parents may borrow up to the
cost of attendance per child, minus financial aid from other
sources. In federal fiscal year 2003, $4.5&nbsp;billion in FFELP
PLUS loans were made according to the DOE.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The maximum aggregate borrowing by a single
borrower of unsubsidized and subsidized Stafford loans is
$23,000 for a dependent undergraduate student, $46,000 for an
independent undergraduate student and $138,500 for a graduate
student (including undergraduate borrowings).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Lender payment of principal and interest on all
FFELP student loans, including consolidation loans, originated
after October&nbsp;1, 1993 are 98% guaranteed by guaranty
agencies against default by the borrower. Guaranty agencies are,
in turn, reinsured for up to 95% of their guarantee payments by
the federal government. If the DOE has determined that a
guaranty agency is unable to meet its guarantee obligations, the
loan holder may submit claims directly to the DOE, and the DOE
would be required to pay the full guarantee claim.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Consolidation loans under the Higher Education
Act were not made available until 1986. The consolidation loan
program allows borrowers with existing federal loans to combine
their variable-rate federal education loans into a single loan,
with a fixed rate, to be repaid over a term ranging from 12 to
30&nbsp;years, depending on the size of the loan. The
consolidation loans are insured and reinsured on a basis similar
to Stafford and PLUS loans. Federal consolidation loans may be
obtained in an amount sufficient to pay outstanding principal,
unpaid interest and late charges on federally insured or
reinsured student loans incurred under the FFEL Program selected
by the borrower, as well as loans made pursuant to the FDL
Program, Perkins and Health Professional Student Loan Programs.
The holder receives a direct payment from the government based
upon a Special Allowance Payment, or SAP, formula. SAPs are
generally paid whenever the average of all of the applicable
floating rates (91-day Treasury bill, commercial paper, 52-week
Treasury bill, or the constant maturity Treasury rate) in a
calendar quarter, plus a spread of between 1.70% and 3.50%
(depending on the loan status and origination date) exceeds the
rate of interest which the borrower is obligated to pay. Lenders
are required to pay the DOE a one-time 0.50% fee on origination
of consolidation, Stafford and PLUS loans. The holder is
required to pay an annual fee to the DOE of 1.05% on
consolidation loans it holds.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The interest rate paid by a student on a
consolidation loan is fixed at a rate equal to the weighted
average of the interest rates on the loans retired, rounded up
one-eighth of one percent, not to exceed 8.25%&nbsp;per annum.
Once a student consolidates his or her loans, the rate
determined at that point is fixed to the borrower for the life
of the loan. Many lenders under the FFEL Program offer borrowers
discounts to their interest rates based on the borrowers&#146;
agreement to make automated payments and payment history. These
discounts can exceed 1.00% per annum.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The FFEL Program entitles borrowers of
consolidation loans to defer payments during certain authorized
deferment periods. In addition, lenders may agree to forebear
interest payments in certain instances.
</FONT>

<P align="center"><FONT size="2">48
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Participants in the FFEL Program include:
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Originators.</FONT></I></B><FONT size="2">
Originators market, process and, in cooperation with eligible
lenders, originate, FFELP&nbsp;loans. Originators include
student loan finance companies as well as eligible lenders as
described below. After an originator originates and/or processes
the origination of a loan, it may retain it in its portfolio or
sell it to third parties, including eligible lenders.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Eligible
lenders.</FONT></I></B><FONT size="2"> Eligible lenders
registered with the DOE originate and/or purchase FFELP loans
and receive interest subsidy payments, SAPs and default
reimbursement. Eligible lenders include banks, savings and loan
associations, credit unions, pension funds, insurance companies,
schools and, under certain circumstances, guaranty agencies. In
addition, other entities that do not meet the definition of
eligible lender can effectively participate through trust
arrangements with entities that meet the definition.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Servicers.</FONT></I></B><FONT size="2">
Servicing of student loan assets is critical for FFELP lenders
because the guarantee is conditioned on the loans being
administered in accordance with DOE and guaranty agency
requirements. Proper servicing of a student loan is also
required in order to maintain eligibility for SAPs and interest
subsidy payments.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Guaranty
agencies.</FONT></I></B><FONT size="2"> Guaranty agencies
reimburse lenders for losses on defaulted FFELP loans on at
least 98% of the loans&#146; principal and interest. These
guaranty agencies are non-profit institutions or state agencies
that have entered into federal reinsurance contracts with the
DOE pursuant to the Higher Education Act. Guaranty agencies
reimburse eligible lenders from reserve accounts established for
this purpose. The guaranty agency, in turn, receives
reimbursement of up to 95% of its payments to lenders from the
DOE.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Department of
Education.</FONT></I></B><FONT size="2"> The DOE&#146;s
regulations provide a number of public policy drivers to FFELP
market participants. The DOE provides eligible lenders with an
incentive to lend to students by reinsuring guarantors for a
portion of their default reimbursements to lenders. When
applicable, it also pays SAPs to ensure that the lender earns a
competitive return. The DOE provides eligible borrowers with
interest subsidies and capped interest rates.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The guarantee and the lender&#146;s right to
subsidy payments on FFELP loans is conditioned on compliance
with requirements set by the DOE and guaranty agencies. FFELP
loans that are not administered in accordance with DOE
regulations risk loss of their guarantee and subsidies, in full
or in part. The most common reason for loss of guarantee or
subsidies on a loan is violations of federal regulations
requiring certain collection steps, such as collection letters
and phone calls for loans that become delinquent. Regulations
also authorize the DOE and guaranty agencies to limit, suspend
or terminate lenders participation in the FFEL Program, as well
as authorize the DOE to impose civil penalties, if lenders
violate certain program regulations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">School eligibility requirements, including
default rate limits, have been implemented by the DOE. In order
to maintain eligibility in the FFEL Program, schools must
maintain default rates below specified levels.
</FONT>

<P align="left">
<B><FONT size="2">Private Loans</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Private education loans are consumer loans that
generally have variable rates, are credit based and have terms
up to 30&nbsp;years. Private loans typically include the
following series of processes:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">consumer development, design and marketing;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">consumer inquiry, credit decisionmaking and
    application;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">loan origination, disbursement, funding and
    servicing.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Borrowers primarily use private loans to
supplement federal loans in the financing of their education or
to consolidate their education debt. Most private loan holders
obtain some form of insurance on each loan to cover the holder
against credit loss. This coverage comes in primarily two forms.
Private loans are either &#147;self-insured&#148; by the
existing holder or insurance is obtained by the loan holder from
an outside
</FONT>

<P align="center"><FONT size="2">49
</FONT>

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<DIV align="left">
<FONT size="2">insurance provider, who, usually for a fee, will
provide insurance coverage to cover the holder against default
and in some instances death, disability and bankruptcy. Loan
terms are typically fixed over a period of time, from five to
30&nbsp;years, where consumers can defer payments during
in-school periods, make interest-only payments or principal and
interest payments to loan holders. Rates on private loans are
typically variable and indexed to the U.S.&nbsp;Treasury Bill,
Prime Rate or LIBOR. In many instances, borrowers pay the holder
or insurance entity an origination and/or guarantee fee. This
fee is usually included in the overall loan amount at the time
of origination.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The private loan market has expanded rapidly in
the past several years. Private loan volume, according to the
College Board, though small relative to federal loan volume, has
grown at a compounded annual rate of 26.8% in constant dollars,
from academic year 1995-1996 through academic year 2002-2003.
According to the College Board, total reported private loan
volume reached approximately $6.9&nbsp;billion in the 2002-2003
academic year, up from $1.1&nbsp;billion in the 1995-1996
academic year. We believe the growth of the private education
loan market reflects a growing reliance on supplements to
federal loans to bridge the widening gap between the cost of
higher education and the amount of funding available to pay that
cost through federal education loans. In addition, private
education loans are viewed as convenient and attractive
financing alternatives by the growing number of older
non-traditional students who are more familiar with other
consumer finance alternatives.
</FONT>

<P align="left">
<B><FONT size="2">Reauthorization and Proposed Legislative
Changes</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Higher Education Act, and as a result the
FFEL Program, is subject to comprehensive reauthorization every
five years. The Higher Education Act is scheduled to expire on
September&nbsp;30, 2004, and reauthorization is currently under
consideration by the United States Congress. In 2000, Congress
passed legislation to tie the yield on FFELP loans to commercial
paper rates. This change has enhanced the current market
stability in the education finance arena. Changes in the Higher
Education Act made in the two most recent reauthorizations have
included reductions in student loan yields paid to lenders,
increased fees paid by lenders and a decreased level of
guarantee. Some of the key issues being considered in the
reauthorization debate are:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <B><I><FONT size="2">Single holder rule on consolidation
    loans.</FONT></I></B><FONT size="2"> Currently, if only one
    lender holds all of a student&#146;s loans, then a competitor
    cannot consolidate the loans away from the current holder unless
    the current holder refuses to consolidate the loans for the
    borrower. In the industry as a whole, a large portion of all
    non-consolidated loans are currently held by only one lender.
    Elimination of the single holder rule would open up a portion of
    the market to increased competition.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <B><I><FONT size="2">The ability to refinance consolidation
    loans.</FONT></I></B><FONT size="2"> Currently, once a loan is
    consolidated, it cannot be refinanced by another government
    guaranteed student loan unless subsequent FFELP or FDLP loans
    are made to the borrower. If this rule changes, the amount of
    consolidation loans that are refinanced could be significant.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <B><I><FONT size="2">Variable-rate consolidation
    loans.</FONT></I></B><FONT size="2"> Currently, FFELP
    consolidation loans have fixed interest rates. Proposals have
    been made that would require new consolidation loans to have
    variable rates. This initiative would eliminate an appealing
    aspect of consolidation loans, i.e.,&nbsp;long-term fixed rates,
    that is not available in most education loans. Adoption of this
    initiative could decrease demand for federal consolidation loans.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <B><I><FONT size="2">Increased access to extended repayment of
    Stafford/ PLUS loans.</FONT></I></B><FONT size="2"> Currently,
    borrowers who secured their first Stafford loan after
    October&nbsp;7, 1998 that leave school with $30,000 or more in
    Stafford loan principal outstanding may have the maturity
    extended beyond the standard 10&nbsp;year maximum term.
    Proposals have been circulated that would allow Stafford/ PLUS
    borrowers to more readily gain extended repayment terms, similar
    to those terms provided for under the loan consolidation
    program. This initiative would provide borrowers of Stafford/
    PLUS loans an appealing aspect of consolidation loans,
    i.e.,&nbsp;a more extended repayment period, without
    consolidating their loans. Adoption of this initiative could
    decrease demand for federal consolidation loans.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">50
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<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <B><I><FONT size="2">Borrower
    limits.</FONT></I></B><FONT size="2"> For the last
    10&nbsp;years, the maximum amount of Stafford loans that a
    dependent freshman or sophomore could borrow has remained at
    $2,625 and $3,500&nbsp;per academic year, respectively, and the
    aggregate amount that a dependent undergraduate student could
    borrow has remained at $23,000. Educational tuition has
    increased at approximately two times the rate of inflation over
    this same time period. If borrower limits are raised this could
    increase the average size of future loan originations in the
    market and those available for later consolidation.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Legislation has also been introduced proposing a
number of initiatives aimed at supporting the FDL Program to the
detriment of the FFEL Program. Such legislation proposes to pay
schools as a reward for choosing to participate in the FDL
Program.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, participants in the education
finance market that use DTC marketing are affected by recently
amended Federal Trade Commission rules and similar state
regulations providing for so-called &#147;do not call&#148;
registries. Under these rules, consumers may have their phone
numbers added to a &#147;do not call&#148; registry, and
marketers are generally prohibited from calling any such
consumers to market products and services. This rule may
restrict marketers&#146; abilities to market products and
services effectively to certain new customers. Furthermore,
compliance with this new rule may prove difficult and require
additional expense, and marketers may incur penalties for
improperly conducting our marketing activities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The origination of private loans is subject to
federal and state consumer protection laws and regulations,
including state usury and disclosure laws and related
regulations, and the Federal Truth in Lending Act. These laws
and regulations impose substantial requirements upon lenders and
their agents and servicers involved in consumer finance.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, participants in the market for
private education loans could also become subject to state
licensing laws due to recent changes in existing federal and
state regulations. As a result, participants in this market
could be required to (1)&nbsp;implement additional or different
programs and information technology systems, (2)&nbsp;meet new
licensing capital and reserve requirements or (3)&nbsp;incur
additional administrative, compliance and third-party service
costs.
</FONT>

<P align="center"><FONT size="2">51
</FONT>

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<DIV align="left">
<A name='112'></A>
</DIV>

<!-- link1 "BUSINESS" -->

<P align="center">
<B><FONT size="2">BUSINESS</FONT></B>

<P align="left">
<B><FONT size="2">Company Overview</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are a vertically integrated education finance
company that markets, originates, finances and services
education loans. We market education loans primarily through
direct-to-consumer, or DTC, programs, including targeted direct
mail, telemarketing and the Internet. Using our DTC marketing
platform and other distribution channels, we assist consumers in
financing and refinancing the cost of undergraduate, graduate,
professional, career and continuing education. We finance,
retain and service a substantial portion of the loans we
originate.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Since our inception in 1998, we have originated
or facilitated the origination of over $15&nbsp;billion in
education loans. We originated or facilitated the origination of
$4.2&nbsp;billion of education loans in 2003 and we believe we
are among the top five originators of federal and private
education loans in the United States. Of our total loan
originations in 2003, $4.0&nbsp;billion were federally
guaranteed consolidation student loans made through the Federal
Family Education Loan Program, which we refer to as the
FFEL&nbsp;Program or FFELP. Through the FFEL Program, an
eligible borrower with multiple federally guaranteed loans can
consolidate his or her loans after graduation into a single
loan. Beginning in May 2003, we increased our focus on private
education loans and, in that year, originated or facilitated the
origination of $199.6&nbsp;million of these loans. Private
loans, which do not have a federal guarantee, are credit-based
consumer loans used to pay for or refinance education-related
expenses. As of December&nbsp;31, 2003, we were servicing
approximately $8.9&nbsp;billion in student loans made to over
360,000&nbsp;customers, and were the seventh largest servicer of
FFELP loans in the United States, according to the Student Loan
Servicing Alliance. We currently have over 1,000&nbsp;employees.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have adapted a direct-to-consumer marketing
model developed in the consumer finance industry for use in
education-based lending. We believe our targeted DTC strategy
enables us to increase consumer awareness of the products we
offer and collect data useful in our product development and
marketing. Using a variety of internal and external databases
accumulated since our inception, we create marketing campaigns
to target consumers with products based on their specific
characteristics. We supplement our DTC strategy through
marketing relationships with membership organizations, alumni
associations and other entities in order to reach customers and
promote our products under our own label or under co-branded
offerings in partnership with other lenders. We are also
investing in the school-based loan origination channel, through
which we market our products to students by cooperative
arrangements with the financial aid offices of education
institutions. We currently have relationships with over
600&nbsp;schools and institutions including having our products
on 539&nbsp;preferred lender lists. Once we have originated a
FFELP loan, we either fund and retain that loan in our portfolio
or sell the originated loan application to a third-party lender.
With respect to private education loans, we either sell
completed loan applications upon origination, in the case of
private consolidation loans, or market loans for origination by
third parties, in the case of private in-school loans, which we
refer to as facilitating the origination of loans.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 2002, we launched our strategy of retaining in
our portfolio a percentage of the federally guaranteed loans we
originate. Prior to 2002, we sold substantially all of our
completed loan applications to third parties and received fees
for these applications at the time of sale. We retain in our
portfolio only loans that are federally guaranteed for at least
98% of principal and interest. We believe that our current
strategy of retaining in our portfolio a portion of the loans we
originate and selling the remainder for a fee provides us with
several advantages, although our net income in current periods
has been lower than it would have been had we sold a larger
percentage of the FFELP loans we originate. Among the benefits
of retaining loans is our ability to take advantage of these
loans&#146; limited credit risk, their duration and other
characteristics and to benefit from a greater revenue stream
over the life of the loan. Selling the remainder of our
originated loan applications permits us to maintain a
diversified source of funding for loan processing and
origination and build our relationships with financial
institutions that purchase our loans. We retained approximately
50% and 21% of the FFELP loans we originated in 2003 and 2002,
respectively, and our portfolio of federally guaranteed loans
grew to $2.9&nbsp;billion as of December&nbsp;31, 2003
</FONT>

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<DIV align="left">
<FONT size="2">from $973.1&nbsp;million as of December&nbsp;31,
2002. We do not fund or retain any of the private loans we
market or originate.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We also provide high quality loan servicing
through our wholly owned subsidiary, CFS-SunTech Servicing LLC
(&#147;SunTech&#148;). We acquired SunTech in April 2003. Prior
to the acquisition, SunTech had been servicing a significant
portion of the loans we originated since our formation in 1998.
Servicing loans provides us with an additional source of fee
income and enables us to retain a direct customer relationship
over the life of the loans, which we believe is a critical
element in establishing our brand. We service substantially all
the loans we hold in our portfolio as well as student loans held
by third-party lenders. We generally seek to retain the
servicing of a majority of the loan applications we sell, which
accounts for a significant portion of our third-party servicing
volume.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our multiple sources of revenue reflect the fact
that we market, originate, finance and service education loans.
They include fee income for selling completed loan applications
to third parties and facilitating the origination of loans for
lenders, net interest income earned on the loans we hold in our
portfolio and servicing fee income for the assets we service.
Fees on loan application sales and for facilitating the
origination of loans, which we refer to collectively as fees on
loan origination, accounted for approximately 75.7% of our net
revenue in 2003. Net interest income after provision for loan
losses, which is primarily comprised of the difference between
the yield we receive on our loan portfolio and the cost of
funding these loans, accounted for 16.6% of our net revenue in
2003. Servicing fees, earned since our acquisition of SunTech in
April 2003, accounted for 7.7% of our net revenue in 2003. Over
time, as we build our portfolio, we expect the percentage of our
net revenue earned from net interest income to increase and the
percentage of our net revenue earned from our fees on loan
origination to decrease.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We primarily finance the loans we retain in our
portfolio through asset-backed securitizations, which we record
as debt on our consolidated balance sheet. To date, we have
completed four securitizations that contributed
$2.9&nbsp;billion of funding, including two transactions for a
total of $1.9&nbsp;billion in 2003. We supplement our
asset-backed securitizations with $500&nbsp;million of secured
warehouse financing availability, which we believe allows us to
access the securitization market on a more timely and
cost-effective basis. In addition, we enter into forward
purchase agreements, under which several financial institutions
have agreed to purchase and, in certain cases, require that we
sell to them, a portion of the loan applications we originate
each year.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our predecessor company was organized in 1998 to
focus primarily on marketing federally guaranteed consolidation
loans. In May 2002, Lightyear Capital, LLC, a private investment
firm based in New&nbsp;York City, acquired Collegiate Funding
Services, Inc. As an investment fund, Lightyear seeks capital
appreciation through direct private equity and equity-related
investments, including leveraged acquisitions, buildups,
recapitalizations, restructurings, management buyouts,
pre-public offering opportunities and growth equity transactions.
</FONT>

<P align="left">
<B><FONT size="2">Our Competitive Strengths</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe the following competitive strengths
distinguish us in the education finance industry:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <B><I><FONT size="2">Vertically integrated education finance
    platform.</FONT></I></B><FONT size="2"> We market, originate,
    finance and service education loans. Through our platform, we
    offer students and their families a suite of loan products,
    including federally guaranteed consolidation loans, other
    federally guaranteed loans and private loans. Once originated,
    we are able to finance and retain the loans or sell the
    originated loan applications. Our internal servicing capability
    allows us to service our student loan portfolio, rather than
    outsource this task to a third party. Our vertically integrated
    platform offers our customers the benefit of dealing with a
    single entity over the lives of their loans, from initial
    inquiry through origination and repayment. We believe the
    breadth of our capabilities in the various sectors of the
    education finance market and the scale of our platform is a
    competitive advantage over many of our peers.
    </FONT></TD>
</TR>

</TABLE>

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<P>

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<TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <B><I><FONT size="2">Leading direct-to-consumer origination
    operation.</FONT></I></B><FONT size="2"> In 2003, we originated
    or facilitated the origination of $4.2&nbsp;billion of education
    loans, of which approximately 98% was originated through our
    direct-to-consumer channel. Our DTC model and our targeted
    marketing process give us the advantage of a direct relationship
    with customers, which permits us to tailor our products to their
    needs. We believe that we originated more consolidation loans
    through this channel than any other education finance company,
    when excluding consolidation of loans by lenders from their own
    portfolios.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <B><I><FONT size="2">Significant portfolio of federally
    guaranteed loans.</FONT></I></B><FONT size="2"> As of
    December&nbsp;31, 2003, all the loans we held in our portfolio
    were FFELP loans, which are federally guaranteed for at least
    98% of principal and accrued interest. Our portfolio of loans
    grew from $973.1&nbsp;million at the end of 2002 to
    $2.9&nbsp;billion at the end of 2003. We expect to continue our
    strategy of retaining a significant portion of the federally
    guaranteed loans we originate. The high credit quality and long
    duration of these loans provide us with a growing base of
    revenue. We do not currently intend to hold in our portfolio any
    private loans.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <B><I><FONT size="2">High quality servicing
    platform.</FONT></I></B><FONT size="2"> As the primary means of
    communication with our customers after their loans are
    originated and financed, our servicing operation provides our
    customers with consistent and seamless service. The quality of
    our servicing platform and its compliance with the rules set
    forth by the U.S.&nbsp;Department of Education, or DOE, is the
    primary determinant in preserving the federal guarantee on FFELP
    loans we service. Our servicing platform uses a system
    specifically designed to manage, adhere to and support the
    requirements of the Higher Education Act and other consumer
    lending regulations and laws. We believe SunTech&#146;s net
    claim reject rate by guaranty agencies due to servicer error of
    0.02% is among the lowest in the industry. Our continuing focus
    on maintaining this performance record will assist us in
    minimizing our credit risk and provide us with credibility as we
    securitize our portfolio of loans and seek third parties willing
    to use us as their loan servicer.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <B><I><FONT size="2">Experienced senior management
    team.</FONT></I></B><FONT size="2"> Our senior management team
    has an average of 19&nbsp;years of experience and comes from a
    broad range of education and consumer finance backgrounds. Our
    management team is led by Chief Executive Officer, J. Barry
    Morrow. Mr.&nbsp;Morrow has worked in the education finance
    industry for over 20&nbsp;years, having served previously as the
    senior operations executive for Sallie Mae and general manager
    of financial services for the U.S.&nbsp;Department of Education.
    We have a management team with significant experience in both
    student loan operations and portfolio management. We believe the
    combination of education and consumer finance experience allows
    us to better serve our customers and maximizes our ability to
    develop and implement our strategy.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Our Strategy</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We intend to focus on marketing, originating,
financing and servicing federally guaranteed consolidation loans
and to leverage our market position and platform to build our
brand and diversify our product and service offerings, including
the expansion of private loan originations, by executing the
following strategy:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <B><I><FONT size="2">Expand the use and reach of our
    direct-to-consumer marketing platform.</FONT></I></B></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <I><FONT size="2">Federal consolidation
    loans.</FONT></I><FONT size="2"> We plan to continue to use our
    DTC channel to originate federal consolidation loans, to expand
    consumer awareness of consolidation loans and to establish our
    brand. We will continue to refine our approach to these products
    based on information we have gathered from our marketing and
    servicing operations. We believe that the education finance
    market will continue to benefit from direct marketing to
    consumers and we seek to use our expertise with this marketing
    strategy to increase our share of federal consolidation loan
    originations.
    </FONT></TD>
</TR>

</TABLE>

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<TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <I><FONT size="2">Private loans.</FONT></I><FONT size="2">
    Beginning in May, 2003, we increased our focus on private
    education loans, and, in 2003, we originated or facilitated the
    origination of $199.6&nbsp;million of these loans. We intend to
    continue to use our expertise in the DTC channel to structure
    and market private loan products and to increase our
    originations and facilitation of the origination of private
    loans. We will utilize our expertise in the marketing of federal
    consolidation loans and mine the data we have generated in
    making and holding those loans to effectively market new private
    loan products.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <B><I><FONT size="2">Expand distribution channels.</FONT></I></B></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="5%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <I><FONT size="2">School-based
    channel.</FONT></I><FONT size="2"> To supplement our DTC
    channel, we will continue investing in the school-based channel
    to increase awareness among students and financial aid officers
    of our consolidation products. In addition, we will continue to
    broaden our product offerings of federal and private loans
    available to students still in school. We currently have
    relationships with over 600 schools and institutions, including
    having our products on 539 preferred lender lists. We have a
    national sales force of education industry professionals working
    directly with colleges and universities and we assist schools
    and financial aid offices by offering an internally-developed
    Internet-based debt and graduation counseling tool as well as
    software tools that aid schools in running their lender
    programs. We will continue our efforts to be added to
    schools&#146; preferred lender lists, which will provide a
    school-based origination channel to supplement our DTC
    origination channel, as well as greater awareness of our
    products and brand name among students and financial aid
    officers.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <I><FONT size="2">Affinity group
    marketing.</FONT></I><FONT size="2"> We have entered into
    marketing relationships with associations such as the American
    Medical Association, the American Dental Association and the
    American Bar Association, in order to promote our products to
    their membership and customer bases. We plan to continue
    developing more affinity relationships, which, through private
    label offerings and product endorsements, provide us with access
    to consumers in need of federal and private loans or
    consolidation of education loans.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <B><I><FONT size="2">Build our FFELP loan portfolio and balance
    our sources of revenue and
    funding.</FONT></I></B><FONT size="2"> Starting in 2002, we
    began holding a portion of the FFELP loans we originated. We
    plan on retaining a significant portion of the FFELP loans we
    originate in the future. Retaining these loans will give us the
    ability to recognize revenue from these assets over a long
    period of time, more fully utilize our servicing capabilities
    and help us to create a more robust customer information
    database for new and emerging products and services. We also
    intend to continue to sell a portion of the loan applications we
    originate. Our sales of originated loan applications allow us to
    maintain a balance in our sources of funding for loan processing
    and origination, provide us with a source of fee income and
    enable us to continue to build relationships and strategic
    partnerships with the financial institutions that acquire our
    loan applications.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <B><I><FONT size="2">Expand the origination capabilities of our
    servicer.</FONT></I></B><FONT size="2"> We intend to continue to
    expand the volume of loans we service for ourselves and for
    third-party lenders and to invest in the technology and
    infrastructure of our servicing operations to permit us to
    originate additional types of loans and increase our ability to
    provide private labeling capabilities to our clients. Through
    our servicer, we intend to extend the reach of our marketing,
    originate more loans and increase the volume of loans we
    service. We believe our enhanced servicing capabilities will
    enable us to support our growth in servicing and originations,
    increase our fee income from servicing and ensure that our
    customers have a favorable experience with CFS.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <B><I><FONT size="2">Seek out and make strategic
    acquisitions.</FONT></I></B><FONT size="2"> In 2003, we acquired
    and successfully integrated SunTech to provide our servicing
    operations. In the future, we will consider acquisitions of
    individual companies as well as loan and servicing portfolios
    that we believe have the potential to enhance the value of our
    company, expand our product reach and/or aid in executing our
    growth strategy.
    </FONT></TD>
</TR>

</TABLE>

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<P align="left">
<B><FONT size="2">Product and Service Offerings</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Loan origination</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Origination
channels.</FONT></B><FONT size="2"> We originate and acquire
education loans through a variety of methods, or channels,
including:
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Direct-to-consumer
(DTC).</FONT></I></B><FONT size="2"> We believe that companies
using direct marketing to consumers will continue to benefit in
the education finance market. We have adapted a
direct-to-consumer marketing model developed in the consumer
finance industry for use in education finance. We originate
education loans primarily by marketing directly to consumers
using direct mail, telemarketing and the Internet. We believe
our targeted DTC marketing strategy enables us to make more
consumers aware of our products. Our DTC channel accounted for
approximately 98% of the education loans we originated or
facilitated the origination of in both 2003 and 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We view education loans as consumer loans that
can be originated in any fashion convenient for the student,
parent or school. A substantial portion of our direct marketing
to consumers is geared towards our telemarketing customer call
centers generating calls to and receiving calls from eligible
borrowers to receive information specific to their eligibility
for different loan programs. Our telemarketing center associates
are extensively trained to adhere to current regulations as well
as to provide timely and convenient information concerning our
loan programs. They provide recent graduates, students and
parents specific, concise and accurate financial aid
information. One of our telemarketing center associates can
typically pre-qualify a borrower over the phone for a federal
consolidation, private, Stafford or PLUS loan in less than five
minutes.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Many of our customer solicitations are targeted
at potential borrowers that have been prescreened for the
likelihood of needing financing for their postsecondary
education or refinancing of their education debt and, in the
case of private loans, for creditworthiness. We use both
internal and external data sources that together create a
database of information used to target consumers in need of
education loans. We use information received from credit bureaus
and from third-party compiled and vertical mailing lists. Our
campaigns consist of mail and Internet offers and telemarketing
scripting delivered separately or in combination to desired
customers. We track and periodically review the results of our
various solicitation campaigns in a &#147;test and learn&#148;
environment. Our DTC marketing strategy targets products to a
consumer based on his or her specific profile and uses consumer
feedback and data analysis to revise and refine the products we
offer. In developing our targeting strategies, we attempt to
respect the privacy of our customers (and potential customers)
by using customer information only in accordance with our
privacy policies.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have the capability to originate loans over
the Internet and, in the past year, have invested in expanding
our Internet-based originations. We believe the Internet will be
a cost-effective and complementary alternative for loan
originations in our direct marketing efforts. In 2003, we tested
several marketing programs using Internet-based advertising, as
well as advertising on certain corporate websites. We intend to
continue to invest in the technology required to grow our
Internet-based origination capability to make it a critical
channel for the origination and facilitating the origination of
loans.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Affinity group
marketing.</FONT></I></B><FONT size="2"> We also market and
originate loans through relationships with certain alumni and
industry groups, including the American Medical Association, the
American Dental Association, the American Bar Association and
alumni associations, through which we are the provider of loan
products sponsored by these organizations. Through endorsements
of our products, groups such as these organizations, as well as
E-Loan and LendingTree, aid us in reaching new customers and
marketing to our current customer lists. This channel accounted
for approximately 2% and 3% of the education loans we originated
or of which we facilitated the origination in 2003 and 2002,
respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">School preferred lender
lists.</FONT></I></B><FONT size="2"> We also market and
originate loans to students currently enrolled in school and
recent graduates through financial aid offices. We have
relationships with 600&nbsp;schools and institutions of higher
learning and our products are on the preferred lender lists of
539&nbsp;institutions. We have a national sales force of
education industry professionals working with colleges and
universities
</FONT>

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<DIV align="left">
<FONT size="2">directly. We are currently expanding our
originations in the school channel by developing the internal
capability to provide originations of Stafford and PLUS loans
and private in-school loans through our servicing platform. In
the past year, our products were added to 430 school preferred
lender lists.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our national sales force of 21 professionals
focuses on implementing this strategy by educating college
financial aid officers about us and offering our products and
services to them. This participation may drive Stafford, PLUS
and private in-school loan volume from the students and parents
who select their lender from the school&#146;s preferred lender
list. In addition, we believe that a portion of the loans that
are originated through our DTC channel are a result of us being
on schools&#146; preferred lender lists.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">One of the primary benefits we offer to schools
is a range of loan products to student and parent borrowers.
Additional services we have developed or licensed to assist
schools and financial aid offices include:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="3%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Collegexit&nbsp;&#151; an Internet-based debt and
    graduation counseling tool, currently offered to students at 175
    financial aid offices across the country;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">RFP platform&nbsp;&#151; a platform designed to
    assist schools in the Request For Proposal (RFP)&nbsp;process
    for preferred lender lists and/or school-as-lender programs.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, our advisory board, consisting of
10&nbsp;financial aid and higher education professionals,
assists us in understanding and evaluating current trends in
education finance and school and student finance needs.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Secondary market
acquisitions.</FONT></I></B><FONT size="2"> In 2003, we acquired
a portion of our portfolio of federal education loans in the
secondary market. Many FFELP lenders sell their loans after
origination. Acquisitions through this channel accounted for
approximately 1% of the student loans in our portfolio in 2003
and are not included in our origination figures.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Our products.</FONT></B><FONT size="2"> The
great majority of education loans we originate are federally
guaranteed consolidation loans. We also originate and facilitate
the origination of private loans, as well as Stafford and PLUS
loans. We originated or facilitated the origination of
$4.2&nbsp;billion in federal and private loans in 2003 and have
done so with respect to over $15&nbsp;billion in such loans
since our inception in 1998. Of our total loan originations in
2003, $4.0&nbsp;billion were federally guaranteed consolidation
loans. See &#147;Industry Overview&#148; for a general
description of these products.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">FFELP
loans.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></I></B><FONT size="2">We
offer FFELP consolidation loans to qualifying borrowers. FFELP
consolidation loans allow borrowers with existing federal loans
to combine their federal education loans into a single loan,
with a fixed rate, to be repaid over a term ranging from 12 to
30&nbsp;years, depending on the size of the loan. We offer
federal consolidation loans in an amount sufficient to pay the
outstanding principal, unpaid interest and late charges on
federally insured or reinsured education loans incurred under
the FFEL Program selected by the borrower, as well as loans made
pursuant to the FDL Program, Perkins and Health Professional
Student Loan Programs.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We also offer borrowers Stafford and PLUS loans
in accordance with those FFEL programs. Subsidized Stafford
loans have terms of up to 10&nbsp;years after the borrower
leaves school, subject to extension, and are awarded to students
on the basis of financial need. Unsubsidized Stafford loans have
terms of up to 10&nbsp;years after the borrower leaves school,
subject to extension, and are available to all students
regardless of financial need. The maximum aggregate borrowing by
a single borrower of unsubsidized and subsidized Stafford loans
is $23,000 for a dependent undergraduate student, $46,000 for an
independent undergraduate student and $138,500 for a graduate
student (including undergraduate borrowings).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our PLUS loans have terms of up to 10&nbsp;years
and allow parents of dependent undergraduate students to borrow
up to the total cost of attendance at a low interest rate.
Unlike student borrowers, parents must pass a credit test to
borrow under the PLUS program. Through this program, parents may
borrow up to the cost of attendance per child, minus financial
aid from other sources.
</FONT>

<P align="center"><FONT size="2">57
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Private consolidation
loans.</FONT></I></B><FONT size="2"> We offer private
consolidation loans to student borrowers who have at least one
eligible private loan to consolidate. &nbsp;Like the FFELP
consolidation loan, borrowers can combine all of their private
education loans up to $125,000 into one loan, with a single
lower monthly payment, to be repaid over a term of up to
30&nbsp;years, depending on outstanding loan amount. These loans
are privately funded and guaranteed, credit-based, variable-rate
loans with an origination fee based on the applicant&#146;s
credit worthiness.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Private in-school loans.
</FONT></I></B><FONT size="2">The private in-school loans we
market are offered to supplement federal loans and aid available
to a wide range of students and their parents, from those
enrolled in kindergarten through graduate school, where the
federal loans and other aid does not cover the student&#146;s
education-related expenses. These loans are privately funded,
credit-based, variable-rate loans up to $30,000 per year that
generally require a co-signer. The term is up to 25&nbsp;years
depending on the amount of the loan and has an origination fee
based on the creditworthiness of the student and co-signer.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Borrower incentives.
</FONT></I></B><FONT size="2">We offer borrower incentives that
are designed to attract new borrowers and improve their
repayment behavior. Our automated clearing house
(ACH)&nbsp;incentive program, which is offered on all of our
loans, reduces a borrower&#146;s interest rate by 0.25%&nbsp;per
annum for so long as he or she makes monthly payments through
automatic deductions from his or her checking or savings
account. Approximately 30% of our borrowers currently
participate in this program. In addition, we offer FFELP
consolidation loan borrowers an on-time incentive program that
reduces a borrower&#146;s interest rates by 1.00%&nbsp;per annum
for so long as he or she makes a specified number of his or her
payments on time and continues to make subsequent payments on
time.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Portfolio funding and
liquidity.</FONT></B><FONT size="2"> A key component of our
business is maintaining access to diversified funding sources
for our education loans. In July 2003, we obtained a one-year,
$500.0&nbsp;million warehouse financing facility to fund our
loan originations. In February 2004, the facility was
temporarily expanded to $1.0&nbsp;billion through May 2004, at
which time it will return to its original $500.0&nbsp;million
capacity. The warehouse facility is provided by a commercial
paper conduit with liquidity support provided by a national
financial institution. Short-term warehousing allows us to
originate and fund education loans prior to transferring them
into more permanent financing arrangements. We hold loans in our
short-term warehousing facility for a period of time ranging
from approximately one month to as many as six months. Our
warehousing capacity allows us to pool education loans in order
to maximize characteristics for efficient securitization
financing and to time market conditions for our securitizations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We rely upon securitization vehicles as our
source of long-term funding for loans. Our first securitization
transaction was executed in 2001, utilizing a master trust
structure, and was comprised of privately placed auction-rate
notes. As the size and volume of our securitizations have
increased, we have begun publicly offering asset-backed
securities under shelf registration statements. During 2003,
2002 and 2001 we issued $1.9&nbsp;billion, $500.0&nbsp;million,
and $527.2&nbsp;million of asset-backed securities,
respectively. We had approximately $2.9&nbsp;billion in
asset-backed securities outstanding as of December&nbsp;31, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Forward purchase
agreements.</FONT></I></B><FONT size="2"> We have several
forward purchase agreements through which we utilize our
marketing platform and access our customer base for third-party
lenders. We currently have forward purchase agreements with
third-party lenders for whom we market FFELP and private
consolidation loans to potential and existing borrowers. The
terms of the agreements range from one to three years with
varying termination rights, although the parties generally have
the right to terminate upon the occurrence of material breach of
representations, warranties or covenants, default under debt
agreements or material adverse change, regulatory changes, or
bankruptcy. Each party has agreed to indemnify the other,
subject to certain limitations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We receive a fee for completed loan applications
or, in the case of private loans, loan disbursements. Through
these forward purchase agreements, third-party lenders are
provided access to borrowers without incurring the incremental
overhead costs of hiring additional sales and marketing
employees. We generally seek to require these counterparties to
service the loans we originate or process for origination with
our servicer for a pre-determined period of time.
</FONT>

<P align="center"><FONT size="2">58
</FONT>
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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are required to represent that the completed
loan applications we sell have been originated in compliance
with all applicable laws and regulations and, with respect to
federally guaranteed loans that the loans are in all respects
eligible for federal guarantee. If any of the FFELP
consolidation loan applications sold under our forward purchase
agreements are deemed ineligible for federal guarantee after
funding, we may be required to purchase the loans and reimburse
the DOE for fees and subsidies associated with such loans.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Fees received under forward purchase agreements
with Citibank (New York State), The Brazos Higher Education
Service Corporation, Inc. and ClassNotes, Inc. d/b/a Educaid,
each accounted for more than 10% of our net revenue in 2003. Any
failure to maintain or replace contractual relationships with
these financial institutions or lenders could have a material
adverse effect on our ability to sustain or increase our
business.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Marketing
agreements.</FONT></I></B><FONT size="2"> We have a relationship
with a financial institution for whom we market private
in-school loans, and who agrees to originate and fund the loans
we market. Under this contractual relationship, we generate loan
applications that are referred to the provider over a
pre-determined period of time and at an agreed upon fee. Certain
conditions mandate that a specific volume of applications be
referred to a provider over a period of time. We are paid for
private in-school loan referrals when a loan is funded by a
lender. The parties have the right to terminate upon the
occurrence of material breach or the bankruptcy of either party.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Eligible
lender.</FONT></I></B><FONT size="2"> When we originate FFELP
loans on our own behalf or when we acquire FFELP loans from
others, we engage U.S. Bank National Association as our
&#147;eligible lender,&#148; as defined in the Higher Education
Act, to act as our trustee to hold title to all such originated
and acquired FFELP loans. This eligible lender trustee holds the
legal title to our FFELP loans, and we hold 100% of the
beneficial interests in those loans.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">See note&nbsp;20 of the notes to our consolidated
financial statements for segment information relating to our
loan origination segment.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Loan servicing</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We specialize in the servicing of federally
guaranteed and private education loans. Our servicing division
offers a complete line of education loan services, including
recovery of non-guaranteed loans, application processing,
disbursement of funds, customer service, account maintenance,
federal reporting and billing collections, payment processing,
default aversion and claim filing. Our contact center staff is
trained in all phases of education credit and can address most
matters with respect to customers&#146; accounts, including the
origination of new loans. SunTech, our servicer, uses an
internally-developed system to manage the servicing process that
provides for automated compliance with most Higher Education Act
regulations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We acquired our wholly-owned servicer, SunTech,
on April&nbsp;15, 2003. SunTech began servicing education loans
in 1990 and services many of the loans we have originated since
our formation in 1998. Prior to 1990, SunTech was part of the
Mississippi secondary market and had serviced loans in that
capacity since 1984. As of December&nbsp;31, 2003, SunTech
serviced a portfolio of approximately 360,000&nbsp;accounts with
outstanding FFELP and private education loan balances of
approximately $8.9&nbsp;billion.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As the primary means of communication with our
customers after their loans are originated, our servicing
operation is managed to provide our customers consistent and
seamless service. Our quality and experience in education loan
servicing is evident in the historical performance of our entire
pool of loan assets, which has historically had a very low net
claim reject rate by guaranty agencies due to servicer error,
which is the percent of claims ultimately rejected by a guaranty
agency due to servicer error. In 2003, SunTech&#146;s net claim
reject rate due to servicer error was approximately 0.02% of all
claims filed by us or our servicing customers. Historically, the
aggregate losses of SunTech&#146;s servicing customers from
servicing-related errors has been $0&nbsp;per year. We believe
our internal servicing operation minimizes our
</FONT>

<P align="center"><FONT size="2">59
</FONT>

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<DIV align="left">
<FONT size="2">credit risk and is an asset as we securitize our
portfolio of loans and seek forward purchase partners willing to
use us as their loan servicer.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">See note&nbsp;20 of the notes to our consolidated
financial statements for segment information relating to our
loan servicing segment.
</FONT>

<P align="left">
<B><FONT size="2">Our Competition</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We face significant competition from numerous
competitors, including SLM Corporation, the parent company of
Sallie Mae. SLM Corporation originated $15.2&nbsp;billion of
education loans through its preferred channel in 2003, services
nearly half of all outstanding FFELP loans and is the largest
holder of student loans, with a managed portfolio of
approximately $89&nbsp;billion as of December&nbsp;31, 2003. In
2002, Sallie Mae began actively marketing consolidation loans
and, as a result of its substantial market presence, quickly
became a leading originator in the consolidation marketplace.
College Loan&nbsp;Corporation originates and retains FFELP loans
and markets private education loans. Education Lending
Group,&nbsp;Inc. holds guaranteed student loans originated with
the assistance of third parties.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We also face competition from other education
finance companies and financial institutions that market,
originate or purchase guaranteed or private education loans. As
we seek to further expand our business, we will face numerous
other competitors, many of whom are already well established in
the markets we seek to penetrate. Some of our competitors are
much larger than we are, have better name recognition than we do
and have greater financial and other resources than we do. In
addition, several of our competitors have large market
capitalizations or cash reserves and are better positioned to
acquire companies or portfolios in order to gain market share
than we are.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Many banks, education finance companies and
secondary market holders recently have begun to engage in
consolidations to prevent loans in their respective portfolios
from being consolidated by other lenders. In addition, as
interest rates have fallen and the market for consolidation
loans has increased, new companies have entered the business of
directly marketing loans to consumers who are eligible for
consolidation of their education loans.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We also face competition from the FDL Program.
Through the FDL Program, the DOE makes loans directly to
students through the educational institutions they attend. The
volume of student loans made under the FFEL Program and
available for us to originate may be reduced to the extent that
the FDL program makes loans to students. The DOE also offers
consolidation loans and has marketed this product widely in
prior years. However, we believe it has recently reduced its
marketing related to consolidation loans.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Legislation has been proposed aimed at supporting
the FDL Program to the detriment of the FFEL Program. If such
legislation were to be enacted, this would have a material
negative impact on us.
</FONT>

<P align="left">
<B><FONT size="2">Seasonality</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Origination of consolidation student loans is
generally subject to seasonal trends, which correspond to the
period prior to or immediately after the July&nbsp;1 reset in a
rising or falling interest rate environment and also to the
expiration of the six-month grace period on payment of certain
loans after graduation, which generally falls in December. Due
to our portfolio size, new disbursements or run-off for any
given month will not materially change the net interest earnings
of the portfolio.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">However, certain other factors may cause our
quarterly results of operations to vary, including, in
particular, unexpected changes in interest rates and the amount
and timing of our loan sales.
</FONT>

<P align="left">
<B><FONT size="2">Properties</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our headquarters are currently located in
Fredericksburg, Virginia, and we have additional offices in
Tampa, Florida and Jackson, Mississippi.
</FONT>

<P align="center"><FONT size="2">60
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We lease land and buildings for our executive
offices and operations. The following table summarizes
information with respect to the principal facilities that we
lease:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="26%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="32%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Location</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Principal Activities</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Area (sq. feet)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Lease Expiration Date</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <FONT size="2">Fredericksburg, Virginia<SUP>(1)</SUP>
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Headquarters&nbsp;and&nbsp;call&nbsp;center
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">54,179</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">09/30/2005</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pinellas Park, Florida
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Call center
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">18,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">03/01/2005</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Jackson, Mississippi
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Servicing&nbsp;and&nbsp;loan&nbsp;processing
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">52,783</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">04/01/2005</FONT></TD>
    <TD align="left" valign="top" nowrap><SUP><FONT size="2">(2)</FONT></SUP></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Washington, DC
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Government relations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">562</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">06/30/2004</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="15%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(1)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">We recently signed a new lease for our principal
    executive offices and will be relocating our headquarters and
    call center in the third quarter of 2004 to 10304 Spotsylvania
    Avenue, Fredericksburg, Virginia 22408. The new lease expires in
    May&nbsp;10, 2010 and the office space is approximately
    64,179&nbsp;square feet.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(2)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Consists of two leases with concurrent expiration.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Employees</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of December&nbsp;31, 2003, we had
approximately 828&nbsp;full-time employees and
236&nbsp;part-time employees. Approximately 254 of our employees
are salaried and approximately 810 are hourly. We are not
subject to any collective bargaining agreements, and we consider
relations with our employees to be good.
</FONT>

<P align="left">
<B><FONT size="2">Legal Proceedings</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are involved in litigation in the ordinary
course of business, both as a defendant and as a plaintiff.
While we cannot predict the outcome of any pending or future
litigation, examination or investigation, we do not believe that
any pending matter will have a material adverse effect on our
financial condition or results of operations.
</FONT>

<P align="center"><FONT size="2">61
</FONT>
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<DIV align="left">
<A name='113'></A>
</DIV>

<!-- link1 "MANAGEMENT" -->

<P align="center">
<B><FONT size="2">MANAGEMENT</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Set forth below are the names, ages as of April,
2004, and current positions of our executive officers and
current directors.
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="46%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="44%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Age</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Position</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">J. Barry Morrow
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">51</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Chief Executive Officer and Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Kevin A. Landgraver
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">41</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Executive Vice President and Chief Financial
    Officer
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">W. Clark McGhee
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">39</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Executive Vice President&#151;Marketing
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Charles L. Terribile
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">58</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Executive Vice President and General Counsel
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">John A. Reeves
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">53</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Executive Vice President&#151;Government and
    Industry Relations
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">John R. Elam
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">58</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Executive Vice President&#151;Servicing and
    Operations
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Donald B. Marron
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">69</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Chairman of the Board and Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Lawrence A. Hough
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">60</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Bruce J. Rubin
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">44</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Richard J. Sterne
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">57</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mark F. Vassallo
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">41</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">J.&nbsp;Barry Morrow
</FONT></I></B><FONT size="2">has been our president and chief
executive officer since 2002. From 2000 to 2002, Mr.&nbsp;Morrow
served as our president and chief operating officer.
Mr.&nbsp;Morrow previously served as the general manager of
Financial Partners for the Office of Student Financial
Assistance at the U.S.&nbsp;Department of Education from 1999 to
2000. Prior to that, Mr.&nbsp;Morrow spent over 17&nbsp;years
with Sallie Mae in various positions including the senior
operations executive. Mr.&nbsp;Morrow holds a B.A. from Virginia
Tech and an M.A. in Public Administration from George Washington
University.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Kevin A.
Landgraver</FONT></I></B><FONT size="2"> has been our executive
vice president and chief financial officer since September,
2001. From March, 1995 to September, 2001, Mr.&nbsp;Landgraver
served as the senior vice president for Educaid, a student loan
company. Mr.&nbsp;Landgraver received a B.A. from Macalester
College and an M.B.A. from Rockhurst University.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">W.&nbsp;Clark
McGhee</FONT></I></B><FONT size="2"> has been our executive vice
president of marketing since August, 2001. From August, 1999 to
August, 2001, Mr.&nbsp;McGhee was the president of Servus
Financial Corporation, a wholly owned private education loan
subsidiary of Wells Fargo Bank. From June, 1986 to August, 1999,
Mr.&nbsp;McGhee held positions at SunTrust Bank (formerly
Crestar Financial Corporation), serving as both executive vice
president of its small business and consumer Internet lines of
business as well as chief executive officer of SunTrust
Education Financial Services Corporation. Mr.&nbsp;McGhee holds
a B.S. from the University of Richmond.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Charles L.
Terribile</FONT></I></B><FONT size="2"> has been our executive
vice president and general counsel since December, 2001. Prior
to that, Mr.&nbsp;Terribile spent 23&nbsp;years with First Union
Corporation, holding a number of positions, including deputy
general counsel for consumer products and services. From 1972 to
1978, Mr.&nbsp;Terribile was an assistant to the commissioner of
the New Jersey Department of Banking. From 1970 to 1972,
Mr.&nbsp;Terribile served as a deputy attorney general for the
New Jersey State Attorney General&#146;s Office.
Mr.&nbsp;Terribile holds a B.S. from the Pennsylvania State
University and a J.D. from Rutgers School of Law.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">John A. Reeves
</FONT></I></B><FONT size="2">has been our executive vice
president of government and industry relations since June, 2002.
From October, 2000 to June, 2002, Mr.&nbsp;Reeves served as the
general manager of Financial Partners for the Office of Student
Financial Assistance at the U.S. Department of Education. From
1988 to 2000, Mr.&nbsp;Reeves served as president of Educaid.
Mr.&nbsp;Reeves holds a B.A. from Lewis &#38; Clark College and
a J.D. from Drake University School of Law.
</FONT>

<P align="center"><FONT size="2">62
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">John R. Elam
</FONT></I></B><FONT size="2">has been our executive vice
president of servicing and operations since April, 2003 and has
been the president and chief operating officer of CFS-SunTech
Servicing LLC since April, 2004. From 2001 to 2003,
Mr.&nbsp;Elam served as senior vice president for Wells Fargo
Mortgage. From 1998 to 2001, Mr.&nbsp;Elam served as chief
information officer for the North American Mortgage Company.
From 1996 to 1998, Mr.&nbsp;Elam served as chief operating
officer for the Computer Science Corporation. From 1992 to 1996,
Mr. Elam held positions at Chase Manhattan Corporation, serving
as both a division senior vice president and vice president of
operations and new acquisitions. From 1991 to 1992,
Mr.&nbsp;Elam served as the special assistant to the Secretary
of Education. From 1990 to 1991, Mr.&nbsp;Elam served as a vice
president for Sallie Mae. Mr.&nbsp;Elam holds a B.S. from Auburn
University, an M.A. in history from University of Georgia and an
M.B.A. from Golden Gate University.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Donald B. Marron
</FONT></I></B><FONT size="2">has been the chairman and CEO of
Lightyear Capital, LLC, an entity he founded, since 2001.
Mr.&nbsp;Marron served as president of PaineWebber Group Inc.
from 1977 to 1980, and as chairman and CEO from 1981 until its
merger with UBS AG in November, 2000. Following the merger,
Mr.&nbsp;Marron served as chairman of UBS America until
September, 2003. Mr.&nbsp;Marron also serves as a director of
Shinsei Bank and Fannie Mae.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Lawrence A. Hough
</FONT></I></B><FONT size="2">has been the chairman of Stuart
Mill Capital, Inc., an investment management company which he
founded, since 1998. In 1999, Stuart Mill Capital, Inc. led an
investment group which acquired, managed, and sold SatoTravel, a
global travel management company. From July, 1990 to August,
1997, Mr. Hough served as president and chief executive office
of SallieMae, where he had been employed since 1972. Mr. Hough
serves as a director of Orbimage, Versura, Inc., and as non
executive chairman of the board of SynXis Inc. Mr. Hough also
serves as a trustee of the Shakespeare Theatre, a trustee of the
Levine School of Music and a director of Community Foundations
of America.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Bruce J. Rubin
</FONT></I></B><FONT size="2">has been a managing director and
chief administrative officer at Lightyear Capital, LLC since
2001. Prior to joining Lightyear, Mr.&nbsp;Rubin spent seven
years with the PaineWebber Group Inc., serving as a managing
director and chief operating officer of PaineWebber Real Estate
Fund and as president and CEO of PaineWebber Properties.
Mr.&nbsp;Rubin held various executive positions at Shearson
Lehman, Smith Barney and Kidder Peabody from 1989 to 1994.
Mr.&nbsp;Rubin also serves on the boards of directors of Kepler
Equities, DeepGreen Financial and Ripon Cogeneration,&nbsp;Inc.
Mr.&nbsp;Rubin holds a B.A. from Stanford University and a J.D.
from Stanford Law School.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Richard J. Sterne
</FONT></I></B><FONT size="2">has been a partner and managing
director of Lightyear Capital, LLC since 2001. From 1999 until
joining Lightyear, Mr. Sterne was a managing director at
PaineWebber Group Inc. in the Principal Transactions Group,
responsible for the firm&#146;s proprietary investments. From
1995 until joining PaineWebber, Mr. Sterne was the chairman and
chief executive officer of Links Securities, Inc.
Mr.&nbsp;Sterne holds a B.A. from Harvard University and an
M.B.A. from Stanford University Business School.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Mark F. Vassallo
</FONT></I></B><FONT size="2">has been a partner and managing
director at Lightyear Capital,&nbsp;LLC since September, 2003.
Prior to joining Lightyear, Mr.&nbsp;Vassallo spent 16 years at
PaineWebber Group Inc. Following the merger of PaineWebber and
UBS AG, Mr.&nbsp;Vassallo spent three years at UBS serving as
managing director, and as senior advisor to Lightyear Capital.
Mr.&nbsp;Vassallo also serves on the boards of directors of New
Flyer Industries and Kepler Equities. Mr. Vassallo holds a B.A.
from Harvard University and an M.B.A. from Columbia University.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Each officer serves at the discretion of our
board of directors and holds office until his or her successor
is elected and qualified or until his or her earlier resignation
or removal. There are no family relationships among any of our
directors or executive officers.
</FONT>

<P align="left">
<B><FONT size="2">Composition of the Board</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our board of directors currently consists of
six&nbsp;directors. We currently have one independent member of
our board of directors, and plan to add a second independent
member within three months after the consummation of this
offering and a third independent member to our board of
directors within 12&nbsp;months after the consummation of this
offering.
</FONT>

<P align="center"><FONT size="2">63
</FONT>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pursuant to our amended and restated certificate
of incorporation, our board of directors will be divided into
three classes. The member or members of each class will serve
for a staggered, three-year term. Upon the expiration of the
term of a class of directors, the director or directors in that
class will be elected for three-year terms at the annual meeting
of stockholders in the year in which his or her or their term
expires. We currently anticipate that the classes will be
composed as follows:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Class&nbsp;I
    Directors:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;will
    be Class&nbsp;I directors and their terms will expire at the
    2005 annual meeting of stockholders;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Class&nbsp;II
    Directors:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;will
    be Class&nbsp;II directors and their terms will expire at the
    2006 annual meeting of stockholders;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Class&nbsp;III
    Directors:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;will
    be Class&nbsp;III directors and their terms will expire at the
    2007 annual meeting of stockholders.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If the number of directors is increased, the
increase in directorships will be apportioned among the three
classes so that, as nearly as possible, each class will consist
of one-third of our directors. This classification of our board
of directors may have the effect of delaying or preventing
changes in control of our company.
</FONT>

<P align="left">
<B><FONT size="2">Committees of the Board of Directors</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our board of directors currently has a
compensation committee and an audit committee and will have a
nominating and corporate governance committee prior to the
closing of this offering.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Audit committee</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our audit committee will initially consist of at
least one independent member prior to the consummation of this
offering. The audit committee will be responsible for
(1)&nbsp;selecting the independent auditors, (2)&nbsp;approving
the overall scope of the audit, (3)&nbsp;assisting the board in
monitoring the integrity of our financial statements, the
independent accountant&#146;s qualifications and independence,
the performance of the independent accountants and our internal
audit function and our compliance with legal and regulatory
requirements, (4)&nbsp;annually reviewing an independent
auditors&#146; report describing the auditing firms&#146;
internal quality-control procedures, any material issues raised
by the most recent internal quality-control review, or peer
review, of the auditing firm, (5)&nbsp;discussing the annual
audited financial and quarterly statements with management and
the independent auditor, (6)&nbsp;discussing earnings press
release, as well as financial information and earnings guidance
provided to analysts and rating agencies, (7)&nbsp;discussing
policies with respect to risk assessment and risk management,
(8)&nbsp;meeting separately, periodically, with management,
internal auditors and the independent auditor,
(9)&nbsp;reviewing with the independent auditor any audit
problems or difficulties and managements&#146; response,
(10)&nbsp;setting clear hiring policies for employees or former
employees of the independent auditors, (11)&nbsp;establishing
procedures for handling complaints regarding the company&#146;s
accounting practices, (12)&nbsp;engaging advisors as necessary
to carry out its duties and determining appropriate funding for
payment of compensation to independent auditors and advisors,
(13)&nbsp;handling such other matters that are specifically
delegated to the audit committee by the board of directors from
time to time and (14)&nbsp;reporting regularly to the full board
of directors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Following the consummation of this offering, we
plan to nominate a second independent member to our audit
committee within three months thereafter and a third independent
member within 12&nbsp;months thereafter to replace existing
members so that all of our audit committee members will be
independent as such term is defined in Rule&nbsp;10A-3(b)(1)
under the Securities Exchange Act of 1934 as amended (the
&#147;Exchange Act&#148;). In addition, one of them will be an
&#147;audit committee financial expert&#148; as such term is
defined in Item&nbsp;401(h) of Regulation&nbsp;S-K.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our board of directors will adopt a written
charter for the audit committee which will be available on our
website.
</FONT>

<P align="center"><FONT size="2">64
</FONT>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Compensation committee</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The compensation committee is responsible for
(1)&nbsp;reviewing key employee compensation policies, plans and
programs, (2)&nbsp;reviewing and approving the compensation of
our executive officers, (3)&nbsp;reviewing and approving
employment contracts and other similar arrangements between us
and our executive officers, (4)&nbsp;reviewing and consulting
with the chief executive officer on the selection of officers
and evaluation of executive performance and other related
matters, (5)&nbsp;administration of stock plans and other
incentive compensation plans and (6)&nbsp;such other matters
that are specifically delegated to the compensation committee by
the board of directors from time to time.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our board of directors will adopt a written
charter for the compensation committee which will be available
on our website.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The compensation committee will be chaired
by &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
is also comprised
of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Nominating and corporate governance
    committee</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon the consummation of this offering, we will
establish a nominating and corporate governance committee. The
nominating and corporate governance committee will be
responsible for the oversight of, and assist our board of
directors in developing and recommending, corporate governance
practices and selecting the director nominees to stand for
election at annual meetings of stockholders.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our board of directors will adopt a written
charter for the nominating and corporate governance committee
which will be available on our website.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The nominating and corporate governance committee
will be chaired
by &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
will also be comprised
of &nbsp;and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><FONT size="2">Compensation Committee Interlocks and Insider
    Participation</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">None of the members of our compensation committee
is or has been an officer or an employee of the company. None of
our executive officers serves as a member of the board of
directors or compensation committee of any entity that has one
or more executive officers serving as a member of our board of
directors or compensation committee.
</FONT>

<P align="left">
<B><FONT size="2">Director and Executive Compensation</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Director compensation</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We do not currently pay any compensation to any
of our directors for serving as a director or as a member or
chair of a committee of the board of directors. Following this
offering, we plan to pay our independent directors
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;annually
and
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
day for each board meeting and each committee meeting attended.
Directors will also be eligible to participate in our Stock
Incentive Plan.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Executive compensation</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As an independent company, we have established
executive compensation practices that link compensation with our
performance as a company. We will continually review our
executive compensation programs to ensure that they are
competitive.
</FONT>

<P align="center"><FONT size="2">65
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table shows 2003 compensation
information on an annual basis, to the extent that it is
currently determinable, for our chief executive officer and our
four other most highly compensated executive officers based on
salary, whom we refer to as the &#147;named executive
officers.&#148; Other Annual Compensation represents our
estimate of perquisites payable to the named executive officers
for 2003 and long-term compensation represents the options that
have been awarded to the named executive officers in 2003.
</FONT>

<P align="center">
<B><FONT size="2">Summary Compensation Table</FONT></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="23%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Long-Term</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Compensation</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">Annual Compensation</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Securities</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name And Principal</FONT></B></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Other Annual</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Underlying</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">All Other</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Position</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Salary($)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Bonus($)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Compensation($)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Options ($)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Compensation($)</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">J. Barry Morrow, Chief Executive Officer
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">419,923</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">625,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">$6,138</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">(1)</FONT></SUP></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Kevin A. Landgraver, Executive Vice President and
    Chief Financial Officer
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">243,338</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">280,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,060</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">(1)</FONT></SUP></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">W. Clark McGhee, Executive Vice
    President&nbsp;&#151; Marketing
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">259,108</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">230,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,054</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">(1)</FONT></SUP></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Charles L. Terribile, Executive Vice President
    and General Counsel
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">212,569</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">220,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,258</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">(1)</FONT></SUP></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">John R. Elam,<BR>
    Executive Vice President&nbsp;&#151; Servicing and Operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">142,789</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">(2)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">125,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">(2)</FONT></SUP></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">91,752</FONT></TD>
    <TD align="left" valign="bottom" nowrap><SUP><FONT size="2">(3)</FONT></SUP></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="30%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(1)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Represents employer contributions to the
    company&#146;s 401(k) plan with respect to this executive
    officer and nominal amounts with respect to paid leave.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(2)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Represents amount earned in 2003 from employment
    starting on April&nbsp;28, 2003 of an annual salary of $225,000
    and a pro-rated annual bonus.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(3)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Reflects amounts received with respect to
    relocation reimbursement.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">66
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">Aggregated Option Exercises in Last Fiscal
Year and Fiscal Year-End Option Values</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">None of our named executive officers exercised
stock options during the year ended December&nbsp;31, 2003. The
following table sets forth information on unexercised options to
purchase our common stock held by the named executive officers
as of December&nbsp;31, 2003. There was no public trading market
for our common stock as of December&nbsp;31, 2003. Accordingly,
the values of the unexercised in-the-money options have been
calculated based on an assumed initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, the midpoint of the price set forth on the cover page of
this prospectus, less the per share exercise price, multiplied
by the number of shares underlying the options.
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="45%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Number of securities</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Value of unexercised</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">underlying unexercised</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">in-the-money options</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">options at fiscal year end</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">at fiscal year end</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercisable</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unexercisable</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercisable</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unexercisable</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">J. Barry Morrow
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">102,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Kevin A. Landgraver
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">W. Clark McGhee
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,700</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">53,300</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Charles L. Terribile
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36,900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Stock Incentive Plan</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Overview.</FONT></I></B><FONT size="2"> Our
board of directors adopted the Stock Incentive Plan, or the
Plan, on May&nbsp;16, 2002 and our stockholders approved the
Plan on May&nbsp;16, 2002. The maximum aggregate number of
shares of common stock that may be issued pursuant to all awards
under the plan is 700,000.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We expect that, prior to the consummation of this
offering, the board will adopt an amended and restated version
of the Plan, which will, subject to approval by our stockholders
prior to this offering, be effective as of the consummation of
the offering and will increase the maximum number of shares of
common stock that may be issued pursuant to the Plan
to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
The amended and restated version of the Plan, will provide for
the grant of options and other equity-based awards relating to
our publicly traded common stock. The terms of the Stock
Incentive Plan are described more fully below.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Outstanding options.
</FONT></I></B><FONT size="2">On May&nbsp;16, 2002, the board of
directors approved the grant to five employees of options to
purchase 315,000 shares of our common stock. Each option had an
exercise price of $1.30 per share. Of these, options to purchase
56,700 shares are currently vested and exercisable and the
remaining 258,300 options will become fully vested and
exercisable after seven years or upon satisfaction of certain
terms and conditions or upon a change of control.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Types of
awards.</FONT></I></B><FONT size="2"> The Plan provides for the
grant of incentive stock options, non-qualified stock options,
restricted stock and other stock-based awards to our employees,
directors and consultants and to those of our subsidiaries and
affiliates.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Administration.
</FONT></I></B><FONT size="2">The plan will be administered by
our board of directors or by a committee designated by the
board, which committee (1)&nbsp;will be constituted in such a
manner as to permit such grants and related transactions under
the Plan to be exempt from Section&nbsp;16(b) of the Securities
Exchange Act, in accordance with Rule&nbsp;16b-3 and
(2)&nbsp;will consist of &#147;outside directors&#148; within
the meaning of Section&nbsp;162(m) of the Internal Revenue Code,
as amended. All awards must be approved by our board of
directors, based on recommendations by our Chief Executive
Officer. The committee will have the discretion to approve forms
of award agreements for use under the plan, construe and
interpret the terms of the Plan and awards, and amend the terms
of any outstanding award, including to provide for accelerated
vesting of the award, so long as any amendment does not
adversely affect the grantee&#146;s rights under the outstanding
award. The committee will have the authority to take action it
deems appropriate that is not inconsistent with the terms of the
Plan.
</FONT>

