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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 7, 1997
---------------
UNION FINANCIAL SERVICES-1, INC.
(Exact name of registrants as specified
in its organizational documents)
NEVADA 333-08929 86-0817755
- ---------------------- ------------------ -------------------
(Corporation state of Commission File (Corporation I.R.S
incorporation) Number Employer Identification No.)
6991 East Camelback Road, Suite B290, Scottsdale, Arizona 85251
- ----------------------------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area
code: (602) 947-7703
Not Applicable
------------------
(Former name or former address, if changes since last report)
PAGE 1 OF 328 PAGES
EXHIBIT INDEX APPEARS ON PAGE 5
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ITEM 5. OTHER EVENTS.
The registrant is filing this Current Report on Form 8-K in order to file
with the Commission its Second Amended and Restated Indenture, excluding
Exhibits E-1, E-2, F-1 and F-2 thereto, and the Series 1996C Supplemental
Indenture, excluding Exhibits D and E thereto.
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ITEM 7. EXHIBITS.
99.1 Second Amended and Restated Indenture by and between Union Financial
Services-1, Inc., as Issuer, and Norwest Bank Minnesota, National Association,
as Trustee, dated as of November 1, 1996, excluding Exhibits E-1, E-2, F-1
and F-2 thereto.
99.2 Series 1996C Supplemental Indenture by and between Union Financial
Services-1, Inc. and Norwest Bank Minnesota, National Association dated as of
November 1, 1996, excluding Exhibits D and E thereto.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
UNION FINANCIAL SERVICES-1, INC.
Date: January 7, 1997 By /s/ Ronald W. Page
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Ronald W. Page
Secretary
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EXHIBIT INDEX
SEQUENTIALLY
EXHIBIT NO. DESCRIPTION NUMBERED PAGE
- ----------- ----------- -------------
99.1 Second Amended and Restated Indenture by and between Union 6
Financial Services-1, Inc., as Issuer, and Norwest Bank
Minnesota, National Association, as Trustee, dated as of
November 1, 1996, excluding Exhibits E-1, E-2, F-1 and F-2
thereto.
99.2 Series 1996C Supplemental Indenture by and between Union 234
Financial Services-1, Inc. and Norwest Bank Minnesota,
National Association dated as of November 1, 1996, excluding
Exhibits D and E thereto.
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SECOND AMENDED AND RESTATED INDENTURE OF TRUST
BY AND BETWEEN
UNION FINANCIAL SERVICES-1, INC.,
AS ISSUER
AND
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
AS TRUSTEE
--------------------------------
DATED AS OF NOVEMBER 1, 1996
--------------------------------
THIS INSTRUMENT HAS BEEN ENTERED INTO BY THE WITHIN-DESCRIBED PARTIES IN
ORDER TO SECURE UNION FINANCIAL SERVICES-1, INC.'S TAXABLE STUDENT LOAN
ASSET-BACKED NOTES IN SUCH AGGREGATE PRINCIPAL AMOUNT AS MAY BE OUTSTANDING
FROM TIME TO TIME HEREUNDER AND TO SECURE CERTAIN OTHER OBLIGATIONS OF UNION
FINANCIAL SERVICES-1, INC.
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UNION FINANCIAL SERVICES-1, INC.
Reconciliation and tie between Trust Indenture Act of 1939 and Second
Amended and Restated Indenture dated as of November 1, 1996.
Trust Indenture Act Section Indenture Section
--------------------------- -----------------
Section 310(a)(1) 7.23
(a)(2) 7.23
(b) 7.23,7.09
Section 312(c) 9.16
Section 314(a) 4.16
(a)(4) 4.17
Section 315(b) 8.05
Section 317(a)(1) 4.18
(a)(2) 7.24
Section 318(a) 9.10
(c) 9.10
- -------------------
NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
Attention should also be directed to Section 318(c) of the 1939 Act, which
provides that the provisions of Sections 310 to and including 317 of the 1939
Act are a part of and govern every qualified indenture, whether or not
physically contained therein.
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TABLE OF CONTENTS
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(This Table of Contents is for convenience of reference only and is not
intended to define, limit or describe the purpose or intent of any provisions
of this Indenture of Trust.)
Page
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PARTIES AND PREAMBLES AND RECITALS . . . . . . . . . . . . . . . . . . . 1
GRANTING CLAUSES, HABENDUM CLAUSE AND DEFEASANCE CLAUSE. . . . . . . . . 2
ARTICLE I
DEFINITIONS AND USE OF PHRASES . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE II
NOTE DETAILS, FORM OF NOTES, REDEMPTION OF NOTES
AND USE OF PROCEEDS OF NOTES
Section 2.01. Series 1996A Note and Series 1996B Note Details. . . . . . 21
Section 2.02. Redemption of the Series 1996A Notes and Series 1996B
Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 2.03. Execution of Notes . . . . . . . . . . . . . . . . . . . . 33
Section 2.04. Registration, Transfer and Exchange of Notes; Persons
Treated as Registered Owners . . . . . . . . . . . . . . . 33
Section 2.05. Lost, Stolen, Destroyed and Mutilated Notes. . . . . . . . 35
Section 2.06. Delivery of Series 1996A Notes and Series 1996B Notes. . . 36
Section 2.07. Trustee's Authentication Certificate . . . . . . . . . . . 37
Section 2.08. Cancellation and Destruction of Notes by the Trustee . . . 37
Section 2.09. Temporary Notes. . . . . . . . . . . . . . . . . . . . . . 37
Section 2.10. Deposit of Note Proceeds and Funding of Trust Estate . . . 37
Section 2.11. Forms of Series 1996A Notes and Series 1996B Notes . . . . 38
Section 2.12. Issuance of Additional Notes . . . . . . . . . . . . . . . 38
ARTICLE III
PARITY OF LIEN; OTHER OBLIGATIONS;
AND SWAP AGREEMENTS
Section 3.01. Parity of Lien . . . . . . . . . . . . . . . . . . . . . . 40
Section 3.02. Other Obligations. . . . . . . . . . . . . . . . . . . . . 40
Section 3.03. Swap Agreements; Counterparty Swap Payments; Issuer Swap
Payments . . . . . . . . . . . . . . . . . . . . . . . . . 41
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ARTICLE IV
PROVISIONS APPLICABLE TO THE NOTES;
DUTIES OF THE ISSUER
Section 4.01. Pledge for Payment . . . . . . . . . . . . . . . . . . . . 42
Section 4.02. Representations and Warranties of the Issuer . . . . . . . 43
Section 4.03. Covenants as to Additional Conveyances . . . . . . . . . . 43
Section 4.04. Further Covenants of the Issuer. . . . . . . . . . . . . . 43
Section 4.05. Enforcement of Servicing Agreements. . . . . . . . . . . . 45
Section 4.06. Procedures for Transfer of Funds . . . . . . . . . . . . . 46
Section 4.07. Additional Covenants with Respect to the Act . . . . . . . 46
Section 4.08. Student Loans; Collections Thereof; Assignment Thereof . . 47
Section 4.09. Appointment of Agents, Etc.. . . . . . . . . . . . . . . . 48
Section 4.10. Capacity to Sue. . . . . . . . . . . . . . . . . . . . . . 48
Section 4.11. Continued Existence; Successor to Issuer . . . . . . . . . 48
Section 4.12. Amendment of Loan Purchase Agreements. . . . . . . . . . . 48
Section 4.13. Representations; Negative Covenants. . . . . . . . . . . . 48
Section 4.14. Additional Covenants . . . . . . . . . . . . . . . . . . . 55
Section 4.15. Providing of Notice. . . . . . . . . . . . . . . . . . . . 56
Section 4.16. Reports by Issuer. . . . . . . . . . . . . . . . . . . . . 56
Section 4.17. Statement as to Compliance . . . . . . . . . . . . . . . . 57
Section 4.18. Collection of Indebtedness and Suits for Enforcement by
Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE V
FUNDS
Section 5.01. Creation of Funds and Accounts . . . . . . . . . . . . . . 58
Section 5.02. Student Loan Fund. . . . . . . . . . . . . . . . . . . . . 59
Section 5.03. Revenue Fund . . . . . . . . . . . . . . . . . . . . . . . 60
Section 5.04. Reserve Fund . . . . . . . . . . . . . . . . . . . . . . . 63
Section 5.05. Interest Fund. . . . . . . . . . . . . . . . . . . . . . . 65
Section 5.06. Note Redemption Fund . . . . . . . . . . . . . . . . . . . 66
Section 5.07. Student Loan Holding Fund. . . . . . . . . . . . . . . . . 69
Section 5.08. Cost of Issuance Fund. . . . . . . . . . . . . . . . . . . 69
Section 5.09. Operating Fund . . . . . . . . . . . . . . . . . . . . . . 70
Section 5.10. General Fund . . . . . . . . . . . . . . . . . . . . . . . 70
Section 5.11. Investment of Funds Held by Trustee. . . . . . . . . . . . 71
Section 5.12. Release. . . . . . . . . . . . . . . . . . . . . . . . . . 72
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ARTICLE VI
DEFAULTS AND REMEDIES
Section 6.01. Event of Default Defined . . . . . . . . . . . . . . . . . 72
Section 6.02. Remedy on Default; Possession of Trust Estate. . . . . . . 73
Section 6.03. Remedy on Default; Advice of Counsel . . . . . . . . . . . 75
Section 6.04. Remedy on Default; Sale of Trust Estate. . . . . . . . . . 75
Section 6.05. Restoration of Position. . . . . . . . . . . . . . . . . . 76
Section 6.06. Purchase of Properties by Trustee or Registered Owners . . 76
Section 6.07. Application of Sale Proceeds . . . . . . . . . . . . . . . 76
Section 6.08. Accelerated Maturity . . . . . . . . . . . . . . . . . . . 76
Section 6.09. Remedies not Exclusive . . . . . . . . . . . . . . . . . . 77
Section 6.10. Direction of Trustee . . . . . . . . . . . . . . . . . . . 77
Section 6.11. Right to Enforce in Trustee. . . . . . . . . . . . . . . . 78
Section 6.12. Physical Possession of Notes not Required. . . . . . . . . 79
ARTICLE VII
THE TRUSTEE
Section 7.01. Acceptance of Trust. . . . . . . . . . . . . . . . . . . . 79
Section 7.02. Recitals of Others . . . . . . . . . . . . . . . . . . . . 80
Section 7.03. As to Filing of Indenture. . . . . . . . . . . . . . . . . 80
Section 7.04. Trustee May Act Through Agents . . . . . . . . . . . . . . 80
Section 7.05. Assumption of Liability and Indemnification of Trustee . . 80
Section 7.06. Trustee's Right to Reliance. . . . . . . . . . . . . . . . 81
Section 7.07. Compensation of Trustee. . . . . . . . . . . . . . . . . . 82
Section 7.08. Trustee May Own Notes. . . . . . . . . . . . . . . . . . . 82
Section 7.09. Resignation of Trustee . . . . . . . . . . . . . . . . . . 82
Section 7.10. Removal of Trustee . . . . . . . . . . . . . . . . . . . . 83
Section 7.11. Successor Trustee. . . . . . . . . . . . . . . . . . . . . 83
Section 7.12. Manner of Vesting Title in Trustee . . . . . . . . . . . . 84
Section 7.13. Filing of Current Information with Trustee . . . . . . . . 84
Section 7.14. Right of Inspection. . . . . . . . . . . . . . . . . . . . 84
Section 7.15. Limitation with Respect to Examination of Reports. . . . . 85
Section 7.16. Servicing Agreement. . . . . . . . . . . . . . . . . . . . 85
Section 7.17. Additional Covenants of Trustee. . . . . . . . . . . . . . 85
Section 7.18. Trustee Covenants with Respect to "Eligible Lender"
Status. . . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 7.19. Trustee's Status as an "Eligible Lender.". . . . . . . . . 85
Section 7.20. Trustee to Cause Investments to be Made. . . . . . . . . . 86
Section 7.21. Duty of Trustee with Respect to Each Rating Agency . . . . 86
Section 7.22. Conversion, Consolidation or Merger of Trustee . . . . . . 86
Section 7.23. Corporate Trustee Required; Eligibility; Conflicting
Interests. . . . . . . . . . . . . . . . . . . . . . . . . 87
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Section 7.24. Trustee May File Proofs of Claim . . . . . . . . . . . . . 87
ARTICLE VIII
SUPPLEMENTAL INDENTURES
Section 8.01. Supplemental Indentures Not Requiring Consent of Registered
Owners . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Section 8.02. Supplemental Indentures Requiring Consent of Registered
Owners . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Section 8.03. Additional Limitation on Modification of Indenture . . . . 90
Section 8.04. Notice to Each Rating Agency . . . . . . . . . . . . . . . 90
Section 8.05. Notice of Defaults . . . . . . . . . . . . . . . . . . . . 91
Section 8.06. Conformity with the Trust Indenture Act. . . . . . . . . . 91
ARTICLE IX
GENERAL PROVISIONS
Section 9.01. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . 91
Section 9.02. Covenants Bind Issuer. . . . . . . . . . . . . . . . . . . 92
Section 9.03. Lien Created . . . . . . . . . . . . . . . . . . . . . . . 93
Section 9.04. Severability of Lien . . . . . . . . . . . . . . . . . . . 93
Section 9.05. Consent of Registered Owners Binds Successors. . . . . . . 93
Section 9.06. Date of Execution. . . . . . . . . . . . . . . . . . . . . 93
Section 9.07. Nonliability of Directors; No General Obligation . . . . . 93
Section 9.08. Nonpresentment of Notes or Interest Checks . . . . . . . . 93
Section 9.09. Security Agreement . . . . . . . . . . . . . . . . . . . . 94
Section 9.10. Laws Governing . . . . . . . . . . . . . . . . . . . . . . 94
Section 9.11. Severability . . . . . . . . . . . . . . . . . . . . . . . 94
Section 9.12. Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . 94
Section 9.13. Parties Interested Herein. . . . . . . . . . . . . . . . . 94
Section 9.14. Notes are Limited Obligations. . . . . . . . . . . . . . . 94
Section 9.15. Swap Counterparty Rights . . . . . . . . . . . . . . . . . 94
Section 9.16. Disclosure of Names and Addresses of Holders . . . . . . . 94
ARTICLE X
PAYMENT AND CANCELLATION OF NOTES
AND SATISFACTION OF INDENTURE
Section 10.01. Trust Irrevocable . . . . . . . . . . . . . . . . . . 95
Section 10.02. Satisfaction of Indenture . . . . . . . . . . . . . . 95
Section 10.03. Cancellation of Paid Notes. . . . . . . . . . . . . . 97
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ARTICLE XI
TERMINATION
Section 11.01. Termination of the Trust. . . . . . . . . . . . . . . 97
Section 11.02. Notice. . . . . . . . . . . . . . . . . . . . . . . . 98
ARTICLE XII
REPORTING REQUIREMENTS
Section 12.01. Annual Statement as to Compliance . . . . . . . . . . 98
Section 12.02. Annual Independent Public Accountants' Servicing
Report . . . . . . . . . . . . . . . . . . . . . . . 99
Section 12.03. Servicer's Certificate. . . . . . . . . . . . . . . . 99
Section 12.04. Statements to Note Holders. . . . . . . . . . . . . . 99
TESTIMONIUM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
SIGNATURES AND SEALS . . . . . . . . . . . . . . . . . . . . . . . . . . 99
ACKNOWLEDGMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
APPENDIX A-- Certain Terms and Provisions of the Auction Notes. . . . . A-1
APPENDIX B-- Certain Terms and Provisions of the Class 1996B Notes and
the Class 1996B-2 Notes. . . . . . . . . . . . . . . . . . B-1
EXHIBIT A-1-- Form of Class 1996[A-1][A-2] Senior (Auction Rate Securities
(ARS-SM-)) . . . . . . . . . . . . . . . . . . . . . . . A-1-1
EXHIBIT A-2-- Form of Class 1996B Subordinate LIBOR Rate Notes . . . . A-2-1
EXHIBIT A-3-- Form of Class 1996A[-3][-4] Senior (Auction Rate Securities
(ARS-SM-)) . . . . . . . . . . . . . . . . . . . . . . . A-3-1
EXHIBIT A-4-- Form of Class 1996B-2 Subordinate LIBOR Rate Notes . . . A-4-1
EXHIBIT B-1-- Form of Series 1996A Investment Letter . . . . . . . . . B-1-1
EXHIBIT B-2-- Forms of Series 1996B Investment Letter. . . . . . . . . B-2-1
EXHIBIT C-1-- Form of Series 1996A Transferee Agreement. . . . . . . . C-1-1
EXHIBIT C-2-- Form of Series 1996B Transferee Agreement. . . . . . . . C-2-1
EXHIBIT C-3-- Form of Master Purchaser's Letter. . . . . . . . . . . . C-3-1
EXHIBIT D-1-- Compliance Certificate . . . . . . . . . . . . . . . . . D-1-1
EXHIBIT D-2-- Consolidation Loan Compliance Certificate. . . . . . . . D-2-1
EXHIBIT E-1-- Series 1996A Cash Flow Assumptions . . . . . . . . . . . E-1-1
EXHIBIT E-2-- Series 1996B Cash Flow Assumptions . . . . . . . . . . . E-2-1
EXHIBIT F-1-- Series 1996A Closing Cash Flow Projections . . . . . . . F-1-1
EXHIBIT F-2-- Series 1996B Closing Cash Flow Projections . . . . . . . F-2-1
EXHIBIT G-- Notice of Payment Default. . . . . . . . . . . . . . . . . G-1
EXHIBIT H-- Notice of Cure of Payment Default. . . . . . . . . . . . . H-1
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EXHIBIT I-- Notice of Proposed Change in Length of One or More Auction
Periods. . . . . . . . . . . . . . . . . . . . . . . . . . I-1
EXHIBIT J-- Notice Establishing Change in Length of One or More Auction
Periods. . . . . . . . . . . . . . . . . . . . . . . . . . J-1
EXHIBIT K-- Notice of Change in Auction Date . . . . . . . . . . . . . K-1
EXHIBIT L-- Notice of Proposed Adjustment to Percentage Used in
Determining [Maximum Auction Rate] [All Hold Rate]
[Non-Payment Rate] . . . . . . . . . . . . . . . . . . . . L-1
EXHIBIT M-- Notice Establishing New Percentage Used in Determining
[Maximum Auction Rate] [All Hold Rate] [Non-Payment Rate]. M-1
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SECOND AMENDED AND RESTATED INDENTURE OF TRUST
THIS SECOND AMENDED AND RESTATED INDENTURE OF TRUST (this "Indenture"),
dated as of November 1, 1996, is by and between UNION FINANCIAL SERVICES-1,
INC., a corporation duly organized and existing under the laws of the State of
Nevada (the "Issuer"), and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a
national banking association duly organized and operating under the laws of the
United States of America and authorized to exercise corporate trust powers, with
its principal place of business and corporate trust office located in
Minneapolis, Minnesota (together with its successors, the "Trustee"), as trustee
hereunder (all capitalized terms used in these preambles, recitals and granting
clauses shall have the same meanings assigned thereto in Article I hereof);
W I T N E S S E T H:
WHEREAS, the Issuer represents that it is duly created as a corporation
under the laws of the State and that by proper action of its governing body
it has previously duly authorized the issuance of its Taxable Student Loan
Asset-Backed Notes, Series 1996A (the "Series 1996A Notes"), in the aggregate
principal amount of $107,700,000, consisting of $96,600,000 of Taxable
Student Loan Asset-Backed Notes, Class 1996A Senior Auction Rate (the "Class
1996A Notes") and $11,100,000 Taxable Student Loan Asset-Backed Notes, Class
1996B Subordinate LIBOR Rate (the "Class 1996B Notes") pursuant to the terms
of the Indenture of Trust dated as of March 1, 1996 (the "Original
Indenture"), between the Issuer and the Trustee; and
WHEREAS, the Issuer represents that by proper action of its governing body
it has previously duly authorized the issuance of its Taxable Student Loan
Asset-Backed Notes, Series 1996B (the "Series 1996B Notes"), in the aggregate
principal amount of $142,200,000, consisting of $128,000,000 of Taxable Student
Loan Asset-Backed Notes, Class 1996A Senior Auction Rate (the "Additional Class
1996A Notes") and $14,200,000 Taxable Student Loan Asset-Backed Notes,
Class 1996B-2 Subordinate LIBOR Rate (the "Class 1996B-2 Notes") pursuant to the
terms of the Amended and Restated Indenture of Trust dated as of June 15, 1996
(the "Amended Indenture") between the Issuer and the Trustee; and
WHEREAS, this Indenture is subject to the provisions of the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act" or "TIA"), that are deemed to
be incorporated into this Indenture and shall, to the extent applicable, be
governed by such provisions; and
WHEREAS, the Issuer desires to amend and restate the Amended Indenture to
conform the Indenture to the requirements of the Trust Indenture Act; and
WHEREAS, to secure the payment of the Series 1996A Notes, the Series 1996B
Notes and any additional notes on a parity with or subordinate to any of the
Series 1996A Notes and the Series 1996B Notes (the "Additional Notes") (the
Series 1996A Notes, the Series 1996B
<PAGE>
Notes and any Additional Notes are referred to herein as the "Notes"), it has
by proper corporate action authorized the execution and delivery of this
Indenture; and
WHEREAS, the Trustee has agreed to accept the trusts herein created upon
the terms herein set forth; and
WHEREAS, it is hereby agreed between the parties hereto and the Registered
Owners of the Notes (the Registered Owners evidencing their consent by their
acceptance of the Notes) that in the performance of any of the agreements of the
Issuer herein contained, any obligation it may thereby incur for the payment of
money shall not be general debt on its part, but shall be secured by and payable
solely from the Trust Estate.
NOW, THEREFORE, the Issuer, in consideration of the premises and acceptance
by the Trustee of the trusts herein created, of the purchase and acceptance of
the Notes by the Registered Owners thereof, the execution and delivery of any
Swap Agreement by any Swap Counterparty and the Issuer and the acknowledgement
thereof by the Trustee, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, does hereby GRANT,
CONVEY, PLEDGE, TRANSFER, ASSIGN AND DELIVER to the Trustee, for the benefit of
the Registered Owners of the Notes, any Swap Counterparty (to secure the payment
of any and all amounts which may from time to time become due and owing to a
Swap Counterparty pursuant to any Swap Agreement), the Trustee (to secure the
payment of any and all amounts which may from time to time be due and owing to
the Trustee under this Indenture), all of the moneys, rights, and properties
described in the granting clauses A through F below (the "Trust Estate"), as
follows:
GRANTING CLAUSE A
The Revenue with respect to Financed Eligible Loans;
GRANTING CLAUSE B
All moneys and investments held in the Funds created under Section 5.01(a)
hereof, except amounts in the Student Loan Holding Fund not representing
Revenue;
GRANTING CLAUSE C
The Financed Eligible Loans purchased with money from the Student Loan Fund
or otherwise acquired and pledged or credited to the Student Loan Fund;
GRANTING CLAUSE D
The rights of the Issuer in and to the Servicing Agreement, the Student
Loan Purchase Agreements, the Custodian Agreement and the Guarantee Agreements
as the same relate to
2
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Financed Eligible Loans and in and to the Auction Agent Agreement and the
Administrative Services Agreement;
GRANTING CLAUSE E
The rights of the Issuer in and to any Swap Agreement and any Swap
Counterparty Guarantee, including accrued liabilities thereon; provided,
however, that this Granting Clause E shall not be for the benefit of any Swap
Counterparty;
GRANTING CLAUSE F
Any and all other property, rights and interests of every kind or
description that from time to time hereafter is granted, conveyed, pledged,
transferred, assigned or delivered to the Trustee as additional security
hereunder.
TO HAVE AND TO HOLD the Trust Estate, whether now owned or held or
hereafter acquired, unto the Trustee and its successors or assigns,
IN TRUST NEVERTHELESS, upon the terms and trusts herein set forth for the
equal and proportionate benefit and security of all present and future
Registered Owners of the Notes, without preference of any Note over any other,
except as provided herein, and for enforcement of the payment of the Notes in
accordance with their terms, and all other sums payable hereunder (including
payments due and payable to any Swap Counterparty) or on the Notes, and for the
performance of and compliance with the obligations, covenants, and conditions of
this Indenture, as if all the Notes at any time Outstanding had been executed
and delivered simultaneously with the execution and delivery of this Indenture;
PROVIDED, HOWEVER, that if the Issuer, its successors or assigns, shall
well and truly pay, or cause to be paid, the principal of the Notes and the
interest due and to become due thereon, or provide fully for payment thereof as
herein provided, at the times and in the manner mentioned in the Notes according
to the true intent and meaning thereof, and shall make all required payments
into the Funds as required under Article V hereof, or shall provide, as
permitted hereby, for the payment thereof by depositing with the Trustee sums
sufficient to pay or to provide for payment of the entire amount due and to
become so due as herein provided (including payments due and payable to any Swap
Counterparty), then, subject to the provisions of Article X hereof, this
Indenture (other than Sections 4.13, 4.14 (for a period of 90 days) and 7.05
hereof) and the rights hereby granted shall cease, terminate and be void;
otherwise, this Indenture shall be and remain in full force and effect;
NOW, THEREFORE, it is mutually covenanted and agreed as follows:
3
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ARTICLE I
DEFINITIONS AND USE OF PHRASES
In addition to the words and terms defined elsewhere in this Indenture and
in Appendix A and Appendix B hereto, the following terms have the following
meanings unless the context clearly requires otherwise:
"ACCOUNT" shall mean any of the accounts created and established within any
Fund by this Indenture.
"ACT" shall mean the Higher Education Act of 1965, as amended or
supplemented from time to time, or any successor federal act and all
regulations, directives, bulletins, and guidelines proposed or promulgated from
time to time thereunder.
"ADDITIONAL CLASS 1996A NOTES" shall mean the Issuer's Taxable Student Loan
Asset-Backed Notes, Class 1996A Senior Auction Rate issued pursuant to this
Indenture in the aggregate principal amount of $128,000,000 and consisting of
$73,700,000 of Class 1996A-3 Notes (Auction Rate Securities-SM- (ARS-SM-)) and
$54,300,000 of Class 1996A-4 Notes (Auction Rate Securities-SM- (ARS-SM-)).
"ADDITIONAL NOTES" shall mean any Notes issued pursuant to Section 2.12 of
this Indenture.
"ADMINISTRATIVE SERVICES AGREEMENT" shall mean any administrative services
agreement entered into between the Issuer and an entity who will provide
administrative services for the Issuer, as supplemented and amended.
"AGGREGATE MARKET VALUE" shall mean on any calculation date the sum of the
Values of all assets of the Trust Estate, less moneys in any Fund or Account
which the Issuer is then entitled to receive for deposit into the Operating Fund
or the General Fund but which has not yet been removed from the Trust Estate.
"AUTHORIZED DENOMINATIONS" shall mean with respect to any Class or subclass
of the Series 1996A Notes and the Series 1996B Notes, $100,000 or any integral
multiple thereof.
"AUTHORIZED OFFICER" shall mean, when used with reference to the Issuer,
its President, its Vice President, its Secretary, or any other officer or agent
authorized in writing by the Board to act on behalf of the Issuer.
"BOARD" or "BOARD OF DIRECTORS" shall mean the Board of Directors of the
Issuer.
"BUSINESS DAY" shall mean any day on which banks located in the City of New
York, New York and banks located in the city in which the Principal Office of
the Trustee is located
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are not required or authorized by law to remain closed and on which The New
York Stock Exchange is not closed.
"CASH FLOW CERTIFICATE" shall mean a report or reports prepared by the
Issuer showing, with respect to the period covered by the Cash Flow Certificate,
which period shall extend from the date of the Cash Flow Certificate to the
latest maturity of the Notes then Outstanding, (a) all Revenue expected to be
received during such period from the Trust Estate, (b) the application of all
such Revenue in accordance with this Indenture and (c) the resulting periodic
balances on each Interest Payment Date, and showing that anticipated Revenue
will exceed, by a margin of $250,000 plus any additional amount, if any,
required by any Supplemental Indenture, the amount necessary to pay the
principal of and interest on the Notes when due and all expenses payable under
this Indenture when due and to maintain the Reserve Fund Requirement at a level
which will not cause the Rating Agencies to withdraw or reduce their respective
ratings on the Notes Outstanding, under all scenarios included in the Cash
Flows. Each Cash Flow Certificate shall be accompanied by all supporting Cash
Flows, shall be based solely upon assumptions acceptable to each Rating Agency
and shall be approved in writing by each Rating Agency.
"CASH FLOWS" shall mean cash flow schedules prepared by the Issuer or its
designee including a listing of all assumptions used in the preparation of such
cash flow schedules. Such assumptions will include those contained in
Exhibits E-1 and E-2 hereto or such other assumptions at the time such Cash
Flows are prepared as shall be reasonable in the judgment of the Issuer and each
Rating Agency.
"CERTIFICATE OF INSURANCE" shall mean a certificate of federal loan
insurance issued with respect to an Eligible Loan by the Secretary pursuant to
the provisions of the Act.
"CLASS 1996A NOTES" shall mean the Issuer's Taxable Student Loan
Asset-Backed Notes, Class 1996A Senior Auction Rate issued pursuant to this
Indenture in the aggregate principal amount of $96,600,000 and consisting of
$48,300,000 of Class 1996A-1 Notes (Auction Rate Securities-SM- (ARS-SM-)) and
$48,300,000 of Class 1996A-2 Notes (Auction Rate Securities-SM- (ARS-SM-)).
"CLASS 1996A-1 NOTES" shall mean, with respect to the Class 1996A Notes,
the $48,300,000 Notes designated as Class 1996A-1.
"CLASS 1996A-2 NOTES" shall mean, with respect to the Class 1996A Notes,
the $48,300,000 Notes designated as Class 1996A-2.
"CLASS 1996A-3 NOTES" shall mean, with respect to the Series 1996B Notes,
the $73,700,000 Additional Class 1996A Notes designated as Class 1996A-3.
"CLASS 1996A-4 NOTES" shall mean, with respect to the Series 1996B Notes,
the $54,300,000 Additional Class 1996A Notes designated as Class 1996A-4.
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"CLASS 1996B NOTES" shall mean, with respect to the Series 1996A Notes, the
Issuer's Taxable Student Loan Asset-Backed Notes, Class 1996B Subordinate LIBOR
Rate, issued pursuant to this Indenture in the aggregate principal amount of
$11,100,000.
"CLASS 1996B-2 NOTES" shall mean, with respect to the Series 1996B Notes,
the Issuer's Taxable Student Loan Asset-Backed Notes, Class 1996B-2 Subordinate
LIBOR Rate, issued pursuant to this Indenture in the aggregate principal amount
of $14,200,000.
"CLOSING CASH FLOW PROJECTION" shall mean the Cash Flow Certificate
delivered on the Date of Issuance of the Series 1996A Notes as attached hereto
as Exhibit F-1 and the Cash Flow Certificate delivered on the Date of Issuance
of the Series 1996B Notes as attached hereto as Exhibit F-2.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from time
to time. Each reference to a section of the Code herein shall be deemed to
include the United States Treasury Regulations, including temporary and proposed
regulations, relating to such section which are applicable to the Notes and the
use of the proceeds thereof. A reference to any specific section of the Code
shall be deemed also to be a reference to the comparable provisions of any
enactment which supersedes or replaces the Code thereunder from time to time.
"COMMISSION" shall mean the Securities and Exchange Commission.
"COMPLIANCE CERTIFICATE" shall mean a certificate substantially in the form
of Exhibit D attached hereto signed by an Authorized Officer and all documents,
opinions and certificates required thereby.
"CONSOLIDATION LOAN" shall mean a Student Loan authorized under
Section 428C of the Act consolidating Eligible Loans.
"CONTRACT OF INSURANCE" shall mean the contract of insurance between the
Eligible Lender and the Secretary.
"COST OF ISSUANCE FUND" shall mean the Fund by that name created in
Section 5.01 hereof and further described in Section 5.08 hereof.
"COUNTERPARTY SWAP PAYMENT" shall mean a payment due to the Issuer from a
Swap Counterparty pursuant to the applicable Swap Agreement (including, but not
limited to, payments in respect of an Early Termination Date, as defined in the
applicable Swap Agreement).
"CUSTODIAN AGREEMENT" shall mean, collectively, the Custodian Agreement
dated as of March 1, 1996, between the Trustee and UNIPAC Service Corporation,
and the custodian agreements with any Servicer related to Financed Eligible
Loans.
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"DATE OF ISSUANCE" shall mean (i) with respect to the Series 1996A Notes,
March 8, 1996, the date of delivery of the Series 1996A Notes to the Placement
Agent, (ii) with respect to the Series 1996B Notes, June 19, 1996, the date of
delivery of the Series 1996B Notes to the Placement Agent and (iii) with respect
to any Additional Notes, the date of delivery of such Additional Notes, as
described in a Supplemental Indenture.
"DISSOLUTION" means, with respect to Article XI and the Issuer, the
occurrence of any of the events which would cause a dissolution of a limited
partnership organized under the laws of the State of Delaware, the sole general
partner of which is the Issuer.
"ELIGIBLE BORROWER" shall mean a borrower who is eligible under the Act to
be the obligor of a loan for financing a program of education at an Eligible
Institution or for consolidating two or more such loans, including without
limitation a borrower who is eligible under the Act to be an obligor of a loan
made pursuant to Section 428A, 428B or 428C of the Act.
"ELIGIBLE INSTITUTION" shall mean (a) an institution of higher education;
(b) a vocational school; or (c), with respect to students who are nationals of
the United States, an institution outside the United States which is comparable
to an institution of higher education or to a vocational school and which has
been approved by the Secretary.
"ELIGIBLE LENDER" shall mean any "ELIGIBLE LENDER," as defined in the Act,
permitted to participate as a seller of Student Loans to the Issuer under the
Program and which has received an eligible lender designation from the Secretary
with respect to Insured Student Loans or from the Guarantee Agency with respect
to Guaranteed Student Loans.
"ELIGIBLE LOAN" shall mean a Student Loan which (a) has been or will be
made to an Eligible Borrower; (b) is Insured or is Guaranteed by a Guarantee
Agency which then has a Guarantee Agreement with the Trustee; (c) unless it is
an Unsubsidized Loan, a PLUS Loan or an SLS Loan, is an "eligible loan" under
the Act for purposes of receiving Interest Benefit Payments; (d) bears interest
at not less than the maximum applicable rate of interest permitted by the Act at
the time originated; (e) is not delinquent more than 180 days and has not been
tendered at any time to either the Secretary or any guarantee agency, including
without limitation, the Guarantee Agency, for payment unless the situation
giving rise to such tender has been cured; and (f) is eligible for Special
Allowance Payments as provided in Section 438 of the Act.
"ESTIMATED AMOUNT" shall mean the amount which the Issuer estimates will be
required to pay Maintenance and Operating Expenses (including accrued but unpaid
Maintenance and Operating Expenses) for the period beginning on the
Date of Issuance of the Series 1996A Notes and ending on June 30, 1996, and
thereafter for the monthly period beginning on the first Business Day of each
month, commencing July 1, 1996. The Estimated Amount shall be paid pursuant to
Section 5.03 hereof; provided, however, such Estimated Amount shall not exceed
(i) the amount shown therefor in the Closing Cash Flow Projection, (ii) 0.12%
annualized on
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the then Outstanding Financed Eligible Loans or (iii) the amount shown in the
most recent subsequent Cash Flow Certificate.
"EVENT OF BANKRUPTCY" shall mean (a) the Issuer shall have commenced a
voluntary case or other proceeding seeking liquidation, reorganization, or other
relief with respect to itself or its debts under any bankruptcy, insolvency, or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian, or other similar official of it or any
substantial part of its property, or shall have made a general assignment for
the benefit of creditors, or shall have declared a moratorium with respect to
its debts or shall have failed generally to pay its debts as they become due, or
shall have taken any action to authorize any of the foregoing; or (b) an
involuntary case or other proceeding shall have been commenced against the
Issuer seeking liquidation, reorganization, or other relief with respect to it
or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property provided such action or proceeding is not dismissed within 60 days.
"EVENT OF DEFAULT" shall have the meaning specified in Article VI hereof.
"EXCHANGE DATE" shall mean the date that the Series 1996A Notes and the
Series 1996B Notes are exchanged for Exchange Notes pursuant to Section 2.02(e)
hereof.
"EXCHANGE NOTES" shall mean the Notes exchanged for the Series 1996A Notes
and the Series 1996B Notes pursuant to Section 2.02(e) hereof.
"FEDERAL REIMBURSEMENT CONTRACTS" shall mean the agreements between the
Guarantee Agency and the Secretary providing for the payment by the Secretary of
amounts authorized to be paid pursuant to the Act, including (but not
necessarily limited to) reimbursement of amounts paid or payable upon defaulted
Financed Eligible Loans and other Student Loans Guaranteed or Insured by the
Guarantee Agency and Interest Benefit Payments and Special Allowance Payments to
holders of qualifying Student Loans Guaranteed or Insured by the Guarantee
Agency.
"FINANCED" or "FINANCING," when used with respect to Eligible Loans or
Student Loans, shall mean or refer to Eligible Loans or Student Loans, as the
case may be, (i) acquired by the Issuer with balances in the Student Loan Fund
and (ii) Eligible Loans substituted or exchanged for Financed Student Loans or
Financed Eligible Loans, but does not include Student Loans or Eligible Loans
released from the lien of this Indenture and sold or transferred, to the extent
permitted by this Indenture.
"FISCAL YEAR" shall mean the fiscal year of the Issuer as established from
time to time.
"FISL PROGRAM" shall mean the federal loan insurance program created under
the Act, whereby the Secretary directly insures the repayment of 100% of the
principal of and accrued interest on student loans under the Act.
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"FITCH" shall mean Fitch Investors Service, L.P., and its successors and
assigns, and, for the purposes of the Auction Procedures, if such corporation
shall be dissolved or liquidated or shall no longer perform the functions of a
securities rating agency, "Fitch" shall be deemed to relate to any other
nationally recognized securities rating agency designated by the Issuer by
notice to the Trustee, the Auction Agent and the Broker-Dealers; provided,
however, that such notice shall not be effective unless accompanied by a consent
of a majority of the Broker-Dealers.
"FUNDS" shall mean the following funds created under Section 5.01 hereof
and held by the Trustee: (a) the Student Loan Fund, including therein the Series
1996 Loan Account, the Series 1996 Note Account and the Series 1996 Recycling
Account, (b) the Revenue Fund, (c) the Reserve Fund, (d) the Interest Fund,
including therein the Senior Interest Account, the Subordinate Interest Account
and the Junior-Subordinate Interest Account, (e) the Note Redemption Fund,
including therein the Senior Note Redemption Account, the Subordinate Note
Redemption Account and the Junior-Subordinate Note Redemption Account, (f) the
Student Loan Holding Fund and (g) the Cost of Issuance Fund.
"GENERAL FUND" shall mean the fund by that name described in Section 5.10
hereof.
"GUARANTEE" or "GUARANTEED" shall mean with respect to a Student Loan, the
insurance or guarantee by the Guarantee Agency pursuant to such Guarantee
Agency's Guarantee Agreement of not less than 98% of the principal of and
accrued interest on such Student Loan and the coverage of such Student Loan by
the Federal Reimbursement Contracts, providing, among other things, for
reimbursement to the Guarantee Agency for payments made by it on defaulted
Student Loans insured or guaranteed by the Guarantee Agency of at least the
minimum reimbursement allowed by the Federal Reinsurance Contracts and the Act
with respect to a particular Student Loan.
"GUARANTEE AGENCY" shall mean (a) United Student Aid Funds, Inc., (b) Iowa
College Student Aid Commission, (c) Oklahoma State Regents for Higher Education,
(d) Nebraska Student Loan Program, Inc., (e) Kentucky Higher Education
Assistance Authority, (f) Colorado Student Loan Program, (g) Northstar Guarantee
Inc. and (h) any other guarantee agency so long as the Issuer shall have
received written confirmation from each Rating Agency that the designation of
such entity as a "Guarantee Agency" hereunder will not, at the time of such
designation, reduce or withdraw its Ratings then applicable to any of the Notes,
and their respective successors and assigns.
"GUARANTEE AGREEMENTS" shall mean (a) the Guarantee Agreement, dated as of
March 7, 1996, between United Student Aid Funds, Inc. and Norwest Bank
Minnesota, National Association, as trustee, (b) the Guarantee Agreement, dated
as of February 23, 1996, between Iowa College Student Aid Commission and Norwest
Bank Minnesota, National Association, as trustee, (c) the Guarantee Agreement,
dated as of March 7, 1996, between Oklahoma State Regents for Higher Education
and Norwest Bank Minnesota, National Association, as trustee, (d) the Guarantee
Agreement, dated as of May 1, 1996, between Nebraska Student Loan
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Program, Inc. and Norwest Bank Minnesota, National Association, as trustee,
(e) the Guarantee Agreement, dated as of June 12, 1996, between the Kentucky
Higher Education Assistance Authority and Norwest Bank Minnesota, National
Association, as trustee, (f) the Lender Participation Agreement, dated as of
September 24, 1996, between Colorado Student Loan Program and Norwest Bank
Minnesota, National Association, as trustee, (g) the Lender Agreement, dated
as of September 26, 1996, between Northstar Guarantee Inc. and Norwest Bank
Minnesota, National Association, as trustee, (h) any similar guarantee or
lender agreement with any other Guarantee Agency, and (i) any amendments to
the foregoing.
"GUARANTEED STUDENT LOAN" shall mean a Student Loan which is Guaranteed or
Insured.
"GUARANTEED STUDENT LOAN PROGRAM" shall mean the program known as the
Federal Family Education Loan Program which makes low interest loans under the
Act available to pay the costs of a student attending post-secondary schools,
whether under the Guarantee Agency program or the FISL Program.
"IMMEDIATE NOTICE" shall mean notice by telephone, telex or telecopier to
such address as the addressee shall have directed in writing, promptly followed
by written notice by first class mail, postage prepaid; provided, however, that
if any person required to give Immediate Notice shall not have been provided
with the necessary information as to the telephone, telex or telecopier number
of an addressee, Immediate Notice shall mean written notice by first class mail,
postage prepaid.
"INDENTURE" shall mean this Second Amended and Restated Indenture of Trust,
including all supplements and amendments hereto.
"INSTITUTIONAL ACCREDITED INVESTOR" shall mean a Person specified as such
under Rule 501(a)(1), (2), (3) or (7) of the Securities Act.
"INSURANCE," "INSURED" or "INSURING" shall mean, with respect to a Student
Loan, insurance by the Secretary under the Act (as evidenced by a Contract of
Insurance issued or entered into under the provisions of the Act) of the maximum
percentage of the principal of such Student Loan allowed by the Act, and, during
such time as such Student Loan is not entitled to Interest Benefit Payments, the
interest on such Student Loan.
"INTEREST BENEFIT PAYMENT" shall mean an interest payment on Student Loans
received pursuant to the Interest Benefits Agreement.
"INTEREST BENEFITS AGREEMENT" shall mean the Agreement between the
Guarantee Agency and the Secretary whereby the Secretary agrees to pay to
holders of Student Loans Guaranteed by the Guarantee Agency the portion of the
interest charges on such loans which students are entitled to have paid on their
behalf pursuant to Sections 428(a)(1) and 428(a)(2) of the Act.
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"INTEREST FUND" shall mean the Fund by that name created in Section 5.01
hereof and further described in Section 5.05 hereof, including the Senior
Interest Account, the Subordinate Interest Account and the Junior-Subordinate
Interest Account created therein.
"INVESTMENT AGREEMENT" shall mean, collectively, the Amended and Restated
Investment Agreement dated as of November 1, 1996 by and among the Trustee, the
Issuer and Lehman Brothers, Inc., the Promissory Note dated as of November 1,
1996 between the Issuer and Lehman Brothers Holdings Inc. and the Master Note
dated November 1, 1996 and issued to the Trustee by Lehman Brothers Holdings
Inc.
"INVESTMENT SECURITIES" shall mean
(a) Direct obligations of (including obligations issued or held in
book entry form on the books of) the Department of Treasury of the United
States of America with remaining maturities not exceeding the first
Business Day preceding the next Transfer Date. If not rated by S&P, the
obligations must have a predetermined fixed dollar principal due at
maturity that cannot vary or change. If the obligation is rated, it should
not have an "r" highlighter affixed to its rating;
(b) Obligations of any of the following federal agencies which
obligations represent full faith and credit of the United States of America
with remaining maturities not exceeding the first Business Day preceding
the next Transfer Date, (i) Export-Import Bank; (ii) Farmers Home
Administration; (iii) General Services Administration; (iv) Government
National Mortgage Association (GNMA); (v) U.S. Department of Housing &
Urban Development (PHA's); (vi) Federal Housing Administration. If not
rated by S&P, the obligations must have a predetermined fixed dollar
principal due at maturity that cannot vary or change. If the obligation is
rated, it should not have an "r" highlighter affixed to its rating;
(c) Notes, bonds or other evidences of indebtedness rated "AAA" by
Fitch and S&P issued by the Federal National Mortgage Association or the
Federal Home Loan Mortgage Corporation with remaining maturities not
exceeding the first Business Day preceding the next Transfer Date. If not
rated by S&P, the obligations must have a predetermined fixed dollar
principal due at maturity that cannot vary or change. If the obligation is
rated, it should not have an "r" highlighter affixed to its rating;
(d) U.S. dollar denominated deposit accounts, federal funds and
banker's acceptances with domestic commercial banks which have a rating on
their short-term debt obligations of "A-1+" by S&P and "F-1+" by Fitch and
maturities not exceeding the first Business Day preceding the next Transfer
Date. In addition, the instruments should not have an "r" highlighter
affixed to the rating and its terms should have a predetermined amount of
principal due at maturity that cannot vary or change (Ratings on holding
companies are not considered as the rating of the bank);
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(e) Commercial paper which is rated "F-1+" by Fitch and "A-1+" by S&P
and maturities not exceeding the first Business Day preceding the next
Transfer Date. In addition, the instruments should not have an "r"
highlighter affixed to the rating and its terms should have a predetermined
amount of principal due at maturity that cannot vary or change;
(f) Investments in money market funds (i) rated within the two
highest rating categories of Fitch and (ii) "AAAm" or "AAAm-G" by S&P;
(g) With the prior written consent of Fitch and S&P, repurchase
agreements with respect to securities of the type described in (a), (b) or
(c) above, with (i) a registered broker/dealer rated by Fitch and S&P or
approved in writing by Fitch and S&P and subject to the Securities
Investors' Protection Issuer Liquidation Act in the event of insolvency to
the full extent of such repurchase agreement, (ii) a primary dealer rated
by Fitch and S&P reporting to and trading with the Federal Reserve Bank of
New York, or (iii) any commercial bank, and in the case of clauses (i),
(ii) and (iii), (x) whose unsecured long-term indebtedness is rated by
Fitch and S&P and whose long-term or short-term indebtedness is rated
"F-1+" or "AAA" by Fitch and "A-1+" or "AAA" by S&P (dependent upon whether
the repurchase agreement is long-term or short-term, respectively), or
(y) which (in the case of clause (iii)) is the lead bank of a parent bank
holding company whose unsecured long-term indebtedness is rated "AAA" or
better by Fitch and S&P, and in the case of either (x) or (y), having a
combined capital, surplus and undivided profits of not less than $100
million and which repurchase agreement shall provide that:
(A) the repurchase obligation is collateralized by the
securities themselves which shall be held by the Trustee (unless the
Trustee is the purchaser under the repurchase agreement) or a third
party which is a Federal Reserve Bank or a commercial bank with
capital, surplus and undivided profits of not less than $50 million,
and the Trustee shall have received written confirmation from such
third party that it holds such securities;
(B) a perfected security interest in favor of the Trustee in the
securities has been created under the Uniform Commercial Code or
pursuant to the book entry procedures described in 31 C.F.R. 306.1 et
seq. or 31 C.F.R. 350.0 et seq., as amended, and any successor
regulations thereto; and
(C) the securities on the date of execution of the repurchase
agreement and upon weekly evaluation by the Trustee thereafter have a
fair market value of at least 102% of the amount of the repurchase
obligation, including both principal and interest;
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(h) With the prior written consent of Fitch and S&P, any investment
agreement that has as a counterparty, an institution rated "F-1+" or "AAA"
by Fitch and "A-1+" or "AAA" by S&P; and
(i) The Investment Agreement and any other investment approved in
advance in writing by each Rating Agency.
"ISSUER" shall mean Union Financial Services-1, Inc., a corporation
organized and existing under the corporation laws of the State, and any
successor to its functions.
"ISSUER ORDER" shall mean a written order signed in the name of the Issuer
by an Authorized Officer.
"ISSUER SWAP PAYMENT" shall mean a payment due to a Swap Counterparty from
the Issuer pursuant to the applicable Swap Agreement (including, but not limited
to, payments in respect of an Early Termination Date, as defined in the
applicable Swap Agreement).
"JUNIOR-SUBORDINATE INTEREST ACCOUNT" shall mean the Account by that name
created within the Interest Fund by Section 5.01 hereof and further described in
Section 5.05 hereof.
"JUNIOR-SUBORDINATE NOTE REDEMPTION ACCOUNT" shall mean the Account by that
name created within the Note Redemption Fund by Section 5.01 hereof and further
described in Section 5.06 hereof.
"JUNIOR-SUBORDINATE NOTES" shall mean Additional Notes secured
subordinate to the Series 1996A Notes and the Series 1996B Notes, if any, the
principal of and interest on which is paid from the Junior-Subordinate
Redemption Account of the Note Redemption Fund and the Junior-Subordinate
Interest Account of the Interest Fund, respectively; provided, however, that
any series of the Junior-Subordinate Notes need not necessarily be payable on
a parity with all other series of the Junior-Subordinate Notes. Any
additional Junior-Subordinate Notes shall be designated by a "C," "D" or
lower alphabetic designation, the higher alphabetic designation ("C" being
higher than "D") indicating the more senior series of the Junior-Subordinate
Notes.
"LETTER OF REPRESENTATIONS" means the Letters of Representations among the
Securities Depository, the Issuer and the Trustee.
"MAINTENANCE AND OPERATING EXPENSES" shall mean the expenses of the Issuer
incurred in direct connection with the Program under this Indenture, including
attorneys' fees, auditing fees, marketing fees, travel expenses of directors and
officers, insurance, taxes, and such other reasonable and necessary expenses
which may be incurred directly or indirectly in connection with the operation of
the Program under this Indenture and in an annual amount not to exceed the
estimated Maintenance and Operating Expenses described in Exhibit E-2 attached
hereto until January 1, 1999, unless otherwise approved by each Rating Agency as
described in Section 5.03 hereof, and on and after January 1, 1999, an annual
amount not to exceed the estimated
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Maintenance and Operating Expenses described in a Cash Flow Certificate to be
approved by each Rating Agency for a specified period approved by each Rating
Agency; but such term shall not include servicing fees and expenses incurred
under the Servicing Agreement, the Trustee fees and expenses and the
Calculation Agent fees and expenses incurred under this Indenture or the
Custodian Agreement, the Auction Agent's fees and expenses incurred under the
Auction Agent Agreement, any Broker-Dealer Fees and expenses incurred under a
Broker-Dealer Agreement or the fees and expenses of the Rating Agencies
incurred under this Indenture.
"MATURITY," when used with respect to any Note, shall mean the date on
which the principal thereof becomes due and payable as therein or herein
provided, whether at its Stated Maturity, by earlier redemption, by declaration
of acceleration, or otherwise.
"NET LOSSES" shall mean the aggregate principal amount of all Financed
Eligible Loans which are over 540 days delinquent, less any recoveries of
principal received with respect to such Financed Eligible Loans.
"NOTES" shall mean the Series 1996A Notes, the Series 1996B Notes and any
Additional Notes.
"NOTE COUNSEL" shall mean Kutak Rock, or any other counsel of nationally
recognized standing in the field of law relating to notes, selected by the
Issuer and reasonably acceptable to the Trustee.
"NOTE REDEMPTION FUND" shall mean the Fund by that name created in
Section 5.01 hereof and further described in Section 5.06 hereof, including the
Senior Note Redemption Account, the Subordinate Note Redemption Account and the
Junior-Subordinate Note Redemption Account created therein.
"NOTICE OF MANDATORY EXCHANGE" means the notice delivered by the Trustee
pursuant to Section 2.02(f) hereof.
"NOTIFICATION OF LOAN APPROVAL" shall mean the written notification by the
Guarantee Agency with respect to an Eligible Loan evidencing the Guarantee
thereof by the Guarantee Agency.
"OPERATING FUND" shall mean the fund by that name continued by Section 5.01
and further described in Section 5.09 hereof.
"OUTSTANDING" shall mean, when used in connection with any Note, a Note
which has been executed and delivered pursuant to this Indenture which at such
time remains unpaid as to principal or interest, unless provision has been made
for such payment pursuant to Section 10.02 hereof, excluding Notes which have
been replaced pursuant to Section 2.04 hereof.
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"OWNERSHIP INTEREST" means, with respect to any Note, any ownership
interest in such Note, including any interest in such Note as the Registered
Owner thereof and any other interest therein, whether direct or indirect,
legal or beneficial.
"PERSON" shall mean an individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated
organization, or government or agency or political subdivision thereof.
"PLACEMENT AGENT" shall mean Smith Barney Inc.
"PLUS LOAN" shall mean a Student Loan authorized under Section 428B of
the Act.
"PRESIDENT" shall mean the President of the Issuer.
"PRINCIPAL OFFICE" shall mean the principal corporate trust office of the
Trustee.
"PRIVATE NOTES" shall mean, collectively, the Series 1996A Notes, the
Series 1996B Notes and any Additional Notes privately placed and not
registered pursuant to the Securities Act.
"PROGRAM" shall mean the Issuer's Program for the purchase of Eligible
Loans from Eligible Lenders in order to increase the supply of money
available for new Student Loans, thereby assisting students in obtaining an
education at an Eligible Institution.
"PURCHASE PRICE" shall mean the purchase price described in the
respective Student Loan Purchase Agreements.
"QUALIFIED INSTITUTIONAL BUYER" shall mean a Person specified as such
under Rule 144A of the Securities Act.
"RATING" shall mean one of the rating categories of Fitch, S&P or any
other Rating Agency, provided Fitch, S&P or any other Rating Agency, as the
case may be, is currently rating the Notes.
"RATING AGENCY" shall mean, collectively, (i) Fitch and its successors
and assigns, (ii) S&P and its successors and assigns or (iii) any other
Rating Agency requested by the Issuer to maintain a Rating on any of the
Notes, but only to the extent such entity is at the time maintaining a Rating
on the Notes.
"REGISTERED OWNER" shall mean the Person in whose name a Note is
registered on the Note registration books maintained by the Trustee or, if a
Note is registered in the name of a Securities Depository, any other Person
with an Ownership Interest.
"REGISTERED OWNER APPROVAL" shall have the meaning set forth in Section
6.01 hereof.
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"REGULATIONS" shall mean the Regulations promulgated from time to time by
the Secretary or the Guarantee Agency.
"RESERVE FUND" shall mean the Fund by that name created in Section 5.01
hereof and further described in Section 5.04 hereof.
"RESERVE FUND REQUIREMENT" shall mean at any time (a) the greater of an
amount equal to 2% of the aggregate principal amount of the Series 1996A
Notes and the Series 1996B Notes then Outstanding plus (b) the greater of an
amount, if any, required to be on deposit in the Reserve Fund with respect to
any Additional Notes pursuant to the Supplemental Indenture authorizing the
issuance of such Additional Notes or $750,000.
"RESOLUTION" shall mean a resolution duly adopted by the Board.
"REVENUE" shall mean all principal and interest payments, proceeds,
charges and other income received by the Trustee or the Issuer on account of
any Financed Eligible Loan (including, but not limited to, scheduled,
delinquent and advance payments of and any insurance proceeds with respect to
such Financed Eligible Loans, interest, including Interest Benefit Payments,
on Financed Eligible Loans and any Special Allowance Payments received by the
Issuer or the Trustee with respect to any Financed Eligible Loan) and
investment income from all Funds and Accounts, and any proceeds from the sale
or other disposition of such Financed Eligible Loans.
"REVENUE FUND" shall mean the Fund by that name created in Section 5.01
hereof and further described in Section 5.03 hereof.
"S&P" shall mean Standard & Poor's Ratings Services, a Division of The
McGraw-Hill Companies, Inc., its successors and assigns, and, for the
purposes of the Auction Procedures, if such corporation shall be dissolved or
liquidated or shall no longer perform the functions of a securities rating
agency, "S&P" shall be deemed to relate to any other nationally recognized
securities rating agency designated by the Issuer by notice to the Trustee,
the Auction Agent and the Broker-Dealers; provided, however, that such notice
shall not be effective unless accompanied by a consent of a majority of the
Broker-Dealers.
"SECRETARY" shall mean the Secretary of the United States Department of
Education or any successor to the pertinent functions thereof, under the Act
or when the context so requires, the former Commissioner of Education of the
United States Department of Health, Education and Welfare.
"SECURITIES DEPOSITORY" shall mean The Depository Trust Company and its
successors and assigns or if, (i) the then Securities Depository resigns from
its functions as depository of the Notes or (ii) the Issuer discontinues use
of the Securities Depository pursuant to Section 2.01(d) hereof, any other
securities depository which agrees to follow the procedures required to be
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followed by a securities depository in connection with the Notes and which is
selected by the Issuer with the consent of the Trustee.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended.
"SELLER" shall mean an Eligible Lender from which the Issuer is
purchasing or has purchased or agreed to purchase Eligible Loans pursuant to
a Student Loan Purchase Agreement between the Issuer and such Eligible
Lender; provided, however, that any Seller, other than Union Bank and Trust
Company, shall be approved in writing by each Rating Agency.
"SENIOR NOTE REDEMPTION ACCOUNT" shall mean the Account by that name
created within the Note Redemption Fund by Section 5.01 hereof and further
described in Section 5.06 hereof.
"SENIOR NOTES" shall mean the Class 1996A Notes, the Additional Class
1996A Notes and any Additional Notes secured on a parity with the Class 1996A
Notes and the Additional Class 1996A Notes, the principal of and interest on
which is paid from the Senior Note Redemption Account of the Note Redemption
Fund and the Senior Interest Account of the Interest Fund, respectively.
"SENIOR INTEREST ACCOUNT" shall mean the Account by that name created
within the Interest Fund by Section 5.01 hereof and further described in
Section 5.05 hereof.
"SERIES 1996 LOAN ACCOUNT" shall mean the Account by that name created
within the Student Loan Fund by Section 5.01 hereof and further described in
Section 5.02 hereof.
"SERIES 1996 NOTE ACCOUNT" shall mean the Account by that name created
within the Student Loan Fund by Section 5.01 hereof and further described in
Section 5.02 hereof.
"SERIES 1996 RECYCLING ACCOUNT" shall mean the Account by that name
created within the Student Loan Fund by Section 5.01 hereof and further
described in Section 5.02 hereof.
"SERIES 1996A NOTES" shall mean the Union Financial Services-1, Inc.,
Taxable Student Loan Asset-Backed Notes, Series 1996A issued pursuant to this
Indenture in the aggregate principal amount of $107,700,000, consisting of
$96,600,000 of Class 1996A Notes and $11,100,000 of Class 1996B Notes.
"SERIES 1996B NOTES" shall mean the Union Financial Services-1, Inc.,
Taxable Student Loan Asset-Backed Notes, Series 1996B issued pursuant to this
Indenture in the aggregate principal amount of $142,200,000, consisting of
$73,700,000 of Class 1996A-3 Notes, $54,300,000 of Class 1996A-4 Notes and
$14,200,000 of Class 1996B-2 Notes.
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"SERVICER" shall mean, collectively, Union Bank and Trust Company and
UNIPAC Service Corporation, and any other servicer or subservicer so long as
the Issuer shall have received written confirmation from each Rating Agency
that the designation of such entity as a "Servicer" hereunder will not, at
the time of such designation, reduce or withdraw its Ratings then applicable
to any of the Notes, and their respective successors and assigns.
"SERVICING AGREEMENT" shall mean, collectively, (i) the Amended and
Restated Servicing Agreement, dated as of June 15, 1996 between the Issuer
and Union Bank and Trust Company and (ii) the Servicing Agreement, dated as
of January 1, 1995, as amended by the First Amendment to Servicing Agreement,
dated as of March 1, 1996 and the Second Amendment to Servicing Agreement,
dated as of June 19, 1996, each between Union Bank and Trust Company and
UNIPAC Service Corporation, each as amended or supplemented from time to
time, and any other servicing or subservicing agreement with any other
Servicer relating to Financed Eligible Loans.
"SLS LOAN" shall mean a Student Loan authorized under Section 428A of the
Act.
"SPECIAL ALLOWANCE PAYMENTS" shall mean the special allowance payments
authorized to be made by the Secretary by Section 438 of the Act, or similar
allowances authorized from time to time by federal law or regulation.
"SPECIAL RECORD DATE" shall have the meaning set forth in Section 2.01(a)
hereof.
"STATE" shall mean the State of Nevada.
"STATED MATURITY" shall mean the date specified in the Notes as the fixed
date on which principal of such Notes is due and payable.
"STUDENT LOAN" shall mean a loan under the Act to an Eligible Borrower
for education at an Eligible Institution (or a loan to consolidate the same)
authorized to be made or acquired by the Issuer pursuant to its articles of
incorporation and described in Section 144(b)(1)(A) of the Code.
"STUDENT LOAN FUND" shall mean the Fund by that name created in Section
5.01 hereof and further described in Section 5.02 hereof, including the
Series 1996 Loan Account, the Series 1996 Note Account and the Series 1996
Recycling Account created therein.
"STUDENT LOAN HOLDING FUND" shall mean the Fund by that name created in
Section 5.01 hereof and further described in Section 5.07 hereof.
"STUDENT LOAN PURCHASE AGREEMENT" shall mean (i) that certain Loan Sale
and Commitment Agreement dated as of March 1, 1996 between the Issuer and
Union Bank and Trust Company, (ii) that certain Loan Sale and Commitment
Agreement dated as of June 19, 1996 between the Issuer and Union Bank and
Trust Company, and (iii) and any other loan
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purchase agreement, entered into between the Issuer and any Eligible Lender
for the purchase of Eligible Loans in substantially the same form as said
Loan Sale and Commitment Agreement, as determined by the Issuer and with an
opinion of Note Counsel.
"SUBORDINATE INTEREST ACCOUNT" shall mean the Account by that name created
within the Interest Fund by Section 5.01 hereof and further described in Section
5.05 hereof.
"SUBORDINATE NOTE REDEMPTION ACCOUNT" shall mean the Account by that name
created within the Note Redemption Fund by Section 5.01 hereof and further
described in Section 5.06 hereof.
"SUBORDINATE NOTES" shall mean the Class 1996B Notes, the Class 1996B-2
Notes and any Additional Notes secured on a parity with the Class 1996B Notes
and the Class 1996B-2 Notes, the principal of and interest on which is paid from
the Subordinate Note Redemption Account of the Note Redemption Fund and the
Subordinate Interest Account of the Interest Fund, respectively.
"SUPPLEMENTAL INDENTURE" shall mean an agreement supplemental hereto
executed pursuant to Article VIII hereof.
"SWAP AGREEMENT" shall mean an interest rate swap agreement between the
Issuer and a Swap Counterparty, as originally executed and as amended or
supplemented, or other interest rate hedge or basis agreement between the
Issuer and a Swap Counterparty, as originally executed and as amended or
supplemented, in each case approved in writing by each Rating Agency, for the
purpose of converting in whole or in part the Issuer's variable interest rate
liability on all or a portion of the Series 1996A Notes, the Series 1996B
Notes or any variable rate Additional Notes issued on a parity therewith to a
fixed rate liability, or for the purpose of converting in whole or in part
the Issuer's fixed interest rate liability on all or a portion of any fixed
rate Additional Notes issued on a parity therewith to a variable rate
liability.
"SWAP COUNTERPARTY" shall mean any Person with whom the Issuer shall,
from time to time, enter into a Swap Agreement.
"SWAP COUNTERPARTY GUARANTEE" shall mean a guarantee in favor of the
Issuer given in connection with the execution and delivery of a Swap
Agreement hereunder.
"TRANSFER DATE" shall mean each January 1 and July 1, commencing July 1,
1996.
"TRUST ESTATE" shall mean the property described as such in the granting
clauses hereto.
"TRUST INDENTURE ACT" or "TIA" means the Trust Indenture Act of 1939, as
amended, and as in force at the date as of which this Indenture was executed,
except as provided in Section 8.06.
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"TRUSTEE" shall mean Norwest Bank Minnesota, National Association, acting
in its capacity as Trustee under this Indenture, or any successor trustee
designated pursuant to this Indenture.
"UNSUBSIDIZED LOAN" shall mean a Student Loan authorized under Section
428H of the Act.
"VALUE" on any calculation date when required under this Indenture shall
mean the value of the Trust Estate calculated by the Trustee as follows:
(a) with respect to any Eligible Loan, the unpaid principal amount
thereof plus any unamortized premiums, any accrued but unpaid interest,
Interest Benefit Payments and Special Allowance Payments as set forth on
the most recent Servicer's report or from the Issuer;
(b) with respect to any funds on deposit in any commercial bank or as
to any banker's acceptance or repurchase agreement or investment contract,
the amount thereof plus accrued but unpaid interest;
(c) with respect to any Investment Securities of an investment
company, the net asset value price of the shares as reported by the
investment company;
(d) as to investments the bid and asked prices of which are published
on a regular basis in THE WALL STREET JOURNAL (or, if not there, then in
THE NEW YORK TIMES): (i) the average of the bid and asked prices for such
investments so published on or most recently prior to such time of
determination, but not in excess of the par amount of such investment plus
accrued interest thereon or (ii) the bid price published by a nationally
recognized pricing service;
(e) with respect to Swap Agreements, (i) mark to market for purposes
of a sale of an interest in a Swap Agreement and (ii) the amount thereof
plus accrued but unpaid interest for other purposes; and
(f) as to investments the bid and asked prices of which are not
published on a regular basis in THE WALL STREET JOURNAL or THE NEW YORK
TIMES: (i) the lower of the bid prices at such time of determination for
such investments by any two nationally recognized government securities
dealers (selected by the Issuer in its absolute discretion) at the time
making a market in such investments or (ii) the bid price published by a
nationally recognized pricing service.
Words importing the masculine gender include the feminine gender. Words
importing persons include firms, associations and corporations. Words importing
the singular number include the plural number and vice versa. Additional terms
are defined in the body of this Indenture.
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ARTICLE II
NOTE DETAILS, FORM OF NOTES, REDEMPTION OF NOTES
AND USE OF PROCEEDS OF NOTES
Section 2.01. SERIES 1996A NOTE AND SERIES 1996B NOTE DETAILS.
(a) (i) The aggregate principal amount of the Series 1996A Notes
which were initially authenticated and delivered under this Indenture
was limited to $107,700,000, consisting of $96,600,000 of Class 1996A
Notes and $11,100,000 of Class 1996B Notes, except for Series 1996A
Notes authenticated and delivered upon transfer of, or in exchange
for, or in lieu of Notes pursuant to Sections 2.03 and 2.04 hereof.
In addition, the Class 1996A Notes were issued in two (2) separate
subclasses (each a "subclass" of the Class 1996A Notes) consisting of
$48,300,000 of Class 1996A-1 Notes and $48,300,000 of Class 1996A-2
Notes. The Class 1996A-1 Notes and the Class 1996A-2 Notes are known
and designated as "Union Financial Services-1, Inc., Taxable Student
Loan Asset-Backed Notes, Class 1996A Senior Auction Rate
Securities-SM- (ARS-SM-)" with the appropriate -1 or -2 designation
and the Class 1996B Notes are known and designated as "Union Financial
Services-1, Inc., Taxable Student Loan Asset-Backed Notes, Class 1996B
Subordinate LIBOR Rate." The Series 1996A Notes were issuable only as
fully registered notes in the Authorized Denominations of $100,000 or
any integral multiple thereof. The Series 1996A Notes of each class
and subclass are each lettered "R" and numbered separately from 1
upwards.
The Class 1996A Notes (also known as "Auction Notes") are dated
their Date of Issuance and bear interest payable on each Interest
Payment Date for such subclass, except that Auction Notes issued upon
transfer, exchange or other replacement shall bear interest from the
most recent Interest Payment Date to which interest has been paid, or
if no interest has been paid, from the Date of Issuance. The Class
1996A-1 Notes shall mature on July 1, 2014 and the Class 1996A-2 Notes
shall mature on July 1, 2014. Interest on the Class 1996A-1 Notes and
the Class 1996A-2 Notes shall be computed on the basis of a 360-day
year and actual days elapsed. The terms of and definitions related to
the Auction Notes are found in Appendix A hereto.
The Class 1996B Notes are dated their Date of Issuance and bear
interest, payable on each Interest Payment Date, commencing April 1,
1996, except that Class 1996B Notes which are issued upon transfer,
exchange or other replacement shall bear interest from the most recent
Interest Payment Date to which interest has been paid, or if no
interest has been paid, from the date of the Class 1996B Notes. The
Class 1996B Notes shall mature on July 1, 2014 in the principal amount
of $11,100,000. Interest on the Class 1996B Notes shall be computed
on
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the basis of a 360-day year and actual days elapse. The terms of
and definitions related to the Class 1996B Notes are found in
Appendix B hereto.
The principal of the Series 1996A Notes due at its Stated
Maturity or redemption in whole shall be payable at the Principal
Office of the Trustee in Minneapolis, Minnesota, or at the Principal
Office of its successor in trust upon presentation and surrender of
the Series 1996A Notes. Payment of interest and principal paid in
connection with a redemption on any Series 1996A Note shall be made to
the Registered Owner thereof by check or draft mailed on the Interest
Payment Date by the Trustee to the Registered Owner at his address as
it last appears on the registration books kept by the Trustee at the
close of business on the Record Date for such interest payment date,
but any such interest not so timely paid or duly provided for shall
cease to be payable to the Registered Owner thereof at the close of
business on the Record Date and shall be payable to the Registered
Owner thereof at the close of business on a special record date (a
"Special Record Date") for the payment of any such defaulted interest.
Such Special Record Date shall be fixed by the Trustee whenever moneys
become available for payment of the defaulted interest, and notice of
such Special Record Date shall be given to the Registered Owners of
the Series 1996A Notes not less than 10 days prior thereto by
first-class mail to each such Registered Owner as shown on the
Trustee's registration books on the date selected by the Trustee,
stating the date of the Special Record Date and the date fixed for the
payment of such defaulted interest. Payment of interest to the
Securities Depository or its nominee shall, and at the written request
addressed to the Trustee of any other Registered Owner owning at least
$1,000,000 principal amount of the Series 1996A Notes, payments of
interest shall, be paid by wire transfer within the United States to
the bank account number filed no later than the Record Date or Special
Record Date with the Trustee for such purpose. All payments on the
Series 1996A Notes shall be made in lawful money of the United States
of America.
(ii) The aggregate principal amount of the Series 1996B Notes
which may be initially authenticated and delivered under this
Indenture is limited to $142,200,000, consisting of $128,000,000 of
Additional Class 1996A Notes and $14,200,000 of Class 1996B-2 Notes,
except for Series 1996B Notes authenticated and delivered upon
transfer of, or in exchange for, or in lieu of Notes pursuant to
Sections 2.03 and 2.04 hereof. The Additional Class 1996A Notes shall
be issued in two (2) separate subclasses (each a "subclass" of the
Additional Class 1996A Notes) consisting of $73,700,000 of Class
1996A-3 Notes and $54,300,000 of Class 1996A-4 Notes. The Class
1996A-3 Notes and the Class 1996A-4 Notes shall be known and
designated as "Union Financial Services-1, Inc., Taxable Student Loan
Asset-Backed Notes, Class 1996A Senior Auction Rate Securities-SM-
(ARS-SM-)" with the appropriate -3 or -4 designation and the Class
1996B-2 Notes shall be known and designated as "Union Financial
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Services-1, Inc., Taxable Student Loan Asset-Backed Notes, Class
1996B-2 Subordinate LIBOR Rate." The Series 1996B Notes shall be
issuable only as fully registered notes in the Authorized
Denominations of $100,000 or any integral multiple thereof. The
Series 1996B Notes of each class and subclass shall each be lettered
"R" and shall be numbered separately from 1 upwards.
The Additional Class 1996A Notes (also known as "Auction Notes")
shall be dated their Date of Issuance and shall bear interest payable
on each Interest Payment Date for such subclass, except that Auction
Notes issued upon transfer, exchange or other replacement shall bear
interest from the most recent Interest Payment Date to which interest
has been paid, or if no interest has been paid, from the Date of
Issuance. The Class 1996A-3 Notes shall mature on July 1, 2014 and
the Class 1996A-4 Notes shall mature on July 1, 2014. Interest on the
Class 1996A-3 Notes and the Class 1996A-4 Notes shall be computed on
the basis of a 360-day year and actual days elapsed. The terms of and
definitions related to the Auction Notes are found in Appendix A
hereto.