<P align="center"><FONT size="2">67
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Options. </FONT></I></B><FONT size="2">The
term of each option will be no more than ten years from the date
of grant. Unless otherwise provided at the time of grant,
options will become exercisable in 25% installments on each of
the first four anniversaries of the date of the consummation of
this offering. The committee will determine the exercise price
for each option, but each option must have an exercise price
that is at least equal to the fair market value of a share of
our common stock on the date the option is granted. An option
holder may exercise an option by written notice and payment of
the exercise price (1)&nbsp;in cash, (2)&nbsp;by check,
(3)&nbsp;by surrender of shares of common stock or delivery of a
form of attestation of ownership of shares of common stock that
have been owned by the option holder for at least six months or
for such other period consistent with applicable accounting
rules, with a fair market value on the date of surrender or
attestation equal to the aggregate exercise price,
(4)&nbsp;payment through the delivery of irrevocable
instructions to a broker-dealer to immediately sell shares
obtained upon the exercise of the option and, out of the sale
proceeds, deliver to the Company an amount equal to the exercise
price for the shares of common stock being purchased, or
(5)&nbsp;any combination of the foregoing methods.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Restricted stock and other stock-based
awards.</FONT></I></B><FONT size="2"> The Plan will provide that
the committee may grant awards of shares of restricted common
stock, shares of common stock, and awards that are valued by
reference to, or that are otherwise based on, the fair market
value of shares of common stock. Such awards will be subject to
terms and conditions established by the committee.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Amendment and
termination.</FONT></I></B><FONT size="2"> Subject to compliance
with applicable laws, our board of directors may amend, suspend
or terminate the Plan at any time, as long as the amendment,
suspension or termination does not diminish any of the rights of
a participant under any awards previously granted under the Plan
without the consent of the participant.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">401(k) Plan</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In July 2000, we established a retirement savings
plan under section&nbsp;401(k) of the Internal Revenue Code of
1986, as amended (the &#147;Code&#148;), to cover our eligible
employees. The Code allows eligible employees to defer a portion
of their compensation, within prescribed limits, on a
tax-deferred basis through contributions to the 401(k) plan. Our
401(k) plan is intended to constitute a qualified plan under
Section&nbsp;401(a) of the Code and its associated trust is
intended to be exempt from federal income taxation under
Section&nbsp;501(a) of the Code. Our 401(k) plan permits us to
make discretionary matching contributions on behalf of eligible
employees and for the year ended December&nbsp;31, 2003, we
matched 100% of the first 3% of the employee&#146;s compensation
to a maximum of $6,000 per year. As of January&nbsp;1, 2004, we
raised our maximum company match to $6,150 per year. The match
percentage and maximum employer contribution is designated on an
annual basis at our discretion and may charge in future periods.
Our discretionary contributions vest immediately. Our
discretionary matching contributions to the 401(k) plan totaled
$0.8&nbsp;million, $0.6&nbsp;million and $0.4&nbsp;million in
2003, 2002 and 2001, respectively.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Employment agreements</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have employment agreements with each of our
executive officers and are currently negotiating new employment
agreements with each of them.
</FONT>

<P align="center"><FONT size="2">68
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<A name='114'></A>
</DIV>

<!-- link1 "PRINCIPAL STOCKHOLDERS" -->

<P align="center">
<B><FONT size="2">PRINCIPAL STOCKHOLDERS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth certain
information with respect to the beneficial ownership of our
common stock, as of December&nbsp;31, 2003 and as adjusted to
reflect the sale of common stock offered by us in this offering,
for:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">each person who we know beneficially owns more
    than 5% of our common stock;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">each of our directors;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">each of our named executive officers;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">all of our directors and executive officers as a
    group.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Beneficial ownership is determined in accordance
with the rules of the SEC and includes voting or investment
power with respect to the securities. Except as indicated by
footnote, and subject to applicable community property laws,
each person identified in the table possesses sole voting and
investment power with respect to all capital stock shown to be
held by them. The number of shares of common stock outstanding,
on an as-converted basis, used in calculating the percentage for
each listed person or entity includes common stock underlying
stock options and warrants held by the person or entity that are
exercisable within 60&nbsp;days of December&nbsp;31, 2003, but
excludes common stock underlying stock options held by any other
person or entity. Percentage of beneficial ownership is based on
14,734,311 shares of common stock outstanding as of
December&nbsp;31, 2003. The numbers shown in the table assume no
exercise shares of common stock outstanding as of
December&nbsp;31, 2003. The numbers shown in the table assume no
exercise by the underwriters of their over-allotment option.
Unless otherwise indicated, the principal address of each of the
stockholders below is c/o&nbsp;Collegiate Funding Services LLC,
100 Riverside Parkway Suite&nbsp;125, Fredericksburg, Virginia
22406.
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="48%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Percentage of shares outstanding</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares beneficially</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">owned prior to</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Prior to this</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name of beneficial owner</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">this offering</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">offering</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">After this offering</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">5% Stockholders:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Lightyear entities<SUP>(1)(2)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,730,784</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">72.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">CDP Financial Services (US)&nbsp;LP<SUP>(2)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,701,519</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">TCW entities<SUP>(2)(3)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,504,225</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Executive officers and directors:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">J. Barry Morrow<SUP>(2)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">192,350</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Kevin A. Landgraver<SUP>(2)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33,180</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">W. Clark McGhee<SUP>(2)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">42,740</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Charles L. Terribile<SUP>(2)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31,380</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">John Reeves
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">John R. Elam
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Donald B. Marron<SUP>(1)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Lawrence A. Hough
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Bruce J. Rubin<SUP>(1)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Richard J. Sterne<SUP>(1)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mark Vassallo<SUP>(1)</SUP>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">All directors and executive officers as a group
    (11&nbsp;persons)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">299,650</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="15%" align="left" noshade>

<P align="left">
<FONT size="2">*&nbsp;&nbsp;&nbsp;&nbsp;Indicates less than 1%.
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(1)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Shares shown as beneficially owned by the
    Lightyear entities are held directly by The Lightyear Fund, L.P.
    and Lightyear Co-Invest Partnership, L.P. The Lightyear Fund
    G.P., LLC is the sole general partner of each of these entities.
    Messrs.&nbsp;Rubin, Sterne and Vassallo are members of The
    Lightyear Fund G.P., LLC which has investment and voting control
    over the shares controlled by each of these entities, and may be
    deemed to be beneficial owners of such shares. Mr. Marron is the
    founding member of Lightyear and, as such may also be deemed to
    share beneficial ownership of the shares controlled by these
    entities. Each of The Lightyear Fund G.P., LLC and
    Messrs.&nbsp;Marron, Rubin, Sterne and Vassallo disclaim
    beneficial ownership of such shares. The address of each of the
    Lightyear entities is c/o&nbsp;Lightyear Capital, LLC, 51 West
    52nd&nbsp;Street, 23rd&nbsp;Floor, New&nbsp;York, New&nbsp;York
    10019.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(2)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Also holds shares of preferred stock of CFSL
    Acquisition Corp. in the following amounts: Lightyear
    entities&#151;11,817,679; CDP Financial Services (US)
    LP&#151;1,873,938; TCW entities&#151;1,561,656; J.
    Morrow&nbsp;&#151; 76,665; C. McGhee&nbsp;&#151; 34,069; K.
    Landgraver&nbsp;&#151; 25,551; and C.&nbsp;Terribile&nbsp;&#151;
    25,551. Upon consummation of this offering, each will receive
    the liquidation preference ($89,136,000 in the aggregate as of
    December&nbsp;31, 2003) with respect to such shares to be paid
    from the proceeds of this offering.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><SUP><FONT size="2">(3)</FONT></SUP><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes TCW/ Crescent Mezzanine
    Partners&nbsp;III, L.P., TCW/ Crescent Mezzanine Trust&nbsp;III,
    TCW Crescent/ Mezzanine Partners&nbsp;III Netherlands, L.P. and
    TCW Leveraged Income Trust&nbsp;IV and includes
    619,048&nbsp;shares issuable upon exercise of warrants for
    nominal consideration.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">69
</FONT>

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<DIV align="left">
<A name='115'></A>
</DIV>

<!-- link1 "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" -->

<P align="center">
<B><FONT size="2">CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS</FONT></B>

<P align="left">
<B><FONT size="2">Our Relationship with Lightyear and Existing
Shareholders</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Lightyear Fund, L.P. is a private equity fund
based in New&nbsp;York. It was formed on November&nbsp;3, 2000
as a limited partnership pursuant to the laws of the State of
Delaware, and commenced operations on January&nbsp;1, 2001. As
an investment fund, The Lightyear Fund, L.P. seeks capital
appreciation through direct private equity and equity-related
investments, including leveraged acquisitions, buildups,
recapitalizations, restructurings, management buyouts,
pre-public offering opportunities and growth equity
transactions. The Lightyear Fund, L.P. and its affiliates, or
Lightyear, acquired their interest in us in May 2002. After
giving effect to this offering, Lightyear will beneficially
own &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of our common stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under a Management Agreement, dated May&nbsp;17,
2002, as amended, among us, Lightyear Capital, LLC, CFSL
Acquisition Corp. and Collegiate Funding Services, L.L.C., we
pay a management fee equal to $1.25&nbsp;million per annum to
Lightyear, plus reasonable out-of-pocket expenses. In return,
Lightyear provides consulting and management advisory services,
including advice on financial and strategic corporate planning
and such other management services as Lightyear and we may
agree. As of December&nbsp;31, 2003, we had no accrued liability
for management fees. Lightyear may in the future receive
customary fees for advisory services rendered to us. Such fees
will be negotiated from time to time with the independent
members of our board of directors on an arm&#146;s-length basis
and will be based on the services performed and the prevailing
fees then charged by third parties for comparable services.
Since May 2002, we have paid fees to Lightyear totaling
approximately $4.94&nbsp;million, consisting of
$2.19&nbsp;million in management fees and a $2.75&nbsp;million
fee paid in connection with the transaction in which Lightyear
acquired its interest in our company.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under a Stockholders Agreement dated May&nbsp;17,
2002, among us, Lightyear, TCW and CDP Financial Services
(US)&nbsp;LP and certain investors, which we refer to as the
existing stockholders, Lightyear and such other investors have
registration rights (including with respect to this offering).
Pursuant to these registration rights, beginning 180&nbsp;days
after the consummation of this offering, the existing
stockholders may demand that we register all or part of their
common stock so long as the shares to be offered pursuant to the
request have an aggregate offering price of at least
$5&nbsp;million (based on the then current market price). We
will be required to fulfill such obligation except in limited
circumstances. The number of shares to be included in any such
public offering will not exceed the maximum number that can be
sold without having a material adverse effect on the success of
the offering, based on the opinion of the managing underwriter
of such offering. The existing stockholders are entitled to
demand registration of their common stock on three occasions,
together with an additional demand that may be made by TCW.
These rights may also be exercised on an unlimited number of
occasions with respect to registration statements on
Form&nbsp;S-3, provided that the stock to be registered has an
aggregate value of at least $10&nbsp;million and we will not be
obligated to effect more than one registration in any
twelve-month period.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, subject to limited exceptions, if we
propose to register any shares of our capital stock, whether or
not for sale for our own account, we are required to provide
notice to the existing stockholders, and if requested by such
stockholders, we will include their shares in the registration
statement. The shares to be included in any such public offering
will not exceed the maximum number that the managing underwriter
determines can be sold in such an offering without having a
material adverse effect on the success of the offering, with
priority given to securities sought to be included at the
request of TCW and then the other existing stockholders. These
registration rights have been waived with respect to this
offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have agreed to pay all expenses (other than
underwriting commissions) and indemnify the existing
stockholders against certain liabilities, including liabilities
under the Securities Act, in connection with any registration
under the Stockholders Agreement. Other provisions of the
Stockholders Agreement
</FONT>

<P align="center"><FONT size="2">70
</FONT>

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<DIV align="left">
<FONT size="2">that pertain to management rights, rights of
first refusal, rights of co-sale, transfer restrictions,
preemptive rights and drag along rights will terminate upon
consummation of the offering.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Management</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In May 2002, we loaned Mr.&nbsp;Morrow $337,532
to purchase our common and preferred stock. The loan was secured
by the pledge of 69,850&nbsp;shares of common stock and 76,665
shares of our preferred stock. Interest accrues on the unpaid
principal at a rate of LIBOR plus 3.00%. The notes must be
repaid with proceeds from the sale of the pledged shares and the
notes are expected to be repaid at the time of the consummation
of this offering.
</FONT>

<P align="center"><FONT size="2">71
</FONT>

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<DIV align="left">
<A name='116'></A>
</DIV>

<!-- link1 "DESCRIPTION OF CAPITAL STOCK" -->

<P align="center">
<B><FONT size="2">DESCRIPTION OF CAPITAL STOCK</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">The following description of our common stock
and preferred stock and the relevant provisions of our amended
and restated certificate of incorporation and bylaws are
summaries thereof and are qualified by reference to our amended
and restated certificate of incorporation and bylaws, copies of
which have been filed with the SEC as exhibits to our
registration statement, of which this prospectus forms a part,
and the applicable provisions of the Delaware General
Corporation Law.</FONT></I>

<P align="left">
<B><FONT size="2">Authorized Capitalization</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our authorized capital stock consists of
18,000,000&nbsp;shares of Class&nbsp;A common stock, par value
$.001&nbsp;per share, 3,000,000&nbsp;shares of Class&nbsp;B
common stock, par value $.001&nbsp;per share and
20,000,000&nbsp;shares of preferred stock, par value
$0.001&nbsp;per share. As of December&nbsp;31, 2003,
14,486,861&nbsp;shares of Class&nbsp;A Common Stock were issued
and outstanding, 247,450&nbsp;shares of Class&nbsp;B Common
Stock were issued and outstanding and no shares of preferred
stock were issued and outstanding.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Immediately prior to the consummation of this
offering, the Company will effect
a &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-for-one
stock split and will amend its amended and restated certificate
of incorporation to eliminate the Class&nbsp;A Common Stock and
Class&nbsp;B Common Stock in order to create a single class of
common stock. Immediately following the consummation of this
offering, our authorized capital stock will consist
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock, par value $0.001 per share
and<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
shares of preferred stock, par value $0.001 per share. There are
expected to
be &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock issued and outstanding
(or &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
if the underwriters exercise their over-allotment option in
full), and no&nbsp;shares of preferred stock issued and
outstanding.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Common stock</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Voting
rights.</FONT></I></B><FONT size="2"> Holders of common stock
are and will be entitled to one vote per share on all matters to
be voted upon by the stockholders. The holders of common stock
do not and will not have cumulative voting rights in the
election of directors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Dividend
rights.</FONT></I></B><FONT size="2"> Holders of common stock
are and will be entitled to receive ratably dividends if, as and
when dividends are declared from time to time by our board of
directors out of funds legally available for that purpose, after
payment of dividends required to be paid on outstanding
preferred stock, as described below, if any. Our senior credit
facility imposes restrictions on our ability to declare
dividends with respect to our common stock and future agreements
may similarly restrict dividend payments.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Liquidation
rights.</FONT></I></B><FONT size="2"> Upon liquidation,
dissolution or winding up, any business combination or a sale or
disposition of all or substantially all of our assets, the
holders of common stock are and will be entitled to receive
ratably the assets available for distribution to the
stockholders after payment of liabilities and accrued but unpaid
dividends and liquidation preferences on any outstanding
preferred stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Other
matters.</FONT></I></B><FONT size="2"> The common stock has no
and will have no preemptive or conversion rights and is not and
will not be subject to further calls or assessment by us. There
are and will be no redemption or sinking fund provisions
applicable to the common stock. All outstanding shares of our
common stock, including the common stock offered in this
offering, are and will be, as applicable, fully paid and
non-assessable.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Preferred stock</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our certificate of incorporation authorizes and
will authorize our board of directors to establish one or more
series of preferred stock and to determine, with respect to any
series of preferred stock, the terms and rights of that series,
including:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the designation of the series;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">72
</FONT>

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<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the number of shares of the series, which our
    board of directors may, except where otherwise provided in the
    preferred stock designation, increase or decrease, but not below
    the number of shares then outstanding;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">whether dividends, if any, will be cumulative or
    non-cumulative and the dividend rate of the series;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the dates at which dividends, if any, will be
    payable;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the redemption rights and price or prices, if
    any, for shares of the series;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the terms and amounts of any sinking fund
    provided for the purchase or redemption of shares of the series;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the amounts payable on shares of the series in
    the event of any voluntary or involuntary liquidation,
    dissolution or winding-up of the affairs of our company;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">whether the shares of the series will be
    convertible into shares of any other class or series, or any
    other security, of our company or any other corporation, and, if
    so, the specification of the other class or series or other
    security, the conversion price or prices or rate or rates, any
    rate adjustments, the date or dates as of which the shares will
    be convertible and all other terms and conditions upon which the
    conversion may be made;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">restrictions on the issuance of shares of the
    same series or of any other class or series;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the voting rights, if any, of the holders of the
    series.
    </FONT></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Warrants</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As part of our acquisition by Lightyear, we
issued warrants to purchase an aggregate of 1,000,000 shares of
Class&nbsp;A common stock to holders of our senior notes. These
warrants expire in May 2012 and have an exercise price of
$0.01&nbsp;per share. The warrants are subject to customary
anti-dilution adjustments. Additional terms of the warrants are
set forth in the warrant agreement that is filed as an exhibit
to the registration statement of which this prospectus forms a
part.
</FONT>

<P align="left">
<B><FONT size="2">Anti-Takeover Effects of Various Provisions of
Delaware Law and Our Amended and Restated Certificate of
Incorporation and Bylaws</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Certain provisions of Delaware law and our
amended and restated certificate of incorporation and amended
and restated bylaws could make more difficult the acquisition of
our company by means of a tender offer, a proxy contest, or
otherwise, and the removal of incumbent officers and directors.
These provisions are expected to discourage certain types of
coercive takeover practices and inadequate takeover bids and to
encourage persons seeking to acquire control of us to first
negotiate with us. We believe that the benefits of increased
protection of our potential ability to negotiate with the
proponent of an unfriendly or unsolicited proposal to acquire or
restructure our company outweighs the disadvantages of
discouraging such proposals, including proposals that are priced
above the then current market value of our common stock,
because, among other things, negotiation of such proposals could
result in an improvement of their terms.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Delaware anti-takeover
    statute</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are subject to Section&nbsp;203 of the
Delaware General Corporation Law (&#147;DGCL&#148;). Subject to
specific exceptions, Section&nbsp;203 prohibits a publicly held
Delaware corporation from engaging in a &#147;business
combination&#148; with an &#147;interested stockholder&#148; for
a period of three years after the date of the transaction in
which the person became an interested stockholder, unless:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the &#147;business combination&#148; or the
    transaction in which the stockholder became an &#147;interested
    stockholder&#148; is approved by the board of directors prior to
    the date the &#147;interested stockholder&#148; attained that
    status;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">73
</FONT>

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<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">upon consummation of the transaction that
    resulted in the stockholder becoming an &#147;interested
    stockholder,&#148; the &#147;interested stockholder&#148; owned
    at least 85% of the voting stock of the corporation outstanding
    at the time the transaction commenced (excluding for purposes of
    determining the voting stock outstanding, voting stock owned by
    the interested stockholder, those shares owned by persons who
    are directors and also officers, and employee stock plans in
    which employee participants do not have the right to determine
    confidentially whether shares held subject to the plan will be
    tendered in a tender or exchange offer);&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">on or subsequent to the date a person became an
    &#147;interested stockholder,&#148; the &#147;business
    combination&#148; is approved by the board of directors and
    authorized at an annual or special meeting of stockholders by
    the affirmative vote of at least two-thirds of the outstanding
    voting stock that is not owned by the &#147;interested
    stockholder.&#148;
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">&#147;Business combinations&#148; include
mergers, asset sales and other transactions resulting in a
financial benefit to the &#147;interested stockholder.&#148;
Subject to various exceptions, an &#147;interested
stockholder&#148; is a person who, together with his or her
affiliates and associates, owns, or within the preceding three
years did own, 15% or more of the corporation&#146;s outstanding
voting stock. These restrictions could prohibit or delay the
accomplishment of mergers or other takeover or change in control
attempts with respect to us and, therefore, may discourage
attempts to acquire us.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, various provisions of our
certificate of incorporation and bylaws, which are summarized in
the following paragraphs, may have an anti-takeover effect and
may delay, defer or prevent a tender offer or takeover attempt
that a stockholder might consider in its best interest,
including those attempts that might result in a premium over the
market price for the shares held by stockholders.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Classified board</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our amended and restated certificate of
incorporation will provide that our board of directors will be
divided into three classes of directors, with the classes to be
as nearly equal in number as possible. As a result,
approximately one-third of our board of directors will be
elected each year. The classification of directors will have the
effect of making it more difficult for stockholders to change
the composition of our board. Our amended and restated
certificate of incorporation will provide that, subject to any
rights of holders of preferred stock to elect additional
directors under specified circumstances, the number of directors
will be fixed in the manner provided in the bylaws. Our amended
and restated certificate of incorporation and bylaws will
provide that the number of directors will be fixed from time to
time exclusively pursuant to a resolution adopted by the board,
but must consist of not less than three or more than
eleven&nbsp;directors.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Removal of directors;
    vacancies</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the DGCL, unless otherwise provided in our
amended and restated certificate of incorporation, directors
serving on a classified board may be removed by the stockholders
only for cause. Our amended and restated certificate of
incorporation and the bylaws will provide that directors may be
removed only for cause and only upon the affirmative vote of
holders of at least 80% of the voting power of all the then
outstanding shares of stock entitled to vote generally in the
election of directors, voting together as a single class. In
addition, our bylaws also provide that any vacancies on our
board of directors will be filled only by the affirmative vote
of a majority of the remaining directors, even if the number of
directors voting would not constitute a quorum.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">No stockholder action by written consent;
    calling of special meetings of stockholders</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our amended and restated certificate of
incorporation will prohibit stockholder action by written
consent. It will also provide that special meetings of our
stockholders may be called only by our chief executive officer
or by our board of directors.
</FONT>

<P align="center"><FONT size="2">74
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<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Advance notice requirements for stockholder
    proposals and director nominations</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our bylaws will provide that stockholders seeking
to nominate candidates for election as directors or to bring
business before an annual meeting of stockholders must provide
timely notice of their proposal in writing to the corporate
secretary.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Generally, to be timely, a stockholder&#146;s
notice must be received at our principal executive offices not
less than 90 nor more than 120&nbsp;days prior to the first
anniversary of the date on which the company first mailed its
proxy materials for the previous year&#146;s annual meeting. Our
bylaws also specify requirements as to the form and content of a
stockholder&#146;s notice. These provisions may impede
stockholders&#146; ability to bring matters before an annual
meeting of stockholders or make nominations for directors at an
annual meeting of stockholders.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Limitations on liability and
    indemnification of officers and directors</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The DGCL authorizes corporations to limit or
eliminate the personal liability of directors to corporations
and their stockholders for monetary damages for breaches of
directors&#146; fiduciary duties. Our amended and restated
certificate of incorporation includes a provision that
eliminates the personal liability of directors for monetary
damages for actions taken as a director, except for liability:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">for breach of duty of loyalty;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">for acts or omissions not in good faith or
    involving intentional misconduct or knowing violation of law;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">under Section&nbsp;174 of the DGCL (unlawful
    dividends);&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">for transactions from which the director derived
    improper personal benefit.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our amended and restated certificate of
incorporation and bylaws provide that we must indemnify our
directors and officers to the fullest extent authorized by the
DGCL. We are also expressly authorized to carry directors&#146;
and officers&#146; insurance providing indemnification for our
directors, officers and certain employees for some liabilities.
We believe that these indemnification provisions and insurance
are useful to attract and retain qualified directors and
executive officers.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The limitation of liability and indemnification
provisions in our amended and restated certificate of
incorporation and bylaws may discourage stockholders from
bringing a lawsuit against directors for breach of their
fiduciary duty. These provisions may also have the effect of
reducing the likelihood of derivative litigation against
directors and officers, even though such an action, if
successful, might otherwise benefit us and our stockholders. In
addition, your investment may be adversely affected to the
extent we pay the costs of settlement and damage awards against
directors and officers pursuant to these indemnification
provisions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">There is currently no pending material litigation
or proceeding involving any of our directors, officers or
employees for which indemnification is sought.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Supermajority provisions</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The DGCL provides generally that the affirmative
vote of a majority of the outstanding shares entitled to vote is
required to amend a corporation&#146;s certificate of
incorporation or bylaws, unless the certificate of incorporation
requires a greater percentage. Our amended and restated
certificate of incorporation will provide that the following
provisions in the certificate of incorporation may be amended
only by a vote of 80% or more of all of the outstanding shares
of our stock entitled to vote:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">classified board (the election and term of our
    directors);
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the removal of directors;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the prohibition on stockholder action by written
    consent;
    </FONT></TD>
</TR>

</TABLE>

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<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the ability to call a special meeting of
    stockholders being vested solely in our chief executive officer
    and the board of directors;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the limitation on the liability of our directors
    to us and our stockholders;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the obligation to indemnify the directors and
    officers to the fullest extent authorized by the DGCL.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, our amended and restated certificate
of incorporation will grant our board of directors the authority
to amend and repeal our bylaws without a stockholder vote in any
manner not inconsistent with the laws of the State of Delaware
or our certificate of incorporation. Our amended and restated
certificate of incorporation will also provide that, except with
respect to amendments proposed by our board of directors, these
provisions in our bylaws may be amended only by a vote of 80% or
more of all of the outstanding shares of our common stock
entitled to vote.
</FONT>

<P align="left">
<B><FONT size="2">Authorized but Unissued Capital
Stock</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The DGCL does not require stockholder approval
for any issuance of authorized shares. However, the listing
requirements of
the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
which would apply so long as our common stock is listed on
the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
require stockholder approval of certain issuances equal to or
exceeding &nbsp;&nbsp;% of the then-outstanding voting power or
then outstanding number of shares of common stock. These
additional shares may be used for a variety of corporate
purposes, including future public offerings, to raise additional
capital or to facilitate acquisitions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">One of the effects of the existence of unissued
and unreserved common stock or preferred stock may be to enable
our board of directors to issue shares to persons friendly to
current management, which issuance could render more difficult
or discourage an attempt to obtain control of our company by
means of a merger, tender offer, proxy contest or otherwise, and
thereby protect the continuity of our management and possibly
deprive the stockholders of opportunities to sell their shares
of common stock at prices higher than prevailing market prices.
</FONT>

<P align="left">
<B><FONT size="2">Transfer Agent and Registrar</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">is the transfer agent and registrar for our
common stock.
</FONT>

<P align="left">
<B><FONT size="2">Listing</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We propose to list our common stock on
the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
subject to official notice of issuance, under the symbol
&#147;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.&#148;
</FONT>

<P align="left">
<B><FONT size="2">CFSL Acquisition Corp. preferred
stock</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of April&nbsp;4, 2004, our subsidiary, CFSL
Acquisition Corp., had 17,062,830&nbsp;shares of preferred stock
issued and outstanding. Immediately following the consummation
of this offering, we expect to pay the liquidation preference of
this preferred stock. As of December&nbsp;31, 2003, the
liquidation preference of this preferred stock was $89,136,000
in the aggregate.
</FONT>

<P align="center"><FONT size="2">76
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<DIV align="left">
<A name='117'></A>
</DIV>

<!-- link1 "SHARES ELIGIBLE FOR FUTURE SALE" -->

<P align="center">
<B><FONT size="2">SHARES ELIGIBLE FOR FUTURE SALE</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to this offering, there has not been any
public market for our common stock, and we cannot predict what
effect, if any, market sales of shares of common stock or the
availability of shares of common stock for sale will have on the
market price of our common stock. Nevertheless, sales of
substantial amounts of common stock, including shares issued
upon the exercise of outstanding options, in the public market,
or the perception that such sales could occur, could materially
and adversely affect the market price of our common stock and
could impair our future ability to raise capital through the
sale of our equity or equity-related securities at a time and
price that we deem appropriate.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon the closing of this offering, we will have
outstanding an aggregate of
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
shares of common stock, assuming no exercise of the
over-allotment option. In addition, we will have
reserved &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock for issuance pursuant to the Stock Incentive
Plan. Of the outstanding shares, the shares sold in this
offering will be freely tradable without restriction or further
registration under the Securities Act, except that any shares
held by our &#147;affiliates,&#148; as that term is defined
under Rule&nbsp;144 of the Securities Act, may be sold only in
compliance with the limitations described below. The remaining
outstanding shares of common stock and any of the shares issued
pursuant to the Stock Incentive Plan will be deemed
&#147;restricted securities&#148; as that term is defined under
Rule&nbsp;144. Restricted securities may be sold in the public
market only if registered or if they qualify for an exemption
from registration under Rule&nbsp;144 or 144(k) under the
Securities Act, which are summarized below.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Subject to the lock-up agreements described below
and the provisions of Rules&nbsp;144 and 144(k), additional
shares of our common stock will be available for sale in the
public market under exemptions from registration requirements as
follows:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="31%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="66%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Number of shares</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Date</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">At various times after 180&nbsp;days from the
    date of this prospectus (subject to volume limitations and other
    conditions under Rule&nbsp;144)
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">At various times after 180&nbsp;days from the
    date of this prospectus (Rule&nbsp;144(k))
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<B><FONT size="2">Rule&nbsp;144</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In general, under Rule&nbsp;144 as currently in
effect, a person (or persons whose shares are required to be
aggregated), including an affiliate, who has beneficially owned
shares of our common stock for at least one year is entitled to
sell in any three-month period a number of shares that does not
exceed the greater of:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">1% of the then-outstanding shares of common stock
    or
    approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    assuming no exercise of the over-allotment option; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the average weekly reported volume of trading in
    the common stock on
    the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;during
    the four calendar weeks preceding the date on which notice of
    sale is filed, subject to restrictions.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Sales under Rule&nbsp;144 are also subject to
manner of sale provisions and notice requirements and to the
availability of current public information about us.
</FONT>

<P align="left">
<B><FONT size="2">Rule&nbsp;144(k)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, a person who is not deemed to have
been an affiliate of ours at any time during the 90&nbsp;days
preceding a sale and who has beneficially owned the shares
proposed to be sold for at least two years, would be entitled to
sell those shares under Rule&nbsp;144(k) without regard to the
manner of sale, public information, volume limitation or notice
requirements of Rule&nbsp;144. To the extent that our affiliates
sell their shares, other than pursuant to Rule&nbsp;144 or a
registration statement, the purchaser&#146;s holding period for
the purpose of effecting a sale under Rule&nbsp;144 commences on
the date of transfer from the affiliate.
</FONT>

<P align="center"><FONT size="2">77
</FONT>

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<P align="left">
<B><FONT size="2">Lock-Up Agreements</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We intend to obtain lock-up agreements from all
of our officers, directors and stockholders, holding
substantially all of our outstanding common stock, including
Lightyear and certain other investors, under which they will
agree not to transfer or dispose of, directly of indirectly, any
shares of common stock or any securities convertible into or
exercisable or exchangeable for shares of common stock, for a
period of 180&nbsp;days after the date of this prospectus
without the prior written consent of both J.P.&nbsp;Morgan
Securities Inc. and Merrill Lynch, Pierce, Fenner&nbsp;&#38;
Smith Incorporated, subject to limited exceptions.
</FONT>

<P align="left">
<B><FONT size="2">Stock Options</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pursuant to our Stock Incentive Plan, we have
granted options to purchase approximately 315,000 shares of our
common stock. Of these, options to purchase 56,700 shares are
currently vested and exercisable and the remaining 258,300
options will become fully vested and exercisable after seven
years or upon satisfaction of certain terms and conditions or
upon a change of control. We have reserved 385,000 shares for
future issuance under our Stock Incentive Plan and prior to the
offering, we intend to increase the number of shares of common
stock available for future issuance.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Following the consummation of this offering, we
intend to file one or more registration statements on
Form&nbsp;S-8 under the Securities Act to register all shares of
common stock subject to outstanding stock options and options
issuable under our stock incentive plan. After expiration of the
applicable contractual resale restrictions, shares covered by
these registration statements will be eligible for sale in the
public markets, other than shares owned by our affiliates, which
may be sold in the public market if they are registered or
qualify for an exemption from registration under Rule&nbsp;144.
</FONT>

<P align="center"><FONT size="2">78
</FONT>
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<DIV align="left">
<A name='118'></A>
</DIV>

<!-- link1 "CERTAIN UNITED STATES TAX CONSEQUENCES TO NON-U.S. HOLDERS" -->

<P align="center">
<B><FONT size="2">CERTAIN UNITED STATES TAX CONSEQUENCES TO
NON-U.S.&nbsp;HOLDERS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following summary describes the material
United States federal income and estate tax consequences of the
ownership of our common stock by a
&#147;non-U.S.&nbsp;holder,&#148; as defined below, as of the
date of this prospectus. This discussion does not address all
aspects of United States federal income and estate taxes and
does not deal with foreign, state and local consequences that
may be relevant to non-U.S.&nbsp;holders in light of their
personal circumstances. Special rules may apply to certain
non-U.S.&nbsp;holders, such as United States expatriates,
&#147;controlled foreign corporations,&#148; &#147;passive
foreign investment companies,&#148; &#147;foreign personal
holding companies,&#148; corporations that accumulate earnings
to avoid United States federal income tax, and investors in
pass-through entities that are subject to special treatment
under the Internal Revenue Code of 1986, which we refer to as
the &#147;Code.&#148; These non-U.S.&nbsp;holders should consult
their own tax advisors to determine the United States federal,
state, local and other tax consequences that may be relevant to
them. Furthermore, the discussion below is based upon the
provisions of the Code, and United States Treasury regulations,
rulings and judicial decisions under the Code as of the date of
this prospectus, and these authorities may be repealed, revoked
or modified, perhaps retroactively, so as to result in United
States federal income and estate tax consequences different from
those discussed below. <B>Persons considering the ownership of
our common stock should consult their own tax advisors
concerning the United States federal income and estate tax
consequences in light of their particular situations as well as
any consequences arising under the laws of any other taxing
jurisdiction.</B>
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If a partnership holds our common stock, the tax
treatment of a partner will generally depend upon the status of
the partner and the activities of the partnership. Persons who
are partners of partnerships holding our common stock should
consult their own tax advisors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As used in this section of the prospectus, a
&#147;non-U.S.&nbsp;holder&#148; means a beneficial owner of our
common stock, other than an entity treated as a partnership,
that is not any of the following for United States federal
income tax purposes:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">a citizen or resident of the United States,
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">a corporation created or organized in or under
    the laws of the United States or any political subdivision of
    the United States,
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">an estate the income of which is subject to
    United States federal income taxation regardless of its
    source,&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">a trust if it (1)&nbsp;is subject to the primary
    supervision of a court within the United States and one or more
    United States persons have the authority to control all
    substantial decisions of the trust or (2)&nbsp;has a valid
    election in effect under applicable United States Treasury
    regulations to be treated as a United States person.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Dividends</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Dividends paid to a non-U.S.&nbsp;holder of our
common stock generally will be subject to withholding of United
States federal income tax at a 30% rate or such lower rate as
may be specified by an applicable income tax treaty. However,
dividends that are effectively connected with the conduct of a
trade or business by the non-U.S.&nbsp;holder within the United
States and, where a tax treaty applies, are attributable to a
United States permanent establishment of the
non-U.S.&nbsp;holder, are not subject to the withholding tax,
provided certain certification and disclosure requirements are
satisfied. Instead, such dividends are subject to United States
federal income tax on a net income basis in the same manner as
if the non-U.S.&nbsp;holder were a United States person as
defined under the Code. Any such effectively connected dividends
received by a foreign corporation may be subject to an
additional &#147;branch profits tax&#148; at a 30% rate or such
lower rate as may be specified by an applicable income tax
treaty.
</FONT>

<P align="center"><FONT size="2">79
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A non-U.S.&nbsp;holder of our common stock who
wishes to claim the benefit of an applicable treaty rate and
avoid backup withholding, as discussed below, for dividends,
will be required to (a)&nbsp;complete Internal Revenue Service
Form&nbsp;W-8BEN or other applicable form and certify under
penalty of perjury that such holder is not a United States
person or (b)&nbsp;if the common stock is held through certain
foreign intermediaries, satisfy the relevant certification
requirements of applicable United States Treasury regulations.
Special certification and other requirements apply to certain
non-U.S.&nbsp;holders that are entities rather than individuals.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A non-U.S.&nbsp;holder of our common stock
eligible for a reduced rate of United States withholding tax
pursuant to an income tax treaty may obtain a refund of any
excess amounts withheld by filing an appropriate claim for
refund with the Internal Revenue Service.
</FONT>

<P align="left">
<B><FONT size="2">Gain on Disposition of Our Common
Stock</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A non-U.S.&nbsp;holder generally will not be
subject to United States federal income tax with respect to gain
recognized on a sale or other disposition of our common stock
unless one of the following applies:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the gain is effectively connected with a trade or
    business of the non-U.S.&nbsp;holder in the United States, and,
    where a tax treaty applies, is attributable to a United States
    permanent establishment of the non-U.S.&nbsp;holder,
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">in the case of a non-U.S.&nbsp;holder who is an
    individual and holds the common stock as a capital asset, such
    holder is present in the United States for 183 or more days in
    the taxable year of the sale or other disposition and certain
    other conditions are met,&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">we are or have been a &#147;United States real
    property holding corporation&#148; for United States federal
    income tax purposes.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">An individual non-U.S.&nbsp;holder described in
the first bullet point immediately above will be subject to tax
on the net gain derived from the sale under regular graduated
United States federal income tax rates. An individual
non-U.S.&nbsp;holder described in the second bullet point
immediately above will be subject to a flat 30% tax on the gain
derived from the sale, which may be offset by United States
source capital losses, even though the individual is not
considered a resident of the United States. If a
non-U.S.&nbsp;holder that is a foreign corporation falls under
the first bullet point immediately above, it will be subject to
tax on its net gain in the same manner as if it were a United
States person as defined under the Code and, in addition, may be
subject to the branch profits tax equal to 30% of its
effectively connected earnings and profits or at such lower rate
as may be specified by an applicable income tax treaty.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe we are not, and do not anticipate
becoming, a &#147;United States real property holding
corporation&#148; for United States federal income tax purposes.
</FONT>

<P align="left">
<B><FONT size="2">Federal Estate Tax</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Common stock held by an individual
non-U.S.&nbsp;holder at the time of death will be included in
such holder&#146;s gross estate for United States federal estate
tax purposes, unless an applicable estate tax treaty provides
otherwise.
</FONT>

<P align="left">
<B><FONT size="2">Information Reporting and Backup
Withholding</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We must report annually to the Internal Revenue
Service and to each non-U.S.&nbsp;holder the amount of dividends
paid to such holder and the tax withheld with respect to such
dividends, regardless of whether withholding was required.
Copies of the information returns reporting such dividends and
withholding may also be made available to the tax authorities in
the country in which the non-U.S.&nbsp;holder resides under the
provisions of an applicable income tax treaty.
</FONT>

<P align="center"><FONT size="2">80
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A non-U.S.&nbsp;holder will be subject to backup
withholding for dividends paid to such holder unless such holder
certifies under penalty of perjury that it is a
non-U.S.&nbsp;holder, and the payor does not have actual
knowledge or reason to know that such holder is a United States
person, or such holder otherwise establishes an exemption.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Information reporting and, depending on the
circumstances, backup withholding will apply to the proceeds of
a sale of our common stock within the United States or conducted
through United States-related financial intermediaries unless
the beneficial owner certifies under penalty of perjury that it
is a non-U.S.&nbsp;holder, and the payor does not have actual
knowledge or reason to know that the beneficial owner is a
United States person, or such owner otherwise establishes an
exemption.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Any amounts withheld under the backup withholding
rules may be allowed as a refund or a credit against such
holder&#146;s United States federal income tax liability
provided the required information is furnished to the Internal
Revenue Service.
</FONT>

<P align="center"><FONT size="2">81
</FONT>
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<DIV align="left">
<A name='119'></A>
</DIV>

<!-- link1 "UNDERWRITING" -->

<P align="center">
<B><FONT size="2">UNDERWRITING</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are offering the shares of common stock
described in this prospectus through a number of underwriters.
J.P.&nbsp;Morgan Securities Inc. and Merrill Lynch, Pierce,
Fenner&nbsp;&#38; Smith Incorporated are acting as joint
book-running managers of the offering and as representatives of
the underwriters. We have entered into a firm commitment
underwriting agreement with the representatives. Subject to the
terms and conditions of the underwriting agreement, we have
agreed to sell to the underwriters, and each underwriter has
agreed to purchase, at the public offering price less the
underwriting discounts and commissions set forth on the cover
page of this prospectus, the number of shares of common stock
listed next to its name in the following table:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="84%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Underwriters</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">shares</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">J.P.&nbsp;Morgan Securities Inc.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Merrill Lynch, Pierce, Fenner&nbsp;&#38; Smith<BR>
    Incorporated
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">You may contact the representatives of the
underwriters at the addresses set forth below for information on
how to purchase common shares in this offering. You may contact
J.P.&nbsp;Morgan Securities Inc. at 277&nbsp;Park Avenue,
New&nbsp;York, New&nbsp;York 10172 and Merrill Lynch, Pierce,
Fenner&nbsp;&#38; Smith Incorporated at 4&nbsp;World Financial
Center, New&nbsp;York, New&nbsp;York 10080.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The underwriting agreement provides that the
obligations of the underwriters are subject to certain
conditions precedent, including the absence of any material
adverse change in our business and the receipt of certain
certificates, opinions and letters from us, our counsel and the
independent auditors. The underwriters are committed to purchase
all the common shares offered by us if they purchase any shares.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The underwriters propose to offer the common
shares directly to the public at the initial public offering
price set forth on the cover page of this prospectus and to
certain dealers at that price less a concession not in excess of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share. Any such dealers may resell shares to certain other
brokers or dealers at a discount of up to
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share from the initial public offering price. After the initial
public offering of the shares, the offering price and other
selling terms may be changed by the underwriters. The
representatives have advised us that the underwriters do not
intend to confirm discretionary sales in excess of 5% of the
common shares offered in this offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The underwriters have an option to buy up
to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
shares of common stock from us to cover sales of shares by the
underwriters which exceed the number of shares specified in the
table above. The underwriters have 30&nbsp;days from the date of
this prospectus to exercise this option. If any shares are
purchased with this option, the underwriters will purchase
shares in approximately the same proportion as shown in the
table above. If any additional shares of common stock are
purchased, the underwriters will offer the additional shares on
the same terms as those on which the shares are being offered.
We will pay the expenses associated with the exercise of the
over-allotment option.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The underwriting fee is equal to the public
offering price per share of common stock less the amount paid by
the underwriters to us per share of common stock. The
underwriting fee is
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share. The following table shows the per share and total
underwriting discounts and commissions to be paid to the
underwriters assuming both no exercise and full exercise of the
underwriters&#146; option to purchase additional shares.
</FONT>

<P align="left">
<B><FONT size="2">Underwriting Discounts and
Commissions</FONT></B>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="64%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Without</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">With</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">over-allotment</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">over-allotment</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">exercise</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">exercise</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Per Share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">82
</FONT>

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<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We estimate that the total expenses of this
offering, including registration, filing and listing fees,
printing fees, transfer agents&#146; fees and legal and
accounting expenses, but excluding the underwriting discount,
will be approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A prospectus in electronic format may be made
available on the web sites maintained by one or more
underwriters, or selling group members, if any, participating in
the offering. The underwriters may agree to allocate a number of
shares to underwriters and selling group members for sale to
their online brokerage account holders. Internet distributions
will be allocated by the joint book-running managers to
underwriters and selling group members that may make Internet
distributions on the same basis as other allocations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We and our directors, executive officers and our
existing stockholders have entered into lock-up agreements with
the underwriters prior to the commencement of this offering
pursuant to which we and such holders of stock have agreed, with
limited exceptions, that without the prior written consent of
both J.P.&nbsp;Morgan Securities Inc. and Merrill Lynch, Pierce,
Fenner&nbsp;&#38; Smith Incorporated, for a period of
180&nbsp;days after the date of this prospectus not to
(1)&nbsp;offer, pledge, announce the intention to sell, sell,
contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right
or warrant to purchase, or otherwise transfer or dispose of,
directly or indirectly, any shares of our common stock or any
securities convertible into or exercisable or exchangeable for
shares of our common stock (including, without limitation,
common stock which may be deemed to be beneficially owned by
such directors, executive officers and stockholders in
accordance with the rules and regulations of the SEC and
securities which may be issued upon exercise of a stock option
or warrant) or (2)&nbsp;enter into any swap or other agreement
that transfers, in whole or in part, any of the economic
consequences of ownership of the common stock, whether any such
transaction described in clause&nbsp;(1) or (2) above is to be
settled by delivery of common stock or such other securities, in
cash or otherwise. The lock-up agreement with the Company is
subject to the following exceptions:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">shares of common stock to be issued in this
    offering;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">issuances of common stock pursuant to employee
    benefit plans, stock option plans or other employee compensation
    plans existing on the date of this prospectus;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">issuances of common stock pursuant to the
    exercise of options, warrants or rights outstanding on the date
    of this prospectus;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">grants of options pursuant to employee benefit
    plans, stock option plans or other employee compensation plans
    existing on the date of this prospectus;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">issuances of common stock in connection with a
    bona fide business acquisition made by us which involves a third
    party that is not our affiliate, provided that the recipient of
    the shares agrees to be bound by these lock-up arrangements.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have agreed to indemnify the underwriters
against certain liabilities, including liabilities under the
Securities Act of 1933.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with this offering, the
underwriters may engage in stabilizing transactions, which
involves making bids for, purchasing and selling shares of
common stock in the open market for the purpose of preventing or
retarding a decline in the market price of the common stock
while this offering is in progress.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">These stabilizing transactions may include making
short sales of the common stock, which involves the sale by the
underwriters of a greater number of shares of common stock than
they are required to purchase in this offering, and purchasing
shares of common stock on the open market to cover positions
created by short sales. Short sales may be &#147;covered&#148;
shorts, which are short positions in an amount not greater than
the underwriters&#146; over-allotment option referred to above,
or may be &#147;naked&#148; shorts, which are short positions in
excess of that amount.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The underwriters may close out any covered short
position either by exercising their over-allotment option, in
whole or in part, or by purchasing shares in the open market. In
making this determination, the underwriters will consider, among
other things, the price of shares available for purchase in the
open
</FONT>

<P align="center"><FONT size="2">83
</FONT>
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<DIV align="left">
<FONT size="2">market compared to the price at which the
underwriters may purchase shares through the over-allotment
option.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A naked short position is more likely to be
created if the underwriters are concerned that there may be
downward pressure on the price of the common stock in the open
market that could adversely affect investors who purchased in
this offering. To the extent that the underwriters create a
naked short position, they will purchase shares in the open
market to cover the position.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The underwriters have advised us that, pursuant
to Regulation&nbsp;M of the Securities Act of 1933, they may
also engage in other activities that stabilize, maintain or
otherwise affect the price of the common stock, including the
imposition of penalty bids. This means that if the
representatives of the underwriters purchase common stock in the
open market in stabilizing transactions or to cover short sales,
the representatives can require the underwriters that sold those
shares as part of this offering to repay the underwriting
discount received by them.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">These activities may have the effect of raising
or maintaining the market price of the common stock or
preventing or retarding a decline in the market price of the
common stock, and, as a result, the price of the common stock
may be higher than the price that otherwise might exist in the
open market. If the underwriters commence these activities, they
may discontinue them at any time. The underwriters may carry out
these transactions on
the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
in the over-the-counter market or otherwise.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to this offering, there has been no public
market for our common stock. The initial public offering price
will be determined by negotiation between us and the
representatives of the underwriters. In determining the initial
public offering price, we and the representatives of the
underwriters expect to consider a number of factors including:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the history of and prospects for our company and
    the industry in which we compete;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">an assessment of our management;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our present operations;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our historical results of operations;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the trend of our revenues and earnings;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">our earnings prospects;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">the prevailing market conditions of the
    applicable United States securities market at the time of this
    offering, market valuations of publicly traded companies that we
    and the representatives of the underwriters believe to be
    comparable to our company; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">&#149;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">other factors deemed relevant.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Neither we nor the underwriters can assure
investors that an active trading market will develop for our
common shares or that the shares will trade in the public market
at or above the initial public offering price.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Because an affiliate of J.P.&nbsp;Morgan
Securities Inc. is a lender under a revolving credit agreement
to be repaid by us and will receive more than 10% of the net
proceeds of this offering, that underwriter may be deemed to
have a &#147;conflict of interest&#148; under
Rule&nbsp;2710(c)(8) of the Conduct Rules of the National
Association of Securities Dealers. Accordingly, this offering
will be made in compliance with the applicable provisions of
Rule&nbsp;2720 of the Conduct Rules. In accordance with this
rule, the initial public offering price is no higher than that
recommended by a &#147;qualified independent underwriter&#148;
meeting certain standards. In accordance with this requirement,
Merrill Lynch, Pierce, Fenner&nbsp;&#38; Smith Incorporated has
assumed the responsibilities of acting as a qualified
independent underwriter and has recommended a price in
compliance with the requirements of Rule&nbsp;2720. Merrill
Lynch, Pierce, Fenner&nbsp;&#38; Smith Incorporated, in its role
as qualified independent underwriter, has performed due
diligence investigations and reviewed and participated in the
preparation of this prospectus and the registration statement of
which this prospectus is a part. We have agreed to indemnify
Merrill Lynch, Pierce,
</FONT>

<P align="center"><FONT size="2">84
</FONT>

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<DIV align="left">
<FONT size="2">Fenner&nbsp;&#38; Smith Incorporated for acting
as a qualified independent underwriter against specified
liabilities under the Securities Act.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">From time to time, certain of the underwriters
and their affiliates have provided, and continue to provide,
investment and other commercial banking services to us in the
ordinary course of business, for which they have received and
may continue to receive customary fees and commissions. For
example, J.P.&nbsp;Morgan Securities Inc. has underwritten
certain of our asset-backed securities. We have also entered
into a $45.0&nbsp;million revolving credit facility with
JPMorgan Chase Bank, an affiliate of J.P. Morgan Securities
Inc., which we intend to repay with proceeds from this offering.
</FONT>

<P align="center"><FONT size="2">85
</FONT>
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<DIV align="left">
<A name='120'></A>
</DIV>

<!-- link1 "LEGAL MATTERS" -->

<P align="center">
<B><FONT size="2">LEGAL MATTERS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The validity of the issuance of the shares of
common stock to be sold in this offering will be passed upon for
us by Simpson Thacher&nbsp;&#38; Bartlett LLP, New&nbsp;York,
New&nbsp;York. Legal matters in connection with this offering
are being passed upon for the underwriters by Davis
Polk&nbsp;&#38; Wardwell, New&nbsp;York, New&nbsp;York.
</FONT>

<DIV align="left">
<A name='121'></A>
</DIV>

<!-- link1 "EXPERTS" -->

<P align="center">
<B><FONT size="2">EXPERTS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Ernst&nbsp;&#38; Young LLP, independent auditors,
have audited our consolidated financial statements as of
December&nbsp;31, 2003 and 2002 and for the year ended
December&nbsp;31, 2003 and the period May&nbsp;17, 2002 through
December&nbsp;31, 2002, and the consolidated financial
statements of our predecessor, Collegiate Funding Services, LLC
for the period January&nbsp;1, 2002 through May&nbsp;16, 2002,
as set forth in their report. We have included these financial
statements in the prospectus and elsewhere in the registration
statement in reliance on Ernst&nbsp;&#38; Young LLP&#146;s
report, given on their authority as experts in accounting and
auditing.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">PBGH LLP, independent auditors, have audited our
predecessor&#146;s financial statements for the year ended
December&nbsp;31, 2001, as set forth in their report. We have
included our financial statements in the prospectus and
elsewhere in the registration statement in reliance upon PBGH
LLP&#146;s report, given on their authority as experts in
accounting and auditing.
</FONT>

<DIV align="left">
<A name='122'></A>
</DIV>

<!-- link1 "WHERE YOU CAN FIND ADDITIONAL INFORMATION" -->

<P align="center">
<B><FONT size="2">WHERE YOU CAN FIND ADDITIONAL
INFORMATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have filed with the Securities and Exchange
Commission (the &#147;SEC&#148;) a registration statement on
Form&nbsp;S-1 under the Securities Act with respect to the
issuance of shares of our common stock being offered hereby.
This prospectus, which forms a part of the registration
statement, does not contain all of the information set forth in
the registration statement. For further information with respect
to us and the shares of our common stock, reference is made to
the registration statement. Statements contained in this
prospectus as to the contents of any contract or other document
are not necessarily complete, and, where such contract or other
document is an exhibit to the registration statement, each such
statement is qualified by the provisions in such exhibit, to
which reference is hereby made. We are not currently subject to
the informational requirements of the Exchange Act. As a result
of the offering of the shares of our common stock, we will
become subject to the informational requirements of the Exchange
Act, and, in accordance therewith, will file reports and other
information with the SEC. The registration statement, such
reports and other information can be inspected and copied at the
Public Reference Room of the SEC located at Room&nbsp;1024,
Judiciary Plaza, 450&nbsp;Fifth Street,&nbsp;N.W.,
Washington&nbsp;D.C. 20549. Copies of such materials, including
copies of all or any portion of the registration statement, can
be obtained from the Public Reference Room of the SEC at
prescribed rates. You can call the SEC at 1-800-SEC-0330 to
obtain information on the operation of the Public Reference
Room. Such materials may also be accessed electronically by
means of the SEC&#146;s home page on the Internet
(http://www.sec.gov).
</FONT>

<P align="center"><FONT size="2">86
</FONT>

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<P align="center">
<B><FONT size="2">Collegiate Funding Services, Inc.</FONT></B>

<DIV align="left">
<A name='123'></A>
</DIV>

<!-- link1 "INDEX TO FINANCIAL STATEMENTS" -->

<P align="center">
<B><FONT size="2">INDEX TO FINANCIAL STATEMENTS</FONT></B>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="90%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Page</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Consolidated financial statements of
    Collegiate Funding Services, Inc. and Predecessor</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Report of Ernst&nbsp;&#38; Young LLP, independent
    auditors
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Report of PBGH LLP, independent auditors
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Consolidated balance sheets as of
    December&nbsp;31, 2003 and 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Consolidated statements of income for the year
    ended December&nbsp;31, 2003, the periods May&nbsp;17, 2002
    through December&nbsp;31, 2002 and January&nbsp;1, 2002 through
    May&nbsp;16, 2002 and the year ended December&nbsp;31, 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Consolidated statements of equity for the year
    ended December&nbsp;31, 2003, the periods May&nbsp;17, 2002
    through December&nbsp;31, 2002 and January&nbsp;1, 2002 through
    May&nbsp;16, 2002 and the year ended December&nbsp;31, 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Consolidated statements of cash flows for the
    year ended December&nbsp;31, 2003, the periods May&nbsp;17, 2002
    through December&nbsp;31, 2002 and January&nbsp;1, 2002 through
    May&nbsp;16, 2002 and the year ended December&nbsp;31, 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes to consolidated financial statements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-1
</FONT>

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<P align="center">
<B><FONT size="2">REPORT OF INDEPENDENT AUDITORS</FONT></B>

<P align="left">
<FONT size="2">To Collegiate Funding Services, Inc.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have audited the accompanying consolidated
balance sheets of Collegiate Funding Services, Inc., formerly
CFSL Holdings Corp. (the Company), as of December&nbsp;31, 2003
and 2002 and the related consolidated statements of income,
equity and cash flows for the year ended December&nbsp;31, 2003
and the period May&nbsp;17, 2002 through December&nbsp;31, 2002.
We have also audited the accompanying statements of income,
equity and cash flows of Collegiate Funding Services, LLC
(Predecessor) for the period January&nbsp;1, 2002 through
May&nbsp;16, 2002. These financial statements are the
responsibility of the Company&#146;s management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We conducted our audits in accordance with
auditing standards generally accepted in the United States.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In our opinion, the financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of the Company at
December&nbsp;31, 2003 and 2002 and the consolidated results of
its operations and cash flows for the year ended
December&nbsp;31, 2003 and for the period May&nbsp;17 through
December&nbsp;31, 2002, and the results of the
Predecessor&#146;s operations and cash flows for the period
January&nbsp;1, 2002, through May&nbsp;16, 2002, in conformity
with accounting principles generally accepted in the United
States.
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">/s/ ERNST &#38; YOUNG LLP
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">McLean, Virginia
</FONT>

<DIV align="left">
<FONT size="2">March&nbsp;6, 2004
</FONT>
</DIV>

<P align="center"><FONT size="2">F-2
</FONT>

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<P align="center">
<B><FONT size="2">INDEPENDENT AUDITOR&#146;S REPORT</FONT></B>

<P align="left">
<FONT size="2">To the Members
</FONT>

<DIV align="left">
<FONT size="2">Collegiate Funding Services, LLC
</FONT>
</DIV>

<DIV align="left">
<FONT size="2">Fredericksburg, Virginia
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have audited the accompanying consolidated
statements of income, members&#146; equity, and cash flows of
Collegiate Funding Services, LLC (the &#147;Company&#148;) for
the year ended December&nbsp;31, 2001. These financial
statements are the responsibility of the Company&#146;s
management. Our responsibility is to express an opinion on these
financial statements based on our audit.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We conducted our audit in accordance with
auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In our opinion, the consolidated financial
statements referred to above present fairly, in all material
respects, the results of the Company&#146;s operations and cash
flows for the year ended December&nbsp;31, 2001 in conformity
with accounting principles generally accepted in the United
States of America.
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">/s/ PBGH LLP
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">Fredericksburg, Virginia
</FONT>

<DIV align="left">
<FONT size="2">March&nbsp;5, 2002
</FONT>
</DIV>

<P align="center"><FONT size="2">F-3
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">COLLEGIATE FUNDING SERVICES, INC.</FONT></B>

<P align="center">
<B><FONT size="2">CONSOLIDATED BALANCE SHEETS</FONT></B>

<DIV align="center">
<B><FONT size="2">(dollars in thousands)</FONT></B>
</DIV>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="67%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Assets</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,436</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32,535</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Restricted cash
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">105,355</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41,608</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,624</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,051</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Student loans, net of allowance of $4,136 and
    $1,925, respectively
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,856,428</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">973,055</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued interest receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,923</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,436</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income taxes receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,694</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,195</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Property and equipment, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,095</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,891</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">160,705</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">152,552</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred financing costs, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,245</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,532</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,777</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">647</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Total assets</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,192,282</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,221,502</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Liabilities, preferred stock of consolidated
    subsidiary and stockholders&#146; equity</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Liabilities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Asset-backed notes and lines of credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,000,866</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,027,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other debt obligations, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,531</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">108,604</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Capital lease obligations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,896</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,234</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">578</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued interest payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,385</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">966</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other accrued liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,360</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,071</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,683</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,661</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Total liabilities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,077,955</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,147,080</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Preferred stock of consolidated
    subsidiary</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">89,136</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">50,262</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Stockholders&#146; equity</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common stock&nbsp;&#151; Class&nbsp;A&nbsp;&#151;
    par value $0.001, 18,000,000&nbsp;shares authorized, 14,486,861
    and 8,052,550&nbsp;shares issued and outstanding, respectively
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common stock&nbsp;&#151; Class&nbsp;B&nbsp;&#151;
    par value $0.001, 3,000,000&nbsp;shares authorized,
    247,450&nbsp;shares issued and outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(107</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(140</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(509</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(713</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Additional paid-in capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,562</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,323</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Retained earnings
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,231</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,682</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Total stockholders&#146; equity</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,191</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,160</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Total liabilities, preferred stock of
    consolidated subsidiary and stockholders&#146; equity</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,192,282</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,221,502</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">See accompanying notes.
</FONT>

<P align="center"><FONT size="2">F-4
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">COLLEGIATE FUNDING SERVICES, INC. AND
PREDECESSOR</FONT></B>

<P align="center">
<B><FONT size="2">CONSOLIDATED STATEMENTS OF INCOME</FONT></B>

<DIV align="center">
<B><FONT size="2">(dollars in thousands, except per share
data)</FONT></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="43%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Predecessor</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period May</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">January 1</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">17 through</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">through</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">May&nbsp;16,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Net revenue</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61,846</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,804</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,454</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,623</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,871</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,309</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,692</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,553</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net interest income (expense)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,975</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,505</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,762</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(930</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Provision for loan losses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,357</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,270</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">752</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net interest income (expense) after provision for
    loan losses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,618</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,775</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,010</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(930</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fee income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">98,558</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84,396</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36,427</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">131,567</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net revenue
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">118,176</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">80,621</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38,437</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">130,637</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Expenses</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Salaries and related benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54,640</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,601</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,819</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,863</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other selling, general and administrative
    expenses:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Marketing and mailing costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,006</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,164</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,613</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,365</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Communications and data processing
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,515</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,156</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,712</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,375</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Management and consulting fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,313</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,800</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,720</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Professional fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,315</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,608</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">603</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">710</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,328</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,244</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">754</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,094</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other general and administrative
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,326</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,261</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,176</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,698</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total other selling, general and administrative
    expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54,803</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,683</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,658</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,962</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Swap interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,439</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Derivative mark-to-market
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,862</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Debt extinguishment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,824</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">119,568</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54,284</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,477</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68,825</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income (loss) before income taxes and accretion
    of dividends on preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,392</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26,337</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,960</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61,812</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income tax provision (benefit)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(196</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,726</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income (loss) before accretion of dividends
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,196</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,611</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,960</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61,812</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accretion of dividends on preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,255</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,929</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,451</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,682</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,960</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61,812</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Earnings (loss) per common share, basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.69</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.53</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Earnings (loss) per common share, diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.69</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.26</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average common shares outstanding, basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,783,059</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,300,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average common shares outstanding,
    diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,783,059</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,068,346</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">See accompanying notes.
</FONT>

<P align="center"><FONT size="2">F-5
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">COLLEGIATE FUNDING SERVICES, INC. AND
PREDECESSOR</FONT></B>

<P align="center">
<B><FONT size="2">CONSOLIDATED STATEMENTS OF EQUITY</FONT></B>

<DIV align="center">
<B><FONT size="2">(dollars in thousands)</FONT></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="25%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Class&nbsp;A</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Class&nbsp;B</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Additional</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Member</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">common</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">common</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Deferred</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Notes</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">paid-in</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Retained</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">interest</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">compensation</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">receivable</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">capital</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">earnings</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Predecessor Balance, December&nbsp;31, 2000
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,111</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,111</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Distributions to Members
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(62,004</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(62,004</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Acquisition of related entity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,910</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,910</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net Income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61,812</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61,812</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Predecessor Balance, December&nbsp;31, 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,009</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,009</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income-January&nbsp;1, 2002 Through
    May&nbsp;16, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,960</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,960</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Distributions to members
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13,266</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13,266</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Predecessor Balance, May&nbsp;16, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,703</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,703</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Acquisition by CSFL Holding Corp.
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6,703</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6,703</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of Class&nbsp;A Common Stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,460</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,468</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of Class&nbsp;B Common Stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">322</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">322</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of warrants
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,401</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,401</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Stock-based compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(140</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">140</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes receivable from management
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(713</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(713</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income-May&nbsp;17, 2002 through
    December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,682</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,682</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance, December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(140</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(713</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,323</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,682</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,160</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of Class&nbsp;A Common Stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,158</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,163</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Conversion of notes payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,081</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,082</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds from notes receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">204</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">204</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Exercise of contingent warrants
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of deferred compensation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net (loss)-January&nbsp;1, 2003 through
    December&nbsp;31, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,451</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,451</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance, December&nbsp;31, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(107</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(509</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,562</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,231</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,191</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">See accompanying notes.
</FONT>

<P align="center"><FONT size="2">F-6
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">COLLEGIATE FUNDING SERVICES, INC. AND
PREDECESSOR</FONT></B>

<P align="center">
<B><FONT size="2">CONSOLIDATED STATEMENTS OF CASH
FLOWS</FONT></B>