The Class 1996B-2 Notes shall be dated their Date of Issuance and
shall bear interest, payable on each Interest Payment Date, commencing
August 1, 1996, except that Class 1996B-2 Notes which are issued upon
transfer, exchange or other replacement shall bear interest from the
most recent Interest Payment Date to which interest has been paid, or
if no interest has been paid, from the date of the Class 1996B-2
Notes. The Class 1996B-2 Notes shall mature on July 1, 2014 in the
principal amount of $14,200,000. Interest on the Class 1996B-2 Notes
shall be computed on the basis of a 360-day year and actual days
elapse. The terms of and definitions related to the Class 1996B-2
Notes are found in Appendix B hereto.
The principal of the Series 1996B Notes due at its Stated
Maturity or redemption in whole shall be payable at the Principal
Office of the Trustee in Minneapolis, Minnesota, or at the Principal
Office of its successor in trust upon presentation and surrender of
the Series 1996B Notes. Payment of interest and principal paid
subject to a redemption on any Series 1996B Note shall be made to the
Registered Owner thereof by check or draft mailed on the Interest
Payment Date by the Trustee to the Registered Owner at his address as
it last appears on the registration books kept by the Trustee at the
close of business on the Record Date for such interest payment date,
but any such interest not so timely paid or duly provided for shall
cease to be payable to the Registered Owner thereof at the close of
business on the Record Date and shall be payable to the Registered
Owner thereof at the close of business on a special record date (a
"Special Record Date") for the payment of any such defaulted interest.
Such Special Record Date shall be fixed by the Trustee whenever moneys
become available for payment of the defaulted interest, and notice of
such Special Record Date shall be given to the Registered Owners of
the Series 1996B Notes not less than 10 days prior
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thereto by first-class mail to each such Registered Owner as shown
on the Trustee's registration books on the date selected by the
Trustee, stating the date of the Special Record Date and the date
fixed for the payment of such defaulted interest. Payment of
interest to the Securities Depository or its nominee shall, and at
the written request addressed to the Trustee of any other
Registered Owner owning at least $1,000,000 principal amount of the
Series 1996B Notes, payments of interest shall, be paid by wire
transfer within the United States to the bank account number filed
no later than the Record Date or Special Record Date with the
Trustee for such purpose. All payments on the Series 1996B Notes
shall be made in lawful money of the United States of America.
(b) Except as otherwise provided in this Section, the Series 1996A
Notes and the Series 1996B Notes in the form of one global note for each
Stated Maturity date of each series or subclass shall be registered in the
name of the Securities Depository or its nominee and ownership thereof
shall be maintained in book-entry form by the Securities Depository for the
account of the Agent Members. Initially, each Series 1996A Note and each
Series 1996B Note shall be registered in the name of CEDE & Co., as the
nominee of The Depository Trust Company. Except as provided in subsection
(d) of this Section, the Series 1996A Notes and the Series 1996B Notes may
be transferred, in whole but not in part, only to the Securities Depository
or a nominee of the Securities Depository or to a successor Securities
Depository selected or approved by the Issuer or to a nominee of such
successor Securities Depository. Each global note shall bear a legend
substantially to the following effect: "Except as otherwise provided in the
Indenture, this global note may be transferred, in whole but not in part,
only to another nominee of the Securities Depository (as defined in the
Indenture) or to a successor Securities Depository or to a nominee of a
successor Securities Depository."
(c) Except as otherwise provided herein, the Issuer and the Trustee
shall have no responsibility or obligation with respect to (i) the accuracy
of the records of the Securities Depository or any Agent Member with
respect to any beneficial ownership interest in the Series 1996A Notes and
the Series 1996B Notes, (ii) the delivery to any Agent Member, beneficial
owner of the Series 1996A Notes and the Series 1996B Notes or other Person,
other than the Securities Depository, of any notice with respect to the
Series 1996A Notes and the Series 1996B Notes or (iii) the payment to any
Agent Member, beneficial owner of the Series 1996A Notes or other Person,
other than the Securities Depository, of any amount with respect to the
principal of or interest on the Series 1996A Notes and the Series 1996B
Notes. So long as the certificates for the Series 1996A Notes and the
Series 1996B Notes issued under this Indenture are not issued pursuant to
subsection (d) of this Section the Issuer and the Trustee may treat the
Securities Depository as, and deem the Securities Depository to be, the
absolute owner of the Series 1996A Notes and the Series 1996B Notes for all
purposes whatsoever, including, without limitation, (i) the payment of
principal of and interest on such Series 1996A Notes and such Series 1996B
Notes, (ii) giving notices of redemption and other matters with respect to
such Series 1996A Notes and such Series 1996B Notes and
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(iii) registering transfers with respect to such Series 1996A Notes and
such Series 1996B Notes. In connection with any notice or other
communication to be provided to the Registered Owners pursuant to this
Indenture by the Issuer or the Trustee with respect to any consent or
other action to be taken by the Registered Owners, the Issuer or the
Trustee, as the case may be, shall establish a record date for such
consent or other action and, if the Securities Depository shall hold all
of the Series 1996A Notes and the Series 1996B Notes, give the
Securities Depository notice of such record date not less than fifteen
(15) calendar days in advance of such record date to the extent
possible. Such notice to the Securities Depository shall be given only
when the Securities Depository is the sole Registered Owner.
(d) If at any time the Securities Depository notifies the Issuer and
the Trustee that it is unwilling or unable to continue as Securities
Depository with respect to any or all of the Series 1996A Notes and the
Series 1996B Notes or if at any time the Securities Depository shall no
longer be registered or in good standing under the Securities Exchange Act
or other applicable statute or regulation and a successor Securities
Depository is not appointed by the Issuer within 90 days after the Issuer
receives notice or becomes aware of such condition, as the case may be,
subsections (b) and (c) of this Section shall no longer be applicable and
the Issuer shall execute and the Trustee shall authenticate and deliver
certificates representing the Series 1996A Notes and the Series 1996B Notes
as provided below. In addition, the Issuer may determine at any time that
the Series 1996A Notes and the Series 1996B Notes shall no longer be
represented by global certificates and that the provisions of subsections
(b) and (c) of this Section shall no longer apply to the Series 1996A Notes
and the Series 1996B Notes. In such event, the Issuer shall execute and
the Trustee shall authenticate and deliver certificates representing the
Series 1996A Notes and the Series 1996B Notes as provided below.
Certificates for the Series 1996A Notes and the Series 1996B Notes issued
in exchange for a global certificate pursuant to this subsection shall be
registered in such names and authorized denominations as the Securities
Depository, pursuant to instructions from the Agent Members or otherwise,
shall instruct in writing the Issuer and the Trustee, and upon which
written instructions the Trustee may rely without investigation. The
Trustee shall promptly deliver such certificates representing the Series
1996A Notes and the Series 1996B Notes to the Persons in whose names such
Notes are so registered.
Section 2.02. REDEMPTION OF THE SERIES 1996A NOTES AND SERIES 1996B NOTES.
(a) MANDATORY REDEMPTION OF SERIES 1996A NOTES AND SERIES 1996B
NOTES.
(i) (A) Subject to the provisions of Section 2.02(d) hereof,
the Series 1996A Notes are subject to mandatory redemption by the
Issuer, in whole or in part, on any Interest Payment Date with
respect to the Class of Series 1996A Notes being redeemed at a
redemption price equal to the principal amount thereof plus
interest accrued, if any, to the date
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of redemption thereof from moneys in the Note Redemption Fund
available therefor pursuant to Section 5.06 hereof.
(B) Subject to the provisions of Section 2.02(d) hereof,
the Series 1996B Notes are subject to mandatory redemption by the
Issuer, in whole or in part, on any Interest Payment Date with
respect to the Class of Series 1996B Notes being redeemed at a
redemption price equal to the principal amount thereof plus
interest accrued, if any, to the date of redemption thereof from
moneys in the Note Redemption Fund available therefor pursuant to
Section 5.06 hereof.
(ii) (A) Subject to the provisions of Section 2.02(d) hereof,
the Series 1996A Notes are also subject to mandatory redemption
by the Issuer at a redemption price equal to the principal amount
thereof plus interest accrued, if any, to the date of redemption
thereof from moneys in the Note Redemption Fund available
therefor pursuant to Section 5.06 hereof, (i) for the Class 1996A
Notes, on the Interest Payment Date next succeeding January 1,
1998 and (ii) for the Class 1996B Notes, on the next Interest
Payment Date thereafter, to the extent that a balance exists in
the Series 1996 Loan Account of the Student Loan Fund, such
anticipated excesses to be determined by estimate as of 30 days
prior to said Interest Payment Dates; provided, however, that if
30 days prior to said Interest Payment Dates, the Issuer files
with the Trustee a certificate that such balances may be invested
at a rate of return until a subsequent Interest Payment Date
which, together with other available Revenues and cash balances,
will produce sufficient cash flows to permit the timely
retirement of the Series 1996A Notes, which cash flows shall not
assume the refunding of the Series 1996A Notes, and such
conclusions are approved by each Rating Agency, then such call
for redemption need not be made; and provided that the Trustee
shall have received an opinion of Note Counsel to the effect that
the failure to redeem Notes as provided in this
Section 2.02(a)(ii)(A) would not cause the Notes to fail to be
characterized as indebtedness of the Issuer for federal income
tax purposes.
(B) Subject to the provisions of Section 2.02(d) hereof,
the Series 1996B Notes are also subject to mandatory redemption
by the Issuer at a redemption price equal to the principal amount
thereof plus interest accrued, if any, to the date of redemption
thereof from moneys in the Note Redemption Fund available
therefor pursuant to Section 5.06 hereof, (i) for the Additional
Class 1996A Notes, on the Interest Payment Date next succeeding
January 1, 1998 and (ii) for the Class 1996B-2 Notes, on the next
Interest Payment Date thereafter, to the extent that a balance
exists in the Series 1996 Loan Account of the Student Loan Fund,
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such anticipated excesses to be determined by estimate as of 30
days prior to said Interest Payment Dates; provided, however,
that if 30 days prior to said Interest Payment Dates, the Issuer
files with the Trustee a certificate that such balances may be
invested at a rate of return until a subsequent Interest Payment
Date which, together with other available Revenues and cash
balances, will produce sufficient cash flows to permit the timely
retirement of the Series 1996B Notes, which cash flows shall not
assume the refunding of the Series 1996B Notes, and such
conclusions are approved by each Rating Agency, then such call
for redemption need not be made; and provided that the Trustee
shall have received an opinion of Note Counsel to the effect that
the failure to redeem Notes as provided in this
Section 2.02(a)(ii)(B) would not cause the Notes to fail to be
characterized as indebtedness of the Issuer for federal income
tax purposes.
(iii) The Series 1996A Notes and the Series 1996B Notes shall
be subject to mandatory redemption at a redemption price equal to 100%
of the principal amount thereof plus accrued interest on any Interest
Payment Date within 60 days from when moneys are deposited in the
Senior Note Redemption Account pursuant to Section 5.03(j) hereof.
(b) OPTIONAL REDEMPTIONS AND OPTIONAL PURCHASE OF SERIES 1996A NOTES
AND SERIES 1996B NOTES.
(i) (A) CLASS 1996A NOTES. Subject to the provisions of
Section 2.02(d) hereof, the Class 1996A-1 Notes and the
Class 1996A-2 Notes are subject to redemption at the option of
the Issuer, from funds received by the Trustee constituting
interest on Financed Eligible Loans remaining in the Revenue Fund
after all other required payments have been made from the Revenue
Fund, in whole or in part, on any Interest Payment Date for such
subclass at a redemption price equal to the principal amount of
the Class 1996A Notes being redeemed, plus interest accrued, if
any, to the date of redemption.
(B) ADDITIONAL CLASS A NOTES. Subject to the provisions of
Section 2.02(d) hereof, the Class 1996A-3 Notes and the
Class 1996A-4 Notes are subject to redemption at the option of
the Issuer, from funds received by the Trustee constituting
interest on Financed Eligible Loans remaining in the Revenue Fund
after all other required payments have been made from the Revenue
Fund, in whole or in part, on any Interest Payment Date for such
subclass at a redemption price equal to the principal amount of
the Additional Class 1996A Notes being redeemed, plus interest
accrued, if any, to the date of redemption.
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(ii) (A) CLASS 1996B NOTES. Subject to the provisions of
Section 2.02(d) hereof, the Class 1996B Notes are subject to
redemption at the option of the Issuer, from funds received by
the Trustee constituting interest on Financed Eligible Loans
remaining in the Revenue Fund after all other required payments
have been made from the Revenue Fund, in whole or in part, on any
Interest Payment Date on or after May 1, 1999, at a redemption
price equal to the principal amount of the Class 1996B Notes
being redeemed, plus interest accrued, if any, to the date of
redemption.
(B) CLASS 1996B-2 NOTES. Subject to the provisions of
Section 2.02(d) hereof, the Class 1996B-2 Notes are subject to
redemption at the option of the Issuer, from funds received by
the Trustee constituting interest on Financed Eligible Loans
remaining in the Revenue Fund after all other required payments
have been made from the Revenue Fund, in whole or in part, on any
Interest Payment Date on or after May 1, 1999, at a redemption
price equal to the principal amount of the Class 1996B-2 Notes
being redeemed, plus interest accrued, if any, to the date of
redemption.
(iii) (A) EXTRAORDINARY OPTIONAL REDEMPTION OF SERIES 1996A
NOTES. Subject to the provisions of Section 2.02(d) hereof, the
Series 1996A Notes shall also be subject to extraordinary
optional redemption, at the option of the Issuer, from any
unallocated and available moneys in the Trust Estate, at a
redemption price equal to the principal amount of the Series
1996A Notes being redeemed, plus accrued interest to the date of
redemption, without premium in whole or in part on any Interest
Payment Date, if the Issuer reasonably determines that it is
unable to acquire Financed Eligible Loans, that the rate of
return on Financed Eligible Loans has materially decreased, or
that the costs of administering the Trust Estate have placed
unreasonable burdens upon the ability of the Issuer to perform
its obligations under this Indenture.
(B) EXTRAORDINARY OPTIONAL REDEMPTION OF SERIES 1996B
NOTES. Subject to the provisions of Section 2.02(d) hereof, the
Series 1996B Notes shall also be subject to extraordinary
optional redemption, at the option of the Issuer, from any
unallocated and available moneys in the Trust Estate, at a
redemption price equal to the principal amount of the Series
1996B Notes being redeemed, plus accrued interest to the date of
redemption, without premium in whole or in part on any Interest
Payment Date, if the Issuer reasonably determines that it is
unable to acquire Financed Eligible Loans, that the rate of
return on Financed Eligible Loans has materially decreased, or
that the costs of administering the
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Trust Estate have placed unreasonable burdens upon the ability
of the Issuer to perform its obligations under this Indenture.
(iv) OPTIONAL PURCHASE. Subject to the provisions of
Section 2.02(d) hereof, the Issuer may purchase or cause to be
purchased all of the Notes on any Interest Payment Date on which the
aggregate current principal balance of the Notes shall be less than or
equal to 10% of the initial aggregate principal balance of the Notes
on the respective Date of Issuance, at a purchase price equal to the
aggregate current principal balance of such Notes, plus accrued
interest on the Notes through the day preceding the Interest Payment
Date on which the purchase occurs. The amount deposited pursuant to
this subsection (iv) shall be paid to the Registered Owners on the
related Interest Payment Date following the date of such deposit. All
Notes which are purchased pursuant to this subsection (iv) shall be
delivered by the Issuer upon such purchase to, and be canceled by, the
Trustee and be disposed of in a manner satisfactory to the Trustee and
the Issuer.
(c) NOTICE OF REDEMPTION AND PURCHASE. The Trustee shall cause
notice of any redemption or purchase to be given by mailing a copy of the
notice to the Registered Owner of any Series 1996A Notes and any Series
1996B Notes, and the Auction Agent in the case of the Auction Notes,
designated for redemption or purchase in whole or in part, at their address
as the same shall last appear upon the registration books, in each case not
less than 15 days prior to the redemption or purchase date; provided,
however, that failure to give such notice, or any defect therein, shall not
affect the validity of any proceedings for the redemption or purchase date
of such Series 1996A Notes and such Series 1996B Notes for which no such
failure or defect occurs.
Each notice of redemption or purchase shall state the following: (i)
the full designated name of the issue, including the series designation,
(ii) the CUSIP number, (iii) the Note numbers and the principal amounts of
each Note to be redeemed or purchased, (iv) the date of redemption or
purchase, (v) the redemption or purchase price, (vi) the name of the
Trustee and the address and phone number of the Trustee's office handling
the redemption or purchase, (vii) the date of the Notes, (viii) the
interest rate, (ix) the maturity date, (x) the date of the notice, (xi) the
place or places of payment, (xii) that payment will be made upon
presentation and surrender of the Notes to be redeemed or purchased, if at
Stated Maturity or redemption in whole, and (xiii) that on and after said
date interest thereon will cease to accrue. If less than all the
Outstanding Notes of any series are to be redeemed, the notice of
redemption shall specify the numbers of the Notes or portions thereof to be
redeemed.
(d) PARTIAL REDEMPTION OF SERIES 1996A NOTES AND SERIES 1996B NOTES.
(i) (A) If less than all of the Series 1996A Notes are to be
redeemed pursuant to Section 2.02(a) or 2.02(b) hereof, the class
and subclass of Series 1996A Notes to be redeemed shall be
redeemed from
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each such class or subclass of the Series 1996A Notes in the
following order of priority: (1) no payments of principal shall
be made with respect to the Class 1996A-2 Notes until all Class
1996A-1 Notes have been paid in full; and (2) no payments of
principal shall be made with respect to the Class 1996B Notes
until all Class 1996A Notes have been paid in full. If less
than all of the Series 1996B Notes are to be redeemed pursuant
to Section 2.02(a) or 2.02(b) hereof, the class or subclass of
Series 1996B Notes to be redeemed shall be redeemed as directed
by an Issuer Order. If less than all of the Series 1996A Notes
or Series 1996B Notes of any Stated Maturity of any class or
subclass of the Series 1996A Notes or Series 1996B Notes are
to be redeemed, such Series 1996A Notes or Series 1996B Notes
of the same Stated Maturity to be redeemed shall be selected by
lot in such manner as the Trustee shall determine.
Notwithstanding the foregoing, the Class 1996B Notes and the
Class 1996B-2 Notes may only be redeemed pursuant to the
provisions of Section 5.06 hereof.
(B) Additional Notes (other than the Series 1996B Notes) to
be redeemed in part shall be redeemed in accordance with the
provisions of the Supplemental Indenture authorizing the issuance
and delivery of such Additional Notes.
(ii) (A) In case a Series 1996A Note is of a denomination larger
than $100,000, a portion of such Note ($100,000, or integral
multiples thereof) may be redeemed. Upon surrender of any Series
1996A Note for redemption in part only, the Issuer shall execute
and the Trustee shall authenticate and deliver to the Registered
Owner thereof, the cost of which shall be paid by the Issuer, a
new Series 1996A Note or Series 1996A Notes of the same series,
maturity and of authorized denominations, in an aggregate
principal amount equal to the unredeemed portion of the Series
1996A Note surrendered.
(B) In case a Series 1996B Note is of a denomination larger
than $100,000, a portion of such Note ($100,000, or integral
multiples thereof) may be redeemed. Upon surrender of any Series
1996B Note for redemption in part only, the Issuer shall execute
and the Trustee shall authenticate and deliver to the Registered
Owner thereof, the cost of which shall be paid by the Issuer, a
new Series 1996B Note or Series 1996B Notes of the same series,
maturity and of authorized denominations, in an aggregate
principal amount equal to the unredeemed portion of the Series
1996B Note surrendered.
(e) MANDATORY EXCHANGE OF PRIVATE NOTES UPON REGISTRATION OF PRIVATE
NOTES. The Private Notes are subject to mandatory exchange, from time to
time, in whole or in
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part, for Exchange Notes on any Exchange Date. Such andatory exchange
shall be effective on the Exchange Date specified by the Trustee in
the notice described in Section 2.02(f) hereof, upon receipt by the
Trustee of immediately available funds from the Issuer equal to the
amount of accrued interest to the Exchange Date due and payable with
respect to the Private Notes subject to mandatory exchange and a copy of
the opinion of Note Counsel described below and by receipt by the Placement
Agent of:
(i) Exchange Notes in an aggregate principal amount equal to the
Private Notes subject to such exchange;
(ii) an opinion of Note Counsel to the effect that (A) the
Exchange Notes constitute legal, valid and binding obligations of the
Issuer thereof enforceable in accordance with their terms (except as
such enforcement may be limited by bankruptcy, insolvency, moratorium
or other laws and equitable principles generally affecting the
enforcement of the rights of creditors), (B) the pledge of the trust
estate to secure the payment of the Exchange Notes is in all material
respects at least equivalent to the Issuer's pledge of the Trust
Estate securing the Private Notes (except as permitted by the
Indenture), (C) the Exchange Notes are registered securities within
the meaning of the Securities Act of 1933, as amended, (D) the
exchange of the Exchange Notes for the Private Notes will not cause
the Private Notes to fail to be characterized as the indebtedness of
the Issuer for federal income tax purposes, (E) the Indenture has been
qualified under the Trust Indenture Act of 1939 or is otherwise exempt
therefrom, and (F) all conditions precedent to the exchange of such
Private Notes for Exchange Notes set forth herein and the Notice of
Mandatory Exchange have been complied with; and
(iii) prior written consent of each Rating Agency and
evidence of the ratings of the Exchange Notes by each Rating Agency.
(f) NOTICE OF EXCHANGE OF PRIVATE NOTES. Not less than ten calendar
days prior to the Exchange Date, and upon the written request of the Issuer
delivered to the Trustee not less than fifteen calendar days prior to the
date such notice is to be mailed to the Registered Owners of the Private
Notes (which request shall set forth the information required below), the
Trustee shall mail to all Registered Owners of the Private Notes, at their
addresses appearing on the registration books for the Private Notes
maintained by the Trustee, by first-class mail, postage pre-paid, a Notice
of Mandatory Exchange of Private Notes for Exchange Notes, a copy of which
shall be sent to the Auction Agent in respect of any such exchange of
Auction Notes, which notice shall set forth:
(i) the Private Notes to be exchanged, specifying the aggregate
principal amount of Private Notes to be exchanged, the maturity
thereof and the CUSIP numbers relating to any Private Note to be
exchanged (provided, however, that the Trustee shall have no
responsibility for the selection or use of
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the CUSIP number nor shall the Trustee be deemed to make any
representation as to the correctness of such CUSIP number on
the Private Notes or as indicated in such notice);
(ii) the Exchange Date, which shall be a single date not less
than 10 days following the date of mailing of such Notice of Mandatory
Exchange and the Record Date for the payment of accrued interest on
the Private Note on the Exchange Date;
(iii) the interest rates for the Exchange Notes (if then
known) and that upon exchange, the security provisions, terms,
conditions and covenants of security documents relating to the
Exchange Notes will control the Exchange Notes and the terms of the
Indenture shall not control the Exchange Notes;
(iv) that the Private Notes subject to mandatory exchange shall
be exchanged on the Exchange Date at the Principal Office of the
Trustee (the address of which shall be specifically set forth in such
notice) by surrendering such Private Notes at such office together
with appropriate letters of transmittal (the form of which may be
provided by the Trustee with such notice) duly executed by the
Registered Owner thereof, upon which surrender, certificates
representing a like principal amount of Exchange Notes shall be issued
by the Trustee for the Exchange Notes in the name of the Registered
Owner or registered assigns and delivered by the Trustee;
(v) that notwithstanding the failure of any owner to surrender
Private Notes subject to mandatory exchange for exchange on the
Exchange Date, provided that all conditions set forth in clause (vi)
of the Notice of Mandatory Exchange have been complied with, all such
Private Notes shall be deemed to have been so exchanged and that
interest shall cease to accrue on such Private Notes at the interest
rate thereon but shall thereafter instead accrue on the Exchange Notes
for which such Private Notes shall have been deemed exchanged from and
after the Exchange Date at the interest rates for the Exchange Notes
corresponding to Private Notes of like maturity, as described in the
Notice of Mandatory Exchange; and
(vi) the conditions to the effectiveness of such exchange as
described below.
Notwithstanding the failure of any Registered Owner to surrender
Private Notes subject to mandatory exchange for exchange on the Exchange
Date, provided that all conditions set forth in this Indenture and the
Notice of Mandatory Exchange have been complied with, all such Private
Notes shall be deemed to have been so exchanged and interest shall cease to
accrue on such Private Notes at the interest rate thereon but shall
thereafter instead accrue on the Exchange Notes for which such Private
Notes shall have
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been deemed exchanged from and after the Exchange Date at the interest
rates for the Exchange Notes corresponding to Private Notes of
like maturity, as described in the Notice of Mandatory Exchange or the
notice given pursuant hereto as applicable.
Any exchange pursuant to the notice described in this Section 2.02(f)
shall be subject to the receipt by the Trustee of the moneys and opinion of
Note Counsel and receipt by the Trustee of the Private Notes to be
exchanged and the Exchange Notes, opinion of Note Counsel and evidence of
ratings specified above and the satisfaction of any other condition
specified by the Issuer and set forth in the Notice of Mandatory Exchange
not later than the opening of business on the Exchange Date, and such
exchange shall be of no effect unless the specified items are so received.
Immediately after effecting any mandatory exchange of Private Notes,
the Issuer shall cause the Trustee for such Exchange Notes to mail to the
addresses of the new owners of the Exchange Notes, at their addresses
appearing on the register of the Exchange Notes maintained for such
Exchange Notes, by first-class mail, postage pre-paid, notice of the
interest rates for the Exchange Notes if not set forth in the Notice of
Mandatory Exchange, together with a copy of the opinion of Note Counsel
delivered in connection with the issuance of such Exchange Notes as
described above.
Copies of each notice described above to be given shall be delivered
by the Trustee to each Rating Agency, to DTC in the event all of the
outstanding Private Notes are registered in the name of DTC or its nominee,
in each case by messenger or by overnight or certified mail--return receipt
requested. In addition, each Rating Agency or DTC shall receive such
notice prior to the close of business on the Business Day prior to the
mailing of the respective notice to the Registered Owners. In each case,
failure of a Registered Owner to receive any such notice, or any defect in
the notice as mailed or in the mailing thereof, shall not affect the
validity of the exchange with respect to such Note.
Section 2.03. EXECUTION OF NOTES. The Notes shall be executed in the name
and on behalf of the Issuer by the manual or facsimile signature of the
President of the Issuer and its corporate seal or a facsimile thereof shall be
thereunto affixed, imprinted, engraved or otherwise reproduced thereon and
attested by the manual or facsimile signature of the Secretary of the Issuer.
Any Note may be signed (manually or by facsimile), sealed or attested on behalf
of the Issuer by any person who, at the date of such act, shall hold the proper
office, notwithstanding that at the date of authentication, issuance or
delivery, such person may have ceased to hold such office.
Section 2.04. REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; PERSONS
TREATED AS REGISTERED OWNERS.
(a) The Issuer shall cause books for the registration and for the
transfer of the Notes as provided in this Indenture to be kept by the
Trustee which is hereby appointed
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the transfer agent of the Issuer for the Notes. Notwithstanding such
appointment, the Trustee is hereby authorized to make any arrangements
with other institutions which it deems necessary or desirable in order
that such institutions may perform the duties of transfer agent for the
Notes. Subject to the restrictions contained in this Section 2.04, upon
surrender for transfer of any Note at the Principal Office of the
Trustee, duly endorsed for transfer or accompanied by an assignment duly
executed by the Registered Owner or his attorney duly authorized in
writing, the Issuer shall execute and the Trustee shall authenticate and
deliver in the name of the transferee or transferees a new fully
registered Note or Notes of the same interest rate and for a like
series, subclass, if any, aggregate principal amount of the same
maturity.
(i) Subject to the restrictions contained in this Section 2.04,
notes may be exchanged at the Principal Office of the Trustee for a
like aggregate principal amount of fully registered Notes of the same
interest rate and maturity in authorized denominations. The Issuer
shall execute and the Trustee shall authenticate and deliver Notes
which the Registered Owner making the exchange is entitled to receive,
bearing numbers not contemporaneously outstanding. The execution by
the Issuer of any fully registered Note of any authorized denomination
shall constitute full and due authorization of such denomination and
the Trustee shall thereby be authorized to authenticate and deliver
such fully registered Note.
(ii) The Trustee shall not be required to transfer or exchange
any Note during the period of fifteen (15) business days next
preceding the mailing of notice of redemption as herein provided.
After the giving of such notice of redemption, the Trustee shall not
be required to transfer or exchange any Note, which Note or portion
thereof has been called for redemption.
(b) (i) Each Person who has or who acquires any Ownership Interest
in a Private Note shall be deemed by the acceptance or acquisition of
such Ownership Interest to have agreed to be bound by the provisions
of this Section 2.04. No Ownership Interest in a Private Note may be
transferred, and the Trustee and the Issuer shall not register the
transfer of any Private Note, unless the proposed transferee shall
have delivered to each of the Trustee, the Placement Agent and the
Issuer (A) evidence satisfactory to them that such Private Note has
been registered under the Securities Act and has been registered or
qualified under all applicable state securities laws to the reasonable
satisfaction of the Trustee or (B) (1) with respect to Auction Notes
that are Private Notes, an express agreement signed by or on behalf of
the transferee substantially in the form of Exhibit C-3 hereto or
(2) with respect to other Private Notes, an express agreement signed
by or on behalf of the transferee substantially in the form of
Exhibit C-1 or C-2, as may be applicable (each of Exhibit C-1, C-2 and
C-3, a "Transferee Agreement") by the proposed transferee to be bound
by and to abide by the provisions of this Section 2.04 and the
restrictions noted in the Transferee
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Agreement; or (C) in the case of the original issuance and delivery
of a Private Note from the Issuer to an initial purchaser, the
investment letter substantially in the form of Exhibit B hereto
(the "Investment Letter") shall be deemed to be a Transferee
Agreement for purposes of this Indenture and the Private Notes and
with respect to Auction Notes that are Private Notes, Exhibit C-3
hereto.
(ii) The Issuer will, upon the request of any Registered Owner of
any Outstanding Private Note, which Registered Owner is a Qualified
Institutional Buyer, provide such Registered Owner, and any Qualified
Institutional Buyer designated by such Registered Owner, such
financial and other information as such Registered Owner may
reasonably determine to be necessary in order to permit compliance
with the information requirements of Rule 144A under the Securities
Act in connection with the resale of Private Notes, except at such
times as the Issuer is subject to the reporting requirements of
section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended.
(c) As to any Note, the person in whose name the same shall be
registered shall be deemed and regarded as the absolute owner thereof for
all purposes, and payment of either principal or interest on any fully
registered Note shall be made only to or upon the written order of the
Registered Owner thereof or his legal representative but such registration
may be changed as hereinabove provided. All such payments shall be valid
and effectual to satisfy and discharge the liability upon such Note to the
extent of the sum or sums paid.
(d) The Trustee shall require the payment by any Registered Owner
requesting exchange or transfer of any tax or other governmental charge
required to be paid with respect to such exchange or transfer. The
applicant for any such transfer or exchange may be required to pay all
taxes and governmental charges and all expenses and charges of the Issuer
and the Trustee in connection with such transfer or exchange.
Section 2.05. LOST, STOLEN, DESTROYED AND MUTILATED NOTES. Upon receipt
by the Issuer and the Trustee of evidence satisfactory to them of the ownership
of and the loss, theft, destruction or mutilation of any Note and, in the case
of a lost, stolen or destroyed Note, of indemnity satisfactory to them, and upon
surrender and cancellation of the Note, if mutilated, (i) the Issuer shall
execute, and the Trustee shall authenticate and deliver, a new Note of the same
series, subclass, if any, interest rate, maturity and denomination in lieu of
such lost, stolen, destroyed or mutilated Note or (ii) if such lost, stolen,
destroyed or mutilated Note shall have matured or have been called for
redemption, in lieu of executing and delivering a new Note as aforesaid, the
Issuer may pay such Note. Any such new Note shall bear a number not
contemporaneously outstanding. The applicant for any such new Note may be
required to pay all taxes and governmental charges and all expenses and charges
of the Issuer and of the Trustee in connection with the issuance of such Note.
All Notes shall be held and owned upon the express condition that, to the extent
permitted by law, the foregoing conditions are exclusive
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with respect to the replacement and payment of mutilated, destroyed, lost or
stolen Notes, negotiable instruments or other securities.
Section 2.06. DELIVERY OF SERIES 1996A NOTES AND SERIES 1996B NOTES.
(a) Upon the execution and delivery of the Original Indenture, the
Issuer executed and delivered to the Trustee and the Trustee authenticated
the Series 1996A Notes and delivered them to The Depository Trust Company
as hereinafter in this Section provided.
Prior to the delivery by the Trustee of any of the Series 1996A Notes,
there was filed with or delivered to the Trustee the following:
(i) A resolution duly adopted by the Issuer, certified by the
Secretary or other Authorized Officer thereof, authorizing the
execution and delivery of this Indenture, the Student Loan Purchase
Agreement, the Servicing Agreement, the Custodian Agreement, the
Broker-Dealer Agreement and the Auction Agent Agreement and the
issuance of the Series 1996A Notes.
(ii) Duly executed copies of this Indenture, the Student Loan
Purchase Agreement, the Servicing Agreement, the Custodian Agreement,
the Auction Agent Agreement and the Broker-Dealer Agreement.
(iii) The written order of the Issuer as to the delivery of
the Series 1996A Notes, signed by an Authorized Officer.
(b) Upon the execution and delivery of this Indenture, the Issuer
shall execute and deliver to the Trustee and the Trustee shall authenticate
the Series 1996B Notes and deliver them to The Depository Trust Company as
hereinafter in this Section provided.
Prior to the delivery by the Trustee of any of the Series 1996B Notes,
there shall have been filed with or delivered to the Trustee the following:
(i) A resolution duly adopted by the Issuer, certified by the
Secretary or other Authorized Officer thereof, authorizing the
execution and delivery of this Indenture, the Student Loan Purchase
Agreement, the Broker-Dealer Agreement and the Auction Agent Agreement
and the issuance of the Series 1996B Notes.
(ii) Duly executed copies of this Indenture, the Student Loan
Purchase Agreement, the Auction Agent Agreement and the Broker-Dealer
Agreement.
(iii) The written order of the Issuer as to the delivery of
the Series 1996B Notes, signed by an Authorized Officer.
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Section 2.07. TRUSTEE'S AUTHENTICATION CERTIFICATE. The Trustee's
authentication certificate upon the Series 1996A Notes shall be substantially in
the forms provided in Exhibits A-1 and A-2. The Trustee's authentication
certificate upon the Series 1996B Notes shall be substantially in the forms
provided in Exhibits A-3 and A-4. No Series 1996A Note or Series 1996B Note
shall be secured hereby or entitled to the benefit hereof, or shall be valid or
obligatory for any purpose, unless a certificate of authentication,
substantially in such form, has been duly executed by the Trustee; and such
certificate of the Trustee upon any Series 1996A Note or Series 1996B Note shall
be conclusive evidence and the only competent evidence that such Note has been
authenticated and delivered hereunder. The Trustee's certificate of
authentication shall be deemed to have been duly executed by it if manually
signed by an authorized officer of the Trustee, but it shall not be necessary
that the same person sign the certificate of authentication on all of the Series
1996A Notes or the Series 1996B Notes issued hereunder.
Section 2.08. CANCELLATION AND DESTRUCTION OF NOTES BY THE TRUSTEE.
Whenever any Outstanding Notes shall be delivered to the Trustee for the
cancellation thereof pursuant to this Indenture, upon payment of the principal
amount and interest represented thereby, or for replacement pursuant to Section
2.05 hereof, such Notes shall be promptly cancelled and cremated or otherwise
destroyed by the Trustee in accordance with its normal procedures.
Section 2.09. TEMPORARY NOTES. Pending the preparation of definitive
Notes, the Issuer may execute and the Trustee shall authenticate and deliver
temporary Notes. Temporary Notes shall be issuable as fully registered Notes
without coupons, of any denomination, and substantially in the form of the
definitive Notes but with such omissions, insertions and variations as may be
appropriate for temporary Notes, all as may be determined by the Issuer. Every
temporary Note shall be executed by the Issuer and be authenticated by the
Trustee upon the same conditions and in substantially the same manner, and with
like effect, as the definitive Notes. As promptly as practicable the Issuer
shall execute and shall furnish definitive Notes and thereupon temporary Notes
may be surrendered in exchange therefor without charge at the principal office
of the Trustee, and the Trustee shall authenticate and deliver in exchange for
such temporary Notes a like aggregate principal amount of definitive Notes.
Until so exchanged the temporary Notes shall be entitled to the same benefits
under this Indenture as definitive Notes.
Section 2.10. DEPOSIT OF NOTE PROCEEDS AND FUNDING OF TRUST ESTATE.
(a) Upon the issuance and delivery of the Series 1996A Notes, the
Trustee deposited the net proceeds thereof ($107,117,100.00) as follows:
(i) an amount equal to $350,000.00 was deposited to the
Operating Fund;
(ii) an amount equal to $313,100.00 was deposited to the Cost of
Issuance Fund;
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(iii) an amount equal to $2,154,000.00 was deposited to the
Reserve Fund;
(iv) an amount equal to $2,800,000.00 was deposited to the
Revenue Fund; and
(v) the balance of the proceeds of the Series 1996A Notes
($101,500,000.00) was deposited to the Series 1996 Loan Account of the
Student Loan Fund.
(b) Upon the issuance and delivery of the Series 1996B Notes, the
Trustee shall deposit the net proceeds thereof ($141,671,026) as follows:
(i) an amount equal to $350,000 shall be deposited to the
Operating Fund;
(ii) an amount equal to $470,276 shall be deposited to the Cost
of Issuance Fund;
(iii) an amount equal to $2,844,000 shall be deposited to the
Reserve Fund; and
(iv) the balance of the proceeds of the Series 1996B Notes
($138,006,750) shall be deposited to the Series 1996 Loan Account of
the Student Loan Fund.
Section 2.11. FORMS OF SERIES 1996A NOTES AND SERIES 1996B NOTES. Any
subclass of the Class 1996A Notes shall be in substantially the form set forth
in Exhibit A-1 hereto, with such variations, omissions and insertions as may be
necessary. The Class 1996B Notes shall be in substantially the form set forth
in Exhibit A-2 hereto, with such variations, omissions and insertions as may be
necessary. Any subclass of the Additional Class 1996A Notes shall be in
substantially the form set forth in Exhibit A-3 hereto, with such variations,
omissions and insertions as may be necessary. The Class 1996B-2 Notes shall be
in substantially the form set forth in Exhibit A-4 hereto, with such variations,
omissions and insertions as may be necessary.
Section 2.12. ISSUANCE OF ADDITIONAL NOTES.
(a) The Issuer shall have the authority, upon complying with the
provisions of this Section, to authenticate and deliver from time to time
Additional Notes secured by the Trust Estate on a parity with or
subordinate to either the Senior Notes, the Subordinate Notes or the
Junior-Subordinate Notes, if any, secured hereunder as shall be determined
by the Issuer. In addition, the Issuer may enter into any Swap Agreements
it deems necessary or desirable with respect to any or all of such
Additional Notes.
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(b) No Additional Notes shall be authenticated and delivered pursuant
to this Indenture until the following conditions have been satisfied:
(i) The Issuer and the Trustee have entered into a Supplemental
Indenture (which Supplemental Indenture shall not require the approval
of the Registered Owners of any of the Outstanding Notes) providing
the terms and forms of the Additional Notes, including the designation
of such Additional Notes as Senior Notes, Subordinate Notes or
Junior-Subordinate Notes, the redemption provisions applicable to such
Additional Notes and the selection provisions applicable to such
Additional Notes in the case of partial redemptions not inconsistent
with this Indenture, and which adopts the applicable provisions of
this Indenture.
(ii) The Issuer has delivered to the Trustee within 30 days prior
to the delivery of the proposed Additional Notes a Cash Flow
Certificate which, taking into account the then-existing Trust Estate
as well as the Trust Estate after giving effect to the issuance of the
proposed Additional Notes, shows, with respect to the period covered
by the Cash Flow Certificate, which period shall extend from the date
of the Cash Flow Certificate to the latest maturity of the Notes
expected to be Outstanding after the issuance of the proposed
Additional Notes, (A) all Revenue expected to be received during such
period from the Trust Estate, (B) the application of all such Revenue
in accordance with this Indenture and (C) the resulting periodic
balances on each Interest Payment Date, and shows that anticipated
Revenue will exceed, by a margin of $250,000 plus any additional
amount, if any, required by any Supplemental Indenture, the amount
necessary to pay the principal of and interest on the Notes, including
the proposed Additional Notes, when due and all expenses payable under
this Indenture when due, under all scenarios included in the Cash
Flows.
(iii) Written evidence from each Rating Agency which has been
requested by the Issuer to and has assigned a Rating or Ratings to any
series of Notes that such Rating or Ratings will not be reduced or
withdrawn as a result of the issuance of the proposed Additional
Notes; provided however, that if any series of the Notes are not then
rated by any Rating Agency, such Additional Notes may not be secured
on a parity with or subordinate to such unrated Notes.
(iv) An opinion of Note Counsel to the effect that all of the
foregoing conditions to the issuance of the proposed Additional Notes
have been satisfied.
(v) Upon the issuance of the Additional Notes, an amount shall
be deposited to the Reserve Fund to increase the amount on deposit
therein to equal the Reserve Fund Requirement.
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(vi) The Trustee shall have received an opinion of Note Counsel
in form and substance acceptable to it to the effect that the issuance
of the Additional Notes, if consummated, would not cause the Notes to
fail to be characterized as the indebtedness of the Issuer for federal
income tax purposes.
(c) Any Additional Notes shall have Stated Maturities of July 1 of
any years or years.
(d) The Trustee is authorized to set up any additional Funds or
Accounts under this Indenture which it deems necessary or convenient in
connection with the issuance and delivery of any Additional Notes.
(e) Additional Notes which constitute Senior Notes shall be
designated by their year of authorization, the letter "A" and a number
indicating its sequence of issuance in that year. Additional Notes which
constitute Subordinate Notes shall be designated by their year of
authorization, the letter "B" and a number indicating its sequence of
issuance in that year. Additional Notes which constitute
Junior-Subordinate Notes shall be designated by their year of
authorization, an alphabetic letter indicating its subordination (which
must be a "C," "D" or lower) and a number indicating its sequence of
issuance in that year (i.e. the second issuance of Junior-Subordinate
Notes in 1996 could be designated "Class 1996C-2" or "Class 1996D-2"
depending upon its level of subordination). The payment of principal
of and interest on a Junior-Subordinate Note designated with a "D" is
subordinated to the payment of principal of and interest on a
Junior-Subordinate Note designated with a "C."
ARTICLE III
PARITY OF LIEN; OTHER OBLIGATIONS;
AND SWAP AGREEMENTS
Section 3.01. PARITY OF LIEN. The provisions, covenants and agreements
herein set forth to be performed by or on behalf of the Issuer shall be for the
equal benefit, protection and security of the Registered Owners of any and all
of the Notes, all of which, regardless of the time or times of their issuance or
maturity, shall be of equal rank without preference, priority or distinction of
any of the Notes over any other thereof, except as expressly provided in this
Indenture.
Section 3.02. OTHER OBLIGATIONS.
(a) The Issuer shall not commingle the Funds established by this
Indenture with funds, proceeds, or investment of funds relating to other
issues or series of notes heretofore or hereafter issued, except to the
extent such commingling is required by the Trustee for ease in
administration of its duties and responsibilities; provided, however, that
should the Trustee require such permitted commingling, it shall keep
complete
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records in order that the funds, proceeds, or investments under
this Indenture may at all times be identified by source and application,
and if necessary, separated.
(b) The Issuer shall not create or voluntarily permit to be created
any debt, lien, or charge which would be on a parity with, junior to, or
prior to the lien of this Indenture; shall not do or omit to do or suffer
to be done or omitted to be done any matter or things whatsoever whereby
the lien of this Indenture or the priority of such lien for the Notes and
Issuer Swap Payments hereby secured might or could be lost or impaired; and
will pay or cause to be paid or will make adequate provisions for the
satisfaction and discharge of all lawful claims and demands which if unpaid
might by law be given precedence to or any equality with this Indenture as
a lien or charge upon the Financed Eligible Loans; provided, however, that
nothing in this subsection (b) shall require the Issuer to pay, discharge,
or make provision for any such lien, charge, claim, or demand so long as
the validity thereof shall be by it in good faith contested, unless
thereby, in the opinion of the Trustee, the same will endanger the security
for the Notes and Issuer Swap Payments; and provided further that any
subordinate lien hereon (i.e., subordinate to the lien securing the Senior
Notes, the Issuer Swap Payments, the Subordinate Notes and the
Junior-Subordinate Notes) shall be entitled to no payment from
the Trust Estate, nor may any remedy be exercised with respect to
such subordinate lien against the Trust Estate until all Notes and
Issuer Swap Payments shall have been paid or deemed paid hereunder.
Section 3.03. SWAP AGREEMENTS; COUNTERPARTY SWAP PAYMENTS; ISSUER SWAP
PAYMENTS. The Issuer hereby authorizes and directs the Trustee to acknowledge
and agree to any Swap Agreement hereafter entered into by the Issuer and a Swap
Counterparty under which (a) the Issuer may be required to make, from time to
time, Issuer Swap Payments and (b) the Trustee may receive, from time to time,
Counterparty Swap Payments for the account of the Issuer. The Issuer shall not
execute and deliver any Swap Agreement unless upon execution and delivery of
such Swap Agreement the notional amount of such Swap Agreement, together with
the notional amounts of any other Swap Agreements outstanding at such time, does
not exceed the aggregate principal amount of Notes Outstanding at such time. In
connection with the execution of a Swap Agreement, the Trustee, on behalf of the
Swap Counterparty and at the Swap Counterparty's written direction, shall waive
in the Supplemental Indenture executed in connection with the Swap Agreement any
and all rights which the Swap Counterparty may have to receive any amounts
realized by the Trustee from foreclosure upon the Trust Estate consisting of any
Swap Agreement and any Swap Counterparty Guarantee.
No later than the Business Day immediately preceding each date on which a
Counterparty Swap Payment or Issuer Swap Payment is due pursuant to the
applicable Swap Agreement through and including the termination date of a Swap
Agreement, the Issuer shall give written notice to the Trustee stating either
(a) the amount of any Counterparty Swap Payment due to be received by the
Trustee for the account of the Issuer no later than such Interest Payment Date
or (b) the amount of any Issuer Swap Payment to be paid to the Swap Counterparty
on such
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Interest Payment Date. If the Trustee fails to receive such written
notification from the Issuer by the end of such Business Day, it shall
immediately notify the Issuer of such fact in writing.
On any Business Day on which a Counterparty Swap Payment is due pursuant to
the applicable Swap Agreement in accordance with the written notification
received from the Issuer, the Trustee shall deposit all moneys received
representing such Counterparty Swap Payment in the Revenue Fund to be applied in
accordance with the provisions of Section 5.03 hereof. The Trustee shall notify
the Issuer on such Business Day, if (a) the amount received from the Swap
Counterparty is not equal to the amount specified in the written notification of
the Issuer, (b) no amount is received from the Swap Counterparty or (c) the
amount received is not received in freely transferable funds.
On any date with respect to which an Issuer Swap Payment is due in
accordance with the written notification received from the Issuer or, with
respect to a payment in respect of an early termination date, from the Swap
Counterparty, the Trustee shall make payment to the Swap Counterparty from
moneys in the Revenue Fund of the amount of the Issuer Swap Payment specified in
such written notification of the Issuer or the Swap Counterparty, as the case
may be, due on such date by the deposit or wire transfer of freely transferable
funds to the credit of the account of the Swap Counterparty specified in such
written notification of the Issuer or the Swap Counterparty, as the case may be.
Nothing in this Indenture shall prohibit, or be construed as prohibiting,
an Issuer Swap Payment or Counterparty Swap Payment from being made on a date
other than an Interest Payment Date.
NOTWITHSTANDING ANY OTHER PROVISION OF THIS INDENTURE, THE ISSUER AGREES
NOT TO ENTER INTO ANY SWAP AGREEMENT SO LONG AS ANY NOTE WHICH HAS BEEN
REGISTERED PURSUANT TO THE SECURITIES ACT REMAINS OUTSTANDING OR UNTIL SUCH TIME
AS A POST-EFFECTIVE AMENDMENT SPECIFICALLY AUTHORIZING THE USE OF A SWAP
AGREEMENT HAS BEEN DECLARED EFFECTIVE BY THE COMMISSION.
ARTICLE IV
PROVISIONS APPLICABLE TO THE NOTES;
DUTIES OF THE ISSUER
Section 4.01. PLEDGE FOR PAYMENT. The Notes and interest thereon and any
Issuer Swap Payments shall be and are hereby declared to be payable from and
equally secured (except as to priority of payment of the Senior Notes and any
Issuer Swap Payments secured on a parity with the Senior Notes, over the
Subordinate Notes and any Issuer Swap Payment secured on a parity with the
Subordinate Notes, and the Junior-Subordinate Notes and any Issuer Swap Payments
secured on a parity with the Junior-Subordinate Notes, the priority of payment
of the Senior Notes, any Issuer Swap Payments secured on a parity with the
Senior Notes, the Subordinate Notes and any Issuer Swap Payments secured on a
parity with the Subordinate Notes, over the Junior-Subordinate Notes and any
Issuer Swap Payments secured on a parity
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with the Junior-Subordinate Notes, and the priority, if any, of payment of
one series of Junior-Subordinate Notes and any Issuer Swap Payments secured
on a parity with such series of Junior-Subordinate Notes over any other
series of Junior-Subordinate Notes and any Issuer Swap Payments secured on a
parity with such series of Junior-Subordinate Notes, as provided herein or as
provided in any Supplemental Indenture) by an irrevocable first lien on and
pledge of the properties constituting the Trust Estate, subject to the
application thereof as permitted by this Indenture, but in no event shall the
Registered Owners or any Swap Counterparty have any right to possession of
any Financed Eligible Loans, which shall be held only by the Trustee or its
agent or bailee.
Section 4.02. REPRESENTATIONS AND WARRANTIES OF THE ISSUER. The Issuer
represents and warrants that it is duly authorized under the laws of the State
to create and issue the Notes and to execute and deliver this Indenture and any
Swap Agreement and to make the pledge to the payment of Notes and any Issuer
Swap Payments hereunder, that all necessary action on the part of the Issuer and
the Board for the creation and issuance of the Notes and the execution and
delivery of this Indenture and any Swap Agreement has been duly and effectively
taken; and that the Notes in the hands of the Registered Owners thereof and the
Issuer Swap Payments are and will be valid and enforceable special limited
obligations of the Issuer secured by and payable solely from the Trust Estate.
Section 4.03. COVENANTS AS TO ADDITIONAL CONVEYANCES. At any and all
times, the Issuer will duly execute, acknowledge, and deliver, or will cause to
be done, executed, and delivered, all and every such further acts, conveyances,
transfers, and assurances in law as the Trustee shall reasonably require for the
better conveying, transferring, and pledging and confirming unto the Trustee,
all and singular, the properties constituting the Trust Estate hereby
transferred and pledged, or intended so to be transferred and pledged.
Section 4.04. FURTHER COVENANTS OF THE ISSUER.
(a) The Issuer will cause financing statements and continuation
statements with respect thereto at all times to be filed in the office of
the Secretary of State of the State and any other jurisdiction necessary to
perfect and maintain the security interest granted by the Issuer hereunder.
(b) The Issuer will duly and punctually keep, observe and perform
each and every term, covenant, and condition on its part to be kept,
observed, and performed, contained in this Indenture and the other
agreements to which the Issuer is a party pursuant to the transactions
contemplated herein, and will punctually perform all duties required by the
Articles of Incorporation and Bylaws of the Issuer and the laws of the
State.
(c) The Issuer shall be operated on the basis of its Fiscal Year.
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(d) The Issuer shall cause to be kept full and proper books of
records and accounts, in which full, true, and proper entries will be made
of all dealings, business, and affairs of the Issuer which relate to the
Notes and any Swap Agreement.
(e) The Issuer, upon written request of the Trustee, will permit at
all reasonable times the Trustee or its agents, accountants, and attorneys,
to examine and inspect the property, books of account, records, reports,
and other data relating to the Financed Student Loans, and will furnish the
Trustee such other information as it may reasonably request. The Trustee
shall be under no duty to make any such examination unless requested in
writing to do so by the Registered Owners of 51% in collective aggregate
principal amount of the Notes at the time Outstanding, and unless such
Registered Owners shall have offered the Trustee security and indemnity
satisfactory to it against any costs, expenses and liabilities which might
be incurred thereby.
(f) The Issuer shall cause an annual audit to be made by an
independent auditing firm of national reputation and file one copy thereof
with the Trustee and each Rating Agency within 150 days of the close of
each Fiscal Year. The Trustee shall be under no obligation to review or
otherwise analyze such audit.
(g) The Issuer covenants that in the event it intends to transfer or
sell Financed Eligible Loans which are a part of the Trust Estate, it shall
give written notice thereof to the Trustee. The Issuer also covenants that
in the event it intends to transfer or sell Financed Eligible Loans (except
in the case of a consolidation or serialization combination or submitting
Financial Eligible Loans for claim to a Guaranty Agency), it shall give
written notice thereof to each Rating Agency. The Issuer shall not sell
Financed Eligible Loans except as permitted by this Indenture, in which
case such Financed Eligible Loans may be sold at a price not less than the
principal amount thereof (including accrued but unpaid interest). In such
case, the proceeds thereof shall be used to either acquire Eligible Loans
with the same or more favorable characteristics or to redeem Notes.
Further, there shall be no sale of Financed Eligible Loans (except in the
case of a consolidation or serialization/combination or submitting
Financial Eligible Loans for claim to a Guaranty Agency) if the Aggregate
Market Value of the Trust Estate is less than the aggregate principal
amount of the Notes Outstanding and there shall be no sale of Financed
Eligible Loans (except in the case of a consolidation or
serialization/combination or submitting Financial Eligible Loans for claim
to a Guaranty Agency) when the Aggregate Market Value of the Trust Estate
is greater than the aggregate principal amount of the Notes Outstanding
unless, immediately upon such sale, the proceeds thereof
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are used to acquire an equal or greater principal amount of Eligible
Loans or are used to optionally redeem Notes pursuant to Section 2.02(b)
hereof, and thereupon the Aggregate Market Value of the Trust Estate is
greater than the aggregate principal amount of all Notes Outstanding
(after giving effect to such redemption). Notwithstanding the prior
sentence, Financed Eligible Loans may be sold when the Aggregate Market
Value of the Trust Estate is less than the aggregate principal amount of
the Notes Outstanding, so long as immediately upon such sale, the
proceeds thereof are used to acquire an equal or greater principal
amount of Eligible Loans having a value comparable to the Financed
Eligible Loans being sold and any unamortized premium paid by the Issuer
with respect to the Financed Eligible Loan being sold is recovered in
connection with the transaction; provided, however, that in the event
such sale and purchase of Financed Eligible Loans would result in (i) an
increase in the number of Financed Eligible Loans held in the Trust
Estate that are delinquent, in deferment or subject to forbearance with
respect to collection, or (ii) an increase of 5% or more in the total
percentage of Financed Eligible Loans held in the Trust Estate that are
(x) attributable to Student Loans the proceeds of which funded tuition
to private Eligible Institutions offering only non-baccalaureate
degrees, or (y) PLUS Loans, SLS Loans, Unsubsidized Loans or
Consolidation Loans, then no such sale of Financed Eligible Loans may be
consummated unless the Trustee has received written evidence from each
Rating Agency that such sale and subsequent purchase of Financed
Eligible Loans would not, by itself, reduce or withdraw the current
ratings of the Notes Outstanding.
(h) The Issuer covenants that all Financed Eligible Loans upon
receipt thereof shall be delivered to the Trustee or its agent or bailee to
be held pursuant to this Indenture and pursuant to the Servicing Agreement
or a custodian agreement.
(i) Notwithstanding anything to the contrary contained herein, except
upon the occurrence and during the continuance of an Event of Default
hereunder, the Issuer hereby expressly reserves and retains the privilege
to receive and, subject to the terms and provisions of this Indenture, to
keep or dispose of, claim, bring suits upon or otherwise exercise, enforce
or realize upon its rights and interest in and to the Financed Eligible
Loans and the proceeds and collections therefrom, and neither the Trustee
nor any Registered Owner shall in any manner be or be deemed to be an
indispensable party to the exercise of any such privilege, claim or suit
and the Trustee shall be under no obligation whatsoever to exercise any
such privilege, claim or suit; provided, however, that the Trustee shall
have and retain possession of the Financed Eligible Loans pursuant to
Section 5.02 hereof (which Financed Eligible Loans may be held by the
Trustee's agent or bailee) so long as such loans are subject to the lien of
this Indenture.
(j) The Issuer shall notify the Trustee and each Rating Agency in
writing prior to entering into any Swap Agreement.
Section 4.05. ENFORCEMENT OF SERVICING AGREEMENTS. The Issuer shall
comply with and shall require the Servicer to comply with the following whether
or not the Issuer is otherwise in default under this Indenture:
(a) cause to be diligently enforced and taken all reasonable steps,
actions and proceedings necessary for the enforcement of all terms,
covenants and conditions of all Servicing Agreements, including the prompt
payment of all amounts due the Issuer thereunder, including without
limitation all principal and interest payments, and
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Guarantee payments which relate to any Financed Eligible Loans and cause
the Servicer to specify whether payments received by it represent
principal or interest;
(b) not permit the release of the obligations of any Servicer
under any Servicing Agreement except in conjunction with amendments or
modifications permitted by (g) below;
(c) at all times, to the extent permitted by law, cause to be
defended, enforced, preserved and protected the rights and privileges of
the Issuer and of the Registered Owners under or with respect to each
Servicing Agreement;
(d) at its own expense, the Issuer shall duly and punctually perform
and observe each of its obligations to the Servicer under the Servicing
Agreement in accordance with the terms thereof;
(e) the Issuer agrees to give the Trustee prompt written notice of
each default on the part of the Servicer of its obligations under the
Servicing Agreement coming to the Issuer's attention;
(f) the Issuer shall not waive any default by the Servicer under the
Servicing Agreement without the written consent of the Trustee; and
(g) not consent or agree to or permit any amendment or modification
of any Servicing Agreement which will in any manner materially adversely
affect the rights or security of the Registered Owners. The Issuer shall
be entitled to receive and rely upon an opinion of Issuer's Counsel that
any such amendment or modification will not materially adversely affect the
rights or security of the Registered Owners.
Section 4.06. PROCEDURES FOR TRANSFER OF FUNDS. In any instance where
this Indenture requires a transfer of funds or money from one Fund to another, a
transfer of ownership in investments or an undivided interest therein may be
made in any manner agreeable to the Issuer and the Trustee, and in the
calculation of the amount transferred, interest on the investment which has or
will accrue before the date the money is needed in the fund to which the
transfer is made shall not be taken into account or considered as money on hand
at the time of such transfer.
Section 4.07. ADDITIONAL COVENANTS WITH RESPECT TO THE ACT. The Issuer
covenants that it will cause the Trustee to be, or replace the Trustee with, an
Eligible Lender under the Act, that it will acquire or cause to be acquired
Eligible Loans originated and held only by an Eligible Lender and that it will
not dispose of or deliver any Financed Eligible Loans or any security interest
in any such Financed Eligible Loans to any party who is not an Eligible Lender
so long as the Act or Regulations adopted thereunder require an Eligible Lender
to be the owner or holder of Guaranteed Student Loans; provided, however, that
nothing above shall prevent the Issuer from delivering the Eligible Loans to the
Servicer or the Guarantee Agency. The
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Registered Owners of the Notes shall not in any circumstances be deemed
to be the owner or holder of the Guaranteed Student Loans.
The Issuer, or its designated agent, shall be responsible for each of the
following actions with respect to the Act:
(a) The Issuer, or its designated agent, shall be responsible for
dealing with the Secretary with respect to the rights, benefits and
obligations under the Certificates of Insurance and the Contract of
Insurance, and the Issuer shall be responsible for dealing with the
Guarantee Agencies with respect to the rights, benefits and obligations
under the Guarantee Agreements with respect to the Financed Eligible Loans;
(b) The Issuer, or its designated agent, shall cause to be diligently
enforced, and shall cause to be taken all reasonable steps, actions and
proceedings necessary or appropriate for the enforcement of all terms,
covenants and conditions of all Financed Eligible Loans and agreements in
connection therewith, including the prompt payment of all principal and
interest payments and all other amounts due thereunder;
(c) The Issuer, or its designated agent, shall cause the Financed
Eligible loans to be serviced by entering into the Servicing Agreement or
other agreement with the Servicer for the collection of payments made for,
and the administration of the accounts of, the Financed Eligible Loans; and
(d) The Issuer, or its designated agent, shall comply, and shall
cause all of its officers, directors, employees and agents to comply, with
the provisions of the Act and any regulations or rulings thereunder, with
respect to the Financed Eligible Loans.
(e) The Issuer, or its designated agent, shall cause the benefits of
the Guarantee Agreements, the Interest Subsidy Payments and the Special
Allowance Payments to flow to the Trustee. The Trustee shall have no
liability for actions taken at the direction of the Issuer, except for
negligence or willful misconduct in the performance of its express duties
hereunder. The Trustee shall have no obligation to administer, service or
collect the loans in the Trust Estate or to maintain or monitor the
administration, servicing or collection of such loans.
The Trustee shall not be deemed to be the designated agent for the
purposes of this Section 4.07 unless it has agreed in writing to be such
agent.
Section 4.08. STUDENT LOANS; COLLECTIONS THEREOF; ASSIGNMENT THEREOF. The
Issuer, through the Servicer, shall diligently collect all principal and
interest payments on all Financed Eligible Loans, and all Interest Benefit
Payments, Insurance Guarantee and default claims and Special Allowance Payments
which relate to such Financed Eligible Loans. The Issuer shall cause the filing
and assignment of such claims (prior to the timely-filing deadline for such
claims
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under the Regulations) by the Servicer. The Issuer will comply with the
Act and Regulations which apply to the Guaranteed Student Loan Program and to
such Financed Eligible Loans.
Section 4.09. APPOINTMENT OF AGENTS, ETC. The Issuer shall employ and
appoint all employees, agents, consultants and attorneys which it may consider
necessary. No member of the Board, neither singly or collectively, shall be
personally liable for any act or omission not willfully fraudulent or MALA FIDE.
Section 4.10. CAPACITY TO SUE. The Issuer shall have the power and
capacity to sue and to be sued on matters arising out of or relating to the
financing of the Financed Eligible Loans.
Section 4.11. CONTINUED EXISTENCE; SUCCESSOR TO ISSUER. The Issuer agrees
that it will do or cause to be done all things necessary to preserve and keep in
full force and effect its existence, rights and franchises as a Nevada
corporation, except as otherwise permitted by this Section 4.11. The Issuer
further agrees that it will not (a) sell, transfer or otherwise dispose of all
or substantially all, of its assets (except Financed Eligible Loans if such
sale, transfer or disposition will discharge this Indenture in accordance with
Article X hereof); (b) consolidate with or merge into another corporation or
entity; or (c) permit one or more other corporations or entities to consolidate
with or merge into it. The preceding restrictions in (a), (b) and (c) shall not
apply to a transaction if the transferee or the surviving or resulting
corporation or entity, if other than the Issuer, by proper written instrument
for the benefit of the Trustee, irrevocably and unconditionally assumes the
obligation to perform and observe the agreements and obligations of the Issuer
under this Indenture.
If a transfer is made as provided in this Section, the provisions of this
Section shall continue in full force and effect and no further transfer shall be
made except in compliance with the provisions of this Section.
Section 4.12. AMENDMENT OF LOAN PURCHASE AGREEMENTS. The Issuer shall
notify the Trustee in writing of any proposed amendments to any existing Student
Loan Purchase Agreement. No such amendment shall become effective unless and
until the Trustee consents thereto in writing. The consent of the Trustee shall
not be unreasonably withheld and shall not be withheld if the Trustee receives
an opinion of Counsel acceptable to them that such an amendment is required by
the Act and is not materially prejudicial to the Registered Owners.
Notwithstanding the foregoing, however, the Trustee shall consent to an
amendment from time to time so long as it is not materially prejudicial to the
interests of the Registered Owners.
Section 4.13. REPRESENTATIONS; NEGATIVE COVENANTS.
(a) The Issuer hereby makes the following representations and
warranties to the Trustee on which the Trustee relies in authenticating the
Notes and on which the Registered Owners have relied in purchasing the
Notes. Such representations and warranties shall survive the transfer and
assignment of the Trust Estate to the Trustee.
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(i) ORGANIZATION AND GOOD STANDING. The Issuer is duly
organized and validly existing under the laws of the State, and has
the power to own its assets and to transact the business in which it
presently engages.
(ii) DUE QUALIFICATION. The Issuer is duly qualified to do
business and is in good standing, and has obtained all material
necessary licenses and approvals, in all jurisdictions where the
failure to be so qualified, have such good standing or have such
licenses or approvals would have a material adverse effect on the
Issuer's business and operations or in which the actions as required
by this Indenture require or will require such qualification.
(iii) AUTHORIZATION. The Issuer has the power, authority and
legal right to execute, deliver and perform this Indenture, the
Student Loan Purchase Agreement, the Broker Dealer Agreement, the
Auction Agent Agreement and the Servicing Agreement and to grant the
Trust Estate to the Trustee and the execution, delivery and
performance of this Indenture, the Student Loan Purchase Agreement,
the Broker Dealer Agreement, the Auction Agent Agreement and the
Servicing Agreement and grant of the Trust Estate to the Trustee have
been duly authorized by the Issuer by all necessary corporate action.
(iv) BINDING OBLIGATION. This Indenture, the Student Loan
Purchase Agreement, the Broker Dealer Agreement, the Auction Agent
Agreement and the Servicing Agreement, assuming due authorization,
execution and delivery by the other parties hereto and thereto, each
constitutes a legal, valid and binding obligation of the Issuer
enforceable against the Issuer in accordance with its terms, except
that (A) such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws (whether statutory,
regulatory or decisional) now or hereafter in effect relating to
creditors' rights generally and (B) the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to
certain equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought, whether a proceeding at
law or in equity.
(v) NO VIOLATION. The consummation of the transactions
contemplated by this Indenture, the Student Loan Purchase Agreement,
the Broker Dealer Agreement, the Auction Agent Agreement and the
Servicing Agreement and the fulfillment of the terms hereof or thereof
does not conflict with, result in any breach of any of the terms and
provisions of or constitute (with or without notice, lapse of time or
both) a default under the organizational documents of the Issuer, or
any material indenture, agreement, mortgage, deed of trust or other
instrument to which the Issuer is a party or by which it is bound, or
result in the creation or imposition of any lien upon any of its
material properties pursuant to the terms of any such indenture,
agreement, mortgage, deed of trust or other instrument, other than
this Indenture, nor violate any law or any order, rule or regulation
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applicable to the Issuer of any court or of any federal or state
regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over the Issuer or any of its
properties.
(vi) NO PROCEEDINGS. There are no proceedings, injunctions,
writs, restraining orders or investigations to which the Issuer or any
of such entity's affiliates is a party pending, or, to the best of
such entity's knowledge, threatened, before any court, regulatory
body, administrative agency, or other tribunal or governmental
instrumentality (A) asserting the invalidity of this Indenture, the
Student Loan Purchase Agreement, the Broker Dealer Agreement, the
Auction Agent Agreement or the Servicing Agreement, (B) seeking to
prevent the issuance of any Notes or the consummation of any of the
transactions contemplated by this Indenture, the Student Loan Purchase
Agreement, the Broker Dealer Agreement, the Auction Agent Agreement or
the Servicing Agreement or (C) seeking any determination or ruling
that might materially and adversely affect the performance by the
Issuer of its obligations under, or the validity or enforceability of,
this Indenture, the Student Loan Purchase Agreement, the Broker Dealer
Agreement, the Auction Agent Agreement or the Servicing Agreement.
(vii) APPROVALS. All approvals, authorizations, consents,
orders or other actions of any person, corporation or other
organization, or of any court, governmental agency or body or
official, required on the part of the Issuer in connection with the
execution and delivery of this Indenture, the Student Loan Purchase
Agreement, the Broker Dealer Agreement, the Auction Agent Agreement
and the Servicing Agreement have been taken or obtained on or prior to
the Date of Issuance.
(viii) PLACE OF BUSINESS. The Issuer's place of business and
chief executive office is in 2255-A Renaissance Drive, Las Vegas,
Nevada 89119.
(ix) TAX AND ACCOUNTING TREATMENT. The Issuer intends to treat
the transactions contemplated by the Student Loan Purchase Agreement
as an absolute transfer rather than as a pledge of the Financed
Eligible Loans from the Seller for federal income tax and financial
accounting purposes and the Issuer will be treated as the owner of the
Financed Eligible Loans for all purposes. The Issuer further intends
to treat the Notes as its indebtedness for federal income tax and
financial accounting purposes.
(x) TAXES. The Issuer has filed (or caused to be filed) all
federal, state, county, local and foreign income, franchise and other
tax returns required to be filed by it through the date hereof, and
has paid all taxes reflected as due thereon. The Issuer has taken all
steps necessary to ensure that it is eligible to file a consolidated
federal income tax return with Union Financial Services, Inc.
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and such returns will be filed for all taxable years in which the
Notes are Outstanding. There is no pending dispute with any taxing
authority that, if determined adversely to the Issuer, would result
in the assertion by any taxing authority of any material tax
deficiency, and the Issuer has no knowledge of a proposed liability
for any tax year to be imposed upon such entity's properties or
assets for which there is not an adequate reserve reflected in such
entity's current financial statements.
(xi) LEGAL NAME. The legal name of the Issuer is "Union
Financial Services-1, Inc." and has not changed since its inception.
The Issuer has no tradenames, fictitious names, assumed names or
"dba's" under which it conducts its business and has made no filing in
respect of any such name.
(xii) BUSINESS PURPOSE. The Issuer has acquired the Financed
Eligible Loans conveyed to it under the Student Loan Purchase
Agreement for a bona fide business purpose and has undertaken the
transactions contemplated herein as principal rather than as an agent
of any other person. The Issuer has no subsidiaries, has adopted and
operated consistently with all corporate formalities with respect to
its operations and has engaged in no other activities other than those
specified in this Indenture, the Student Loan Purchase Agreement, the
Broker Dealer Agreement, the Auction Agent Agreement and the Servicing
Agreement and in accordance with the transactions contemplated herein
and therein.
(xiii) COMPLIANCE WITH LAWS. The Issuer is in compliance with
all applicable laws and regulations with respect to the conduct of its
business and has obtained and maintains all permits, licenses and
other approvals as are necessary for the conduct of its operations.
(xiv) VALID BUSINESS REASONS; NO FRAUDULENT TRANSFERS. The
transactions contemplated by this Indenture are in the ordinary course
of the Issuer's business and the Issuer has valid business reasons for
granting the Trust Estate pursuant to this Indenture. At the time of
each such grant: (A) the Issuer granted the Trust Estate to the
Trustee without any intent to hinder, delay, or defraud any current or
future creditor of the Issuer; (B) the Issuer was not insolvent and
did not become insolvent as a result of any such grant; (C) the Issuer
was not engaged and was not about to engage in any business or
transaction for which any property remaining with such entity was an
unreasonably small capital or for which the remaining assets of such
entity are unreasonably small in relation to the business of such
entity or the transaction; (D) the Issuer did not intend to incur, and
did not believe or should not have reasonably believed, that it would
incur, debts beyond its ability to pay as they become due; and (E) the
consideration paid received by the Issuer for the grant of the Trust
Estate was reasonably equivalent to the value of the related grant.
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(xv) NO MANAGEMENT OF AFFAIRS OF SELLER. The Issuer is not and
will not be involved in the day-to-day management of the Seller or the
Issuer's parent or any affiliate.
(xvi) NO INTERCORPORATE TRANSFERS WITH SELLER OR AFFILIATES.
Other than the acquisition of assets and the transfer of any Notes
pursuant to this Indenture, the Issuer does not engage in and will not
engage in any intercorporate transactions with the Seller and
affiliates, except as provided herein with respect to Maintenance and
Operating Expenses or the payment of dividends to the Issuer's parent.
(xvii) ABILITY TO PERFORM. There has been no material
impairment in the ability of the Issuer to perform its obligations
under this Indenture, the Student Loan Purchase Agreement, the Broker
Dealer Agreement, the Auction Agent Agreement or the Servicing
Agreement.
(xviii) FINANCIAL CONDITION. No material adverse change has
occurred in the Issuer's financial status since the date of its
formation.