<DIV align="center">
<B><FONT size="2">(dollars in thousands)</FONT></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="36%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Predecessor</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Period</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">May 17</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">January 1</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">through</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">through</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31, 2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31, 2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">May&nbsp;16, 2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31, 2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Cash flows from operating activities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,451</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,682</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,960</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61,812</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Adjustments to reconcile net income to net cash
    provided by operating activities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accretion of dividends on preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,255</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,929</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,328</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,244</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">754</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,110</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loss on disposal of property and equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred income tax provision
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,022</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,661</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of deferred costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,110</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,884</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Debt extinguishment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,824</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Provision for loan losses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,357</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,270</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">752</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Changes in:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued interest receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,487</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,921</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,191</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,323</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts receivable and other assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(366</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(73</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,186</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">291</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income taxes receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,499</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,195</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,241</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">338</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,253</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued interest payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,784</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">607</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(834</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,193</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other accrued liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,634</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,281</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,760</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,887</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash provided by operating activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,767</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,707</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,162</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">64,970</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Cash flows from investing activities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Originations and purchases of student loans
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,016,245</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(637,748</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(212,694</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(151,147</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net proceeds from student loan principal payments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">128,262</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,557</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,878</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">202</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Acquisitions, net of cash acquired
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(17,152</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(166,208</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(90</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Purchases of property and equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,482</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,303</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(665</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,176</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash used in investing activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,908,617</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(780,702</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(204,481</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(153,211</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Cash flows from financing activities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds from asset-backed notes and lines of
    credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,814,075</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">528,482</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Payments on asset-backed notes and lines of credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(840,409</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds from other debt obligations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">125,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Payments on other debt obligations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(107,500</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(12,235</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(529</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,283</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Payments on capital lease obligations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(361</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Payment of financing costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(8,011</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,094</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,926</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds from notes receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">204</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds from stock issuance
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">52,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Change in restricted cash
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(63,747</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">122,922</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">206,633</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(371,163</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Distributions to members
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13,266</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(63,914</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash provided by financing activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,869,751</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">783,843</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">192,824</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">89,196</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net increase (decrease) in cash and cash
    equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(18,099</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,848</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,505</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">955</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Cash and cash equivalents:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Beginning
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32,535</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,687</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,182</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,227</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Ending
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,436</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32,535</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,687</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,182</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Supplemental disclosures:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash payments for interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31,733</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,450</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,994</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">106</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash payments (receipts) for income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,718</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,260</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Non-cash financing and investing activities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Conversion of convertible notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,365</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Capital lease of property and equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,257</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Liability incurred upon acquisition of SunTech
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">650</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">See accompanying notes.
</FONT>

<P align="center"><FONT size="2">F-7
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">COLLEGIATE FUNDING SERVICES, INC. AND
PREDECESSOR</FONT></B>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS</FONT></B>

<DIV align="center">
<B><FONT size="2">(dollars in thousands, except per share
data)</FONT></B>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">1.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Nature of the Business</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Collegiate Funding Services, Inc., formerly CFSL
Holdings Corp. (the Company), established in 2002, is a Delaware
Corporation. The Company and a wholly-owned subsidiary, CFSL
Acquisition Corp. (CFSL Acquisition) were established for the
purpose of acquiring the operations of Collegiate Funding
Services, LLC (Predecessor or CFS). The Company continues the
business of the Predecessor, which was established in 1998.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Collegiate Funding Services, Inc. is a vertically
integrated education finance company that markets, originates,
finances and services education loans. The Company markets
education loans primarily through direct to consumer programs,
including targeted direct mail, telemarketing and the internet.
Using its direct-to-consumer platform, or DTC, along with other
distribution channels, and its origination capabilities, the
Company assists consumers in financing and refinancing the cost
of undergraduate, graduate, professional, career and continuing
education training. The DTC marketing strategy is supplemented
with marketing through channels created by relationships with
membership organizations, alumni associations and other entities
to reach customers and promote the Company&#146;s products under
private label and co-branded offerings. The Company finances,
retains and services a substantial portion of the loans it
originates.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Certain completed loan applications are sold to
and funded by third party lenders whereby the Company receives a
fee for its services. Other completed consolidation loan
applications are funded through a subsidiary of the Company and
held and serviced by the Company. The Company has call centers
located in Virginia and Florida. The Company also has a
loan-servicing center in Mississippi.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On April&nbsp;15, 2002, CFS along with the
members of CFS (the Sellers) entered into a purchase agreement
to sell all of the outstanding Class&nbsp;A and Class&nbsp;B
member interests that represented a 100% interest in CFS and its
subsidiaries to CFSL Acquisition. The sale transaction closed on
May&nbsp;17, 2002 (the Acquisition), and the Sellers received an
aggregate of $147,800 in cash and $15,000 in subordinated notes
due in 2007 for a total purchase price of $162,800.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As a result of the Acquisition, all assets and
liabilities acquired were recorded at their estimated fair
value. The excess of the purchase price over the fair value of
the net assets acquired of $159,504 was recorded in the
financial statements as an increase of $7,037 to Student Loans,
$924 as a discount on the Sellers&#146; note and the remaining
$151,543 to goodwill. The increase to Student Loans is being
amortized as an adjustment to interest income over the estimated
life of the Student Loans. The discount on the Sellers&#146;
note is being amortized over the remaining life of the note as
an adjustment to interest expense. There was no impairment of
goodwill at December&nbsp;31, 2003, or at December&nbsp;31, 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to the Acquisition, CFS operated as a
limited liability company (LLC), which was treated as a
partnership for income tax purposes. All members of CFS were
taxed individually for their respective share of the income,
gains, losses, credits and deductions. The Company is a taxable
entity for both federal and state income taxes.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On April&nbsp;15, 2003, the Company acquired
substantially all of the assets and certain liabilities of
SunTech,&nbsp;Inc. (&#147;SunTech&#148;), the Company&#146;s
primary loan servicer. The new company created from this
acquisition operates under the name of CFS-SunTech Servicing
LLC. The operating results of CFS-SunTech Servicing LLC have
been included in the Company&#146;s consolidated financial
statements since April&nbsp;15, 2003. CFS-SunTech Servicing LLC,
located in Ridgeland, Mississippi, provides loan servicing for
the Company&#146;s Student Loans and other student loan lenders.
</FONT>

<P align="center"><FONT size="2">F-8
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">COLLEGIATE FUNDING SERVICES, INC. AND
PREDECESSOR</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED
FINANCIAL&nbsp;STATEMENTS&#151;(Continued)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table summarizes the estimated fair
values of the acquired assets and assumed liabilities of SunTech
at the date of acquisition:
</FONT>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="84%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">605</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,006</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Property and equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,062</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Developed software
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Servicing Rights
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,640</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">191</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets acquired
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,754</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts payable and other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(420</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net assets acquired
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,334</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Allocation of the purchase price:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net assets acquired
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,334</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,077</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total purchase price
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,411</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">All of the goodwill is deductible for income tax
purposes.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">2.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Summary of Significant Accounting
    Policies</FONT></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Estimates and assumptions</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States requires management to make estimates and
assumptions that affect the amounts reported in the financial
statements and accompanying notes. Management believes that the
estimates utilized in preparing the financial statements are
reasonable and prudent. Actual results could differ from those
estimates.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Principles of consolidation</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries: CFSL
Acquisition; Collegiate Funding Services, LLC; Collegiate
Funding Master Servicing, LLC; Collegiate Funding Services
Education Loan Trust&nbsp;I; Collegiate Funding of Delaware,
LLC; Collegiate Funding Portfolio Administration, LLC;
Collegiate Funding Originations, LLC; Collegiate Funding
Services Resources&nbsp;I, LLC; CFS Servicing, LLC; CFS-SunTech
Servicing LLC; Collegiate Funding Services Education Loan Trust
2003-A; Collegiate Funding Services Education Loan Trust 2003-B.
All intercompany accounts and transactions have been eliminated.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Cash and cash equivalents</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company includes in cash and cash equivalents
all unrestricted cash accounts and short-term cash investments
and other investments with maturities of less than 90&nbsp;days
at purchase.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Restricted cash</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Cash held by Collegiate Funding Services
Education Loan Trust&nbsp;I (Trust&nbsp;I), Collegiate Funding
Services Education Loan Trust 2003&#150;A (Trust&nbsp;II),
Collegiate Funding Services Education Loan Trust 2003&#150;B
(Trust&nbsp;III), and Collegiate Funding Services
Resources&nbsp;I, LLC is restricted as to its use in accordance
with specifications detailed in the respective indentures
relating to the asset-backed financing of student loans.
</FONT>

<P align="center"><FONT size="2">F-9
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">COLLEGIATE FUNDING SERVICES, INC. AND
PREDECESSOR</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED
FINANCIAL&nbsp;STATEMENTS&#151;(Continued)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">CFS-SunTech Servicing LLC, in order to satisfy a
customer requirement to have funds readily available to satisfy
servicing claims against it, has obtained a letter of credit in
the amount of $250. This letter of credit is secured by a time
deposit for $250, which is included in restricted cash on the
Balance Sheet at December&nbsp;31, 2003.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Student loans</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Student loans are stated at the amount of unpaid
principal plus deferred loan costs and the fair value
adjustments related to the Acquisition. Costs incurred in
connection with loan originations are deferred. Deferred loan
costs and the fair value adjustments are amortized over the
estimated life of the student loans as a reduction of the
loan&#146;s yield using the effective interest method.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Property and equipment</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Property and equipment are carried at cost, less
accumulated depreciation, computed primarily by the
straight-line method over the following estimated useful lives:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="85%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Leasehold improvements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top">
    <FONT size="2">1-7 years
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Office furniture and equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top">
    <FONT size="2">3-7&nbsp;years
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Software
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top">
    <FONT size="2">3&nbsp;years
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Deferred financing costs</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Deferred financing costs associated with the
asset-backed debt and lines of credit and other debt obligations
are amortized using a method that approximates the effective
interest method over the respective terms of the debt and are
recorded as interest expense.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Goodwill</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In June 2001, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards
(SFAS)&nbsp;No.&nbsp;142, <I>Goodwill and Other Intangible
Assets</I>. This Statement requires that goodwill and intangible
assets that have indefinite useful lives are not amortized but
rather are tested at least annually for impairment. Intangible
assets that have finite useful lives will continue to be
amortized over their useful lives. The Company applied this
statement for the goodwill resulting from the Acquisition and
from the purchase of SunTech.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Revenue recognition</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company recognizes fee income on sold loan
applications at the time of sale to third parties and, for
certain private loan products, when customers referred to a
third party receive their loan proceeds. Loan servicing fee
income is earned as services are provided. The Company
recognizes student loan interest income as earned, including
amortization of premiums and discounts. With the guarantee on
the student loans applicable to both principal and interest, the
Company recognizes income on guaranteed student loans as earned
regardless of delinquency status. If a student loan should lose
its guaranteed status, interest would be recognized as received.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Advertising</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company charges the costs of advertising to
expense as incurred. Advertising costs were approximately
$1,453, $570, $436 and $521 for the year ended December&nbsp;31,
2003, for the periods from May&nbsp;17 through December&nbsp;31,
2002, and January&nbsp;1 through May&nbsp;16, 2002 and for the
year ended December&nbsp;31, 2001 respectively. Advertising
expenses are reported as a component of marketing expenses.
</FONT>

<P align="center"><FONT size="2">F-10
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">COLLEGIATE FUNDING SERVICES, INC. AND
PREDECESSOR</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED
FINANCIAL&nbsp;STATEMENTS&#151;(Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Income taxes</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pursuant to SFAS&nbsp;No.&nbsp;109, <I>Accounting
for Income Taxes</I>, a deferred tax asset or liability is
recognized for temporary differences, which arise, based upon
differences between the tax basis of assets and liabilities and
the reported amounts in the financial statements. Deferred tax
expense or benefit is then recognized for the change in deferred
tax assets or liabilities between periods.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Stock-based compensation</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In accordance with SFAS&nbsp;No.&nbsp;123, the
Company recognizes the fair value of the stock options as
compensation expense, allocated over the vesting period.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Earnings per share</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">SFAS No.&nbsp;128, <I>Earnings Per Share</I>,
requires the presentation of basic and diluted earnings per
share. Basic earnings (loss) per common share is computed by
dividing income (loss) attributable to common stockholders by
the weighted average number of common shares outstanding for the
period. The diluted earnings (loss) per common share data is
computed using the weighted average number of common shares
outstanding plus the dilutive effect of common stock
equivalents, unless the common stock equivalents are
anti-dilutive.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For the year ended December&nbsp;31, 2003, the
effect of outstanding convertible notes converting into shares
of common stock prior to their conversion in April 2003 was not
included in the computation of diluted loss per common share as
the effect would be anti-dilutive. In addition, the treasury
stock effect of warrants and options to purchase an aggregate of
1,315,000 shares of common stock that were outstanding as of
December&nbsp;31, 2003, were excluded from the computation of
diluted loss per common share as their effect would be
anti-dilutive.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following details the computation of earnings
(loss) per common share for the year ended December&nbsp;31,
2003 and for the period from May&nbsp;17 through
December&nbsp;31, 2002:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="66%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income (loss) available to common stockholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,451</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,682</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Add: interest expense on convertible notes, net
    of tax effect
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income (loss) adjusted for conversion of
    convertible notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,451</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,712</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average common shares calculation:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average common shares outstanding, basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,783,059</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,300,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Effect of conversion of convertible notes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">776,038</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Treasury stock effect of warrants and options
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">992,308</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average common shares outstanding,
    diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,783,059</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,068,346</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Earnings (loss) per common share:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Earnings (loss) per common share, basic
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.69</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.53</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Earnings (loss) per common share, diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.69</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.26</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">3.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Cash Balances</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company maintains cash balances at various
financial institutions. At December&nbsp;31, 2003 and at
December&nbsp;31, 2002, the Company&#146;s balances exceeded the
federally insured limits. The Company does not believe it has
significant credit risk relative to those uninsured amounts.
</FONT>

<P align="center"><FONT size="2">F-11
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">COLLEGIATE FUNDING SERVICES, INC. AND
PREDECESSOR</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED
FINANCIAL&nbsp;STATEMENTS&#151;(Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">4.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Student Loans</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company&#146;s loan portfolio consists of
loans originated under the Federal Family Education Loan Program
(FFELP). The FFELP is subject to comprehensive reauthorization
every five years and to statutory and regulatory changes. The
most recent reauthorization was the Higher Education Amendments
of 1998, which is scheduled to expire on September&nbsp;30, 2004.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">There are three principal categories of FFELP
loans: consolidation loans, Parent Loans for Undergraduate
Students (PLUS)&nbsp;loans and Stafford loans. Generally,
Stafford loans and PLUS loans have repayment periods of between
five and ten years. Consolidation loans have repayment periods
ranging from 12 to 30&nbsp;years. At December&nbsp;31, 2003 and
2002, the Company retained only FFELP loans in its portfolio.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company&#146;s FFELP loans are guaranteed
against the borrower&#146;s default, death, disability or
bankruptcy. The guarantee on FFELP loans is provided by certain
state or nonprofit guarantee agencies, which are reinsured by
the federal government. The loans are 100% guaranteed in cases
of death, disability and bankruptcy and are guaranteed for 98%
in other cases, resulting in 2% risk-sharing for the Company.
The Company accrues interest until receipt of proceeds from the
guarantor.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The FFELP loans are also subject to regulatory
requirements relating to origination and servicing. In the event
of default or the borrower&#146;s death, disability or
bankruptcy, the Company files a claim with the insurer or
guarantor of the loan, who, provided the loan has been properly
originated and serviced, pays the Company the unpaid principal
balance and accrued interest on the loan, less risk-sharing (in
the case of defaults).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Claims not immediately honored by the guarantor
because of servicing or origination defects are returned for
remedial servicing, during which period income is not earned.
The Company&#146;s and the predecessor&#146;s servicing
experience with FFELP loans resulted in two and zero outstanding
rejected claims during the years ended December&nbsp;31, 2003
and December&nbsp;31, 2002, respectively. The Company had no
non-accrual loans at December&nbsp;31, 2003 or December&nbsp;31,
2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The weighted average remaining term of student
loans in the Company&#146;s portfolio was approximately
23&nbsp;years and 22&nbsp;years at December&nbsp;31, 2003 and
December&nbsp;31, 2002, respectively.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">5.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Allowance for Loan Losses</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The allowance for loan losses represents the
amount estimated to absorb probable losses inherent in the
portfolio. The evaluation of the allowance for loan losses is
inherently subjective, as it requires material estimates that
may be susceptible to significant changes. The Company&#146;s
current portfolio has not matured to a point at which
predictable loan loss patterns have developed. The Company
considered industry trends of similar portfolios and default
rates in determining the level of allowance for loan losses as
of December&nbsp;31, 2003 and December&nbsp;31, 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company&#146;s allowance for loan losses is
$4,136 and $1,925, at December&nbsp;31, 2003 and
December&nbsp;31, 2002, respectively. The Company had
charge-offs of $146, $45, and $52 for the year ended
December&nbsp;31, 2003, and the periods from May&nbsp;17 through
December&nbsp;31, 2002, and January 1 through May&nbsp;16, 2002,
respectively. There were no recoveries during these periods.
</FONT>

<P align="center"><FONT size="2">F-12
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">COLLEGIATE FUNDING SERVICES, INC. AND
PREDECESSOR</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED
FINANCIAL&nbsp;STATEMENTS&#151;(Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">6.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Property and Equipment</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The major classes of property and equipment and
the total accumulated depreciation as of December&nbsp;31, 2003
and December&nbsp;31, 2002, are as follows:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="75%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Leasehold improvements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,506</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">679</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Office furniture and equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,646</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,933</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Software
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,844</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,867</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,996</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,479</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Less: accumulated depreciation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,901</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,588</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Property and equipment, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,095</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,891</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">7.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Debt</FONT></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Asset-backed notes and lines of
    credit</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company finances its loan originations
through the sale of asset-backed notes in the capital markets,
using both public offerings and private placements. The Company
publicly offered $1,874,775 in asset-backed notes in 2003 and
privately placed $500,000 and $527,200 in asset-backed notes in
2002 and 2001, respectively, to fund the retention of new loan
originations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">These securitizations are secured by separate
pools of FFELP consolidation loans. Approximately 97% of the
notes issued to date by the Company have been structured to a
AAA credit rating. The notes issued are indexed to three month
LIBOR or are auction rate based. After the initial issuance,
interest rates on the auction rate notes are reset every
28&nbsp;days.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">2003 issuance</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company issued $1,036,000 of asset-backed
notes in November 2003. The principal balances outstanding,
interest rates and maturity dates at December&nbsp;31, 2003 are
as follows:
</FONT>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="22%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Principal</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Interest</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Series</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">outstanding</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">rate</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Type</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Maturity date</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;A-1
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">249,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.29%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">LIBOR</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom" nowrap><FONT size="2">September 2013</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;A-2
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">250,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">LIBOR</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom" nowrap><FONT size="2">March 2021</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;A-3&nbsp;&#150; 7
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">485,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.19</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">Auction</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom" nowrap><FONT size="2">December 2043</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;B
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">52,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">Auction</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom" nowrap><FONT size="2">December 2043</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">No principal payments were made in 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company issued $838,775 of asset-backed notes
in February 2003. The principal balances outstanding, interest
rates and maturity dates at December&nbsp;31, 2003 are as
follows:
</FONT>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="22%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Principal</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Interest</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Series</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">outstanding</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">rate</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Type</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Maturity date</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;A-1
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">79,091</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.23%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">LIBOR</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom" nowrap><FONT size="2">March 2012</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;A-2
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">319,025</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.47</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">LIBOR</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom" nowrap><FONT size="2">September 2020</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;A-3&nbsp;&#150; 6
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">352,400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.18</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">Auction</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom" nowrap><FONT size="2">March 2042</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;B
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">42,350</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.32</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">Auction</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom" nowrap><FONT size="2">March 2042</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company made $45,909 in principal payments as
required under the terms of the related indenture.
</FONT>

<P align="center"><FONT size="2">F-13
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">COLLEGIATE FUNDING SERVICES, INC. AND
PREDECESSOR</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED
FINANCIAL&nbsp;STATEMENTS&#151;(Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">2002 and 2001 issuances</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company privately placed $500,000 and
$527,200 of asset-backed notes in July 2002 and in November
2001, respectively. The principal balances outstanding, interest
rates and maturity dates at December&nbsp;31, 2003 are as
follows:
</FONT>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="22%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Principal</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Interest</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">series</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">outstanding</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">rate</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Type</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Maturity date</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2002A-8&nbsp;&#150; 15
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">470,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.24%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">Auction</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom" nowrap><FONT size="2">July 2042</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2002B
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.33</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">Auction</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom" nowrap><FONT size="2">July 2042</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="22%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Principal</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Interest</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">series</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">outstanding</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">rate</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Type</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Maturity date</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2001A-1&nbsp;&#150; 7
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">495,600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.25%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">Auction</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">December 2041</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2001B
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31,600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.33</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">Auction</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">December 2041</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">No principal payments were made in 2003 or 2002.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Warehouse line of credit</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On July&nbsp;23, 2003, the Company entered into a
warehouse credit facility with a multi-seller conduit
administered by a third party bank providing for up to $500,000
in borrowings. The Company utilizes this warehouse credit
facility principally to fund its retention of FFELP loan
originations, of which such loans collateralize the associated
borrowings. The Company pays the conduit a credit spread over
the commercial paper rate, typically a 30-day rate, on the
warehouse credit facility. The ability to draw down on this
facility expires on July&nbsp;20, 2004, but can be extended by
consent of the conduit and bank up to another 364-day period.
Unless otherwise agreed, the entire facility must be repaid by
July&nbsp;18, 2006. There was $144,800 outstanding on this
facility as of December&nbsp;31, 2003. Interest and other
associated fees are paid monthly. On February&nbsp;17, 2004, the
bank and the conduit temporarily increased the funding
commitment level of the warehouse credit facility to $1,000,000
through the end of May 2004, at which time it will return to a
$500,000 commitment level. The weighted average interest rate
for 2003 was approximately 1.76% and approximated 1.52% at
December&nbsp;31, 2003.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Acquisition financing</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company issued senior notes payable in the
amount of $105,000 in connection with the Acquisition. The
senior notes had a fixed annual interest rate of 11.0%. The
balances on the notes at December&nbsp;31, 2003 and
December&nbsp;31, 2002, were zero and $93,750 (less unamortized
discount of $5,147 relating to warrants and preferred stock of a
consolidated subsidiary issued in connection with the issuance
of the senior notes), respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Payments on the outstanding amounts were
scheduled to be paid quarterly ($5,000 plus interest through
2003, $3,750 plus interest thereafter). There was also a
principal prepayment provision, based upon unrestricted cash
held by the Company at December&nbsp;31 of each year through
2006, payable on February 4 of the following year. The principal
prepayment amount was equal to 75% of the Company&#146;s excess
cash flow for the preceding calendar year, as determined by the
note. The principal prepayment amount paid on February&nbsp;4,
2003 was $14,499. In October 2003, these notes were repaid in
full. Unamortized deferred financing fees of $1,246 and the
remaining debt discount of $3,578 were charged to debt
extinguishment.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company issued a note to the Sellers for
$15,000 as part of the Acquisition. This note matures on
June&nbsp;30, 2007 and has a fixed annual interest rate of
4.47%. Interest is paid quarterly.
</FONT>

<P align="center"><FONT size="2">F-14
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">COLLEGIATE FUNDING SERVICES, INC. AND
PREDECESSOR</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED
FINANCIAL&nbsp;STATEMENTS&#151;(Continued)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company also issued $5,000 of convertible
notes to fund the Acquisition. The notes had a fixed annual
interest rate of 8.0% and interest was payable at maturity. The
notes were scheduled to mature on April&nbsp;30, 2004. However,
the notes were converted in conjunction with the purchase of
SunTech. Principal of $3,991 of the convertible notes, plus
unpaid interest of $291 was converted into 913,836&nbsp;shares
of preferred stock of a consolidated subsidiary at a conversion
price of $4.6858&nbsp;per share. Principal of $1,009 of the
convertible notes, plus unpaid interest of $74 was converted
into 832,605 common shares at a conversion price of
$1.30&nbsp;per share.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As part of the Acquisition, the Company paid off
all outstanding balances of a term loan, an equipment
line-of-credit and a note payable to Wachovia.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Revolving line of credit</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company entered into a revolving credit
agreement on October&nbsp;30, 2003 for $45,000. Also on
October&nbsp;30, 2003, $40,000 was drawn on the line and was
used to retire a portion of the senior notes that were issued in
the Acquisition. On December&nbsp;31, 2003, $26,250 was
outstanding on this line of credit. The amount of the facility
was reduced by $3,750 on December&nbsp;31, 2003 and will be
reduced by an additional $3,750 at the end of each quarter until
the expiration date in September 2006. Borrowings under the line
bear interest at either LIBOR or prime at the Company&#146;s
option. The interest rate on outstanding borrowings at
December&nbsp;31, 2003 was 4.62%. Unrestricted cash over $5,000
(Excess Cash) at the end of each calendar year, beginning in
2004, will be applied to the outstanding principal balance.
Interest is paid monthly.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Future minimum principal payments for subsequent
years for all debt are as follows:
</FONT>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="81%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amount</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="left" nowrap><B><FONT size="1">Year:</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">160,012</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2005
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,492</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2006
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">274</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2007
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,408</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2008
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Thereafter
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,856,066</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,043,293</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">8.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Derivative Financial Instruments</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company is exposed to interest rate risk as
its asset-backed debt notes are indexed to short-term indices
(LIBOR and auction rates) and the assets behave as fixed rate
assets in the current interest rate environment. Derivative
instruments are utilized to reduce the Company&#146;s interest
rate risk. The key terms of the derivatives at December&nbsp;31,
2003 are as follows:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pay&#151;</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Receive&#151;</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Maturity</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Derivative type</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Notional amount</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">fixed rate</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">floating rate (LIBOR)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">date</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Fair value</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">Swap</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.89</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.12</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1/26/2005</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,070</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">Swap</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">225,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.64</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11/26/2004</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(606</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">Swap</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">225,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.64</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11/26/2004</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(606</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">Cap (Sold)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.09</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1/26/2005</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(328</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">Total</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,610</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company received $1,700 in proceeds from the
sale of the Cap on February&nbsp;28, 2003. The amount is
recorded as a derivative liability and is marked-to-market over
the term of the Cap. Payments
</FONT>

<P align="center"><FONT size="2">F-15
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">COLLEGIATE FUNDING SERVICES, INC. AND
PREDECESSOR</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED
FINANCIAL&nbsp;STATEMENTS&#151;(Continued)</FONT></B>

<P align="left">
<FONT size="2">on the Cap derivative will be made only when the
Commercial Paper rate exceeds 2.09%. No payments were made in
2003. The notional amounts of the Cap and the $500,000 swap will
reduce to $250,000 each, on July&nbsp;26, 2004.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has not designated any of its
derivatives into SFAS&nbsp;No.&nbsp;133 hedge relationships and
therefore records changes in their value as derivative
mark-to-market on the statement of income. The impact of the
cash payments and accruals are reported as swap interest on the
statement of income. The fair value of the derivatives is
included with other accrued liabilities on the balance sheet.
There were no derivatives outstanding at December&nbsp;31, 2002.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">9.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Lease Commitments</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total rent expense, including amounts paid under
monthly operating leases, was approximately $1,820, $901, $464
and $929 for the year ended December&nbsp;31, 2003, for the
periods from May&nbsp;17 through December&nbsp;31, 2002, and
January 1 through May&nbsp;16, 2002, and for the year ended
December&nbsp;31, 2001, respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Future minimum commitments for both office leases
and office equipment leases are as follows:
</FONT>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="84%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amount</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="left" nowrap><B><FONT size="1">Year:</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,894</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2005
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,613</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2006
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">494</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2007
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">296</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2008
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">258</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,555</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company will be relocating its Virginia
operations to a new facility in Virginia in the third quarter of
2004. The new lease when executed will expire in 2010.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">10.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Related Party Transactions</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon closing of the Acquisition, agreements were
entered into to provide management services to the Company. The
first agreement is with the Sellers for consulting services.
This agreement provides for a $1,000 fee per year for two years,
paid in quarterly installments. The Company has an option to
extend the agreement for a third year. The Company incurred
consulting fees to the Sellers of the Company totaling $1,000
for the year ended December&nbsp;31, 2003 and $625 for the
period from May&nbsp;17 through December&nbsp;31, 2002. The
Company also incurred management fees of $2,800 to the Sellers
for the period from January&nbsp;1 through May&nbsp;16, 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The second agreement is a 10-year agreement with
Lightyear Capital, LLC, an affiliate of the majority
stockholders of the Company. The Company incurred management
fees to Lightyear Capital, LLC, totaling $1,250 for the year
ended December&nbsp;31, 2003 and $625 for the period from
May&nbsp;17 through December&nbsp;31, 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon closing of the purchase of SunTech,
agreements were entered into to provide management services to
CFS-SunTech Servicing LLC. The first agreement is with the
previous owner of SunTech. This agreement provides for a $1,350
fee for the first year and a $1,000 fee for the second year,
payable in quarterly installments. The second agreement is with
the previous head of operations. This agreement provides for a
$150 fee per year for a period of two years, payable monthly.
The Company incurred consulting fees of approximately $1,063
related to the SunTech agreement during the year ended
December&nbsp;31, 2003.
</FONT>

<P align="center"><FONT size="2">F-16
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">COLLEGIATE FUNDING SERVICES, INC. AND
PREDECESSOR</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED
FINANCIAL&nbsp;STATEMENTS&#151;(Continued)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Expenses to related parties totaled $3,313,
$1,250, $2,800 and $6,720 for the year ended December&nbsp;31,
2003, for the periods from May&nbsp;17 through December&nbsp;31,
2002, and January&nbsp;1 through May&nbsp;16, 2002, and for the
year ended December&nbsp;31, 2001, respectively. Those expenses
are presented as management and consulting fees on the statement
of income.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">11.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Major Business Customers and Sources of
    Revenue</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Certain business customers generated significant
amounts of the Company&#146;s revenue. Fee income from one
customer was $42,747, $51,672, $17,704 and $90,090 for the year
ended December&nbsp;31, 2003, for the periods from May&nbsp;17
through December&nbsp;31, 2002, and January&nbsp;1 through
May&nbsp;16, 2002, and for the year ended December&nbsp;31,
2001, respectively. Fee income from a second customer was
$23,001, $374, $337 and $39,310 for the year ended
December&nbsp;31, 2003, for the periods from May&nbsp;17 through
December&nbsp;31, 2002, and January&nbsp;1 through May&nbsp;16,
2002, and for the year ended December&nbsp;31, 2001,
respectively. Fee income from a third customer was $12,006,
$32,339, and $18,416 for the year ended December&nbsp;31, 2003,
and for the periods from May&nbsp;17 through December&nbsp;31,
2002, and January&nbsp;1 through May&nbsp;16, 2002, respectively.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">12.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Income Taxes</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Components of income tax expense for the year
ended December&nbsp;31, 2003 and for the period from May&nbsp;17
through December&nbsp;31, 2002, are presented below:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="74%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current income tax provision (benefit):
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Federal
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6,159</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,059</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">State
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,059</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,006</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total current income tax provision (benefit)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,218</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,065</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred income tax provision:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Federal
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,981</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,119</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">State
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,041</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">542</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total deferred income tax provision
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,022</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,661</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income tax provision (benefit)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(196</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,726</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The reconciliations from federal statutory rates
to the effective income tax rates for the year ended
December&nbsp;31, 2003 and the period from May&nbsp;17 through
December&nbsp;31, 2002 are presented below:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="77%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Tax Rate Analysis</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Expected federal income tax (benefit) provision
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(35.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Lobbying, meals, entertainment and other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">State income taxes, net of federal benefit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Effective income tax rate
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Deferred tax assets and liabilities are
recognized for future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered
or settled. The effect on deferred tax assets and liabilities of
a change in tax rates is recognized in income in
</FONT>

<P align="center"><FONT size="2">F-17
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">COLLEGIATE FUNDING SERVICES, INC. AND
PREDECESSOR</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED
FINANCIAL&nbsp;STATEMENTS&#151;(Continued)</FONT></B>

<P align="left">
<FONT size="2">the period that includes the enactment date. The
sources and tax effects of temporary differences that give rise
to significant portions of deferred tax assets and liabilities
for the year ended December&nbsp;31, 2003 and for the period
from May&nbsp;17 through December&nbsp;31, 2002 are presented
below:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="75%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Deferred income tax analysis</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred income tax assets:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Provision for loan losses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,335</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">474</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unrealized losses on derivatives
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">721</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net operating loss carryforward
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">382</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">138</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">101</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total deferred income tax assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,576</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">575</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred income tax liabilities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">461</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">154</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,717</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,626</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loan origination costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,081</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,456</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total deferred income tax liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,259</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,236</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net deferred income tax liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,683</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,661</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">13.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Retirement Plan</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company sponsors a 401(k) defined
contribution retirement plan. Employees may participate in the
plan upon completion of 60&nbsp;days of service and attainment
of age&nbsp;18 by electing to have a portion of their
compensation contributed to the plan. The Company matches 100%
of the employees&#146; contribution up to 3% of eligible
compensation. Plan expense was $757, $373, $251 and $414 for the
year ended December&nbsp;31, 2003, for the periods from
May&nbsp;17 through December&nbsp;31, 2002, and January 1
through May&nbsp;16, 2002, and for the year ended
December&nbsp;31, 2001, respectively.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">14.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Stock Incentive Plan</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Effective May&nbsp;17, 2002, the Company
initiated the 2002 Stock Incentive Plan to provide additional
incentives to key personnel. The maximum aggregate number of
shares which may be issued is 700,000&nbsp;shares of
Class&nbsp;B common stock. On May&nbsp;17, 2002, the Company
granted 315,000 stock options with an exercise price of
$1.30&nbsp;per common share, the fair market value of a share of
common stock at issuance. Subject to certain conditions,
portions of the options may have accelerated vesting to vest on
the anniversary dates of the grants. There were
56,700&nbsp;shares that vested in May 2003. For any year that
the specified conditions are not met, the options not then
vesting will vest in 2009.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The fair value of the options under the
Black-Scholes option pricing model assumed: an interest rate of
approximately 3%; no dividends; volatility of approximately 25%;
and an expected life of seven years. This options pricing model
requires the input of subjective assumptions. Because the
Company&#146;s options have characteristics significantly
different from those publicly traded options and because changes
in the subjective input assumptions can materially affect the
fair value estimate, in managements&#146; opinion, the existing
models do not necessarily provide a reliable single measure of
the fair value of these stock options. Using this model, the
fair value of the options as of the grant date was approximately
$140. Since the inception of the plan, the Company has
recognized approximately $33 in compensation expense.
</FONT>

<P align="center"><FONT size="2">F-18
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">COLLEGIATE FUNDING SERVICES, INC. AND
PREDECESSOR</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED
FINANCIAL&nbsp;STATEMENTS&#151;(Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">15.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Preferred Stock of Consolidated
    Subsidiary</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company&#146;s consolidated subsidiary, CFSL
Acquisition, has authorized 20,000,000&nbsp;shares of preferred
stock, par value $0.001. CFSL Acquisition issued
10,000,000&nbsp;shares of preferred stock on May&nbsp;17, 2002
in connection with the Acquisition. In April 2003,
1,015,382&nbsp;shares of CFSL Acquisition preferred stock were
issued in connection with the conversion of $3,991 of
convertible notes plus accrued interest. Also in April 2003,
CFSL Acquisition issued 1,788,682 preferred shares to fund a
portion of the purchase of SunTech. In October 2003, CFSL
Acquisition issued 4,258,766 preferred shares to fund a portion
of the payoff of the 11%&nbsp;senior notes.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The preferred stock is without voting rights. The
liquidation preference of the preferred stock is equal to the
sum of the original issue price of $4.6858&nbsp;per share plus
the aggregate amount of all accrued and unpaid dividends.
Dividends are cumulative and accrue at the rate of 10%&nbsp;per
annum on the liquidation preference per share compounded
annually. The aggregate liquidation preference of the preferred
stock was $89,136 and $49,787 as of December&nbsp;31, 2003 and
December&nbsp;31, 2002, respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The preferred stock is redeemable at any time at
the option of the Company, at its liquidation preference, which
includes accrued but unpaid dividends, on the date of such
redemption. The preferred stock was immediately redeemable on
the respective dates of issuance as the holders of the majority
of the preferred stock control the Company through their
ownership of common stock and board of director representation.
The Company records periodic accretion to accrue the cumulative
dividends on the preferred stock such that the carrying amount
of the preferred stock is equal to its redemption amount at each
balance sheet date.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">16.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Stockholders&#146; Equity</FONT></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Common stock</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has authorized 18,000,000&nbsp;shares
of its Class&nbsp;A common stock, par value $0.001. The
Class&nbsp;A common stock has ten votes per share. On
May&nbsp;17, 2002 the Company issued 8,052,550&nbsp;shares of
its Class&nbsp;A common stock. In April 2003, $1,009 of
convertible notes plus accrued interest, and contingent warrants
were converted into 924,412&nbsp;shares of Class&nbsp;A common
stock. Also in April, the Company issued 1,629,688&nbsp;shares
to fund in part the purchase of SunTech. In October 2003, the
Company issued 3,880,211&nbsp;shares to fund in part the payoff
of the 11%&nbsp;senior notes.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On May&nbsp;17, 2002, the Company also issued
247,450&nbsp;shares of Class&nbsp;B common stock, par value
$0.001, which has 3,000,000&nbsp;shares authorized. The
Class&nbsp;B common stock has one vote per share.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Dividends and distributions in liquidation are to
be pro-rata for Class&nbsp;A and Class&nbsp;B shares. As of
December&nbsp;31, 2003, no dividends have been declared to date
on any class of stock.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Preferred stock</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has authorized 20,000,000&nbsp;shares
of preferred stock par value $0.001. No shares of the preferred
stock have been issued or are outstanding
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Warrants</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company issued to holders of the $105,000 of
senior notes, warrants to purchase an aggregate of
1,000,000&nbsp;shares of Class&nbsp;A common stock, and
contingent warrants to purchase up to an additional
100,575&nbsp;shares of Class&nbsp;A common stock. The warrants
expire in May 2012 and have an exercise price of $0.01&nbsp;per
share. The contingent warrants were exercised in April 2003.
</FONT>

<P align="center"><FONT size="2">F-19
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">COLLEGIATE FUNDING SERVICES, INC. AND
PREDECESSOR</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED
FINANCIAL&nbsp;STATEMENTS&#151;(Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Notes receivable from
    management</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with a share purchase agreement
dated May&nbsp;17, 2002, the Company has notes receivable from
members of management for stock purchases of approximately $509
and $713 at December&nbsp;31, 2003 and December&nbsp;31, 2002,
respectively. These notes bear interest at an adjustable rate
based on LIBOR but at no time less than 3.21%. In accordance
with the agreement, the notes cannot exceed 75% of the value of
the underlying stock acquired. The principal and accrued
interest is due in full May 2005.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Shares issued and
    outstanding:</FONT></I></B></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="68%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Class A</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Class B</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Common</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Common</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stock</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">18,000,000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">3,000,000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">authorized</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">authorized</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(Par value $0.001)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Shares issued and outstanding, May&nbsp;17,
    2002</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of Class&nbsp;A Common Stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,052,550</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of Class&nbsp;B Common Stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">247,450</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Shares issued and outstanding,
    December&nbsp;31, 2002</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,052,550</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">247,450</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of Class&nbsp;A Common Stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,509,899</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Conversion of notes payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">832,605</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Exercise of contingent warrants
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">91,807</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Shares issued and outstanding,
    December&nbsp;31, 2003</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,486,861</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">247,450</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">17.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Fair Value of Financial Instruments</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Management uses its best judgment in estimating
the fair value of the Company&#146;s financial instruments;
however, there are inherent weaknesses in any estimation
technique. Therefore, for substantially all financial
instruments, the fair value estimates herein are not necessarily
indicative of the amounts the Company could have realized in a
sale transaction on the dates indicated.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The estimated fair value amounts have been
measured as of the balance sheet date. As such, the estimated
fair values of these financial instruments subsequent to the
reporting date may be different from the amounts reported as of
the balance sheet date.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Student loans</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Student Loans fair value is estimated based upon
the Company&#146;s historical loan application sales data. At
December&nbsp;31, 2003 and December&nbsp;31, 2002, the fair
value of student loans was approximately $2,947,000 and
$995,000, respectively.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Debt</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The carrying amount of the Company&#146;s
asset-backed notes approximates their fair value due to the
frequency of the resetting of interest rates (every
28&nbsp;days) and the AAA rating.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The carrying amounts of the warehouse and
revolving lines of credit approximate their fair value because
they have floating interest rates.
</FONT>

<P align="center"><FONT size="2">F-20
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">COLLEGIATE FUNDING SERVICES, INC. AND
PREDECESSOR</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED
FINANCIAL&nbsp;STATEMENTS&#151;(Continued)</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Other</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Other carrying amounts of cash and cash
equivalents, restricted cash, accounts receivable, derivatives,
accounts payable and accrued interest approximate their fair
value.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">18.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Reclassifications</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Certain prior period amounts have been
reclassified to conform to the current year presentation.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">19.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Commitments and Contingencies</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the normal course of business the Company is
subject to consumer credit and human resources disputes and
potential litigation. At December&nbsp;31, 2003, the Company is
not party to any material disputes or litigation. The Company
has commitments with third party liquidity providers, with whom
it is obligated to sell a minimum amount of FFELP or private
student loan applications originated under specific criteria.
These commitments generally extend for one year. As of
December&nbsp;31, 2003 and 2002, the Company was obligated to
sell $1,200,000 and $606,000, respectively, in student loan
applications at contractual rates under various agreements
through December&nbsp;31, 2004. The Company may also acquire
FFELP student loans or successfully completed applications for
FFELP loans from time-to-time should market conditions warrant.
</FONT>

<P align="left">
<B><FONT size="2">20.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Segment
Data</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company&#146;s reportable segments are its
loan origination operations and its loan servicing operations.
The Company&#146;s accounting policies for segments are the same
as those described in the &#147;Summary of Significant
Accounting Policies.&#148; Prior to the Company acquiring
SunTech on April&nbsp;15, 2003, the Company operated in only one
segment.
</FONT>

<P align="center"><FONT size="2">F-21
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">COLLEGIATE FUNDING SERVICES, INC. AND
PREDECESSOR</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED
FINANCIAL&nbsp;STATEMENTS&#151;(Continued)</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table presents segment data for the
year ended December&nbsp;31, 2003:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="38%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Loan Origination</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Loan Servicing</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Eliminations</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Consolidated</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Net revenue</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61,305</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">541</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61,846</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,871</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,871</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net interest income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,434</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">541</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,975</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Provision for loan losses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,357</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,357</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net interest income after provision for loan
    losses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,077</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">541</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,618</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fee income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">89,508</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,784</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,734</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">98,558</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net revenue
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">108,585</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,325</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,734</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">118,176</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Expenses</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Salaries and related benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">48,324</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,316</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54,640</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other selling, general and administrative
    expenses:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Marketing and mailing costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,999</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,006</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Communications and data processing
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,344</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,171</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,515</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Management and consulting fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,313</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,313</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Professional fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,983</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,332</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,315</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,831</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,497</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,328</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other general&nbsp;&#38; administrative
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,712</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,348</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,734</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,326</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total other selling, general and administrative
    expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">52,182</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,355</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,734</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54,803</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Swap interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,439</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,439</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Derivative mark-to-market
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,862</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,862</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Debt extinguishment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,824</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,824</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">110,631</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,671</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,734</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">119,568</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income (loss) before income taxes and accretion
    of dividends on preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,046</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">654</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,392</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,172,067</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,215</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,192,282</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Intercompany transactions of $2,734 in other
operating expenses in the loan origination segment were paid as
fee income to the loan servicing segment and are eliminated in
the consolidated financials.
</FONT>

<P align="center"><FONT size="2">F-22
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<HR size="4" noshade color="#000000" style="margin-top: -5px">
</DIV>

<DIV align="left">
<HR size="1" noshade color="#000000" style="margin-top: -10px">
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Through and
including &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2004 (the 25th day after the date of this prospectus), all
dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a
prospectus. This is in addition to a dealer&#146;s obligation to
deliver a prospectus when acting as an underwriter and with
respect to an unsold allotment or subscription.
</FONT>

<P align="center">
<B><FONT size="4">Shares</FONT></B>

<P align="center">
<B><FONT size="5">Collegiate Funding Services, Inc.</FONT></B>

<P align="center">
<B><FONT size="4">Common Stock</FONT></B>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<DIV align="center">
<B><FONT size="4">PROSPECTUS</FONT></B>
</DIV>

<DIV align="center">
<HR size="1" width="30%" align="center" noshade>
</DIV>

<P align="center">
<B> </B><I>Joint Book-Running Managers</I>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="50%"></TD>
    <TD width="50%"></TD>
</TR>

<TR valign="top">
    <TD align="left"><B><FONT size="5">JPMorgan</FONT></B></TD>
    <TD align="right"><B><FONT size="5">Merrill Lynch&nbsp;&#38; Co.</FONT></B></TD>
</TR>

</TABLE>

<P align="center">
<B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2004</FONT></B>

<P align="left">
<HR size="1" noshade color="#000000" style="margin-top: -2px">

<DIV align="left">
<HR size="4" noshade color="#000000" style="margin-top: -10px">
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">PART&nbsp;II</FONT></B>

<P align="center">
<B><FONT size="2">INFORMATION NOT REQUIRED IN
PROSPECTUS</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Item&nbsp;13.</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Other Expenses of Issuance and
    Distribution.</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The actual and estimated expenses in connection
with this offering, all of which will be borne by us are as
follows:
</FONT>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="83%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">SEC Registration Fee
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,856</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Printing and Engraving Expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Legal Fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounting Fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Listing Fees
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">NASD Filing Fee
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Miscellaneous
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left">
<FONT size="2">*&nbsp;To be filed by amendment.
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Item&nbsp;14.</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Indemnification of Directors and
    Officers</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Collegiate Funding Services, Inc. (the
&#147;Registrant&#148;) is a Delaware corporation.
Section&nbsp;145 of the Delaware General Corporation Law (the
&#147;DGCL&#148;) grants each corporation organized thereunder
the power to indemnify any person who is or was a director,
officer, employee or agent of a corporation or enterprise,
against expenses, including attorneys&#146; fees, judgments,
fines and amounts paid in settlement actually and reasonably
incurred by him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, other than an action by or in
the right of the corporation, by reason of being or having been
in any such capacity, if he acted in good faith in a manner
reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;102(b)(7) of the DGCL enables a
corporation in its certificate of incorporation or an amendment
thereto to eliminate or limit the personal liability of a
director to the corporation or its stockholders for monetary
damages for violations of the directors&#146; fiduciary duty of
care, except (i)&nbsp;for any breach of the director&#146;s duty
of loyalty to the corporation or its stockholders, (ii)&nbsp;for
acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii)&nbsp;pursuant to
Section&nbsp;174 of the DGCL (providing for liability of
directors for unlawful payment of dividends or unlawful stock
purchases or redemptions) or (iv)&nbsp;for any transaction from
which a director derived an improper personal benefit.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Article&nbsp;SEVENTH of the Registrant&#146;s
Amended and Restated Certificate of Incorporation (filed as
Exhibit&nbsp;3.1) provides that except as otherwise provided by
the DGCL, no director of the Registrant shall be personally
liable to the Registrant or its stockholders for monetary
damages for breach of fiduciary duty as a director and that the
Registrant may indemnify directors and officers of the
Registrant to the fullest extent permitted by the DGCL.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Article&nbsp;IV of the Registrant&#146;s Amended
and Restated By-laws provides that:
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">With respect to third party claims, the
Registrant, to the fullest extent permitted and in the manner
required, by the laws of the State of Delaware, as in effect
from time to time shall indemnify any person who was or is made
a party to or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding
(including any appeal thereof), whether civil, criminal,
administrative, regulatory or investigative in nature (other
than an action by or in the right of the Registrant), by reason
of the fact that such person is or was a director or officer of
the Registrant, or, if at a time when he or she was a director
or officer of the Registrant, is or was serving at the request
of, or to represent the interests of, the Registrant as a
director, officer, partner, member, trustee, fiduciary, employee
or agent (a
</FONT>

<P align="center"><FONT size="2">II-1
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">&#147;Subsidiary Officer&#148;) of another
corporation, partnership, joint venture, limited liability
company, trust, employee benefit plan or other enterprise
including any charitable or not-for-profit public service
organization or trade association (an &#147;Affiliated
Entity&#148;), against expenses (including attorneys&#146; fees
and disbursements), costs, judgments, fines, penalties and
amounts paid in settlement actually and reasonably incurred by
such person in connection with such action, suit or proceeding
if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best
interests of the Registrant, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his or
her conduct was unlawful; <I>provided, however</I>, that
(i)&nbsp;the Registrant shall not be obligated to indemnify a
director or officer of the Registrant or a Subsidiary Officer of
any Affiliated Entity against expenses incurred in connection
with an action, suit, proceeding or investigation to which such
person is threatened to be made a party but does not become a
party unless such expenses were incurred with the approval of
the Board of Directors, a committee thereof or the Chairman, a
Vice Chairman or the President of the Registrant and
(ii)&nbsp;the Registrant shall not be obligated to indemnify
against any amount paid in settlement unless the Registrant has
consented to such settlement. The termination of any action,
suit or proceeding by judgment, order, settlement or conviction
or upon a plea of nolo contendere or its equivalent shall not,
of itself, create a presumption that the person did not act in
good faith and in a manner which such person reasonably believed
to be in or not opposed to the best interests of the Registrant,
and, with respect to any criminal action or proceeding, that
such person had reasonable cause to believe that his or her
conduct was unlawful. Notwithstanding anything to the contrary
in the foregoing provisions of this paragraph, a person shall
not be entitled, as a matter of right, to indemnification
pursuant to this paragraph against costs or expenses incurred in
connection with any action, suit or proceeding commenced by such
person against the Registrant or any Affiliated Entity or any
person who is or was a director, officer, partner, member,
fiduciary, employee or agent of the Registrant or a Subsidiary
Officer of any Affiliated Entity in their capacity as such, but
such indemnification may be provided by the Registrant in a
specific case as permitted by the Amended and Restated By-laws.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Registrant&#146;s Amended and Restated
By-laws also provides that, with respect to derivative claims,
the Registrant, to the fullest extent permitted and in the
manner required, by the laws of the State of Delaware, as in
effect from time to time shall indemnify any person who was or
is made a party to or is threatened to be made a party to any
threatened, pending or completed action or suit (including any
appeal thereof) brought by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that such
person is or was a director or officer of the Corporation, or,
if at a time when he or she was a director or officer to the
Registrant, is or was serving at the request of, or to represent
the interests of, the Registrant as a Subsidiary Officer of an
Affiliated Entity against expenses (including attorneys&#146;
fees and disbursements) and costs actually and reasonably
incurred by such person in connection with such action or suit
if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best
interests of the Registrant, except that no indemnification
shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the
Registrant unless, and only to the extent that, the Court of
Chancery of the State of Delaware or the court in which such
judgment was rendered shall determine upon application that,
despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses and costs as the Court
of Chancery of the State of Delaware or such other court shall
deem proper; provided, however, that the Registrant shall not be
obligated to indemnify a director or officer of the Registrant
or a Subsidiary Officer of any Affiliated Entity against
expenses incurred in connection with an action or suit to which
such person is threatened to be made a party but does not become
a party unless such expenses were incurred with the approval of
the Board of Directors, a committee thereof, or the Chairman, a
Vice Chairman or the President of the Corporation.
Notwithstanding anything to the contrary in the foregoing
provisions of this paragraph, a person shall not be entitled, as
a matter of right, to indemnification pursuant to this paragraph
against costs and expenses incurred in connection with any
action or suit in the right of the Registrant commenced by such
Person, but such indemnification may be provided by the
Registrant in any specific case as permitted under the Amended
and Restated By-laws.
</FONT>

<P align="center"><FONT size="2">II-2
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Registrant has also obtained officers&#146;
and directors&#146; liability insurance which insures against
liabilities that officers and directors of the Registrant may,
in such capacities, incur.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Item&nbsp;15.</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Recent Sales of Unregistered
    Securities</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Since its inception, the Registrant has issued
securities in the following transactions, each of which was
exempt from the registration requirements of the Securities Act
of 1933, as amended, as transactions by an issuer not involving
any public offering thereunder. All of the below-referenced
securities are deemed restricted securities for the purposes of
the Securities Act. No underwriters were involved in any of the
below-referenced sales of securities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection
with the acquisition of us by Lightyear, on May&nbsp;17, 2002,
we issued 8,052,550&nbsp;shares of Class&nbsp;A common stock to
Lightyear and other investors, at a price per share of $1.30 for
aggregate cash consideration of $7,966,795 and $2,501,520,
respectively; 147,450&nbsp;shares of Class&nbsp;B common stock
to certain members of management, at a price per share of $1.30
for aggregate cash consideration of $191,685; 100,000 shares of
Class&nbsp;B common stock to J. Barry Morrow, for no cash
consideration; and 10,00,000 shares of preferred stock of CFSL
Acquisition Corp., our wholly-owned subsidiary, to Lightyear,
other investors and certain members of management, at a price
per share of $4.69 for aggregate cash consideration of
$31,545,812, $14,595,177 and $759,011, respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On May&nbsp;17,
2002, we issued $5,000,000 of convertible notes for cash to
Lightyear and other investors. Of this total, $1,009,000 of the
notes were convertible into Class&nbsp;A common stock, at a
price of $1.30 per share, and $3,991,000 of the notes were
convertible into preferred stock of CFSL Acquisition Corp., at a
price of $4.69 per share. In connection with the issuance of the
convertible notes, we also issued contingent warrants to
purchase up to an additional 100,575 shares of Class&nbsp;A
common stock, at an exercise price of $0.01 per share. On
April&nbsp;15, 2003, 924,412 shares of Class&nbsp;A common stock
and 1,015,382 shares of preferred stock of CFSL Acquisition
Corp. were issued in connection with the conversion of the
convertible notes plus accrued but unpaid interest and exercise
of the contingent warrants. On May 17, 2002, we also issued to
holders of the senior notes, warrants to purchase an aggregate
of 1,000,000 shares of Class A common stock, at a price of $0.01
per share. As of the date of this filing, these warrants have
not been exercised.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection
with the acquisition of SunTech, on April&nbsp;15, 2003, we
issued 1,629,688&nbsp;shares of Class&nbsp;A common stock to
Lightyear and other investors, at a price per share of $1.30 for
aggregate cash consideration of $1,442,598 and $675,996,
respectively; and 1,788,682&nbsp;shares of preferred stock of
CFSL Acquisition Corp. to Lightyear and other investors, at a
price per share of $4.69 for aggregate cash consideration of
$5,763,555 and $2,625,364, respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection
with the redemption of a portion of our senior notes, on
October&nbsp;28, 2003, we issued 3,880,211 shares of
Class&nbsp;A common stock to Lightyear and other investors, at a
price per share of $1.30 for aggregate cash consideration of
$3,675,186 and $1,369,089, respectively; and 4,258,766 shares of
preferred stock of CFSL Acquisition Corp. to Lightyear and other
investors, at a price per share of $4.69 for aggregate cash
consideration of $14,688,690 and $5,284,922, respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, we have granted options to purchase
shares of our common stock to certain members of management,
none of which have been exercised to date.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The sales of the above securities were exempt
from the registration requirements of the Securities Act, in
reliance on Section&nbsp;4(2) of the Securities Act,
Regulation&nbsp;S, Regulation&nbsp;D or Rule&nbsp;701
promulgated thereunder, as transactions by an issuer not
involving a public offering or to qualified institutional buyers
or transactions pursuant to compensatory benefit plans and
contracts relating to compensation as provided under
Rule&nbsp;701. There were no underwriters involved in connection
with the sale of the above securities.
</FONT>

<P align="center"><FONT size="2">II-3
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Item&nbsp;16.</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Exhibits and Financial Statement
    Schedules</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;Exhibit&nbsp;Index
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="21%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="76%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Exhibit No.</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Description of Exhibit</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">1.1*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Underwriting Agreement
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">3.1*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amended and Restated Certificate of Incorporation
    of Collegiate Funding Services, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">3.2*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amended and Restated By-Laws of Collegiate
    Funding Services, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">4.1*<FONT face="wingdings">&#252;</FONT>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Stockholders Agreement, dated May&nbsp;17, 2002,
    by and among CFSL Holdings Corp., CFSL Acquisition Corp. and the
    investors listed on Schedule&nbsp;A thereto
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">4.2*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Certificate of Common Stock
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">4.3*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Indenture of Trust from Collegiate Funding
    Services Education Loan Trust&nbsp;I and U.S. Bank National
    Association, as Eligible Lender Trustee to U.S. Bank National
    Association, as Indenture Trustee, dated as of November&nbsp;1,
    2001, together with First Supplemental Indenture of Trust, dated
    November&nbsp;1, 2001 and Second Supplemental Indenture of
    Trust, dated July&nbsp;1, 2002
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">4.4*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Indenture of Trust between Collegiate Funding
    Services Education Loan Trust 2003-A and U.S. Bank National
    Association, as Eligible Lender Trustee and as Trustee, dated as
    of February&nbsp;1, 2003
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">4.5*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Indenture of Trust between Collegiate Funding
    Services Education Loan Trust 2003-B and U.S. Bank National
    Association, as Eligible Lender Trustee and as Trustee, dated as
    of November&nbsp;1, 2003
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">5.1*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Opinion of Simpson Thacher &#38; Bartlett LLP
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.1*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Warehouse Financing Indenture, dated as of
    July&nbsp;23, 2003, by and among Collegiate Funding Services
    Resources I, LLC, as Issuer, the conduit lenders parties
    thereto, certain financial institutions parties thereto, as
    Committed Lenders, Citicorp North America, Inc., as Agent, U.S.
    Bank National Association, as Indenture Trustee and Eligible
    Lender Trustee, Collegiate Funding Portfolio Administration,
    L.L.C., as Administrator and Collegiate Funding Master
    Servicing, L.L.C., as Master Servicer, together with Amendment
    No.&nbsp;1, dated as of October&nbsp;30, 2003 and Amendment
    No.&nbsp;2, dated as of February&nbsp;17, 2004
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.2*&#134;
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consolidation Loan Origination Responsibility
    Agreement, dated November&nbsp;15, 1999, by and between
    Collegiate Funding Services, LLC and Citibank as Trustee for the
    Student Loan Corporation, together with First Amendment, dated
    March&nbsp;1, 2001, Second Amendment, dated November&nbsp;1,
    2001, Third Amendment, dated May&nbsp;7, 2002, Fourth Amendment,
    dated July&nbsp;25, 2002, Fifth Amendment, dated August&nbsp;20,
    2002 and Sixth Amendment, dated April&nbsp;3, 2003
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.3*&#134;
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consolidation Loan Origination Responsibility
    Agreement, dated December&nbsp;3, 2002, by and between
    Collegiate Funding Services, LLC and The Brazos Higher Education
    Service Corporation, Inc., together with First Email Agreement,
    dated September&nbsp;3, 2003, Second Email Agreement, dated
    September&nbsp;26, 2003 and First Amendment Agreement, dated
    January&nbsp;1, 2004
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.4*&#134;
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Real World Consolidation Loan Origination
    Responsibility Agreement, dated April&nbsp;1, 2003, by and
    between Collegiate Funding Services, LLC and Mississippi Higher
    Education Assistance Corporation
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.5*&#134;
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Origination, Disbursement, Interim Sub-Servicing
    and Purchasing Master Agreement, dated February&nbsp;19, 2004,
    by and between Collegiate Funding Services, LLC and the Higher
    Education Loan Authority of the State of Missouri
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.6*&#134;
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Private Consolidation Loan Origination
    Responsibility Agreement, dated June&nbsp;12, 2001, by and
    between Collegiate Funding Services, LLC and First Union
    National Bank of Delaware
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.7*&#134;
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amendment Agreement, dated August&nbsp;1, 2001,
    among First Union National Bank of Delaware, The Education
    Resources Institute, SunTech, Inc. and Collegiate Funding
    Services, LLC, together with Amendment Agreement, dated
    February&nbsp;20, 2002
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">II-4
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="21%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="76%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Exhibit No.</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Description of Exhibit</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.8*&#134;
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amendment Agreement, dated November&nbsp;7, 2003,
    by and between Collegiate Funding Services, LLC, ClassNotes Inc.
    (d/b/a Educaid) and Wachovia Bank of Delaware (as successor in
    interest to First Union National Bank of Delaware), together
    with Amendment Agreement, dated March&nbsp;17, 2004
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.9*<FONT face="wingdings">&#252;</FONT>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Credit Agreement, dated as of October&nbsp;30,
    2003 between Collegiate Funding Services, LLC, as Borrower, CFSL
    Holdings Corp. and CFSL Acquisition Corp., as Parent Guarantors,
    the Subsidiary Guarantors referred to therein, as Subsidiary
    Guarantors, the lenders named therein, as Lenders and JPMorgan
    Chase Bank, as Administrative Agent
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.10*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Underwriting Agreement, dated November&nbsp;25,
    2003, by and among Banc of America Securities LLC, J.P. Morgan
    Securities Inc., Citigroup Global Markets Inc., Collegiate
    Funding of Delaware, LLC and Collegiate Funding Services, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.11*<FONT face="wingdings">&#252;</FONT>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Warrant Agreement, dated May&nbsp;17, 2002, by
    and among CFSL Holdings Corp. and the purchasers party thereto
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.12*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Stock Incentive Plan of Collegiate Funding
    Services, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.13*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated
    April&nbsp;&nbsp;&nbsp;, 2004, by and between Collegiate Funding
    Services, Inc. and J.&nbsp;Barry Morrow
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.14*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated
    April&nbsp;&nbsp;&nbsp;, 2004, by and between Collegiate Funding
    Services, Inc. and Kevin&nbsp;A. Landgraver
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.15*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated
    April&nbsp;&nbsp;&nbsp;, 2004, by and between Collegiate Funding
    Services, Inc. and Charles&nbsp;L. Terribile
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.16*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated
    April&nbsp;&nbsp;&nbsp;, 2004, by and between Collegiate Funding
    Services, Inc. and Clark McGhee
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.17*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated
    April&nbsp;&nbsp;&nbsp;, 2004, by and between Collegiate Funding
    Services, Inc. and John&nbsp;R. Elam
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.18*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated
    April&nbsp;&nbsp;&nbsp;, 2004, by and between Collegiate Funding
    Services, Inc. and John Reeves
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.19*<FONT face="wingdings">&#252;</FONT>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Management Agreement, dated May&nbsp;17, 2002, by
    and between Lightyear Capital, LLC, CFSL Holdings Corp., CFSL
    Acquisition Corp. and Collegiate Funding Services, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.20*<FONT face="wingdings">&#252;</FONT>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consulting Services Agreement, dated May&nbsp;17,
    2002, between NOBS Capital Ventures, LLC and CFSL Holdings Corp.
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.21*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consulting Agreement, dated March&nbsp;31, 2003,
    among Collegiate Funding Services, LLC, EdPro,&nbsp;LLC and
    Malcolm&nbsp;B. Lightsey
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.22*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Broker-Dealer Agreement
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">21.1*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">List of Subsidiaries
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">23.1*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of Simpson Thacher &#38;
    Bartlett&nbsp;LLP (included as part of its opinion filed as
    Exhibit&nbsp;5.1 hereto)
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">23.2
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of Ernst&nbsp;&#38; Young LLP
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">23.3
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of PBGH LLP
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">24.1
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Powers of Attorney of the directors and officers
    of the registrants (included in the signature pages to the
    registration statement)
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2"><FONT face="wingdings">&#252;</FONT>&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">CFSL Holdings Corp. has subsequently changed its
    name to Collegiate Funding Services, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">*&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">To be filed by amendment.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#134;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Confidential treatment to be requested for
    certain portions of this Exhibit pursuant to Rule&nbsp;406
    promulgated under the Securities Act.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(b)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Financial Statement Schedules
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left">
<FONT size="2">None.
</FONT>
</DIV>

<P align="center"><FONT size="2">II-5
</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">Item&nbsp;17.</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Undertakings</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors,
officers and controlling persons of the registrant pursuant to
the foregoing provisions, or otherwise, the registrants have
been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final
adjudication of such issue.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned
registrant hereby undertakes to provide to the underwriter at
the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names
as required by the underwriter to permit prompt delivery to each
purchaser.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(2)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For purposes of
determining any liability under the Securities Act of 1933, the
information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule&nbsp;430A and
contained in a form of prospectus filed by the registrant
pursuant to Rule&nbsp;424(b)(1) or (4)&nbsp;or 497(h) under the
Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(3)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For purposes of
determining any liability under the Securities Act of 1933, each
post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to
the securities offering therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
</FONT>