(xix) EVENT OF DEFAULT. No Event of Default has occurred and
no event has occurred that, with the giving of notice, the passage of
time, or both, would become an Event of Default.
(xx) ACQUISITION OF FINANCED ELIGIBLE LOANS LEGAL. The Issuer
has complied with all applicable federal, state and local laws and
regulations in connection with its acquisition of the Financed
Eligible Loans from the Seller.
(xxi) NO MATERIAL MISSTATEMENTS OR OMISSIONS. No
information, certificate of an officer, statement furnished in writing
or report delivered to the Trustee, the Servicer or any Registered
Owner by the Issuer contains any untrue statement of a material fact
or omits a material fact necessary to make such information,
certificate, statement or report not misleading.
(b) The Issuer will not:
(i) sell, transfer, exchange or otherwise dispose of any portion
of the Trust Estate except as expressly permitted by this Indenture;
(ii) claim any credit on, or make any deduction from, the
principal amount of any of the Notes by reason of the payment of any
taxes levied or assessed upon any portion of the Trust Estate;
(iii) except as otherwise provided herein, dissolve or
liquidate in whole or in part, except with the prior written consent
of the Trustee, and to the extent
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Notes remain Outstanding, Noteholder approval and prior written
confirmation from each Rating Agency that the respective ratings
on the Notes will not be reduced or withdrawn;
(iv) permit the validity or effectiveness of this Indenture, any
Supplement or any grant hereunder to be impaired, or permit the lien
of this Indenture to be amended, hypothecated, subordinated,
terminated or discharged, or permit any Person to be released from any
covenants or obligations under this Indenture, except as may be
expressly permitted hereby;
(v) except as otherwise provided herein, permit any lien,
charge, security interest, mortgage or other encumbrance (other than
the lien of this Indenture) to be created on or extend to or otherwise
arise upon or burden the Trust Estate or any part thereof or any
interest therein or the proceeds thereof;
(vi) permit the lien of this Indenture not to constitute a valid
first priority, perfected security interest in the Trust Estate;
(vii) incur or assume any indebtedness or guarantee any
indebtedness of any Person whether secured by any Financed Eligible
Loans under this Indenture or otherwise, except for such obligations
as may be incurred by the Issuer in connection with the issuance of
the Notes pursuant to this Indenture and unsecured trade payables in
the ordinary course of its business;
(viii) operate such that it would be consolidated with its
parent or any other affiliate and its separate corporate existence
disregarded in any federal or state proceeding;
(ix) act as agent of any Seller or, except as provided in the
Servicing Agreement, allow the Seller to act as its agent;
(x) allow the Seller or its parent or any other affiliate to pay
its expenses, guarantee its obligations or advance funds to it for
payment of expenses; or
(xi) consent to the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings of or relating to the
Issuer or of or relating to all or substantially all of its property,
or a decree or order of a court or agency or supervisory authority
having jurisdiction in the premises for the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment
of debt, marshalling of assets and liabilities or similar proceedings,
or for the winding-up or liquidation of its affairs, shall have been
entered against the Issuer; or the Issuer shall not consent to the
appointment of a receiver, conservator or liquidator
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in any insolvency, readjustment of debt, marshalling of assets and
liabilities, voluntary liquidation or similar proceedings of or
relating to the Issuer or of or relating to all or substantially all
of its property; or admit in writing its inability to pay its debts
generally as they become due, file a petition to take advantage of any
applicable insolvency, bankruptcy or reorganization statute, make an
assignment for the benefit of its creditors or voluntarily suspend
payment of its obligations.
(c) The Issuer makes the following representations and warranties as
to the Trust Estate which is granted to the Trustee hereunder on such date,
on which the Trustee relies in accepting the Trust Estate. Such
representations and warranties shall survive the grant of the Trust Estate
to the Trustee pursuant to this Indenture:
(i) FINANCED ELIGIBLE LOANS. Each Financed Eligible Loan
acquired by the Issuer shall constitute an Eligible Loan and contain
the characteristics found in the Student Loan Purchase Agreement.
Notwithstanding the definition of "Eligible Loans" herein, the Issuer
covenants not to acquire Eligible Loan delinquent by more than 91
days. In addition, the Issuer covenants that no more than 15% of each
purchase of Eligible Loans will be made up of Eligible Loans
delinquent between 30 and 90 days.
(ii) SCHEDULE OF FINANCED ELIGIBLE LOANS. The information set
forth in each Schedule of Financed Eligible Loans is true and correct
in all material respects as of the opening of business on the Date of
Issuance.
(iii) GRANT. It is the intention of the Issuer that the
transfer herein contemplated constitutes a grant of the Financed
Eligible Loans to the Trustee.
(iv) ALL FILINGS MADE. All filings (including, without
limitation, UCC filings) necessary in any jurisdiction to give the
Trustee a first priority perfected ownership and security interest in
the Trust Estate, including the Financed Eligible Loans, have been
made no later than the Date of Issuance and copies of the file-stamped
financing statements shall be delivered to the Trustee within five
Business Days of receipt by the Issuer or its agent from the
appropriate secretary of state. The Issuer has not caused, suffered
or permitted any lien, pledges, offsets, defenses, claims,
counterclaims, charges or security interest with respect to the
promissory notes relating to the Financed Eligible Loans (other than
the security interest created in favor of the Trustee) to be created.
(v) TRANSFER NOT SUBJECT TO BULK TRANSFER ACT. Each grant of
the Financed Eligible Loans by the Issuer pursuant to this Indenture
is not subject to the bulk transfer act or any similar statutory
provisions in effect in any applicable jurisdiction.
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(vi) NO TRANSFER TAXES DUE. Each grant of the Financed Eligible
Loans (including all payments due or to become due thereunder) by the
Issuer pursuant to this Indenture is not subject to and will not
result in any tax, fee or governmental charge payable by the Issuer or
the Seller to any federal, state or local government.
Section 4.14. ADDITIONAL COVENANTS. So long as any of the Notes are
Outstanding:
(a) The Issuer shall not engage in any business or activity other
than in connection with the activities contemplated hereby and in the
Student Loan Purchase Agreement, and in connection with the issuance of
Additional Notes.
(b) The Issuer shall not consolidate or merge with or into any other
entity or convey or transfer its properties and assets substantially as an
entirety to any entity except as otherwise provided herein.
(c) The funds and other assets of the Issuer shall not be commingled
with those of any other individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust, unincorporated
organization, or government or any agency or political subdivision thereof.
(d) The Issuer shall not be, become or hold itself out as being
liable for the debts of any other party.
(e) The Issuer shall not form, or cause to be formed, any
subsidiaries.
(f) The Issuer shall act solely in its own name and through its duly
authorized officers or agents in the conduct of its business, and shall
conduct its business so as not to mislead others as to the identity of the
entity with which they are concerned.
(g) The Issuer shall maintain its records and books of account and
shall not commingle its records and books of account with the records and
books of account of any other Person. The books of the Issuer may be kept
(subject to any provision contained in the statutes) inside or outside the
State at such place or places as may be designated from time to time by the
board of trustees or in the bylaws of the Issuer.
(h) All actions of the Issuer shall be taken by a duly authorized
officer or agent of the Issuer.
(i) The Issuer shall not amend, alter, change or repeal any provision
contained in this Section 4.14 without (i) the prior written consent of the
Trustee and (ii) prior written confirmation from each Rating Agency rating
any Notes Outstanding (a copy of which shall be provided to the Trustee)
that such amendment, alteration, change or repeal will have no adverse
effect on the rating assigned to the Notes.
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(j) The Issuer shall not amend its Articles of Incorporation without
first obtaining the prior written consent of each Rating Agency.
(k) All audited financial statements of the Issuer that are
consolidated with those of any affiliate thereof will contain detailed
notes clearly stating that (i) all of the Issuer's assets are owned by the
Issuer, and (ii) the Issuer is a separate entity with creditors who have
received ownership and/or security interests in the Issuer's assets.
(l) The Issuer will strictly observe legal formalities in its
dealings with the Seller, the Issuer's parent or any affiliate thereof, and
funds or other assets of the Issuer will not be commingled with those of
the Seller, the Issuer's parent or any other affiliate thereof. The Issuer
shall not maintain joint bank accounts or other depository accounts to
which the Seller, the Issuer's parent or any other affiliate has
independent access. None of the Issuer's funds will at any time be pooled
with any funds of the Seller, the Issuer's parent or any other affiliate.
(m) The Issuer will maintain an arm's length relationship with the
Seller (and any affiliate). Any Person that renders or otherwise furnishes
services to the Issuer will be compensated by the Issuer at market rates
for such services it renders or otherwise furnishes to the Issuer except as
otherwise provided in this Indenture. Except as contemplated in this
Indenture, the Student Loan Purchase Agreement or the Servicing Agreement,
the Issuer will not hold itself out to be responsible for the debts of the
Seller, the parent or the decisions or actions respecting the daily
business and affairs of the Seller or parent.
Section 4.15. PROVIDING OF NOTICE. The Issuer, upon learning of any
failure on its part to observe or perform in any material respect any covenant,
representation or warranty of the Issuer set forth in this Indenture or the
Student Loan Purchase Agreement, or of any failure on the part of the Seller to
observe or perform in any material respect any covenant, representation or
warranty of the Seller set forth in the Student Loan Purchase Agreement, shall
promptly notify the Trustee, the Servicer and each Rating Agency of such
failure.
Section 4.16. REPORTS BY ISSUER. The Issuer will:
(a) file with the Trustee, within 15 days after the Issuer is
required to file the same with the Commission, copies of the annual reports
and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may from time to time by
rules and regulations prescribe) which the Issuer may be required to file
with the Commission pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, as amended;
(b) file with the Trustee and the Commission, in accordance with
rules and regulations prescribed from time to time by the Commission, such
additional information, documents and reports with respect to compliance by
the Issuer with the conditions and
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covenants of this Indenture as may be required from time to time by such
rules and regulations; and
(c) transmit by mail to the Holders of Notes, within 30 days after
the filing thereof with the Trustee, in the manner and to the extent
provided in TIA Section 313(c), such summaries of any information,
documents and reports required to be filed by the Issuer pursuant to
clauses (a) and (b) of this Section 4.16 as may be required by rules and
regulations prescribed from time to time by the Commission.
Section 4.17. STATEMENT AS TO COMPLIANCE. The Issuer will deliver to the
Trustee, within 120 days after the end of each fiscal year, a brief certificate
from the principal executive officer, principal financial officer or principal
accounting officer as to his or her knowledge of the Issuer's compliance with
all conditions and covenants under this Indenture and, in the event of any
noncompliance, specifying such noncompliance and the nature and status thereof.
For purposes of this Section 4.17, such compliance shall be determined without
regard to any period of grace or requirement of notice under this Indenture.
Section 4.18. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
TRUSTEE. The Issuer covenants that if:
(a) default is made in the payment of any installment of interest, if
any, on any Notes when such interest becomes due and payable and such
default continues for a period of 30 days; or
(b) default is made in the payment of the principal of (or premium,
if any, on) any Notes at its Maturity,
then the Issuer will, upon demand of the Trustee, pay to the Trustee, for the
benefit of the Holders of such Notes, the whole amount then due and payable on
such Notes for principal (and premium, if any) and interest, with interest upon
any overdue principal (and premium, if any) and, to the extent that payment of
such interest shall be legally enforceable, upon any overdue installments of
interest, if any, at the rate or rates borne by or provided for in such Notes,
and, in addition thereto, such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee and its agents and counsel.
If the Issuer fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as Trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree, and may enforce the same
against the Issuer or any other obligor upon such Notes of such series and
collect the moneys adjudged or decreed to be payable in the manner provided by
law out of the property of the Issuer or any other obligor upon such Notes,
wherever situated.
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If an Event of Default with respect to Notes occurs and is continuing, the
Trustee may in its discretion proceed to protect and enforce its rights and the
rights of the Holders of Notes and any related coupons by such appropriate
judicial proceedings as the Trustee shall deem most effectual to protect and
enforce any such rights, whether for the specific enforcement of any covenant or
agreement in this Indenture or in aid of the exercise of any power granted
herein, or to enforce any other proper remedy.
ARTICLE V
FUNDS
Section 5.01. CREATION OF FUNDS AND ACCOUNTS.
(a) There are hereby created and established the following Funds to
be held and maintained by the Trustee for the benefit of the Registered
Owners and any Swap Counterparty:
(i) Student Loan Fund, including a Series 1996 Loan Account, a
Series 1996 Note Account, a Series 1996 Recycling Account and any
other Accounts added pursuant to a Supplemental Indenture therein,
(ii) Revenue Fund,
(iii) Reserve Fund,
(iv) Interest Fund, including a Senior Interest Account, a
Subordinate Interest Account and a Junior-Subordinate Interest Account
therein,
(v) Note Redemption Fund, including a Senior Note Redemption
Account, a Subordinate Note Redemption Account and a Junior-
Subordinate Note Redemption Account therein, and
(vi) Student Loan Holding Fund.
(b) There is hereby created and established the Cost of Issuance Fund
to be held and maintained by the Trustee in which neither the Issuer
(except as provided in Section 5.08 hereof), the Registered Owners and any
Swap Counterparty has any right, title or interest.
(c) The following funds have previously been established by the
Issuer, are hereby continued, do not constitute Funds within the meaning of
this Indenture, and are held by a depository bank of the Issuer for the
benefit of the Issuer, and neither the Trustee, the Registered Owners nor
any Swap Counterparty shall have any right, title or interest therein:
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(i) Operating Fund, and
(ii) General Fund.
The Trustee is hereby authorized for the purpose of facilitating the
administration of the Trust Estate and for the administration of any Additional
Notes issued hereunder to create Accounts or subaccounts in any of the various
Funds and Accounts established hereunder which are deemed necessary or
desirable; provided, however, that the obligation of the Issuer to provide such
Funds and Accounts is not altered or amended.
Section 5.02. STUDENT LOAN FUND. On the respective Date of Issuance of
the Series 1996A Notes and the Series 1996B Notes, there was or shall be
transferred to the Series 1996 Loan Account of the Student Loan Fund the
amounts set forth in Sections 2.10(a)(v) and 2.10(b)(v) hereof. In addition,
there shall be deposited from time to time into the Recycling Accounts of the
Student Loan Fund, as appropriate, moneys transferred thereto from the
Student Loan Holding Fund pursuant to Section 5.07 hereof. Financed Eligible
Loans acquired with moneys contained in the Loan Accounts or the Recycling
Accounts shall be held by the Trustee or its agent or bailee (including the
Servicer) and pledged to and accounted for as part of the Note Accounts of
the Student Loan Fund.
Moneys transferred to the Loan Accounts of the Student Loan Fund or to the
Recycling Accounts of the Student Loan Fund pursuant to Section 5.07 shall be
used solely to acquire Eligible Loans. An executed Compliance Certificate, in
the forms attached hereto as Exhibit D shall be delivered to the Trustee prior
to the acquisition of Financed Eligible Loans. Upon receipt by the Trustee of
an executed Compliance Certificate, the Trustee shall release the aggregate
Purchase Price of the Financed Eligible Loans being purchased from either the
applicable Loan Account or the applicable Recycling Account, as described in the
Compliance Certificate.
Subject to the provisions of Section 5.04(d) hereof and so long as no Event
of Default has occurred and is continuing, moneys held in the Recycling Accounts
of the Student Loan Fund may be used, subject to the preceding paragraph, to
acquire Eligible Loans, in their respective order of receipt, for a period of up
to one year from the date of deposit therein. The Issuer will not, however, use
proceeds in any Recycling Account of the Student Loan Fund to purchase Eligible
Loans which constitute Consolidation Loans. If on any Transfer Date moneys have
remained in any Recycling Account of the Student Loan Fund for more than one
year, said moneys shall be immediately transferred to the Note Redemption Fund
unless: (i) the Aggregate Market Value of the Trust Estate is greater than the
aggregate principal amount of Notes Outstanding, or (ii) the Aggregate Market
Value of the Trust Estate is less than the aggregate principal amount of Notes
Outstanding and the Issuer prepares a Cash Flow Certificate and the Trustee
shall receive an opinion of Note Counsel to the effect that the failure to
redeem Notes would not cause the Notes to fail to be characterized as debt for
federal income tax purposes, in which case said moneys shall remain in such
Recycling Account of the Student Loan Fund for a period of up to one additional
year. If such Cash Flow Certificate is not delivered to the
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Trustee, said moneys in such Recycling Account of the Student Loan Fund shall
be immediately transferred to the Note Redemption Fund.
No Eligible Loan shall be acquired if, after the Date of Issuance, Congress
has, in the judgment of the Issuer, materially adversely changed any of the
following characteristics of Eligible Loans: (A) the Special Allowance Payments,
(B) the loan interest yield formula, (C) the guaranty obligation of the
Guarantee Agency, (D) the federal interest subsidies, or (E) federal reinsurance
of Eligible Loans, or makes any other economic change in such loans, which, in
each instance, would have a materially adverse effect on the return to the
holder of such loans. The Trustee shall be entitled to rely upon the
certification of an Authorized Officer of the Issuer as to the compliance with
the provisions of this paragraph in connection with the origination and
acquisition of Eligible Loans.
Notwithstanding the foregoing, if on the first Business Day preceding any
Interest Payment Date or Transfer Date there are not sufficient moneys on
deposit in the Revenue Fund to make the transfers required by Section 5.03
hereof, other than Sections 5.03(k) through 5.03(l) hereof, then, but only after
required transfers from the Note Redemption Fund, the Student Loan Holding Fund
and the Reserve Fund, such transfers shall be made by the Trustee upon Issuer
Order, in an amount equal to any such deficiency, directly from the Loan
Accounts of the Student Loan Fund, then from the Recycling Accounts of the
Student Loan Fund and then from the proceeds from the sale of Financed Eligible
Loans in the Note Accounts of the Student Loan Fund.
Notwithstanding anything herein to the contrary, on the Business Day next
preceding January 1, 1998, the Trustee shall transfer to the Note Redemption
Fund, moneys in the Series 1996 Loan Account of the Student Loan Fund specified
in Sections 2.02(a)(ii)(A) and 2.02(a)(ii)(B) hereof.
The Trustee shall, upon Issuer Order, transfer or liquidate Financed
Eligible Loans and credit the same to the General Fund of the Issuer, but only
to the extent that the conditions set forth in Section 5.10 hereof shall have
been satisfied.
On April 1, 1999, all moneys and investments remaining in the Series 1996
Recycling Account of the Student Loan Fund shall be transferred to the Note
Redemption Fund.
Section 5.03. REVENUE FUND. The Trustee shall deposit into the Revenue
Fund (a) all amounts required to be transferred to the Revenue Fund from the
Student Loan Holding Fund, (b) all amounts designated in Sections 2.10(a)(iv)
and 2.10(b)(iv) hereof and (c) all Counterparty Swap Payments.
Upon Issuer Order directing the same, moneys in the Revenue Fund shall be
used, on any date, to pay fees and expenses of the Servicer when due under the
Servicing Agreement insofar as the same relate to the Financed Eligible Loans,
to pay Trustee fees and expenses incurred under this Indenture and the Custodian
Agreement, to pay Auction Agent fees and
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expenses incurred under the Auction Agent Agreement, to pay Broker-Dealer
fees and expenses incurred under any Broker-Dealer Agreement, to pay the
Calculation Agent fees and expenses incurred hereunder, to pay fees and
expenses of the Rating Agencies incurred hereunder, and other fees, taxes,
including taxes related to the Issuer's income, and expenses with respect to
the Trust Estate but not included as Maintenance and Operating Expenses.
Payments made in satisfaction of the fees and expenses described in the
preceding sentence, other than taxes related to the Issuer's income and fees
and expenses of the Servicer, shall not exceed the estimate of such fees and
expenses described in Exhibit E-2 attached hereto until January 1, 1999,
unless otherwise approved by each Rating Agency and on and after January 1,
1999, an annual amount not to exceed such estimated fees and expenses
described in a Cash Flow Certificate to be approved by each Rating Agency for
a period approved by each Rating Agency. Moneys in the Revenue Fund shall
also be used, on any date, to pay Maintenance and Operating Expenses in
excess of the Estimated Amount, upon Issuer Order delivered to the Trustee
and each Rating Agency directing the same, but only following delivery of a
Cash Flow Certificate to the Trustee and each Rating Agency showing, among
other things, that the payments required by this Section, other than Sections
5.03(k) through 5.03(l) hereof, will not be impaired and such amount has been
approved by each Rating Agency.
Money in the Revenue Fund shall be kept separate and apart from all other
Funds and shall be used and transferred to (i) the Interest Fund on the first
Business Day preceding each Interest Payment Date (other than a Transfer
Date) as specified in (w), (x) and (y) below and (ii) the Operating Fund on
the first Business Day of each month as specified in (z) below, all in the
following order of precedence (any money not so transferred or paid to remain
in the Revenue Fund until subsequently applied pursuant to this Section):
(w) to the Senior Interest Account of the Interest Fund an amount
necessary to pay interest, if any, due on any Senior Notes on such Interest
Payment Date or any Issuer Swap Payment secured on a parity with the Senior
Notes due on such Interest Payment Date, after giving effect to moneys
already on deposit therein;
(x) to the Subordinate Interest Account of the Interest Fund an
amount necessary to pay interest due on any Subordinate Notes on such
Interest Payment Date or any Issuer Swap Payment secured on a parity with
the Subordinate Notes due on such Interest Payment Date, after giving
effect to moneys already on deposit therein;
(y) to the Junior-Subordinate Interest Account of the Interest Fund
an amount necessary to pay interest due on any Junior-Subordinate Notes on
such Interest Payment Date or any Issuer Swap Payment secured on a parity
with the Junior-Subordinate Notes due on such Interest Payment Date, after
giving effect to moneys already on deposit therein; and
(z) An amount equal to the Estimated Amount shall be transferred from
the Revenue Fund to the Operating Fund on the first Business Day of each
month.
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In addition, money in the Revenue Fund shall be used and transferred to
other funds or Persons between the fifth and first Business Day preceding each
Transfer Date as specified in this Section and in the following order of
precedence (any money not so transferred or paid to remain in the Revenue Fund
until subsequently applied pursuant to this Section):
(a) if such Transfer Date is an Interest Payment Date, to the Senior
Interest Account of the Interest Fund an amount necessary to pay interest
due on any Senior Notes on such Transfer Date or any Issuer Swap Payment
secured on a parity with the Senior Notes due on such Interest Payment
Date, after giving effect to moneys already on deposit therein;
(b) to the Senior Note Redemption Account of the Note Redemption Fund
the amount, if any, necessary to pay the principal of or premium, if any,
on any Senior Notes due on such Transfer Date (if such Transfer Date is a
Stated Maturity or mandatory sinking fund redemption date, if any, with
respect to such Senior Notes), after giving effect to moneys already on
deposit therein and required transfers from the Reserve Fund;
(c) if such Transfer Date is an Interest Payment Date, to the
Subordinate Interest Account of the Interest Fund an amount necessary to
pay interest due on any Subordinate Notes on such Transfer Date or any
Issuer Swap Payment secured on a parity with the Subordinate Notes due on
such Interest Payment Date, after giving effect to moneys already on
deposit therein;
(d) to the Subordinate Note Redemption Account of the Note Redemption
Fund the amount, if any, necessary to pay the principal of or premium, if
any, on any Subordinate Notes due on such Transfer Date (if such Transfer
Date is a Stated Maturity or mandatory sinking fund redemption date, if
any, with respect to such Subordinate Notes), after giving effect to moneys
already on deposit therein and required transfers from the Reserve Fund;
(e) if such Transfer Date is an Interest Payment Date, to the Junior-
Subordinate Interest Account of the Interest Fund an amount necessary to
pay interest due on any Junior-Subordinate Notes on such Transfer Date or
any Issuer Swap Payment secured on a parity with the Junior-Subordinate
Notes due on such Interest Payment Date, after giving effect to moneys
already on deposit therein;
(f) to the Junior-Subordinate Note Redemption Account of the Note
Redemption Fund the amount, if any, necessary to pay the principal of or
premium, if any, on any Junior-Subordinate Notes due on such Transfer Date
(if such Transfer Date is a Stated Maturity or mandatory sinking fund
redemption date with respect to the Junior-Subordinate Notes), after giving
effect to moneys already on deposit therein and required transfers from the
Reserve Fund;
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(g) an amount equal to the Net Losses incurred by the Issuer since
the last Transfer Date, as reported to the Trustee by the Issuer, if any,
(i) to the Series 1996 Recycling Account of the Student Loan Fund prior to
April 1, 1999 and (ii) to the Note Redemption Fund on and after April 1,
1999;
(h) to the Reserve Fund the amount, if any, required by Section 5.04
hereof;
(i) [Reserved.];
(j) to the Senior Note Redemption Account of the Note Redemption
Fund, all moneys remaining to reduce the principal amount of the Senior
Notes until such time as the par amount of the Financed Eligible Loans
equals the par amount of the Notes Outstanding, pursuant to
Section 2.02(a)(iii) hereof;
(k) at the option of the Issuer and upon Issuer Order, to the Note
Redemption Fund or, prior to April 1, 1999, to the Series 1996 Recycling
Account of the Student Loan Fund; and
(l) so long as no Event of Default has occurred and is continuing, at
the option of the Issuer and upon Issuer Order, to the General Fund to the
extent permitted by Section 5.10 hereof.
Notwithstanding the foregoing, if an Event of Default has occurred and is
continuing, other than an Event of Default described in Section 6.01(g)
hereof, the Revenues otherwise scheduled to be transferred pursuant to
subsections (k) and (l) above shall be transferred instead to the Note
Redemption Fund and used to redeem Notes pursuant to Section 2.02(a) hereof.
In addition, if amounts were available to transfer pursuant to (k) and (l)
above, but such transfers were not made on the dates provided above, the
Trustee shall make such transfers on a subsequent date no later than six
months from the date of required transfer upon written request of an
Authorized Officer of the Issuer, provided that no Event of Default shall
exist hereunder at the time of transfer. In addition, if the Auction Rate
for any Class of Auction Notes exceeds the T-Bill Rate + .80% for 12
consecutive months, the Trustee shall not transfer the Estimated Amount to
the Operating Fund and shall reduce the Broker-Dealer fees to .13% until such
time as each Rating Agency approves a Cash Flow Certificate prepared by the
Issuer. Any such unpaid Estimated Amount and Broker-Dealer fees shall not be
paid until one year and one day after the Stated Maturity or earlier
redemption of all Notes Outstanding.
Section 5.04. RESERVE FUND.
(a) The Trustee shall deposit to the Reserve Fund the amount
specified in Section 2.10(a)(iii) and 2.10(b)(iii) hereof. The Trustee,
first, shall transfer money in the Reserve Fund to the Senior Interest
Account of the Interest Fund on the first Business Day prior to each
Interest Payment Date to cure any deficiency in the Senior Interest Account
of the Interest Fund if such deficiency would cause a failure to pay or
deposit
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accrued interest on any Senior Notes on such Interest Payment Date
or to make any Issuer Swap Payment secured on a parity with the Senior
Notes when due and payable on such Interest Payment Date, second, shall
transfer money in the Reserve Fund to the Senior Note Redemption Account of
the Note Redemption Fund on the first Business Day prior to such Transfer
Date to pay the principal amount of any Senior Notes coming due on such
Transfer Date (if such Transfer Date is a Stated Maturity) if the money in
the Senior Note Redemption Account of the Note Redemption Fund is
insufficient to do so, third, shall transfer money in the Reserve Fund to
the Subordinate Interest Account of the Interest Fund on the first Business
Day prior to each Interest Payment Date to cure any deficiency in the
Subordinate Interest Account of the Interest Fund if such deficiency would
cause a failure to pay or deposit accrued interest on any Subordinate Notes
on such Interest Payment Date or to make any Issuer Swap Payment secured on
a parity with the Subordinate Notes when due and payable on such Interest
Payment Date, fourth, shall transfer money in the Reserve Fund to the
Subordinate Note Redemption Account of the Note Redemption Fund on the
first Business Day prior to such Transfer Date to pay the principal amount
of any Subordinate Notes coming due on such Transfer Date (if such Transfer
Date is a Stated Maturity) if the money in the Subordinate Note Redemption
Account of the Note Redemption Fund is insufficient to do so, fifth, shall
transfer money in the Reserve Fund to the Junior-Subordinate Interest
Account of the Interest Fund on the first Business Day prior to each
Interest Payment Date to cure any deficiency in the Junior-Subordinate
Interest Account of the Interest Fund if such deficiency would cause a
failure to pay or deposit accrued interest on any Junior-Subordinate Notes
on such Interest Payment Date or to make any Issuer Swap Payment secured on
a parity with the Junior-Subordinate Notes when due and payable on such
Interest Payment Date, and sixth, shall transfer money in the Reserve Fund
to the Junior-Subordinate Note Redemption Account of the Note Redemption
Fund on the first Business Day prior to such Transfer Date to pay the
principal amount of any Junior-Subordinate Notes coming due on such
Transfer Date (if such Transfer Date is a Stated Maturity) if the money in
the Junior-Subordinate Note Redemption Account of the Note Redemption Fund
is insufficient to do so.
(b) If the Reserve Fund is used for the purposes described in
Section 5.04(a) hereof the Trustee shall restore the Reserve Fund to the
Reserve Fund Requirement by transfers from the Revenue Fund on the next
Transfer Date pursuant to Section 5.03(h) hereof. If the full amount
required to restore the Reserve Fund to the Reserve Fund Requirement is not
available in the Revenue Fund on such next succeeding Transfer Date, the
Trustee shall continue to transfer funds from the Revenue Fund as they
become available and in accordance with Section 5.03(h) until the
deficiency in the Reserve Fund has been eliminated.
(c) The Reserve Fund shall not contain an amount in excess of the
Reserve Fund Requirement. On any day after a Transfer Date that the amount
in the Reserve Fund exceeds the Reserve Fund Requirement for any reason,
the Trustee shall transfer the excess to the Senior Note Redemption Account
of the Note Redemption Fund until
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all Senior Notes have been paid in full and then to the Subordinate Note
Redemption Account of the Note Redemption Fund.
(d) The Reserve Fund shall not be used to pay (i) principal on the
Notes pursuant to an optional redemption or (ii) Net Losses if, after
giving effect to such payments, Notes remain Outstanding and the balance in
the Reserve Fund is less than the Reserve Fund Requirement. In addition,
if the balance in the Reserve Fund is less than $750,000, the Issuer will
not purchase Eligible Loans with proceeds in any Recycling Account of the
Student Loan Fund until such time as each Rating Agency approves a Cash
Flow Certificate prepared by the Issuer.
Section 5.05. INTEREST FUND. On the first Business Day preceding each
Interest Payment Date, the Trustee shall transfer to the Interest Fund from the
Revenue Fund an amount equal to the interest due and payable on such Interest
Payment Date on the Outstanding Notes less any amounts already on deposit in the
Interest Fund. Any moneys transferred to the Interest Fund and not specifically
required to be deposited to any Account therein shall be deposited, first, to
the Senior Interest Account of the Interest Fund to the extent required to
increase the amount on deposit therein to equal the interest due and payable on
the next Interest Payment Date for any Outstanding Senior Notes and the amount
of any Issuer Swap Payment secured on a parity with the Senior Notes due and
payable on the next Interest Payment Date, second, to the Subordinate Interest
Account of the Interest Fund to the extent required to increase the amount on
deposit therein to equal the interest due and payable on the next Interest
Payment Date for any Outstanding Subordinate Notes and the amount of any Issuer
Swap Payment secured on a parity with the Subordinate Notes due and payable on
the next Interest Payment Date and, third, to the Junior-Subordinate Interest
Account of the Interest Fund to the extent required to increase the amount on
deposit therein to equal the interest due and payable on the next Interest
Payment Date for any Outstanding Junior-Subordinate Notes and the amount of any
Issuer Swap Payment secured on a parity with the Junior-Subordinate Notes due
and payable on the next Interest Payment Date.
If money sufficient to pay all interest due on the Senior Notes and any
Issuer Swap Payments secured on a parity with the Senior Notes on a
particular Interest Payment Date is not available in the Senior Interest
Account of the Interest Fund for that purpose on the first Business Day
preceding an Interest Payment Date from moneys transferred from the Revenue
Fund as provided above, then the amount of any such deficiency shall be
provided from the Reserve Fund, from any other Account of the Interest Fund,
the Junior-Subordinate Note Redemption Account of the Note Redemption Fund,
the Subordinate Note Redemption Account of the Note Redemption Fund, the
Senior Note Redemption Account of the Note Redemption Fund, the Student Loan
Holding Fund and from the Accounts in the Student Loan Fund (in the order
provided in Section 5.02 hereof), in that order. The money in the Senior
Interest Account of the Interest Fund required for the payment of interest on
any Senior Notes and to pay any Issuer Swap Payments secured on a parity with
the Senior Notes shall be applied in accordance with this Section by the
Trustee to the payment of such interest or Issuer Swap Payments when due
without further authorization or direction.
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If money sufficient to pay all interest due on any Subordinate Notes and
Issuer Swap Payments secured on a parity with the Subordinate Notes on a
particular Interest Payment Date is not available in the Subordinate Interest
Account of the Interest Fund for that purpose on the first Business Day
preceding an Interest Payment Date from moneys transferred for the Revenue
Fund as provided above, then the amount of any such deficiency shall be
provided from the Reserve Fund (after first making any required transfers
from the Reserve Fund to the Senior Interest Account), and then from the
Junior-Subordinate Note Redemption Account of the Note Redemption Fund, the
Subordinate Note Redemption Account of the Note Redemption Fund, the Student
Loan Holding Fund and from the Accounts in the Student Loan Fund (in the
order provided in Section 5.02 hereof), in that order. The money in the
Subordinate Interest Account of the Interest Fund required for the payment of
interest on any Subordinate Notes and to pay any Issuer Swap Payments secured
on a parity with the Subordinate Notes shall be applied in accordance with
this Section by the Trustee to the payment of such interest or Issuer Swap
Payments when due without further authorization or direction.
If money sufficient to pay all interest due on any Junior-Subordinate
Notes and Issuer Swap Payments secured on a parity with the
Junior-Subordinate Notes on a particular Interest Payment Date is not
available in the Junior-Subordinate Interest Account of the Interest Fund for
that purpose on the first Business Day preceding an Interest Payment Date
from moneys transferred from the Revenue Fund as provided above, then the
amount of any such deficiency shall be provided from the Reserve Fund (after
first making any required transfers from the Reserve Fund to the Senior
Interest Account and the Subordinate Interest Account), and then from the
Junior-Subordinate Note Redemption Account of the Note Redemption Fund, the
Student Loan Holding Fund and from the Accounts in the Student Loan Fund (in
the order provided in Section 5.02 hereof), in that order. The money in the
Junior-Subordinate Interest Account of the Interest Fund required for the
payment of interest on any Junior-Subordinate Notes and to pay any Issuer
Swap Payments secured on a parity with the Junior-Subordinate Notes shall be
applied in accordance with this Section by the Trustee to the payment of such
interest or Issuer Swap Payments when due without further authorization or
direction.
Section 5.06. NOTE REDEMPTION FUND. The Trustee shall deposit to the Note
Redemption Fund all amounts required to be transferred to the Note Redemption
Fund from the Revenue Fund, the Reserve Fund, the Interest Fund, the Student
Loan Fund and the Student Loan Holding Fund; and any moneys transferred to the
Note Redemption Fund and not specifically required to be deposited to any
Account therein shall be deposited to the Senior Note Redemption Account of the
Note Redemption Fund unless the Trustee receives a Issuer Order in accordance
with this Section designating that such amounts shall be deposited to the
Subordinate Note Redemption Account or to the Junior-Subordinate Note Redemption
Account of the Note Redemption Fund.
Subject to Sections 2.02(d)(i)(A) and 2.02(d)(i)(B), the Issuer, pursuant
to an Issuer Order, may designate that a specified amount of moneys or
investments to be transferred to the Note Redemption Fund pursuant to the
terms and provisions of this Indenture be deposited to the Subordinate Note
Redemption Account of the Note Redemption Fund if after the redemption
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of Subordinate Notes from the moneys and investments transferred to the
Subordinate Note Redemption Account of the Note Redemption Fund and the
redemption of Senior Notes, if any, from the moneys and investments
transferred to the Senior Note Redemption Account of the Note Redemption
Fund, the Aggregate Market Value of the Trust Estate will equal at least 110%
of the aggregate principal amount of all Senior Notes Outstanding. The
Issuer, pursuant to an Issuer Order, may designate that a specified amount of
moneys or investments to be transferred to the Note Redemption Fund pursuant
to the terms and provisions of this Indenture be deposited to the
Junior-Subordinate Note Redemption Account of the Note Redemption Fund if
after the redemption of Junior-Subordinate Notes from the moneys and
investments transferred to the Junior-Subordinate Account of the Note
Redemption and the redemption of Senior Notes and Subordinate Notes, if any,
from the moneys and investments transferred to the Senior Note Redemption
Account and the Subordinate Note Redemption Account of the Note Redemption
Fund, the Aggregate Market Value of the Trust Estate will equal at least 110%
of the aggregate principal amount of all Senior Notes Outstanding and at
least 102% of the aggregate principal amount of all Senior and Subordinate
Notes Outstanding.
In addition, first, if on the first Business Day preceding the Stated
Maturity of one or more Senior Notes, there is not available in the Senior
Note Redemption Account of the Note Redemption Fund an amount sufficient to
pay the principal of the Senior Notes coming due on such date, then an amount
equal to such deficiency shall be transferred by the Trustee to the Senior
Note Redemption Account of the Note Redemption Fund, from the Revenue Fund,
from the Student Loan Holding Fund, from the Reserve Fund, from the
Subordinate Note Redemption Account of the Note Redemption Fund, from the
Junior-Subordinate Note Redemption Account of the Note Redemption Fund, from
the Subordinate Interest Account of the Interest Fund, from the
Junior-Subordinate Interest Account of the Interest Fund and from the
Accounts in the Student Loan Fund (in the order provided in Section 5.02
hereof), in that order, second, if on the first Business Day preceding the
Stated Maturity of any Subordinate Notes, there is not available in the
Subordinate Note Redemption Account of the Note Redemption Fund an amount
sufficient to pay the principal of the Subordinate Notes coming due on such
date, then an amount equal to such deficiency shall be transferred by the
Trustee to the Subordinate Note Redemption Account of the Note Redemption
Fund, from the Revenue Fund, from the Student Loan Holding Fund, from the
Reserve Fund, from the Junior-Subordinate Interest Account of the Interest
Fund and from the Accounts in the Student Loan Fund (in the order provided in
Section 5.02 hereof), and, third, if on the first Business Day preceding the
Stated Maturity of any Junior-Subordinate Notes, there is not available in
the Junior-Subordinate Note Redemption Account of the Note Redemption Fund an
amount sufficient to pay the principal of the Junior-Subordinate Notes coming
due on such date, then an amount equal to such deficiency shall be
transferred by the Trustee to the Junior-Subordinate Note Redemption Account
of the Note Redemption Fund, from the Revenue Fund, from the Student Loan
Holding Fund, from the Reserve Fund and from the Accounts in the Student Loan
Fund (in the order provided in Section 5.02 hereof), in that order.
The Trustee shall use amounts in the Senior Note Redemption Account of the
Note Redemption Fund (a) to pay principal of Senior Notes at their Stated
Maturity and (b) to pay the redemption price of any Senior Notes pursuant to
Section 2.02(a) hereof, but insofar as such
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redemptions relate to redemptions pursuant to Section 2.02(a) hereof, only to
the extent that such moneys are identified by the Servicer as being derived
from principal repayments on or with respect to the Financed Eligible Loans
or transferred to the Senior Note Redemption Account of the Note Redemption
Fund pursuant to Section 5.02 or Section 5.03(k) hereof and such moneys are
on deposit in the Senior Note Redemption Account of the Note Redemption Fund
on the fifth Business Day prior to the last date on which a redemption notice
can be given which are in excess of the sum of the principal due on the
Senior Notes on the next Stated Maturity which is within one year of the date
of such transfer. Notwithstanding the foregoing, if on the first Business
Day preceding any Interest Payment Date or Transfer Date there are not
sufficient moneys on deposit in the Revenue Fund to make the transfers
required by Section 5.03 hereof, other than Sections 5.03(k) and 5.03(l)
hereof, then such transfers shall be made by the Trustee, in an amount equal
to any such deficiency, directly from the Senior Note Redemption Account of
the Note Redemption Fund; provided, however, that the Subordinate Note
Redemption Account and the Junior-Subordinate Note Redemption Account of the
Note Redemption Fund has been fully depleted (except as provided therein)
pursuant to similar transfers previously made from such Accounts of the Note
Redemption Fund pursuant to this Section.
The Trustee shall use amounts in the Subordinate Note Redemption Account of
the Note Redemption Fund (a) to pay principal of any Subordinate Notes at their
Stated Maturity and (b) to pay the redemption price of Subordinate Notes
pursuant to Section 2.02(a) hereof, but insofar as such redemptions relate to
redemptions pursuant to Section 2.02(a) hereof, only to the extent that such
moneys are identified by the Servicer as being derived from principal repayments
on or with respect to the Eligible Loans or transferred to the Subordinate Note
Redemption Account of the Note Redemption Fund pursuant to Section 5.02 or
Section 5.03(k) hereof and such moneys are on deposit in the Subordinate Note
Redemption Account of the Note Redemption Fund on the fifth Business Day prior
to the last date on which a redemption notice can be given which are in excess
of the sum of the principal due on the Subordinate Notes on the next Stated
Maturity which is within one year of the date of such transfer. Notwithstanding
the foregoing, if on the first Business Day preceding any Interest Payment Date
or Transfer Date there are not sufficient moneys on deposit in the Revenue Fund
to make the transfers required by Section 5.03 hereof, other then Sections
5.03(k) and 5.03(l) hereof, then such transfers shall be made by the Trustee, in
an amount equal to any such deficiency, directly from the Subordinate Note
Redemption Account of the Note Redemption Fund; provided, however, that the
Junior-Subordinate Note Redemption Account of the Note Redemption Fund has been
fully depleted (except as provided therein) pursuant to similar transfers
previously made from such Accounts of the Note Redemption Fund pursuant to this
Section.
The Trustee shall use amounts in the Junior-Subordinate Note Redemption
Account of the Note Redemption Fund (a) to pay principal of any
Junior-Subordinate Notes at their Stated Maturity and (b) to pay the
redemption price of Junior-Subordinate Notes pursuant to Section 2.02(a)
hereof, but insofar as such redemptions relate to redemptions pursuant to
Section 2.02(a) hereof, only to the extent that such moneys are identified by
the Servicer as being derived from principal repayments on or with respect to
the Eligible Loans or transferred to the Junior-Subordinate Note Redemption
Account of the Note Redemption Fund pursuant to
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Section 5.02 or Section 5.03(k) hereof and such moneys are on deposit in the
Junior-Subordinate Note Redemption Account of the Note Redemption Fund on the
fifth Business Day prior to the last date on which a redemption notice can be
given which are in excess of the sum of the principal due on the
Junior-Subordinate Notes on the next Stated Maturity which is within one year
of the date of such transfer. Notwithstanding the foregoing, if on the first
Business Day preceding any Interest Payment Date or Transfer Date there are
not sufficient moneys on deposit in the Revenue Fund to make the transfers
required by Section 5.03 hereof, other than Sections 5.03(k) and 5.03(l)
hereof, then such transfers shall be made by the Trustee, in an amount equal
to any such deficiency, directly from the Junior-Subordinate Note Redemption
Account of the Note Redemption Fund.
No moneys in any Account of the Note Redemption Fund shall be transferred
to any other Fund or Account if such money is on deposit for the purpose of
redeeming Notes for which notice has been given.
Section 5.07. STUDENT LOAN HOLDING FUND. The Trustee shall deposit to
the Student Loan Holding Fund all amounts received by the Trustee which
represent payments, regardless of source, on Financed Eligible Loans. Upon
receipt by the Trustee from the Issuer of the Servicer's statement with a
direction indicating the portion of such payments which represents interest
payments on Financed Eligible Loans and the portion of such payment which
represents principal payments on Financed Eligible Loans, the Trustee shall
promptly transfer (i) that portion of such payment representing interest
payments (including Special Allowance Payments and Interest Subsidy Payments)
on Eligible Loans to the Revenue Fund, (ii) shall so transfer the portion of
such payment representing principal payments (including unamortized premiums)
on Financed Eligible Loans held in the Series 1996 Note Account of the
Student Loan Fund to the Series 1996 Recycling Account of the Student Loan
Fund prior to April 1, 1999 and (iii) subsequent thereto to the Note
Redemption Fund.
Notwithstanding the foregoing, if on the first Business Day preceding any
Interest Payment Date or Transfer Date there are not sufficient moneys on
deposit in the Revenue Fund to make the transfers required by Section 5.03
hereof, other than Sections 5.03(k) and 5.03(l) hereof, then, but only after
required transfers from the Note Redemption Fund, if any, such transfers shall
be made by the Trustee, in an amount equal to any such deficiency directly from
the Student Loan Holding Fund.
Section 5.08. COST OF ISSUANCE FUND. The Trustee shall deposit in the
Cost of Issuance Fund on the Date of Issuance the amounts set forth in Section
2.10(a)(ii) and 2.10(b)(ii) hereof. Moneys in the Cost of Issuance Fund shall
be used by the Trustee, upon the written direction of an Authorized Officer of
the Issuer, solely for the purpose of paying costs of issuance of the Series
1996A Notes and the Series 1996B Notes, including without limitation any
underwriting compensation of the Placement Agent not paid from the proceeds of
the Notes. If any moneys remain in the Cost of Issuance Fund on June 1, 1996 in
the case of deposits made pursuant to Section 2.10(a)(ii) hereof or September 1,
1996 in the case of deposits made pursuant to
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Section 2.10(b)(ii) hereof, such amounts shall be paid by the Trustee without
further direction to the Issuer.
Section 5.09. OPERATING FUND. The Operating Fund is a special fund
created and established by an agreement with a depository bank of the Issuer
and shall be used to pay Maintenance and Operating Expenses. The Operating
Fund shall be held by such depository bank of the Issuer, and neither the
Registered Owners, any Swap Counterparties nor the Trustee shall have any
right, title or interest in the Operating Fund.
On or before the 25th day of each month, the Issuer shall deliver an
Issuer Order to the Trustee which sets forth the Estimated Amount. If at any
time the Issuer determines that the Estimated Amount is less than the amount
required to pay expected Maintenance and Operating Expenses, the Issuer may
direct the Trustee by Issuer Order to transfer additional amounts from the
Revenue Fund as may be needed to pay Maintenance and Operating Expenses,
subject to the second paragraph of Section 5.03 hereof.
Upon the receipt of any such Issuer Order, the Trustee shall withdraw the
amount so directed from the Revenue Fund (or so much thereof as is then on
deposit in the Revenue Fund) and transfer the same to such depository bank of
the Issuer with instructions to deposit the same in the Operating Fund.
Interest income earned on the money held in the Operating Fund may be retained
therein or as otherwise provided in the agreement with such depository bank of
the Issuer.
Section 5.10. GENERAL FUND. Except as provided in Section 7.19, neither
the Registered Owners, any Swap Counterparties nor the Trustee shall have any
right, title or interest in the General Fund. Transfers from the Student Loan
Fund to the General Fund shall be made in accordance with Section 5.02 hereof
and transfers from the Revenue Fund to the General Fund shall be made in
accordance with Section 5.03 hereof; provided, however, that no transfer of
assets to the General Fund shall be made if there is not on deposit in the
Reserve Fund an amount equal to at least the Reserve Fund Requirement; provided
however, that no transfer shall be made to the General Fund unless, (a)
immediately after taking into account any such transfer, the Aggregate Market
Value of the assets in the Trust Estate (less an amount equal to unpaid accrued
interest on the Outstanding Notes and less an amount equal to $250,000 and less
any additional amount, if any, required by any Supplemental Indenture) will be
equal to at least 103% of the unpaid principal amount of the Outstanding Notes
and (b) there shall have been delivered to the Trustee a Cash Flow Certificate
showing that after such transfer the Aggregate Market Value of the assets in the
Trust Estate (less an amount equal to unpaid accrued interest on the Outstanding
Notes and less an amount equal to $250,000 and less any additional amount, if
any, required by any Supplemental Indenture) will continue to be equal to at
least 112% of the unpaid principal amount of the Outstanding Senior Notes and
(c) there shall have been delivered to the Trustee a Cash Flow Certificate
showing that after such transfer the Aggregate Market Value of the assets in the
Trust Estate (less an amount equal to unpaid accrued interest on the Outstanding
Notes and less an amount equal to $250,000 and less any additional amount, if
any, required by any Supplemental Indenture) will continue to be equal to at
least 103% of
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the unpaid principal amount of the Notes Outstanding on each Interest Payment
Date and (d) the Aggregate Market Value of the assets in the Trust Estate
(less an amount equal to unpaid accrued interest on the Outstanding Notes and
less an amount equal to $250,000 and less any additional amount, if any,
required by any Supplemental Indenture) will continue to be equal to at least
112% of the unpaid principal amount of the Outstanding Senior Notes on each
Interest Payment Date.
The amounts held in the General Fund may be used for any proper purpose of
the Issuer and investment earnings thereon shall be the property of the Issuer.
Section 5.11. INVESTMENT OF FUNDS HELD BY TRUSTEE. The Trustee shall
invest money held for the credit of any Fund or Account held by the Trustee
hereunder as directed in writing (or orally, confirmed in writing) by an
Authorized Officer of the Issuer or a designee appointed in writing by an
Authorized Officer of the Issuer, to the fullest extent practicable and
reasonable, in Investment Securities which shall mature or be redeemed at the
option of the holder prior to the respective dates when the money held for the
credit of such Fund or Account will be required for the purposes intended. In
the absence of written direction by an Authorized Officer of the Issuer, all
uninvested moneys in any Fund or Account held by the Trustee hereunder shall be
invested in Investment Securities described in (a), (b), (c), (d), (e) or (f) of
the definition of Investment Securities. Interest earnings on all Investment
Securities shall be transferred to the Revenue Fund. The Trustee and the Issuer
hereby agree that unless an Event of Default shall have occurred hereunder, the
Issuer acting by and through an Authorized Officer shall be entitled to, and
shall, provide written direction or oral direction confirmed in writing to the
Trustee with respect to any discretionary acts required or permitted of the
Trustee under any Investment Agreement and the Trustee shall not take such
discretionary acts without such written direction.
The Investment Securities purchased shall be held by the Trustee and shall
be deemed at all times to be part of such Fund or Account or combination of
Funds or Accounts, and the Trustee shall inform the Issuer of the details of all
such investments. Upon direction in writing (or orally, confirmed in writing)
from an Authorized Officer of the Issuer, the Trustee shall use its best efforts
to sell at the best price obtainable, or present for redemption, any Investment
Securities purchased by it as an investment whenever it shall be necessary to
provide money to meet any payment from the applicable Fund. The Trustee shall
advise the Issuer in writing, on or before the fifteenth day of each calendar
month (or such later date as reasonably consented to by the Issuer), of all
investments held for the credit of each Fund in its custody under the provisions
of this Indenture as of the end of the preceding month and the value thereof,
and shall list any investments which were sold or liquidated for less than their
value at the time thereof.
Money in any Fund constituting a part of the Trust Estate may be pooled for
the purpose of making investments and may be used to pay accrued interest on
Investment Securities purchased. Any purchase of Investment Securities may be
made by or through the Trustee or any of its affiliates.
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Notwithstanding the foregoing, the Trustee shall not be responsible or
liable for any losses on investments made by it hereunder or for keeping all
Funds held by it, fully invested at all times, its only responsibility being to
comply with the investment instructions of the Issuer or its designee in a
non-negligent manner.
Section 5.12. RELEASE. The Trustee shall, upon Issuer Order and subject
to the provisions of this Indenture, take all actions reasonably necessary to
effect the release of any Financed Eligible Loans from the lien of this
Indenture to the extent the terms hereof permit the sale, disposition or
transfer of such Financed Eligible Loans.
ARTICLE VI
DEFAULTS AND REMEDIES
Section 6.01. EVENT OF DEFAULT DEFINED. For the purpose of this
Indenture, each of the following events are hereby defined as, and are declared
to be, "Events of Default":
(a) default in the due and punctual payment of any interest on any of
the Senior Notes when due or failure to make any Issuer Swap Payment
secured on a parity with the Senior Notes when due;
(b) default in the due and punctual payment of the principal of any
of the Senior Notes at their Maturity;
(c) if no Senior Notes are Outstanding hereunder, default in the due
and punctual payment of any interest on any of the Subordinate Notes when
due or failure to make any Issuer Swap Payment secured on a parity with the
Subordinate Notes when due;
(d) if no Senior Notes are Outstanding hereunder, default in the due
and punctual payment of the principal of any of the Subordinate Notes at
their Maturity;
(e) if no Senior Notes or Subordinate Notes are Outstanding
hereunder, default in the due and punctual payment of any interest on any
of the Junior-Subordinate Notes when due or failure to make any Issuer Swap
Payment secured on a parity with the Junior-Subordinate Notes when due;
(f) if no Senior Notes or Subordinate Notes are Outstanding
hereunder, default in the due and punctual payment of the principal of any
of the Junior-Subordinate Notes at their Maturity;
(g) default in the performance or observance of any other of the
covenants, agreements, or conditions on the part of the Issuer to be kept,
observed, and performed contained in this Indenture or in the Notes, and
continuation of such default for a period
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of 90 days after written notice thereof by the Trustee to the President
and Secretary of the Issuer; or
(h) the occurrence of an Event of Bankruptcy.
Any notice herein provided to be given to the President or Secretary of the
Issuer with respect to any default shall be deemed sufficiently given if sent by
registered mail with postage prepaid to the Person to be notified, addressed to
him at his post office address as shown at the end of this Indenture or such
other address as may hereafter be given as the principal office of the Issuer in
writing to the Trustee by the Secretary of the Issuer. The Trustee may give any
such notice in its discretion and shall give such notice if requested to do so
in writing by the Registered Owners of at least 51% of the collective aggregate
principal amount of the Senior Notes and each Swap Counterparty secured on a
parity with the Senior Notes, if required by the related Swap Agreement at the
time Outstanding (or if no Senior Notes or Swap Agreements secured on a parity
with the Senior Notes are Outstanding hereunder at such time, then by the
Registered Owners of at least 51% of the collective aggregate principal amount
of the Subordinate Notes and each Swap Counterparty secured on a parity with the
Subordinate Notes, if required by the related Swap Agreement at the time
Outstanding) (or if no Senior Notes or Swap Agreements secured on a parity with
the Senior Notes or Subordinate Notes or Swap Agreements secured on a parity
with the Subordinate Notes are Outstanding hereunder at such time, then by the
Registered Owners of at least 51% of the collective aggregate principal amount
of the Junior-Subordinate Notes and each Swap Counterparty secured on a parity
with the Junior-Subordinate Notes, if required by the related Swap Agreement at
the time Outstanding) (the "Registered Owners Approval"). Solely for purposes
of Article XI, Registered Owner Approval shall be deemed given only if a
majority in interest of all Registered Owners of Notes Outstanding, excluding
any Notes held by the Issuer or its affiliates, shall consent to the actions
described herein.
Section 6.02. REMEDY ON DEFAULT; POSSESSION OF TRUST ESTATE. Subject to
Section 6.11 hereof, upon the happening and continuance of any Event of Default,
the Trustee personally or by its attorneys or agents may take possession of such
portion of the Trust Estate as shall be in the custody of others, and all
property comprising the Trust Estate, and each and every part thereof, and have,
hold, use, operate, manage, and control the same and each and every part
thereof, and in the name of the Issuer or otherwise, as they shall deem best,
conduct the business thereof and exercise the privileges pertaining thereto and
all the rights and powers of the Issuer and use all of the Trust Estate for that
purpose, and collect and receive all charges, income and Revenues of the same
and of every part thereof, and after deducting therefrom all expenses incurred
hereunder and all other proper outlays herein authorized, and all payments which
may be made as just and reasonable compensation for its own services, and for
the services of its attorneys, agents, and assistants, the Trustee shall apply
the rest and residue of the money received by the Trustee as follows:
(a) if the principal of none of the Notes shall have become due,
first, to the payment of the interest in default on the Senior Notes and to
the payment of all Issuer
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Swap Payments secured on a parity with the Senior Notes then due, in order
of the maturity of the installments of such interest and any such Issuer
Swap Payments, with interest on the overdue installments thereof at the
same rates, respectively, as were borne by the Senior Notes on which such
interest shall be in default and any such Issuer Swap Payments then due,
such payments to be made ratably to the parties entitled thereto without
discrimination or preference, second, to the payment of the interest in
default on the Subordinate Notes and to the payment of all Issuer Swap
Payments secured on a parity with the Subordinate Notes then due, in order
of the maturity of the installments of such interest and any such Issuer
Swap Payments, with interest on the overdue installments thereof at the
same rates, respectively, as were borne by the Subordinate Notes on which
such interest shall be in default and any such Issuer Swap Payments then
due, such payments to be made ratably to the parties entitled thereto
without discrimination or preference and, third, to the payment of the
interest in default on the Junior-Subordinate Notes and to the payment
of all Issuer Swap Payments secured on a parity with such Junior-
Subordinate Notes then due, in order of the maturity of the installments
of such interest and any such Issuer Swap Payments, with interest on the
overdue installments thereof at the same rates, respectively, as were
borne by the Junior-Subordinate Notes on which such interest shall be in
default and any such Issuer Swap Payments then due, such payments to be
made ratably to the parties entitled thereto without discrimination or
preference, except as may be provided in a Supplemental Indenture; and
(b) if the principal of any of the Notes shall have become due by
declaration of acceleration or otherwise, first to the payment of the
interest and principal in default on the Senior Notes and all Issuer Swap
Payments secured on a parity with the Senior Notes then due, with interest
on overdue installments of principal, interest and such Issuer Swap
Payments then due at the same rates, respectively, as were borne by the
Senior Notes on which such interest shall be in default, and such Issuer
Swap Payments then due, as the case may be, such payments to be made
ratably to the parties entitled thereto without discrimination or
preference, second, to the payment of the interest in default on the
Subordinate Notes and all Issuer Swap Payments secured on a parity with the
Subordinate Notes then due, with interest on overdue installments of
principal, interest and such Issuer Swap Payments then due at the same
rates, respectively, as were borne by the Subordinate Notes on which such
interest shall be in default and such Issuer Swap Payments then due at the
same rates, respectively, such payments to be made ratably to the parties
entitled thereto without discrimination or preference, third, to the
payment of the principal of all Subordinate Notes then due, such payments
to be made ratably to the parties entitled thereto without discrimination
or preference, fourth, to the payment of the interest in default on the
Junior-Subordinate Notes and all Issuer Swap Payments secured on a parity
with such Junior-Subordinate Notes then due, with interest on overdue
installments of principal, interest and such Issuer Swap Payments then due
at the same rates, respectively, as were borne by the Junior-Subordinate
Notes on which such interest shall be in default and such Issuer Swap
Payments then due at the same rates, respectively, such payments to be made
ratably to the parties entitled thereto
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without discrimination or preference, fifth, to the payment of the
principal of all Junior-Subordinate Notes then due, such payments to be
made ratably to the parties entitled thereto without discrimination or
preference, except as may be provided in a Supplemental Indenture.
Section 6.03. REMEDY ON DEFAULT; ADVICE OF COUNSEL. Upon the happening
of any Event of Default, the Trustee may proceed to protect and enforce the
rights of the Trustee and the Registered Owners in such manner as counsel for
the Trustee may advise, whether for the specific performance of any covenant,
condition, agreement or undertaking herein contained, or in aid of the
execution of any power herein granted, or for the enforcement of such other
appropriate legal or equitable remedies as, in the opinion of such counsel,
may be more effectual to protect and enforce the rights aforesaid.
Section 6.04. REMEDY ON DEFAULT; SALE OF TRUST ESTATE. Upon the
happening of any Event of Default and if the principal of all of the
Outstanding Notes shall have been declared due and payable, then and in every
such case, and irrespective of whether other remedies authorized shall have
been pursued in whole or in part, the Trustee may sell, with or without
entry, to the highest bidder the Trust Estate, and all right, title,
interest, claim and demand thereto and the right of redemption thereof, at
any such place or places, and at such time or times and upon such notice and
terms as may be required by law. Upon such sale the Trustee may make and
deliver to the purchaser or purchasers a good and sufficient assignment or
conveyance for the same, which sale shall be a perpetual bar both at law and
in equity against the Issuer and all Persons claiming such properties. No
purchaser at any sale shall be bound to see to the application of the
purchase money or to inquire as to the authorization, necessity, expediency
or regularity of any such sale. The Trustee is hereby irrevocably appointed
the true and lawful attorney-in-fact of the Issuer, in its name and stead, to
make and execute all bills of sale, instruments of assignment and transfer
and such other documents of transfer as may be necessary or advisable in
connection with a sale of all or part of the Trust Estate, but the Issuer, if
so requested by the Trustee, shall ratify and confirm any sale or sales by
executing and delivering to the Trustee or to such purchaser or purchasers
all such instruments as may be necessary, or in the judgment of the Trustee,
proper for the purpose which may be designated in such request. In addition,
the Trustee may proceed to protect and enforce the rights of the Trustee, the
Registered Owners of Notes hereunder and each Swap Counterparty in such
manner as counsel for the Trustee may advise, whether for the specific
performance of any covenant, condition, agreement or undertaking herein
contained, or in aid of the execution of any power herein granted, or for the
enforcement of such other appropriate legal or equitable remedies as may in
the opinion of such counsel, be more effectual to protect and enforce the
rights aforesaid. The Trustee shall take any such action or actions if
requested to do so in writing by the Registered Owners of at least 51% of the
collective aggregate principal amount of the Outstanding Senior Notes and
each Swap Counterparty secured on a parity with the Senior Notes,
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if required by the related Swap Agreement (or if no Senior Notes or Swap
Agreements secured on a parity with the Senior Notes are Outstanding
hereunder, then by the Registered Owners of at least 51% of the collective
aggregate principal amount of the Outstanding Subordinate Notes and each Swap
Counterparty secured on a parity with the Subordinate Notes, if required by
the related Swap Agreement) (or if no Senior Notes or Swap Agreements secured
on a parity with the Senior Notes or Subordinate Notes or Swap Agreements
secured on a parity with the Subordinate Notes are Outstanding hereunder,
then by the Registered Owners of at least 51% of the collective aggregate
principal amount of the Outstanding Junior-Subordinate Notes and each Swap
Counterparty secured on a parity with the Junior-Subordinate Notes, if
required by the related Swap Agreement).
Section 6.05. RESTORATION OF POSITION. In case the Trustee shall have
proceeded to enforce any rights under this Indenture by sale or otherwise, and
such proceedings shall have been discontinued, or shall have been determined
adversely to the Trustee, then and in every such case to the extent not
inconsistent with such adverse decree, the Issuer and the Trustee shall be
restored to their former respective positions and the rights hereunder in
respect to the Trust Estate, and all rights, remedies, and powers of the Trustee
and of the Registered Owners and Swap Counterparties shall continue as though no
such proceeding had been taken.
Section 6.06. PURCHASE OF PROPERTIES BY TRUSTEE OR REGISTERED OWNERS. In
case of any such sale of the Trust Estate, any Registered Owner or Registered
Owners or committee of Registered Owners, Swap Counterparty or the Trustee, may
bid for and purchase such property and upon compliance with the terms of sale
may hold, retain possession, and dispose of such property as the absolute right
of the purchaser or purchasers without further accountability and shall be
entitled, for the purpose of making any settlement or payment for the property
purchased, to use and apply any Notes hereby secured and any interest thereon
due and unpaid, by presenting such Notes in order that there may be credited
thereon the sum apportionable and applicable thereto out of the net proceeds of
such sale, and thereupon such purchaser or purchasers shall be credited on
account of such purchase price payable to him or them with the sum apportionable
and applicable out of such net proceeds to the payment of or as a credit on the
Notes so presented.
Section 6.07. APPLICATION OF SALE PROCEEDS. The proceeds of any sale of
the Trust Estate, together with any funds at the time held by the Trustee and
not otherwise appropriated, shall be applied by the Trustee as set forth in
Section 6.02 hereof, and then to the Issuer or whomsoever shall be lawfully
entitled thereto.
Section 6.08. ACCELERATED MATURITY. If an Event of Default shall have
occurred and be continuing, the Trustee may declare, or upon the written
direction by the Registered Owners of at least 51% of the collective aggregate
principal amount of the Outstanding Senior Notes and each Swap Counterparty
secured on a parity with the Senior Notes, if required by the related Swap
Agreement (or if no Senior Notes or Swap Agreements secured on a parity with the
Senior Notes are Outstanding hereunder, then upon the written direction of the
Registered
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Owners of at least 51% of the collective aggregate principal amount of the
Outstanding Subordinate Notes and each Swap Counterparty secured on a parity
with the Subordinate Notes, if required by the related Swap Agreement) (or if
no Senior Notes or Swap Agreements secured on a parity with the Senior Notes
or Subordinate Notes or Swap Agreements secured on a parity with the
Subordinate Notes are Outstanding hereunder, then upon the written direction
of the Registered Owners of at least 51% of the collective aggregate
principal amount of the Outstanding Junior-Subordinate Notes and each Swap
Counterparty secured on a parity with the Junior-Subordinate Notes, if
required by the related Swap Agreement), and shall declare, the principal of
all Notes issued hereunder, or any supplement hereto, and then Outstanding,
and the interest thereon, if not previously due, immediately due and payable,
anything in the Notes or in this Indenture to the contrary notwithstanding;
provided, however, that a declaration of acceleration upon a default pursuant
to Section 6.01(g) hereof shall require the consent of 100% of the Registered
Owners of the collective aggregate principal amount of the appropriate series
of Notes and Swap Agreements, as described above.
Section 6.09. REMEDIES NOT EXCLUSIVE. The remedies herein conferred
upon or reserved to the Trustee or the Registered Owners of Notes are not
intended to be exclusive of any other remedy, but each remedy herein provided
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing, and every power and remedy hereby
given to the Trustee or to the Registered Owners of Notes, or any supplement
hereto, may be exercised from time to time as often as may be deemed
expedient. No delay or omission of the Trustee or of any Registered Owner of
Notes to exercise any power or right arising from any default hereunder shall
impair any such right or power or shall be construed to be a waiver of any
such default or to be acquiescence therein.
Section 6.10. DIRECTION OF TRUSTEE. Upon the happening of any Event of
Default, the Registered Owners of at least 51% of the collective aggregate
principal amount of the Senior Notes and each Swap Counterparty secured on a
parity with the Senior Notes, if required by the related Swap Agreement
hereby secured and then Outstanding (or, if no Senior Notes or Swap
Agreements secured on a parity with the Senior Notes are Outstanding
hereunder, then the Registered Owners of at least 51% of the collective
aggregate principal amount of the Subordinate Notes and each Swap
Counterparty secured on a parity with the Subordinate Notes, if required by
the related Swap Agreement hereby secured and then Outstanding) (or, if no
Senior Notes or Swap Agreements secured on a parity with the Senior Notes or
Subordinate Notes or Swap Agreements secured on a parity with the Subordinate
Notes are Outstanding hereunder, then the Registered Owners of at least 51%
of the collective aggregate principal amount of the Junior-Subordinate Notes
and each Swap Counterparty secured on a parity with the Junior-Subordinate
Notes, if required by the related Swap Agreement hereby secured and then
Outstanding) with the prior written consent of each Swap Counterparty, if
required by the related Swap Agreement, shall have the right by an instrument
or instruments in writing delivered to the Trustee to direct and control the
Trustee as to the method of taking any and all proceedings for any sale of
any or all of the Trust Estate, or for the appointment of a receiver, if
permitted by law, and may at any time cause any proceedings authorized by the
terms hereof to be so taken or to be discontinued or delayed; provided,
however, that such Registered Owners and Swap Counterparty, if required by
the related Swap Agreement, shall not be entitled to cause the Trustee to
take any proceedings which in the Trustee's opinion would be unjustly
prejudicial to non-assenting Registered Owners of Notes, but the Trustee
shall be entitled to assume that the action requested by the Registered
Owners of 51% of the collective aggregate principal amount of the Senior
Notes and each Swap Counterparty secured on a parity with the
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Senior Notes, if required by the related Swap Agreement hereby secured and
then Outstanding (or, if no Senior Notes or Swap Agreements secured on a
parity with the Senior Notes are Outstanding hereunder, then the Registered
Owners of at least 51% of the collective aggregate principal amount of the
Subordinate Notes and each Swap Counterparty secured on a parity with the
Subordinate Notes, if required by the related Swap Agreement hereby secured
and then Outstanding) (or, if no Senior Notes or Swap Agreements secured on a
parity with the Senior Notes or Subordinate or Swap Agreements secured on a
parity with the Subordinate Notes are Outstanding hereunder, then the
Registered Owners of at least 51% of the collective aggregate principal
amount of the Junior-Subordinate Notes and each Swap Counterparty secured on
a parity with the Junior-Subordinate Notes, if required by the related Swap
Agreement hereby secured and then Outstanding) will not be prejudicial to any
non-assenting Registered Owner. Provided, however, that anything in this
Indenture to the contrary notwithstanding, the Registered Owners of a
majority of the collective aggregate principal amount of the Senior Notes
hereby secured and then Outstanding together with the Registered Owners of a
majority of the collective aggregate principal amount of the Subordinate
Notes hereby secured and then Outstanding and the Registered Owners of a
majority of the collective aggregate principal amount of the
Junior-Subordinate Notes hereby secured and then Outstanding shall and with
the written consent of each Swap Counterparty, if required by the Swap
Agreement, have the right, at any time, by an instrument or instruments in
writing executed and delivered to the Trustee, to direct the method and place
of conducting all proceedings to be taken in connection with the enforcement
of the terms and conditions of this Indenture, or for the appointment of a
receiver or any other proceedings hereunder, provided that such direction
shall not be otherwise than in accordance with the provisions of law and of
this Indenture.
Section 6.11. RIGHT TO ENFORCE IN TRUSTEE. No Registered Owner of any
Note or Swap Counterparty shall have any right as such Registered Owner or Swap
Counterparty to institute any suit, action, or proceedings for the enforcement
of the provisions of this Indenture or for the execution of any trust hereunder
or for the appointment of a receiver or for any other remedy hereunder, all
rights of action hereunder being vested exclusively in the Trustee, unless and
until such Registered Owner or Swap Counterparty shall have previously given to
the Trustee written notice of a default hereunder, and of the continuance
thereof, and also unless the Registered Owners of the requisite principal amount
of the Notes then Outstanding or the Swap Counterparty shall have made written
request upon the Trustee and the Trustee shall have been afforded reasonable
opportunity to institute such action, suit or proceeding in its own name, and
unless the Trustee shall have been offered reasonable indemnity and security
satisfactory to it against the costs, expenses, and liabilities to be incurred
therein or thereby and the Trustee for 30 days after receipt of such
notification, request, or offer of indemnity, shall have failed to institute any
such action, suit or proceeding. It is understood and intended that no one or
more Registered Owners of the Notes or the Swap Counterparty shall have the
right in any manner whatever by his or their action to affect, disturb, or
prejudice the lien of this Indenture or to enforce any right hereunder except in
the manner herein provided and for the equal benefit of the Registered Owners of
not less than 60% of the collective aggregate principal amount of the Notes then
Outstanding or the Swap Counterparty.
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Section 6.12. PHYSICAL POSSESSION OF NOTES NOT REQUIRED. In any suit or
action by the Trustee arising under this Indenture or on all or any of the Notes
issued hereunder, or any supplement hereto, the Trustee shall not be required to
produce such Notes, but shall be entitled in all things to maintain such suit or
action without their production.
ARTICLE VII
THE TRUSTEE
Section 7.01. ACCEPTANCE OF TRUST. The Trustee hereby accepts the trusts
imposed upon it by this Indenture, and agrees to perform said trusts, but only
upon and subject to the following terms and conditions:
(a) Except during the continuance of an Event of Default,
(i) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture; but in the case of any such certificates or
opinions which by any provisions hereof are specifically required to
be furnished to the Trustee, the Trustee shall be under a duty to
examine the same to determine whether or not they conform as to form
with the requirements of this Indenture and whether or not they
contain the statements required under this Indenture.
(b) In case an Event of Default has occurred and is continuing, the
Trustee, in exercising the rights and powers vested in it by this
Indenture, shall use the same degree of care and skill in its exercise as a
prudent man would exercise or use under the circumstances in the conduct of
his own affairs.