<P align="center"><FONT size="2">II-6
</FONT>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">SIGNATURES</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pursuant to the requirements of the Securities
Act of 1933, the registrant has duly caused this registration
statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York on
April&nbsp;14, 2004.
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Collegiate Funding Services, Inc.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="2%"></TD>
    <TD width="58%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">By:&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">/s/ J. BARRY MORROW <BR>
     ______________________________________ <BR>
     Name:&nbsp;J. Barry Morrow <BR>
     Title:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;principal executive officer
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We, the undersigned directors and officers of
Collegiate Funding Services, Inc., do hereby constitute and
appoint Kevin A.&nbsp;Landgraver and Charles L. Terribile, or
any of them, our true and lawful attorneys and agents, to do any
and all acts and things in our name and on our behalf in our
capacities as directors and officers and to execute any and all
instruments for us and in our names in the capacities indicated
below, which said attorneys and agents, or either of them, may
deem necessary or advisable to enable said registrant to comply
with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in
connection with this Registration Statement, including
specifically, but without limitation, power and authority to
sign for us or any of us in our names in the capacities
indicated below, any and all amendments (including
post-effective amendments) hereto and registration statements
filed pursuant to Rule&nbsp;462 under the Securities Act of
1933, and we do hereby ratify and confirm all that said
attorneys and agents, or any of them, shall do or cause to be
done by virtue hereof.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pursuant to the requirements of the Securities
Act of 1933, this registration statement has been signed by the
following persons in the capacities indicated on April&nbsp;14,
2004.
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="44%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="36%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="14%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Signature</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Title</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Date</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <FONT size="2">/s/ J. BARRY MORROW<BR>
    <HR size="1" noshade>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;J. Barry
    Morrow
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Chief Executive Officer<BR>
    and Director<BR>
    (principal executive officer)
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">April 14, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <FONT size="2">/s/ KEVIN A. LANDGRAVER<BR>
    <HR size="1" noshade>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Kevin A.
    Landgraver
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Executive Vice President<BR>
    and Chief Financial Officer<BR>
    (principal financial and<BR>
    accounting officer)
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">April 14, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <FONT size="2">/s/ DONALD B. MARRON<BR>
    <HR size="1" noshade>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Donald B.
    Marron
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Chairman of the Board of Directors<BR>
    and Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">April 14, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <FONT size="2">/s/ LAWRENCE A. HOUGH<BR>
    <HR size="1" noshade>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Lawrence A.
    Hough
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">April 14, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <FONT size="2">/s/ BRUCE J. RUBIN<BR>
    <HR size="1" noshade>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bruce J. Rubin
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">April 14, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <FONT size="2">/s/ RICHARD J. STERNE<BR>
    <HR size="1" noshade>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Richard J.
    Sterne
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">April 14, 2004
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <FONT size="2">/s/ MARK F. VASSALLO<BR>
    <HR size="1" noshade>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mark F.
    Vassallo
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">April 14, 2004
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">II-7
</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">EXHIBIT INDEX</FONT></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="21%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="76%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Exhibit No.</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Description of Exhibit</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">1.1*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Underwriting Agreement
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">3.1*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amended and Restated Certificate of Incorporation
    of Collegiate Funding Services, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">3.2*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amended and Restated By-Laws of Collegiate
    Funding Services, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">4.1*<FONT face="wingdings">&#252;</FONT>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Stockholders Agreement, dated May&nbsp;17, 2002,
    by and among CFSL Holdings Corp., CFSL Acquisition Corp. and the
    investors listed on Schedule&nbsp;A thereto
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">4.2*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Certificate of Common Stock
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">4.3*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Indenture of Trust from Collegiate Funding
    Services Education Loan Trust&nbsp;I and U.S. Bank National
    Association, as Eligible Lender Trustee to U.S. Bank National
    Association, as Indenture Trustee, dated as of November&nbsp;1,
    2001, together with First Supplemental Indenture of Trust, dated
    November&nbsp;1, 2001 and Second Supplemental Indenture of
    Trust, dated July&nbsp;1, 2002
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">4.4*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Indenture of Trust between Collegiate Funding
    Services Education Loan Trust 2003-A and U.S. Bank National
    Association, as Eligible Lender Trustee and as Trustee, dated as
    of February&nbsp;1, 2003
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">4.5*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Indenture of Trust between Collegiate Funding
    Services Education Loan Trust 2003-B and U.S. Bank National
    Association, as Eligible Lender Trustee and as Trustee, dated as
    of November&nbsp;1, 2003
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">5.1*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Opinion of Simpson Thacher &#38; Bartlett LLP
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.1*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Warehouse Financing Indenture, dated as of
    July&nbsp;23, 2003, by and among Collegiate Funding Services
    Resources I, LLC, as Issuer, the conduit lenders parties
    thereto, certain financial institutions parties thereto, as
    Committed Lenders, Citicorp North America, Inc., as Agent, U.S.
    Bank National Association, as Indenture Trustee and Eligible
    Lender Trustee, Collegiate Funding Portfolio Administration,
    L.L.C., as Administrator and Collegiate Funding Master
    Servicing, L.L.C., as Master Servicer, together with Amendment
    No.&nbsp;1, dated as of October&nbsp;30, 2003 and Amendment
    No.&nbsp;2, dated as of February&nbsp;17, 2004
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.2*&#134;
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consolidation Loan Origination Responsibility
    Agreement, dated November&nbsp;15, 1999, by and between
    Collegiate Funding Services, LLC and Citibank as Trustee for the
    Student Loan Corporation, together with First Amendment, dated
    March&nbsp;1, 2001, Second Amendment, dated November&nbsp;1,
    2001, Third Amendment, dated May&nbsp;7, 2002, Fourth Amendment,
    dated July&nbsp;25, 2002, Fifth Amendment, dated August&nbsp;20,
    2002 and Sixth Amendment, dated April&nbsp;3, 2003
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.3*&#134;
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consolidation Loan Origination Responsibility
    Agreement, dated December&nbsp;3, 2002, by and between
    Collegiate Funding Services, LLC and The Brazos Higher Education
    Service Corporation, Inc., together with First Email Agreement,
    dated September&nbsp;3, 2003, Second Email Agreement, dated
    September&nbsp;26, 2003 and First Amendment Agreement, dated
    January&nbsp;1, 2004
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.4*&#134;
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Real World Consolidation Loan Origination
    Responsibility Agreement, dated April&nbsp;1, 2003, by and
    between Collegiate Funding Services, LLC and Mississippi Higher
    Education Assistance Corporation
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.5*&#134;
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Origination, Disbursement, Interim Sub-Servicing
    and Purchasing Master Agreement, dated February&nbsp;19, 2004,
    by and between Collegiate Funding Services, LLC and the Higher
    Education Loan Authority of the State of Missouri
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.6*&#134;
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Private Consolidation Loan Origination
    Responsibility Agreement, dated June&nbsp;12, 2001, by and
    between Collegiate Funding Services, LLC and First Union
    National Bank of Delaware
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.7*&#134;
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amendment Agreement, dated August&nbsp;1, 2001,
    among First Union National Bank of Delaware, The Education
    Resources Institute, SunTech, Inc. and Collegiate Funding
    Services, LLC, together with Amendment Agreement, dated
    February&nbsp;20, 2002
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="21%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="76%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Exhibit No.</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Description of Exhibit</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.8*&#134;
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Amendment Agreement, dated November&nbsp;7, 2003,
    by and between Collegiate Funding Services, LLC, ClassNotes Inc.
    (d/b/a Educaid) and Wachovia Bank of Delaware (as successor in
    interest to First Union National Bank of Delaware), together
    with Amendment Agreement, dated March&nbsp;17, 2004
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.9*<FONT face="wingdings">&#252;</FONT>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Credit Agreement, dated as of October&nbsp;30,
    2003 between Collegiate Funding Services, LLC, as Borrower, CFSL
    Holdings Corp. and CFSL Acquisition Corp., as Parent Guarantors,
    the Subsidiary Guarantors referred to therein, as Subsidiary
    Guarantors, the lenders named therein, as Lenders and JPMorgan
    Chase Bank, as Administrative Agent
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.10*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Underwriting Agreement, dated November&nbsp;25,
    2003, by and among Banc of America Securities LLC, J.P. Morgan
    Securities Inc., Citigroup Global Markets Inc., Collegiate
    Funding of Delaware, LLC and Collegiate Funding Services, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.11*<FONT face="wingdings">&#252;</FONT>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Warrant Agreement, dated May&nbsp;17, 2002, by
    and among CFSL Holdings Corp. and the purchasers party thereto
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.12*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Stock Incentive Plan of Collegiate Funding
    Services, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.13*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated
    April&nbsp;&nbsp;&nbsp;, 2004, by and between Collegiate Funding
    Services, Inc. and J.&nbsp;Barry Morrow
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.14*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated
    April&nbsp;&nbsp;&nbsp;, 2004, by and between Collegiate Funding
    Services, Inc. and Kevin&nbsp;A. Landgraver
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.15*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated
    April&nbsp;&nbsp;&nbsp;, 2004, by and between Collegiate Funding
    Services, Inc. and Charles&nbsp;L. Terribile
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.16*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated
    April&nbsp;&nbsp;&nbsp;, 2004, by and between Collegiate Funding
    Services, Inc. and Clark McGhee
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.17*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated
    April&nbsp;&nbsp;&nbsp;, 2004, by and between Collegiate Funding
    Services, Inc. and John&nbsp;R. Elam
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.18*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Employment Agreement, dated
    April&nbsp;&nbsp;&nbsp;, 2004, by and between Collegiate Funding
    Services, Inc. and John Reeves
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.19*<FONT face="wingdings">&#252;</FONT>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Management Agreement, dated May&nbsp;17, 2002, by
    and between Lightyear Capital, LLC, CFSL Holdings Corp., CFSL
    Acquisition Corp. and Collegiate Funding Services, LLC
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.20*<FONT face="wingdings">&#252;</FONT>
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consulting Services Agreement, dated May&nbsp;17,
    2002, between NOBS Capital Ventures, LLC and CFSL Holdings Corp.
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.21*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consulting Agreement, dated March&nbsp;31, 2003,
    among Collegiate Funding Services, LLC, EdPro,&nbsp;LLC and
    Malcolm&nbsp;B. Lightsey
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">10.22*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Broker-Dealer Agreement
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">21.1*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">List of Subsidiaries
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">23.1*
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of Simpson Thacher &#38;
    Bartlett&nbsp;LLP (included as part of its opinion filed as
    Exhibit&nbsp;5.1 hereto)
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">23.2
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of Ernst&nbsp;&#38; Young LLP
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">23.3
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of PBGH LLP
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">24.1
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Powers of Attorney of the directors and officers
    of the registrants (included in the signature pages to the
    registration statement)
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="18%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2"><FONT face="wingdings">&#252;</FONT>&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">CFSL Holdings Corp. has subsequently changed its
    name to Collegiate Funding Services, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">*&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">To be filed by amendment.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">&#134;&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Confidential treatment to be requested for
    certain portions of this Exhibit pursuant to Rule&nbsp;406
    promulgated under the Securities Act.
    </FONT></TD>
</TR>