(c) Before taking any action hereunder requested by Registered
Owners, the Trustee may require that it be furnished an indemnity note or
other indemnity and security satisfactory to it by the Registered Owners,
as applicable, for the reimbursement of all expenses to which it may be put
and to protect it against all liability, except liability which results
from the gross negligence or willful misconduct of the Trustee and
negligence with respect to moneys deposited and applied pursuant to this
Indenture, by reason of any action so taken by the Trustee.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its
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duties hereunder, or in the exercise of any of its rights or powers, if it
hall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured
to it.
(e) The permissive right of the Trustee to do things enumerated in
this Indenture or under the other transaction documents shall not be
construed as a duty, and the Trustee shall not be answerable for other than
its negligence or willful default.
(f) Whether or not herein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of
this Section.
Section 7.02. RECITALS OF OTHERS. The recitals, statements, and
representations set forth herein and in the Notes shall be taken as the
statements of the Issuer, and the Trustee assumes no responsibility for the
correctness of the same. The Trustee makes no representations as to the
title of the Issuer in the Trust Estate or as to the security afforded
thereby and hereby, or as to the validity or sufficiency of this Indenture or
of the Notes issued hereunder, and the Trustee shall incur no responsibility
in respect of such matters.
Section 7.03. AS TO FILING OF INDENTURE. The Trustee shall be under no
duty (a) to file or record, or cause to be filed or recorded, this Indenture
or any instrument supplemental hereto, (b) or to procure any further order or
additional instruments of further assurance, (c) to see to the delivery to it
of any personal property intended to be mortgaged or pledged hereunder or
thereunder, (d) or to do any act which may be suitable to be done for the
better maintenance or continuance of the lien or security hereof, or (e) for
giving notice of the existence of such lien, or for extending or
supplementing the same or to see that any rights to Revenue and Funds
intended now or hereafter to be transferred in trust hereunder are subject to
the lien hereof. The Trustee shall not be liable for failure of the Issuer
to pay any tax or taxes in respect of such property, or any part thereof, or
the income therefrom or otherwise, nor shall the Trustee be under any duty in
respect of any tax which may be assessed against it or the Registered Owners
of the Notes in respect of such property or pledged Revenue and Funds.
Section 7.04. TRUSTEE MAY ACT THROUGH AGENTS. The Trustee may execute
any of the trusts or powers hereof and perform any duty hereunder, either
itself or by or through its attorneys, agents, or employees, and it shall not
be answerable or accountable for any default, neglect, or misconduct of any
such attorneys, agents, or employees, if reasonable care has been exercised
in the appointment thereof.
Section 7.05. ASSUMPTION OF LIABILITY AND INDEMNIFICATION OF TRUSTEE. The
Trustee shall be under no obligation or duty to perform any act at the request
of Registered Owners of Notes or to institute or defend any suit in respect
thereof unless properly indemnified and provided with security to its
satisfaction as provided in Section 7.01(c) hereof. The Trustee shall not be
required to take notice, or be deemed to have knowledge, of any default or Event
of Default of the Issuer or the Board hereunder and may conclusively assume that
there has been
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no such default or Event of Default (other than an Event of Default described
in Sections 6.01(a), (b), (c), (d), (e) or (f) hereof) unless and until it
shall have been specifically notified in writing at the address in Section
9.01 hereof of such default or Event of Default by (i) the Registered Owners
of the percentages in principal amount of the Notes then Outstanding
hereinabove specified or (ii) an Authorized Officer of the Issuer. The
Issuer agrees to assume liability for and to indemnify the Trustee for, and
to hold it harmless against, any loss, liability, or expenses incurred
without negligence or bad faith on its part, arising out of or in connection
with the acceptance or administration of the trust or trusts hereunder,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers
or duties hereunder or arising from the Trust Estate.
The Issuer agrees to assume any liability aggregate against the trust and
to indemnify and hold harmless the Trustee against any and all claims, demands,
suits, actions or other proceedings and all liabilities, costs and expenses
whatsoever caused by any untrue statement or misleading statement or alleged
untrue statement or alleged misleading statement of a material fact contained in
the Preliminary Private Placement Memorandum or the final Private Placement
Memorandum in connection with the issuance of the Notes or caused by any
omission or alleged omission from the Preliminary Private Placement Memorandum
or the final Private Placement Memorandum such information of any material fact
required to be stated therein or necessary in order to make the statements made
therein in the light of the circumstances under which they were made, not
misleading. Notwithstanding the foregoing, the assumption of liability created
under this Section 7.05 does not include the assumption of any liability with
respect to the payment of the Notes except as otherwise expressly provided
herein. The assumption of liability by the Issuer is intended to create the
same primary liability as would apply to a general partner of a limited
partnership organized under the laws of the State of Delaware.
Section 7.06. TRUSTEE'S RIGHT TO RELIANCE. The Trustee shall be
protected in acting upon any notice, resolution, request, consent, order,
certificate, report, servicer's report appraisal, opinion, Issuer Order or
other paper or document believed by it to be genuine and to have been signed
or presented by the proper party or parties. The Trustee may consult with
experts and with counsel (who may be counsel for the Issuer, the Trustee, or
for a Registered Owner or who may be Note Counsel), and the opinion of such
counsel shall be full and complete authorization and protection in respect of
any action taken or suffered, and in respect of any determination made by it
hereunder in good faith and in accordance with the opinion of such counsel.
Whenever in the administration hereof the Trustee shall deem it desirable
that a matter be proved or established prior to taking, suffering, or
omitting any action hereunder, the Trustee (unless other evidence be herein
specifically prescribed) may, in the absence of bad faith on its part, rely
upon a certificate signed by the President or the Secretary of the Issuer;
provided, however, that the Trustee may not delay any action required
hereunder because the Trustee has failed to receive such certificate.
The Trustee shall not be liable for any action taken, suffered, or omitted
by it in good faith and believed by it to be authorized or within the discretion
or rights or powers conferred
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upon it hereby; provided, however, that the Trustee shall be liable for its
negligence or willful misconduct in taking such action.
The Trustee is authorized, under this Indenture, to sell, assign, transfer,
convey, or repurchase Financed Student Loans in accordance with an Issuer Order,
provided that no such Financed Student Loan may be sold, assigned, transferred,
or conveyed to any Person who is not an Eligible Lender. The Trustee is further
authorized to enter into agreements with other Persons, in its capacity as
Trustee, in order to carry out or implement the terms and provisions of this
Indenture.
The Trustee shall not be liable with respect to any action taken, suffered
or omitted to be taken in good faith in accordance with this Indenture or any
other transaction document or at the direction of the Registered Owners
evidencing the appropriate percentage of the aggregate principal amount of the
Outstanding Notes relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred upon the Trustee, under this Indenture or any other transaction
document;
Section 7.07. COMPENSATION OF TRUSTEE. The Issuer shall pay to the
Trustee from time to time reasonable compensation for all services rendered
by it hereunder, and also all its reasonable expenses, charges, and other
disbursements and those of its attorneys, agents, and employees incurred in
and about the administration and execution of the trusts hereby created. The
Trustee may not change the amount of its annual compensation without giving
the Issuer at least 90 days' written notice prior to the beginning of a
Fiscal Year. In the event of a default of such payments by the Issuer, and as
security for such payment, the Trustee shall have a lien therefor on the
Trust Estate, the Operating Fund and the General Fund prior to any rights of
the Registered Owners of the Notes.
Section 7.08. TRUSTEE MAY OWN NOTES. The Trustee hereunder, or any
successor Trustee, in its individual or other capacity, may become the owner
or pledgee of Notes and may otherwise deal with the Issuer, with the same
rights it would have if it were not the Trustee. The Trustee may act as
depository for, and permit any of its officers or directors to act as a
member of, or act in any other capacity in respect to, any committee formed
to protect the rights of the Registered Owners of Notes or to effect or aid
in any reorganization growing out of the enforcement of the Notes or of this
Indenture, whether or not any such committee shall represent the Registered
Owners of more than 60% of the collective aggregate principal amount of the
Outstanding Notes.
Section 7.09. RESIGNATION OF TRUSTEE. The Trustee and any successor to
the Trustee may resign and be discharged from the trust created by this
Indenture by giving to the President notice in writing which notice shall
specify the date on which such resignation is to take effect; provided,
however, that such resignation shall only take effect on the day specified in
such notice if a successor Trustee shall have been appointed pursuant to
Section 7.11 hereof (and is qualified to be the Trustee under the
requirements of Section 7.11 hereof). If no successor Trustee has been
appointed by the date specified or within a period of 30 days from the
receipt
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of the notice by the Issuer, whichever period is the longer, the Trustee may
(A) appoint a temporary successor Trustee having the qualifications provided
in Section 7.11 hereof or (B) request a court of competent jurisdiction to
(1) require the Issuer to appoint a successor, as provided in Section 7.11
hereof, within three days of the receipt of citation or notice by the court,
or (2) appoint a Trustee having the qualifications provided in Section 7.11
hereof. In no event may the resignation of the Trustee be effective until a
qualified successor Trustee shall have been selected and appointed. In the
event a temporary successor Trustee is appointed pursuant to (A) above, the
Board may remove such temporary successor Trustee and appoint a successor
thereto pursuant to Section 7.11 hereof.
Section 7.10. REMOVAL OF TRUSTEE. The Trustee or any successor Trustee
may be removed (i) at any time by the Registered Owners of a majority of the
collective aggregate principal amount of the Outstanding Senior Notes (or if no
Senior Notes are then Outstanding, a majority of the collective aggregate
principal amount of the Outstanding Subordinate Notes and if no Subordinate
Notes are then Outstanding, a majority of the collective aggregate principal
amount of the Junior-Subordinate Notes) by an instrument or concurrent
instruments in writing in duplicate by such Registered Owners, (ii) by the
Issuer for cause or upon the sale or other disposition of the Trustee or its
trust functions or (iii) by the Issuer without cause so long as no Event of
Default exists or has existed within the last 90 days, upon payment to the
Trustee so removed of all money then due to it hereunder and appointment of a
successor thereto by the Issuer and acceptance thereof by said successor. One
copy of any such instrument shall be filed with the Secretary of the Issuer and
the other with the Trustee so removed.
In the event a Trustee (or successor Trustee) is removed, by any person or
for any reason permitted hereunder, such removal shall not become effective
until (a) in the case of removal by the Registered Owners, such Registered
Owners of Notes by instrument or concurrent instruments in writing (signed and
acknowledged by such Registered Owners or their attorneys-in-fact) filed with
the Trustee removed have appointed a successor Trustee or otherwise the Issuer
shall have appointed a successor, and (b) the successor Trustee has accepted
appointment as such.
Section 7.11. SUCCESSOR TRUSTEE. In case at any time the Trustee or any
successor Trustee shall resign, be dissolved, or otherwise shall be disqualified
to act or be incapable of acting, or in case control of the Trustee or of any
successor Trustee or of its officers shall be taken over by any public officer
or officers, a successor Trustee may be appointed by the Board by an instrument
in writing duly authorized by resolution. In the case of any such appointment
by the Board of a successor to the Trustee, the Board shall forthwith cause
notice thereof to be mailed to the Registered Owners at the address of each
Registered Owner appearing on the note registration books maintained by the
Registrar.
Every successor Trustee appointed by the Registered Owners, by a court of
competent jurisdiction, or by the Board shall be a bank or trust company in good
standing, organized and doing business under the laws of the United States or of
a state therein, which has a reported capital and surplus of not less than
$50,000,000, be authorized under the law to exercise
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corporate trust powers, be subject to supervision or examination by a federal
or state authority, and be an Eligible Lender. Every successor Trustee shall
become a party to each and every agreement described herein to which the
Trustee is a party to (including, but not limited to, each Guaranty
Agreement).
Section 7.12. MANNER OF VESTING TITLE IN TRUSTEE. Any successor Trustee
appointed hereunder shall execute, acknowledge, and deliver to its predecessor
Trustee, and also to the Issuer, an instrument accepting such appointment
hereunder, and thereupon such successor Trustee, without any further act, deed,
or conveyance shall become fully vested with all the estate, properties, rights,
powers, trusts, duties, and obligations of its predecessors in trust hereunder
(except that the predecessor Trustee shall continue to have the benefits to
indemnification hereunder together with the successor Trustee), with like effect
as if originally named as Trustee herein; but the Trustee ceasing to act shall
nevertheless, on the written request of an Authorized Officer of the Issuer, or
an authorized officer of the successor Trustee, execute, acknowledge, and
deliver such instruments of conveyance and further assurance and do such other
things as may reasonably be required for more fully and certainly vesting and
confirming in such successor Trustee all the right, title, and interest of the
Trustee which it succeeds, in and to pledged Revenue and Funds and such rights,
powers, trusts, duties, and obligations, and the Trustee ceasing to act also,
upon like request, pay over, assign, and deliver to the successor Trustee any
money or other property or rights subject to the lien of this Indenture,
including any pledged securities which may then be in its possession. Should
any deed or instrument in writing from the Issuer be required by the successor
Trustee for more fully and certainly vesting in and confirming to such new
Trustee such estate, properties, rights, powers, and duties, any and all such
deeds and instruments in writing shall on request be executed, acknowledged and
delivered by the Issuer.
In case any of the Notes to be issued hereunder shall have been
authenticated but not delivered, any successor Trustee may adopt the
certificate of authentication of the Trustee or of any successor to the
Trustee; and in case any of the Notes shall not have been authenticated, any
successor to the Trustee may authenticate such Notes in its own name; and in
all such cases such certificate shall have the full force which it has
anywhere in the Notes or in this Indenture.
Section 7.13. FILING OF CURRENT INFORMATION WITH TRUSTEE. The Secretary
of the Issuer shall file with the Trustee on or before January 1 of each year,
commencing in 1997, a certificate showing the names of the then members of the
Board and the names of the President and the Secretary of the Issuer.
Section 7.14. RIGHT OF INSPECTION. The Registered Owner of a Note shall
be permitted at reasonable times during regular business hours and in accordance
with reasonable regulations prescribed by the Trustee to examine at the
principal office of the Trustee a copy of any report or instrument theretofore
filed with the Trustee relating to the condition of the Trust Estate.
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Section 7.15. LIMITATION WITH RESPECT TO EXAMINATION OF REPORTS. Except
as provided in this Indenture, the Trustee shall be under no duty to examine any
report or statement or other document required or permitted to be filed with it
by the Issuer.
Section 7.16. SERVICING AGREEMENT. The Trustee acknowledges the receipt
of a copy of the Servicing Agreement described in Section 4.05 hereof.
Section 7.17. ADDITIONAL COVENANTS OF TRUSTEE. The Trustee, by the
execution hereof, covenants, represents and agrees that it will not exercise any
of the rights, duties, or privileges under this Indenture (particularly those
enumerated in Article VI hereof or Article VII hereof) in such manner as would
cause the Student Loans held or acquired under the terms hereof to be
transferred, assigned, or pledged as security to any person or entity other than
as permitted by this Indenture.
Section 7.18. TRUSTEE COVENANTS WITH RESPECT TO "ELIGIBLE LENDER" STATUS.
The Trustee covenants as follows:
(a) The Trustee represents and warrants that it satisfies the
requirements to be an "eligible lender" as that term is defined in the Act
and covenants that it will remain and "eligible lender" so long as the
Trustee remains Trustee under this Indenture; provided, however, that the
Trustee shall have no responsibility or liability hereunder if it fails to
remain as an "eligible lender" as a result of the actions or inactions of
the Issuer or any servicer; and
(b) The Trustee shall take such actions, but only such actions, with
respect to being an "eligible lender" as shall be reasonably requested by
the Issuer; such actions do not include taking steps or instituting suits,
actions or proceedings necessary or appropriate for the enforcement of all
terms, covenants and conditions of all Financed Eligible Loans and
agreements in connection therewith, including the prompt payment of all
principal and interest payments and all other amounts due thereunder, for
which the Issuer is solely responsible.
Section 7.19. TRUSTEE'S STATUS AS AN "ELIGIBLE LENDER." For the purposes
of this Indenture and all documents, agreements, understandings and arrangements
relating to this Indenture that are executed by the Trustee, such documents have
been executed by the Trustee with the understanding that it may be deemed to be
an "eligible lender" under the Act. The Issuer hereby acknowledges the fact
that the Trustee may be deemed an "eligible lender" under the Act and thus may
be subject to certain liabilities because of such status and that the Trustee is
willing to accept the status of "eligible lender" hereunder as an accommodation
to the Issuer, and the Issuer hereby agrees that it will indemnify and hold
harmless the Trustee and its officers, directors, employees and agents for any
and all liability which may be incurred because of Trustee's status as an
"eligible lender" or because of the Trustee's entering into the Indenture or any
of the other transaction documents that results from the actions or inactions of
the Issuer or any servicer, from the moneys available pursuant to
Section 5.03(l) or in the General Fund,
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if any. The Issuer agrees that it will not seek recourse or commence any
action against the Trustee or its officers, directors, employees or agents or
any of their personal assets for the performance or payment of any obligation
under the Act. The Trustee shall have no liability or responsibility with
respect to any of the duties and obligations specifically undertaken by the
Issuer pursuant to Section 4.08 hereof.
Section 7.20. TRUSTEE TO CAUSE INVESTMENTS TO BE MADE. As to any Funds
held by the Trustee under this Indenture, the same shall be invested by the
Trustee as directed by an Issuer Order, within the limitations herein
prescribed.
Section 7.21. DUTY OF TRUSTEE WITH RESPECT TO EACH RATING AGENCY. It
shall be the duty of the Trustee to notify each Rating Agency then rating any
series of the Notes of (i) any change, expiration, extension, or renewal of this
Indenture, (ii) redemption or defeasance of any or all the Notes, or (iii) any
change in the Trustee; provided, however, the provisions of this Section do not
apply when such documents have been previously supplied to such Rating Agency
and the Trustee has received written evidence to such effect, all as may be
required by this Indenture. The Trustee shall also promptly deliver to each
Rating Agency duplicate copies of all correspondence, notices, certificates,
audits, reports or other communications prepared by the Trustee and sent by the
Trustee to the Registered Owners or the Issuer in accordance with this
Indenture. All notices and other items to each Rating Agency required under
this Section shall be in writing at the following addresses:
Fitch Investors Service, Inc.
One State Street Plaza
New York, New York 10004
Attention: Municipal Structured Finance Group
Standard & Poor's Ratings Services,
a Division of The McGraw Hill Companies, Inc.
26 Broadway
New York, New York 10004
Attention: Asset-Backed Surveillance Group
The Trustee also acknowledges that each Rating Agency's periodic review for
maintenance of a Rating on any series of the Notes may involve discussions
and/or meetings with representatives of the Trustee at mutually agreeable times
and places.
Section 7.22. CONVERSION, CONSOLIDATION OR MERGER OF TRUSTEE. Any bank or
trust company into which the Trustee or its successor may be converted, merged,
or with which it may be consolidated, or to which it may sell or transfer its
corporate trust business as a whole shall be the successor of the Trustee under
this Indenture with the same rights, powers, duties and obligations and subject
to the same restrictions, limitations and liabilities as its predecessor, all
without the execution or filing of any papers or any further act on the part of
any of the parties hereto, anything herein to the contrary notwithstanding. In
case any of the Notes to be
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issued hereunder shall have been authenticated, but not delivered, any
successor Trustee may adopt the certificate of any predecessor Trustee, and
deliver the same as authenticated; and, in case any of such Notes shall not
have been authenticated, any successor Trustee may authenticate such Notes in
the name of such successor Trustee.
Section 7.23. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY; CONFLICTING
INTERESTS. There shall at all times be a Trustee hereunder which shall be
eligible to act as Trustee under TIA Section 310(a)(1) and shall have a combined
capital and surplus of at least $50,000,000. If such corporation publishes
reports of condition at least annually, pursuant to law or the requirements of
federal, state, territorial or District of Columbia supervising or examining
authority, then for the purposes of this Section 7.23, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section 7.23, it shall resign immediately in the manner and
with the effect hereinafter specified in this Article VII. Neither the Issuer
nor any Person directly or indirectly controlling or controlled by, or under
common control with, the Issuer shall serve as Trustee.
Section 7.24. TRUSTEE MAY FILE PROOFS OF CLAIM. In case of the pendency
of any receivership, insolvency, liquidation, bankruptcy, reorganization,
arrangement, adjustment, composition or other judicial proceeding relative to
the Issuer or any other obligor upon the Notes or the property of the Issuer or
of such other obligor or their creditors, the Trustee (irrespective of whether
the principal of the Notes of any series shall then be due and payable as
therein expressed or by declaration or otherwise and irrespective of whether the
Trustee shall have made any demand on the Issuer for the payment of overdue
principal, premium, if any, or interest) shall be entitled and empowered, by
intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount, or such lesser
amount as may be provided for in the Notes, of principal (and premium, if
any) and interest, if any, owing and unpaid in respect of the Notes and to
file such other papers or documents as may be necessary or advisable in
order to have the claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances of the
Trustee and its agents and counsel) and of the Holders allowed in such
judicial proceeding; and
(b) to collect and receive any money or other property payable or
deliverable on any such claims and to distribute the same; and any
custodian, receiver, assignee, trustee, liquidator, sequestrator (or other
similar official) in any such judicial proceeding is hereby authorized by
each Holder of Notes to make such payments to the Trustee, and if the
Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee and any
predecessor Trustee, their agents and counsel, and any other amounts due
the Trustee or any predecessor Trustee.
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Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder of a Note
any plan of reorganization, arrangement, adjustment or composition affecting
the Notes or the rights of any Holder thereof, or to authorize the Trustee to
vote in respect of the claim of any Holder of a Note in any such proceeding.
In any proceedings brought by the Trustee (and also any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party), the Trustee shall be held to represent all the
Holders of the Notes, and it shall not be necessary to make any Holders of
the Notes parties to any such proceedings.
ARTICLE VIII
SUPPLEMENTAL INDENTURES
Section 8.01. SUPPLEMENTAL INDENTURES NOT REQUIRING CONSENT OF REGISTERED
OWNERS. The Issuer and the Trustee may, without the consent of or notice to any
of the Registered Owners or any Swap Counterparty, enter into any indenture or
indentures supplemental to this Indenture for any one or more of the following
purposes:
(a) To cure any ambiguity or formal defect or omission in this
Indenture;
(b) To grant to or confer upon the Trustee for the benefit of the
Registered Owners any additional benefits, rights, remedies, powers or
authorities that may lawfully be granted to or conferred upon the
Registered Owners or the Trustee;
(c) To subject to this Indenture additional revenues, properties
or collateral;
(d) To modify, amend or supplement this Indenture or any indenture
supplemental hereto in such manner as to permit the qualification hereof
and thereof under the Trust Indenture Act of 1939 or any similar federal
statute hereafter in effect or to permit the qualification of the Notes for
sale under the securities laws of the United States of America or of any of
the states of the United States of America, and, if they so determine, to
add to this Indenture or any indenture supplemental hereto such other
terms, conditions and provisions as may be permitted by said Trust
Indenture Act of 1939 or similar federal statute;
(e) To evidence the appointment of a separate or co-Trustee or a
co-registrar or transfer agent or the succession of a new Trustee
hereunder, or any additional or substitute Guarantee Agency or Servicer;
(f) To add such provisions to or to amend such provisions of this
Indenture as may, in Note Counsel's opinion, be necessary or desirable to
assure implementation of the Program in conformance with the Act if along
with such Supplemental Indenture
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there is filed a Note Counsel's opinion to the effect that the addition or
amendment of such provisions will in no way impair the existing security of
the Registered Owners of any Outstanding Note;
(g) To make any change as shall be necessary in order to obtain
and/or maintain for any of the Notes an investment grade Rating from a
nationally recognized rating service, which changes, in the opinion of the
Trustee, which opinion may be supported by an opinion of counsel to the
Trustee, are not to the prejudice of the Registered Owner of any of the
Notes;
(h) To make any changes necessary to comply with the Act, the
Regulations or the Code and the regulations promulgated thereunder;
(i) To provide for the issuance of Additional Notes pursuant to
the provisions of the Indenture, including the creation of appropriate
Funds and Accounts with respect to such Additional Notes;
(j) To make the terms and provisions of this Indenture, including
the lien and security interest granted herein, applicable to a Swap
Agreement;
(k) To create any additional Funds or Accounts under this
Indenture deemed by the Trustees to be necessary or desirable;
(l) To make changes necessary to add a letter of credit to any
subclass of the Auction Notes;
(m) To make any other change which, in the judgment of the
Trustee, which judgment may be supported by an opinion of counsel to the
Trustee, is not to the material prejudice of the Registered Owners or any
Swap Counterparty.
Section 8.02. SUPPLEMENTAL INDENTURES REQUIRING CONSENT OF REGISTERED
OWNERS. Exclusive of Supplemental Indentures covered by Section 8.01 hereof
and subject to the terms and provisions contained in this Section, and not
otherwise, the Registered Owners of not less than two-thirds (2/3) of the
collective aggregate principal amount of the Notes then Outstanding which in
the opinion of the Trustee (which opinion may be supported by an opinion of
counsel to the Trustee) are affected shall have the right, from time to time,
with the prior written consent of each Swap Counterparty, if required by the
related Swap Agreement (so long as such Swap Counterparty is not in default
of its obligations under its Swap Agreement, all obligations of the Issuer
under such Swap Agreement have not been satisfied and such Swap Agreement has
not been terminated) anything contained in this Indenture to the contrary
notwithstanding, to consent to and approve the execution by the Issuer and
the Trustee of such other indenture or indentures supplemental hereto as
shall be deemed necessary and desirable by the Trustee for the purpose of
modifying, altering, amending, adding to or rescinding, in any particular,
any of the terms or provisions contained in this Indenture or in any
Supplemental Indenture; provided, however,
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that nothing in this Section contained shall permit, or be construed as
permitting (1) without the consent of the Registered Owners of all then
Outstanding Notes, (a) an extension of the maturity date of the principal of
or the interest on any Note, or (b) a reduction in the principal amount of
any Note or the rate of interest thereon, or (c) a privilege or priority of
any Note or Notes over any other Note or Notes, or (d) a reduction in the
aggregate principal amount of the Notes required for consent to such
Supplemental Indenture, or (e) the creation of any lien other than a lien
ratably securing all of the Notes at any time Outstanding hereunder or (2)
any modification of the trusts, powers, rights, obligations, duties,
remedies, immunities and privileges of the Trustee without the prior written
approval of the Trustee.
If at any time the Issuer shall request the Trustee to enter into any
such Supplemental Indenture for any of the purposes of this Section, the
Trustee shall, upon being satisfactorily indemnified with respect to
expenses, cause notice of the proposed execution of such Supplemental
Indenture to be mailed by registered or certified mail to each Registered
Owner of a Note at the address shown on the registration books. Such notice
shall briefly set forth the nature of the proposed Supplemental Indenture and
shall state that copies thereof are on file at the principal corporate trust
office of the Trustee for inspection by all Registered Owners. If, within 60
days, or such longer period as shall be prescribed by the Issuer, following
the mailing of such notice, the Registered Owners representing the applicable
percentage of the collective aggregate principal amount of the Notes
Outstanding required hereby at the time of the execution of any such
Supplemental Indenture shall have consented in writing to and approved the
substance of the amendments made by the Supplemental Indenture and the
execution thereof as herein provided, no Registered Owner of any Note shall
have any right to object to any of the terms and provisions contained
therein, or the operation thereof, or in any manner to question the propriety
of the execution thereof, or to enjoin or restrain the Trustee or the Issuer
from executing the same or from taking any action pursuant to the provisions
thereof. Upon the execution of any such Supplemental Indenture as in this
Section 8.02 permitted and provided, this Indenture shall be and be deemed to
be modified and amended in accordance therewith.
Section 8.03. ADDITIONAL LIMITATION ON MODIFICATION OF INDENTURE. None
of the provisions of this Indenture (including Sections 8.01 and 8.02 hereof)
shall permit an amendment to the provisions of the Indenture which permits
the transfer of all or part of Guaranteed Student Loans or granting of a
security interest therein to any Person other than an Eligible Lender or the
Servicer, unless the Act or Regulations are hereafter modified so as to
permit the same.
No amendment to this Indenture or to the indentures supplemental thereto
shall be effective unless the Trustee receives an opinion of Note Counsel to
the effect that such amendment was adopted in conformance with this Indenture.
Section 8.04. NOTICE TO EACH RATING AGENCY. Prior written notice of any
proposed amendment or supplement to this Indenture shall be given by the
Issuer to each Rating Agency, together with the proposed form thereof. In
addition, the Issuer shall give notice to each Rating Agency of any intended
additional parties to be designated as a Guarantee Agency or Servicer and not
listed in the definition thereof, along with a request of certification of
the Rating, and
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shall provide them with duplicate copies of all correspondence, notices,
certificates, audits, reports or other communications required to be prepared
by the Issuer and sent to the Trustee in accordance with this Indenture. The
Issuer shall also promptly deliver to each Rating Agency such additional
reports or information as is necessary for maintenance of a public rating on
the Notes. The Issuer acknowledges that periodic reviews by each Rating
Agency may involve discussions and/or meetings with representatives of the
Issuer at mutually agreeable times.
Section 8.05. NOTICE OF DEFAULTS. Within 90 days after the occurrence of
any default hereunder with respect to the Notes, the Trustee shall transmit
in the manner and to the extent provided in TIA Section 313(c), notice of
such default hereunder known to the Trustee, unless such default shall have
been cured or waived; provided, however, that, except in the case of a
default in the payment of the principal of (or premium, if any) or interest
with respect to any Note, or in the payment of any sinking fund installment
with respect to the Notes, the Trustee shall be protected in withholding such
notice if and so long as an authorized officer of the Trustee in good faith
determine that the withholding of such notice is in the interest of the
Holders of the Notes. For the purpose of this Section 8.05, the term
"default" means any event which is, or after notice or lapse of time or both
would become, an Event of Default with respect to the Notes.
Section 8.06. CONFORMITY WITH THE TRUST INDENTURE ACT. Every
supplemental indenture executed pursuant to this Article VIII shall conform
to the requirements of the Trust Indenture Act as then in effect.
ARTICLE IX
GENERAL PROVISIONS
Section 9.01. NOTICES. Any notice, request or other instrument required
by this Indenture to be signed or executed by the Registered Owners of Notes
may be executed by the execution of any number of concurrent instruments of
similar tenor, and may be signed or executed by such Registered Owners of
Notes in person or by agent appointed in writing. As a condition for acting
thereunder the Trustee may demand proof of the execution of any such
instrument and of the fact that any person claiming to be the owner of any of
said Notes is such owner and may further require the actual deposit of such
Note or Notes with the Trustee. The fact and date of the execution of such
instrument may be proved by the certificate of any officer in any
jurisdiction who by the laws thereof is authorized to take acknowledgments of
deeds within such jurisdiction, that the person signing such instrument
acknowledged before him the execution thereof, or may be proved by any
affidavit of a witness to such execution sworn to before such officer.
The amount of Notes held by any person executing such instrument as a
Registered Owner of Notes and the fact, amount, and numbers of the Notes held
by such person and the date of his holding the same may be proved by a
certificate executed by any responsible trust company, bank, banker, or other
depository in a form approved by the Trustee, showing that
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at the date therein mentioned such person had on deposit with such depository
the Notes described in such certificate; provided, however, that at all times
the Trustee may require the actual deposit of such Note or Notes with the
Trustee.
All notices, requests and other communications to any party hereunder
shall be in writing (including bank wire, telex or similar writing) at the
following addresses:
If intended for the Issuer:
Union Financial Services-1, Inc.
6991 East Camelback Road, Suite B290
Scottsdale, Arizona 85251
Attention: President
Telephone: (602) 947-7703
Telecopier: (602) 947-5452
If intended for the Principal Office of the Trustee:
Norwest Bank Minnesota, National Association
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Department, Student Loan Group
Telephone: 612-667-8058
Telecopier: 612-667-9825
Any party may change the address to which subsequent notices to such party
are to be sent, or of its Principal Office, by notice to the others,
delivered by hand or received by telex or telecopier or registered
first-class mail, postage prepaid. Each such notice, request or other
communication shall be effective when delivered by hand or received by telex
or telecopier or registered first-class mail, postage prepaid.
Section 9.02. COVENANTS BIND ISSUER. The covenants, agreements,
conditions, promises, and undertakings in this Indenture shall extend to and
be binding upon the successors and assigns of the Issuer, and all of the
covenants hereof shall bind such successors and assigns, and each of them,
jointly and severally. All the covenants, conditions, and provisions hereof
shall be held to be for the sole and exclusive benefit of the parties hereto
and their successors and assigns and of the Registered Owners from time to
time of the Notes.
No extension of time of payment of any of the Notes shall operate to
release or discharge the Issuer, it being agreed that the liability of the
Issuer, to the extent permitted by law, shall continue until all of the Notes
are paid in full, notwithstanding any transfer of Guaranteed Student Loans or
extension of time for payment.
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Section 9.03. LIEN CREATED. This Indenture shall operate effectually as
(i) a grant of lien on and security interest in, and (ii) an assignment of,
the Trust Estate.
Section 9.04. SEVERABILITY OF LIEN. If the lien of this Indenture shall
be or shall ever become ineffectual, invalid, or unenforceable against any
part of the Trust Estate, which are not subject to the lien, because of want
of power or title in the Issuer, the inclusion of any such part shall not in
any way affect or invalidate the pledge and lien hereof against such part of
the Trust Estate as the Issuer had the right to pledge.
Section 9.05. CONSENT OF REGISTERED OWNERS BINDS SUCCESSORS. Any request
or consent of the Registered Owner of any Notes given for any of the purposes
of this Indenture shall bind all future Registered Owners of the same Note or
any Notes issued in exchange therefor or in substitution thereof in respect
of anything done or suffered by the Issuer or the Trustee in pursuance of
such request or consent.
Section 9.06. DATE OF EXECUTION. Although this Indenture for convenience
and for the purpose of reference is dated as of June 15, 1996, the actual
dates of execution by the Issuer and by the Trustee are as indicated by their
respective acknowledgments hereto annexed.
Section 9.07. NONLIABILITY OF DIRECTORS; NO GENERAL OBLIGATION. It is
hereby expressly made a condition of this Indenture that any agreements,
covenants, or representations herein contained or contained in the Notes do
not and shall never constitute or give rise to a personal or pecuniary
liability or charge against the incorporators, officers, employees, agents,
or Directors of the Issuer, or against the general credit of the Issuer, and
in the event of a breach of any such agreement, covenant, or representation,
no personal or pecuniary liability or charge payable directly or indirectly
from the general revenues of the Issuer shall arise therefrom. Nothing
contained in this Section, however, shall relieve the Issuer from the
observance and performance of the several covenants and agreements on its
part herein contained.
Section 9.08. NONPRESENTMENT OF NOTES OR INTEREST CHECKS. Should any of
the Notes or interest checks not be presented for payment when due, the
Trustee shall retain from any money transferred to it for the purpose of
paying the Notes or interest checks so due, for the benefit of the Registered
Owners thereof, a sum of money sufficient to pay such Notes or interest
checks when the same are presented by the Registered Owners thereof for
payment. Such money shall not be required to be invested, except as directed
by the Issuer. All liability of the Issuer to the Registered Owners of such
Notes or interest checks and all rights of such Registered Owners against the
Issuer under the Notes or interest checks or under this Indenture shall
thereupon cease and determine, and the sole right of such Registered Owners
shall thereafter be against such deposit. If any Note or interest check
shall not be presented for payment within the period of four years following
the final Stated Maturity of the Notes, the Trustee shall return to the
Issuer the money theretofore held by it for payment of such Note or interest
check, and such Note or interest check shall (subject to the defense of any
applicable statute of limitation) thereafter be an unsecured obligation of
the Issuer.
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Section 9.09. SECURITY AGREEMENT. This Indenture constitutes a
Financing Statement and a Security Agreement under the Nevada Uniform
Commercial Code.
Section 9.10. LAWS GOVERNING. It is the intent of the parties hereto
that this Indenture shall in all respects be governed by the laws of the
State. This Indenture is subject to the provisions of the TIA that are
required to be part of this Indenture and shall, to the extent applicable, be
governed by such provisions.
Section 9.11. SEVERABILITY. Of any covenant, agreement, waiver, or part
thereof in this Indenture contained be forbidden by any pertinent law or
under any pertinent law be effective to render this Indenture invalid or
unenforceable or to impair the lien hereof, then each such covenant,
agreement, waiver, or part thereof shall itself be and is hereby declared to
be wholly ineffective, and this Indenture shall be construed as if the same
were not included herein.
Section 9.12. EXHIBITS. The terms of the Exhibits attached to this
Indenture are incorporated herein in all particulars.