</TABLE>
</BODY>
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{"company-data": {"conformed-name": "COLLEGIATE FUNDING SERVICES INC", "cik": "0001286686", "irs-number": "043649118", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-114466", "film-number": "04733482"}, "business-address": {"street1": "100 RIVERSIDE PARKWAY SUITE 125", "city": "FREDERICKSBURG", "state": "VA", "zip": "22406", "phone": "5403741600"}, "mail-address": {"street1": "100 RIVERSIDE PARKWAY SUITE 125", "city": "FREDERICKSBURG", "state": "VA", "zip": "22406"}}
COLLEGIATE FUNDING SERVICES, INC.
As filed with the Securities and Exchange
Commission on April 14, 2004
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Collegiate Funding Services, Inc.
(Exact name of Registrant as Specified in its
Charter)
Delaware
6141
04-3649118
(State or Other Jurisdiction of
Incorporation or Organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification Number)
100 Riverside Parkway
Suite 125
Fredericksburg, Virginia 22406
(540) 374-1600
(Address, Including Zip Code, and
Telephone Number, Including Area Code, of Registrant's
Principal Executive Offices)
Charles L. Terribile
100 Riverside Parkway
Suite 125
Fredericksburg, Virginia 22406
(540) 374-1600
(Name, Address, Including Zip Code, and
Telephone Number, Including Area Code, of Agent For
Service)
With copies to:
Michael D. Nathan, Esq.
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
(212) 455-2000
Luciana Fato, Esq.
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
(212) 450-4000
Approximate date of
commencement of proposed sale to the public:
As soon as
practicable after the effective date of this Registration
Statement.
If the securities being
registered on this form are being offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities
Act of 1933, check the following
box.
o
If this form is filed to
register additional securities for an offering pursuant to
Rule 462(b) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
If this form is a
post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier
effective registration statement for the same
offering.
o
If this form is a
post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier
effective registration statement for the same
offering.
o
If delivery of the
prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following
box.
o
CALCULATION OF REGISTRATION FEE
Proposed Maximum
Title of Each Class
Proposed Maximum
Aggregate Offering
Amount of
of Securities to be Registered
Amount to be Registered
Offering Price Per Unit
Price(1)
Registration Fee
Common Stock, par value $0.001 per share
—
—
$172,500,000
$21,856.00
(1)
Estimated solely for the purpose of calculating
    the amount of the registration fee pursuant to Rule 457(o).
The registrant hereby
amends this registration statement on such date or dates as may
be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that
this registration statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933,
or until this registration statement shall become effective on
such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
The information in this
preliminary prospectus is not complete and may be changed. The
securities may not be sold until the registration statement
filed with the Securities and Exchange Commission is effective.
This preliminary prospectus is not an offer to sell nor does it
seek an offer to buy these securities in any state where the
offer or sale is not permitted.
Subject to Completion.
Preliminary Prospectus dated April 14, 2004
PROSPECTUS
Shares
Collegiate Funding Services, Inc.
Common Stock
This
is an initial public offering of shares of common stock of
Collegiate Funding Services, Inc. All of the shares of common
stock are being sold by us.
Prior
to this offering, there has been no public market for the common
stock. We currently estimate that the initial public offering
price per share will be between
$          and
$          .
We intend to list the common stock on
the           under
the symbol
"       ".
See
"Risk Factors" beginning on page 10 to read about
factors you should consider before buying shares of the common
stock.
Per Share
Total
Initial public offering price
$
$
Underwriting discount
$
$
Proceeds, before expenses, to Collegiate Funding
    Services, Inc.
$
$
To the extent that the underwriters sell more
than                      shares
of common stock, the underwriters have the option to purchase up
to an
additional                      shares
from us at the initial public offering price less the
underwriting discount.
Neither
the Securities and Exchange Commission nor any other regulatory
body has approved or disapproved of these securities or passed
upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
The
shares will be ready for delivery on or
about        , 2004.
JPMorgan
Merrill Lynch & Co.
The date of this prospectus
is        , 2004.
TABLE OF CONTENTS
Page
Prospectus Summary
1
Risk Factors
10
Cautionary Notice Regarding
    Forward-Looking Statements
22
Use of Proceeds
23
Dividend Policy
23
Capitalization
24
Dilution
25
Selected Historical
    Consolidated Financial Data
26
Management's Discussion
    and Analysis of Financial Condition and Results of Operations
29
Industry Overview
46
Business
52
Management
62
Principal Stockholders
69
Certain Relationships and
    Related Transactions
70
Description of Capital
    Stock
72
Shares Eligible for Future
    Sale
77
Certain United States Tax
    Consequences to Non-U.S. Holders
79
Underwriting
82
Legal Matters
86
Experts
86
Where You Can Find
    Additional Information
86
Index to Financial
    Statements
F-1
You should rely only on the information contained
in this prospectus. We have not authorized anyone to provide you
with information different from that contained in this
prospectus. We are offering to sell, and seeking offers to buy,
shares of our common stock only in jurisdictions where offers
and sales are permitted. The information contained in this
prospectus is accurate only as of the date of this prospectus,
regardless of the time of delivery of this prospectus or of any
sale of our common stock.
No action is being taken in any jurisdiction
outside the United States to permit a public offering of the
common stock or possession or distribution of this prospectus in
that jurisdiction. Persons who come into possession of this
prospectus in jurisdictions outside the United States are
required to inform themselves about and to observe any
restrictions as to this offering and the distribution of this
prospectus applicable to those jurisdictions.
The product and service names and logos used in
this prospectus are service marks/ trademarks or registered
service marks/ trademarks of CFS or its affiliates. CFS,
Collegiate Funding Services, Collegexit, Collegexit.com, Real
World Loan and Dedicated to Students and Families are service
marks of Collegiate Funding Services, L.L.C. Other
products, services and company names mentioned in this
prospectus are the service marks/ trademarks of their respective
owners.
This prospectus includes industry data and
forecasts that we obtained from industry publications and
surveys and internal company surveys. As noted in this
prospectus, the U.S. Department of Education and The
College Board were the primary sources for third-party industry
data and forecasts. Industry publications and surveys and
forecasts generally state that the information contained therein
has been obtained from sources believed to be reliable, but
there can be no assurance as to the accuracy or completeness of
included information. We have not independently verified any of
the data from third-party sources nor have we ascertained the
underlying economic assumptions relied upon therein. Statements
as to our market position relative to our competitors are based
on data provided by the Student Loan Servicing Alliance and the
U.S. Department of Education.
i
PROSPECTUS SUMMARY
In this prospectus, unless the context
requires otherwise, "Collegiate Funding Services,"
"CFS," "we," "us," "our"
and the "Company" refer to Collegiate Funding
Services, Inc., a Delaware corporation, and its subsidiaries,
including Collegiate Funding Services, LLC, our predecessor, and
not to the underwriters. This summary highlights selected
information contained elsewhere in this prospectus.
This summary does not contain all the
information you should consider before investing in shares of
our common stock. You should read this entire prospectus
carefully, including "Risk Factors," "Cautionary
Note Regarding Forward-Looking Statements" and our
financial statements and the related notes, before making an
investment decision.
Our Company
We are a vertically integrated education finance
company that markets, originates, finances and services
education loans. We market education loans primarily through
direct-to-consumer, or DTC, programs, including targeted direct
mail, telemarketing and the Internet. Using our DTC marketing
platform and other distribution channels, we assist consumers in
financing and refinancing the cost of undergraduate, graduate,
professional, career and continuing education. We finance,
retain and service a substantial portion of the loans we
originate.
Since our inception in 1998, we have originated
or facilitated the origination of over $15 billion in
education loans. We originated or facilitated the origination of
$4.2 billion of education loans in 2003 and we believe we
are among the top five originators of federal and private
education loans in the United States. Of our total loan
originations in 2003, $4.0 billion were federally
guaranteed consolidation student loans made through the Federal
Family Education Loan Program, which we refer to as the
FFEL Program or FFELP. Through the FFEL Program, an
eligible borrower with multiple federally guaranteed loans can
consolidate his or her loans after graduation into a single
loan. Beginning in May 2003, we increased our focus on private
education loans and, in that year, originated or facilitated the
origination of $199.6 million of these loans. Private
loans, which do not have a federal guarantee, are credit-based
consumer loans used to pay for or refinance education-related
expenses. As of December 31, 2003, we were servicing
approximately $8.9 billion in student loans made to over
360,000 customers, and were the seventh largest servicer of
FFELP loans in the United States, according to the Student Loan
Servicing Alliance. We currently have over 1,000 employees.
We have adapted a direct-to-consumer marketing
model developed in the consumer finance industry for use in
education-based lending. We believe our targeted DTC strategy
enables us to increase consumer awareness of the products we
offer and collect data useful in our product development and
marketing. Using a variety of internal and external databases
accumulated since our inception, we create marketing campaigns
to target consumers with products based on their specific
characteristics. We supplement our DTC strategy through
marketing relationships with membership organizations, alumni
associations and other entities in order to reach customers and
promote our products under our own label or under co-branded
offerings in partnership with other lenders. We are also
investing in the school-based loan origination channel, through
which we market our products to students by cooperative
arrangements with the financial aid offices of education
institutions. We currently have relationships with over
600 schools and institutions including having our products
on 539 preferred lender lists. Once we have originated a
FFELP loan, we either fund and retain that loan in our portfolio
or sell the originated loan application to a third-party lender.
With respect to private education loans, we either sell
completed loan applications upon origination, in the case of
private consolidation loans, or market loans for origination by
third parties, in the case of private in-school loans, which we
refer to as facilitating the origination of loans.
In 2002, we launched our strategy of retaining in
our portfolio a percentage of the federally guaranteed loans we
originate. Prior to 2002, we sold substantially all of our
completed loan applications to third parties and received fees
for these applications at the time of sale. We retain in our
portfolio only
1
loans that are federally guaranteed for at least
98% of principal and interest. We believe that our current
strategy of retaining in our portfolio a portion of the loans we
originate and selling the remainder for a fee provides us with
several advantages, although our net income in current periods
has been lower than it would have been had we sold a larger
percentage of the FFELP loans we originate. Among the benefits
of retaining loans is our ability to take advantage of these
loans' limited credit risk, their duration and other
characteristics and to benefit from a greater revenue stream
over the life of the loan. Selling the remainder of our
originated loan applications permits us to maintain a
diversified source of funding for loan processing and
origination and build our relationships with financial
institutions that purchase our loans. We retained approximately
50% and 21% of the FFELP loans we originated in 2003 and 2002,
respectively, and our portfolio of federally guaranteed loans
grew to $2.9 billion as of December 31, 2003 from
$973.1 million as of December 31, 2002. We do not fund
or retain any of the private loans we market or originate.
We also provide high quality loan servicing
through our wholly owned subsidiary, CFS-SunTech Servicing LLC
("SunTech"). We acquired SunTech in April 2003. Prior
to the acquisition, SunTech had been servicing a significant
portion of the loans we originated since our formation in 1998.
Servicing loans provides us with an additional source of fee
income and enables us to retain a direct customer relationship
over the life of the loans, which we believe is a critical
element in establishing our brand. We service substantially all
the loans we hold in our portfolio as well as student loans held
by third-party lenders. We generally seek to retain the
servicing of a majority of the loan applications we sell, which
accounts for a significant portion of our third-party servicing
volume.
Our multiple sources of revenue reflect the fact
that we market, originate, finance and service education loans.
They include fee income for selling completed loan applications
to third parties and facilitating the origination of loans for
lenders, net interest income earned on the loans we hold in our
portfolio and servicing fee income for the assets we service.
Fees on loan application sales and for facilitating the
origination of loans, which we refer to collectively as fees on
loan origination, accounted for approximately 75.7% of our net
revenue in 2003. Net interest income after provision for loan
losses, which is primarily comprised of the difference between
the yield we receive on our loan portfolio and the cost of
funding these loans, accounted for 16.6% of our net revenue in
2003. Servicing fees, earned since our acquisition of SunTech in
April 2003, accounted for 7.7% of our net revenue in 2003. Over
time, as we build our portfolio, we expect the percentage of our
net revenue earned from net interest income to increase and the
percentage of our net revenue earned from our fees on loan
origination to decrease.
We primarily finance the loans we retain in our
portfolio through asset-backed securitizations, which we record
as debt on our consolidated balance sheet. To date, we have
completed four securitizations that contributed
$2.9 billion of funding, including two transactions for a
total of $1.9 billion in 2003. We supplement our
asset-backed securitizations with $500 million of secured
warehouse financing availability, which we believe allows us to
access the securitization market on a more timely and
cost-effective basis. In addition, we enter into forward
purchase agreements, under which several financial institutions
have agreed to purchase and, in certain cases, require that we
sell to them, a portion of the loan applications we originate
each year.
Our Competitive Strengths
We believe the following competitive strengths
distinguish us in the education finance industry:
•
Vertically integrated education finance
    platform.
We market, originate,
    finance and service education loans. Through our platform, we
    offer students and their families a suite of loan products,
    including federally guaranteed consolidation loans, other
    federally guaranteed loans and private loans. Once originated,
    we are able to finance and retain the loans or sell the
    originated loan applications. Our internal servicing capability
    allows us to service our student loan portfolio, rather than
    outsource this task to a third party. Our vertically integrated
    platform offers our customers the benefit of dealing with a
    single entity over the lives of their
2
loans, from initial inquiry through origination
    and repayment. We believe the breadth of our capabilities in the
    various sectors of the education finance market and the scale of
    our platform is a competitive advantage over many of our peers.
•
Leading direct-to-consumer origination
    operation.
In 2003, we originated
    or facilitated the origination of $4.2 billion of education
    loans, of which approximately 98% was originated through our
    direct-to-consumer channel. Our DTC model and our targeted
    marketing process give us the advantage of a direct relationship
    with customers, which permits us to tailor our products to their
    needs. We believe that we originated more consolidation loans
    through this channel than any other education finance company,
    when excluding consolidation of loans by lenders from their own
    portfolios.
•
Significant portfolio of federally
    guaranteed loans.
As of
    December 31, 2003, all the loans we held in our portfolio
    were FFELP loans, which are federally guaranteed for at least
    98% of principal and accrued interest. Our portfolio of loans
    grew from $973.1 million at the end of 2002 to
    $2.9 billion at the end of 2003. We expect to continue our
    strategy of retaining a significant portion of the federally
    guaranteed loans we originate. The high credit quality and long
    duration of these loans provide us with a growing base of
    revenue. We do not currently intend to hold in our portfolio any
    private loans.
•
High quality servicing
    platform.
As the primary means of
    communication with our customers after their loans are
    originated and financed, our servicing operation provides our
    customers with consistent and seamless service. The quality of
    our servicing platform and its compliance with the rules set
    forth by the U.S. Department of Education, or DOE, is the
    primary determinant in preserving the federal guarantee on FFELP
    loans we service. Our servicing platform uses a system
    specifically designed to manage, adhere to and support the
    requirements of the Higher Education Act and other consumer
    lending regulations and laws. We believe SunTech's net
    claim reject rate by guaranty agencies due to servicer error of
    0.02% is among the lowest in the industry. Our continuing focus
    on maintaining this performance record will assist us in
    minimizing our credit risk and provide us with credibility as we
    securitize our portfolio of loans and seek third parties willing
    to use us as their loan servicer.
•
Experienced senior management
    team.
Our senior management team
    has an average of 19 years of relevant industry experience
    from a broad range of education and consumer finance
    backgrounds. We believe this combination of education and
    consumer finance experience allows us to better serve our
    customers and maximizes our ability to develop and implement our
    strategy.
Our Strategy
We intend to focus on marketing, originating,
financing and servicing federally guaranteed consolidation loans
and to leverage our market position and platform to build our
brand and diversify our product and service offerings, including
the expansion of private loan originations, by executing the
following strategy:
•
Expand the use and reach of our
    direct-to-consumer marketing platform.
Federal consolidation
    loans.
We plan to continue to use our
    DTC channel to originate federal consolidation loans, to expand
    consumer awareness of consolidation loans and to establish our
    brand. We will continue to refine our approach to these products
    based on information we have gathered from our marketing and
    servicing operations. We believe that the education finance
    market will continue to benefit from direct marketing to
    consumers and we seek to use our expertise with this marketing
    strategy to increase our share of federal consolidation loan
    originations.
3
Private loans.
Beginning in May, 2003, we increased our focus on private
    education loans, and, in 2003, we originated or facilitated the
    origination of $199.6 million of these loans. We intend to
    continue to use our expertise in the DTC channel to structure
    and market private loan products and to increase our
    originations and facilitation of the origination of private
    loans. We will utilize our expertise in the marketing of federal
    consolidation loans and mine the data we have generated in
    making and holding those loans to effectively market new private
    loan products.
•
Expand distribution channels.
School-based
    channel.
To supplement our DTC
    channel, we will continue investing in the school-based channel
    to increase awareness among students and financial aid officers
    of our consolidation products. In addition, we will continue to
    broaden our product offerings of federal and private loans
    available to students still in school. We currently have
    relationships with over 600 schools and institutions, including
    having our products on 539 preferred lender lists. We have a
    national sales force of education industry professionals working
    directly with colleges and universities and we assist schools
    and financial aid offices by offering an internally-developed
    Internet-based debt and graduation counseling tool as well as
    software tools that aid schools in running their lender
    programs. We will continue our efforts to be added to
    schools' preferred lender lists, which will provide a
    school-based origination channel to supplement our DTC
    origination channel, as well as greater awareness of our
    products and brand name among students and financial aid
    officers.
Affinity group
    marketing.
We have entered into
    marketing relationships with associations such as the American
    Medical Association, the American Dental Association and the
    American Bar Association, in order to promote our products to
    their membership and customer bases. We plan to continue
    developing more affinity relationships, which, through private
    label offerings and product endorsements, provide us with access
    to consumers in need of federal and private loans or
    consolidation of education loans.
•
Build our FFELP loan portfolio and balance
    our sources of revenue and
    funding.
Starting in 2002, we
    began holding a portion of the FFELP loans we originated. We
    plan on retaining a significant portion of the FFELP loans we
    originate in the future. Retaining these loans will give us the
    ability to recognize revenue from these assets over a long
    period of time, more fully utilize our servicing capabilities
    and help us to create a more robust customer information
    database for new and emerging products and services. We also
    intend to continue to sell a portion of the loan applications we
    originate. Our sales of originated loan applications allow us to
    maintain a balance in our sources of funding for loan processing
    and origination, provide us with a source of fee income and
    enable us to continue to build relationships and strategic
    partnerships with the financial institutions that acquire our
    loan applications.
•
Expand the origination capabilities of our
    servicer.
We intend to continue to
    expand the volume of loans we service for ourselves and for
    third-party lenders and to invest in the technology and
    infrastructure of our servicing operations to permit us to
    originate additional types of loans and increase our ability to
    provide private labeling capabilities to our clients. Through
    our servicer, we intend to extend the reach of our marketing,
    originate more loans and increase the volume of loans we
    service. We believe our enhanced servicing capabilities will
    enable us to support our growth in servicing and originations,
    increase our fee income from servicing and ensure that our
    customers have a favorable experience with CFS.
•
Seek out and make strategic
    acquisitions.
In 2003, we acquired
    and successfully integrated SunTech to provide our servicing
    operations. In the future, we will consider acquisitions of
    individual companies as well as loan and servicing portfolios
    that we believe have the potential to enhance the value of our
    company, expand our product reach and/or aid in executing our
    growth strategy.
4
Education Finance Industry
The U.S. postsecondary education finance
market is large and growing. According to the DOE, in academic
year 2002-2003, expenditures for postsecondary education totaled
$331.9 billion. The two main drivers of the size and growth
prospects of this market are enrollment population and cost of
attendance. The DOE estimates that college enrollment will grow
to 18 million by 2013, up from an estimated 16 million
in 2003. Between the 1993-1994 and 2003-2004 academic years, the
average amount of tuition and fees, which is the largest
component of the cost of attendance, increased on an
enrollment-weighted and constant-dollar basis by 47% at
four-year public institutions and 42% at four-year private
institutions. During the period from 1993 to 2002, median
household income grew only 11%, on a constant-dollar basis.
Of the $331.9 billion spent on postsecondary
education in academic year 2002-2003, according to the College
Board, $105.1 billion was provided by financial aid. Of
this amount, federal loans represented approximately 46.7%, or
$49.1 billion, and private loans represented approximately
6.6%, or $6.9 billion, while grants, education tax credits,
work study and other education loans made up the balance. The
DOE estimates that federal education loan volume, excluding
consolidation loans, is expected to increase to
$95.2 billion in federal fiscal year 2011. We believe that
a significant portion of the remaining expenditures on
postsecondary education was comprised of other loan products
that are not characterized as traditional education loans.
Education loan consolidation has emerged over the
past few years as an important option for consumers. Federal
consolidation loans allow consumers to refinance and extend the
repayment term of existing education loan debt at a fixed rate
and with a single monthly payment that is generally lower than a
consumer would pay in the aggregate in monthly payments on the
replaced loans. There were $9.5 billion of FFELP
consolidation loans disbursed in federal fiscal year 2001. This
grew to $23.2 billion and $35.3 billion in federal
fiscal year 2002 and 2003, respectively. The DOE, however,
projects that FFELP consolidation loan volume will decrease to
$25.9 billion in federal fiscal year 2004 and to
$22.3 billion in federal fiscal year 2005. Although the DOE
projections are the most widely accepted projections available,
we note that the DOE's projections for following-year FFELP
consolidation loan volumes have underestimated actual
consolidation loan volume in each of federal fiscal year 2003,
2002 and 2001 by $13.6 billion, $8.9 billion and
$2.0 billion, respectively.
According to the College Board, private loan
volume, though small in comparison to federal loan volume, has
grown at a compounded annual rate of 26.8% in constant dollars,
from academic year 1995-1996 through academic year 2002-2003.
Total reported private loan volume reached approximately
$6.9 billion in the 2002-2003 academic year, up from
$1.1 billion in the 1995-1996 academic year. We believe the
growth of the private education loan market reflects an
increasing reliance on supplements to federal loans, under which
the amount that can be borrowed is capped, to bridge the
widening gap between the cost of higher education and the amount
of funding available to pay that cost through federal education
loans. In addition, we believe private education loans are
viewed as convenient and attractive financing alternatives by
the growing number of older non-traditional students who are
more familiar with other consumer finance alternatives.
5
Total Expenditures for Postsecondary Education
(dollars in billions)
Academic years (beginning)
(Source: U.S. Department of Education)
The Higher Education Act of 1965, which governs
the FFEL Program, must be reauthorized by Congress every five
years, and, at such time, the FFEL Program may be amended. The
United States Congress is currently considering reauthorization
of the Higher Education Act. In connection with this
reauthorization, a number of proposals have been made to modify
the terms of the FFEL Program, some of which, if enacted, could
decrease the yield to lenders of, and borrower demand for
consolidation loans. See "Risk Factors."
Corporate Information
We were founded in 1998 as Collegiate Funding
Services, LLC. Collegiate Funding Services, Inc. is a Delaware
corporation incorporated on April 2, 2002.
In May 2002, we were acquired by The Lightyear
Fund, L.P. and its affiliates, which we refer to as Lightyear,
and certain other investors. Lightyear is a private investment
firm based in New York City. Lightyear invests private
equity capital in leveraged buyout, recapitalization and growth
opportunities, primarily in the financial services area. Upon
completion of this offering, Lightyear will continue to own
approximately      % of our common
stock.
Our principal executive offices are located at
100 Riverside Parkway, Suite 125, Fredericksburg,
Virginia 22406, and our telephone number is (866) 697-6773.
We plan to relocate our principal executive offices to 10304
Spotsylvania Avenue, Suite 100, Fredericksburg, Virginia
22408 in the third quarter of 2004. Our website is
www.cfsloans.com.
Information contained on our web site
is not a part of this prospectus.
6
The Offering
Common Stock offered by us
shares
Common Stock to be outstanding after this offering
shares
Use of proceeds
We will use
    $          of
    the net proceeds from this offering to pay the liquidation
    preference of all shares of the preferred stock issued by our
    subsidiary,
    $          of
    the net proceeds to repay all outstanding amounts under our
    revolving line of credit, and the remaining net proceeds to make
    potential acquisitions and for general corporate purposes.
    Lightyear, other investors and certain members of management
    will receive the net proceeds used to pay the liquidation
    preference of the preferred stock.
Proposed stock symbol
The number of shares of common stock that will be
outstanding after this offering and all other information in
this prospectus, unless the context otherwise requires, gives
effect to the conversion of all shares of Class A Common
Stock and Class B Common Stock into a single class of
common stock and
a  -for- stock split to be effected immediately prior
to consummation of this offering and excludes:
•
315,000 shares of common stock subject to
    stock options outstanding as of December 31, 2003, options
    for 56,700 of which were exercisable as of December 31,
    2003, at a weighted average exercise price equal to $1.30;
•
warrants to purchase an aggregate of
    1,000,000 shares of common stock at an exercise price of
    $0.01 per share; and
•
shares
    of common stock available for future grant or issuance under our
    stock incentive plans.
Unless otherwise indicated, all information in
this prospectus assumes that the underwriters do not exercise
the over-allotment option granted to purchase up
to                     additional
shares of common stock in this offering from the Company.
7
Summary Consolidated Financial Data
You should read the summary consolidated
financial data set forth below in conjunction with
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" and our and our
predecessor's financial statements and the related notes
included elsewhere in this prospectus. We derived the financial
data as of December 31, 2003, for the year ended
December 31, 2003, and for the period May 17 through
December 31, 2002 from our financial statements included
elsewhere in this prospectus and we derived the financial data
for the period January 1 through May 16, 2002 and for
the year ended December 31, 2001 from our
predecessor's financial statements included elsewhere in
this prospectus. Prior to 2002, our predecessor sold
substantially all of its originated loan applications to third
parties and received fees for the sale of these loan
applications at the time of sale. Since 2002, we have retained a
portion of the FFELP loans that we originate. We and our
predecessor retained approximately 50%, 21% and 4% of the FFELP
loans originated in 2003, 2002 and 2001, respectively.
(dollars in thousands, except per share data)
The Company
Predecessor
Period May 17
Period
Year
Year ended
through
January 1
ended
December 31,
December 31,
through May 16,
December 31,
2003
2002
2002
2001
Income statement data:
Net interest income (expense)
$
21,975
$
(2,505
)
$
2,762
$
(930
)
Provision for loan losses
2,357
1,270
752
—
Net interest income (expense) after provision for
    loan losses
19,618
(3,775
)
2,010
(930
)
Fee income
98,558
84,396
36,427
131,567
Net revenue
118,176
80,621
38,437
130,637
Expenses
119,568
54,284
27,477
68,825
Income (loss) before income taxes and accretion
    of dividends on preferred stock
(1,392
)
26,337
10,960
61,812
Income tax provision (benefit)
(1)
(196
)
10,726
—
—
Income (loss) before accretion of dividends
(1,196
)
15,611
10,960
61,812
Accretion of dividends on preferred stock
6,255
2,929
—
—
Net income (loss)
$
(7,451
)
$
12,682
$
10,960
$
61,812
Earnings (loss) per common share, basic
$
(0.69
)
$
1.53
Earnings (loss) per common share, diluted
$
(0.69
)
$
1.26
Weighted average common shares outstanding, basic
10,783,059
8,300,000
Weighted average common shares outstanding,
    diluted
10,783,059
10,068,346
December 31,
2003
2003
As adjusted
(2)
Actual
(dollars in thousands)
Balance sheet data:
Cash and cash equivalents
$
$
14,436
Restricted cash
105,355
Student loans, net
2,856,428
Goodwill
160,705
Total assets
3,192,282
Asset-backed notes and lines of credit
3,000,866
Other debt obligations, net
40,531
Total liabilities
3,077,955
Preferred stock of consolidated subsidiary
89,136
Stockholders' equity
25,191
8
Year ended December 31,
(3)
2003
2002
2001
(dollars in thousands)
Other data:
Originations:
(4)
FFELP loans retained
$
1,977,934
$
824,337
$
150,222
FFELP loans sold
(5)
1,988,910
3,042,144
3,411,336
Private loans sold
(5)
209,312
111,621
43,020
Total volume
$
4,176,156
$
3,978,102
$
3,604,578
Average student loans
(6)
$
1,621,625
$
485,847
$
11,536
Average asset-backed notes and lines of credit
1,963,413
757,969
81,108
Student loans serviced (at end of
    period)
(7)
8,906,303
—
—
Ratios:
Net portfolio margin
1.62
%
1.27
%
(1.44
)%
Net claim reject rate by guaranty agencies due to
    servicer error
(8)
0.02
%
—
—
(1)
Our predecessor operated as a limited liability
    company that was treated as a partnership for income tax
    purposes. As a result, our predecessor had no provision for
    income taxes.
(2)
As adjusted amounts give effect to our issuance
    and sale
    of         shares of
    common stock in this offering at an assumed initial public
    offering price of
    $         per
    share, the midpoint of the range set forth on the cover page,
    and the application of the estimated net proceeds of this
    offering, after deducting the underwriting discount and
    estimated offering expenses payable by us, as set forth under
    "Use of Proceeds" and "Capitalization."
(3)
Amounts for the year ended December 31,
    2001, reflect information for our predecessor. Amounts for the
    year ended December 31, 2002, reflect a combination of our
    information and information for our predecessor.
(4)
Reflects the principal balance of loans which we
    originate as well as the private education loans we market for
    origination by our lender partners, which we also refer to as
    facilitating for origination.
(5)
Reflects, with respect to FFELP and private
    consolidation loans, the principal balance of loans with respect
    to which we sold the originated applications, and, with respect
    to private in-school loans, the principal balance of loans which
    we facilitated for origination by other lenders.
(6)
Reflects principal balance of loans without
    adjustments for deferred loan costs which, as of
    December 31, 2003, 2002 and 2001, totaled
    $26.4 million, $12.5 million and $1.0 million,
    respectively. Amounts also do not reflect the allowance for loan
    losses of $4.1 million, $1.9 million and $0 as of
    December 31, 2003, 2002 and 2001, respectively.
(7)
Prior to our acquisition of SunTech in April,
    2003, SunTech serviced $7.4 billion and $6.2 billion
    of loans at December 31, 2002 and 2001, respectively.
(8)
Prior to our acquisition of SunTech in April,
    2003, SunTech had a net claim reject rate of 0.00% in 2002 and
    2001.
9
RISK FACTORS
You should carefully consider the following risk
factors and all other information contained in this prospectus
before investing in shares of our common stock. Investing in our
common stock involves a high degree of risk. If any of the
following risks actually occur, our business, financial
condition and results of operations could be materially and
adversely affected. In that event, the trading price of our
common stock could decline and you may lose part or all of your
investment.
Risks Related to Our Industry and Our
Company
Changes in federal laws and regulations
relating to education loans, particularly legislation affecting
federally guaranteed consolidation loans, could materially
adversely affect our results of operations and
business.
The Higher Education Act of 1965 must be
reauthorized by Congress every five years and the FFEL Program
is periodically amended. The United States Congress is currently
considering reauthorization of the Act, which is scheduled to
expire in 2004. Changes in the Higher Education Act made in the
two most recent reauthorizations have resulted in reductions in
education loan yields paid to lenders, increased fees paid by
lenders and a decreased level of federal guarantee. Federally
guaranteed consolidation loans made up 95.0% of our loan
originations and 99.9% of our loan portfolio as of
December 31, 2003, and efforts underway to pass legislation
that affects federal consolidation loans would have a
significant impact on us. Some of the key changes that may be
considered in the reauthorization debate that could have a
negative effect on our business include:
•
Eliminating fixed-rate consolidation loans and
    requiring that all consolidation loans be made at a variable
    rate.
If consolidation loans are
    required to be made at a variable rate rather than a fixed rate,
    as virtually all consolidation loans are currently made, it
    could reduce the amount of income we can earn on the loans we
    originate in the future and reduce the demand for consolidation
    loans.
•
Increasing access to extended repayment terms
    for Stafford loans.
If the Stafford
    program, which currently allows loan repayment terms of ten
    years that cannot be extended unless the loans meet certain
    conditions, is changed to increase access to longer repayment
    terms on loans, students will be able to realize one of the key
    benefits of consolidation loans without having to consolidate
    their loans.
•
Permitting borrowers to refinance
    consolidation loans.
If borrowers
    holding consolidation loans are permitted to refinance their
    consolidation loans under the FFEL Program, this would open the
    consolidation loans in our portfolio to refinancing.
Any of these legislative changes, if enacted,
could have a material adverse impact upon us.
In addition, legislation has been introduced
proposing a number of initiatives aimed at supporting the
William D. Ford Federal Direct Loan Program, which we refer to
as the FDL Program or FDLP. Under the FDL Program, the DOE makes
loans directly to student borrowers through the educational
institutions they attend. If legislation promoting the FDL
Program to the detriment of the FFEL Program were to be enacted,
it could have a material adverse impact on us.
Further amendments, the nature of which we cannot
currently anticipate, could also hurt our business and our
results of operations. Moreover, there can be no assurance that
the provisions of the Higher Education Act will be reauthorized
this year. While Congress has consistently extended the
effective date of the Higher Education Act, it may elect not to
reauthorize the DOE's ability to provide interest subsidies
and federal guarantees for student loans. Such a failure to
reauthorize would reduce the number of federally guaranteed
student loans available for us to originate in the future and
could materially adversely affect us.
10
In addition, the DOE oversees and implements the
Higher Education Act and periodically issues regulations and
interpretations of that Act. Changes in such regulations and
interpretations could negatively impact our business.
Significantly decreased demand for
consolidation loans would have a material adverse impact on our
business.
A combination of increased consumer awareness,
rising education debt volume and historically low interest rates
available to borrowers in the last three years has increased the
number of borrowers seeking to consolidate their variable-rate
education loans into one loan. Currently, the great majority of
our loan originations are consolidation loans. One of the
advantages of consolidation loans is that borrowers are able to
fix the interest rate on their variable rate student loans at
the then existing rate. If rates rise, students may have less
incentive to consolidate their loans at a fixed rate. Demand for
consolidation loans could also decrease in the future as a
result of a decrease in the pool of potential borrowers eligible
to consolidate their loans. The DOE projects that FFELP
consolidation loan volume will decrease from $35.3 billion
in federal fiscal year 2003 to an estimated $25.9 billion
in federal fiscal year 2004 and to $22.3 billion in federal
fiscal year 2005. Demand for consolidation loans could also
decrease as a result of regulatory changes or if certain
legislative proposals described above are enacted. A significant
decrease in demand for consolidation loans would have a material
adverse effect upon our business.
We must comply with governmental regulations
relating to our FFELP loans and guaranty agency rules and our
business and results of operations could be materially adversely
affected if we fail to meet these requirements.
Our principal business is comprised of
originating, holding and servicing education loans made and
guaranteed pursuant to the FFEL Program. Most significant
aspects of our lines of business are governed by the Higher
Education Act. We must also meet various requirements of the
guaranty agencies, which are private not-for-profit
organizations or state agencies that have entered into federal
reinsurance contracts with the DOE, in order to maintain the
federal guarantee on our FFELP loans. These requirements
establish origination and servicing requirements and procedural
guidelines and specify school and borrower eligibility criteria.
The federal guarantee of FFELP loans is conditioned on
compliance with origination, servicing and collection standards
set by the DOE and guaranty agencies. FFELP loans that are not
originated, disbursed or serviced in accordance with DOE
regulations risk loss of their guarantee, in full or in part.
Our failure to comply with the regulatory regimes
described above may arise from:
•
breaches of our internal control system, such as
    a failure to adjust manual or automated servicing functions
    following a change in regulatory requirements;
•
unintentional employee errors, such as inputting
    erroneous data or failure to adhere to established company
    processes;
•
technological defects, such as a malfunction in
    or destruction of our computer systems;
•
fraud by third parties who refer loan
    applications to us or from whom we acquire originated loan
    applications; or
•
fraud by our employees or other persons in
    activities such as origination or borrower payment processing.
If we fail to comply with any of the above
requirements, we could incur penalties or lose the federal
guarantee on some or all of our FFELP loans. In addition, even
if we comply with the above requirements, a failure to comply by
third parties with whom we conduct business may be attributable
to us and result in us incurring penalties or losing the federal
guarantee on some or all of our FFELP loans. If we experience a
high rate of servicing deficiencies, we could incur costs
associated with remedial servicing, and, if we are unsuccessful
in curing such deficiencies, the eventual losses on the loans
that are not cured could be material. In addition, failure to
comply with these laws and regulations could result in our
liability to borrowers and potential class action suits.
11
We have only recently begun retaining a
significant portion of the loans we originate in our portfolio
and servicing loans.
We were formed in June 1998. Prior to 2002, we
did not retain in our portfolio a significant amount of the
loans we originated. We retained approximately 50% and 21% of
the FFELP loans we originated in 2003 and 2002, respectively.
Although we believe that the retained loans are valuable assets,
due to their long duration and high quality (due to the federal
guarantee), we cannot assure you that our predictions will
reflect actual experience. The loans retained in our portfolio
may be repaid prior to maturity and may have poor future
performance, which could have a material adverse effect on our
business.
In addition, we only began servicing loans in
April 2003, following our acquisition of SunTech. Although
SunTech has been in business for more than 15 years and has
serviced a significant portion of the loans we have originated
since our formation in 1998, we have operated as a vertically
integrated company offering loan servicing for only one year. If
SunTech does not perform at the level of its historical
performance, our business and results of operations could be
materially adversely affected.
Our quarterly results of operations have
varied in the past and are expected to continue to do so, which
may cause our stock price to fluctuate.
Our quarterly results of operations have varied
in the past and are expected to continue to do so in the future.
The market price of our common stock may decline significantly
if our future quarterly results of operations fall below the
expectations of securities or industry analysts or investors. A
number of factors outside of our control may cause our quarterly
results to fluctuate, including:
•
seasonal patterns affecting loan originations,
    primarily an increase in consolidation activity during the
    summer and late fall and a decrease in consolidation activity
    during the rest of the year;
•
the amount and timing of loan sales;
•
the impact of general economic conditions;
•
changes in interest rates; and
•
our introduction of new products.
We forecast the volume and timing of our loan
originations for our operational and financial planning on the
basis of many factors and subjective judgments. Therefore,
failure to generate originations according to our expectations
in a particular quarter could have a material adverse effect on
our results of operations for that quarter and for future
periods.
"Do not call" registries may limit
our ability to market our products and services.
Our direct marketing operations are subject to
various federal and state "do not call" list
requirements and may become subject to additional state "do
not call" list requirements. The Federal Trade Commission
has recently amended its rules to provide for a centralized
national "do not call" registry. Under these new
federal regulations, consumers may have their phone numbers
added to the national "do not call" registry.
Generally, we are prohibited from calling anyone on that
registry unless we have an existing relationship with that
person. We also are required to pay a fee to access the registry
on a quarterly basis. Federal enforcement of the "do not
call" provisions began in the fall of 2003, and the rule
provides for fines of up to $11,000 per violation and other
possible penalties. This rule may restrict our ability to market
effectively our products and services to new customers.
Furthermore, compliance with this new rule may prove difficult,
and we may incur penalties for improperly conducting our
marketing activities. In addition, failure to comply with the
terms of this new rule could have a negative impact on our
reputation.
Nineteen states continue to maintain state
"do not call" lists with varying penalties and fines
for noncompliance. Compliance and coordination with these state
lists and with federal lists may prove difficult and we may
incur additional penalties for failure to comply with any of
these lists, which could also have a negative impact on our
business.
12
Our inability to maintain relationships with
financial institutions that acquire our originated loan
applications, with our eligible lender or with lenders that
originate our private loans could have material adverse effect
on our ability to sustain or increase our business.
We enter into forward purchase agreements with
financial institutions who agree to purchase, and in certain
cases, require that we sell to them, a portion of the FFELP or
private consolidation loan applications we originate. Under
these contracts, which are typically one- to three-year
agreements, we generate loan applications that are then
forwarded to partnering financial institutions over
pre-determined periods of time and for agreed upon fees. If we
are unable to renew forward purchase agreements with these
institutions at rates or on terms that we deem acceptable, or
if, such contracts are terminated, we would have to find other
financial institutions to acquire our loan applications or we
would have to hold a larger portion of loans we originate in our
portfolio. Fees received from three customers under forward
purchase agreements each accounted for more than 10% of our net
revenue in 2003. We can provide no assurance that we will be
able to renew these contracts or that suitable replacements can
be found at acceptable rates or on acceptable terms.
In addition, when we originate FFELP loans on our
own behalf or when we acquire FFELP loans from others, we engage
U.S. Bank National Association as our "eligible
lender," as defined in the Higher Education Act, to act as
our trustee to hold title to all such originated and acquired
FFELP loans. This eligible lender trustee holds the legal title
to our FFELP loans, and we hold 100% of the beneficial interests
in those loans. If we are unable to renew our contract with U.S.
Bank, or if the contract is terminated, we would have to find
another institution to serve as our eligible lender. We can
provide no assurance that we will be able to renew this contract
or that a replacement eligible lender can be found at acceptable
rates or on acceptable terms.
Moreover, we have a relationship with a lender
for whom we market and facilitate the origination of private
in-school loans. The number of financial institutions willing to
originate and finance these private in-school loans will be a
significant factor in the growth of this market. As the market
is less mature than that for federally guaranteed loans, there
are, at present, fewer institutions originating and acquiring
these loans. Accordingly, we can provide no assurance that we
will be able to renew this contract or that suitable
replacements could be found or that we will find additional
lenders willing to finance the volume of private loans that we
may seek to market or originate.
Any failure to maintain or replace contractual
relationships with these financial institutions or lenders could
have a material adverse effect on our ability to sustain or
increase our business.
If our strategies to grow our business are not
successful, our results of operations and business could be
materially adversely affected.
Our strategy includes increasing the amount of
private loans we originate or whose origination we facilitate,
as well as expanding our channels of distribution. We have much
more limited experience in these products and channels than in
our business of marketing and originating FFELP consolidation
loans through our DTC channel. In connection with these
strategies, we have invested and will continue to invest
resources in market research and technology and have hired and
trained and will continue to hire and train additional
personnel, when necessary. If these strategies are not
successful, our results of operations and business could be
materially adversely affected.
Our ability to operate our company effectively
could be impaired if we fail to attract and retain key
personnel.
Our ability to operate our business and implement
our strategies effectively depends, in part, on the efforts of
our executive officers and other key employees. In addition, our
future success will depend on, among other factors, our ability
to attract and retain other qualified personnel. The loss of the
services of any of our key employees or the failure to attract
or retain other qualified personnel could have a material
adverse effect on our business.
13
We may not be able to successfully make
acquisitions or increase our profits from these
acquisitions.
We intend to pursue continued growth through
selected acquisitions. Such an acquisition strategy includes
certain risks. For example:
•
we may be unable to identify strategic
    acquisition candidates, negotiate definitive agreements on
    acceptable terms or, as necessary, secure additional financing;
•
we may encounter unforeseen expenses,
    difficulties, complications or delays in connection with the
    integration of acquired entities;
•
we may fail to achieve acquisition synergies;
•
our acquisition strategy, including the focus on
    the integration of operations of acquired entities, may divert
    management's attention from the day-to-day operation of our
    businesses;
•
acquired loan or servicing portfolios may have
    unforeseen problems; or
•
key personnel at acquired companies may leave
    employment.
In addition, we may compete for certain
acquisition targets with companies having greater financial
resources than us. We cannot assure you that we will be able to
successfully make future acquisitions or what effects those
acquisitions may have on our financial condition and results of
operations. Inherent in any future acquisition is the risk of
transitioning company cultures and facilities. The failure to
efficiently and effectively achieve such transitions could have
a material adverse effect on our financial condition and results
of operations, particularly during the period immediately
following any acquisitions.
We anticipate that we would finance potential
acquisitions through cash provided by operating activities
and/or borrowings, which would reduce our cash available for
other purposes and our debt capacity, as well as our debt
service requirements. We cannot assure you, however, that we
would be able to obtain needed financing in the event strategic
acquisition opportunities are identified. We may also consider
financing acquisitions by issuing additional shares of common
stock, which would dilute your ownership.
Our inability to maintain our relationships
with third parties for whom we service loans could have an
adverse impact on our business.
Our inability to maintain strong relationships
with servicing customers could result in loss of loan servicing
volume generated by some of our loan servicing customers. We
cannot assure you that these relationships will continue. The
loss of such loan servicing volume could result in an adverse
effect on our business. As of December 31, 2003,
approximately 69.4% of the loans we serviced were owned by third
parties. Of these, a majority are governed by agreements with
terms of three years or less. To the extent that our third-party
servicing clients reduce the volume of education loans that we
service on their behalf, our income would be reduced, and, to
the extent the related costs could not be reduced
correspondingly, our net income could be materially adversely
affected. We might lose third-party servicing volume for a
variety of reasons, including if our third-party servicing
clients begin or increase internal servicing activities, shift
volume to another service provider, exit the FFEL Program
completely or if we fail to comply with applicable laws and
regulations.
If loan applications for federally guaranteed
loans that we sell are subsequently found to be ineligible for
the federal guarantee, we may be required to purchase such loans
and reimburse the DOE for certain fees.
Pursuant to the terms of our forward purchase
agreements, FFELP loans that we originate must comply with all
applicable laws and regulations and must be eligible for federal
guarantee. A portion of the loan applications that we originate
and sell are generated by third-party marketing entities with
whom we have marketing contracts. If any of the loan
applications that we sell under our forward purchase agreements,
whether marketed by us or by a third-party marketer, are deemed
ineligible for federal guarantee by a guaranty agency, we may be
obligated to purchase those loans. We would also be required to
reimburse the DOE for fees associated with those loans. Prior to
2001, a portion of the loan applications
14
we originated were generated by referrals from
collection agencies, including approximately $3.9 million in
principal amount of loans generated by referrals from the Valley
Acceptance Corporation. Individuals associated with Valley
Acceptance have been charged with improper processing of loans,
including loan applications which we originated and sold to
third parties. To date, a small number of claims relating to
these loans have been rejected by the applicable guarantee
agency, and, accordingly, we may be required to purchase these
loans and reimburse the DOE for the associated fees. If other
loan applications which we originated are found to be ineligible
for federal guarantee after they are funded, including loans
referred by other third-party marketers, we may be required to
purchase additional loans in the future and reimburse the DOE
for the associated fees which could have an adverse effect on
our results of operations.
We could experience cash flow problems if a
guaranty agency defaults on its guarantee obligation.
A deterioration in the financial status of
guaranty agencies, which are private not-for-profit
organizations or state agencies, or in their ability to honor
guarantee claims on defaulted student loans could result in a
failure of these guaranty agencies to make their guarantee
payments in a timely manner, if at all. If the DOE has
determined that a guaranty agency is unable to meet its
guarantee obligations, we may submit claims directly to the DOE,
and the DOE would be required to pay the full guarantee claim.
In such event, payment of the guarantee claims may not be made
in a timely manner, which could adversely affect our liquidity.
Higher rates of prepayments of student loans
could reduce our profits.
Pursuant to the Higher Education Act, borrowers
may prepay loans made under the FFEL Program at any time.
Prepayments may result from consolidating student loans, which
has historically tended to occur more frequently in low interest
rate environments, from borrower defaults, which will result in
the receipt of a guarantee payment and from voluntary full or
partial prepayments, among other things. The rate of voluntary
prepayments of student loans may be influenced by a variety of
economic, social and other factors affecting borrowers,
including interest rates, the availability of alternative
financing and legislative changes. Any legislation that permits
borrowers to refinance existing consolidation loans at possibly
lower interest rates could significantly increase the rate of
prepayments on our student loans. Our profits could be adversely
affected by higher prepayments, which would reduce the amount of
interest we receive and expose us to reinvestment risk.
Fluctuations in interest rates may materially
and adversely affect our results of operations.
Because we expect to generate a significant
portion of our earnings from the difference, or spread, between
the yield we receive on our portfolio of loans and the cost of
financing these loans, changes in interest rates could have a
material effect on our results of operations. Substantially all
the loans in our portfolio are FFELP consolidation loans which
bear interest at a fixed rate, however, the yield we receive is
the higher of the fixed rate or a variable rate determined under
the FFEL Program. For consolidation loans currently in our
portfolio, the FFELP-determined variable rate is 2.64% over the
91-day financial commercial paper rate. Substantially all
interest costs on our debt obligations are determined based upon
LIBOR, commercial paper or the result of auctions. Using the
portfolio as of December 31, 2003 and assuming normal
portfolio payment patterns for 2004, an increase in interest
rates of 200 basis points would decrease our net interest
income by approximately $22.2 million and an increase in
interest rates of 100 basis points would decrease our net
interest income by approximately $14.5 million, while a
corresponding decrease in these interest rates of 100 basis
points would increase our net interest income by approximately
$22.4 million. Changes in interest rates, the composition
of our loan portfolio and derivative instruments will impact the
effect of interest rates on our earnings, and we cannot predict
any such impact with any level of certainty. See
"Management's Discussion and Analysis of Financial
Condition and Result of Operations—Interest Rate Risk."
15
Our derivative instruments may not be
successful in managing our interest rate risk and failure of
counterparties to perform under certain derivative instruments
could harm our business.
When we utilize derivative instruments, we
utilize them to manage our interest rate sensitivity. Although
we do not use derivative instruments for speculative purposes,
our derivative instruments do not meet the criteria set forth in
Statement of Financial Accounting Standards, or SFAS,
No. 133, Accounting for Derivatives Instruments and Hedging
Activities, which allow offset of the changes in the fair value
of the derivative instrument against the effects of the changes
in the hedged item in the statement of income. Therefore, we
only mark-to-market the derivative instruments with changes
reflected in the income statement. The derivative instruments we
use are typically in the form of interest rate swaps and
interest rate caps, which have a duration of between twelve and
twenty four months. Our interest rate hedging strategy is
designed to address fluctuations in the short term, rather than
the long term. Developing an effective strategy for dealing with
movements in interest rates is complex, and no strategy can
completely insulate us from risks associated with such
fluctuations. In addition, a counterparty to a derivative
instrument could default on its obligation, thereby exposing us
to credit risk. Further, we may have to repay certain costs,
such as transaction fees or brokerage costs, if a derivative
instrument is terminated by us. As a result, we cannot assure
you that our economic hedging activities will not have an
adverse impact on our results of operations or financial
condition.
If we fail to renew our warehouse facility and
revolving line of credit, our liquidity and results of
operations could be adversely affected.
Our primary funding needs are those required to
finance our loan portfolio and satisfy our cash requirements for
acquisitions, operating expenses and technological development.
We rely upon a conduit warehouse facility to support our funding
needs on a short-term basis. The term of the facility is one
year, and it is renewable at the option of the lender and may be
terminated at any time for cause. Currently, the aggregate
short-term availability under our warehouse facility is
$1.0 billion, which will be reduced to $500 million in
May 2004. There can be no assurance that we will be able to
maintain such conduit facility, increase the availability under
such facility or find alternative funding, if necessary. Our
revolving line of credit may be terminated at any time upon the
occurrence of an event of default. Unavailability of warehouse
or revolving financing sources may subject us to the risk that
we may be unable to meet our financial commitments to borrowers
and creditors when due, unless we find alternative funding
mechanisms. If the availability under our warehouse facility
were to decrease or terminate, our ability to retain loans could
be adversely affected, which could adversely affect our results
of operation on a short- and/ or long-term basis.
Characteristics unique to asset-backed
securitizations pose risks to our continued liquidity and our
results of operations.
We have begun to rely upon, and expect to rely
increasingly upon, asset-backed securitizations as our most
significant source of long-term funding for our loan portfolio.
Approximately $1.9 billion and $500 million of our
asset-backed securitizations were issued for the years ended
December 31, 2003 and 2002, respectively. Our access to the
asset-backed securitization market is subject to conditions in
the asset-backed securitization market, over which we have no
control. If our access to the asset-backed securitization market
were to decrease, we would have to find other methods to finance
our loan originations on a long-term basis or be required to
sell a larger portion of our originated loan applications either
of which option, if available, may be less favorable than the
asset-backed securitization market has been historically. In
such event, our liquidity and results of operations could be
adversely affected on a short and/or long term basis.
As part of our securitization transactions in
2003 and 2002, we borrowed funds in excess of the principal
balance of the loans included in the applicable securitization
transactions. A portion of these additional funds was used to
repay other indebtedness and to fund our operations. We are also
entitled to receive excess spread from securitizations in the
future, generally after the principal balance of the loans and
restricted cash held in the securitizations equals the
outstanding indebtedness. However, our rights to
16
cash flow from securitized loans are subordinate
to noteholder interests and these loans may fail to generate any
cash flow beyond what is due to pay bondholders. Moreover, the
cash generated from these loans may be restricted by these
securitization vehicles for certain periods. Accordingly,
adverse developments in the performance of our current and
future securitizations could adversely affect our liquidity.
The interest rates on certain of our asset-backed
securities are set and periodically reset via a "dutch
auction" utilizing remarketing agents for varying intervals
ranging from seven to 91 days. If there are insufficient
potential bid orders in the auctions to purchase all of the
notes offered for sale or being repriced, we could be subject to
interest costs substantially above the anticipated and
historical rates paid on these types of securities. A failed
auction or remarketing could also reduce the investor base of
our future securitizations and other financing and debt
instruments.
Future losses due to defaults on loans held by
us present credit risk which could adversely affect our
earnings.
As of December 31, 2003, 100% our loan
portfolio was comprised of FFELP loans. These loans benefit from
a federal guarantee of 98% of their principal balance and
accrued interest. We bear full risk of losses experienced with
respect to the 2% non-guaranteed portion of the loans.
The performance of the FFELP loans in our
portfolio is affected by the economy and other factors outside
of our control, and a prolonged economic downturn may have an
adverse effect on the credit performance of these loans. While
we provide allowances estimated to cover losses that may be
experienced in our loans that are federally guaranteed under the
FFEL Program, there can be no assurance that such allowances
will be sufficient to cover actual losses in the future.
Increases in losses in excess of our allowance could adversely
affect our results of operations in the future.
Access to alternative means of financing the
costs of education may reduce demand for government guaranteed
and private education loans.
The demand for government guaranteed and private
education loans could weaken if borrowers use other sources of
funds to finance their post-secondary education. These sources
include, among others:
•
home equity loans or lines of credit, under which
    families borrow money based on the value of their real estate;
•
Federal Direct Loan Program loans, if the DOE or
    schools increase the education loans available through the FDL
    Program;
•
pre-paid tuition plans, which allow students to
    pay tuition at today's rates to cover tuition costs in the
    future;
•
529 plans, which are state-sponsored investment
    plans that allow a family to save funds for education
    expenses; and
•
education IRAs, now known as Coverdell Education
    Savings Accounts, under which a holder can make annual
    contributions for education savings.
If demand for government guaranteed or private
education loans weakens, we would experience reduced demand for
our products and services.
Competition from other originators, lenders
and servicers and competition created by the Federal Direct Loan
Program may materially adversely impact our business.
We face significant competition from SLM
Corporation, the parent company of Sallie Mae. SLM Corporation
originated $15.2 billion of education loans through its
preferred channel in 2003, services nearly half of all
outstanding FFELP loans and is the largest holder of education
loans, with a managed portfolio of approximately
$89 billion as of December 31, 2003. We also face
intense competition from
17
other education-related entities, such as
Education Lending Group and College Loan Corporation. As we
seek to further expand our business, we will face numerous other
competitors, many of which will be well established in the
markets we seek to penetrate. Some of our current and potential
competitors are much larger than we are, have better name
recognition than we do and have greater financial and other
resources than we do. Several of these competitors have large
market capitalizations or cash reserves and are better
positioned to acquire companies or portfolios in order to gain
market share than we are. Consequently, such competitors may
have more flexibility to address the risks inherent in the
education finance business. Finally, some of our competitors are
tax-exempt organizations that do not pay federal or state income
taxes. As a result of their tax-exempt status, these
organizations may have access to a lower cost of funding their
education loans than we do. These factors could give our
competitors significant advantages.
In 1992, Congress created the William D. Ford
Federal Direct Loan Program, which we refer to as the FDL
Program or the FDLP. Under the FDL Program, the DOE makes loans
directly to student borrowers through the educational
institutions they attend. FDL loans are available to students
only if the institution they attend participates in the FDL
Program. The volume of student loans made under the FFEL Program
and available for us to originate may be reduced to the extent
loans are made to students under the FDL Program.
Failures in our information technology system
could materially disrupt our business.
Our servicing and operating processes are highly
dependent upon our information technology system infrastructure,
and we face the risk of business disruption if failures in our
information systems occur, which could have a material impact
upon our business and operations. We depend heavily on our own
computer-based data processing systems in servicing both our own
loans and those of third-party servicing customers. Problems or
errors may occur in the future in connection with the conversion
of newly originated and acquired loans to our platform. If
servicing errors do occur, they may result in a loss of the
federal guarantee on the FFELP loans that we service or in a
failure to collect amounts due on the student loans that we
service. A major physical disaster or other calamity that causes
significant damage to our information systems could adversely
affect our business. Additionally, loss of our information
systems for a sustained period of time could have a negative
impact on our performance and ultimately on our cash flow in the
event we were unable to process borrower payments.
If we fail to comply with governmental
regulations relating to our private loan business, our business
and results of operations could be adversely affected.
We are expanding our private loan business and
currently originate and facilitate the origination of private
loans for third parties. The origination of private loans is
subject to federal and state consumer protection laws and
regulations, including state usury and disclosure laws and
related regulations, and the Federal Truth in Lending Act. These
laws and regulations impose substantial requirements upon
lenders and their agents and servicers involved in consumer
finance. Failure to comply with these governmental regulations
could have an adverse effect on our business and results of
operations.
If we become subject to the licensing laws of
any jurisdiction or any additional government regulation, our
compliance costs could increase significantly.
In addition to being subject to certain state and
federal consumer protection laws, which may change, we are
currently licensed as telemarketers in two states. We could also
become subject to other licensing laws due to changes in
existing federal and state regulations. As a result, we could be
required to (1) implement additional or different programs
and information technology systems, (2) meet new licensing
capital and reserve requirements or (3) incur additional
administrative, compliance and third-party service costs.
Furthermore, we could become subject to licensing laws in other
states if we engage in licensable activities in the future. This
includes the risk that even if we were not physically present, a
state could assert jurisdiction over our operations for services
we provide through the mail, by phone, through the Internet or
by other remote means. Our failure to comply with such
requirements could subject us to civil or criminal penalties and
could curtail our ability to continue to conduct business in
that jurisdiction.
18
Moreover, compliance with such requirements could
involve additional costs. Either of these consequences could
have a material adverse effect on our business.
Additionally, other organizations with which we
work are subject to licensing and extensive governmental
regulations, including truth-in-lending laws and other consumer
protection regulations. From time to time we have, and we may in
the future, become responsible for compliance with these
regulations under contractual arrangements with our clients. If
we fail to comply with these regulations, we could be subject to
civil or criminal penalties.
Failure to comply with restrictions on
inducements under the Higher Education Act could harm our
business.
The Higher Education Act generally prohibits a
lender from providing inducements to educational institutions or
individuals in order to secure applicants for FFELP loans.
However, the DOE permits de minimis gifts in connection with
advertising FFELP loans. If the DOE were to change its position
on these matters, this could potentially result in the DOE
imposing sanctions upon us if we fail to adapt our policies to
comply with the new guidelines, and such failure could impact
our business.
We have also entered into various agreements to
use marketing lists of prospective borrowers from sources such
as associations. On occasion, we pay to acquire these lists and
for completed loan applications resulting from these lists. We
believe that such arrangements are permissible and do not
violate restrictions on inducements, as they fit within a
regulatory exception recognized by the DOE for generalized
marketing and advertising activities. The DOE has provided
subregulatory guidance that such arrangements do not raise any
improper inducement issues, since such arrangements fall within
the generalized marketing exception. If the DOE were to change
its position, this could hurt our reputation and potentially
result in the DOE imposing sanctions on us. These sanctions
could negatively impact our business.
Risks Related to This Offering
Future sales of our common stock may depress
our stock price.
The market price of our common stock could
decline as a result of sales of substantial amounts of our
common stock in the public market after this offering or the
perception that these sales could occur. In addition, these
factors could make it more difficult for us to raise funds
through future equity offerings. There will
be                      shares
of our common stock outstanding immediately after this offering.
All of the shares of our common stock sold in
this offering will be freely transferable by persons other than
our affiliates without restriction or further registration under
the Securities Act of 1933. Substantially all of the remaining
shares of our outstanding common stock will be eligible for
immediate sale in the public market pursuant to Rule 144
under the Securities Act of 1933 (other than shares of common
stock held by our affiliates, who after completion of this
offering will own approximately      %
of our outstanding common stock, which will be subject to volume
limitations) subject to 180-day lock-up agreements with the
underwriters described below. See "Shares Eligible for
Future Sale."
We and our executive officers and directors and
our existing stockholders have entered into 180-day lock-up
agreements with the underwriters. The lock-up agreements
prohibit each of us from selling or otherwise disposing of
shares of common stock except in limited circumstances. The
lock-up agreements are only contractual agreements, and
J.P. Morgan Securities Inc. and Merrill Lynch, Pierce,
Fenner & Smith Incorporated, at their discretion, can
waive the restrictions of any lock-up agreement at an earlier
time without prior notice or announcement and allow any of us to
sell shares of our common stock. If the restrictions in the
lock-up agreement are waived, shares of our common stock will be
available earlier for sale into the public market, subject to
applicable securities laws, which could reduce the market price
for shares of our common stock. While we will require executive
officers to maintain a certain level of ownership of our common
stock, we cannot assure you that our directors or stockholders
will maintain their ownership position of our common stock after
the end of the lock-up period. Under the terms of the
19
stockholders agreement, Lightyear, which will
beneficially own
approximately                      shares
of our common stock, or      %, after
this offering, will have the ability to require us to register
the resale of its shares. In addition, TCW, which will
beneficially own
approximately                      shares
of our common stock, or      %, after
this offering, will also have the ability to require us to
register the resale of its shares. Lightyear and certain other
investors will have the ability to exercise certain
"piggyback" registration rights in connection with
other registered offerings. See "Shares Eligible for Future
Sale" and "Certain Relationships and Related
Transactions."
In addition, pursuant to our stock incentive
plan, we have granted options to purchase approximately
315,000 shares of common stock. Of these, options to
purchase 56,700 shares are currently vested and exercisable. We
have reserved 385,000 shares for future issuance under our
stock incentive plan and prior to the offering, we intend to
increase the number of shares of common stock available for
future issuance. In addition, we will have an additional
shares of common stock reserved for issuance pursuant to our
stock incentive plan. Following the consummation of this
offering, we intend to file one or more registration statements
on Form S-8 under the Securities Act to register the sale
of shares issued or issuable upon the exercise of stock options.
In the future, we may issue our common stock in connection with
acquisitions. The amount of such common stock issued could
constitute a material portion of our then outstanding common
stock. The issuance of additional shares of common stock could
result in dilution to our stockholders and a decline in the
market price of our common stock.
Lightyear controls us and may have conflicts
of interest with us or you in the future.
Prior to this offering, Lightyear beneficially
owned approximately      % of our
outstanding shares of common stock, and, after giving effect to
this offering, Lightyear will beneficially
own      % of our common stock,
or      % if the underwriters exercise
their over-allotment option in full. As a result, Lightyear will
have the ability to control the outcome of the election of our
directors, which may give Lightyear substantial influence over
our decisions to enter into any corporate transaction. Lightyear
also will have the ability to prevent any transaction that
requires the approval of stockholders, regardless of whether or
not other stockholders believe that any such transactions are in
their own best interests. For example, Lightyear could cause us
to make acquisitions that increase the amount of our
indebtedness. Additionally, Lightyear is in the business of
making investments in companies and may from time to time
acquire and hold interests in businesses that compete directly
or indirectly with our business. Lightyear may also pursue
acquisition opportunities that may be complementary to our
business, and, as a result, those acquisition opportunities may
not be available to us. So long as Lightyear continues to own a
significant amount of the outstanding shares of our common
stock, it will continue to be able to strongly influence or
effectively control our decisions.
There is no existing market for our common
stock, and we do not know if one will develop to provide you
with adequate liquidity.
There has not been a public market for our common
stock. We cannot predict the extent to which investor interest
in our company will lead to the development of a trading market
on
the                          or
otherwise or how liquid that market might become. The initial
public offering price for the shares will be determined by
negotiations between us and the representatives of the
underwriters and may not be indicative of prices that will
prevail in the open market following this offering.
Provisions in our certificate of incorporation
and bylaws and Delaware corporate law may discourage a takeover
attempt.
Provisions contained in our certificate of
incorporation and bylaws and the corporate law of Delaware, the
state in which we are incorporated, could make it more difficult
for a third party to acquire us, even if doing so might be
beneficial to our stockholders. Provisions of our certificate of
incorporation and bylaws impose various procedural and other
requirements, which could make it more difficult for
stockholders to effect certain corporate actions.
20
These anti-takeover provisions, which may delay
or deter a change of control of the company, include the
following:
•
the board of directors is authorized to determine
    the rights, preferences, privileges and restrictions of unissued
    series of preferred stock, without any vote or action by our
    stockholders;
•
the board of directors is classified into three
    classes;
•
stockholders may remove a director only for cause
    and only upon the affirmative vote of at least 80% of the then
    outstanding shares entitled to vote in the election of
    directors, voting together as a single class;
•
vacancies on the board of directors may only be
    filled by the affirmative vote of a majority of the remaining
    directors;
•
stockholder action by written consent is
    prohibited and special meetings of stockholders may only be
    called by our chief executive officer or board of
    directors; and
•
advance notice is required for stockholder
    proposals and director nominations.
These provisions could limit the price that
certain investors might be willing to pay in the future for
shares of our common stock. See "Description of Capital
Stock."
The market price of our common stock may be
volatile, which could cause the value of your investment to
decline.
After this offering, our stock price may vary
significantly from the initial offering price in response to the
risk factors described in this section and to the following
factors, some of which are beyond our control:
•
failure of our operating results to meet the
    expectations of investors or security analysts;
•
changes in investment recommendations by security
    analysts relating to our common stock;
•
changes in market valuations of our competitors;
•
announcements by us or our competitors of
    significant contracts, acquisitions, strategic partnerships,
    joint ventures or capital commitments; and
•
fluctuations in stock prices generally.
The book value of shares of common stock
purchased in the offering will be immediately diluted.
Our net tangible book value as of
December 31, 2003 was negative $135.5 million, or
negative $9.20 per share of common stock. Accordingly, investors
who purchase common stock in the offering will suffer immediate
dilution of
$           per
share in the pro forma net tangible book value per share. We
also have outstanding stock options and warrants representing
approximately      % of the outstanding
common stock with exercise prices that are below the estimated
initial public offering price of the common stock. To the extent
that these options or warrants are exercised, there will also be
dilution.
21
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING
STATEMENTS
This prospectus includes "forward-looking
statements." Forward-looking statements include statements
concerning our plans, objectives, goals, strategies, future
events, future revenue or performance, future loan originations,
capital expenditures, financing needs, plans or intentions
relating to acquisitions, business trends and other information
that is not historical information and, in particular, appear
under the headings "Summary," "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and "Business." When used in this
prospectus, the words "estimates,"
"expects," "anticipates,"
"projects," "plans," "intends,"
"believes," "forecasts," or future or
conditional verbs, such as "will," "should,"
"could" or "may," and variations of such
words or similar expressions are intended to identify
forward-looking statements. All forward-looking statements,
including, without limitation, management's examination of
historical operating trends and data are based upon our current
expectations and various assumptions. Our expectations, beliefs
and projections are expressed in good faith, and we believe
there is a reasonable basis for them. However, there can be no
assurance that management's expectations, beliefs and
projections will be achieved.
There are a number of risks and uncertainties
that could cause our actual results to differ materially from
the forward-looking statements contained in this prospectus.
Important factors that could cause our actual results to differ
materially from the forward-looking statements we make in this
prospectus are set forth in this prospectus, including under the
heading "Risk Factors."
All forward-looking statements attributable to us
or persons acting on our behalf apply only as of the date of
this prospectus and are expressly qualified in their entirety by
the cautionary statements included in this prospectus. We
undertake no obligation to update or revise forward-looking
statements which may be made to reflect events or circumstances
that arise after the date made or to reflect the occurrence of
unanticipated events unless we have an obligation to do so under
the federal securities laws.
22
USE OF PROCEEDS
We estimate that the net proceeds from the sale
of                      shares
of common stock being offered hereby at an assumed initial
public offering price per share of
$          ,
the midpoint of the range set forth on the cover page of this
prospectus, after deducting estimated underwriting discounts and
offering expenses, will be approximately
$                     million.
We will use
$          of
the net proceeds from this offering to pay the liquidation
preference of all shares of the preferred stock issued by our
subsidiary,
$          of
the net proceeds to repay all outstanding amounts under our
revolving line of credit and the balance of the net proceeds to
make potential acquisitions and for general corporate purposes.
Lightyear, other investors and certain members of management
will receive the net proceeds of the offering used to pay the
liquidation preference of the preferred stock.
DIVIDEND POLICY
We do not currently intend to pay any cash
dividends on our common stock and, instead, intend to retain
earnings, if any, for future operation and expansion. We are not
permitted to pay dividends on our common stock under the terms
of our revolving line of credit. Any decision to declare and pay
dividends in the future will be made at the discretion of our
board of directors and will depend on, among other things, our
results of operations, cash requirements, financial condition,
contractual restrictions and other factors that our board of
directors may deem relevant.
23
CAPITALIZATION
The following table sets forth our capitalization
as of December 31, 2003 on an actual basis and on an as
adjusted basis to reflect:
•
the      -for-     split
    of our common stock prior to the completion of this offering;
•
the sale of
    approximately                      shares
    of our common stock in this offering at an assumed public
    offering price per share of
    $          ,
    the midpoint of the range set forth on the cover page of this
    prospectus, after deducting estimated underwriting discounts and
    offering expenses; and
•
the application of the estimated net proceeds
    therefrom as described under "Use of Proceeds."
You should read the information in this table in
conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and our
consolidated financial statements and the consolidated financial
statements of our predecessor company included elsewhere in this
prospectus.
As of
December 31, 2003
Actual
As adjusted
(dollars in thousands)
Debt and Capital Lease Obligations:
Asset-backed notes and lines of credit
$
3,000,866
$
Other debt obligations, net
40,531
Capital lease obligations
1,896
Total debt and capital lease obligations
3,043,293
Preferred stock of consolidated subsidiary
89,136
Stockholders' equity:
Common stock
14
Deferred compensation
(107
)
Notes receivable
(509
)
Additional paid-in capital
20,562
Retained earnings
5,231
Total stockholders' equity
25,191
Total capitalization
$
3,157,620
$
The table above excludes the following shares:
•
315,000 shares of common stock subject to
    stock options outstanding as of December 31, 2003, options
    for 56,700 of which were exercisable as of December 31,
    2003, at a weighted average exercise price equal to $1.30;
•
warrants to purchase an aggregate of
    1,000,000 shares of common stock at an exercise price of
    $0.01 per share; and
•
shares
    of common stock available for future grant or issuance under our
    stock incentive plans.
24
DILUTION
If you invest in our common stock, your interest
will be diluted to the extent of the difference between the
initial public offering price per share of our common stock and
the adjusted net tangible book value per share of our common
stock immediately after this offering. Our net tangible book
value as of December 31, 2003 was negative
$135.5 million, or negative $9.20 per share of common
stock. Net tangible book value per share is determined by
dividing our tangible net worth (total tangible assets less
total liabilities and subsidiary preferred stock) by the
aggregate number of shares of common stock outstanding.
Dilution is the amount by which the offering
price paid by the purchasers of the common stock to be sold in
this offering will exceed the net tangible book value per share
of common stock after the offering. After giving effect to the
sale of shares of common stock in this offering at an assumed
initial public offering price of
$           per
share, the midpoint of the range set forth on the cover page of
this prospectus, and after deducting estimated underwriting
discounts and offering expenses and the application of the net
proceeds therefrom as described under "Use of
Proceeds," our pro forma net tangible book value as of
December 31, 2003 would have been
$          ,
or
$           per
share of common stock. This represents an immediate increase in
net tangible book value of
$           per
share to existing stockholders and an immediate dilution in net
tangible book value of
$           per
share to new investors.
The following table illustrates this per share
dilution:
Per share
Assumed initial public offering price per share
$
Net tangible book value per share before this
    offering
$
(9.20
)
Increase per share attributable to this offering
Pro forma net tangible book value per share after
    this offering
Dilution per share to new investors
$
The following table summarizes, on a pro forma
basis as of December 31, 2003, the total number of shares
of common stock purchased from us, the total consideration,
including non-cash consideration, paid to us and the average
price per share paid by existing stockholders and by new
investors purchasing shares in this offering. The calculation
below is based on an assumed initial public offering price of
$           per
share, which is the midpoint of the range listed on the cover
page of this prospectus, before deducting estimated underwriting
discounts and commissions and estimated offering expenses that
we must pay:
Shares Purchased
Total Consideration
Average Price
Number
Percent
Amount
Percent
Per Share
Existing stockholders
14,734,311
%
$
%
$
New investors
Total
100.00
%
$
100.00
%
The tables and calculations above assume no
exercise of outstanding options or warrants. To the extent that
these options or warrants are exercised, there will also be
dilution to new investors. See "Management— Executive
Compensation" and "Description of Capital Stock."
25
SELECTED HISTORICAL CONSOLIDATED FINANCIAL
DATA
You should read the summary consolidated
financial data set forth below in conjunction with
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" and our and our
predecessor's financial statements and the related notes
included elsewhere in this prospectus. We derived the financial
data as of December 31, 2003 and 2002, for the year ended
December 31, 2003 and for the period May 17 through
December 31, 2002 from our financial statements included
elsewhere in this prospectus. We derived the financial data for
the period January 1 through May 16, 2002 and for the
year ended December 31, 2001 from our predecessor's
financial statements included elsewhere in this prospectus and
we derived the financial data as of December 31, 2001, 2000
and 1999, for the years ended December 31, 2000 and 1999
from our predecessor's financial statements not included
elsewhere in this prospectus. The historical results are not
necessarily indicative of the results to be expected for any
future period.
26
(dollars in thousands, except per share data)
Predecessor
The Company
Period
Period May 17
January 1
Year ended
through
through
Year ended December 31,
December 31,
December 31,
May 16,
2003
2002
2002
2001
2000
1999
Income statement data:
Net revenue:
Interest income
$
61,846
$
18,804
$
7,454
$
1,623
$
143
$
—
Interest expense
39,871
21,309
4,692
2,553
163
32
Net interest income (expense)
21,975
(2,505
)
2,762
(930
)
(20
)
(32
)
Provision for loan losses
2,357
1,270
752
—
—
—
Net interest income (expense) after
    provision for loan losses
(1)
19,618
(3,775
)
2,010
(930
)
(20
)
(32
)
Fee income
(1)
98,558
84,396
36,427
131,567
66,919
4,435
Net revenue
(1)
118,176
80,621
38,437
130,637
66,899
4,403
Expenses:
Salaries and related benefits
54,640
30,601
16,819
40,863
18,499
1,167
Other selling, general and administrative
    expenses:
Marketing and mailing costs
25,006
11,164
2,613
12,365
11,408
1,941
Communications and data processing
7,515
5,156
1,712
2,375
1,185
78
Management and consulting fees
3,313
1,250
2,800
6,720
3,260
200
Professional fees
6,315
1,608
603
710
359
164
Depreciation and amortization
4,328
1,244
754
1,094
459
49
Other general and administrative
8,326
3,261
2,176
4,698
2,379
523
Total other selling, general, and administrative
    expenses
54,803
23,683
10,658
27,962
19,050
2,955
Swap interest
3,439
—
—
—
—
—
Derivative mark-to-market
1,862
—
—
—
—
—
Debt extinguishment
4,824
—
—
—
—
—
Total expenses
119,568
54,284
27,477
68,825
37,549
4,122
Income (loss) before income taxes and accretion
    of dividends on preferred stock
(1,392
)
26,337
10,960
61,812
29,350
281
Income tax provision (benefit)
(2)
(196
)
10,726
—
—
—
—
Income (loss) before accretion of dividends
(1,196
)
15,611
10,960
61,812
29,350
281
Accretion of dividends on preferred stock
6,255
2,929
—
—
—
—
Net income (loss)
$
(7,451
)
$
12,682
$
10,960
$
61,812
$
29,350
$
281
Earnings (loss) per common share, basic
$
(0.69
)
$
1.53
Earnings (loss) per common share, diluted
$
(0.69
)
$
1.26
Weighted average common shares outstanding, basic
10,783,059
8,300,000
Weighted average common shares outstanding,
    diluted
10,783,059
10,068,346
27
(dollars in thousands)
The Company
Predecessor
2003
As adjusted
(3)
2003
2002
2001
2000
1999
Balance sheet data (at period end):
Cash and cash equivalents
$
14,436
$
32,535
$
7,182
$
6,227
$
297
Restricted cash
105,355
41,608
371,163
—
—
Student loans, net
2,856,428
973,055
150,935
—
—
Goodwill
160,705
152,552
3,004
—
—
Total assets
3,192,282
1,221,502
542,436
14,259
1,704
Asset-backed notes and lines of credit
3,000,866
1,027,200
527,200
—
—
Other debt obligations, net
40,531
108,604
1,514
1,515
210
Total liabilities
3,077,955
1,147,080
533,427
3,148
1,409
Preferred stock of consolidated subsidiary
89,136
50,262
—
—
—
Stockholders'/Members' equity
25,191
24,160
9,009
11,111
295
(1)
Prior to 2002, our predecessor sold substantially
    all of our originated applications to third parties and received
    fees for the sale of these loan applications at the time of
    sale. Since 2002, we have retained an increasing portion of the
    FFELP loans we originate. We and our predecessor retained
    approximately 50%, 21% and 4% of the FFELP loans originated in
    2003, 2002 and 2001, respectively.
(2)
Our predecessor operated as a limited liability
    company that was treated as a partnership for income tax
    purposes. As a result, our predecessor had no provision for
    income taxes.
(3)
As adjusted amounts give effect to our issuance
    and sale
    of                  shares
    of common stock in this offering at an assumed initial public
    offering price of
    $         per
    share, the midpoint of the range set forth on the cover page,
    and the application of the estimated net proceeds of this
    offering, after deducting the underwriting discount and
    estimated offering expenses payable by us, as set forth under
    "Use of Proceeds" and "Capitalization."
28
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis of our
results of operations and financial condition for the fiscal
years ended December 31, 2003, 2002 and 2001 should be read
in conjunction with Selected Consolidated Financial Data and our
and our predecessor's audited consolidated financial
statements and the notes to those statements that are included
elsewhere in this prospectus. Our discussion contains
forward-looking statements based upon current expectations that
involve risks and uncertainties, such as our plans, objectives,
expectations and intentions. Actual results and the timing of
events could differ materially from those anticipated in these
forward-looking statements as a result of a number of factors,
including those set forth under the Risk Factors, Cautionary
Notice Regarding Forward-Looking Statements and Business
sections and elsewhere in this prospectus.
Overview
We are a vertically integrated education finance
company that markets, originates, finances and services
education loans. We originated or facilitated the origination of
$4.2 billion in education loans in 2003 and we believe we
are among the top five originators of federal and private
education loans in the United States. Of our total loan
originations in 2003, $4.0 billion were federally
guaranteed consolidation student loans made through the FFEL
Program. Beginning in May 2003, we increased our focus on
private education loans and, in 2003, we originated or
facilitated the origination of $199.6 million of these
loans. As of December 31, 2003, we also serviced
approximately $8.9 billion in student loans made to over
360,000 customers.
We commenced operations in 1998 through a
predecessor company. On May 17, 2002, Lightyear acquired
us. As a result of the acquisition, all of our assets and
liabilities were recorded at their estimated fair value. The
excess of the purchase price over the fair value of net assets
acquired of approximately $159.5 million was recorded as an
increase of $7.0 million to loan receivables,
$0.9 million to debt discount and $151.6 million to
goodwill. For purposes of analyzing the results of operations
for the year ended December 31, 2002, we have added the
applicable amount for the periods prior to, and after, the date
of the acquisition by Lightyear.
In 2002, we adopted a strategy of retaining a
larger portion of the federally guaranteed loans we originate,
which has resulted in our holding a portfolio of loans that has
grown from $973.1 million at December 31, 2002 to
$2.9 billion at December 31, 2003. Prior to 2002, we
sold substantially all of our completed loan applications to
third parties and received fees for those applications at the
time of sale.
We believe that retaining FFELP loans in our
portfolio benefits the Company because it generally provides
greater long-term value to the Company than selling these loans,
although our net income in current periods has been lower than
it would have been had we sold a larger percentage of the FFELP
loans we originate. We evaluate our originations on a
loan-by-loan basis and seek to retain loans that have
characteristics, such as balances, rates and terms that provide
us the greatest value. We have sold and will continue to sell a
portion of the FFELP loan applications we originate in order to
capitalize upon market opportunities, provide sources of funding
for loan processing and origination expenses and generate
additional operating cash flow. We will periodically review our
allocation between FFELP loan originations retained and loan
applications sold, and, accordingly, our allocation may change
from period to period. We do not currently fund or retain any
private loans.
29
The following table sets forth for each of 2003,
2002 and 2001 our loan applications sold and retained and the
loans in our portfolio.
Loan Originations and Portfolio
2003
2002
2001
Dollars
%
Dollars
%
Dollars
%
(dollars in millions)
FFELP consolidation,
PLUS, Stafford loans:
Sold
(1)
$
1,988.9
50.1
%
$
3,042.1
78.7
%
$
3,411.3
95.8
%
Retained
1,977.9
49.9
824.3
21.3
150.2
4.2
Total FFELP loans originated
3,966.8
100.0
%
3,866.4
100.0
%
3,561.5
100.0
%
Private loans:
Sold
(2)(3)
209.3
100.0
%
111.6
100.0
%
43.0
100.0
%
Retained
—
—
—
—
—
—
Total private loans originated
209.3
100.0
%
111.6
100.0
%
43.0
100.0
%
Total loans originated
$
4,176.1
$
3,978.0
$
3,604.5
Portfolio of loans (all FFELP):
Monthly average for period
(4)
$
1,621.6
$
485.8
$
11.5
Period end
(4)
$
2,834.1
$
962.5
$
150.0
(1)
Reflects the principal balance of loans with
    respect to which we sold the originated applications.
(2)
Reflects the principal balance of loans with
    respect to which we facilitated the origination by third party
    lenders.
(3)
Includes Health Education Assistance
    consolidation loans which equaled $9.7 million,
    $20.6 million and $8.7 million in 2003, 2002 and 2001,
    respectively.
(4)
Substantially all the loans in our portfolio are
    FFELP consolidation loans. Currently, our portfolio does not
    contain any private loans. Amounts reflect principal balance of
    loans without adjustments for deferred loan costs which, as of
    December 31, 2003, 2002 and 2001, totaled
    $26.4 million, $12.5 million and $1.0 million,
    respectively. Amounts also do not reflect the allowance for loan
    losses of $4.1 million, $1.9 million and $0 as of
    December 31, 2003, 2002 and 2001, respectively.
In April 2003 we acquired SunTech and began
generating revenue from servicing activities. Prior to our
acquisition of SunTech, it serviced many of the loans we
originated, and we paid SunTech a fee for loans in our portfolio
serviced by them. We currently service substantially all the
loans in our portfolio, as well as loans held by third-party
lenders. We seek to obtain servicing for a majority of the loan
originations we sell, which accounts for a significant portion
of our third-party servicing volume.
We finance the loans in our portfolio through
asset-backed securitizations and a secured warehouse facility
and we record the obligations related to these facilities as
debt on our consolidated balance sheet. To date, we have
completed four securitizations that have provided
$2.9 billion of funding, including two transactions for a
total of $1.9 billion in 2003. We also have several forward
purchase agreements, under which financial institutions have
agreed to purchase, and, in certain circumstances, require that
we sell to them, a portion of the loans we market and originate.
We currently operate in two reportable segments
as follows:
Loan
origination.
Includes marketing,
origination and financing of loans.
Loan
servicing.
Includes servicing for
our portfolio of loans and third-party loans.
Prior to our acquisition of SunTech in April,
2003, we operated in a single segment, loan origination, and all
loans in our portfolio were serviced by third parties, including
SunTech. For additional information relating to our segments,
see note 20 of the notes to our consolidated financial
statements.
We generate revenue primarily from three sources,
which are described in greater detail below. In our loan
origination segment, we generate revenue from fees we receive
from the sale of originated loan applications and for marketing
loans for third parties, which we refer to collectively as fees
on loan sales.
30
We also generate net interest income on our loan
portfolio and cash balances in our loan origination segment. In
our loan servicing segment, we primarily generate revenue from
fees we receive for disbursement on loan applications and for
servicing loans.
Our revenue in any period is directly affected by
the amount of loans we originate and service, as well as the
percentage of those originated loan applications that we decide
to retain. We believe that a significant driver of the growth in
our consolidation loan originations during the past three years
has been the increased awareness of consolidation loans on the
part of many borrowers who have been out of school, as well as
of more recent graduates. This recent increase in awareness is a
result of extensive marketing efforts by us and other lenders in
this market, including Sallie Mae, coupled with the effects of
the recent low interest rate environment, that has heightened
interest in these products among both borrowers and lenders. As
an increasing percentage of the debt held by borrowers who have
been out of school for several years has been consolidated, we
expect that our consolidation loan originations will decline for
at least the next couple of years. However, we believe that the
consolidation of loans by recent graduates with increased debt
loads may mitigate the decline in consolidation loan
originations. In addition, we expect that as the demand grows
for financing to bridge the gap between the cost of higher
education and government-backed financial aid, the amount of
private loans we market or originate in the future will increase
through expanded use of our DTC marketing platform and our
initiative to market through school financial aid offices. The
volume of consolidation and other loans we originate, our
results of operations and our financial condition may also be
affected by changes in applicable laws and regulations relating
to the FFEL Program as well as other factors outside of our
control. See "Risk Factors."
Components of Net Revenue
We have two primary categories of revenue: net
interest income and fee income, which since April 2003 has
included servicing fee income.
Net Interest Income
We define net interest income to be the excess of
interest income we earn on our loan portfolio and cash balances
over our interest expense on the debt we incur to finance our
portfolio of loans and for general operating needs. We define
net portfolio margin as being equal to the weighted average
yield on our loans and restricted cash less the weighted average
interest expense on the debt we incur to finance our loans. The
current and future interest rate environment can and will affect
our net interest income and net spread. The effects of changing
interest rate environments are further outlined in
"— Interest Rate Risk" below.
Interest
income.
Substantially all the
loans in our portfolio are FFELP consolidation loans which bear
interest at a fixed rate. The average yield on our portfolio of
student loans for the year ended December 31, 2003 was
4.77%. In addition, in certain interest rate environments, we
receive a direct payment from the federal government based upon
a Special Allowance Payment, or SAP, formula with respect to
FFELP loans held in our portfolio. SAPs, with respect to our
FFELP consolidation loans, are generally paid whenever the
91-day financial commercial paper rate in a calendar quarter
plus a spread of 2.64% exceeds the rate of interest which the
borrower is obligated to pay. With respect to the Stafford and
PLUS loans in our portfolio, all of which were first disbursed
after January 1, 2000, SAPs are generally paid whenever the
91-day financial commercial paper rate in a calendar quarter
plus a spread of 2.34% or 2.64%, respectively exceeds the
borrower rate. Due to the recent interest rate environment, we
have not received SAPs on any of the loans in our portfolio.
Our interest income is presented net of
amortization of capitalized loan origination fees and the fees
we pay the DOE in connection with our FFELP loans. Those fees
include a one-time 0.50% fee on origination of consolidation,
Stafford and PLUS loans. We are also required to pay to the DOE
a monthly fee at a rate equal to 1.05% per annum on the
FFELP consolidation loans we hold. Our interest income will also
be reduced by incentives we offer to borrowers that are designed
to attract new borrowers and improve their payment behavior. One
incentive program reduces a borrower's interest rate by
0.25% per
31
annum for so long as the borrower makes monthly
payments through automatic deductions from his or her checking
or savings account. Approximately 30% of our borrowers currently
participate in this program. In addition, we offer FFELP
consolidation loan borrowers an on-time incentive program that
reduces their interest rates by 1.00% per annum for so long
as they make a specified number of their payments on time and
continue to make subsequent payments on time. Because we have
implemented our on-time payment program only recently, it has
not resulted to date in any reduction in interest income.
We also earn interest income from unrestricted
cash as well as restricted cash held in our special purpose
entities for our asset-backed securitizations.
Interest
expense.
We have three categories
of interest expense: interest on our warehouse facility,
interest on our asset-backed securitizations and interest on our
other debt obligations.
Interest on our warehouse facility is based on
the amount outstanding under the facility plus a fee on unused
capacity under the facility. The amount outstanding under the
warehouse facility is affected by the amount of loans we
originate in such period and the timing of securitizations.
Deferred financing costs associated with the warehouse facility
are amortized using a method that approximates the effective
interest method and are recorded as interest expense.
Interest on our asset-backed securitizations is
based on the principal amount of notes outstanding under the
facilities as well as the method of determining the interest
rate for each securitization tranche. All of our asset-backed
securitizations accrue interest at a variable rate. The rate
varies based upon when the notes were issued, the fixed spread
above an index, the index used and, in certain cases, auction
results. The relative proportion of our asset-back
securitizations that accrue interest based on auction rates and
on fixed spreads above an index will affect our cost of funds.
Broker-dealer fees incurred in connection with the periodic
auction for the auction rate notes are reflected in interest
expense. Deferred financing costs associated with issuing the
asset-backed notes are amortized using a method that
approximates the effective interest method and are recorded as
interest expense.
Interest expense on other obligations relates to
interest expense on items not associated with financing our loan
portfolio.
Net portfolio margin and net interest
income.
In certain interest rate
environments, part of our net portfolio margin includes fixed
rate floor income. Fixed rate floor income is the additional net
portfolio margin we receive as a result of a decline in
short-term interest rates from the rates used to fix the
borrower's rate on a consolidation loan. Fixed rate floor
income represents the amount by which interest income,
determined at the borrower's fixed rate, exceeds the amount
determined using the DOE computed variable rate. As a result of
the decline in short-term interest rates over the last three
years, we have earned fixed rate floor income during the past
three years. Fixed rate floor income is reduced, and can be
eliminated, in a rising interest rate environment. See
"—Net Portfolio Margin Analysis."
Provision for loan
losses.
We record periodic
provisions for loan losses to maintain an allowance for loan
losses which management believes is sufficient to cover probable
losses in the portfolio. The reserve is an estimate based on the
amount of loans subject to the 2% risk sharing, the historical
experience of losses and the delinquency rates on our portfolio.
Moreover, since our portfolio is relatively new, we also review
industry loss data in assessing probabilities of loan default.
The evaluation of the allowance for loan losses
is inherently subjective, as it requires material estimates that
may be subject to significant changes. The provision for loan
losses reflects the periodic income statement charges necessary
to maintain an allowance at a level that our management believes
is adequate to cover probable losses inherent in the loan
portfolio.
Fee Income
Fees on loan
sales.
In our loan origination
segment, we receive fees for selling FFELP consolidation and
private consolidation loan applications to third parties and for
marketing private in-school loans for third parties. We receive
a fixed fee for each completed FFELP application we sell to
third parties.
32
Generally, the amount of the fee is set forth in
forward purchase agreements with third parties which are
negotiated for between one- and three-year terms and apply to an
aggregate number of loan applications sold during each year of
the agreement. We also receive fee income from third parties to
whom we sell completed private consolidation loan applications
and for whom we market private in-school loans. Generally, the
fee is calculated based on a percentage of the funded amount of
the loan. This rate is set forth in agreements with the third
parties which have a term of one year, with respect to private
consolidation loans, and three years, with respect to private
in-school loans, and applies to an aggregate amount of loans
funded each year. We recognize revenue from fees on loan sales
when the loans are funded.
Fees for
servicing.
Since acquiring SunTech
in April 2003, we have received fee income for performing loan
servicing activities for third parties pursuant to servicing
agreements. Servicing fees under these agreements are calculated
based on the number of accounts serviced for each client and
specific activities such as disbursement or filing claims with
guarantee agencies. The fees are billed monthly. The terms of
the agreements vary from one year to the life of the applicable
loan portfolio. The intracompany servicing fees paid to our
servicer for servicing our own portfolio are eliminated in our
consolidated financial statements.
Expenses
The majority of our expenses consist of salaries
and related benefits and marketing expenses. Salaries and
related benefits include expenses related to granting incentive
stock options to our employees, which we expense in accordance
with SFAS No. 123. Marketing expenses include the cost
of direct mail campaigns, postage, list development, collateral
printing, internet marketing, affinity partner fees and school
channel expenditures. The amount of marketing expenses and a
portion of the amount of the salaries and benefits is directly
affected by the scope of our marketing campaigns and the amount
of loans we originate or facilitate for origination by other
lenders. We increased our marketing expenses from
$10.4 million for the first six months of 2003 to
$14.6 million for the final six months of 2003. We expect
that we will incur marketing expenses in 2004 at a rate higher
than the rate at which we incurred marketing expenses for the
second half of 2003. In addition, our expenses include
communications and data processing expenses, professional fees,
management and consulting fees, depreciation and amortization
and other general and administrative expenses. For a description
of certain management and consulting agreements, see
"Certain Relationships and Related Transactions." Our
expenses, primarily our salaries and related benefits and other
general and administrative expenses, increased in 2003 as a
result of our acquisition of SunTech in April 2003. We expect
that our expenses will increase as a result of becoming a public
company.
Debt extinguishment
expenses.
The costs associated
with obtaining financing are generally capitalized and recorded
as deferred financing costs, which are amortized over the life
of the related financing. If we repay the associated financing
prior to its anticipated repayment schedule, we are required to
write off the remaining deferred financing costs, which is
recorded as debt extinguishment expenses.
Derivatives.
In connection with financing our portfolio, we enter into
interest rate swap and cap agreements from time to time.
Generally, these agreements have maturities of no more than
24 months. We record expenses relating to payments we make
under the swaps and caps and mark-to-market gains and losses
based on changes in their fair values from period to period.
These expenses and gains and losses are not reflected as part of
net interest income. See "—Critical Accounting
Policies—Accounting for Derivatives" and note 8
to our consolidated financial statements.
Quarterly Fluctuations
Our quarterly results of operations have varied
in the past and are expected to continue to vary in the future.
A number of factors outside of our control may cause our
quarterly results to fluctuate, including:
•
seasonal patterns affecting loan originations,
    which correspond to an increase in consolidation activity in the
    period prior to, or immediately after, the July 1 borrower
    rate reset in a rising or falling interest rate environment and
    also to the expiration of the six-month grace period or
33
payment of certain loans after graduation, which
    generally falls in December, and a decrease in consolidation
    activity during the rest of the year;
•
the amount and timing of loan sales;
•
the impact of general economic conditions;
•
changes in interest rates; and
•
the introduction of new product offerings.
Results of Operations
For purposes of analyzing the results of
operations, for the year ended December 31, 2002, we have
combined the applicable amounts for the periods prior to, and
after, the date of acquisition by Lightyear.
Year ended December 31, 2003 compared
    to year ended December 31, 2002
Net revenue.
Net revenue was $118.2 million in 2003, a decrease of 0.8%
from net revenue of $119.1 million in 2002. The decrease in
net revenue was primarily the result of a decrease in fees from
loan sales offset by an increase in net interest income, in each
case, as a result of our decision to retain more loans in our
portfolio. Net revenue in 2003 also included servicing fee
income of $9.1 million, due to the acquisition of SunTech.
Net
interest income (expense).
Interest income.
Interest income increased by $35.5 million to
$61.8 million in 2003 compared to $26.3 million in
2002. This increase was the result of an increase in the average
balance of loans in our portfolio, which grew to
$1.6 billion in 2003 from $489.3 million in 2002, as
we continued to retain a greater portion of the federally
guaranteed consolidation loans we originated. The amount of loan
originations retained increased to $2.0 billion in 2003
from $824.3 million in 2002. The impact of our increased
portfolio was partially offset by changes in interest rates and
in the pricing characteristics of our loan assets. The average
yield on our loan portfolio decreased to 4.77% in 2003 from
5.79% in 2002 due to the addition of consolidation loans
originated with a fixed rate in the lower interest rate
environment during 2003. Amortization of the fair market value
adjustment of the loan portfolio from the Lightyear acquisition
increased $0.4 million, or 80%, to $0.9 million in
2003 compared to $0.5 million in 2002, due to the timing of
the acquisition. Interest income on restricted cash decreased
$1.2 million, or 29.3%, to $2.9 million in 2003
compared to $4.1 million in 2002 due to a decrease in the
amount of restricted cash and lower interest rates. The decline
in restricted cash was the result of more efficient transactions
where funds from asset-backed securitizations were more quickly
invested in loans. Other interest income increased
$0.5 million to $0.7 million in 2003 compared to
$0.2 million in 2002.
Interest expense.
Interest expense increased by $13.9 million, or 53.5%, to
$39.9 million in 2003 from $26.0 million in 2002. Our
average debt balance under our warehouse and asset-backed
securitizations increased by $1.2 billion to
$2.0 billion in 2003 from $758.0 million in 2002.
Interest expense on this debt increased $13.1 million, or
78.9%, to $29.7 million in 2003 compared to
$16.6 million in 2002. The reduction in short-term interest
rates, together with a reduction in the portion of asset-backed
securitizations funded with auction rate notes, decreased our
average cost of funds to 1.53% in 2003 from 2.22% in 2002.
Interest expense on other indebtedness increased to
$10.2 million in 2003 compared to $9.4 million in
2002, primarily as a result of having higher average outstanding
other indebtedness for the full year because our senior notes
issued in the acquisition by Lightyear were outstanding for a
longer period in 2003 as compared to 2002. In October 2003, we
entered into a revolving line of credit and drew
$40.0 million to repay our senior notes. As a result, our
other outstanding indebtedness and capital lease obligations
were reduced from $108.6 million to $42.4 million in
October 2003. The new revolving line of credit was at a
substantially lower interest rate than the senior notes.
Provision for loan
losses.
The provision for loan losses
for loans in our portfolio increased $0.4 million, or
20.0%, to $2.4 million in 2003 compared to
$2.0 million in 2002. The increase resulted from the
increased loan balance, partially offset by a reduction in the
estimated amount of loans expected to default. After giving
effect to the provision for loan losses and the activity in the
allowance for loan
34
losses in 2003, our allowance for loan losses as
a percentage of outstanding loans at year end decreased to 0.14%
in 2003 from 0.20% in 2002.
Net portfolio margin and net interest income
(expense) after provision for loan
losses.
Net portfolio margin increased
to 1.62% in 2003 from 1.27% in 2002 due to lower rates of
interest on indebtedness used to finance our portfolio. As a
result of the foregoing, net interest income after provision for
loan losses increased by $21.4 million to
$19.6 million in 2003 compared to net interest expense
after provision for loan losses of $1.8 million in 2002.
Fee income.
Fees on loan sales.
Fees on loan sales decreased to $89.5 million in 2003 from
$120.8 million in 2002, primarily reflecting the lower
percentage of loans originated which were sold to third parties.
The amount of loans originated that were sold to, or marketed
for, third parties declined to $2.2 billion in 2003 from
$3.2 billion in 2002. Included in our fees on loan sales
were fees for marketing private in-school loans, which increased
to $5.3 million in 2003 from no such fees in 2002. This
increase primarily reflected the launch in May 2003 of our
program for private loan products targeted at in-school students.
Fees for servicing.
We generated $9.1 million in loan servicing fees on a
consolidated basis for the period from April through
December 31, 2003 compared to none in 2002, the year prior
to our acquisition of SunTech. On a separate segment basis, we
recorded loan servicing fees for 2003 of $11.8 million,
including $2.7 million from the servicing of loans in our
portfolio. As of December 31, 2003 SunTech serviced
$8.9 billion of loans, an increase of 22.0% from the amount
of loans serviced at the close of the transaction earlier in the
year.
Expenses.
Total expenses increased $37.8 million, or 46.2%, to
$119.6 million in 2003 compared to $81.8 million in
2002, primarily as a result of increased marketing expenses and
the acquisition of SunTech. See note 20 to our consolidated
financial statement for expenses on a segment basis.
Salaries and benefits increased
$7.2 million, or 15.2%, to $54.6 million in 2003
compared to $47.4 million in 2002, including salaries and
benefits in our loan servicing segment which increased by
$6.3 million, as a result of the SunTech acquisition.
Salaries and benefits increased in our loan origination segment
by $0.9 million as a result of the expansion of our sales
force and increased health care costs, although we also had a
reduction in other headcount in 2003.
Marketing expenses increased $11.2 million,
or 81.2%, to $25.0 million in 2003 compared to
$13.8 million in 2002 due to an increase in marketing
activities across all our product lines, including an increased
focus on marketing private loans. In addition, in anticipation
of the effects that the national "do not call" list
introduced in September 2003 would have on certain of our
marketing activities, we increased our marketing efforts in the
second half of 2003. Fees to affinity partners also increased as
we gained additional volume through this channel.
Communications and data processing expense
increased $0.6 million, or 9.4%, in 2003 compared to 2002
primarily due to the acquisition of SunTech, offset in part by a
reduction in rates for these services. Management and consulting
fees decreased to $3.3 million in 2003 from
$4.1 million in 2002 primarily as a result of the
expiration of certain consulting agreements relating to the
Lightyear acquisition offset by new consulting agreements
relating to the SunTech acquisition. Professional fees increased
$4.1 million to $6.3 million in 2003 compared to
$2.2 million in 2002 as a result of the engagement of
consultants for projects and pursuing acquisition opportunities.
Other general and administrative expenses increased
$2.9 million, or 53.7%, in 2003 compared to 2002 as a
result of increased travel, franchise taxes and corporate
insurance. Depreciation and amortization increased
$2.3 million to $4.3 million in 2003 compared to
$2.0 million in 2002, primarily as a result of the
acquisition of additional computer equipment, other property and
software in 2003, including $0.5 million of amortization of
servicing rights related to the SunTech acquisition.
In connection with the repayment of our senior
notes in 2003, we incurred non-cash debt extinguishment expenses
of $4.8 million. We did not incur any debt extinguishment
expenses in 2002.
35
In 2003, in connection with the financing of our
portfolio we entered into interest rate swaps and an interest
rate cap that resulted in swap interest expense of
$3.4 million and a derivative mark-to-market expense of
$1.9 million. We had no derivatives in 2002.
Income tax expense
(benefit).
Income tax expense
decreased by $10.9 million to a benefit of
$0.2 million in 2003 compared to an expense of
$10.7 million for the nearly seven months we operated as a
taxable corporation in 2002 due to the decrease in income before
taxes in 2003. Our effective tax rate was negative 14.1% for
2003 compared to 40.8% for the nearly seven months we operated
as a taxable corporation in 2002. Included in our net loss for
2003 were non-deductible expenses, which caused our 2003
effective tax rate to be at a rate below the statutory rate.
Because we operated as a limited liability company prior to May,
2002, we had no income tax expense for the period prior to
May 17, 2002.
Net income
(loss).
Net income (loss)
decreased to a net loss of $7.5 million for 2003 from net
income of $23.6 million for 2002, primarily as a result of
our decision to retain more loans in our portfolio, the increase
in marketing expenses and the change in tax status. This was
partially offset by the addition of income from our acquisition
of SunTech and the other factors described above.
Year ended
December 31, 2002 compared to year ended December 31,
2001
Net revenue.
Net revenue was $119.1 million in 2002, a decrease of 8.8%
from net revenue of $130.6 million in 2001. The decrease in
net revenue was primarily the result of a decrease in fees from
loan sales offset by an increase in net interest income, in each
case, as a result of our decision to retain more loans in our
portfolio.
Net interest income (expense).
Interest income.
Interest income increased to $26.3 million in 2002 compared
to $1.6 million in 2001. This increase was the result of
our decision to retain in our portfolio a percentage of the
loans we originate. During 2002, we increased the average
balance of loans in our portfolio to $489.3 million from
$11.6 million in 2001 by retaining $824.3 million of
loan originations in 2002. This increase was partially offset by
changes in the interest rates and in the pricing characteristics
of our loan assets. The average yield on our loan portfolio was
5.79% in 2002 compared to 6.02% in 2001 due to the addition of
consolidation loans originated with a fixed rate in the lower
interest rate environment during 2002. Amortization of the fair
market value adjustment of the loan portfolio from the Lightyear
acquisition was $0.5 million in 2002 compared to $0 in
2001, due to the timing of the acquisition. Interest income on
restricted cash increased to $4.1 million in 2002 compared
to $0.7 million in 2001, due to an increase in restricted
cash as a result of our asset-backed financings. Other interest
income was $0.2 million in both 2002 and 2001.
Interest expense.
Interest expense increased to $26.0 million in 2002,
compared to $2.6 million in 2001. Our asset-backed
securitizations increased $500.0 million to
$1,027.2 million at December 31, 2002 from
$527.2 million at December 31, 2001. Interest expense
on this debt incurred to finance our portfolio of loans
increased $14.1 million to $16.6 million in 2002
compared to $2.5 million in 2001. The reduction in
short-term interest rates decreased our average cost of funds to
2.22% in 2002 from 3.05% in 2001. Interest expense on other debt
increased $9.3 million to $9.4 million in 2002
compared to $0.1 million in 2001, as a result of the debt
we incurred in connection with the acquisition of CFS.
Provision for loan
losses.
The provision for loan losses
for loans in our portfolio increased to $2.0 million for
2002 from no provision in 2001. Our allowance for loan losses as
a percentage of outstanding loans at year end was 0.2% in 2002.
Net interest income (expense) after
provision for loan losses.
As a result
of the foregoing, net interest expense after provision for loan
losses increased by $0.9 million to $1.8 million in
2002 compared to $0.9 million in 2001.
Fee income.
Fees on loan sales.
Fees on loan sales decreased to $120.8 million in 2002 from
$131.6 million in 2001, primarily reflecting the lower
percentage of loans originated which were sold to third parties.
The
36
amount of loans originated that were sold or
marketed for third parties declined to $3.2 billion in 2002
from $3.5 billion in 2001.
Servicing fees.
We
generated no servicing fee income in 2002 or 2001.
Expenses.
Total expenses increased $13.0 million, or 18.9%, to
$81.8 million in 2002 compared to $68.8 million in
2001, primarily as a result of an increase in salaries and
benefits as well as communications and data processing.
Salaries and benefits increased
$6.5 million, or 15.9%, to $47.4 million in 2002
compared to $40.9 million in 2001. The increase in salaries
and benefits is due to an expansion of our sales force and
increased health care costs.
Marketing expenses increased $1.4 million,
or 11.3%, to $13.8 million in 2002 compared to
$12.4 million in 2001 due to an increase in consolidation
loan marketing activities.
Communications and data processing expenses
increased $4.5 million to $6.9 million in 2002
compared to $2.4 million in 2001 due to the expansion of
our telemarketing efforts. Management and consulting fees
decreased to $4.1 million in 2002 from $6.7 million in
2001 primarily as a result of decreased management fees paid to
our previous owners. Professional fees increased
$1.5 million in 2002 compared to 2001 as a result of
additional legal and accounting fees primarily associated with
additional entities created in conjunction with our asset-backed
securitizations. Other general and administrative expenses
increased $0.7 million, or 14.9%, to $5.4 million in
2002 compared to $4.7 million in 2001 as a result of
increased travel and corporate insurance. Depreciation and
amortization increased $0.9 million, or 81.8%, to
$2.0 million in 2002 compared to $1.1 million in 2001.
This increase can be attributed to increased depreciation and
amortization of computer equipment, equipment, furniture,
leasehold improvements and software in 2002 compared to 2001.
Income tax
expense.
Income tax expense
increased to $10.7 million for 2002 compared to no income
tax expense in 2001 due to the change from an LLC to a taxable
corporation in May 2002. Our effective tax rate was 40.8% for
the seven months we operated as a taxable corporation in 2002.
Because we operated as an LLC prior to the acquisition by
Lightyear, we had no tax expense in 2001, rather the LLC members
paid taxes on their share of taxable income.
Net income.
Net income decreased to $23.6 million for 2002 from
$61.8 million for 2001, primarily as a result of our
decision to retain more loans in our portfolio and the change in
tax status.
Financial Condition
Total assets increased by $2.0 billion to
$3.2 billion at December 31, 2003 from
$1.2 billion at December 31, 2002. This was due to an
increase in our loan portfolio of approximately
$1.9 billion, to $2.9 billion at December 31,
2003 from $973.1 million at December 31, 2002. All of
the loans in our portfolio are FFELP loans and over 99% are
consolidation loans.
Total liabilities increased by $1.9 billion
to $3.1 billion at December 31, 2003 from
$1.2 billion at December 31, 2002. This growth in
liabilities was a result of an increase in debt incurred to
finance our loan portfolio.
Preferred stock of our consolidated subsidiary
increased by $38.8 million to $89.1 million at
December 31, 2003 from $50.3 million at
December 31, 2002 as a result of the issuance of additional
preferred stock in 2003 to raise funds to acquire SunTech and to
repay indebtedness and of the accretion of dividends on the
preferred stock of $6.3 million for 2003.
Stockholders' equity increased by
$1.0 million to $25.2 million at December 31,
2003 from $24.2 million at December 31, 2002 primarily
as a result of the issuance of additional shares of common stock
for cash and the conversion of notes into common stock during
the year. This increase was offset by the net loss for 2003.
37
Liquidity and Capital Resources
We finance our operations through operating cash
flow and borrowings under a warehouse facility, asset-backed
securitizations and a revolving line of credit. Operating
activities provided net cash of $20.8 million in 2003, a
decrease of $13.1 million from the net cash provided by
operating activities of $33.9 million in 2002. The primary
reason for this decrease was the change in our business strategy
from selling substantially all of our FFELP loans to third
parties for fee income to retaining a significant percentage of
our FFELP loan originations in our portfolio and funding this
growth through secured financing arrangements, primarily
asset-backed securitizations. Net cash used in investing
activities increased to $1,908.6 million in 2003 from
$985.2 million in 2002 primarily as a result of the
increase in size of our retained portfolio. Net cash provided by
financing activities increased to $1,869.8 million in 2003
from $976.7 million in 2002, primarily as a result of the
increased financing for our retained portfolio. We believe that
the use of our warehousing capacity, continued access to the
asset-backed securitization market and forward purchase
agreements will provide adequate liquidity to fund our
operations, loan processing and originations and capital
expenditures for the foreseeable future.
On October 30, 2003, we obtained a
three-year $45.0 million revolving credit facility from two
national financial institutions. The amount of the facility was
reduced by $3.75 million on December 31, 2003 and will
be reduced by an additional $3.75 million at the end of
each fiscal quarter going forward until the expiration date in
September, 2006. The revolving line of credit bears interest,
payable quarterly, at LIBOR plus 3.50%. We are also required to
pay a commitment fee of 0.50% on undrawn amounts under the
facility. The facility is secured by substantially all of our
non-student loan assets, including the outstanding capital stock
or membership interests of certain of our subsidiaries. The
credit facility contains certain mandatory prepayment and
commitment reduction provisions and event of default provisions
relating to a change of control, as well as restrictions
concerning the payment of dividends, incurrence of additional
debt and capital expenditures. In addition, we are subject to,
and in compliance with, certain financial covenants including
ratios related to fixed charges coverage, interest coverage and
leverage. Collegiate Funding Services, Inc. and certain of our
subsidiaries have guaranteed all of our obligations under the
credit agreement. We drew $40.0 million initially under the
facility to retire a portion of the senior notes that had been
issued to help finance our acquisition by Lightyear in May,
2002. As of December 31, 2003, approximately
$26.3 million was outstanding on this revolving line of
credit. Upon completion of this offering, we intend to use a
portion of the net proceeds to repay any indebtedness
outstanding under the revolving line of credit.
In July, 2003, we obtained a one-year
$500.0 million conduit warehouse financing facility,
through a special purpose company, to fund our loan
originations. In February, 2004, the facility was temporarily
expanded to $1.0 billion through May, 2004, at which time
it will return to a $500.0 million capacity. The ability to
draw on the facility expires in July, 2004 unless extended. It
must be repaid in full by July, 2006 unless extended. The
warehouse facility is provided by a commercial paper conduit
with liquidity support provided by a national financial
institution. We use the warehouse facility to fund our loan
originations until such time as we accumulate sufficient loans
to effectively access the asset-backed securitization market.
The facility is secured by our portfolio of loans financed under
the facility. The interest rate on funds advanced by the conduit
lender is calculated based on the commercial paper rate plus a
margin and for funds advanced by the liquidity provider at the
Eurodollar rate plus 1.0% or the alternate base rate. The
interest rate on amounts outstanding under the warehouse
facility on December 31, 2003 was 1.52%. In addition we pay
a fee of 0.15% per annum on the unused portion of the
facility. As of December 31, 2003, $144.8 million was
outstanding under our warehouse facility. The conduit facility
contains certain affirmative and negative covenants as well as
reporting requirements and covenants relating to loan servicing.
The affirmative covenants require us to, among other things,
preserve the federal guarantee on our FFELP loan portfolio. An
event of default under the conduit facility will occur if, among
other things, the federal guarantee on FFELP loans is reduced,
the excess spread on the loans in our portfolio drops below a
certain rate or the default rate of loans in our portfolio
exceeds a certain percentage.
During 2003 and 2002, we issued $1.9 billion
and $500.0 million, respectively, of asset-backed
securities. These secured financings were issued primarily in
the domestic capital markets and are secured
38
by separate pools of FFELP loans. Securities
issued in our securitizations accrue interest based on a rate of
a spread to LIBOR or set under an auction procedure related to
the securities. As part of our securitization transactions, we
borrowed funds in excess of the principal balance of the loans
included in the applicable securitization transactions. A
portion of these additional funds was used to repay our other
indebtedness and fund our operations. We are also entitled to
receive excess spread from the securitization in the future,
subject to compliance with certain conditions, generally after
the principal balance of the loans and restricted cash held in
the securitization vehicles equals the outstanding indebtedness.
Our access to excess spread may also be affected by the amount
of loans in our portfolio in grace or deferment status or with
respect to which we have granted forbearance and the level of
delinquencies. As of December 31, 2003 we had not received
any excess spread under any securitization. In 2003, we made
$45.9 million in principal payments and in 2002, we made no
principal payments on our asset-backed securitizations. At
December 31, 2003 and 2002, we held $105.4 million and
$41.6 million, respectively, of restricted cash, including
reserves, in the securitization entities. We anticipate
continuing to access the domestic asset-backed securitization
market in 2004 and subsequent years. The timing of future
issuances will depend on market conditions.
On May 17, 2002, in connection with our
acquisition by Lightyear and its affiliates, CFSL Acquisition
Corp. issued a 4.47% subordinated note, due June 30,
2007, in the principal amount of $15.0 million to the
previous owners of the Company. The note may be redeemed at any
time at the option of the Company, and must be redeemed in the
event of a change of control of the Company.
The following tables summarize our indebtedness
and capital leases outstanding as of December 31, 2003 and
2002:
As of December 31, 2003
Principal
Percent
Interest
amount
of total
rate range
Final maturity
(2)
(dollars in millions)
Warehouse facility
$
144.8
4.7
%
1.52%
07/20/04 - 07/18/06
(3)
Asset-backed notes:
(1)
Notes based on LIBOR
897.1
29.5
1.23% - 1.47%
03/01/12 - 03/28/21
Notes based on auction rates
1,959.0
64.4
1.18% - 1.33%
12/01/41 - 12/01/43
Total asset-backed notes and warehouse facility
3,000.9
98.6
Revolving line of credit
26.3
0.8
4.62%
09/30/06
Fixed-rate notes
14.2
(4)
0.5
4.47%
06/30/07
Fixed-rate capital leases
1.9
0.1
6.34% - 7.82%
04/01/08
Convertible notes
—
—
Total
$
3,043.3
100.0
%
39
As of December 31, 2002
Principal
Percent
Interest
amount
of total
rate range
Final maturity
(2)
(dollars in millions)
Warehouse facility
$
—
—
%
Asset-backed notes:
(1)
Notes based on LIBOR
—
—
Notes based on auction rates
1,027.2
90.4
1.58% - 1.67%
12/01/41 - 07/01/42
Total asset-backed notes and warehouse facility
1,027.2
90.4
Revolving line of credit
—
—
Fixed-rate notes
103.6
(4)
9.1
4.47% - 11.00%
03/31/07 - 06/30/07
Fixed-rate capital leases
—
—
Convertible notes
5.0
0.5
8.00%
04/30/04
Total
$
1,135.8
100.0
%
(1)
Issued in securitization transactions.
(2)
The final maturity date is the stated legal
    maturity of the applicable class of notes. However, the
    principal of the notes is paid based on the receipt of principal
    payments under the applicable pools of loans and is expected to
    be paid prior to the final maturity date.
(3)
The warehouse facility may be drawn upon to
    July 20, 2004, unless it is extended, and must be repaid by
    July 18, 2006.
(4)
Balances are net of unamortized discount of
    $0.8 million and $5.2 million as of December 31,
    2003 and 2002, respectively.
Payments on outstanding indebtedness and capital
and operating lease obligations are due after December 31,
2003 in varying amounts as follows:
Total
<1 year
1 - 3 years
4 - 5 years
> 5 years
(dollars in millions)
Warehouse facility
$
144.8
$
144.8
$
—
$
—
$
—
Asset-backed notes
(1)
2,856.1
—
—
—
2,856.1
Other indebtedness
40.5
14.8
10.8
14.9
—
Capital lease obligations
1.9
0.4
0.9
0.6
—
Operating lease obligations
4.6
1.9
2.1
0.6
—
Total
$
3,047.9
$
161.9
$
13.8
$
16.1
$
2,856.1
(1)
Principal on our asset-backed notes will be paid
    based on receipt of principal payments under the applicable
    pools of loans and is expected to be paid prior to final
    maturity date of the notes.
In addition, we have forward purchase agreements
under which we are obligated to sell a minimum amount of FFELP
loans, refer a minimum of private in-school loan applications
and sell all of the private consolidation loan applications we
originate. These commitments generally run for between one and
three years. As of December 31, 2003, 2002 and 2001, we
were obligated to sell $1.2 billion, $606.0 million
and $600.0 million, respectively, in loan applications at
contractual rates under various agreements through
December 31, 2004. See "Business—Products and
Service Offerings."
40
Loan Portfolio
The table below describes the components of our
loan portfolio as of December 31, 2003, 2002 and 2001:
As of December 31,
2003
2002
2001
Weighted
Weighted
Weighted
average
average
average
Percent
maturity
Percent
maturity
Percent
maturity
Principal
(1)
of total
(yrs)
Principal
(1)
of total
(yrs)
Principal
(1)
of total
(yrs)
(dollars in millions)
FFELP loans:
Consolidation
$
2,830.9
99.9
%
22.8
$
960.4
99.8
%
23.1
$
150.0
100.0
%
21.7
PLUS
2.9
0.1
9.2
2.1
0.2
9.8
—
—
—
Stafford
0.3
—
13.9
—
—
—
—
—
—
Total
$
2,834.1
100.0
%
22.8
$
962.5
100.0
%
23.1
$
150.0
100.0
%
21.7
(1)
Amounts reflect principal balance of loans
    without adjustments for deferred loan costs which, as of
    December 31, 2003, 2002 and 2001, totaled
    $26.4 million, $12.5 million and $1.0 million,
    respectively. Amounts also exclude the allowance for loan losses
    of $4.1 million, $1.9 million and $0 as of
    December 31, 2003, 2002 and 2001, respectively.
The table below shows the repayment status of
loans and delinquency amounts as of December 31, 2003, 2002
and 2001. Delinquencies have the potential to adversely impact
our earnings through increased servicing and collection costs
and write-offs.
As of December 31,
2003
2002
2001
Percent
Percent
Percent
Percent
Percent
Percent
of
of
of
of
of
of
total
loans
total
loans
total
loans
loan
in
loan
in
loan
in
Principal
(1)
portfolio
repayment
Principal
(1)
portfolio
repayment
Principal
(1)
portfolio
repayment
(dollars in millions)
Loan portfolio:
Loans in school/ grace/ deferment
(2)
$
275.7
9.7
%
$
78.8
8.2
%
$
0.1
0.1
%
Loans in forbearance
(3)
167.4
5.9
58.8
6.1
1.1
0.7
Loans in repayment status:
Current
2,276.7
80.3
95.2
%
780.6
81.1
94.6
%
148.8
99.2
100.0
%
Delinquent 31-60 days
(4)
54.0
1.9
2.3
18.0
1.9
2.2
—
—
—
Delinquent 61-90 days
21.4
0.8
0.9
8.2
0.8
1.0
—
—
—
Delinquent over 90 days
(5)
38.9
1.4
1.6
18.1
1.9
2.2
—
—
—
Total loans in repayment
2,391.0
84.4
100.0
%
824.9
85.7
100.0
%
148.8
99.2
100.0
%
Total loan portfolio
$
2,834.1
100.0
%
$
962.5
100.0
%
$
150.0
100.0
%
(1)
Amounts reflect principal balance of loans
    without adjustments for deferred loan costs, which, as of
    December 31, 2003, 2002 and 2001, totaled
    $26.4 million, $12.5 million and $1.0 million,
    respectively. Amounts also do not reflect the allowance for loan
    losses of $4.1 million, $1.9 million and $0 as of
    December 31, 2003, 2002 and 2001, respectively.
(2)
Loans for borrowers who still may be attending
    school or engaging in other permitted educational activities and
    are not yet required to make payments on the loans, e.g.,
    residency periods for medical students or a grace period for bar
    exam preparation.
(3)
Loans for borrowers who have temporarily ceased
    making full payments due to hardship or other factors, according
    to a schedule approved by the servicer consistent with the
    established loan program servicing procedures and policies.
(4)
The period of delinquency is based on the number
    of days scheduled payments are contractually past due and relate
    to loans in repayment status, that is, receivables not charged
    off, and not in school, grace, deferment or forbearance.
(5)
Includes loans in claim status, which are loans
    that are over 270 days past due which have gone into
    default and have been submitted to the guaranty agency for FFELP
    loans to process the claim for payment.
41
Net Portfolio Margin Analysis
The following table sets forth the net portfolio
margin and average loans and restricted cash for the period
indicated. This table represents the margin on the assets
associated with our portfolio, specifically loans and restricted
cash, earned over the cost of funding the assets.
Year ended December 31,
2003
2002
2001
(dollars in thousands)
Loan and restricted cash yield
4.18
%
4.34
%
1.78
%
DOE rebate
(1)
(0.91
)
(0.72
)
(0.16
)
Amortization
(2)
(0.12
)
(0.13
)
(0.01
)
Net loan and restricted cash yield
3.15
3.49
1.61
Asset-backed notes and lines of credit cost of
    funds
(1.53
)
(2.22
)
(3.05
)
Net portfolio margin
1.62
%
1.27
%
(1.44
)%
Average loans and restricted cash
$
1,940,400
$
747,891
$
80,549
(1)
Reflects the 1.05% per annum rebate fee on FFELP
    consolidation loans.
(2)
Represents the amortization of capitalized
    origination costs and purchase accounting adjustments, including
    the 0.50% fee payable to the DOE on the origination of FFELP
    loans.
Interest Rate Risk
Because we expect to generate a significant
portion of our earnings from the difference, or spread, between
the yield we receive on our loan portfolio of student loans and
the cost of financing these loans, our results of operations are
sensitive to interest rates. We fund our loan portfolio with
variable-rate debt. In the current low interest rate
environment, our loan portfolio is yielding excess income
primarily due to the reduction in interest rates on the
variable-rate liabilities funding loans from the fixed borrower
rate. See "Risk Factors."
Therefore, absent utilizing derivative
instruments, in a low interest rate environment, a rise in
interest rates will have an adverse effect on our earnings and
fair values. In higher interest rate environments, where the
interest rate rises above the borrower rate and the fixed-rate
loans become variable rate and are effectively matched with
variable-rate debt, the impact of rate fluctuations is
substantially reduced.
One objective when financing our loan portfolio
is to manage interest rate risk through:
•
match-funding of loan assets with associated
    secured borrowings and
•
utilizing interest rate swaps and other
    derivative instruments (described below) to minimize the adverse
    effect of interest rate fluctuations in the short term.
During 2003, we entered into certain derivative
instrument contracts to help manage our interest rate risk. The
table below summarizes the derivative instruments to which we
were a party at December 31, 2003:
Notional
Pay-
Receive-
Maturity
Fair
Derivative type
amount
fixed rate
floating rate
date
value
(3)
(dollars in thousands)
Swap
(1)
$
500,000
1.89
%
3-month LIBOR
1/26/2005
$
(2,070
)
Swap
(1)
225,000
1.64
3-month LIBOR
11/26/2004
(606
)
Swap
(1)
225,000
1.64
3-month LIBOR
11/26/2004
(606
)
Cap (sold)
500,000
—
(2)
1/26/2005
(328
)
Total
$
(3,610
)
(1)
Under the interest rate swaps, we agree to pay a
    fixed rate in exchange for a floating rate. The interest rate
    swap effectively converts a portion of our variable-rate debt to
    a fixed rate for a period of time thereby fixing the relative
    spread between a portion of our loan assets equal to the size of
    the swap notional amount.
(2)
The Company received $1.7 million in
    proceeds from the sale of the cap on February 28, 2003. The
    amount is recorded as a derivative liability and is marked to
    market over the term of the cap. Payments on the cap will be
    made only when the 91-day commercial paper rate exceeds 2.09%.
(3)
Reflects the value to the Company of the interest
    rate swaps and the cap assuming the applicable swap or cap was
    terminated as of December 31, 2003.
42
We have not designated any of these derivative
instruments to meet the criteria for hedge accounting. See
"—Critical Accounting Policies— Accounting for
Derivatives."
Interest rate sensitivity refers to the change in
earnings that may result from the changes in the level of
interest rates. Our net interest income is affected by changes
in various interest rates, including LIBOR and the commercial
paper rate. While the FFELP consolidation loan borrower pays a
fixed rate of interest, the yield we receive is the higher of
the fixed rate or a floating rate according to the terms of FFEL
Program. For FFELP consolidation loans currently in our
portfolio, the floating rate is 2.64% over the 91-day financial
commercial paper rate. Substantially all interest costs on our
debt obligations are determined based upon variable rates based
upon LIBOR, commercial paper or the result of auctions. As a
result of the decline in short-term interest rates over the last
three years, we have earned fixed rate floor income during the
past three years. Fixed rate floor income is reduced and can be
eliminated in a rising interest rate environment.
The following table shows the estimated change in
net interest income for a 12-month period based on an increase
or decrease in interest rates on January 1, 2004 which is
maintained for the entire year applied to our interest-earning
assets and interest-bearing liabilities as of December 31,
2003 and assuming normal portfolio payment patterns for 2004:
Estimated change in net interest income
over 12 months
Rate change (basis points)
(dollars in millions)
-100
$
22.4
+100
(14.5
)
+200
(22.2
)
We hold four derivative contracts to help
mitigate the economic impact of changing interest rates. Because
the derivatives are not accounted for as accounting hedges under
SFAS No. 133, we present their effect in a separate line
item, swap interest expense, in the income statement. Under our
existing swaps and cap, a decrease of 100 basis points, an
increase of 100 basis points and an increase of
200 basis points would have the effect of increasing
(decreasing) swap interest expense by $8.0 million,
$(8.0) million, and $(11.6) million, respectively.
Critical Accounting Policies
This Management's Discussion and Analysis of
Financial Condition and Results of Operations discusses our
consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the
United States of America, or GAAP. The preparation of these
financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and the reported amounts of income and expenses
during the reporting periods. We base our estimates and
judgments on historical experience and on various other factors
that we believe are reasonable under the circumstances. Actual
results may differ from these estimates under varying
assumptions or conditions. Note 2 of the notes to
consolidated financial statements includes a summary of the
significant accounting policies and methods used in the
preparation of our consolidated financial statements.
On an on-going basis, management evaluates its
estimates and judgments, particularly as they relate to
accounting policies that management believes are most
"critical"— that is, they are most important to
the portrayal of our financial condition and results of
operations and they require management's most difficult,
subjective or complex judgments, often as a result of the need
to make estimates about the effect of matters that are
inherently uncertain. These accounting policies include
accounting for derivatives, determining the level of the
allowance for loan losses and accounting for business
combinations and goodwill.
Accounting
for derivatives
We account for derivative and certain financial
instruments in accordance with SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities,
which requires that every derivative instrument, including
certain derivative instruments embedded in other contracts, be
recorded at fair value on the balance sheet as either an asset
or liability.
43
SFAS No. 133 requires that changes in
the fair value of derivative instruments be recognized currently
in earnings unless specific hedge accounting criteria as
specified by SFAS No. 133 are met. We believe that our
derivatives are effective economic hedges and they are a
critical element of our interest rate risk management strategy.
However, our derivative instruments do not meet the criteria to
qualify for hedge accounting pursuant to SFAS No. 133,
and therefore the Company records changes in their value as
derivative mark-to-market expense on the statement of income.
The impact of the cash payments and accruals are reported as
swap interest expense on the statement of income. The fair value
of the derivatives is included with other accrued liabilities on
the balance sheet. There were no derivatives outstanding at
December 31, 2002.
Allowance
for loan losses
The allowance for loan losses represents
management's estimate of probable losses on loans as of the
reporting date. This evaluation process is conducted
periodically and is subject to numerous estimates and judgments.
In making such estimates and judgments, management considers
such things as the general characteristics of loans outstanding,
including guarantees of at least 98% of the loan principal
balance, past loan loss experience of our loan portfolio,
changes to the Higher Education Act and general economic
conditions. Historical payment (e.g., delinquency) experience is
also considered when reviewing the current aging of the
portfolio, together with analyses that reflect current trends
and conditions. Moreover, since our portfolio is relatively new,
we also survey the loan loss information and portfolio trends of
other FFELP holders. The allowance is maintained at a level
management believes is adequate to provide for estimated
probable credit losses inherent in the loan portfolio. This
evaluation is inherently subjective, as it requires estimates
that may be susceptible to significant changes.
Business
combinations and goodwill
Our predecessor was acquired in a business
combination by CFS. We acquired SunTech in April 2003. We may
make additional acquisitions in the future. We follow the
guidance in SFAS No. 141, Business Combinations, in
accounting for business combinations. The standard requires that
the purchase price of a business be allocated to assets and
liabilities at their fair values, with any unallocated purchase
price being attributed to goodwill. Certain judgments and
estimates are required in the fair value measurement, for
example in our acquisition of SunTech we recorded fair value
adjustments to certain servicing rights and a servicing system.
In both the Lightyear acquisition of us and the acquisition of
SunTech, the majority of the purchase price was allocated to
goodwill. We had $160.7 million in goodwill at
December 31, 2003.
SFAS No. 142 is the standard we follow in
our accounting for goodwill. The standard requires that the we
perform annual impairment tests of our goodwill. The goodwill
impairment test is a two-step process. The first step is to make
an estimate of the fair value of each reporting unit and to
compare the valuation to the carrying values, including the
goodwill. We have used third parties to derive estimates of the
fair values used in our assessments. The result of our first
step has been that fair value exceeds the carrying amount of the
assets, thus there has been no impairment of any our goodwill
and we are not required to perform the step two computation of
the amount of impairment. We will continue to perform the
impairment assessment each year.
Recent Accounting Pronouncements
Consolidation of variable interest
    entities
In January 2003, the FASB issued FIN No. 46,
Consolidation of Variable Interest Entities. FIN No. 46
clarifies the application of Accounting Research Bulletin
No. 51, Consolidated Financial Statements, to certain
entities in which equity investors do not have the
characteristics of a controlling financial interest or do not
have sufficient equity at risk for the entity to finance its
activities without additional subordinated financial support
from other parties, which are referred to as variable interest
entities. Variable interest entities are required to be
consolidated by their primary beneficiaries. The
44
primary beneficiary of a variable interest entity
is the party that absorbs a majority of the entity's
expected losses, receives a majority of its expected residual
returns, or both, as a result of holding variable interests. FIN
No. 46 also requires new disclosures about variable
interest entities. On October 31, 2003, the FASB issued an
exposure draft of a proposed interpretation modifying
Interpretation No. 46. The proposed clarifications and
modifications would apply to periods ending after
December 31, 2003. We do not believe that FIN No. 46
will have a material effect on our financial position or results
of operations.
Accounting for certain financial instruments
    with characteristics of both liabilities and equity
In May 2003, the FASB issued SFAS No 150,
Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity.
SFAS No. 150 establishes standards for how an issuer
classifies and measures certain financial instruments with
characteristics of both liabilities and equity. It requires that
an issuer classify a financial instrument that is within its
scope as a liability, or an asset in some circumstances.
SFAS No. 150 is effective for financial instruments
entered into or modified after May 31, 2003, and otherwise
is effective at the beginning of the first interim period
beginning after June 15, 2003. We have adopted the standard
effective July 1, 2003. The adoption of
SFAS No. 150 did not have a significant impact on our
financial position or results of operations.
45
INDUSTRY OVERVIEW
The U.S. postsecondary education finance
market is large and growing. According to the DOE, in academic
year 2002-2003, expenditures for postsecondary education totaled
$331.9 billion. The two main drivers of the size and growth
prospects of this market are enrollment population and cost of
attendance. The DOE estimates that college enrollment will grow
to 18 million by 2013, up from an estimated 16 million
in 2003. Between the 1993-1994 and 2003-2004 academic years, the
average amount of tuition and fees, which is the largest
component of the cost of attendance, increased on an
enrollment-weighted and constant-dollar basis by 47% at
four-year public institutions and 42% at four-year private
institutions. During the period from 1993 to 2002, median
household income grew only 11%, on a constant-dollar basis.
Of the $331.9 billion spent on postsecondary
education in academic year 2002-2003, according to the College
Board, $105.1 billion was provided by financial aid. Of
this amount, federal loans represented approximately 46.7%, or
$49.1 billion, and private loans represented approximately
6.6%, or $6.9 billion, while grants, education tax credits,
work study and other education loans made up the balance. The
DOE estimates that federal education loan volume, excluding
consolidation loans, is expected to increase to
$95.2 billion in federal fiscal year 2011. We believe that
a significant portion of the remaining expenditures on
postsecondary education was comprised of other loan products
that are not characterized as traditional education loans.
Education loan consolidation has emerged over the
past few years as an important option for consumers. Federal
consolidation loans allow consumers to refinance and extend the
repayment term of existing education loan debt at a fixed rate
and with a single monthly payment that is generally lower than a
consumer would pay in the aggregate in monthly payments on the
replaced loans. There were $9.5 billion of FFELP
consolidation loans disbursed in federal fiscal year 2001. This
grew to $23.2 billion and $35.3 billion in federal
fiscal year 2002 and 2003, respectively. The DOE, however,
projects that FFELP consolidation loan volume will decrease to
$25.9 billion in federal fiscal year 2004 and to
$22.3 billion in federal fiscal year 2005. Although the DOE
projections are the most widely accepted projections available,
we note that the DOE's projections for following-year FFELP
consolidation loan volumes have underestimated actual
consolidation loan volume in each of federal fiscal year 2003,
2002 and 2001 by $13.6 billion, $8.9 billion and
$2.0 billion, respectively.
According to the College Board, private loan
volume, though small in comparison to federal loan volume, has
grown at a compounded annual rate of 26.8% in constant dollars,
from academic year 1995-1996 through academic year 2002-2003.
Total reported private loan volume reached approximately
$6.9 billion in the 2002-2003 academic year, up from
$1.1 billion in the 1995-1996 academic year. We believe the
growth of the private education loan market reflects an
increasing reliance on supplements to federal loans, under which
the amount that can be borrowed is capped, to bridge the
widening gap between the cost of higher education and the amount
of funding available to pay that cost through federal education
loans. In addition, we believe private education loans are
viewed as convenient and attractive financing alternatives by
the growing number of older non-traditional students who are
more familiar with other consumer finance alternatives.
46
Total Expenditures for Postsecondary Education
(dollars in billions)
Academic years (beginning)
(Source: U.S. Department of Education)
There are three major federal education loan
programs:
The Federal Family Education Loan Program allows
private financial institutions to make loans that are guaranteed
by intermediary guaranty agencies that are, in turn, reinsured
by the federal government. The FFEL Program was originally
created by the Higher Education Act of 1965. The FFEL Program is
the single largest source of college financial assistance in the
United States.
The William D. Ford Federal Direct Student Loan
Program was enacted in 1993 and authorizes the DOE to lend funds
directly to students and parents from the U.S. Treasury for
financial aid purposes.
The Perkins Loan program is a relatively small
program that provides capital to schools to help fund revolving
loan funds the schools can use to make loans to their students
who have exceptional financial need.
Together, the FFEL Program and FDL Program
accounted for 97% of all federal education loan volume in
academic year 2002-2003.
The Federal Family Education Loan
Program
The FFEL Program, the single largest source of
college financial assistance in the United States, is a
public-private partnership where lenders make guaranteed student
loans to students. FFELP loans offer below-market interest rates
and favorable repayment terms to students and parents. The FFEL
Program includes the following types of loans:
Consolidation
loans.
Consolidation loans allow
student and parent borrowers to combine different federal loans
with various repayment schedules into one loan having a term of
up to 30 years. The primary benefits are a fixed interest
rate, a single monthly payment and extended repayment terms. In
federal fiscal year 2003, $35.3 billion of FFELP
consolidation loans were made according to the DOE.
Subsidized Stafford
loans.
Subsidized Stafford loans
have terms of up to 10 years after the borrower leaves
school and are awarded to students on the basis of financial
need. The loans are referred to as subsidized because the
federal government pays the interest that accrues while students
are enrolled, for a six-month grace period after they leave
school and during certain authorized deferment periods. This loan
47
type is the largest component of the FFEL
Program. In federal fiscal year 2003, $17.8 billion in
FFELP subsidized Stafford loans were made, according to the DOE.
Unsubsidized Stafford
loans.
Unsubsidized Stafford loans
have terms of up to 10 years after a borrower leaves school
and are available to all students regardless of financial need.
They offer the same interest rate and six-month grace period as
subsidized Stafford loans, but interest on these loans accrues
while students are in school, grace or deferment. Students may
opt to make interest payments during those periods, or they may
choose to have the interest capitalized so that they pay it when
the loan is in repayment status. In federal fiscal year 2003,
$16.5 billion in FFELP unsubsidized Stafford loans were
made, according to the DOE.
PLUS loans.
PLUS loans have terms of up to 10 years and allow parents
of dependent undergraduate students to borrow up to the total
cost of attendance at a low interest rate. Unlike student
borrowers, parents must pass a credit test to borrow under the
PLUS program. Through this program, parents may borrow up to the
cost of attendance per child, minus financial aid from other
sources. In federal fiscal year 2003, $4.5 billion in FFELP
PLUS loans were made according to the DOE.
The maximum aggregate borrowing by a single
borrower of unsubsidized and subsidized Stafford loans is
$23,000 for a dependent undergraduate student, $46,000 for an
independent undergraduate student and $138,500 for a graduate
student (including undergraduate borrowings).
Lender payment of principal and interest on all
FFELP student loans, including consolidation loans, originated
after October 1, 1993 are 98% guaranteed by guaranty
agencies against default by the borrower. Guaranty agencies are,
in turn, reinsured for up to 95% of their guarantee payments by
the federal government. If the DOE has determined that a
guaranty agency is unable to meet its guarantee obligations, the
loan holder may submit claims directly to the DOE, and the DOE
would be required to pay the full guarantee claim.
Consolidation loans under the Higher Education
Act were not made available until 1986. The consolidation loan
program allows borrowers with existing federal loans to combine
their variable-rate federal education loans into a single loan,
with a fixed rate, to be repaid over a term ranging from 12 to
30 years, depending on the size of the loan. The
consolidation loans are insured and reinsured on a basis similar
to Stafford and PLUS loans. Federal consolidation loans may be
obtained in an amount sufficient to pay outstanding principal,
unpaid interest and late charges on federally insured or
reinsured student loans incurred under the FFEL Program selected
by the borrower, as well as loans made pursuant to the FDL
Program, Perkins and Health Professional Student Loan Programs.
The holder receives a direct payment from the government based
upon a Special Allowance Payment, or SAP, formula. SAPs are
generally paid whenever the average of all of the applicable
floating rates (91-day Treasury bill, commercial paper, 52-week
Treasury bill, or the constant maturity Treasury rate) in a
calendar quarter, plus a spread of between 1.70% and 3.50%
(depending on the loan status and origination date) exceeds the
rate of interest which the borrower is obligated to pay. Lenders
are required to pay the DOE a one-time 0.50% fee on origination
of consolidation, Stafford and PLUS loans. The holder is
required to pay an annual fee to the DOE of 1.05% on
consolidation loans it holds.
The interest rate paid by a student on a
consolidation loan is fixed at a rate equal to the weighted
average of the interest rates on the loans retired, rounded up
one-eighth of one percent, not to exceed 8.25% per annum.
Once a student consolidates his or her loans, the rate
determined at that point is fixed to the borrower for the life
of the loan. Many lenders under the FFEL Program offer borrowers
discounts to their interest rates based on the borrowers'
agreement to make automated payments and payment history. These
discounts can exceed 1.00% per annum.
The FFEL Program entitles borrowers of
consolidation loans to defer payments during certain authorized
deferment periods. In addition, lenders may agree to forebear
interest payments in certain instances.
48
Participants in the FFEL Program include:
Originators.
Originators market, process and, in cooperation with eligible
lenders, originate, FFELP loans. Originators include
student loan finance companies as well as eligible lenders as
described below. After an originator originates and/or processes
the origination of a loan, it may retain it in its portfolio or
sell it to third parties, including eligible lenders.
Eligible
lenders.
Eligible lenders
registered with the DOE originate and/or purchase FFELP loans
and receive interest subsidy payments, SAPs and default
reimbursement. Eligible lenders include banks, savings and loan
associations, credit unions, pension funds, insurance companies,
schools and, under certain circumstances, guaranty agencies. In
addition, other entities that do not meet the definition of
eligible lender can effectively participate through trust
arrangements with entities that meet the definition.
Servicers.
Servicing of student loan assets is critical for FFELP lenders
because the guarantee is conditioned on the loans being
administered in accordance with DOE and guaranty agency
requirements. Proper servicing of a student loan is also
required in order to maintain eligibility for SAPs and interest
subsidy payments.
Guaranty
agencies.
Guaranty agencies
reimburse lenders for losses on defaulted FFELP loans on at
least 98% of the loans' principal and interest. These
guaranty agencies are non-profit institutions or state agencies
that have entered into federal reinsurance contracts with the
DOE pursuant to the Higher Education Act. Guaranty agencies
reimburse eligible lenders from reserve accounts established for
this purpose. The guaranty agency, in turn, receives
reimbursement of up to 95% of its payments to lenders from the
DOE.
Department of
Education.
The DOE's
regulations provide a number of public policy drivers to FFELP
market participants. The DOE provides eligible lenders with an
incentive to lend to students by reinsuring guarantors for a
portion of their default reimbursements to lenders. When
applicable, it also pays SAPs to ensure that the lender earns a
competitive return. The DOE provides eligible borrowers with
interest subsidies and capped interest rates.
The guarantee and the lender's right to
subsidy payments on FFELP loans is conditioned on compliance
with requirements set by the DOE and guaranty agencies. FFELP
loans that are not administered in accordance with DOE
regulations risk loss of their guarantee and subsidies, in full
or in part. The most common reason for loss of guarantee or
subsidies on a loan is violations of federal regulations
requiring certain collection steps, such as collection letters
and phone calls for loans that become delinquent. Regulations
also authorize the DOE and guaranty agencies to limit, suspend
or terminate lenders participation in the FFEL Program, as well
as authorize the DOE to impose civil penalties, if lenders
violate certain program regulations.
School eligibility requirements, including
default rate limits, have been implemented by the DOE. In order
to maintain eligibility in the FFEL Program, schools must
maintain default rates below specified levels.
Private Loans
Private education loans are consumer loans that
generally have variable rates, are credit based and have terms
up to 30 years. Private loans typically include the
following series of processes:
•
consumer development, design and marketing;
•
consumer inquiry, credit decisionmaking and
    application; and
•
loan origination, disbursement, funding and
    servicing.
Borrowers primarily use private loans to
supplement federal loans in the financing of their education or
to consolidate their education debt. Most private loan holders
obtain some form of insurance on each loan to cover the holder
against credit loss. This coverage comes in primarily two forms.
Private loans are either "self-insured" by the
existing holder or insurance is obtained by the loan holder from
an outside
49
insurance provider, who, usually for a fee, will
provide insurance coverage to cover the holder against default
and in some instances death, disability and bankruptcy. Loan
terms are typically fixed over a period of time, from five to
30 years, where consumers can defer payments during
in-school periods, make interest-only payments or principal and
interest payments to loan holders. Rates on private loans are
typically variable and indexed to the U.S. Treasury Bill,
Prime Rate or LIBOR. In many instances, borrowers pay the holder
or insurance entity an origination and/or guarantee fee. This
fee is usually included in the overall loan amount at the time
of origination.
The private loan market has expanded rapidly in
the past several years. Private loan volume, according to the
College Board, though small relative to federal loan volume, has
grown at a compounded annual rate of 26.8% in constant dollars,
from academic year 1995-1996 through academic year 2002-2003.
According to the College Board, total reported private loan
volume reached approximately $6.9 billion in the 2002-2003
academic year, up from $1.1 billion in the 1995-1996
academic year. We believe the growth of the private education
loan market reflects a growing reliance on supplements to
federal loans to bridge the widening gap between the cost of
higher education and the amount of funding available to pay that
cost through federal education loans. In addition, private
education loans are viewed as convenient and attractive
financing alternatives by the growing number of older
non-traditional students who are more familiar with other
consumer finance alternatives.
Reauthorization and Proposed Legislative
Changes
The Higher Education Act, and as a result the
FFEL Program, is subject to comprehensive reauthorization every
five years. The Higher Education Act is scheduled to expire on
September 30, 2004, and reauthorization is currently under
consideration by the United States Congress. In 2000, Congress
passed legislation to tie the yield on FFELP loans to commercial
paper rates. This change has enhanced the current market
stability in the education finance arena. Changes in the Higher
Education Act made in the two most recent reauthorizations have
included reductions in student loan yields paid to lenders,
increased fees paid by lenders and a decreased level of
guarantee. Some of the key issues being considered in the
reauthorization debate are:
•
Single holder rule on consolidation
    loans.
Currently, if only one
    lender holds all of a student's loans, then a competitor
    cannot consolidate the loans away from the current holder unless
    the current holder refuses to consolidate the loans for the
    borrower. In the industry as a whole, a large portion of all
    non-consolidated loans are currently held by only one lender.
    Elimination of the single holder rule would open up a portion of
    the market to increased competition.
•
The ability to refinance consolidation
    loans.
Currently, once a loan is
    consolidated, it cannot be refinanced by another government
    guaranteed student loan unless subsequent FFELP or FDLP loans
    are made to the borrower. If this rule changes, the amount of
    consolidation loans that are refinanced could be significant.
•
Variable-rate consolidation
    loans.
Currently, FFELP
    consolidation loans have fixed interest rates. Proposals have
    been made that would require new consolidation loans to have
    variable rates. This initiative would eliminate an appealing
    aspect of consolidation loans, i.e., long-term fixed rates,
    that is not available in most education loans. Adoption of this
    initiative could decrease demand for federal consolidation loans.
•
Increased access to extended repayment of
    Stafford/ PLUS loans.
Currently,
    borrowers who secured their first Stafford loan after
    October 7, 1998 that leave school with $30,000 or more in
    Stafford loan principal outstanding may have the maturity
    extended beyond the standard 10 year maximum term.
    Proposals have been circulated that would allow Stafford/ PLUS
    borrowers to more readily gain extended repayment terms, similar
    to those terms provided for under the loan consolidation
    program. This initiative would provide borrowers of Stafford/
    PLUS loans an appealing aspect of consolidation loans,
    i.e., a more extended repayment period, without
    consolidating their loans. Adoption of this initiative could
    decrease demand for federal consolidation loans.
50
•
Borrower
    limits.
For the last
    10 years, the maximum amount of Stafford loans that a
    dependent freshman or sophomore could borrow has remained at
    $2,625 and $3,500 per academic year, respectively, and the
    aggregate amount that a dependent undergraduate student could
    borrow has remained at $23,000. Educational tuition has
    increased at approximately two times the rate of inflation over
    this same time period. If borrower limits are raised this could
    increase the average size of future loan originations in the
    market and those available for later consolidation.
Legislation has also been introduced proposing a
number of initiatives aimed at supporting the FDL Program to the
detriment of the FFEL Program. Such legislation proposes to pay
schools as a reward for choosing to participate in the FDL
Program.
In addition, participants in the education
finance market that use DTC marketing are affected by recently
amended Federal Trade Commission rules and similar state
regulations providing for so-called "do not call"
registries. Under these rules, consumers may have their phone
numbers added to a "do not call" registry, and
marketers are generally prohibited from calling any such
consumers to market products and services. This rule may
restrict marketers' abilities to market products and
services effectively to certain new customers. Furthermore,
compliance with this new rule may prove difficult and require
additional expense, and marketers may incur penalties for
improperly conducting our marketing activities.
The origination of private loans is subject to
federal and state consumer protection laws and regulations,
including state usury and disclosure laws and related
regulations, and the Federal Truth in Lending Act. These laws
and regulations impose substantial requirements upon lenders and
their agents and servicers involved in consumer finance.
In addition, participants in the market for
private education loans could also become subject to state
licensing laws due to recent changes in existing federal and
state regulations. As a result, participants in this market
could be required to (1) implement additional or different
programs and information technology systems, (2) meet new
licensing capital and reserve requirements or (3) incur
additional administrative, compliance and third-party service
costs.
51
BUSINESS
Company Overview
We are a vertically integrated education finance
company that markets, originates, finances and services
education loans. We market education loans primarily through
direct-to-consumer, or DTC, programs, including targeted direct
mail, telemarketing and the Internet. Using our DTC marketing
platform and other distribution channels, we assist consumers in
financing and refinancing the cost of undergraduate, graduate,
professional, career and continuing education. We finance,
retain and service a substantial portion of the loans we
originate.
Since our inception in 1998, we have originated
or facilitated the origination of over $15 billion in
education loans. We originated or facilitated the origination of
$4.2 billion of education loans in 2003 and we believe we
are among the top five originators of federal and private
education loans in the United States. Of our total loan
originations in 2003, $4.0 billion were federally
guaranteed consolidation student loans made through the Federal
Family Education Loan Program, which we refer to as the
FFEL Program or FFELP. Through the FFEL Program, an
eligible borrower with multiple federally guaranteed loans can
consolidate his or her loans after graduation into a single
loan. Beginning in May 2003, we increased our focus on private
education loans and, in that year, originated or facilitated the
origination of $199.6 million of these loans. Private
loans, which do not have a federal guarantee, are credit-based
consumer loans used to pay for or refinance education-related
expenses. As of December 31, 2003, we were servicing
approximately $8.9 billion in student loans made to over
360,000 customers, and were the seventh largest servicer of
FFELP loans in the United States, according to the Student Loan
Servicing Alliance. We currently have over 1,000 employees.
We have adapted a direct-to-consumer marketing
model developed in the consumer finance industry for use in
education-based lending. We believe our targeted DTC strategy
enables us to increase consumer awareness of the products we
offer and collect data useful in our product development and
marketing. Using a variety of internal and external databases
accumulated since our inception, we create marketing campaigns
to target consumers with products based on their specific
characteristics. We supplement our DTC strategy through
marketing relationships with membership organizations, alumni
associations and other entities in order to reach customers and
promote our products under our own label or under co-branded
offerings in partnership with other lenders. We are also
investing in the school-based loan origination channel, through
which we market our products to students by cooperative
arrangements with the financial aid offices of education
institutions. We currently have relationships with over
600 schools and institutions including having our products
on 539 preferred lender lists. Once we have originated a
FFELP loan, we either fund and retain that loan in our portfolio
or sell the originated loan application to a third-party lender.
With respect to private education loans, we either sell
completed loan applications upon origination, in the case of
private consolidation loans, or market loans for origination by
third parties, in the case of private in-school loans, which we
refer to as facilitating the origination of loans.
In 2002, we launched our strategy of retaining in
our portfolio a percentage of the federally guaranteed loans we
originate. Prior to 2002, we sold substantially all of our
completed loan applications to third parties and received fees
for these applications at the time of sale. We retain in our
portfolio only loans that are federally guaranteed for at least
98% of principal and interest. We believe that our current
strategy of retaining in our portfolio a portion of the loans we
originate and selling the remainder for a fee provides us with
several advantages, although our net income in current periods
has been lower than it would have been had we sold a larger
percentage of the FFELP loans we originate. Among the benefits
of retaining loans is our ability to take advantage of these
loans' limited credit risk, their duration and other
characteristics and to benefit from a greater revenue stream
over the life of the loan. Selling the remainder of our
originated loan applications permits us to maintain a
diversified source of funding for loan processing and
origination and build our relationships with financial
institutions that purchase our loans. We retained approximately
50% and 21% of the FFELP loans we originated in 2003 and 2002,
respectively, and our portfolio of federally guaranteed loans
grew to $2.9 billion as of December 31, 2003
52
from $973.1 million as of December 31,
2002. We do not fund or retain any of the private loans we
market or originate.
We also provide high quality loan servicing
through our wholly owned subsidiary, CFS-SunTech Servicing LLC
("SunTech"). We acquired SunTech in April 2003. Prior
to the acquisition, SunTech had been servicing a significant
portion of the loans we originated since our formation in 1998.
Servicing loans provides us with an additional source of fee
income and enables us to retain a direct customer relationship
over the life of the loans, which we believe is a critical
element in establishing our brand. We service substantially all
the loans we hold in our portfolio as well as student loans held
by third-party lenders. We generally seek to retain the
servicing of a majority of the loan applications we sell, which
accounts for a significant portion of our third-party servicing
volume.
Our multiple sources of revenue reflect the fact
that we market, originate, finance and service education loans.
They include fee income for selling completed loan applications
to third parties and facilitating the origination of loans for
lenders, net interest income earned on the loans we hold in our
portfolio and servicing fee income for the assets we service.
Fees on loan application sales and for facilitating the
origination of loans, which we refer to collectively as fees on
loan origination, accounted for approximately 75.7% of our net
revenue in 2003. Net interest income after provision for loan
losses, which is primarily comprised of the difference between
the yield we receive on our loan portfolio and the cost of
funding these loans, accounted for 16.6% of our net revenue in
2003. Servicing fees, earned since our acquisition of SunTech in
April 2003, accounted for 7.7% of our net revenue in 2003. Over
time, as we build our portfolio, we expect the percentage of our
net revenue earned from net interest income to increase and the
percentage of our net revenue earned from our fees on loan
origination to decrease.
We primarily finance the loans we retain in our
portfolio through asset-backed securitizations, which we record
as debt on our consolidated balance sheet. To date, we have
completed four securitizations that contributed
$2.9 billion of funding, including two transactions for a
total of $1.9 billion in 2003. We supplement our
asset-backed securitizations with $500 million of secured
warehouse financing availability, which we believe allows us to
access the securitization market on a more timely and
cost-effective basis. In addition, we enter into forward
purchase agreements, under which several financial institutions
have agreed to purchase and, in certain cases, require that we
sell to them, a portion of the loan applications we originate
each year.
Our predecessor company was organized in 1998 to
focus primarily on marketing federally guaranteed consolidation
loans. In May 2002, Lightyear Capital, LLC, a private investment
firm based in New York City, acquired Collegiate Funding
Services, Inc. As an investment fund, Lightyear seeks capital
appreciation through direct private equity and equity-related
investments, including leveraged acquisitions, buildups,
recapitalizations, restructurings, management buyouts,
pre-public offering opportunities and growth equity transactions.
Our Competitive Strengths
We believe the following competitive strengths
distinguish us in the education finance industry:
•
Vertically integrated education finance
    platform.
We market, originate,
    finance and service education loans. Through our platform, we
    offer students and their families a suite of loan products,
    including federally guaranteed consolidation loans, other
    federally guaranteed loans and private loans. Once originated,
    we are able to finance and retain the loans or sell the
    originated loan applications. Our internal servicing capability
    allows us to service our student loan portfolio, rather than
    outsource this task to a third party. Our vertically integrated
    platform offers our customers the benefit of dealing with a
    single entity over the lives of their loans, from initial
    inquiry through origination and repayment. We believe the
    breadth of our capabilities in the various sectors of the
    education finance market and the scale of our platform is a
    competitive advantage over many of our peers.
53
•
Leading direct-to-consumer origination
    operation.
In 2003, we originated
    or facilitated the origination of $4.2 billion of education
    loans, of which approximately 98% was originated through our
    direct-to-consumer channel. Our DTC model and our targeted
    marketing process give us the advantage of a direct relationship
    with customers, which permits us to tailor our products to their
    needs. We believe that we originated more consolidation loans
    through this channel than any other education finance company,
    when excluding consolidation of loans by lenders from their own
    portfolios.
•
Significant portfolio of federally
    guaranteed loans.
As of
    December 31, 2003, all the loans we held in our portfolio
    were FFELP loans, which are federally guaranteed for at least
    98% of principal and accrued interest. Our portfolio of loans
    grew from $973.1 million at the end of 2002 to
    $2.9 billion at the end of 2003. We expect to continue our
    strategy of retaining a significant portion of the federally
    guaranteed loans we originate. The high credit quality and long
    duration of these loans provide us with a growing base of
    revenue. We do not currently intend to hold in our portfolio any
    private loans.
•
High quality servicing
    platform.
As the primary means of
    communication with our customers after their loans are
    originated and financed, our servicing operation provides our
    customers with consistent and seamless service. The quality of
    our servicing platform and its compliance with the rules set
    forth by the U.S. Department of Education, or DOE, is the
    primary determinant in preserving the federal guarantee on FFELP
    loans we service. Our servicing platform uses a system
    specifically designed to manage, adhere to and support the
    requirements of the Higher Education Act and other consumer
    lending regulations and laws. We believe SunTech's net
    claim reject rate by guaranty agencies due to servicer error of
    0.02% is among the lowest in the industry. Our continuing focus
    on maintaining this performance record will assist us in
    minimizing our credit risk and provide us with credibility as we
    securitize our portfolio of loans and seek third parties willing
    to use us as their loan servicer.
•
Experienced senior management
    team.
Our senior management team
    has an average of 19 years of experience and comes from a
    broad range of education and consumer finance backgrounds. Our
    management team is led by Chief Executive Officer, J. Barry
    Morrow. Mr. Morrow has worked in the education finance
    industry for over 20 years, having served previously as the
    senior operations executive for Sallie Mae and general manager
    of financial services for the U.S. Department of Education.
    We have a management team with significant experience in both
    student loan operations and portfolio management. We believe the
    combination of education and consumer finance experience allows
    us to better serve our customers and maximizes our ability to
    develop and implement our strategy.
Our Strategy
We intend to focus on marketing, originating,
financing and servicing federally guaranteed consolidation loans
and to leverage our market position and platform to build our
brand and diversify our product and service offerings, including
the expansion of private loan originations, by executing the
following strategy:
•
Expand the use and reach of our
    direct-to-consumer marketing platform.
Federal consolidation
    loans.
We plan to continue to use our
    DTC channel to originate federal consolidation loans, to expand
    consumer awareness of consolidation loans and to establish our
    brand. We will continue to refine our approach to these products
    based on information we have gathered from our marketing and
    servicing operations. We believe that the education finance
    market will continue to benefit from direct marketing to
    consumers and we seek to use our expertise with this marketing
    strategy to increase our share of federal consolidation loan
    originations.
54
Private loans.
Beginning in May, 2003, we increased our focus on private
    education loans, and, in 2003, we originated or facilitated the
    origination of $199.6 million of these loans. We intend to
    continue to use our expertise in the DTC channel to structure
    and market private loan products and to increase our
    originations and facilitation of the origination of private
    loans. We will utilize our expertise in the marketing of federal
    consolidation loans and mine the data we have generated in
    making and holding those loans to effectively market new private
    loan products.
•
Expand distribution channels.
School-based
    channel.
To supplement our DTC
    channel, we will continue investing in the school-based channel
    to increase awareness among students and financial aid officers
    of our consolidation products. In addition, we will continue to
    broaden our product offerings of federal and private loans
    available to students still in school. We currently have
    relationships with over 600 schools and institutions, including
    having our products on 539 preferred lender lists. We have a
    national sales force of education industry professionals working
    directly with colleges and universities and we assist schools
    and financial aid offices by offering an internally-developed
    Internet-based debt and graduation counseling tool as well as
    software tools that aid schools in running their lender
    programs. We will continue our efforts to be added to
    schools' preferred lender lists, which will provide a
    school-based origination channel to supplement our DTC
    origination channel, as well as greater awareness of our
    products and brand name among students and financial aid
    officers.
Affinity group
    marketing.
We have entered into
    marketing relationships with associations such as the American
    Medical Association, the American Dental Association and the
    American Bar Association, in order to promote our products to
    their membership and customer bases. We plan to continue
    developing more affinity relationships, which, through private
    label offerings and product endorsements, provide us with access
    to consumers in need of federal and private loans or
    consolidation of education loans.
•
Build our FFELP loan portfolio and balance
    our sources of revenue and
    funding.
Starting in 2002, we
    began holding a portion of the FFELP loans we originated. We
    plan on retaining a significant portion of the FFELP loans we
    originate in the future. Retaining these loans will give us the
    ability to recognize revenue from these assets over a long
    period of time, more fully utilize our servicing capabilities
    and help us to create a more robust customer information
    database for new and emerging products and services. We also
    intend to continue to sell a portion of the loan applications we
    originate. Our sales of originated loan applications allow us to
    maintain a balance in our sources of funding for loan processing
    and origination, provide us with a source of fee income and
    enable us to continue to build relationships and strategic
    partnerships with the financial institutions that acquire our
    loan applications.
•
Expand the origination capabilities of our
    servicer.
We intend to continue to
    expand the volume of loans we service for ourselves and for
    third-party lenders and to invest in the technology and
    infrastructure of our servicing operations to permit us to
    originate additional types of loans and increase our ability to
    provide private labeling capabilities to our clients. Through
    our servicer, we intend to extend the reach of our marketing,
    originate more loans and increase the volume of loans we
    service. We believe our enhanced servicing capabilities will
    enable us to support our growth in servicing and originations,
    increase our fee income from servicing and ensure that our
    customers have a favorable experience with CFS.
•
Seek out and make strategic
    acquisitions.
In 2003, we acquired
    and successfully integrated SunTech to provide our servicing
    operations. In the future, we will consider acquisitions of
    individual companies as well as loan and servicing portfolios
    that we believe have the potential to enhance the value of our
    company, expand our product reach and/or aid in executing our
    growth strategy.
55
Product and Service Offerings
Loan origination
Origination
channels.
We originate and acquire
education loans through a variety of methods, or channels,
including:
Direct-to-consumer
(DTC).
We believe that companies
using direct marketing to consumers will continue to benefit in
the education finance market. We have adapted a
direct-to-consumer marketing model developed in the consumer
finance industry for use in education finance. We originate
education loans primarily by marketing directly to consumers
using direct mail, telemarketing and the Internet. We believe
our targeted DTC marketing strategy enables us to make more
consumers aware of our products. Our DTC channel accounted for
approximately 98% of the education loans we originated or
facilitated the origination of in both 2003 and 2002.
We view education loans as consumer loans that
can be originated in any fashion convenient for the student,
parent or school. A substantial portion of our direct marketing
to consumers is geared towards our telemarketing customer call
centers generating calls to and receiving calls from eligible
borrowers to receive information specific to their eligibility
for different loan programs. Our telemarketing center associates
are extensively trained to adhere to current regulations as well
as to provide timely and convenient information concerning our
loan programs. They provide recent graduates, students and
parents specific, concise and accurate financial aid
information. One of our telemarketing center associates can
typically pre-qualify a borrower over the phone for a federal
consolidation, private, Stafford or PLUS loan in less than five
minutes.
Many of our customer solicitations are targeted
at potential borrowers that have been prescreened for the
likelihood of needing financing for their postsecondary
education or refinancing of their education debt and, in the
case of private loans, for creditworthiness. We use both
internal and external data sources that together create a
database of information used to target consumers in need of
education loans. We use information received from credit bureaus
and from third-party compiled and vertical mailing lists. Our
campaigns consist of mail and Internet offers and telemarketing
scripting delivered separately or in combination to desired
customers. We track and periodically review the results of our
various solicitation campaigns in a "test and learn"
environment. Our DTC marketing strategy targets products to a
consumer based on his or her specific profile and uses consumer
feedback and data analysis to revise and refine the products we
offer. In developing our targeting strategies, we attempt to
respect the privacy of our customers (and potential customers)
by using customer information only in accordance with our
privacy policies.
We have the capability to originate loans over
the Internet and, in the past year, have invested in expanding
our Internet-based originations. We believe the Internet will be
a cost-effective and complementary alternative for loan
originations in our direct marketing efforts. In 2003, we tested
several marketing programs using Internet-based advertising, as
well as advertising on certain corporate websites. We intend to
continue to invest in the technology required to grow our
Internet-based origination capability to make it a critical
channel for the origination and facilitating the origination of
loans.
Affinity group
marketing.
We also market and
originate loans through relationships with certain alumni and
industry groups, including the American Medical Association, the
American Dental Association, the American Bar Association and
alumni associations, through which we are the provider of loan
products sponsored by these organizations. Through endorsements
of our products, groups such as these organizations, as well as
E-Loan and LendingTree, aid us in reaching new customers and
marketing to our current customer lists. This channel accounted
for approximately 2% and 3% of the education loans we originated
or of which we facilitated the origination in 2003 and 2002,
respectively.
School preferred lender
lists.
We also market and
originate loans to students currently enrolled in school and
recent graduates through financial aid offices. We have
relationships with 600 schools and institutions of higher
learning and our products are on the preferred lender lists of
539 institutions. We have a national sales force of
education industry professionals working with colleges and
universities
56
directly. We are currently expanding our
originations in the school channel by developing the internal
capability to provide originations of Stafford and PLUS loans
and private in-school loans through our servicing platform. In
the past year, our products were added to 430 school preferred
lender lists.
Our national sales force of 21 professionals
focuses on implementing this strategy by educating college
financial aid officers about us and offering our products and
services to them. This participation may drive Stafford, PLUS
and private in-school loan volume from the students and parents
who select their lender from the school's preferred lender
list. In addition, we believe that a portion of the loans that
are originated through our DTC channel are a result of us being
on schools' preferred lender lists.
One of the primary benefits we offer to schools
is a range of loan products to student and parent borrowers.
Additional services we have developed or licensed to assist
schools and financial aid offices include:
•
Collegexit — an Internet-based debt and
    graduation counseling tool, currently offered to students at 175
    financial aid offices across the country; and
•
RFP platform — a platform designed to
    assist schools in the Request For Proposal (RFP) process
    for preferred lender lists and/or school-as-lender programs.
In addition, our advisory board, consisting of
10 financial aid and higher education professionals,
assists us in understanding and evaluating current trends in
education finance and school and student finance needs.
Secondary market
acquisitions.
In 2003, we acquired
a portion of our portfolio of federal education loans in the
secondary market. Many FFELP lenders sell their loans after
origination. Acquisitions through this channel accounted for
approximately 1% of the student loans in our portfolio in 2003
and are not included in our origination figures.
Our products.
The
great majority of education loans we originate are federally
guaranteed consolidation loans. We also originate and facilitate
the origination of private loans, as well as Stafford and PLUS
loans. We originated or facilitated the origination of
$4.2 billion in federal and private loans in 2003 and have
done so with respect to over $15 billion in such loans
since our inception in 1998. Of our total loan originations in
2003, $4.0 billion were federally guaranteed consolidation
loans. See "Industry Overview" for a general
description of these products.
FFELP
loans.
We
offer FFELP consolidation loans to qualifying borrowers. FFELP
consolidation loans allow borrowers with existing federal loans
to combine their federal education loans into a single loan,
with a fixed rate, to be repaid over a term ranging from 12 to
30 years, depending on the size of the loan. We offer
federal consolidation loans in an amount sufficient to pay the
outstanding principal, unpaid interest and late charges on
federally insured or reinsured education loans incurred under
the FFEL Program selected by the borrower, as well as loans made
pursuant to the FDL Program, Perkins and Health Professional
Student Loan Programs.
We also offer borrowers Stafford and PLUS loans
in accordance with those FFEL programs. Subsidized Stafford
loans have terms of up to 10 years after the borrower
leaves school, subject to extension, and are awarded to students
on the basis of financial need. Unsubsidized Stafford loans have
terms of up to 10 years after the borrower leaves school,
subject to extension, and are available to all students
regardless of financial need. The maximum aggregate borrowing by
a single borrower of unsubsidized and subsidized Stafford loans
is $23,000 for a dependent undergraduate student, $46,000 for an
independent undergraduate student and $138,500 for a graduate
student (including undergraduate borrowings).
Our PLUS loans have terms of up to 10 years
and allow parents of dependent undergraduate students to borrow
up to the total cost of attendance at a low interest rate.
Unlike student borrowers, parents must pass a credit test to
borrow under the PLUS program. Through this program, parents may
borrow up to the cost of attendance per child, minus financial
aid from other sources.
57
Private consolidation
loans.
We offer private
consolidation loans to student borrowers who have at least one
eligible private loan to consolidate.  Like the FFELP
consolidation loan, borrowers can combine all of their private
education loans up to $125,000 into one loan, with a single
lower monthly payment, to be repaid over a term of up to
30 years, depending on outstanding loan amount. These loans
are privately funded and guaranteed, credit-based, variable-rate
loans with an origination fee based on the applicant's
credit worthiness.
Private in-school loans.
The private in-school loans we
market are offered to supplement federal loans and aid available
to a wide range of students and their parents, from those
enrolled in kindergarten through graduate school, where the
federal loans and other aid does not cover the student's
education-related expenses. These loans are privately funded,
credit-based, variable-rate loans up to $30,000 per year that
generally require a co-signer. The term is up to 25 years
depending on the amount of the loan and has an origination fee
based on the creditworthiness of the student and co-signer.
Borrower incentives.
We offer borrower incentives that
are designed to attract new borrowers and improve their
repayment behavior. Our automated clearing house
(ACH) incentive program, which is offered on all of our
loans, reduces a borrower's interest rate by 0.25% per
annum for so long as he or she makes monthly payments through
automatic deductions from his or her checking or savings
account. Approximately 30% of our borrowers currently
participate in this program. In addition, we offer FFELP
consolidation loan borrowers an on-time incentive program that
reduces a borrower's interest rates by 1.00% per annum
for so long as he or she makes a specified number of his or her
payments on time and continues to make subsequent payments on
time.
Portfolio funding and
liquidity.
A key component of our
business is maintaining access to diversified funding sources
for our education loans. In July 2003, we obtained a one-year,
$500.0 million warehouse financing facility to fund our
loan originations. In February 2004, the facility was
temporarily expanded to $1.0 billion through May 2004, at
which time it will return to its original $500.0 million
capacity. The warehouse facility is provided by a commercial
paper conduit with liquidity support provided by a national
financial institution. Short-term warehousing allows us to
originate and fund education loans prior to transferring them
into more permanent financing arrangements. We hold loans in our
short-term warehousing facility for a period of time ranging
from approximately one month to as many as six months. Our
warehousing capacity allows us to pool education loans in order
to maximize characteristics for efficient securitization
financing and to time market conditions for our securitizations.
We rely upon securitization vehicles as our
source of long-term funding for loans. Our first securitization
transaction was executed in 2001, utilizing a master trust
structure, and was comprised of privately placed auction-rate
notes. As the size and volume of our securitizations have
increased, we have begun publicly offering asset-backed
securities under shelf registration statements. During 2003,
2002 and 2001 we issued $1.9 billion, $500.0 million,
and $527.2 million of asset-backed securities,
respectively. We had approximately $2.9 billion in
asset-backed securities outstanding as of December 31, 2003.
Forward purchase
agreements.
We have several
forward purchase agreements through which we utilize our
marketing platform and access our customer base for third-party
lenders. We currently have forward purchase agreements with
third-party lenders for whom we market FFELP and private
consolidation loans to potential and existing borrowers. The
terms of the agreements range from one to three years with
varying termination rights, although the parties generally have
the right to terminate upon the occurrence of material breach of
representations, warranties or covenants, default under debt
agreements or material adverse change, regulatory changes, or
bankruptcy. Each party has agreed to indemnify the other,
subject to certain limitations.
We receive a fee for completed loan applications
or, in the case of private loans, loan disbursements. Through
these forward purchase agreements, third-party lenders are
provided access to borrowers without incurring the incremental
overhead costs of hiring additional sales and marketing
employees. We generally seek to require these counterparties to
service the loans we originate or process for origination with
our servicer for a pre-determined period of time.
58
We are required to represent that the completed
loan applications we sell have been originated in compliance
with all applicable laws and regulations and, with respect to
federally guaranteed loans that the loans are in all respects
eligible for federal guarantee. If any of the FFELP
consolidation loan applications sold under our forward purchase
agreements are deemed ineligible for federal guarantee after
funding, we may be required to purchase the loans and reimburse
the DOE for fees and subsidies associated with such loans.
Fees received under forward purchase agreements
with Citibank (New York State), The Brazos Higher Education
Service Corporation, Inc. and ClassNotes, Inc. d/b/a Educaid,
each accounted for more than 10% of our net revenue in 2003. Any
failure to maintain or replace contractual relationships with
these financial institutions or lenders could have a material
adverse effect on our ability to sustain or increase our
business.
Marketing
agreements.
We have a relationship
with a financial institution for whom we market private
in-school loans, and who agrees to originate and fund the loans
we market. Under this contractual relationship, we generate loan
applications that are referred to the provider over a
pre-determined period of time and at an agreed upon fee. Certain
conditions mandate that a specific volume of applications be
referred to a provider over a period of time. We are paid for
private in-school loan referrals when a loan is funded by a
lender. The parties have the right to terminate upon the
occurrence of material breach or the bankruptcy of either party.
Eligible
lender.
When we originate FFELP
loans on our own behalf or when we acquire FFELP loans from
others, we engage U.S. Bank National Association as our
"eligible lender," as defined in the Higher Education
Act, to act as our trustee to hold title to all such originated
and acquired FFELP loans. This eligible lender trustee holds the
legal title to our FFELP loans, and we hold 100% of the
beneficial interests in those loans.
See note 20 of the notes to our consolidated
financial statements for segment information relating to our
loan origination segment.
Loan servicing
We specialize in the servicing of federally
guaranteed and private education loans. Our servicing division
offers a complete line of education loan services, including
recovery of non-guaranteed loans, application processing,
disbursement of funds, customer service, account maintenance,
federal reporting and billing collections, payment processing,
default aversion and claim filing. Our contact center staff is
trained in all phases of education credit and can address most
matters with respect to customers' accounts, including the
origination of new loans. SunTech, our servicer, uses an
internally-developed system to manage the servicing process that
provides for automated compliance with most Higher Education Act
regulations.
We acquired our wholly-owned servicer, SunTech,
on April 15, 2003. SunTech began servicing education loans
in 1990 and services many of the loans we have originated since
our formation in 1998. Prior to 1990, SunTech was part of the
Mississippi secondary market and had serviced loans in that
capacity since 1984. As of December 31, 2003, SunTech
serviced a portfolio of approximately 360,000 accounts with
outstanding FFELP and private education loan balances of
approximately $8.9 billion.
As the primary means of communication with our
customers after their loans are originated, our servicing
operation is managed to provide our customers consistent and
seamless service. Our quality and experience in education loan
servicing is evident in the historical performance of our entire
pool of loan assets, which has historically had a very low net
claim reject rate by guaranty agencies due to servicer error,
which is the percent of claims ultimately rejected by a guaranty
agency due to servicer error. In 2003, SunTech's net claim
reject rate due to servicer error was approximately 0.02% of all
claims filed by us or our servicing customers. Historically, the
aggregate losses of SunTech's servicing customers from
servicing-related errors has been $0 per year. We believe
our internal servicing operation minimizes our
59
credit risk and is an asset as we securitize our
portfolio of loans and seek forward purchase partners willing to
use us as their loan servicer.
See note 20 of the notes to our consolidated
financial statements for segment information relating to our
loan servicing segment.
Our Competition
We face significant competition from numerous
competitors, including SLM Corporation, the parent company of
Sallie Mae. SLM Corporation originated $15.2 billion of
education loans through its preferred channel in 2003, services
nearly half of all outstanding FFELP loans and is the largest
holder of student loans, with a managed portfolio of
approximately $89 billion as of December 31, 2003. In
2002, Sallie Mae began actively marketing consolidation loans
and, as a result of its substantial market presence, quickly
became a leading originator in the consolidation marketplace.
College Loan Corporation originates and retains FFELP loans
and markets private education loans. Education Lending
Group, Inc. holds guaranteed student loans originated with
the assistance of third parties.
We also face competition from other education
finance companies and financial institutions that market,
originate or purchase guaranteed or private education loans. As
we seek to further expand our business, we will face numerous
other competitors, many of whom are already well established in
the markets we seek to penetrate. Some of our competitors are
much larger than we are, have better name recognition than we do
and have greater financial and other resources than we do. In
addition, several of our competitors have large market
capitalizations or cash reserves and are better positioned to
acquire companies or portfolios in order to gain market share
than we are.
Many banks, education finance companies and
secondary market holders recently have begun to engage in
consolidations to prevent loans in their respective portfolios
from being consolidated by other lenders. In addition, as
interest rates have fallen and the market for consolidation
loans has increased, new companies have entered the business of
directly marketing loans to consumers who are eligible for
consolidation of their education loans.
We also face competition from the FDL Program.
Through the FDL Program, the DOE makes loans directly to
students through the educational institutions they attend. The
volume of student loans made under the FFEL Program and
available for us to originate may be reduced to the extent that
the FDL program makes loans to students. The DOE also offers
consolidation loans and has marketed this product widely in
prior years. However, we believe it has recently reduced its
marketing related to consolidation loans.
Legislation has been proposed aimed at supporting
the FDL Program to the detriment of the FFEL Program. If such
legislation were to be enacted, this would have a material
negative impact on us.
Seasonality
Origination of consolidation student loans is
generally subject to seasonal trends, which correspond to the
period prior to or immediately after the July 1 reset in a
rising or falling interest rate environment and also to the
expiration of the six-month grace period on payment of certain
loans after graduation, which generally falls in December. Due
to our portfolio size, new disbursements or run-off for any
given month will not materially change the net interest earnings
of the portfolio.
However, certain other factors may cause our
quarterly results of operations to vary, including, in
particular, unexpected changes in interest rates and the amount
and timing of our loan sales.
Properties
Our headquarters are currently located in
Fredericksburg, Virginia, and we have additional offices in
Tampa, Florida and Jackson, Mississippi.
60
We lease land and buildings for our executive
offices and operations. The following table summarizes
information with respect to the principal facilities that we
lease:
Location
Principal Activities
Area (sq. feet)
Lease Expiration Date
Fredericksburg, Virginia
(1)
Headquarters and call center
54,179
09/30/2005
Pinellas Park, Florida
Call center
18,000
03/01/2005
Jackson, Mississippi
Servicing and loan processing
52,783
04/01/2005
(2)
Washington, DC
Government relations
562
06/30/2004
(1)
We recently signed a new lease for our principal
    executive offices and will be relocating our headquarters and
    call center in the third quarter of 2004 to 10304 Spotsylvania
    Avenue, Fredericksburg, Virginia 22408. The new lease expires in
    May 10, 2010 and the office space is approximately
    64,179 square feet.
(2)
Consists of two leases with concurrent expiration.
Employees
As of December 31, 2003, we had
approximately 828 full-time employees and
236 part-time employees. Approximately 254 of our employees
are salaried and approximately 810 are hourly. We are not
subject to any collective bargaining agreements, and we consider
relations with our employees to be good.
Legal Proceedings
We are involved in litigation in the ordinary
course of business, both as a defendant and as a plaintiff.
While we cannot predict the outcome of any pending or future
litigation, examination or investigation, we do not believe that
any pending matter will have a material adverse effect on our
financial condition or results of operations.
61
MANAGEMENT
Set forth below are the names, ages as of April,
2004, and current positions of our executive officers and
current directors.
Name
Age
Position
J. Barry Morrow
51
Chief Executive Officer and Director
Kevin A. Landgraver
41
Executive Vice President and Chief Financial
    Officer
W. Clark McGhee
39
Executive Vice President—Marketing
Charles L. Terribile
58
Executive Vice President and General Counsel
John A. Reeves
53
Executive Vice President—Government and
    Industry Relations
John R. Elam
58
Executive Vice President—Servicing and
    Operations
Donald B. Marron
69
Chairman of the Board and Director
Lawrence A. Hough
60
Director
Bruce J. Rubin
44
Director
Richard J. Sterne
57
Director
Mark F. Vassallo
41
Director
J. Barry Morrow
has been our president and chief
executive officer since 2002. From 2000 to 2002, Mr. Morrow
served as our president and chief operating officer.
Mr. Morrow previously served as the general manager of
Financial Partners for the Office of Student Financial
Assistance at the U.S. Department of Education from 1999 to
2000. Prior to that, Mr. Morrow spent over 17 years
with Sallie Mae in various positions including the senior
operations executive. Mr. Morrow holds a B.A. from Virginia
Tech and an M.A. in Public Administration from George Washington
University.
Kevin A.
Landgraver
has been our executive
vice president and chief financial officer since September,
2001. From March, 1995 to September, 2001, Mr. Landgraver
served as the senior vice president for Educaid, a student loan
company. Mr. Landgraver received a B.A. from Macalester
College and an M.B.A. from Rockhurst University.
W. Clark
McGhee
has been our executive vice
president of marketing since August, 2001. From August, 1999 to
August, 2001, Mr. McGhee was the president of Servus
Financial Corporation, a wholly owned private education loan
subsidiary of Wells Fargo Bank. From June, 1986 to August, 1999,
Mr. McGhee held positions at SunTrust Bank (formerly
Crestar Financial Corporation), serving as both executive vice
president of its small business and consumer Internet lines of
business as well as chief executive officer of SunTrust
Education Financial Services Corporation. Mr. McGhee holds
a B.S. from the University of Richmond.
Charles L.
Terribile
has been our executive
vice president and general counsel since December, 2001. Prior
to that, Mr. Terribile spent 23 years with First Union
Corporation, holding a number of positions, including deputy
general counsel for consumer products and services. From 1972 to
1978, Mr. Terribile was an assistant to the commissioner of
the New Jersey Department of Banking. From 1970 to 1972,
Mr. Terribile served as a deputy attorney general for the
New Jersey State Attorney General's Office.
Mr. Terribile holds a B.S. from the Pennsylvania State
University and a J.D. from Rutgers School of Law.
John A. Reeves
has been our executive vice
president of government and industry relations since June, 2002.
From October, 2000 to June, 2002, Mr. Reeves served as the
general manager of Financial Partners for the Office of Student
Financial Assistance at the U.S. Department of Education. From
1988 to 2000, Mr. Reeves served as president of Educaid.
Mr. Reeves holds a B.A. from Lewis & Clark College and
a J.D. from Drake University School of Law.
62
John R. Elam
has been our executive vice
president of servicing and operations since April, 2003 and has
been the president and chief operating officer of CFS-SunTech
Servicing LLC since April, 2004. From 2001 to 2003,
Mr. Elam served as senior vice president for Wells Fargo
Mortgage. From 1998 to 2001, Mr. Elam served as chief
information officer for the North American Mortgage Company.
From 1996 to 1998, Mr. Elam served as chief operating
officer for the Computer Science Corporation. From 1992 to 1996,
Mr. Elam held positions at Chase Manhattan Corporation, serving
as both a division senior vice president and vice president of
operations and new acquisitions. From 1991 to 1992,
Mr. Elam served as the special assistant to the Secretary
of Education. From 1990 to 1991, Mr. Elam served as a vice
president for Sallie Mae. Mr. Elam holds a B.S. from Auburn
University, an M.A. in history from University of Georgia and an
M.B.A. from Golden Gate University.
Donald B. Marron
has been the chairman and CEO of
Lightyear Capital, LLC, an entity he founded, since 2001.
Mr. Marron served as president of PaineWebber Group Inc.
from 1977 to 1980, and as chairman and CEO from 1981 until its
merger with UBS AG in November, 2000. Following the merger,
Mr. Marron served as chairman of UBS America until
September, 2003. Mr. Marron also serves as a director of
Shinsei Bank and Fannie Mae.
Lawrence A. Hough
has been the chairman of Stuart
Mill Capital, Inc., an investment management company which he
founded, since 1998. In 1999, Stuart Mill Capital, Inc. led an
investment group which acquired, managed, and sold SatoTravel, a
global travel management company. From July, 1990 to August,
1997, Mr. Hough served as president and chief executive office
of SallieMae, where he had been employed since 1972. Mr. Hough
serves as a director of Orbimage, Versura, Inc., and as non
executive chairman of the board of SynXis Inc. Mr. Hough also
serves as a trustee of the Shakespeare Theatre, a trustee of the
Levine School of Music and a director of Community Foundations
of America.
Bruce J. Rubin
has been a managing director and
chief administrative officer at Lightyear Capital, LLC since
2001. Prior to joining Lightyear, Mr. Rubin spent seven
years with the PaineWebber Group Inc., serving as a managing
director and chief operating officer of PaineWebber Real Estate
Fund and as president and CEO of PaineWebber Properties.
Mr. Rubin held various executive positions at Shearson
Lehman, Smith Barney and Kidder Peabody from 1989 to 1994.
Mr. Rubin also serves on the boards of directors of Kepler
Equities, DeepGreen Financial and Ripon Cogeneration, Inc.
Mr. Rubin holds a B.A. from Stanford University and a J.D.
from Stanford Law School.
Richard J. Sterne
has been a partner and managing
director of Lightyear Capital, LLC since 2001. From 1999 until
joining Lightyear, Mr. Sterne was a managing director at
PaineWebber Group Inc. in the Principal Transactions Group,
responsible for the firm's proprietary investments. From
1995 until joining PaineWebber, Mr. Sterne was the chairman and
chief executive officer of Links Securities, Inc.
Mr. Sterne holds a B.A. from Harvard University and an
M.B.A. from Stanford University Business School.
Mark F. Vassallo
has been a partner and managing
director at Lightyear Capital, LLC since September, 2003.
Prior to joining Lightyear, Mr. Vassallo spent 16 years at
PaineWebber Group Inc. Following the merger of PaineWebber and
UBS AG, Mr. Vassallo spent three years at UBS serving as
managing director, and as senior advisor to Lightyear Capital.
Mr. Vassallo also serves on the boards of directors of New
Flyer Industries and Kepler Equities. Mr. Vassallo holds a B.A.
from Harvard University and an M.B.A. from Columbia University.
Each officer serves at the discretion of our
board of directors and holds office until his or her successor
is elected and qualified or until his or her earlier resignation
or removal. There are no family relationships among any of our
directors or executive officers.
Composition of the Board
Our board of directors currently consists of
six directors. We currently have one independent member of
our board of directors, and plan to add a second independent
member within three months after the consummation of this
offering and a third independent member to our board of
directors within 12 months after the consummation of this
offering.
63
Pursuant to our amended and restated certificate
of incorporation, our board of directors will be divided into
three classes. The member or members of each class will serve
for a staggered, three-year term. Upon the expiration of the
term of a class of directors, the director or directors in that
class will be elected for three-year terms at the annual meeting
of stockholders in the year in which his or her or their term
expires. We currently anticipate that the classes will be
composed as follows:
•
Class I
    Directors:          will
    be Class I directors and their terms will expire at the
    2005 annual meeting of stockholders;
•
Class II
    Directors:          will
    be Class II directors and their terms will expire at the
    2006 annual meeting of stockholders; and
•
Class III
    Directors:          will
    be Class III directors and their terms will expire at the
    2007 annual meeting of stockholders.
If the number of directors is increased, the
increase in directorships will be apportioned among the three
classes so that, as nearly as possible, each class will consist
of one-third of our directors. This classification of our board
of directors may have the effect of delaying or preventing
changes in control of our company.
Committees of the Board of Directors
Our board of directors currently has a
compensation committee and an audit committee and will have a
nominating and corporate governance committee prior to the
closing of this offering.
Audit committee
Our audit committee will initially consist of at
least one independent member prior to the consummation of this
offering. The audit committee will be responsible for
(1) selecting the independent auditors, (2) approving
the overall scope of the audit, (3) assisting the board in
monitoring the integrity of our financial statements, the
independent accountant's qualifications and independence,
the performance of the independent accountants and our internal
audit function and our compliance with legal and regulatory
requirements, (4) annually reviewing an independent
auditors' report describing the auditing firms'
internal quality-control procedures, any material issues raised
by the most recent internal quality-control review, or peer
review, of the auditing firm, (5) discussing the annual
audited financial and quarterly statements with management and
the independent auditor, (6) discussing earnings press
release, as well as financial information and earnings guidance
provided to analysts and rating agencies, (7) discussing
policies with respect to risk assessment and risk management,
(8) meeting separately, periodically, with management,
internal auditors and the independent auditor,
(9) reviewing with the independent auditor any audit
problems or difficulties and managements' response,
(10) setting clear hiring policies for employees or former
employees of the independent auditors, (11) establishing
procedures for handling complaints regarding the company's
accounting practices, (12) engaging advisors as necessary
to carry out its duties and determining appropriate funding for
payment of compensation to independent auditors and advisors,
(13) handling such other matters that are specifically
delegated to the audit committee by the board of directors from
time to time and (14) reporting regularly to the full board
of directors.
Following the consummation of this offering, we
plan to nominate a second independent member to our audit
committee within three months thereafter and a third independent
member within 12 months thereafter to replace existing
members so that all of our audit committee members will be
independent as such term is defined in Rule 10A-3(b)(1)
under the Securities Exchange Act of 1934 as amended (the
"Exchange Act"). In addition, one of them will be an
"audit committee financial expert" as such term is
defined in Item 401(h) of Regulation S-K.
Our board of directors will adopt a written
charter for the audit committee which will be available on our
website.
64
Compensation committee
The compensation committee is responsible for
(1) reviewing key employee compensation policies, plans and
programs, (2) reviewing and approving the compensation of
our executive officers, (3) reviewing and approving
employment contracts and other similar arrangements between us
and our executive officers, (4) reviewing and consulting
with the chief executive officer on the selection of officers
and evaluation of executive performance and other related
matters, (5) administration of stock plans and other
incentive compensation plans and (6) such other matters
that are specifically delegated to the compensation committee by
the board of directors from time to time.
Our board of directors will adopt a written
charter for the compensation committee which will be available
on our website.
The compensation committee will be chaired
by             and
is also comprised
of            .
Nominating and corporate governance
    committee
Upon the consummation of this offering, we will
establish a nominating and corporate governance committee. The
nominating and corporate governance committee will be
responsible for the oversight of, and assist our board of
directors in developing and recommending, corporate governance
practices and selecting the director nominees to stand for
election at annual meetings of stockholders.
Our board of directors will adopt a written
charter for the nominating and corporate governance committee
which will be available on our website.
The nominating and corporate governance committee
will be chaired
by                     and
will also be comprised
of  and                     .
Compensation Committee Interlocks and Insider
    Participation
None of the members of our compensation committee
is or has been an officer or an employee of the company. None of
our executive officers serves as a member of the board of
directors or compensation committee of any entity that has one
or more executive officers serving as a member of our board of
directors or compensation committee.
Director and Executive Compensation
Director compensation
We do not currently pay any compensation to any
of our directors for serving as a director or as a member or
chair of a committee of the board of directors. Following this
offering, we plan to pay our independent directors
$                    annually
and
$                    per
day for each board meeting and each committee meeting attended.
Directors will also be eligible to participate in our Stock
Incentive Plan.
Executive compensation
As an independent company, we have established
executive compensation practices that link compensation with our
performance as a company. We will continually review our
executive compensation programs to ensure that they are
competitive.
65
The following table shows 2003 compensation
information on an annual basis, to the extent that it is
currently determinable, for our chief executive officer and our
four other most highly compensated executive officers based on
salary, whom we refer to as the "named executive
officers." Other Annual Compensation represents our
estimate of perquisites payable to the named executive officers
for 2003 and long-term compensation represents the options that
have been awarded to the named executive officers in 2003.
Summary Compensation Table
Long-Term
Compensation
Annual Compensation
Securities
Name And Principal
Other Annual
Underlying
All Other
Position
Year
Salary($)
Bonus($)
Compensation($)
Options ($)
Compensation($)
J. Barry Morrow, Chief Executive Officer
2003
$
419,923
$
625,000
$
—
$
—
$6,138
(1)
Kevin A. Landgraver, Executive Vice President and
    Chief Financial Officer
2003
243,338
280,000
—
—
6,060
(1)
W. Clark McGhee, Executive Vice
    President — Marketing
2003
259,108
230,000
—
—
6,054
(1)
Charles L. Terribile, Executive Vice President
    and General Counsel
2003
212,569
220,000
—
—
6,258
(1)
John R. Elam,
Executive Vice President — Servicing and Operations
2003
142,789
(2)
125,000
(2)
—
—
91,752
(3)
(1)
Represents employer contributions to the
    company's 401(k) plan with respect to this executive
    officer and nominal amounts with respect to paid leave.
(2)
Represents amount earned in 2003 from employment
    starting on April 28, 2003 of an annual salary of $225,000
    and a pro-rated annual bonus.
(3)
Reflects amounts received with respect to
    relocation reimbursement.
66
Aggregated Option Exercises in Last Fiscal
Year and Fiscal Year-End Option Values
None of our named executive officers exercised
stock options during the year ended December 31, 2003. The
following table sets forth information on unexercised options to
purchase our common stock held by the named executive officers
as of December 31, 2003. There was no public trading market
for our common stock as of December 31, 2003. Accordingly,
the values of the unexercised in-the-money options have been
calculated based on an assumed initial public offering price of
$          per
share, the midpoint of the price set forth on the cover page of
this prospectus, less the per share exercise price, multiplied
by the number of shares underlying the options.
Number of securities
Value of unexercised
underlying unexercised
in-the-money options
options at fiscal year end
at fiscal year end
Exercisable
Unexercisable
Exercisable
Unexercisable
J. Barry Morrow
22,500
102,500
Kevin A. Landgraver
9,900
45,100
W. Clark McGhee
11,700
53,300
Charles L. Terribile
8,100
36,900
Stock Incentive Plan
Overview.
Our
board of directors adopted the Stock Incentive Plan, or the
Plan, on May 16, 2002 and our stockholders approved the
Plan on May 16, 2002. The maximum aggregate number of
shares of common stock that may be issued pursuant to all awards
under the plan is 700,000.
We expect that, prior to the consummation of this
offering, the board will adopt an amended and restated version
of the Plan, which will, subject to approval by our stockholders
prior to this offering, be effective as of the consummation of
the offering and will increase the maximum number of shares of
common stock that may be issued pursuant to the Plan
to                .
The amended and restated version of the Plan, will provide for
the grant of options and other equity-based awards relating to
our publicly traded common stock. The terms of the Stock
Incentive Plan are described more fully below.
Outstanding options.
On May 16, 2002, the board of
directors approved the grant to five employees of options to
purchase 315,000 shares of our common stock. Each option had an
exercise price of $1.30 per share. Of these, options to purchase
56,700 shares are currently vested and exercisable and the
remaining 258,300 options will become fully vested and
exercisable after seven years or upon satisfaction of certain
terms and conditions or upon a change of control.
Types of
awards.
The Plan provides for the
grant of incentive stock options, non-qualified stock options,
restricted stock and other stock-based awards to our employees,
directors and consultants and to those of our subsidiaries and
affiliates.
Administration.
The plan will be administered by
our board of directors or by a committee designated by the
board, which committee (1) will be constituted in such a
manner as to permit such grants and related transactions under
the Plan to be exempt from Section 16(b) of the Securities
Exchange Act, in accordance with Rule 16b-3 and
(2) will consist of "outside directors" within
the meaning of Section 162(m) of the Internal Revenue Code,
as amended. All awards must be approved by our board of
directors, based on recommendations by our Chief Executive
Officer. The committee will have the discretion to approve forms
of award agreements for use under the plan, construe and
interpret the terms of the Plan and awards, and amend the terms
of any outstanding award, including to provide for accelerated
vesting of the award, so long as any amendment does not
adversely affect the grantee's rights under the outstanding
award. The committee will have the authority to take action it
deems appropriate that is not inconsistent with the terms of the
Plan.
67
Options.
The
term of each option will be no more than ten years from the date
of grant. Unless otherwise provided at the time of grant,
options will become exercisable in 25% installments on each of
the first four anniversaries of the date of the consummation of
this offering. The committee will determine the exercise price
for each option, but each option must have an exercise price
that is at least equal to the fair market value of a share of
our common stock on the date the option is granted. An option
holder may exercise an option by written notice and payment of
the exercise price (1) in cash, (2) by check,
(3) by surrender of shares of common stock or delivery of a
form of attestation of ownership of shares of common stock that
have been owned by the option holder for at least six months or
for such other period consistent with applicable accounting
rules, with a fair market value on the date of surrender or
attestation equal to the aggregate exercise price,
(4) payment through the delivery of irrevocable
instructions to a broker-dealer to immediately sell shares
obtained upon the exercise of the option and, out of the sale
proceeds, deliver to the Company an amount equal to the exercise
price for the shares of common stock being purchased, or
(5) any combination of the foregoing methods.
Restricted stock and other stock-based
awards.
The Plan will provide that
the committee may grant awards of shares of restricted common
stock, shares of common stock, and awards that are valued by
reference to, or that are otherwise based on, the fair market
value of shares of common stock. Such awards will be subject to
terms and conditions established by the committee.
Amendment and
termination.
Subject to compliance
with applicable laws, our board of directors may amend, suspend
or terminate the Plan at any time, as long as the amendment,
suspension or termination does not diminish any of the rights of
a participant under any awards previously granted under the Plan
without the consent of the participant.
401(k) Plan
In July 2000, we established a retirement savings
plan under section 401(k) of the Internal Revenue Code of
1986, as amended (the "Code"), to cover our eligible
employees. The Code allows eligible employees to defer a portion
of their compensation, within prescribed limits, on a
tax-deferred basis through contributions to the 401(k) plan. Our
401(k) plan is intended to constitute a qualified plan under
Section 401(a) of the Code and its associated trust is
intended to be exempt from federal income taxation under
Section 501(a) of the Code. Our 401(k) plan permits us to
make discretionary matching contributions on behalf of eligible
employees and for the year ended December 31, 2003, we
matched 100% of the first 3% of the employee's compensation
to a maximum of $6,000 per year. As of January 1, 2004, we
raised our maximum company match to $6,150 per year. The match
percentage and maximum employer contribution is designated on an
annual basis at our discretion and may charge in future periods.
Our discretionary contributions vest immediately. Our
discretionary matching contributions to the 401(k) plan totaled
$0.8 million, $0.6 million and $0.4 million in
2003, 2002 and 2001, respectively.
Employment agreements
We have employment agreements with each of our
executive officers and are currently negotiating new employment
agreements with each of them.
68
PRINCIPAL STOCKHOLDERS
The following table sets forth certain
information with respect to the beneficial ownership of our
common stock, as of December 31, 2003 and as adjusted to
reflect the sale of common stock offered by us in this offering,
for:
•
each person who we know beneficially owns more
    than 5% of our common stock;
•
each of our directors;
•
each of our named executive officers; and
•
all of our directors and executive officers as a
    group.
Beneficial ownership is determined in accordance
with the rules of the SEC and includes voting or investment
power with respect to the securities. Except as indicated by
footnote, and subject to applicable community property laws,
each person identified in the table possesses sole voting and
investment power with respect to all capital stock shown to be
held by them. The number of shares of common stock outstanding,
on an as-converted basis, used in calculating the percentage for
each listed person or entity includes common stock underlying
stock options and warrants held by the person or entity that are
exercisable within 60 days of December 31, 2003, but
excludes common stock underlying stock options held by any other
person or entity. Percentage of beneficial ownership is based on
14,734,311 shares of common stock outstanding as of
December 31, 2003. The numbers shown in the table assume no
exercise shares of common stock outstanding as of
December 31, 2003. The numbers shown in the table assume no
exercise by the underwriters of their over-allotment option.
Unless otherwise indicated, the principal address of each of the
stockholders below is c/o Collegiate Funding Services LLC,
100 Riverside Parkway Suite 125, Fredericksburg, Virginia
22406.
Percentage of shares outstanding
Shares beneficially
owned prior to
Prior to this
Name of beneficial owner
this offering
offering
After this offering
5% Stockholders:
Lightyear entities
(1)(2)
10,730,784
72.8
%
CDP Financial Services (US) LP
(2)
1,701,519
11.6
TCW entities
(2)(3)
1,504,225
9.8
Executive officers and directors:
J. Barry Morrow
(2)
192,350
1.3
Kevin A. Landgraver
(2)
33,180
*
W. Clark McGhee
(2)
42,740
*
Charles L. Terribile
(2)
31,380
*
John Reeves
—
—
John R. Elam
—
—
Donald B. Marron
(1)
—
—
Lawrence A. Hough
—
—
Bruce J. Rubin
(1)
—
—
Richard J. Sterne
(1)
—
—
Mark Vassallo
(1)
—
—
All directors and executive officers as a group
    (11 persons)
299,650
2.0
*    Indicates less than 1%.
(1)
Shares shown as beneficially owned by the
    Lightyear entities are held directly by The Lightyear Fund, L.P.
    and Lightyear Co-Invest Partnership, L.P. The Lightyear Fund
    G.P., LLC is the sole general partner of each of these entities.
    Messrs. Rubin, Sterne and Vassallo are members of The
    Lightyear Fund G.P., LLC which has investment and voting control
    over the shares controlled by each of these entities, and may be
    deemed to be beneficial owners of such shares. Mr. Marron is the
    founding member of Lightyear and, as such may also be deemed to
    share beneficial ownership of the shares controlled by these
    entities. Each of The Lightyear Fund G.P., LLC and
    Messrs. Marron, Rubin, Sterne and Vassallo disclaim
    beneficial ownership of such shares. The address of each of the
    Lightyear entities is c/o Lightyear Capital, LLC, 51 West
    52nd Street, 23rd Floor, New York, New York
    10019.
(2)
Also holds shares of preferred stock of CFSL
    Acquisition Corp. in the following amounts: Lightyear
    entities—11,817,679; CDP Financial Services (US)
    LP—1,873,938; TCW entities—1,561,656; J.
    Morrow — 76,665; C. McGhee — 34,069; K.
    Landgraver — 25,551; and C. Terribile —
    25,551. Upon consummation of this offering, each will receive
    the liquidation preference ($89,136,000 in the aggregate as of
    December 31, 2003) with respect to such shares to be paid
    from the proceeds of this offering.
(3)
Includes TCW/ Crescent Mezzanine
    Partners III, L.P., TCW/ Crescent Mezzanine Trust III,
    TCW Crescent/ Mezzanine Partners III Netherlands, L.P. and
    TCW Leveraged Income Trust IV and includes
    619,048 shares issuable upon exercise of warrants for
    nominal consideration.
69
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
Our Relationship with Lightyear and Existing
Shareholders
The Lightyear Fund, L.P. is a private equity fund
based in New York. It was formed on November 3, 2000
as a limited partnership pursuant to the laws of the State of
Delaware, and commenced operations on January 1, 2001. As
an investment fund, The Lightyear Fund, L.P. seeks capital
appreciation through direct private equity and equity-related
investments, including leveraged acquisitions, buildups,
recapitalizations, restructurings, management buyouts,
pre-public offering opportunities and growth equity
transactions. The Lightyear Fund, L.P. and its affiliates, or
Lightyear, acquired their interest in us in May 2002. After
giving effect to this offering, Lightyear will beneficially
own      % of our common stock.
Under a Management Agreement, dated May 17,
2002, as amended, among us, Lightyear Capital, LLC, CFSL
Acquisition Corp. and Collegiate Funding Services, L.L.C., we
pay a management fee equal to $1.25 million per annum to
Lightyear, plus reasonable out-of-pocket expenses. In return,
Lightyear provides consulting and management advisory services,
including advice on financial and strategic corporate planning
and such other management services as Lightyear and we may
agree. As of December 31, 2003, we had no accrued liability
for management fees. Lightyear may in the future receive
customary fees for advisory services rendered to us. Such fees
will be negotiated from time to time with the independent
members of our board of directors on an arm's-length basis
and will be based on the services performed and the prevailing
fees then charged by third parties for comparable services.
Since May 2002, we have paid fees to Lightyear totaling
approximately $4.94 million, consisting of
$2.19 million in management fees and a $2.75 million
fee paid in connection with the transaction in which Lightyear
acquired its interest in our company.
Under a Stockholders Agreement dated May 17,
2002, among us, Lightyear, TCW and CDP Financial Services
(US) LP and certain investors, which we refer to as the
existing stockholders, Lightyear and such other investors have
registration rights (including with respect to this offering).
Pursuant to these registration rights, beginning 180 days
after the consummation of this offering, the existing
stockholders may demand that we register all or part of their
common stock so long as the shares to be offered pursuant to the
request have an aggregate offering price of at least
$5 million (based on the then current market price). We
will be required to fulfill such obligation except in limited
circumstances. The number of shares to be included in any such
public offering will not exceed the maximum number that can be
sold without having a material adverse effect on the success of
the offering, based on the opinion of the managing underwriter
of such offering. The existing stockholders are entitled to
demand registration of their common stock on three occasions,
together with an additional demand that may be made by TCW.
These rights may also be exercised on an unlimited number of
occasions with respect to registration statements on
Form S-3, provided that the stock to be registered has an
aggregate value of at least $10 million and we will not be
obligated to effect more than one registration in any
twelve-month period.
In addition, subject to limited exceptions, if we
propose to register any shares of our capital stock, whether or
not for sale for our own account, we are required to provide
notice to the existing stockholders, and if requested by such
stockholders, we will include their shares in the registration
statement. The shares to be included in any such public offering
will not exceed the maximum number that the managing underwriter
determines can be sold in such an offering without having a
material adverse effect on the success of the offering, with
priority given to securities sought to be included at the
request of TCW and then the other existing stockholders. These
registration rights have been waived with respect to this
offering.
We have agreed to pay all expenses (other than
underwriting commissions) and indemnify the existing
stockholders against certain liabilities, including liabilities
under the Securities Act, in connection with any registration
under the Stockholders Agreement. Other provisions of the
Stockholders Agreement
70
that pertain to management rights, rights of
first refusal, rights of co-sale, transfer restrictions,
preemptive rights and drag along rights will terminate upon
consummation of the offering.
Management
In May 2002, we loaned Mr. Morrow $337,532
to purchase our common and preferred stock. The loan was secured
by the pledge of 69,850 shares of common stock and 76,665
shares of our preferred stock. Interest accrues on the unpaid
principal at a rate of LIBOR plus 3.00%. The notes must be
repaid with proceeds from the sale of the pledged shares and the
notes are expected to be repaid at the time of the consummation
of this offering.
71
DESCRIPTION OF CAPITAL STOCK
The following description of our common stock
and preferred stock and the relevant provisions of our amended
and restated certificate of incorporation and bylaws are
summaries thereof and are qualified by reference to our amended
and restated certificate of incorporation and bylaws, copies of
which have been filed with the SEC as exhibits to our
registration statement, of which this prospectus forms a part,
and the applicable provisions of the Delaware General
Corporation Law.
Authorized Capitalization
Our authorized capital stock consists of
18,000,000 shares of Class A common stock, par value
$.001 per share, 3,000,000 shares of Class B
common stock, par value $.001 per share and
20,000,000 shares of preferred stock, par value
$0.001 per share. As of December 31, 2003,
14,486,861 shares of Class A Common Stock were issued
and outstanding, 247,450 shares of Class B Common
Stock were issued and outstanding and no shares of preferred
stock were issued and outstanding.
Immediately prior to the consummation of this
offering, the Company will effect
a                     -for-one
stock split and will amend its amended and restated certificate
of incorporation to eliminate the Class A Common Stock and
Class B Common Stock in order to create a single class of
common stock. Immediately following the consummation of this
offering, our authorized capital stock will consist
of                               shares
of common stock, par value $0.001 per share
and
shares of preferred stock, par value $0.001 per share. There are
expected to
be                      shares
of common stock issued and outstanding
(or                      shares
if the underwriters exercise their over-allotment option in
full), and no shares of preferred stock issued and
outstanding.
Common stock
Voting
rights.
Holders of common stock
are and will be entitled to one vote per share on all matters to
be voted upon by the stockholders. The holders of common stock
do not and will not have cumulative voting rights in the
election of directors.
Dividend
rights.
Holders of common stock
are and will be entitled to receive ratably dividends if, as and
when dividends are declared from time to time by our board of
directors out of funds legally available for that purpose, after
payment of dividends required to be paid on outstanding
preferred stock, as described below, if any. Our senior credit
facility imposes restrictions on our ability to declare
dividends with respect to our common stock and future agreements
may similarly restrict dividend payments.
Liquidation
rights.
Upon liquidation,
dissolution or winding up, any business combination or a sale or
disposition of all or substantially all of our assets, the
holders of common stock are and will be entitled to receive
ratably the assets available for distribution to the
stockholders after payment of liabilities and accrued but unpaid
dividends and liquidation preferences on any outstanding
preferred stock.
Other
matters.
The common stock has no
and will have no preemptive or conversion rights and is not and
will not be subject to further calls or assessment by us. There
are and will be no redemption or sinking fund provisions
applicable to the common stock. All outstanding shares of our
common stock, including the common stock offered in this
offering, are and will be, as applicable, fully paid and
non-assessable.
Preferred stock
Our certificate of incorporation authorizes and
will authorize our board of directors to establish one or more
series of preferred stock and to determine, with respect to any
series of preferred stock, the terms and rights of that series,
including:
•
the designation of the series;
72
•
the number of shares of the series, which our
    board of directors may, except where otherwise provided in the
    preferred stock designation, increase or decrease, but not below
    the number of shares then outstanding;
•
whether dividends, if any, will be cumulative or
    non-cumulative and the dividend rate of the series;
•
the dates at which dividends, if any, will be
    payable;
•
the redemption rights and price or prices, if
    any, for shares of the series;
•
the terms and amounts of any sinking fund
    provided for the purchase or redemption of shares of the series;
•
the amounts payable on shares of the series in
    the event of any voluntary or involuntary liquidation,
    dissolution or winding-up of the affairs of our company;
•
whether the shares of the series will be
    convertible into shares of any other class or series, or any
    other security, of our company or any other corporation, and, if
    so, the specification of the other class or series or other
    security, the conversion price or prices or rate or rates, any
    rate adjustments, the date or dates as of which the shares will
    be convertible and all other terms and conditions upon which the
    conversion may be made;
•
restrictions on the issuance of shares of the
    same series or of any other class or series; and
•
the voting rights, if any, of the holders of the
    series.
Warrants
As part of our acquisition by Lightyear, we
issued warrants to purchase an aggregate of 1,000,000 shares of
Class A common stock to holders of our senior notes. These
warrants expire in May 2012 and have an exercise price of
$0.01 per share. The warrants are subject to customary
anti-dilution adjustments. Additional terms of the warrants are
set forth in the warrant agreement that is filed as an exhibit
to the registration statement of which this prospectus forms a
part.
Anti-Takeover Effects of Various Provisions of
Delaware Law and Our Amended and Restated Certificate of
Incorporation and Bylaws
Certain provisions of Delaware law and our
amended and restated certificate of incorporation and amended
and restated bylaws could make more difficult the acquisition of
our company by means of a tender offer, a proxy contest, or
otherwise, and the removal of incumbent officers and directors.
These provisions are expected to discourage certain types of
coercive takeover practices and inadequate takeover bids and to
encourage persons seeking to acquire control of us to first
negotiate with us. We believe that the benefits of increased
protection of our potential ability to negotiate with the
proponent of an unfriendly or unsolicited proposal to acquire or
restructure our company outweighs the disadvantages of
discouraging such proposals, including proposals that are priced
above the then current market value of our common stock,
because, among other things, negotiation of such proposals could
result in an improvement of their terms.
Delaware anti-takeover
    statute
We are subject to Section 203 of the
Delaware General Corporation Law ("DGCL"). Subject to
specific exceptions, Section 203 prohibits a publicly held
Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for
a period of three years after the date of the transaction in
which the person became an interested stockholder, unless:
•
the "business combination" or the
    transaction in which the stockholder became an "interested
    stockholder" is approved by the board of directors prior to
    the date the "interested stockholder" attained that
    status;
73
•
upon consummation of the transaction that
    resulted in the stockholder becoming an "interested
    stockholder," the "interested stockholder" owned
    at least 85% of the voting stock of the corporation outstanding
    at the time the transaction commenced (excluding for purposes of
    determining the voting stock outstanding, voting stock owned by
    the interested stockholder, those shares owned by persons who
    are directors and also officers, and employee stock plans in
    which employee participants do not have the right to determine
    confidentially whether shares held subject to the plan will be
    tendered in a tender or exchange offer); or
•
on or subsequent to the date a person became an
    "interested stockholder," the "business
    combination" is approved by the board of directors and
    authorized at an annual or special meeting of stockholders by
    the affirmative vote of at least two-thirds of the outstanding
    voting stock that is not owned by the "interested
    stockholder."
"Business combinations" include
mergers, asset sales and other transactions resulting in a
financial benefit to the "interested stockholder."
Subject to various exceptions, an "interested
stockholder" is a person who, together with his or her
affiliates and associates, owns, or within the preceding three
years did own, 15% or more of the corporation's outstanding
voting stock. These restrictions could prohibit or delay the
accomplishment of mergers or other takeover or change in control
attempts with respect to us and, therefore, may discourage
attempts to acquire us.
In addition, various provisions of our
certificate of incorporation and bylaws, which are summarized in
the following paragraphs, may have an anti-takeover effect and
may delay, defer or prevent a tender offer or takeover attempt
that a stockholder might consider in its best interest,
including those attempts that might result in a premium over the
market price for the shares held by stockholders.
Classified board
Our amended and restated certificate of
incorporation will provide that our board of directors will be
divided into three classes of directors, with the classes to be
as nearly equal in number as possible. As a result,
approximately one-third of our board of directors will be
elected each year. The classification of directors will have the
effect of making it more difficult for stockholders to change
the composition of our board. Our amended and restated
certificate of incorporation will provide that, subject to any
rights of holders of preferred stock to elect additional
directors under specified circumstances, the number of directors
will be fixed in the manner provided in the bylaws. Our amended
and restated certificate of incorporation and bylaws will
provide that the number of directors will be fixed from time to
time exclusively pursuant to a resolution adopted by the board,
but must consist of not less than three or more than
eleven directors.
Removal of directors;
    vacancies
Under the DGCL, unless otherwise provided in our
amended and restated certificate of incorporation, directors
serving on a classified board may be removed by the stockholders
only for cause. Our amended and restated certificate of
incorporation and the bylaws will provide that directors may be
removed only for cause and only upon the affirmative vote of
holders of at least 80% of the voting power of all the then
outstanding shares of stock entitled to vote generally in the
election of directors, voting together as a single class. In
addition, our bylaws also provide that any vacancies on our
board of directors will be filled only by the affirmative vote
of a majority of the remaining directors, even if the number of
directors voting would not constitute a quorum.
No stockholder action by written consent;
    calling of special meetings of stockholders
Our amended and restated certificate of
incorporation will prohibit stockholder action by written
consent. It will also provide that special meetings of our
stockholders may be called only by our chief executive officer
or by our board of directors.
74
Advance notice requirements for stockholder
    proposals and director nominations
Our bylaws will provide that stockholders seeking
to nominate candidates for election as directors or to bring
business before an annual meeting of stockholders must provide
timely notice of their proposal in writing to the corporate
secretary.
Generally, to be timely, a stockholder's
notice must be received at our principal executive offices not
less than 90 nor more than 120 days prior to the first
anniversary of the date on which the company first mailed its
proxy materials for the previous year's annual meeting. Our
bylaws also specify requirements as to the form and content of a
stockholder's notice. These provisions may impede
stockholders' ability to bring matters before an annual
meeting of stockholders or make nominations for directors at an
annual meeting of stockholders.
Limitations on liability and
    indemnification of officers and directors
The DGCL authorizes corporations to limit or
eliminate the personal liability of directors to corporations
and their stockholders for monetary damages for breaches of
directors' fiduciary duties. Our amended and restated
certificate of incorporation includes a provision that
eliminates the personal liability of directors for monetary
damages for actions taken as a director, except for liability:
•
for breach of duty of loyalty;
•
for acts or omissions not in good faith or
    involving intentional misconduct or knowing violation of law;
•
under Section 174 of the DGCL (unlawful
    dividends); or
•
for transactions from which the director derived
    improper personal benefit.
Our amended and restated certificate of
incorporation and bylaws provide that we must indemnify our
directors and officers to the fullest extent authorized by the
DGCL. We are also expressly authorized to carry directors'
and officers' insurance providing indemnification for our
directors, officers and certain employees for some liabilities.
We believe that these indemnification provisions and insurance
are useful to attract and retain qualified directors and
executive officers.
The limitation of liability and indemnification
provisions in our amended and restated certificate of
incorporation and bylaws may discourage stockholders from
bringing a lawsuit against directors for breach of their
fiduciary duty. These provisions may also have the effect of
reducing the likelihood of derivative litigation against
directors and officers, even though such an action, if
successful, might otherwise benefit us and our stockholders. In
addition, your investment may be adversely affected to the
extent we pay the costs of settlement and damage awards against
directors and officers pursuant to these indemnification
provisions.
There is currently no pending material litigation
or proceeding involving any of our directors, officers or
employees for which indemnification is sought.
Supermajority provisions
The DGCL provides generally that the affirmative
vote of a majority of the outstanding shares entitled to vote is
required to amend a corporation's certificate of
incorporation or bylaws, unless the certificate of incorporation
requires a greater percentage. Our amended and restated
certificate of incorporation will provide that the following
provisions in the certificate of incorporation may be amended
only by a vote of 80% or more of all of the outstanding shares
of our stock entitled to vote:
•
classified board (the election and term of our
    directors);
•
the removal of directors;
•
the prohibition on stockholder action by written
    consent;
75
•
the ability to call a special meeting of
    stockholders being vested solely in our chief executive officer
    and the board of directors;
•
the limitation on the liability of our directors
    to us and our stockholders; and
•
the obligation to indemnify the directors and
    officers to the fullest extent authorized by the DGCL.
In addition, our amended and restated certificate
of incorporation will grant our board of directors the authority
to amend and repeal our bylaws without a stockholder vote in any
manner not inconsistent with the laws of the State of Delaware
or our certificate of incorporation. Our amended and restated
certificate of incorporation will also provide that, except with
respect to amendments proposed by our board of directors, these
provisions in our bylaws may be amended only by a vote of 80% or
more of all of the outstanding shares of our common stock
entitled to vote.
Authorized but Unissued Capital
Stock
The DGCL does not require stockholder approval
for any issuance of authorized shares. However, the listing
requirements of
the                     ,
which would apply so long as our common stock is listed on
the                     ,
require stockholder approval of certain issuances equal to or
exceeding   % of the then-outstanding voting power or
then outstanding number of shares of common stock. These
additional shares may be used for a variety of corporate
purposes, including future public offerings, to raise additional
capital or to facilitate acquisitions.
One of the effects of the existence of unissued
and unreserved common stock or preferred stock may be to enable
our board of directors to issue shares to persons friendly to
current management, which issuance could render more difficult
or discourage an attempt to obtain control of our company by
means of a merger, tender offer, proxy contest or otherwise, and
thereby protect the continuity of our management and possibly
deprive the stockholders of opportunities to sell their shares
of common stock at prices higher than prevailing market prices.
Transfer Agent and Registrar
is the transfer agent and registrar for our
common stock.
Listing
We propose to list our common stock on
the                     ,
subject to official notice of issuance, under the symbol
"                    ."
CFSL Acquisition Corp. preferred
stock
As of April 4, 2004, our subsidiary, CFSL
Acquisition Corp., had 17,062,830 shares of preferred stock
issued and outstanding. Immediately following the consummation
of this offering, we expect to pay the liquidation preference of
this preferred stock. As of December 31, 2003, the
liquidation preference of this preferred stock was $89,136,000
in the aggregate.
76
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has not been any
public market for our common stock, and we cannot predict what
effect, if any, market sales of shares of common stock or the
availability of shares of common stock for sale will have on the
market price of our common stock. Nevertheless, sales of
substantial amounts of common stock, including shares issued
upon the exercise of outstanding options, in the public market,
or the perception that such sales could occur, could materially
and adversely affect the market price of our common stock and
could impair our future ability to raise capital through the
sale of our equity or equity-related securities at a time and
price that we deem appropriate.
Upon the closing of this offering, we will have
outstanding an aggregate of
approximately            million
shares of common stock, assuming no exercise of the
over-allotment option. In addition, we will have
reserved                shares
of common stock for issuance pursuant to the Stock Incentive
Plan. Of the outstanding shares, the shares sold in this
offering will be freely tradable without restriction or further
registration under the Securities Act, except that any shares
held by our "affiliates," as that term is defined
under Rule 144 of the Securities Act, may be sold only in
compliance with the limitations described below. The remaining
outstanding shares of common stock and any of the shares issued
pursuant to the Stock Incentive Plan will be deemed
"restricted securities" as that term is defined under
Rule 144. Restricted securities may be sold in the public
market only if registered or if they qualify for an exemption
from registration under Rule 144 or 144(k) under the
Securities Act, which are summarized below.
Subject to the lock-up agreements described below
and the provisions of Rules 144 and 144(k), additional
shares of our common stock will be available for sale in the
public market under exemptions from registration requirements as
follows:
Number of shares
Date
At various times after 180 days from the
    date of this prospectus (subject to volume limitations and other
    conditions under Rule 144)
At various times after 180 days from the
    date of this prospectus (Rule 144(k))
Rule 144
In general, under Rule 144 as currently in
effect, a person (or persons whose shares are required to be
aggregated), including an affiliate, who has beneficially owned
shares of our common stock for at least one year is entitled to
sell in any three-month period a number of shares that does not
exceed the greater of:
•
1% of the then-outstanding shares of common stock
    or
    approximately            shares
    assuming no exercise of the over-allotment option; and
•
the average weekly reported volume of trading in
    the common stock on
    the                          during
    the four calendar weeks preceding the date on which notice of
    sale is filed, subject to restrictions.
Sales under Rule 144 are also subject to
manner of sale provisions and notice requirements and to the
availability of current public information about us.
Rule 144(k)
In addition, a person who is not deemed to have
been an affiliate of ours at any time during the 90 days
preceding a sale and who has beneficially owned the shares
proposed to be sold for at least two years, would be entitled to
sell those shares under Rule 144(k) without regard to the
manner of sale, public information, volume limitation or notice
requirements of Rule 144. To the extent that our affiliates
sell their shares, other than pursuant to Rule 144 or a
registration statement, the purchaser's holding period for
the purpose of effecting a sale under Rule 144 commences on
the date of transfer from the affiliate.
77
Lock-Up Agreements
We intend to obtain lock-up agreements from all
of our officers, directors and stockholders, holding
substantially all of our outstanding common stock, including
Lightyear and certain other investors, under which they will
agree not to transfer or dispose of, directly of indirectly, any
shares of common stock or any securities convertible into or
exercisable or exchangeable for shares of common stock, for a
period of 180 days after the date of this prospectus
without the prior written consent of both J.P. Morgan
Securities Inc. and Merrill Lynch, Pierce, Fenner &
Smith Incorporated, subject to limited exceptions.
Stock Options
Pursuant to our Stock Incentive Plan, we have
granted options to purchase approximately 315,000 shares of our
common stock. Of these, options to purchase 56,700 shares are
currently vested and exercisable and the remaining 258,300
options will become fully vested and exercisable after seven
years or upon satisfaction of certain terms and conditions or
upon a change of control. We have reserved 385,000 shares for
future issuance under our Stock Incentive Plan and prior to the
offering, we intend to increase the number of shares of common
stock available for future issuance.
Following the consummation of this offering, we
intend to file one or more registration statements on
Form S-8 under the Securities Act to register all shares of
common stock subject to outstanding stock options and options
issuable under our stock incentive plan. After expiration of the
applicable contractual resale restrictions, shares covered by
these registration statements will be eligible for sale in the
public markets, other than shares owned by our affiliates, which
may be sold in the public market if they are registered or
qualify for an exemption from registration under Rule 144.
78
CERTAIN UNITED STATES TAX CONSEQUENCES TO
NON-U.S. HOLDERS
The following summary describes the material
United States federal income and estate tax consequences of the
ownership of our common stock by a
"non-U.S. holder," as defined below, as of the
date of this prospectus. This discussion does not address all
aspects of United States federal income and estate taxes and
does not deal with foreign, state and local consequences that
may be relevant to non-U.S. holders in light of their
personal circumstances. Special rules may apply to certain
non-U.S. holders, such as United States expatriates,
"controlled foreign corporations," "passive
foreign investment companies," "foreign personal
holding companies," corporations that accumulate earnings
to avoid United States federal income tax, and investors in
pass-through entities that are subject to special treatment
under the Internal Revenue Code of 1986, which we refer to as
the "Code." These non-U.S. holders should consult
their own tax advisors to determine the United States federal,
state, local and other tax consequences that may be relevant to
them. Furthermore, the discussion below is based upon the
provisions of the Code, and United States Treasury regulations,
rulings and judicial decisions under the Code as of the date of
this prospectus, and these authorities may be repealed, revoked
or modified, perhaps retroactively, so as to result in United
States federal income and estate tax consequences different from
those discussed below.
Persons considering the ownership of
our common stock should consult their own tax advisors
concerning the United States federal income and estate tax
consequences in light of their particular situations as well as
any consequences arising under the laws of any other taxing
jurisdiction.
If a partnership holds our common stock, the tax
treatment of a partner will generally depend upon the status of
the partner and the activities of the partnership. Persons who
are partners of partnerships holding our common stock should
consult their own tax advisors.
As used in this section of the prospectus, a
"non-U.S. holder" means a beneficial owner of our
common stock, other than an entity treated as a partnership,
that is not any of the following for United States federal
income tax purposes:
•
a citizen or resident of the United States,
•
a corporation created or organized in or under
    the laws of the United States or any political subdivision of
    the United States,
•
an estate the income of which is subject to
    United States federal income taxation regardless of its
    source, or
•
a trust if it (1) is subject to the primary
    supervision of a court within the United States and one or more
    United States persons have the authority to control all
    substantial decisions of the trust or (2) has a valid
    election in effect under applicable United States Treasury
    regulations to be treated as a United States person.
Dividends
Dividends paid to a non-U.S. holder of our
common stock generally will be subject to withholding of United
States federal income tax at a 30% rate or such lower rate as
may be specified by an applicable income tax treaty. However,
dividends that are effectively connected with the conduct of a
trade or business by the non-U.S. holder within the United
States and, where a tax treaty applies, are attributable to a
United States permanent establishment of the
non-U.S. holder, are not subject to the withholding tax,
provided certain certification and disclosure requirements are
satisfied. Instead, such dividends are subject to United States
federal income tax on a net income basis in the same manner as
if the non-U.S. holder were a United States person as
defined under the Code. Any such effectively connected dividends
received by a foreign corporation may be subject to an
additional "branch profits tax" at a 30% rate or such
lower rate as may be specified by an applicable income tax
treaty.
79
A non-U.S. holder of our common stock who
wishes to claim the benefit of an applicable treaty rate and
avoid backup withholding, as discussed below, for dividends,
will be required to (a) complete Internal Revenue Service
Form W-8BEN or other applicable form and certify under
penalty of perjury that such holder is not a United States
person or (b) if the common stock is held through certain
foreign intermediaries, satisfy the relevant certification
requirements of applicable United States Treasury regulations.
Special certification and other requirements apply to certain
non-U.S. holders that are entities rather than individuals.
A non-U.S. holder of our common stock
eligible for a reduced rate of United States withholding tax
pursuant to an income tax treaty may obtain a refund of any
excess amounts withheld by filing an appropriate claim for
refund with the Internal Revenue Service.
Gain on Disposition of Our Common
Stock
A non-U.S. holder generally will not be
subject to United States federal income tax with respect to gain
recognized on a sale or other disposition of our common stock
unless one of the following applies:
•
the gain is effectively connected with a trade or
    business of the non-U.S. holder in the United States, and,
    where a tax treaty applies, is attributable to a United States
    permanent establishment of the non-U.S. holder,
•
in the case of a non-U.S. holder who is an
    individual and holds the common stock as a capital asset, such
    holder is present in the United States for 183 or more days in
    the taxable year of the sale or other disposition and certain
    other conditions are met, or
•
we are or have been a "United States real
    property holding corporation" for United States federal
    income tax purposes.
An individual non-U.S. holder described in
the first bullet point immediately above will be subject to tax
on the net gain derived from the sale under regular graduated
United States federal income tax rates. An individual
non-U.S. holder described in the second bullet point
immediately above will be subject to a flat 30% tax on the gain
derived from the sale, which may be offset by United States
source capital losses, even though the individual is not
considered a resident of the United States. If a
non-U.S. holder that is a foreign corporation falls under
the first bullet point immediately above, it will be subject to
tax on its net gain in the same manner as if it were a United
States person as defined under the Code and, in addition, may be
subject to the branch profits tax equal to 30% of its
effectively connected earnings and profits or at such lower rate
as may be specified by an applicable income tax treaty.
We believe we are not, and do not anticipate
becoming, a "United States real property holding
corporation" for United States federal income tax purposes.
Federal Estate Tax
Common stock held by an individual
non-U.S. holder at the time of death will be included in
such holder's gross estate for United States federal estate
tax purposes, unless an applicable estate tax treaty provides
otherwise.
Information Reporting and Backup
Withholding
We must report annually to the Internal Revenue
Service and to each non-U.S. holder the amount of dividends
paid to such holder and the tax withheld with respect to such
dividends, regardless of whether withholding was required.
Copies of the information returns reporting such dividends and
withholding may also be made available to the tax authorities in
the country in which the non-U.S. holder resides under the
provisions of an applicable income tax treaty.
80
A non-U.S. holder will be subject to backup
withholding for dividends paid to such holder unless such holder
certifies under penalty of perjury that it is a
non-U.S. holder, and the payor does not have actual
knowledge or reason to know that such holder is a United States
person, or such holder otherwise establishes an exemption.
Information reporting and, depending on the
circumstances, backup withholding will apply to the proceeds of
a sale of our common stock within the United States or conducted
through United States-related financial intermediaries unless
the beneficial owner certifies under penalty of perjury that it
is a non-U.S. holder, and the payor does not have actual
knowledge or reason to know that the beneficial owner is a
United States person, or such owner otherwise establishes an
exemption.
Any amounts withheld under the backup withholding
rules may be allowed as a refund or a credit against such
holder's United States federal income tax liability
provided the required information is furnished to the Internal
Revenue Service.
81
UNDERWRITING
We are offering the shares of common stock
described in this prospectus through a number of underwriters.
J.P. Morgan Securities Inc. and Merrill Lynch, Pierce,
Fenner & Smith Incorporated are acting as joint
book-running managers of the offering and as representatives of
the underwriters. We have entered into a firm commitment
underwriting agreement with the representatives. Subject to the
terms and conditions of the underwriting agreement, we have
agreed to sell to the underwriters, and each underwriter has
agreed to purchase, at the public offering price less the
underwriting discounts and commissions set forth on the cover
page of this prospectus, the number of shares of common stock
listed next to its name in the following table:
Number of
Underwriters
shares
J.P. Morgan Securities Inc.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Total
You may contact the representatives of the
underwriters at the addresses set forth below for information on
how to purchase common shares in this offering. You may contact
J.P. Morgan Securities Inc. at 277 Park Avenue,
New York, New York 10172 and Merrill Lynch, Pierce,
Fenner & Smith Incorporated at 4 World Financial
Center, New York, New York 10080.
The underwriting agreement provides that the
obligations of the underwriters are subject to certain
conditions precedent, including the absence of any material
adverse change in our business and the receipt of certain
certificates, opinions and letters from us, our counsel and the
independent auditors. The underwriters are committed to purchase
all the common shares offered by us if they purchase any shares.
The underwriters propose to offer the common
shares directly to the public at the initial public offering
price set forth on the cover page of this prospectus and to
certain dealers at that price less a concession not in excess of
$           per
share. Any such dealers may resell shares to certain other
brokers or dealers at a discount of up to
$           per
share from the initial public offering price. After the initial
public offering of the shares, the offering price and other
selling terms may be changed by the underwriters. The
representatives have advised us that the underwriters do not
intend to confirm discretionary sales in excess of 5% of the
common shares offered in this offering.
The underwriters have an option to buy up
to                     additional
shares of common stock from us to cover sales of shares by the
underwriters which exceed the number of shares specified in the
table above. The underwriters have 30 days from the date of
this prospectus to exercise this option. If any shares are
purchased with this option, the underwriters will purchase
shares in approximately the same proportion as shown in the
table above. If any additional shares of common stock are
purchased, the underwriters will offer the additional shares on
the same terms as those on which the shares are being offered.
We will pay the expenses associated with the exercise of the
over-allotment option.
The underwriting fee is equal to the public
offering price per share of common stock less the amount paid by
the underwriters to us per share of common stock. The
underwriting fee is
$           per
share. The following table shows the per share and total
underwriting discounts and commissions to be paid to the
underwriters assuming both no exercise and full exercise of the
underwriters' option to purchase additional shares.
Underwriting Discounts and
Commissions
Without
With
over-allotment
over-allotment
exercise
exercise
Per Share
$
$
Total
$
$
82
We estimate that the total expenses of this
offering, including registration, filing and listing fees,
printing fees, transfer agents' fees and legal and
accounting expenses, but excluding the underwriting discount,
will be approximately
$          .
A prospectus in electronic format may be made
available on the web sites maintained by one or more
underwriters, or selling group members, if any, participating in
the offering. The underwriters may agree to allocate a number of
shares to underwriters and selling group members for sale to
their online brokerage account holders. Internet distributions
will be allocated by the joint book-running managers to
underwriters and selling group members that may make Internet
distributions on the same basis as other allocations.
We and our directors, executive officers and our
existing stockholders have entered into lock-up agreements with
the underwriters prior to the commencement of this offering
pursuant to which we and such holders of stock have agreed, with
limited exceptions, that without the prior written consent of
both J.P. Morgan Securities Inc. and Merrill Lynch, Pierce,
Fenner & Smith Incorporated, for a period of
180 days after the date of this prospectus not to
(1) offer, pledge, announce the intention to sell, sell,
contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right
or warrant to purchase, or otherwise transfer or dispose of,
directly or indirectly, any shares of our common stock or any
securities convertible into or exercisable or exchangeable for
shares of our common stock (including, without limitation,
common stock which may be deemed to be beneficially owned by
such directors, executive officers and stockholders in
accordance with the rules and regulations of the SEC and
securities which may be issued upon exercise of a stock option
or warrant) or (2) enter into any swap or other agreement
that transfers, in whole or in part, any of the economic
consequences of ownership of the common stock, whether any such
transaction described in clause (1) or (2) above is to be
settled by delivery of common stock or such other securities, in
cash or otherwise. The lock-up agreement with the Company is
subject to the following exceptions:
•
shares of common stock to be issued in this
    offering;
•
issuances of common stock pursuant to employee
    benefit plans, stock option plans or other employee compensation
    plans existing on the date of this prospectus;
•
issuances of common stock pursuant to the
    exercise of options, warrants or rights outstanding on the date
    of this prospectus;
•
grants of options pursuant to employee benefit
    plans, stock option plans or other employee compensation plans
    existing on the date of this prospectus; and
•
issuances of common stock in connection with a
    bona fide business acquisition made by us which involves a third
    party that is not our affiliate, provided that the recipient of
    the shares agrees to be bound by these lock-up arrangements.
We have agreed to indemnify the underwriters
against certain liabilities, including liabilities under the
Securities Act of 1933.
In connection with this offering, the
underwriters may engage in stabilizing transactions, which
involves making bids for, purchasing and selling shares of
common stock in the open market for the purpose of preventing or
retarding a decline in the market price of the common stock
while this offering is in progress.
These stabilizing transactions may include making
short sales of the common stock, which involves the sale by the
underwriters of a greater number of shares of common stock than
they are required to purchase in this offering, and purchasing
shares of common stock on the open market to cover positions
created by short sales. Short sales may be "covered"
shorts, which are short positions in an amount not greater than
the underwriters' over-allotment option referred to above,
or may be "naked" shorts, which are short positions in
excess of that amount.
The underwriters may close out any covered short
position either by exercising their over-allotment option, in
whole or in part, or by purchasing shares in the open market. In
making this determination, the underwriters will consider, among
other things, the price of shares available for purchase in the
open
83
market compared to the price at which the
underwriters may purchase shares through the over-allotment
option.
A naked short position is more likely to be
created if the underwriters are concerned that there may be
downward pressure on the price of the common stock in the open
market that could adversely affect investors who purchased in
this offering. To the extent that the underwriters create a
naked short position, they will purchase shares in the open
market to cover the position.
The underwriters have advised us that, pursuant
to Regulation M of the Securities Act of 1933, they may
also engage in other activities that stabilize, maintain or
otherwise affect the price of the common stock, including the
imposition of penalty bids. This means that if the
representatives of the underwriters purchase common stock in the
open market in stabilizing transactions or to cover short sales,
the representatives can require the underwriters that sold those
shares as part of this offering to repay the underwriting
discount received by them.
These activities may have the effect of raising
or maintaining the market price of the common stock or
preventing or retarding a decline in the market price of the
common stock, and, as a result, the price of the common stock
may be higher than the price that otherwise might exist in the
open market. If the underwriters commence these activities, they
may discontinue them at any time. The underwriters may carry out
these transactions on
the                          ,
in the over-the-counter market or otherwise.
Prior to this offering, there has been no public
market for our common stock. The initial public offering price
will be determined by negotiation between us and the
representatives of the underwriters. In determining the initial
public offering price, we and the representatives of the
underwriters expect to consider a number of factors including:
•
the history of and prospects for our company and
    the industry in which we compete;
•
an assessment of our management;
•
our present operations;
•
our historical results of operations;
•
the trend of our revenues and earnings;
•
our earnings prospects;
•
the prevailing market conditions of the
    applicable United States securities market at the time of this
    offering, market valuations of publicly traded companies that we
    and the representatives of the underwriters believe to be
    comparable to our company; and
•
other factors deemed relevant.
Neither we nor the underwriters can assure
investors that an active trading market will develop for our
common shares or that the shares will trade in the public market
at or above the initial public offering price.
Because an affiliate of J.P. Morgan
Securities Inc. is a lender under a revolving credit agreement
to be repaid by us and will receive more than 10% of the net
proceeds of this offering, that underwriter may be deemed to
have a "conflict of interest" under
Rule 2710(c)(8) of the Conduct Rules of the National
Association of Securities Dealers. Accordingly, this offering
will be made in compliance with the applicable provisions of
Rule 2720 of the Conduct Rules. In accordance with this
rule, the initial public offering price is no higher than that
recommended by a "qualified independent underwriter"
meeting certain standards. In accordance with this requirement,
Merrill Lynch, Pierce, Fenner & Smith Incorporated has
assumed the responsibilities of acting as a qualified
independent underwriter and has recommended a price in
compliance with the requirements of Rule 2720. Merrill
Lynch, Pierce, Fenner & Smith Incorporated, in its role
as qualified independent underwriter, has performed due
diligence investigations and reviewed and participated in the
preparation of this prospectus and the registration statement of
which this prospectus is a part. We have agreed to indemnify
Merrill Lynch, Pierce,
84
Fenner & Smith Incorporated for acting
as a qualified independent underwriter against specified
liabilities under the Securities Act.
From time to time, certain of the underwriters
and their affiliates have provided, and continue to provide,
investment and other commercial banking services to us in the
ordinary course of business, for which they have received and
may continue to receive customary fees and commissions. For
example, J.P. Morgan Securities Inc. has underwritten
certain of our asset-backed securities. We have also entered
into a $45.0 million revolving credit facility with
JPMorgan Chase Bank, an affiliate of J.P. Morgan Securities
Inc., which we intend to repay with proceeds from this offering.
85
LEGAL MATTERS
The validity of the issuance of the shares of
common stock to be sold in this offering will be passed upon for
us by Simpson Thacher & Bartlett LLP, New York,
New York. Legal matters in connection with this offering
are being passed upon for the underwriters by Davis
Polk & Wardwell, New York, New York.
EXPERTS
Ernst & Young LLP, independent auditors,
have audited our consolidated financial statements as of
December 31, 2003 and 2002 and for the year ended
December 31, 2003 and the period May 17, 2002 through
December 31, 2002, and the consolidated financial
statements of our predecessor, Collegiate Funding Services, LLC
for the period January 1, 2002 through May 16, 2002,
as set forth in their report. We have included these financial
statements in the prospectus and elsewhere in the registration
statement in reliance on Ernst & Young LLP's
report, given on their authority as experts in accounting and
auditing.
PBGH LLP, independent auditors, have audited our
predecessor's financial statements for the year ended
December 31, 2001, as set forth in their report. We have
included our financial statements in the prospectus and
elsewhere in the registration statement in reliance upon PBGH
LLP's report, given on their authority as experts in
accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL
INFORMATION
We have filed with the Securities and Exchange
Commission (the "SEC") a registration statement on
Form S-1 under the Securities Act with respect to the
issuance of shares of our common stock being offered hereby.
This prospectus, which forms a part of the registration
statement, does not contain all of the information set forth in
the registration statement. For further information with respect
to us and the shares of our common stock, reference is made to
the registration statement. Statements contained in this
prospectus as to the contents of any contract or other document
are not necessarily complete, and, where such contract or other
document is an exhibit to the registration statement, each such
statement is qualified by the provisions in such exhibit, to
which reference is hereby made. We are not currently subject to
the informational requirements of the Exchange Act. As a result
of the offering of the shares of our common stock, we will
become subject to the informational requirements of the Exchange
Act, and, in accordance therewith, will file reports and other
information with the SEC. The registration statement, such
reports and other information can be inspected and copied at the
Public Reference Room of the SEC located at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W.,
Washington D.C. 20549. Copies of such materials, including
copies of all or any portion of the registration statement, can
be obtained from the Public Reference Room of the SEC at
prescribed rates. You can call the SEC at 1-800-SEC-0330 to
obtain information on the operation of the Public Reference
Room. Such materials may also be accessed electronically by
means of the SEC's home page on the Internet
(http://www.sec.gov).
86
Collegiate Funding Services, Inc.
INDEX TO FINANCIAL STATEMENTS
Page
Consolidated financial statements of
    Collegiate Funding Services, Inc. and Predecessor
Report of Ernst & Young LLP, independent
    auditors
F-2
Report of PBGH LLP, independent auditors
F-3
Consolidated balance sheets as of
    December 31, 2003 and 2002
F-4
Consolidated statements of income for the year
    ended December 31, 2003, the periods May 17, 2002
    through December 31, 2002 and January 1, 2002 through
    May 16, 2002 and the year ended December 31, 2001
F-5
Consolidated statements of equity for the year
    ended December 31, 2003, the periods May 17, 2002
    through December 31, 2002 and January 1, 2002 through
    May 16, 2002 and the year ended December 31, 2001
F-6
Consolidated statements of cash flows for the
    year ended December 31, 2003, the periods May 17, 2002
    through December 31, 2002 and January 1, 2002 through
    May 16, 2002 and the year ended December 31, 2001
F-7
Notes to consolidated financial statements
F-8
F-1
REPORT OF INDEPENDENT AUDITORS
To Collegiate Funding Services, Inc.
We have audited the accompanying consolidated
balance sheets of Collegiate Funding Services, Inc., formerly
CFSL Holdings Corp. (the Company), as of December 31, 2003
and 2002 and the related consolidated statements of income,
equity and cash flows for the year ended December 31, 2003
and the period May 17, 2002 through December 31, 2002.
We have also audited the accompanying statements of income,
equity and cash flows of Collegiate Funding Services, LLC
(Predecessor) for the period January 1, 2002 through
May 16, 2002. These financial statements are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with
auditing standards generally accepted in the United States.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of the Company at
December 31, 2003 and 2002 and the consolidated results of
its operations and cash flows for the year ended
December 31, 2003 and for the period May 17 through
December 31, 2002, and the results of the
Predecessor's operations and cash flows for the period
January 1, 2002, through May 16, 2002, in conformity
with accounting principles generally accepted in the United
States.
/s/ ERNST & YOUNG LLP
McLean, Virginia
March 6, 2004
F-2
INDEPENDENT AUDITOR'S REPORT
To the Members
Collegiate Funding Services, LLC
Fredericksburg, Virginia
We have audited the accompanying consolidated
statements of income, members' equity, and cash flows of
Collegiate Funding Services, LLC (the "Company") for
the year ended December 31, 2001. These financial
statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with
auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the consolidated financial
statements referred to above present fairly, in all material
respects, the results of the Company's operations and cash
flows for the year ended December 31, 2001 in conformity
with accounting principles generally accepted in the United
States of America.
/s/ PBGH LLP
Fredericksburg, Virginia
March 5, 2002
F-3
COLLEGIATE FUNDING SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
December 31,
2003
2002
Assets
Cash and cash equivalents
$
14,436
$
32,535
Restricted cash
105,355
41,608
Accounts receivable
2,624
1,051
Student loans, net of allowance of $4,136 and
    $1,925, respectively
2,856,428
973,055
Accrued interest receivable
17,923
6,436
Income taxes receivable
7,694
2,195
Property and equipment, net
12,095
4,891
Goodwill
160,705
152,552
Deferred financing costs, net
12,245
6,532
Other assets
2,777
647
Total assets
$
3,192,282
$
1,221,502
Liabilities, preferred stock of consolidated
    subsidiary and stockholders' equity
Liabilities
Asset-backed notes and lines of credit
$
3,000,866
$
1,027,200
Other debt obligations, net
40,531
108,604
Capital lease obligations
1,896
—
Accounts payable
2,234
578
Accrued interest payable
2,385
966
Other accrued liabilities
19,360
6,071
Deferred income taxes
10,683
3,661
Total liabilities
3,077,955
1,147,080
Preferred stock of consolidated
    subsidiary
89,136
50,262
Stockholders' equity
Common stock — Class A —
    par value $0.001, 18,000,000 shares authorized, 14,486,861
    and 8,052,550 shares issued and outstanding, respectively
14
8
Common stock — Class B —
    par value $0.001, 3,000,000 shares authorized,
    247,450 shares issued and outstanding
—
—
Deferred compensation
(107
)
(140
)
Notes receivable
(509
)
(713
)
Additional paid-in capital
20,562
12,323
Retained earnings
5,231
12,682
Total stockholders' equity
25,191
24,160
Total liabilities, preferred stock of
    consolidated subsidiary and stockholders' equity
$
3,192,282
$
1,221,502
See accompanying notes.
F-4
COLLEGIATE FUNDING SERVICES, INC. AND
PREDECESSOR
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share
data)
Predecessor
Period
Period May
January 1
Year Ended
17 through
through
Year Ended
December 31,
December 31,
May 16,
December 31,
2003
2002
2002
2001
Net revenue
Interest income
$
61,846
$
18,804
$
7,454
$
1,623
Interest expense
39,871
21,309
4,692
2,553
Net interest income (expense)
21,975
(2,505
)
2,762
(930
)
Provision for loan losses
2,357
1,270
752
—
Net interest income (expense) after provision for
    loan losses
19,618
(3,775
)
2,010
(930
)
Fee income
98,558
84,396
36,427
131,567
Net revenue
118,176
80,621
38,437
130,637
Expenses
Salaries and related benefits
54,640
30,601
16,819
40,863
Other selling, general and administrative
    expenses:
Marketing and mailing costs
25,006
11,164
2,613
12,365
Communications and data processing
7,515
5,156
1,712
2,375
Management and consulting fees
3,313
1,250
2,800
6,720
Professional fees
6,315
1,608
603
710
Depreciation and amortization
4,328
1,244
754
1,094
Other general and administrative
8,326
3,261
2,176
4,698
Total other selling, general and administrative
    expenses
54,803
23,683
10,658
27,962
Swap interest
3,439
—
—
—
Derivative mark-to-market
1,862
—
—
—
Debt extinguishment
4,824
—
—
—
Total expenses
119,568
54,284
27,477
68,825
Income (loss) before income taxes and accretion
    of dividends on preferred stock
(1,392
)
26,337
10,960
61,812
Income tax provision (benefit)
(196
)
10,726
—
—
Income (loss) before accretion of dividends
(1,196
)
15,611
10,960
61,812
Accretion of dividends on preferred stock
6,255
2,929
—
—
Net income (loss)
$
(7,451
)
$
12,682
$
10,960
$
61,812
Earnings (loss) per common share, basic
$
(0.69
)
$
1.53
Earnings (loss) per common share, diluted
$
(0.69
)
$
1.26
Weighted average common shares outstanding, basic
10,783,059
8,300,000
Weighted average common shares outstanding,
    diluted
10,783,059
10,068,346
See accompanying notes.
F-5
COLLEGIATE FUNDING SERVICES, INC. AND
PREDECESSOR
CONSOLIDATED STATEMENTS OF EQUITY
(dollars in thousands)
Class A
Class B
Additional
Member
common
common
Deferred
Notes
paid-in
Retained
interest
stock
stock
compensation
receivable
capital
earnings
Total
Predecessor Balance, December 31, 2000
$
11,111
$
—
$
—
$
—
$
—
$
—
$
—
$
11,111
Distributions to Members
(62,004
)
—
—
—
—
—
—
(62,004
)
Acquisition of related entity
(1,910
)
—
—
—
—
—
—
(1,910
)
Net Income
61,812
—
—
—
—
—
—
61,812
Predecessor Balance, December 31, 2001
$
9,009
$
—
$
—
$
—
$
—
$
—
$
—
$
9,009
Net income-January 1, 2002 Through
    May 16, 2002
10,960
—
—
—
—
—
—
10,960
Distributions to members
(13,266
)
—
—
—
—
—
—
(13,266
)
Predecessor Balance, May 16, 2002
$
6,703
$
—
$
—
$
—
$
—
$
—
$
—
$
6,703
Acquisition by CSFL Holding Corp.
(6,703
)
—
—
—
—
—
—
(6,703
)
Issuance of Class A Common Stock
—
8
—
—
—
10,460
—
10,468
Issuance of Class B Common Stock
—
—
—
—
—
322
—
322
Issuance of warrants
—
—
—
—
—
1,401
—
1,401
Stock-based compensation
—
—
—
(140
)
—
140
—
—
Notes receivable from management
—
—
—
—
(713
)
—
—
(713
)
Net income-May 17, 2002 through
    December 31, 2002
—
—
—
—
—
—
12,682
12,682
Balance, December 31, 2002
$
—
$
8
$
—
$
(140
)
$
(713
)
$
12,323
$
12,682
$
24,160
Issuance of Class A Common Stock
—
5
—
—
—
7,158
—
7,163
Conversion of notes payable
—
1
—
—
—
1,081
—
1,082
Proceeds from notes receivable
—
—
—
—
204
—
—
204
Exercise of contingent warrants
—
—
—
—
—
—
—
—
Amortization of deferred compensation
—
—
—
33
—
—
—
33
Net (loss)-January 1, 2003 through
    December 31, 2003
—
—
—
—
—
—
(7,451
)
(7,451
)
Balance, December 31, 2003
$
—
$
14
$
—
$
(107
)
$
(509
)
$
20,562
$
5,231
$
25,191
See accompanying notes.
F-6
COLLEGIATE FUNDING SERVICES, INC. AND
PREDECESSOR
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(dollars in thousands)
Predecessor
Period
Period
Year
May 17
January 1
Year
ended
through
through
ended
December 31, 2003
December 31, 2002
May 16, 2002
December 31, 2001
Cash flows from operating activities
Net income (loss)
$
(7,451
)
$
12,682
$
10,960
$
61,812
Adjustments to reconcile net income to net cash
    provided by operating activities:
Accretion of dividends on preferred stock
6,255
2,929
—
—
Depreciation and amortization
4,328
1,244
754
1,110
Loss on disposal of property and equipment
15
—
—
—
Deferred income tax provision
7,022
3,661
—
—
Amortization of deferred costs
5,110
1,884
28
—
Debt extinguishment
4,824
—
—
—
Provision for loan losses
2,357
1,270
752
—
Changes in:
Accrued interest receivable
(11,487
)
(3,921
)
(1,191
)
(1,323
)
Accounts receivable and other assets
(366
)
(73
)
2,186
291
Income taxes receivable
(5,499
)
(2,195
)
—
—
Accounts payable
1,241
338
(1,253
)
—
Accrued interest payable
1,784
607
(834
)
1,193
Other accrued liabilities
12,634
1,281
2,760
1,887
Net cash provided by operating activities
20,767
19,707
14,162
64,970
Cash flows from investing activities
Originations and purchases of student loans
(2,016,245
)
(637,748
)
(212,694
)
(151,147
)
Net proceeds from student loan principal payments
128,262
24,557
8,878
202
Acquisitions, net of cash acquired
(17,152
)
(166,208
)
—
(90
)
Purchases of property and equipment
(3,482
)
(1,303
)
(665
)
(2,176
)
Net cash used in investing activities
(1,908,617
)
(780,702
)
(204,481
)
(153,211
)
Cash flows from financing activities
Proceeds from asset-backed notes and lines of
    credit
2,814,075
500,000
—
528,482
Payments on asset-backed notes and lines of credit
(840,409
)
—
—
—
Proceeds from other debt obligations
40,000
125,000
—
—
Payments on other debt obligations
(107,500
)
(12,235
)
(529
)
(1,283
)
Payments on capital lease obligations
(361
)
—
—
—
Payment of financing costs
(8,011
)
(4,094
)
(14
)
(2,926
)
Proceeds from notes receivable
204
—
—
—
Proceeds from stock issuance
35,500
52,250
—
—
Change in restricted cash
(63,747
)
122,922
206,633
(371,163
)
Distributions to members
—
—
(13,266
)
(63,914
)
Net cash provided by financing activities
1,869,751
783,843
192,824
89,196
Net increase (decrease) in cash and cash
    equivalents
(18,099
)
22,848
2,505
955
Cash and cash equivalents:
Beginning
32,535
9,687
7,182
6,227
Ending
$
14,436
$
32,535
$
9,687
$
7,182
Supplemental disclosures:
Cash payments for interest
$
31,733
$
17,450
$
4,994
$
106
Cash payments (receipts) for income taxes
$
(1,718
)
$
9,260
$
—
$
—
Non-cash financing and investing activities:
Conversion of convertible notes
$
5,365
$
—
$
—
$
—
Capital lease of property and equipment
$
2,257
$
—
$
—
$
—
Liability incurred upon acquisition of SunTech
$
650
$
—
$
—
$
—
See accompanying notes.
F-7
COLLEGIATE FUNDING SERVICES, INC. AND
PREDECESSOR
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(dollars in thousands, except per share
data)
1.
Nature of the Business
Collegiate Funding Services, Inc., formerly CFSL
Holdings Corp. (the Company), established in 2002, is a Delaware
Corporation. The Company and a wholly-owned subsidiary, CFSL
Acquisition Corp. (CFSL Acquisition) were established for the
purpose of acquiring the operations of Collegiate Funding
Services, LLC (Predecessor or CFS). The Company continues the
business of the Predecessor, which was established in 1998.
Collegiate Funding Services, Inc. is a vertically
integrated education finance company that markets, originates,
finances and services education loans. The Company markets
education loans primarily through direct to consumer programs,
including targeted direct mail, telemarketing and the internet.
Using its direct-to-consumer platform, or DTC, along with other
distribution channels, and its origination capabilities, the
Company assists consumers in financing and refinancing the cost
of undergraduate, graduate, professional, career and continuing
education training. The DTC marketing strategy is supplemented
with marketing through channels created by relationships with
membership organizations, alumni associations and other entities
to reach customers and promote the Company's products under
private label and co-branded offerings. The Company finances,
retains and services a substantial portion of the loans it
originates.
Certain completed loan applications are sold to
and funded by third party lenders whereby the Company receives a
fee for its services. Other completed consolidation loan
applications are funded through a subsidiary of the Company and
held and serviced by the Company. The Company has call centers
located in Virginia and Florida. The Company also has a
loan-servicing center in Mississippi.
On April 15, 2002, CFS along with the
members of CFS (the Sellers) entered into a purchase agreement
to sell all of the outstanding Class A and Class B
member interests that represented a 100% interest in CFS and its
subsidiaries to CFSL Acquisition. The sale transaction closed on
May 17, 2002 (the Acquisition), and the Sellers received an
aggregate of $147,800 in cash and $15,000 in subordinated notes
due in 2007 for a total purchase price of $162,800.
As a result of the Acquisition, all assets and
liabilities acquired were recorded at their estimated fair
value. The excess of the purchase price over the fair value of
the net assets acquired of $159,504 was recorded in the
financial statements as an increase of $7,037 to Student Loans,
$924 as a discount on the Sellers' note and the remaining
$151,543 to goodwill. The increase to Student Loans is being
amortized as an adjustment to interest income over the estimated
life of the Student Loans. The discount on the Sellers'
note is being amortized over the remaining life of the note as
an adjustment to interest expense. There was no impairment of
goodwill at December 31, 2003, or at December 31, 2002.
Prior to the Acquisition, CFS operated as a
limited liability company (LLC), which was treated as a
partnership for income tax purposes. All members of CFS were
taxed individually for their respective share of the income,
gains, losses, credits and deductions. The Company is a taxable
entity for both federal and state income taxes.
On April 15, 2003, the Company acquired
substantially all of the assets and certain liabilities of
SunTech, Inc. ("SunTech"), the Company's
primary loan servicer. The new company created from this
acquisition operates under the name of CFS-SunTech Servicing
LLC. The operating results of CFS-SunTech Servicing LLC have
been included in the Company's consolidated financial
statements since April 15, 2003. CFS-SunTech Servicing LLC,
located in Ridgeland, Mississippi, provides loan servicing for
the Company's Student Loans and other student loan lenders.
F-8
COLLEGIATE FUNDING SERVICES, INC. AND
PREDECESSOR
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS—(Continued)
The following table summarizes the estimated fair
values of the acquired assets and assumed liabilities of SunTech
at the date of acquisition:
Cash
$
605
Accounts receivable
2,006
Property and equipment
3,062
Developed software
2,250
Servicing Rights
1,640
Other assets
191
Total assets acquired
9,754
Accounts payable and other
(420
)
Net assets acquired
$
9,334
Allocation of the purchase price:
Net assets acquired
$
9,334
Goodwill
9,077
Total purchase price
$
18,411
All of the goodwill is deductible for income tax
purposes.
2.
Summary of Significant Accounting
    Policies
Estimates and assumptions
The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States requires management to make estimates and
assumptions that affect the amounts reported in the financial
statements and accompanying notes. Management believes that the
estimates utilized in preparing the financial statements are
reasonable and prudent. Actual results could differ from those
estimates.
Principles of consolidation
The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries: CFSL
Acquisition; Collegiate Funding Services, LLC; Collegiate
Funding Master Servicing, LLC; Collegiate Funding Services
Education Loan Trust I; Collegiate Funding of Delaware,
LLC; Collegiate Funding Portfolio Administration, LLC;
Collegiate Funding Originations, LLC; Collegiate Funding
Services Resources I, LLC; CFS Servicing, LLC; CFS-SunTech
Servicing LLC; Collegiate Funding Services Education Loan Trust
2003-A; Collegiate Funding Services Education Loan Trust 2003-B.
All intercompany accounts and transactions have been eliminated.
Cash and cash equivalents
The Company includes in cash and cash equivalents
all unrestricted cash accounts and short-term cash investments
and other investments with maturities of less than 90 days
at purchase.
Restricted cash
Cash held by Collegiate Funding Services
Education Loan Trust I (Trust I), Collegiate Funding
Services Education Loan Trust 2003–A (Trust II),
Collegiate Funding Services Education Loan Trust 2003–B
(Trust III), and Collegiate Funding Services
Resources I, LLC is restricted as to its use in accordance
with specifications detailed in the respective indentures
relating to the asset-backed financing of student loans.
F-9
COLLEGIATE FUNDING SERVICES, INC. AND
PREDECESSOR
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS—(Continued)
CFS-SunTech Servicing LLC, in order to satisfy a
customer requirement to have funds readily available to satisfy
servicing claims against it, has obtained a letter of credit in
the amount of $250. This letter of credit is secured by a time
deposit for $250, which is included in restricted cash on the
Balance Sheet at December 31, 2003.
Student loans
Student loans are stated at the amount of unpaid
principal plus deferred loan costs and the fair value
adjustments related to the Acquisition. Costs incurred in
connection with loan originations are deferred. Deferred loan
costs and the fair value adjustments are amortized over the
estimated life of the student loans as a reduction of the
loan's yield using the effective interest method.
Property and equipment
Property and equipment are carried at cost, less
accumulated depreciation, computed primarily by the
straight-line method over the following estimated useful lives:
Leasehold improvements
1-7 years
Office furniture and equipment
3-7 years
Software
3 years
Deferred financing costs
Deferred financing costs associated with the
asset-backed debt and lines of credit and other debt obligations
are amortized using a method that approximates the effective
interest method over the respective terms of the debt and are
recorded as interest expense.
Goodwill
In June 2001, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards
(SFAS) No. 142,
Goodwill and Other Intangible
Assets
. This Statement requires that goodwill and intangible
assets that have indefinite useful lives are not amortized but
rather are tested at least annually for impairment. Intangible
assets that have finite useful lives will continue to be
amortized over their useful lives. The Company applied this
statement for the goodwill resulting from the Acquisition and
from the purchase of SunTech.
Revenue recognition
The Company recognizes fee income on sold loan
applications at the time of sale to third parties and, for
certain private loan products, when customers referred to a
third party receive their loan proceeds. Loan servicing fee
income is earned as services are provided. The Company
recognizes student loan interest income as earned, including
amortization of premiums and discounts. With the guarantee on
the student loans applicable to both principal and interest, the
Company recognizes income on guaranteed student loans as earned
regardless of delinquency status. If a student loan should lose
its guaranteed status, interest would be recognized as received.
Advertising
The Company charges the costs of advertising to
expense as incurred. Advertising costs were approximately
$1,453, $570, $436 and $521 for the year ended December 31,
2003, for the periods from May 17 through December 31,
2002, and January 1 through May 16, 2002 and for the
year ended December 31, 2001 respectively. Advertising
expenses are reported as a component of marketing expenses.
F-10
COLLEGIATE FUNDING SERVICES, INC. AND
PREDECESSOR
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS—(Continued)
Income taxes
Pursuant to SFAS No. 109,
Accounting
for Income Taxes
, a deferred tax asset or liability is
recognized for temporary differences, which arise, based upon
differences between the tax basis of assets and liabilities and
the reported amounts in the financial statements. Deferred tax
expense or benefit is then recognized for the change in deferred
tax assets or liabilities between periods.
Stock-based compensation
In accordance with SFAS No. 123, the
Company recognizes the fair value of the stock options as
compensation expense, allocated over the vesting period.
Earnings per share
SFAS No. 128,
Earnings Per Share
,
requires the presentation of basic and diluted earnings per
share. Basic earnings (loss) per common share is computed by
dividing income (loss) attributable to common stockholders by
the weighted average number of common shares outstanding for the
period. The diluted earnings (loss) per common share data is
computed using the weighted average number of common shares
outstanding plus the dilutive effect of common stock
equivalents, unless the common stock equivalents are
anti-dilutive.
For the year ended December 31, 2003, the
effect of outstanding convertible notes converting into shares
of common stock prior to their conversion in April 2003 was not
included in the computation of diluted loss per common share as
the effect would be anti-dilutive. In addition, the treasury
stock effect of warrants and options to purchase an aggregate of
1,315,000 shares of common stock that were outstanding as of
December 31, 2003, were excluded from the computation of
diluted loss per common share as their effect would be
anti-dilutive.
The following details the computation of earnings
(loss) per common share for the year ended December 31,
2003 and for the period from May 17 through
December 31, 2002:
2003
2002
Net income (loss) available to common stockholders
$
(7,451
)
$
12,682
Add: interest expense on convertible notes, net
    of tax effect
—
30
Net income (loss) adjusted for conversion of
    convertible notes
$
(7,451
)
$
12,712
Weighted average common shares calculation:
Weighted average common shares outstanding, basic
10,783,059
8,300,000
Effect of conversion of convertible notes
—
776,038
Treasury stock effect of warrants and options
—
992,308
Weighted average common shares outstanding,
    diluted
10,783,059
10,068,346
Earnings (loss) per common share:
Earnings (loss) per common share, basic
$
(0.69
)
$
1.53
Earnings (loss) per common share, diluted
$
(0.69
)
$
1.26
3.
Cash Balances
The Company maintains cash balances at various
financial institutions. At December 31, 2003 and at
December 31, 2002, the Company's balances exceeded the
federally insured limits. The Company does not believe it has
significant credit risk relative to those uninsured amounts.
F-11
COLLEGIATE FUNDING SERVICES, INC. AND
PREDECESSOR
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS—(Continued)
4.
Student Loans
The Company's loan portfolio consists of
loans originated under the Federal Family Education Loan Program
(FFELP). The FFELP is subject to comprehensive reauthorization
every five years and to statutory and regulatory changes. The
most recent reauthorization was the Higher Education Amendments
of 1998, which is scheduled to expire on September 30, 2004.
There are three principal categories of FFELP
loans: consolidation loans, Parent Loans for Undergraduate
Students (PLUS) loans and Stafford loans. Generally,
Stafford loans and PLUS loans have repayment periods of between
five and ten years. Consolidation loans have repayment periods
ranging from 12 to 30 years. At December 31, 2003 and
2002, the Company retained only FFELP loans in its portfolio.
The Company's FFELP loans are guaranteed
against the borrower's default, death, disability or
bankruptcy. The guarantee on FFELP loans is provided by certain
state or nonprofit guarantee agencies, which are reinsured by
the federal government. The loans are 100% guaranteed in cases
of death, disability and bankruptcy and are guaranteed for 98%
in other cases, resulting in 2% risk-sharing for the Company.
The Company accrues interest until receipt of proceeds from the
guarantor.
The FFELP loans are also subject to regulatory
requirements relating to origination and servicing. In the event
of default or the borrower's death, disability or
bankruptcy, the Company files a claim with the insurer or
guarantor of the loan, who, provided the loan has been properly
originated and serviced, pays the Company the unpaid principal
balance and accrued interest on the loan, less risk-sharing (in
the case of defaults).
Claims not immediately honored by the guarantor
because of servicing or origination defects are returned for
remedial servicing, during which period income is not earned.
The Company's and the predecessor's servicing
experience with FFELP loans resulted in two and zero outstanding
rejected claims during the years ended December 31, 2003
and December 31, 2002, respectively. The Company had no
non-accrual loans at December 31, 2003 or December 31,
2002.
The weighted average remaining term of student
loans in the Company's portfolio was approximately
23 years and 22 years at December 31, 2003 and
December 31, 2002, respectively.
5.
Allowance for Loan Losses
The allowance for loan losses represents the
amount estimated to absorb probable losses inherent in the
portfolio. The evaluation of the allowance for loan losses is
inherently subjective, as it requires material estimates that
may be susceptible to significant changes. The Company's
current portfolio has not matured to a point at which
predictable loan loss patterns have developed. The Company
considered industry trends of similar portfolios and default
rates in determining the level of allowance for loan losses as
of December 31, 2003 and December 31, 2002.
The Company's allowance for loan losses is
$4,136 and $1,925, at December 31, 2003 and
December 31, 2002, respectively. The Company had
charge-offs of $146, $45, and $52 for the year ended
December 31, 2003, and the periods from May 17 through
December 31, 2002, and January 1 through May 16, 2002,
respectively. There were no recoveries during these periods.
F-12
COLLEGIATE FUNDING SERVICES, INC. AND
PREDECESSOR
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS—(Continued)
6.
Property and Equipment
The major classes of property and equipment and
the total accumulated depreciation as of December 31, 2003
and December 31, 2002, are as follows:
2003
2002
Leasehold improvements
$
2,506
$
679
Office furniture and equipment
11,646
5,933
Software
4,844
1,867
Total
18,996
8,479
Less: accumulated depreciation
6,901
3,588
Property and equipment, net
$
12,095
$
4,891
7.
Debt
Asset-backed notes and lines of
    credit
The Company finances its loan originations
through the sale of asset-backed notes in the capital markets,
using both public offerings and private placements. The Company
publicly offered $1,874,775 in asset-backed notes in 2003 and
privately placed $500,000 and $527,200 in asset-backed notes in
2002 and 2001, respectively, to fund the retention of new loan
originations.
These securitizations are secured by separate
pools of FFELP consolidation loans. Approximately 97% of the
notes issued to date by the Company have been structured to a
AAA credit rating. The notes issued are indexed to three month
LIBOR or are auction rate based. After the initial issuance,
interest rates on the auction rate notes are reset every
28 days.
2003 issuance
The Company issued $1,036,000 of asset-backed
notes in November 2003. The principal balances outstanding,
interest rates and maturity dates at December 31, 2003 are
as follows:
Principal
Interest
Series
outstanding
rate
Type
Maturity date
Class A-1
$
249,000
1.29%
LIBOR
September 2013
Class A-2
250,000
1.45
LIBOR
March 2021
Class A-3 – 7
485,000
1.19
Auction
December 2043
Class B
52,000
1.25
Auction
December 2043
No principal payments were made in 2003.
The Company issued $838,775 of asset-backed notes
in February 2003. The principal balances outstanding, interest
rates and maturity dates at December 31, 2003 are as
follows:
Principal
Interest
Series
outstanding
rate
Type
Maturity date
Class A-1
$
79,091
1.23%
LIBOR
March 2012
Class A-2
319,025
1.47
LIBOR
September 2020
Class A-3 – 6
352,400
1.18
Auction
March 2042
Class B
42,350
1.32
Auction
March 2042
The Company made $45,909 in principal payments as
required under the terms of the related indenture.
F-13
COLLEGIATE FUNDING SERVICES, INC. AND
PREDECESSOR
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS—(Continued)
2002 and 2001 issuances
The Company privately placed $500,000 and
$527,200 of asset-backed notes in July 2002 and in November
2001, respectively. The principal balances outstanding, interest
rates and maturity dates at December 31, 2003 are as
follows:
2002
Principal
Interest
series
outstanding
rate
Type
Maturity date
2002A-8 – 15
$
470,000
1.24%
Auction
July 2042
2002B
30,000
1.33
Auction
July 2042
2001
Principal
Interest
series
outstanding
rate
Type
Maturity date
2001A-1 – 7
$
495,600
1.25%
Auction
December 2041
2001B
31,600
1.33
Auction
December 2041
No principal payments were made in 2003 or 2002.
Warehouse line of credit
On July 23, 2003, the Company entered into a
warehouse credit facility with a multi-seller conduit
administered by a third party bank providing for up to $500,000
in borrowings. The Company utilizes this warehouse credit
facility principally to fund its retention of FFELP loan
originations, of which such loans collateralize the associated
borrowings. The Company pays the conduit a credit spread over
the commercial paper rate, typically a 30-day rate, on the
warehouse credit facility. The ability to draw down on this
facility expires on July 20, 2004, but can be extended by
consent of the conduit and bank up to another 364-day period.
Unless otherwise agreed, the entire facility must be repaid by
July 18, 2006. There was $144,800 outstanding on this
facility as of December 31, 2003. Interest and other
associated fees are paid monthly. On February 17, 2004, the
bank and the conduit temporarily increased the funding
commitment level of the warehouse credit facility to $1,000,000
through the end of May 2004, at which time it will return to a
$500,000 commitment level. The weighted average interest rate
for 2003 was approximately 1.76% and approximated 1.52% at
December 31, 2003.
Acquisition financing
The Company issued senior notes payable in the
amount of $105,000 in connection with the Acquisition. The
senior notes had a fixed annual interest rate of 11.0%. The
balances on the notes at December 31, 2003 and
December 31, 2002, were zero and $93,750 (less unamortized
discount of $5,147 relating to warrants and preferred stock of a
consolidated subsidiary issued in connection with the issuance
of the senior notes), respectively.
Payments on the outstanding amounts were
scheduled to be paid quarterly ($5,000 plus interest through
2003, $3,750 plus interest thereafter). There was also a
principal prepayment provision, based upon unrestricted cash
held by the Company at December 31 of each year through
2006, payable on February 4 of the following year. The principal
prepayment amount was equal to 75% of the Company's excess
cash flow for the preceding calendar year, as determined by the
note. The principal prepayment amount paid on February 4,
2003 was $14,499. In October 2003, these notes were repaid in
full. Unamortized deferred financing fees of $1,246 and the
remaining debt discount of $3,578 were charged to debt
extinguishment.
The Company issued a note to the Sellers for
$15,000 as part of the Acquisition. This note matures on
June 30, 2007 and has a fixed annual interest rate of
4.47%. Interest is paid quarterly.
F-14
COLLEGIATE FUNDING SERVICES, INC. AND
PREDECESSOR
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS—(Continued)
The Company also issued $5,000 of convertible
notes to fund the Acquisition. The notes had a fixed annual
interest rate of 8.0% and interest was payable at maturity. The
notes were scheduled to mature on April 30, 2004. However,
the notes were converted in conjunction with the purchase of
SunTech. Principal of $3,991 of the convertible notes, plus
unpaid interest of $291 was converted into 913,836 shares
of preferred stock of a consolidated subsidiary at a conversion
price of $4.6858 per share. Principal of $1,009 of the
convertible notes, plus unpaid interest of $74 was converted
into 832,605 common shares at a conversion price of
$1.30 per share.
As part of the Acquisition, the Company paid off
all outstanding balances of a term loan, an equipment
line-of-credit and a note payable to Wachovia.
Revolving line of credit
The Company entered into a revolving credit
agreement on October 30, 2003 for $45,000. Also on
October 30, 2003, $40,000 was drawn on the line and was
used to retire a portion of the senior notes that were issued in
the Acquisition. On December 31, 2003, $26,250 was
outstanding on this line of credit. The amount of the facility
was reduced by $3,750 on December 31, 2003 and will be
reduced by an additional $3,750 at the end of each quarter until
the expiration date in September 2006. Borrowings under the line
bear interest at either LIBOR or prime at the Company's
option. The interest rate on outstanding borrowings at
December 31, 2003 was 4.62%. Unrestricted cash over $5,000
(Excess Cash) at the end of each calendar year, beginning in
2004, will be applied to the outstanding principal balance.
Interest is paid monthly.
Future minimum principal payments for subsequent
years for all debt are as follows:
Amount
Year:
2004
$
160,012
2005
11,492
2006
274
2007
15,408
2008
41
Thereafter
2,856,066
Total
$
3,043,293
8.
Derivative Financial Instruments
The Company is exposed to interest rate risk as
its asset-backed debt notes are indexed to short-term indices
(LIBOR and auction rates) and the assets behave as fixed rate
assets in the current interest rate environment. Derivative
instruments are utilized to reduce the Company's interest
rate risk. The key terms of the derivatives at December 31,
2003 are as follows:
Pay—
Receive—
Maturity
Derivative type
Notional amount
fixed rate
floating rate (LIBOR)
date
Fair value
Swap
$
500,000
1.89
%
1.12
%
1/26/2005
$
(2,070
)
Swap
225,000
1.64
1.12
11/26/2004
(606
)
Swap
225,000
1.64
1.12
11/26/2004
(606
)
Cap (Sold)
500,000
2.09
1/26/2005
(328
)
Total
$
(3,610
)
The Company received $1,700 in proceeds from the
sale of the Cap on February 28, 2003. The amount is
recorded as a derivative liability and is marked-to-market over
the term of the Cap. Payments
F-15
COLLEGIATE FUNDING SERVICES, INC. AND
PREDECESSOR
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS—(Continued)
on the Cap derivative will be made only when the
Commercial Paper rate exceeds 2.09%. No payments were made in
2003. The notional amounts of the Cap and the $500,000 swap will
reduce to $250,000 each, on July 26, 2004.
The Company has not designated any of its
derivatives into SFAS No. 133 hedge relationships and
therefore records changes in their value as derivative
mark-to-market on the statement of income. The impact of the
cash payments and accruals are reported as swap interest on the
statement of income. The fair value of the derivatives is
included with other accrued liabilities on the balance sheet.
There were no derivatives outstanding at December 31, 2002.
9.
Lease Commitments
Total rent expense, including amounts paid under
monthly operating leases, was approximately $1,820, $901, $464
and $929 for the year ended December 31, 2003, for the
periods from May 17 through December 31, 2002, and
January 1 through May 16, 2002, and for the year ended
December 31, 2001, respectively.
Future minimum commitments for both office leases
and office equipment leases are as follows:
Amount
Year:
2004
$
1,894
2005
1,613
2006
494
2007
296
2008
258
Total
$
4,555
The Company will be relocating its Virginia
operations to a new facility in Virginia in the third quarter of
2004. The new lease when executed will expire in 2010.
10.
Related Party Transactions
Upon closing of the Acquisition, agreements were
entered into to provide management services to the Company. The
first agreement is with the Sellers for consulting services.
This agreement provides for a $1,000 fee per year for two years,
paid in quarterly installments. The Company has an option to
extend the agreement for a third year. The Company incurred
consulting fees to the Sellers of the Company totaling $1,000
for the year ended December 31, 2003 and $625 for the
period from May 17 through December 31, 2002. The
Company also incurred management fees of $2,800 to the Sellers
for the period from January 1 through May 16, 2002.
The second agreement is a 10-year agreement with
Lightyear Capital, LLC, an affiliate of the majority
stockholders of the Company. The Company incurred management
fees to Lightyear Capital, LLC, totaling $1,250 for the year
ended December 31, 2003 and $625 for the period from
May 17 through December 31, 2002.
Upon closing of the purchase of SunTech,
agreements were entered into to provide management services to
CFS-SunTech Servicing LLC. The first agreement is with the
previous owner of SunTech. This agreement provides for a $1,350
fee for the first year and a $1,000 fee for the second year,
payable in quarterly installments. The second agreement is with
the previous head of operations. This agreement provides for a
$150 fee per year for a period of two years, payable monthly.
The Company incurred consulting fees of approximately $1,063
related to the SunTech agreement during the year ended
December 31, 2003.
F-16
COLLEGIATE FUNDING SERVICES, INC. AND
PREDECESSOR
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS—(Continued)
Expenses to related parties totaled $3,313,
$1,250, $2,800 and $6,720 for the year ended December 31,
2003, for the periods from May 17 through December 31,
2002, and January 1 through May 16, 2002, and for the
year ended December 31, 2001, respectively. Those expenses
are presented as management and consulting fees on the statement
of income.
11.
Major Business Customers and Sources of
    Revenue
Certain business customers generated significant
amounts of the Company's revenue. Fee income from one
customer was $42,747, $51,672, $17,704 and $90,090 for the year
ended December 31, 2003, for the periods from May 17
through December 31, 2002, and January 1 through
May 16, 2002, and for the year ended December 31,
2001, respectively. Fee income from a second customer was
$23,001, $374, $337 and $39,310 for the year ended
December 31, 2003, for the periods from May 17 through
December 31, 2002, and January 1 through May 16,
2002, and for the year ended December 31, 2001,
respectively. Fee income from a third customer was $12,006,
$32,339, and $18,416 for the year ended December 31, 2003,
and for the periods from May 17 through December 31,
2002, and January 1 through May 16, 2002, respectively.
12.
Income Taxes
Components of income tax expense for the year
ended December 31, 2003 and for the period from May 17
through December 31, 2002, are presented below:
2003
2002
Current income tax provision (benefit):
Federal
$
(6,159
)
$
6,059
State
(1,059
)
1,006
Total current income tax provision (benefit)
(7,218
)
7,065
Deferred income tax provision:
Federal
5,981
3,119
State
1,041
542
Total deferred income tax provision
7,022
3,661
Income tax provision (benefit)
$
(196
)
$
10,726
The reconciliations from federal statutory rates
to the effective income tax rates for the year ended
December 31, 2003 and the period from May 17 through
December 31, 2002 are presented below:
2003
2002
Tax Rate Analysis
Expected federal income tax (benefit) provision
(35.0
)%
35.0
%
Lobbying, meals, entertainment and other
22.3
1.7
State income taxes, net of federal benefit
(1.4
)
4.1
Effective income tax rate
(14.1
)%
40.8
%
Deferred tax assets and liabilities are
recognized for future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered
or settled. The effect on deferred tax assets and liabilities of
a change in tax rates is recognized in income in
F-17
COLLEGIATE FUNDING SERVICES, INC. AND
PREDECESSOR
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS—(Continued)
the period that includes the enactment date. The
sources and tax effects of temporary differences that give rise
to significant portions of deferred tax assets and liabilities
for the year ended December 31, 2003 and for the period
from May 17 through December 31, 2002 are presented
below:
2003
2002
Deferred income tax analysis
Deferred income tax assets:
Provision for loan losses
$
1,335
$
474
Unrealized losses on derivatives
721
—
Net operating loss carryforward
382
—
Other
138
101
Total deferred income tax assets
2,576
575
Deferred income tax liabilities:
Depreciation
461
154
Amortization of goodwill
6,717
2,626
Loan origination costs
6,081
1,456
Total deferred income tax liabilities
13,259
4,236
Net deferred income tax liabilities
$
10,683
$
3,661
13.
Retirement Plan
The Company sponsors a 401(k) defined
contribution retirement plan. Employees may participate in the
plan upon completion of 60 days of service and attainment
of age 18 by electing to have a portion of their
compensation contributed to the plan. The Company matches 100%
of the employees' contribution up to 3% of eligible
compensation. Plan expense was $757, $373, $251 and $414 for the
year ended December 31, 2003, for the periods from
May 17 through December 31, 2002, and January 1
through May 16, 2002, and for the year ended
December 31, 2001, respectively.
14.
Stock Incentive Plan
Effective May 17, 2002, the Company
initiated the 2002 Stock Incentive Plan to provide additional
incentives to key personnel. The maximum aggregate number of
shares which may be issued is 700,000 shares of
Class B common stock. On May 17, 2002, the Company
granted 315,000 stock options with an exercise price of
$1.30 per common share, the fair market value of a share of
common stock at issuance. Subject to certain conditions,
portions of the options may have accelerated vesting to vest on
the anniversary dates of the grants. There were
56,700 shares that vested in May 2003. For any year that
the specified conditions are not met, the options not then
vesting will vest in 2009.
The fair value of the options under the
Black-Scholes option pricing model assumed: an interest rate of
approximately 3%; no dividends; volatility of approximately 25%;
and an expected life of seven years. This options pricing model
requires the input of subjective assumptions. Because the
Company's options have characteristics significantly
different from those publicly traded options and because changes
in the subjective input assumptions can materially affect the
fair value estimate, in managements' opinion, the existing
models do not necessarily provide a reliable single measure of
the fair value of these stock options. Using this model, the
fair value of the options as of the grant date was approximately
$140. Since the inception of the plan, the Company has
recognized approximately $33 in compensation expense.
F-18
COLLEGIATE FUNDING SERVICES, INC. AND
PREDECESSOR
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS—(Continued)
15.
Preferred Stock of Consolidated
    Subsidiary
The Company's consolidated subsidiary, CFSL
Acquisition, has authorized 20,000,000 shares of preferred
stock, par value $0.001. CFSL Acquisition issued
10,000,000 shares of preferred stock on May 17, 2002
in connection with the Acquisition. In April 2003,
1,015,382 shares of CFSL Acquisition preferred stock were
issued in connection with the conversion of $3,991 of
convertible notes plus accrued interest. Also in April 2003,
CFSL Acquisition issued 1,788,682 preferred shares to fund a
portion of the purchase of SunTech. In October 2003, CFSL
Acquisition issued 4,258,766 preferred shares to fund a portion
of the payoff of the 11% senior notes.
The preferred stock is without voting rights. The
liquidation preference of the preferred stock is equal to the
sum of the original issue price of $4.6858 per share plus
the aggregate amount of all accrued and unpaid dividends.
Dividends are cumulative and accrue at the rate of 10% per
annum on the liquidation preference per share compounded
annually. The aggregate liquidation preference of the preferred
stock was $89,136 and $49,787 as of December 31, 2003 and
December 31, 2002, respectively.
The preferred stock is redeemable at any time at
the option of the Company, at its liquidation preference, which
includes accrued but unpaid dividends, on the date of such
redemption. The preferred stock was immediately redeemable on
the respective dates of issuance as the holders of the majority
of the preferred stock control the Company through their
ownership of common stock and board of director representation.
The Company records periodic accretion to accrue the cumulative
dividends on the preferred stock such that the carrying amount
of the preferred stock is equal to its redemption amount at each
balance sheet date.
16.
Stockholders' Equity
Common stock
The Company has authorized 18,000,000 shares
of its Class A common stock, par value $0.001. The
Class A common stock has ten votes per share. On
May 17, 2002 the Company issued 8,052,550 shares of
its Class A common stock. In April 2003, $1,009 of
convertible notes plus accrued interest, and contingent warrants
were converted into 924,412 shares of Class A common
stock. Also in April, the Company issued 1,629,688 shares
to fund in part the purchase of SunTech. In October 2003, the
Company issued 3,880,211 shares to fund in part the payoff
of the 11% senior notes.
On May 17, 2002, the Company also issued
247,450 shares of Class B common stock, par value
$0.001, which has 3,000,000 shares authorized. The
Class B common stock has one vote per share.
Dividends and distributions in liquidation are to
be pro-rata for Class A and Class B shares. As of
December 31, 2003, no dividends have been declared to date
on any class of stock.
Preferred stock
The Company has authorized 20,000,000 shares
of preferred stock par value $0.001. No shares of the preferred
stock have been issued or are outstanding
Warrants
The Company issued to holders of the $105,000 of
senior notes, warrants to purchase an aggregate of
1,000,000 shares of Class A common stock, and
contingent warrants to purchase up to an additional
100,575 shares of Class A common stock. The warrants
expire in May 2012 and have an exercise price of $0.01 per
share. The contingent warrants were exercised in April 2003.
F-19
COLLEGIATE FUNDING SERVICES, INC. AND
PREDECESSOR
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS—(Continued)
Notes receivable from
    management
In connection with a share purchase agreement
dated May 17, 2002, the Company has notes receivable from
members of management for stock purchases of approximately $509
and $713 at December 31, 2003 and December 31, 2002,
respectively. These notes bear interest at an adjustable rate
based on LIBOR but at no time less than 3.21%. In accordance
with the agreement, the notes cannot exceed 75% of the value of
the underlying stock acquired. The principal and accrued
interest is due in full May 2005.
Shares issued and
    outstanding:
Class A
Class B
Common
Common
Stock
Stock
18,000,000
3,000,000
authorized
authorized
(Par value $0.001)
Shares issued and outstanding, May 17,
    2002
—
—
Issuance of Class A Common Stock
8,052,550
—
Issuance of Class B Common Stock
—
247,450
Shares issued and outstanding,
    December 31, 2002
8,052,550
247,450
Issuance of Class A Common Stock
5,509,899
—
Conversion of notes payable
832,605
—
Exercise of contingent warrants
91,807
—
Shares issued and outstanding,
    December 31, 2003
14,486,861
247,450
17.
Fair Value of Financial Instruments
Management uses its best judgment in estimating
the fair value of the Company's financial instruments;
however, there are inherent weaknesses in any estimation
technique. Therefore, for substantially all financial
instruments, the fair value estimates herein are not necessarily
indicative of the amounts the Company could have realized in a
sale transaction on the dates indicated.
The estimated fair value amounts have been
measured as of the balance sheet date. As such, the estimated
fair values of these financial instruments subsequent to the
reporting date may be different from the amounts reported as of
the balance sheet date.
Student loans
Student Loans fair value is estimated based upon
the Company's historical loan application sales data. At
December 31, 2003 and December 31, 2002, the fair
value of student loans was approximately $2,947,000 and
$995,000, respectively.
Debt
The carrying amount of the Company's
asset-backed notes approximates their fair value due to the
frequency of the resetting of interest rates (every
28 days) and the AAA rating.
The carrying amounts of the warehouse and
revolving lines of credit approximate their fair value because
they have floating interest rates.
F-20
COLLEGIATE FUNDING SERVICES, INC. AND
PREDECESSOR
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS—(Continued)
Other
Other carrying amounts of cash and cash
equivalents, restricted cash, accounts receivable, derivatives,
accounts payable and accrued interest approximate their fair
value.
18.
Reclassifications
Certain prior period amounts have been
reclassified to conform to the current year presentation.
19.
Commitments and Contingencies
In the normal course of business the Company is
subject to consumer credit and human resources disputes and
potential litigation. At December 31, 2003, the Company is
not party to any material disputes or litigation. The Company
has commitments with third party liquidity providers, with whom
it is obligated to sell a minimum amount of FFELP or private
student loan applications originated under specific criteria.
These commitments generally extend for one year. As of
December 31, 2003 and 2002, the Company was obligated to
sell $1,200,000 and $606,000, respectively, in student loan
applications at contractual rates under various agreements
through December 31, 2004. The Company may also acquire
FFELP student loans or successfully completed applications for
FFELP loans from time-to-time should market conditions warrant.
20.     Segment
Data
The Company's reportable segments are its
loan origination operations and its loan servicing operations.
The Company's accounting policies for segments are the same
as those described in the "Summary of Significant
Accounting Policies." Prior to the Company acquiring
SunTech on April 15, 2003, the Company operated in only one
segment.
F-21
COLLEGIATE FUNDING SERVICES, INC. AND
PREDECESSOR
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS—(Continued)
The following table presents segment data for the
year ended December 31, 2003:
Loan Origination
Loan Servicing
Eliminations
Consolidated
Net revenue
Interest income
$
61,305
$
541
$
—
$
61,846
Interest expense
39,871
—
—
39,871
Net interest income
21,434
541
—
21,975
Provision for loan losses
2,357
—
—
2,357
Net interest income after provision for loan
    losses
19,077
541
—
19,618
Fee income
89,508
11,784
(2,734
)
98,558
Net revenue
108,585
12,325
(2,734
)
118,176
Expenses
Salaries and related benefits
48,324
6,316
—
54,640
Other selling, general and administrative
    expenses:
Marketing and mailing costs
24,999
7
—
25,006
Communications and data processing
6,344
1,171
—
7,515
Management and consulting fees
3,313
—
—
3,313
Professional fees
4,983
1,332
—
6,315
Depreciation and amortization
2,831
1,497
—
4,328
Other general & administrative
9,712
1,348
(2,734
)
8,326
Total other selling, general and administrative
    expenses
52,182
5,355
(2,734
)
54,803
Swap interest
3,439
—
—
3,439
Derivative mark-to-market
1,862
—
—
1,862
Debt extinguishment
4,824
—
—
4,824
Total expenses
110,631
11,671
(2,734
)
119,568
Income (loss) before income taxes and accretion
    of dividends on preferred stock
$
(2,046
)
$
654
$
—
$
(1,392
)
Total assets
$
3,172,067
$
20,215
$
—
$
3,192,282
Intercompany transactions of $2,734 in other
operating expenses in the loan origination segment were paid as
fee income to the loan servicing segment and are eliminated in
the consolidated financials.
F-22
Through and
including                ,
2004 (the 25th day after the date of this prospectus), all
dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a
prospectus. This is in addition to a dealer's obligation to
deliver a prospectus when acting as an underwriter and with
respect to an unsold allotment or subscription.
Shares
Collegiate Funding Services, Inc.
Common Stock
PROSPECTUS
Joint Book-Running Managers
JPMorgan
Merrill Lynch & Co.
,
2004
PART II
INFORMATION NOT REQUIRED IN
PROSPECTUS
Item 13.
Other Expenses of Issuance and
    Distribution.
The actual and estimated expenses in connection
with this offering, all of which will be borne by us are as
follows:
SEC Registration Fee
$
21,856
Printing and Engraving Expenses
*
Legal Fees
*
Accounting Fees
*
Listing Fees
*
NASD Filing Fee
17,750
Miscellaneous
*
Total
$
*
* To be filed by amendment.
Item 14.
Indemnification of Directors and
    Officers
Collegiate Funding Services, Inc. (the
"Registrant") is a Delaware corporation.
Section 145 of the Delaware General Corporation Law (the
"DGCL") grants each corporation organized thereunder
the power to indemnify any person who is or was a director,
officer, employee or agent of a corporation or enterprise,
against expenses, including attorneys' fees, judgments,
fines and amounts paid in settlement actually and reasonably
incurred by him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, other than an action by or in
the right of the corporation, by reason of being or having been
in any such capacity, if he acted in good faith in a manner
reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
Section 102(b)(7) of the DGCL enables a
corporation in its certificate of incorporation or an amendment
thereto to eliminate or limit the personal liability of a
director to the corporation or its stockholders for monetary
damages for violations of the directors' fiduciary duty of
care, except (i) for any breach of the director's duty
of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) pursuant to
Section 174 of the DGCL (providing for liability of
directors for unlawful payment of dividends or unlawful stock
purchases or redemptions) or (iv) for any transaction from
which a director derived an improper personal benefit.
Article SEVENTH of the Registrant's
Amended and Restated Certificate of Incorporation (filed as
Exhibit 3.1) provides that except as otherwise provided by
the DGCL, no director of the Registrant shall be personally
liable to the Registrant or its stockholders for monetary
damages for breach of fiduciary duty as a director and that the
Registrant may indemnify directors and officers of the
Registrant to the fullest extent permitted by the DGCL.
Article IV of the Registrant's Amended
and Restated By-laws provides that:
With respect to third party claims, the
Registrant, to the fullest extent permitted and in the manner
required, by the laws of the State of Delaware, as in effect
from time to time shall indemnify any person who was or is made
a party to or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding
(including any appeal thereof), whether civil, criminal,
administrative, regulatory or investigative in nature (other
than an action by or in the right of the Registrant), by reason
of the fact that such person is or was a director or officer of
the Registrant, or, if at a time when he or she was a director
or officer of the Registrant, is or was serving at the request
of, or to represent the interests of, the Registrant as a
director, officer, partner, member, trustee, fiduciary, employee
or agent (a
II-1
"Subsidiary Officer") of another
corporation, partnership, joint venture, limited liability
company, trust, employee benefit plan or other enterprise
including any charitable or not-for-profit public service
organization or trade association (an "Affiliated
Entity"), against expenses (including attorneys' fees
and disbursements), costs, judgments, fines, penalties and
amounts paid in settlement actually and reasonably incurred by
such person in connection with such action, suit or proceeding
if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best
interests of the Registrant, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his or
her conduct was unlawful;
provided, however
, that
(i) the Registrant shall not be obligated to indemnify a
director or officer of the Registrant or a Subsidiary Officer of
any Affiliated Entity against expenses incurred in connection
with an action, suit, proceeding or investigation to which such
person is threatened to be made a party but does not become a
party unless such expenses were incurred with the approval of
the Board of Directors, a committee thereof or the Chairman, a
Vice Chairman or the President of the Registrant and
(ii) the Registrant shall not be obligated to indemnify
against any amount paid in settlement unless the Registrant has
consented to such settlement. The termination of any action,
suit or proceeding by judgment, order, settlement or conviction
or upon a plea of nolo contendere or its equivalent shall not,
of itself, create a presumption that the person did not act in
good faith and in a manner which such person reasonably believed
to be in or not opposed to the best interests of the Registrant,
and, with respect to any criminal action or proceeding, that
such person had reasonable cause to believe that his or her
conduct was unlawful. Notwithstanding anything to the contrary
in the foregoing provisions of this paragraph, a person shall
not be entitled, as a matter of right, to indemnification
pursuant to this paragraph against costs or expenses incurred in
connection with any action, suit or proceeding commenced by such
person against the Registrant or any Affiliated Entity or any
person who is or was a director, officer, partner, member,
fiduciary, employee or agent of the Registrant or a Subsidiary
Officer of any Affiliated Entity in their capacity as such, but
such indemnification may be provided by the Registrant in a
specific case as permitted by the Amended and Restated By-laws.
The Registrant's Amended and Restated
By-laws also provides that, with respect to derivative claims,
the Registrant, to the fullest extent permitted and in the
manner required, by the laws of the State of Delaware, as in
effect from time to time shall indemnify any person who was or
is made a party to or is threatened to be made a party to any
threatened, pending or completed action or suit (including any
appeal thereof) brought by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that such
person is or was a director or officer of the Corporation, or,
if at a time when he or she was a director or officer to the
Registrant, is or was serving at the request of, or to represent
the interests of, the Registrant as a Subsidiary Officer of an
Affiliated Entity against expenses (including attorneys'
fees and disbursements) and costs actually and reasonably
incurred by such person in connection with such action or suit
if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best
interests of the Registrant, except that no indemnification
shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the
Registrant unless, and only to the extent that, the Court of
Chancery of the State of Delaware or the court in which such
judgment was rendered shall determine upon application that,
despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses and costs as the Court
of Chancery of the State of Delaware or such other court shall
deem proper; provided, however, that the Registrant shall not be
obligated to indemnify a director or officer of the Registrant
or a Subsidiary Officer of any Affiliated Entity against
expenses incurred in connection with an action or suit to which
such person is threatened to be made a party but does not become
a party unless such expenses were incurred with the approval of
the Board of Directors, a committee thereof, or the Chairman, a
Vice Chairman or the President of the Corporation.
Notwithstanding anything to the contrary in the foregoing
provisions of this paragraph, a person shall not be entitled, as
a matter of right, to indemnification pursuant to this paragraph
against costs and expenses incurred in connection with any
action or suit in the right of the Registrant commenced by such
Person, but such indemnification may be provided by the
Registrant in any specific case as permitted under the Amended
and Restated By-laws.
II-2
The Registrant has also obtained officers'
and directors' liability insurance which insures against
liabilities that officers and directors of the Registrant may,
in such capacities, incur.
Item 15.
Recent Sales of Unregistered
    Securities
Since its inception, the Registrant has issued
securities in the following transactions, each of which was
exempt from the registration requirements of the Securities Act
of 1933, as amended, as transactions by an issuer not involving
any public offering thereunder. All of the below-referenced
securities are deemed restricted securities for the purposes of
the Securities Act. No underwriters were involved in any of the
below-referenced sales of securities.
1.     In connection
with the acquisition of us by Lightyear, on May 17, 2002,
we issued 8,052,550 shares of Class A common stock to
Lightyear and other investors, at a price per share of $1.30 for
aggregate cash consideration of $7,966,795 and $2,501,520,
respectively; 147,450 shares of Class B common stock
to certain members of management, at a price per share of $1.30
for aggregate cash consideration of $191,685; 100,000 shares of
Class B common stock to J. Barry Morrow, for no cash
consideration; and 10,00,000 shares of preferred stock of CFSL
Acquisition Corp., our wholly-owned subsidiary, to Lightyear,
other investors and certain members of management, at a price
per share of $4.69 for aggregate cash consideration of
$31,545,812, $14,595,177 and $759,011, respectively.
2.     On May 17,
2002, we issued $5,000,000 of convertible notes for cash to
Lightyear and other investors. Of this total, $1,009,000 of the
notes were convertible into Class A common stock, at a
price of $1.30 per share, and $3,991,000 of the notes were
convertible into preferred stock of CFSL Acquisition Corp., at a
price of $4.69 per share. In connection with the issuance of the
convertible notes, we also issued contingent warrants to
purchase up to an additional 100,575 shares of Class A
common stock, at an exercise price of $0.01 per share. On
April 15, 2003, 924,412 shares of Class A common stock
and 1,015,382 shares of preferred stock of CFSL Acquisition
Corp. were issued in connection with the conversion of the
convertible notes plus accrued but unpaid interest and exercise
of the contingent warrants. On May 17, 2002, we also issued to
holders of the senior notes, warrants to purchase an aggregate
of 1,000,000 shares of Class A common stock, at a price of $0.01
per share. As of the date of this filing, these warrants have
not been exercised.
3.     In connection
with the acquisition of SunTech, on April 15, 2003, we
issued 1,629,688 shares of Class A common stock to
Lightyear and other investors, at a price per share of $1.30 for
aggregate cash consideration of $1,442,598 and $675,996,
respectively; and 1,788,682 shares of preferred stock of
CFSL Acquisition Corp. to Lightyear and other investors, at a
price per share of $4.69 for aggregate cash consideration of
$5,763,555 and $2,625,364, respectively.
4.     In connection
with the redemption of a portion of our senior notes, on
October 28, 2003, we issued 3,880,211 shares of
Class A common stock to Lightyear and other investors, at a
price per share of $1.30 for aggregate cash consideration of
$3,675,186 and $1,369,089, respectively; and 4,258,766 shares of
preferred stock of CFSL Acquisition Corp. to Lightyear and other
investors, at a price per share of $4.69 for aggregate cash
consideration of $14,688,690 and $5,284,922, respectively.
In addition, we have granted options to purchase
shares of our common stock to certain members of management,
none of which have been exercised to date.
The sales of the above securities were exempt
from the registration requirements of the Securities Act, in
reliance on Section 4(2) of the Securities Act,
Regulation S, Regulation D or Rule 701
promulgated thereunder, as transactions by an issuer not
involving a public offering or to qualified institutional buyers
or transactions pursuant to compensatory benefit plans and
contracts relating to compensation as provided under
Rule 701. There were no underwriters involved in connection
with the sale of the above securities.
II-3
Item 16.
Exhibits and Financial Statement
    Schedules
(a) Exhibit Index
Exhibit No.
Description of Exhibit
1.1*
Form of Underwriting Agreement
3.1*
Amended and Restated Certificate of Incorporation
    of Collegiate Funding Services, Inc.
3.2*
Amended and Restated By-Laws of Collegiate
    Funding Services, Inc.
4.1*
ü
Stockholders Agreement, dated May 17, 2002,
    by and among CFSL Holdings Corp., CFSL Acquisition Corp. and the
    investors listed on Schedule A thereto
4.2*
Form of Certificate of Common Stock
4.3*
Indenture of Trust from Collegiate Funding
    Services Education Loan Trust I and U.S. Bank National
    Association, as Eligible Lender Trustee to U.S. Bank National
    Association, as Indenture Trustee, dated as of November 1,
    2001, together with First Supplemental Indenture of Trust, dated
    November 1, 2001 and Second Supplemental Indenture of
    Trust, dated July 1, 2002
4.4*
Indenture of Trust between Collegiate Funding
    Services Education Loan Trust 2003-A and U.S. Bank National
    Association, as Eligible Lender Trustee and as Trustee, dated as
    of February 1, 2003
4.5*
Indenture of Trust between Collegiate Funding
    Services Education Loan Trust 2003-B and U.S. Bank National
    Association, as Eligible Lender Trustee and as Trustee, dated as
    of November 1, 2003
5.1*
Opinion of Simpson Thacher & Bartlett LLP
10.1*
Warehouse Financing Indenture, dated as of
    July 23, 2003, by and among Collegiate Funding Services
    Resources I, LLC, as Issuer, the conduit lenders parties
    thereto, certain financial institutions parties thereto, as
    Committed Lenders, Citicorp North America, Inc., as Agent, U.S.
    Bank National Association, as Indenture Trustee and Eligible
    Lender Trustee, Collegiate Funding Portfolio Administration,
    L.L.C., as Administrator and Collegiate Funding Master
    Servicing, L.L.C., as Master Servicer, together with Amendment
    No. 1, dated as of October 30, 2003 and Amendment
    No. 2, dated as of February 17, 2004
10.2*†
Consolidation Loan Origination Responsibility
    Agreement, dated November 15, 1999, by and between
    Collegiate Funding Services, LLC and Citibank as Trustee for the
    Student Loan Corporation, together with First Amendment, dated
    March 1, 2001, Second Amendment, dated November 1,
    2001, Third Amendment, dated May 7, 2002, Fourth Amendment,
    dated July 25, 2002, Fifth Amendment, dated August 20,
    2002 and Sixth Amendment, dated April 3, 2003
10.3*†
Consolidation Loan Origination Responsibility
    Agreement, dated December 3, 2002, by and between
    Collegiate Funding Services, LLC and The Brazos Higher Education
    Service Corporation, Inc., together with First Email Agreement,
    dated September 3, 2003, Second Email Agreement, dated
    September 26, 2003 and First Amendment Agreement, dated
    January 1, 2004
10.4*†
Real World Consolidation Loan Origination
    Responsibility Agreement, dated April 1, 2003, by and
    between Collegiate Funding Services, LLC and Mississippi Higher
    Education Assistance Corporation
10.5*†
Origination, Disbursement, Interim Sub-Servicing
    and Purchasing Master Agreement, dated February 19, 2004,
    by and between Collegiate Funding Services, LLC and the Higher
    Education Loan Authority of the State of Missouri
10.6*†
Private Consolidation Loan Origination
    Responsibility Agreement, dated June 12, 2001, by and
    between Collegiate Funding Services, LLC and First Union
    National Bank of Delaware
10.7*†
Amendment Agreement, dated August 1, 2001,
    among First Union National Bank of Delaware, The Education
    Resources Institute, SunTech, Inc. and Collegiate Funding
    Services, LLC, together with Amendment Agreement, dated
    February 20, 2002
II-4
Exhibit No.
Description of Exhibit
10.8*†
Amendment Agreement, dated November 7, 2003,
    by and between Collegiate Funding Services, LLC, ClassNotes Inc.
    (d/b/a Educaid) and Wachovia Bank of Delaware (as successor in
    interest to First Union National Bank of Delaware), together
    with Amendment Agreement, dated March 17, 2004
10.9*
ü
Credit Agreement, dated as of October 30,
    2003 between Collegiate Funding Services, LLC, as Borrower, CFSL
    Holdings Corp. and CFSL Acquisition Corp., as Parent Guarantors,
    the Subsidiary Guarantors referred to therein, as Subsidiary
    Guarantors, the lenders named therein, as Lenders and JPMorgan
    Chase Bank, as Administrative Agent
10.10*
Underwriting Agreement, dated November 25,
    2003, by and among Banc of America Securities LLC, J.P. Morgan
    Securities Inc., Citigroup Global Markets Inc., Collegiate
    Funding of Delaware, LLC and Collegiate Funding Services, LLC
10.11*
ü
Warrant Agreement, dated May 17, 2002, by
    and among CFSL Holdings Corp. and the purchasers party thereto
10.12*
Stock Incentive Plan of Collegiate Funding
    Services, Inc.
10.13*
Employment Agreement, dated
    April   , 2004, by and between Collegiate Funding
    Services, Inc. and J. Barry Morrow
10.14*
Employment Agreement, dated
    April   , 2004, by and between Collegiate Funding
    Services, Inc. and Kevin A. Landgraver
10.15*
Employment Agreement, dated
    April   , 2004, by and between Collegiate Funding
    Services, Inc. and Charles L. Terribile
10.16*
Employment Agreement, dated
    April   , 2004, by and between Collegiate Funding
    Services, Inc. and Clark McGhee
10.17*
Employment Agreement, dated
    April   , 2004, by and between Collegiate Funding
    Services, Inc. and John R. Elam
10.18*
Employment Agreement, dated
    April   , 2004, by and between Collegiate Funding
    Services, Inc. and John Reeves
10.19*
ü
Management Agreement, dated May 17, 2002, by
    and between Lightyear Capital, LLC, CFSL Holdings Corp., CFSL
    Acquisition Corp. and Collegiate Funding Services, LLC
10.20*
ü
Consulting Services Agreement, dated May 17,
    2002, between NOBS Capital Ventures, LLC and CFSL Holdings Corp.
10.21*
Consulting Agreement, dated March 31, 2003,
    among Collegiate Funding Services, LLC, EdPro, LLC and
    Malcolm B. Lightsey
10.22*
Form of Broker-Dealer Agreement
21.1*
List of Subsidiaries
23.1*
Consent of Simpson Thacher &
    Bartlett LLP (included as part of its opinion filed as
    Exhibit 5.1 hereto)
23.2
Consent of Ernst & Young LLP
23.3
Consent of PBGH LLP
24.1
Powers of Attorney of the directors and officers
    of the registrants (included in the signature pages to the
    registration statement)
ü
CFSL Holdings Corp. has subsequently changed its
    name to Collegiate Funding Services, Inc.
*
To be filed by amendment.
†
Confidential treatment to be requested for
    certain portions of this Exhibit pursuant to Rule 406
    promulgated under the Securities Act.
(b)
Financial Statement Schedules
None.
II-5
Item 17.
Undertakings
Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors,
officers and controlling persons of the registrant pursuant to
the foregoing provisions, or otherwise, the registrants have
been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final
adjudication of such issue.
(1)     The undersigned
registrant hereby undertakes to provide to the underwriter at
the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names
as required by the underwriter to permit prompt delivery to each
purchaser.
(2)     For purposes of
determining any liability under the Securities Act of 1933, the
information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(3)     For purposes of
determining any liability under the Securities Act of 1933, each
post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to
the securities offering therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-6
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, the registrant has duly caused this registration
statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York on
April 14, 2004.
Collegiate Funding Services, Inc.
By:
/s/ J. BARRY MORROW
______________________________________
Name: J. Barry Morrow
Title:     principal executive officer
We, the undersigned directors and officers of
Collegiate Funding Services, Inc., do hereby constitute and
appoint Kevin A. Landgraver and Charles L. Terribile, or
any of them, our true and lawful attorneys and agents, to do any
and all acts and things in our name and on our behalf in our
capacities as directors and officers and to execute any and all
instruments for us and in our names in the capacities indicated
below, which said attorneys and agents, or either of them, may
deem necessary or advisable to enable said registrant to comply
with the Securities Act of 1933 and any rules, regulations and
requirements of the Securities and Exchange Commission, in
connection with this Registration Statement, including
specifically, but without limitation, power and authority to
sign for us or any of us in our names in the capacities
indicated below, any and all amendments (including
post-effective amendments) hereto and registration statements
filed pursuant to Rule 462 under the Securities Act of
1933, and we do hereby ratify and confirm all that said
attorneys and agents, or any of them, shall do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities
Act of 1933, this registration statement has been signed by the
following persons in the capacities indicated on April 14,
2004.
Signature
Title
Date
/s/ J. BARRY MORROW
J. Barry
    Morrow
Chief Executive Officer
and Director
(principal executive officer)
April 14, 2004
/s/ KEVIN A. LANDGRAVER
Kevin A.
    Landgraver
Executive Vice President
and Chief Financial Officer
(principal financial and
accounting officer)
April 14, 2004
/s/ DONALD B. MARRON
Donald B.
    Marron
Chairman of the Board of Directors
and Director
April 14, 2004
/s/ LAWRENCE A. HOUGH
Lawrence A.
    Hough
Director
April 14, 2004
/s/ BRUCE J. RUBIN
Bruce J. Rubin
Director
April 14, 2004
/s/ RICHARD J. STERNE
Richard J.
    Sterne
Director
April 14, 2004
/s/ MARK F. VASSALLO
Mark F.
    Vassallo
Director
April 14, 2004
II-7
EXHIBIT INDEX
Exhibit No.
Description of Exhibit
1.1*
Form of Underwriting Agreement
3.1*
Amended and Restated Certificate of Incorporation
    of Collegiate Funding Services, Inc.
3.2*
Amended and Restated By-Laws of Collegiate
    Funding Services, Inc.
4.1*
ü
Stockholders Agreement, dated May 17, 2002,
    by and among CFSL Holdings Corp., CFSL Acquisition Corp. and the
    investors listed on Schedule A thereto
4.2*
Form of Certificate of Common Stock
4.3*
Indenture of Trust from Collegiate Funding
    Services Education Loan Trust I and U.S. Bank National
    Association, as Eligible Lender Trustee to U.S. Bank National
    Association, as Indenture Trustee, dated as of November 1,
    2001, together with First Supplemental Indenture of Trust, dated
    November 1, 2001 and Second Supplemental Indenture of
    Trust, dated July 1, 2002
4.4*
Indenture of Trust between Collegiate Funding
    Services Education Loan Trust 2003-A and U.S. Bank National
    Association, as Eligible Lender Trustee and as Trustee, dated as
    of February 1, 2003
4.5*
Indenture of Trust between Collegiate Funding
    Services Education Loan Trust 2003-B and U.S. Bank National
    Association, as Eligible Lender Trustee and as Trustee, dated as
    of November 1, 2003
5.1*
Opinion of Simpson Thacher & Bartlett LLP
10.1*
Warehouse Financing Indenture, dated as of
    July 23, 2003, by and among Collegiate Funding Services
    Resources I, LLC, as Issuer, the conduit lenders parties
    thereto, certain financial institutions parties thereto, as
    Committed Lenders, Citicorp North America, Inc., as Agent, U.S.
    Bank National Association, as Indenture Trustee and Eligible
    Lender Trustee, Collegiate Funding Portfolio Administration,
    L.L.C., as Administrator and Collegiate Funding Master
    Servicing, L.L.C., as Master Servicer, together with Amendment
    No. 1, dated as of October 30, 2003 and Amendment
    No. 2, dated as of February 17, 2004
10.2*†
Consolidation Loan Origination Responsibility
    Agreement, dated November 15, 1999, by and between
    Collegiate Funding Services, LLC and Citibank as Trustee for the
    Student Loan Corporation, together with First Amendment, dated
    March 1, 2001, Second Amendment, dated November 1,
    2001, Third Amendment, dated May 7, 2002, Fourth Amendment,
    dated July 25, 2002, Fifth Amendment, dated August 20,
    2002 and Sixth Amendment, dated April 3, 2003
10.3*†
Consolidation Loan Origination Responsibility
    Agreement, dated December 3, 2002, by and between
    Collegiate Funding Services, LLC and The Brazos Higher Education
    Service Corporation, Inc., together with First Email Agreement,
    dated September 3, 2003, Second Email Agreement, dated
    September 26, 2003 and First Amendment Agreement, dated
    January 1, 2004
10.4*†
Real World Consolidation Loan Origination
    Responsibility Agreement, dated April 1, 2003, by and
    between Collegiate Funding Services, LLC and Mississippi Higher
    Education Assistance Corporation
10.5*†
Origination, Disbursement, Interim Sub-Servicing
    and Purchasing Master Agreement, dated February 19, 2004,
    by and between Collegiate Funding Services, LLC and the Higher
    Education Loan Authority of the State of Missouri
10.6*†
Private Consolidation Loan Origination
    Responsibility Agreement, dated June 12, 2001, by and
    between Collegiate Funding Services, LLC and First Union
    National Bank of Delaware
10.7*†
Amendment Agreement, dated August 1, 2001,
    among First Union National Bank of Delaware, The Education
    Resources Institute, SunTech, Inc. and Collegiate Funding
    Services, LLC, together with Amendment Agreement, dated
    February 20, 2002
Exhibit No.
Description of Exhibit
10.8*†
Amendment Agreement, dated November 7, 2003,
    by and between Collegiate Funding Services, LLC, ClassNotes Inc.
    (d/b/a Educaid) and Wachovia Bank of Delaware (as successor in
    interest to First Union National Bank of Delaware), together
    with Amendment Agreement, dated March 17, 2004
10.9*
ü
Credit Agreement, dated as of October 30,
    2003 between Collegiate Funding Services, LLC, as Borrower, CFSL
    Holdings Corp. and CFSL Acquisition Corp., as Parent Guarantors,
    the Subsidiary Guarantors referred to therein, as Subsidiary
    Guarantors, the lenders named therein, as Lenders and JPMorgan
    Chase Bank, as Administrative Agent
10.10*
Underwriting Agreement, dated November 25,
    2003, by and among Banc of America Securities LLC, J.P. Morgan
    Securities Inc., Citigroup Global Markets Inc., Collegiate
    Funding of Delaware, LLC and Collegiate Funding Services, LLC
10.11*
ü
Warrant Agreement, dated May 17, 2002, by
    and among CFSL Holdings Corp. and the purchasers party thereto
10.12*
Stock Incentive Plan of Collegiate Funding
    Services, Inc.
10.13*
Employment Agreement, dated
    April   , 2004, by and between Collegiate Funding
    Services, Inc. and J. Barry Morrow
10.14*
Employment Agreement, dated
    April   , 2004, by and between Collegiate Funding
    Services, Inc. and Kevin A. Landgraver
10.15*
Employment Agreement, dated
    April   , 2004, by and between Collegiate Funding
    Services, Inc. and Charles L. Terribile
10.16*
Employment Agreement, dated
    April   , 2004, by and between Collegiate Funding
    Services, Inc. and Clark McGhee
10.17*
Employment Agreement, dated
    April   , 2004, by and between Collegiate Funding
    Services, Inc. and John R. Elam
10.18*
Employment Agreement, dated
    April   , 2004, by and between Collegiate Funding
    Services, Inc. and John Reeves
10.19*
ü
Management Agreement, dated May 17, 2002, by
    and between Lightyear Capital, LLC, CFSL Holdings Corp., CFSL
    Acquisition Corp. and Collegiate Funding Services, LLC
10.20*
ü
Consulting Services Agreement, dated May 17,
    2002, between NOBS Capital Ventures, LLC and CFSL Holdings Corp.
10.21*
Consulting Agreement, dated March 31, 2003,
    among Collegiate Funding Services, LLC, EdPro, LLC and
    Malcolm B. Lightsey
10.22*
Form of Broker-Dealer Agreement
21.1*
List of Subsidiaries
23.1*
Consent of Simpson Thacher &
    Bartlett LLP (included as part of its opinion filed as
    Exhibit 5.1 hereto)
23.2
Consent of Ernst & Young LLP
23.3
Consent of PBGH LLP
24.1
Powers of Attorney of the directors and officers
    of the registrants (included in the signature pages to the
    registration statement)
ü
CFSL Holdings Corp. has subsequently changed its
    name to Collegiate Funding Services, Inc.
*
To be filed by amendment.
†
Confidential treatment to be requested for
    certain portions of this Exhibit pursuant to Rule 406
    promulgated under the Securities Act.