Section 9.13. PARTIES INTERESTED HEREIN. Nothing in this Indenture
expressed or implied is intended or shall be construed to confer upon, or to
give to, any person or entity, other than the Trustee, the paying agent, if
any, and the Registered Owners of the Notes, any right, remedy or claim under
or by reason of this Indenture or any covenant, condition or stipulation
hereof, and all covenants, stipulations, promises and agreements in this
Indenture contained by and on behalf of the Issuer shall be for the sole and
exclusive benefit of the Trustee, the paying agent, if any, and the
Registered Owners of the Notes.
Section 9.14. NOTES ARE LIMITED OBLIGATIONS. The Notes and any agreement
of the Issuer mentioned herein are special, limited obligations of the
Issuer, secured by and payable solely from the Trust Estate herein provided.
The Issuer shall not be obligated to pay the Notes, the interest thereon, or
any other obligation created by or arising from this Indenture from any other
source.
Section 9.15. SWAP COUNTERPARTY RIGHTS. Notwithstanding any provision of
this Indenture, no Swap Counterparty which shall be in default under any Swap
Agreement with the Issuer shall have any of the rights granted to a Swap
Counterparty hereunder.
Section 9.16. DISCLOSURE OF NAMES AND ADDRESSES OF HOLDERS. Every Holder
of Notes, by receiving and holding the same, agrees with the Issuer and the
Trustee that neither the Issuer nor the Trustee nor any Paying Agent nor any
Security Registrar shall be held accountable by reason of the disclosure of
any information as to the names and addresses of the Holders of Notes in
accordance with TIA Section 312, regardless of the source from which such
information was derived, and that the Trustee shall not be held accountable
by reason of mailing any material pursuant to a request made under TIA
Section 312(b).
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ARTICLE X
PAYMENT AND CANCELLATION OF NOTES
AND SATISFACTION OF INDENTURE
Section 10.01. TRUST IRREVOCABLE. The trust created by the terms and
provisions of this Indenture is irrevocable until the indebtedness secured
hereby (the Notes and interest thereon) is fully paid or provision made for
its payment as provided in this Article and the Issuer has paid all of the
fees and expenses of the Trustee and given notice to the Trustee to terminate
this Indenture.
Section 10.02. SATISFACTION OF INDENTURE.
(a) If the Issuer shall pay, or cause to be paid, or there shall
otherwise be paid (i) to the Registered Owners, the principal of and
interest on the Notes, at the times and in the manner stipulated in this
Indenture and (ii) to each Swap Counterparty, all Issuer Swap Payments then
due, then the pledge of the Trust Estate, and all covenants, agreements,
and other obligations of the Issuer to the Registered Owners of Notes other
than as provided in the paragraph immediately following the Granting
Clauses hereof shall thereupon cease, terminate, and become void and be
discharged and satisfied. In such event, the Trustee shall execute and
deliver to the Issuer all such instruments as may be desirable to evidence
such discharge and satisfaction, and the Trustee shall pay over or deliver
all money held by it under this Indenture to the party entitled to receive
the same under this Indenture. If the Issuer shall pay or cause to be
paid, or there shall otherwise be paid, to the Registered Owners of any
Outstanding Notes the principal of and interest on such Notes and to each
Swap Counterparty, all Counterparty Swap Payments then due, at the times
and in the manner stipulated in this Indenture and in the Swap Agreement,
such Notes and each Swap Counterparty shall cease to be entitled to any
lien, benefit, or security under this Indenture, and all covenants,
agreements, and obligations of the Issuer to the Registered Owners thereof
and each Swap Counterparty shall thereupon cease, terminate, and become
void and be discharged and satisfied.
(b) Notes or interest installments shall be deemed to have been
paid within the meaning of Section 10.02(a) hereof if money for the payment
or redemption thereof has been set aside and is being held in trust by the
Trustee at the Stated Maturity or earlier redemption date thereof. All
Outstanding Notes shall, prior to the Stated Maturity or earlier redemption
thereof, be deemed to have been paid within the meaning and with the effect
expressed in Section 10.02(a) hereof if (i) such Notes are to be redeemed
on any date prior to their Stated Maturity and (ii) the Issuer shall have
given notice of redemption as provided herein on said date, there shall
have been deposited with the Trustee either money (fully insured by the
Federal Deposit Insurance Issuer or fully collateralized by Governmental
Obligations) in an amount which shall be sufficient, or Governmental
Obligations (including any Governmental Obligations issued or held in
book-entry form on the books of the Department of Treasury of the United
States of
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America) the principal of and the interest on which when due will provide
money which, together with the money, if any, deposited with the Trustee
at the same time, shall be sufficient, to pay when due the principal of and
interest to become due on such Notes on and prior to the redemption date or
Stated Maturity thereof, as the case may be. Notwithstanding anything
herein to the contrary, however, no such deposit shall have the effect
specified in this subsection (b) if made during the existence of an Event
of Default, unless made with respect to all of the Notes then Outstanding.
Neither Governmental Obligations nor money deposited with the Trustee
pursuant to this subsection (b) nor principal or interest payments on any
such Governmental Obligations shall be withdrawn or used for any purpose
other than, and shall be held irrevocably in trust in an escrow account
for, the payment of the principal of and interest on such Notes. Any cash
received from such principal of and interest on such Governmental
Obligations deposited with the Trustee, if not needed for such purpose,
shall, to the extent practicable, be reinvested in Governmental Obligations
maturing at times and in amounts sufficient to pay when due the principal
of and interest on such Notes on and prior to such redemption date or
Stated Maturity thereof, as the case may be, and interest earned from such
reinvestments shall be paid over to the Issuer, as received by the Trustee,
free and clear of any trust, lien, or pledge, subject to verification by a
certified public accountant or firm thereof that the remaining amounts in
escrow are sufficient to pay the principal of and interest on the Notes as
aforesaid. Any payment for Governmental Obligations purchased for the
purpose of reinvesting cash as aforesaid shall be made only against
delivery of such Governmental Obligations. For the purposes of this
Section, "Governmental Obligations" shall mean and include only
non-callable direct obligations of the Department of the Treasury of the
United States of America, and such Governmental Obligations shall be
certified by an independent public accounting firm of national reputation
to be of such amounts, maturities, and interest payment dates and to bear
such interest as will, without further investment or reinvestment of either
the principal amount thereof or the interest earnings therefrom, be
sufficient to make the payments required herein, and which obligations have
been deposited in an escrow account which is irrevocably pledged as
security for the Notes. Such term shall not include mutual funds and unit
investment trusts.
(c) Any Issuer Swap Payments are deemed to have been paid and
the applicable Swap Agreement terminated when payment of all Issuer Swap
Payments due and payable to each Swap Counterparty under its respective
Swap Agreement have been made or duly provided for to the satisfaction of
each Swap Counterparty and the respective Swap Agreement has been
terminated.
(d) In no event shall the Trustee deliver over to the Issuer any
Guaranteed Student Loans unless the Issuer is an Eligible Lender, if the
Act or Regulations then in effect require the owner or holder of Guaranteed
Student Loans to be an Eligible Lender.
(e) The provisions of this Section are applicable to the Notes
and the Issuer Swap Payments and any portion of the Notes.
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Section 10.03. CANCELLATION OF PAID NOTES. Any Notes which have been
paid or purchased by the Issuer, mutilated Notes replaced by new Notes, and
any temporary Note for which definitive Notes have been delivered shall
forthwith be cancelled by the Trustee and, except for temporary Notes,
returned to the Issuer.
ARTICLE XI
TERMINATION
Section 11.01. TERMINATION OF THE TRUST.
(a) The trust created by this Indenture (the "Trust") shall
terminate upon the earlier of (i) the later of (A) payment to the
Registered Owners and to the Trustee of all amounts required to be paid
to them pursuant to this Indenture and any Supplemental Indenture and the
disposition of all property held as part of the Trust Estate or (B) the
day following the date on which all reimbursement obligations to the Swap
Counterparty, if any, and any other Person as may be provided for in any
Supplemental Indenture have been paid in full, (ii) the expiration of
21 years from the death of the last survivor of the descendants of Joseph
P. Kennedy (the late ambassador of the United States to the Court of
St. James) living on the date of this Indenture or (iii) subject to
Section 11.01(d), upon the occurrence of a Liquidation Event (as
hereinafter defined). The Issuer shall promptly notify the Trustee
of any prospective termination pursuant to this Section 11.01.
(b) Notice of any prospective termination, specifying the
Interest Payment Date for payment of the final distribution and requesting
the surrender of the Notes for cancellation, shall be given promptly by the
Trustee by letter to Registered Owners mailed not less than ten nor more
than fifteen days preceding the specified Interest Payment Date stating (i)
the Interest Payment Date upon which final payment of the Notes shall be
made, (ii) the amount of any such final payment, and (iii) the location for
presentation and surrender of the Notes. Payment of the final distribution
which shall be made only upon presentation and surrender of the Notes at
the Corporate Trust Office of the Trustee specified in the notice.
(c) A "Liquidation Event" shall be deemed to have occurred,
subject to Section 11.01(d), upon Dissolution of the Issuer.
(d) The Issuer shall not voluntarily take any action that would
cause it to be deemed dissolved within the meaning of this Article XI.
In the event of the Dissolution of the Issuer or any action that
would cause the Issuer to cease being deemed a general partner of the Trust
if the Trust were deemed a limited partnership formed under the Delaware
Revised Uniform Limited Partnership Act, and the Issuer's interest were
deemed to represent the sole general partnership interest in such a
partnership, the Trust shall terminate 90 days after the date of such
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event and its assets liquidated in accordance with Section 11.01(e) unless
both of the following occur:
(i) The Registered Owners representing Registered Owner
Approval, as defined in Section 6.01 hereof, inform the Trustee in
writing before the end of such 90 day period that they disapprove
of the liquidation of the assets of the Trust; and
(ii) The Issuer, the Trustee and the Swap Counterparty, if
any, shall receive an Opinion of Counsel to the effect that the
continuation of the Trust shall not cause the Trust to be treated
as an association taxable as a corporation for federal income tax
purposes.
(e) Upon receipt by the Trustee from the Issuer of notice of the
occurrence of a Liquidation Event (as defined in Section 11.01(c)), the
Trustee shall, subject to the direction of the Registered Owners
constituting Registered Owner Approval (provided that, if Registered Owners
constituting Registered Owner Approval shall not have provided such
direction to the Trustee within 30 days of the Trustee having sent a
written request for such direction to the Registered Owners, the Trustee
shall proceed without such direction) sell the remaining assets of the
Trust Estate, if any, at public or private sale, in a commercially
reasonable manner and on commercially reasonable terms. The Issuer agrees
to cooperate with the Trustee to effect any such sale, including by
executing such instruments of conveyance or assignment as shall be
necessary or required by the purchaser. Proceeds of sale, net of expenses,
shall be treated as collections on the assets of the Trust and shall be
deposited into the Revenue Fund. On the next Interest Payment Date the
Trustee shall cause to be paid to Registered Owners and the Issuer amounts
distributable on such Interest Payment Date pursuant to Article V.
Following the termination of the Trust, all right, title and interest in
and to the Financed Eligible Loans and other property and funds in the
Trust Estate (other than funds on deposit in certain accounts for the
payment of expenses) shall be conveyed and transferred to the Issuer.
Section 11.02. NOTICE. The Trustee shall give notice of termination of
the Trust to the Issuer and each Rating Agency.
ARTICLE XII
REPORTING REQUIREMENTS
Section 12.01. ANNUAL STATEMENT AS TO COMPLIANCE. The Servicer will
deliver to each Rating Agency, the Trustee and the Issuer, on or before March
31 of each year, beginning with March 31, 1997, a certificate stating that
(a) a review of the activities of the Servicer during the preceding calendar
year and of its performance under the Servicing Agreement has been made under
the supervision of the officer signing such certificate and (b) to the best
of such officers'
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knowledge, based on such review, the Servicer has fulfilled all its
obligations under the Servicing Agreement throughout such year, or, there has
been a default in the fulfillment of any such obligation, specifying each
such default known to such officer and the nature and statue thereof. Copies
of such statements shall be provided, at the expense of the Servicer, by the
Trustee to Series 1996C Note Holders upon request.
Section 12.02. ANNUAL INDEPENDENT PUBLIC ACCOUNTANTS' SERVICING REPORT.
On or before March 31 of each year, beginning March 31, 1997, the Servicer at
its expense shall cause a firm of independent public accountants which is a
member of the American Institute of Certified Public Accountants to furnish a
statement to each Rating Agency, the Issuer and the Trustee to the effect
that such firm has examined certain documents and records relating to the
servicing of the Financed Eligible Loans (during the preceding fiscal year)
under servicing agreements substantially similar one to another and to the
Servicing Agreement and that, on the basis of such examination, such
servicing has been conducted in compliance with such servicing agreements
except for such significant exceptions or errors in records that, in the
opinion of such firm, requires it to report and which are set forth in such
report. Copies of the statement shall be provided, at the expense of the
Servicer, by the Trustee to Series 1996C Note Holders, upon request.
Section 12.03. SERVICER'S CERTIFICATE. Each month, not later than the
fifteenth day of each month, the Servicer shall deliver to the Trustee, a
certificate certified by an officer of the Servicer certifying to the
accuracy of the monthly statement contemplated by Section 12.04.
Section 12.04. STATEMENTS TO NOTE HOLDERS. On or before the fifteenth
day of each month, the Servicer or the Issuer shall provide to the Trustee
(with a copy to the Rating Agencies) for the Trustee to forward within five
days of receipt to each Note Holder of the applicable Class of record, a
statement setting forth at least the following information with respect to
the preceding month, to the extent applicable;
(a) the amount of payments with respect to each Class paid with
respect to principal during the preceding month;
(b) the amount of payments with respect to each Class paid with
respect to interest during the preceding month;
(c) the amount of the payments allocable to any Noteholders'
Auction Rate Interest Carryover (for each Class of Auction Rate Notes
only), Note Holders' LIBOR Rate Interest Carryover (for each Class of the
LIBOR Rate Notes only), and Noteholders' Treasury Rate Interest Carryover
(for each Class of Treasury Rate Notes only), together with any remaining
outstanding amount of each thereof;
(d) the principal balance of Financial Eligible Loans as of the
close of business on the last day of the preceding month;
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(e) the aggregate outstanding principal amount of the Notes of
each Class as of the close of business on the last day of the preceding
month, after giving effect to payments allocated to principal reported under
clause (a) above;
(f) the interest rate for the applicable Class of Notes with
respect to each payment referred to in clause (b) above, indicating whether
such interest rate is calculated based on the Net Loan Rate or based on the
applicable Auction Rate (for each Class of the Auction Rate Notes only),
LIBOR Rate (for each Class of the LIBOR Rate Notes only), or Treasury Rate
(for each Class of the Treasury Rate Notes only) as the case may be, and
specifying what each such interest would have been using the alternate
basis for such calculation;
(g) the amount of the Servicing Fee allocated to the Servicer as
of the close of business on the last day of the preceding month;
(h) the amount of the Administration Fee, the Auction Agent Fee
and the Trustee Fee, allocated as of the close of business on the last day
of the preceding month;
(i) the amount of the aggregate Net Losses, if any, as of the
close of business on the last day of the preceding month and any recoveries
of principal and interest received during the preceding month relating to
Financed Student Loans for which Net Losses were previously allocated;
(j) the amount of the payment attributable to amounts in the
Reserve Fund, the amount of any other withdrawals from the Reserve Fund
and the balance of the Reserve Fund as of the close of business on the
last day of the preceding month;
(k) the portion, if any, of the payments attributable to amounts
on deposit in the Loan Account with respect to each Series of the Student
Loan Fund;
(l) the aggregate amount, if any, paid by the Trustee to acquire
Eligible Loans from amounts on deposit in the Loan Account with respect to
each Series of the Student Loan Fund during the preceding month;
(m) the amount remaining in the Loan Account with respect to
each Series of the Student Loan Fund that has not been used to acquire
Eligible Loans and is being transferred to the Note Redemption Fund;
(n) the aggregate amount, if any, paid for Financed Student
Loans purchased from the Trust during the preceding month;
(o) the number and principal amount of Financed Student Loans,
as of the close of business on the last day of the preceding month, that
are (i) 30 to 60 days delinquent, (ii) 61 to 90 days delinquent, (iii) 91
to 120 days delinquent, (iv) more than
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120 days delinquent and (v) for which claims have been filed with the
appropriate Guarantee Agency and which are awaiting payment; and
(p) the Aggregate Market Value of the Trust Estate and the
Outstanding principal amount of the Notes as of the close of business on
the last day of the preceding month.
Each amount set forth pursuant to paragraph (a), (b), (g) and (h) above
shall be expressed as a dollar amount per $50,000 of original principal
balance of a Note. A copy of the statements referred to above may be
obtained by any Note Holder by a written request to the Trustee, addressed to
its Corporate Trust Office.
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IN WITNESS WHEREOF, the Issuer has caused this Indenture to be executed
in its corporate name and behalf by the President, and the Trustee, to
evidence its acceptance of the trusts hereby created, has caused this
Indenture to be executed in its corporate name and behalf, has caused its
corporate seal to be hereunto affixed by its duly authorized officer, all in
multiple counterparts, each of which shall be deemed an original, and the
Issuer and the Trustee have caused this Indenture to be dated as of the date
herein above first shown, although actually executed on the dates shown in
the acknowledgments hereafter appearing.
UNION FINANCIAL SERVICES-1, INC.
By /s/ Stephen F. Butterfield
-----------------------------
Stephen F. Butterfield
President
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By /s/ Roxanne Rouleau
-----------------------------
Assistant Vice President
Union Bank and Trust Company (the "Servicer") hereby acknowledges and
accepts the duties and obligations assigned to the Servicer in Article XII
hereof.
UNION BANK AND TRUST COMPANY, as
Servicer
By /s/ Kenneth L. Backemeyer
-----------------------------
Title: Senior Vice President
and Trust Officer
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ACKNOWLEDGMENTS
STATE OF COLORADO ]
] ss.
CITY AND COUNTY OF DENVER ]
The foregoing instrument was acknowledged before me on November 1, 1996
by Stephen F. Butterfield, President of the Union Financial Services-1, Inc.,
a Nevada corporation, on behalf of such corporation.
[SEAL] /s/ Kathy Wolford
--------------------------------------------------
Notary Public in and for the State of Colorado
My commission expires:
8/15/99
- ------------------------------------
STATE OF COLORADO ]
] ss.
CITY AND COUNTY OF DENVER ]
The foregoing instrument was acknowledged before me on November 1, 1996
by Roxanne Rouleau, an Assistant Vice President of Norwest Bank Minnesota,
National Association, a banking corporation, on behalf of such corporation.
/s/ Kathy Wolford
--------------------------------------------------
Notary Public in and for the State of Colorado
My commission expires:
8/15/99
- ------------------------------------
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APPENDIX A
CERTAIN TERMS AND PROVISIONS OF THE AUCTION NOTES
ARTICLE I
Section 1.01. DEFINITIONS. Except as provided below in this Section, all
terms which are defined in Article I of the Indenture shall have the same
meanings, respectively, in this Appendix A as such terms are given in the
Indenture. In addition, the following terms shall have the following
respective meanings:
"AFTER-TAX EQUIVALENT" means the "AA" Composite Commercial Paper Rate.
"ALL HOLD RATE" means the Applicable LIBOR Rate less .20%; provided that
in no event shall the applicable All Hold Rate be greater than the applicable
Maximum Auction Rate.
"APPLICABLE LIBOR RATE" means, (a) for Auction Periods of 35 days or
less, One-Month LIBOR, (b) for Auction Periods of more than 35 days but less
than 91 days, Three-Month LIBOR, (c) for Auction Periods of more than 90 days
but less than 181 days, Six-Month LIBOR, and (d) for Auction Periods of more
than 180 days, One-Year LIBOR.
"AUCTION" means the implementation of the Auction Procedures on an
Auction Date.
"AUCTION AGENT" means the Initial Auction Agent under the Initial Auction
Agent Agreement unless and until a Substitute Auction Agent Agreement becomes
effective, after which "Auction Agent" shall mean the Substitute Auction
Agent.
"AUCTION AGENT AGREEMENT" means the Initial Auction Agent Agreement
unless and until a Substitute Auction Agent Agreement is entered into, after
which "Auction Agent Agreement" shall mean such Substitute Auction Agent
Agreement.
"AUCTION AGENT FEE" has the meaning set forth in the Auction Agent
Agreement.
"AUCTION DATE" means, initially, March 20, 1996 with respect to the Class
1996A-1 Notes, April 1, 1996 with respect to the Class 1996A-2 Notes, July
15, 1996 with respect to the Class 1996A-3 Notes and July 29, 1996 with
respect to the Class 1996A-4 Notes and thereafter, the Business Day
immediately preceding the first day of each Auction Period for each
respective Class, other than:
(a) each Auction Period commencing after the ownership of the
applicable Auction Notes is no longer maintained in Book-entry Form by the
Securities Depository;
(b) each Auction Period commencing after and during the
continuance of a Payment Default; or
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(c) each Auction Period commencing less than two Business Days
after the cure or waiver of a Payment Default.
Notwithstanding the foregoing, the Auction Date for one or more Auction
Periods may be changed pursuant to Section 2.02(h) of this Appendix A.
"AUCTION NOTES" means, collectively, the Class 1996A Notes and the
Additional Class 1996A Notes.
"AUCTION NOTE INTEREST RATE" means each variable rate of interest per
annum borne by an Auction Note for each Auction Period and determined in
accordance with the provisions of Sections 2.01 and 2.02 hereof; provided,
however, that in the event of a Payment Default, the Auction Note Interest
Rate shall equal the applicable Non-Payment Rate; provided, further, however
that such Auction Note Interest Rate shall in no event exceed the applicable
Maximum Auction Rate.
"AUCTION PERIOD" means the Interest Period applicable to the Auction
Notes during which time the Interest Rate is determined pursuant to Section
2.02(a) hereof, which Auction Period (after the Initial Period for such
Class) initially shall consist generally of (a) 7 days for the Class 1996A-1
Notes, (b) 28 days for the Class 1996A-2 Notes, (c) 28 days for the Class
1996A-3 Notes and (d) 28 days for the Class 1996A-4 Notes, as the same may be
adjusted pursuant to Section 2.02(g) hereof.
"AUCTION PERIOD ADJUSTMENT" means an adjustment to the Auction Period as
provided in Section 2.02(g) hereof.
"AUCTION PROCEDURES" means the procedures set forth in Section 2.02(a)
hereof by which the Auction Rate is determined.
"AUCTION RATE" means the rate of interest per annum that results from
implementation of the Auction Procedures and is determined as described in
Section 2.02(a)(iii)(B) hereof.
"AUTHORIZED DENOMINATIONS" means $100,000 and any integral multiple
thereof.
"AVAILABLE AUCTION NOTES" has the meaning set forth in Section
2.02(a)(iii)(A)(1) hereof.
"BID" has the meaning set forth in Section 2.02(a)(i)(A) hereof.
"BID AUCTION RATE" has the meaning set forth in Section 2.02(a)(iii)(A)
hereof.
"BIDDER" has the meaning set forth in Section 2.02(a)(i)(A) hereof.
"BOND EQUIVALENT YIELD" means, in respect of any security the rate for
which is quoted in THE WALL STREET JOURNAL on a bank discount basis, the
"bond equivalent yield" (expressed as
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a percentage) for such security which appears on Telerate's United States
Treasury and Money Market Composite Page 0223, rounded up to the nearest one
one-hundredth of one percent.
"BOOK-ENTRY FORM" or "BOOK-ENTRY SYSTEM" means a form or system under
which (a) the beneficial right to principal and interest may be transferred
only through a book entry, (b) physical securities in registered form are
issued only to a Securities Depository or its nominee as registered owner,
with the securities "immobilized" to the custody of the Securities
Depository, and (c) the book entry is the record that identifies the owners
of beneficial interests in that principal and interest.
"BROKER-DEALER" means Smith Barney Inc. or any other broker or dealer
(each as defined in the Securities Exchange Act of 1934, as amended),
commercial bank or other entity permitted by law to perform the functions
required of a Broker-Dealer set forth in the Auction Procedures that (a) is a
Participant (or an affiliate of a Participant), (b) has been appointed as
such by the Issuer pursuant to Section 2.02(f) hereof and by Smith Barney
Inc., if applicable, and (c) has entered into a Broker-Dealer Agreement that
is in effect on the date of reference.
"BROKER-DEALER AGREEMENT" means each agreement between the Auction Agent
and a Broker-Dealer, and approved by the Issuer, pursuant to which the
Broker-Dealer agrees to participate in Auctions as set forth in the Auction
Procedures, as from time to time amended or supplemented. Each Broker-Dealer
Agreement shall be in substantially the form of the Amended and Restated
Broker-Dealer Agreement dated as of June 15, 1996, among the Issuer, Bankers
Trust Company, as Auction Agent, and Smith Barney Inc., as Broker-Dealer.
"BROKER-DEALER FEE" has the meaning set forth in the Auction Agent
Agreement.
"BROKER-DEALER FEE RATE" has the meaning set forth in the Auction Agent
Agreement.
"BUSINESS DAY" means a day of the year on which (a) banks located in the
city in which the Principal Office of the Trustee is located are not required
or authorized to remain closed, (b) banks located in the city in which the
Principal Office of the Auction Agent, as set forth in and for purposes of
the Auction Agent Agreement, is located are not required or authorized to
remain closed and (c) The New York Stock Exchange is not closed.
"CARRY-OVER AMOUNT" means the excess, if any, of (a) the amount of
interest on an Auction Note that would have accrued with respect to the
related Interest Period at the applicable Auction Rate over (b) the amount of
interest on such Auction Note actually accrued with respect to such Auction
Note with respect to such Interest Period based on the applicable Maximum
Auction Rate (without regard to the last two clauses of the definition
thereof) together with the unreduced portion of any such excess from prior
Interest Periods; provided that any reference to "principal" or "interest" in
this Appendix A and the Auction Notes shall not include within the meanings
of such words any Carry-over Amount or any interest accrued on any Carry-over
Amount.
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"CLOSING DATE" means the Date of Issuance of the Series 1996A Notes
(March 8, 1996) and the Date of Issuance of the Series 1996B Notes (June 19,
1996).
"COMMERCIAL PAPER DEALER" means Smith Barney Inc., its successors and
assigns, and any other commercial paper dealer appointed pursuant to Section
2.02(c) of this Appendix A.
"ELIGIBLE CARRY-OVER MAKE-UP AMOUNT" means, with respect to each Interest
Period relating to the Auction Notes as to which, as of the first day of such
Interest Period, there is any unpaid Carry-over Amount, an amount equal to
the lesser of (a) interest computed on the principal balance of the Auction
Notes in respect to such Interest Period at a per annum rate equal to the
excess, if any, of applicable Maximum Auction Rate (without regard to the
last two clauses of the definition thereof) over the Auction Rate, together
with the unreduced portion of any such excess from prior Interest Periods and
(b) the aggregate Carry-over Amount remaining unpaid as of the first day of
such Interest Period together with interest accrued and unpaid thereon
through the end of such Interest Period.
"EXISTING OWNER" means (a) with respect to and for the purpose of dealing
with the Auction Agent in connection with an Auction, a Person who is a
Broker-Dealer listed in the Existing Owner Registry at the close of business
on the Business Day immediately preceding the Auction Date for such Auction
and (b) with respect to and for the purpose of dealing with the Broker-Dealer
in connection with an Auction, a Person who is a beneficial owner of Auction
Notes.
"EXISTING OWNER REGISTRY" means the registry of Persons who are owners of
the Auction Notes, maintained by the Auction Agent as provided in the Auction
Agent Agreement.
"HOLD ORDER" has the meaning set forth in Section 2.02(a)(i)(A) hereof.
"INITIAL AUCTION AGENT" means Bankers Trust Company, a New York banking
corporation, its successors and assigns.
"INITIAL AUCTION AGENT AGREEMENT" means, collectively, the Amended and
Restated Auction Agent Agreement dated as of June 15, 1996, by and among the
Issuer, the Trustee and the Initial Auction Agent, including any amendment
thereof or supplement thereto.
"INITIAL PERIOD" means, as to Auction Notes, the period commencing on the
Closing Date and continuing through the day immediately preceding the Initial
Rate Adjustment Date for such Auction Notes.
"INITIAL RATE" means 5.40% for the Class 1996A-1 Notes, 5.35% for the
Class 1996A-2 Notes, 5.52% for the Class 1996A-3 Notes and 5.51% for the
Class 1996A-4 Notes.
"INITIAL RATE ADJUSTMENT DATE" means (a) with respect to the Class
1996A-1 Notes, March 21, 1996, (b) with respect to the Class 1996A-2 Notes,
April 2, 1996, (c) with respect
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to the Class 1996A-3 Notes, July 16, 1996 and (d) with respect to the Class
1996A-4 Notes, July 30, 1996.
"INTEREST PAYMENT DATE" means (a) so long as the Auction Notes bear
interest at an Auction Note Interest Rate for an Interest Period of not
greater than 180 days, the Business Day immediately following the expiration
of the Initial Period for such Class, and each related Auction Period
thereafter and (b) if and for so long as the Auction Notes bear interest at
an Auction Note Interest Rate for an Interest Period of greater than 180
days, each January 1 and July 1.
"INTEREST PERIOD" means, with respect to the Auction Notes, the Initial
Period and each period commencing on an Interest Rate Adjustment Date for
such Class and ending on the day before (a) the next Interest Rate Adjustment
Date for such Class or (b) the Stated Maturity of such Class, as applicable.
"INTEREST RATE ADJUSTMENT DATE" means the date on which an Auction Note
Interest Rate is effective, and means, with respect to the Auction Notes, the
date of commencement of each Auction Period.
"INTEREST RATE DETERMINATION DATE" means, with respect to the Auction
Notes, the Auction Date, or if no Auction Date is applicable to such Class,
the Business Day immediately preceding the date of commencement of an Auction
Period.
"MARKET AGENT" means Smith Barney Inc., New York, New York, in such
capacity hereunder, or any successor to it in such capacity hereunder.
"MAXIMUM AUCTION RATE" means the least of (a) either (i) the Applicable
LIBOR Rate plus 1.50% (if the ratings assigned by the Rating Agency to the
Auction Notes are "Aa3" and "AA-," respectively, or better) or (ii) the
Applicable LIBOR Rate plus 2.50% (if any one of the ratings assigned by the
Rating Agency to the Auction Notes is less than "Aa3" or "AA-,"
respectively), (b) the Net Loan Rate, (c) 18% and (d) the highest rate the
Issuer may legally pay, from time to time, as interest on the Auction Notes.
For purposes of the Auction Agent and the Auction Procedures, the ratings
referred to in this definition shall be the last ratings of which the Auction
Agent has been given written notice pursuant to the Auction Agent Agreement.
"NET LOAN RATE" means, with respect to the Auction Notes, the rate of
interest per annum (rounded to the next highest one one-hundredth of one
percent) equal to the applicable United States Treasury Security Rate plus
1.50%. For Auction Periods of 180 days or less, the applicable United States
Treasury Security Rate is for 91-day United States Treasury securities, and
for Auction Periods of more than 180 days, the applicable United States
Treasury Security Rate is for one-year United States Treasury securities.
"NON-PAYMENT RATE" means One-Month LIBOR plus 1.50%.
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"ONE-MONTH LIBOR," "THREE-MONTH LIBOR," "SIX-MONTH LIBOR" or "ONE-YEAR
LIBOR," means the rate of interest per annum equal to the rate per annum at
which United States dollar deposits having a maturity of one month, three
months, six months or one year, respectively, are offered to prime banks in
the London interbank market which appear on the Reuters Screen LIBOR Page as
of approximately 11:00 a.m., London time, on the Interest Rate Determination
Date. If at least two such quotations appear, One-Month LIBOR, Three-Month
LIBOR, Six-Month LIBOR or One-Year LIBOR, respectively, will be the
arithmetic mean (rounded upwards, if necessary, to the nearest one-hundredth
of one percent) of such offered rates. If fewer than two such quotes appear,
One-Month LIBOR, Three-Month LIBOR, Six-Month LIBOR or One-Year LIBOR,
respectively, with respect to such Interest Period will be determined at
approximately 11:00 a.m., London time, on such Interest Rate Determination
Date on the basis of the rate at which deposits in United States dollars
having a maturity of one month, three months, six months or one year,
respectively, are offered to prime banks in the London interbank market by
four major banks in the London interbank market selected by (a) the Auction
Agent or (b) the Trustee, as applicable, and in a principal amount of not
less than U.S. $1,000,000 and that is representative for a single transaction
in such market at such time. The Auction Agent or the Trustee, as
applicable, will request the principal London office of each of such banks to
provide a quotation of its rate. If at least two quotations are provided,
One-Month LIBOR, Three-Month LIBOR, Six-Month LIBOR or One-Year LIBOR,
respectively, will be the arithmetic mean (rounded upwards, if necessary, to
the nearest one-hundredth of one percent) of such offered rates. If fewer
than two quotations are provided, One-Month LIBOR, Three-Month LIBOR,
Six-Month LIBOR or One-Year LIBOR, respectively, with respect to such
Interest Period will be the arithmetic mean (rounded upwards, if necessary,
to the nearest one-hundredth of one percent) of the rates quoted at
approximately 11:00 a.m., New York City time on such Interest Rate
Determination Date by three major banks in New York, New York selected by (i)
the Auction Agent or (ii) the Trustee, as applicable, for loans in United
States dollars to leading European banks having a maturity of one month,
three months, six months or one year, respectively, and in a principal amount
equal to an amount of not less than U.S. $1,000,000 and that is
representative for a single transaction in such market at such time;
provided, however, that if the banks selected as aforesaid are not quoting as
mentioned in this sentence, One-Month LIBOR, Three-Month LIBOR, Six-Month
LIBOR or One-Year LIBOR, respectively, in effect for the applicable Interest
Period will be One-Month LIBOR, Three-Month LIBOR, Six-Month LIBOR or
One-Year LIBOR, respectively, in effect for the immediately preceding
Interest Period.
"ORDER" has the meaning set forth in Section 2.02(a)(i)(A) hereof.
"PAYMENT DEFAULT" means, with respect to a Class of the Auction Notes,
(a) a default in the due and punctual payment of any installment of interest
on such Class, or (b) a default in the due and punctual payment of any
interest on and principal of such Class at their maturity.
"POTENTIAL OWNER" means any Person (including an Existing Owner that is
(a) a Broker-Dealer when dealing with the Auction Agent and (b) a potential
beneficial owner when dealing
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with a Broker-Dealer) who may be interested in acquiring Auction Notes (or,
in the case of an Existing Owner thereof, an additional principal amount of
Auction Notes).
"PSA" means the Public Securities Association, its successors and assigns.
"QUARTERLY AVERAGE AUCTION RATE" means the simple average of the Auction
Rates for the Auction Dates preceding the current Auction Date by 91 days or
less, including the current Auction Date.
"QUARTERLY AVERAGE T-BILL RATE" means the simple average of the Bond
Equivalent Yields of 91-day Treasury bills auctioned in the 91 days preceding
(but not including) the current Auction Date.
"REGULAR RECORD DATE" means the Business Day next preceding the
applicable Auction Date.
"REUTERS SCREEN LIBOR PAGE" means the display designated as page "LIBOR"
on the Reuters Monitor Money Rates Service (or such other page as may replace
the LIBOR page for the purposes of displaying London interbank offered rates
of major banks).
"S&P" means Standard & Poor's Ratings Services, a Division of The
McGraw-Hill Companies, Inc., its successors and assigns.
"SELL ORDER" has the meaning set forth in Section 2.02(a)(i)(A) hereof.
"SUBMISSION DEADLINE" means 12:30 p.m., eastern time, on any Auction Date
or such other time on any Auction Date by which Broker-Dealers are required
to submit Orders to the Auction Agent as specified by the Auction Agent from
time to time.
"SUBMITTED BID" has the meaning set forth in Section 2.02(a)(iii)(A)
hereof.
"SUBMITTED HOLD ORDER" has the meaning set forth in Section
2.02(a)(iii)(A) hereof.
"SUBMITTED ORDER" has the meaning set forth in Section 2.02(a)(iii)(A)
hereof.
"SUBMITTED SELL ORDER" has the meaning set forth in Section
2.02(a)(iii)(A) hereof.
"SUBSTITUTE AUCTION AGENT" means the Person with whom the Issuer and the
Trustee enter into a Substitute Auction Agent Agreement.
"SUBSTITUTE AUCTION AGENT AGREEMENT" means an auction agent agreement
containing terms substantially similar to the terms of the Initial Auction
Agent Agreement, whereby a Person having the qualifications required by
Section 2.02(e) of this Appendix A agrees with the Trustee and the Issuer to
perform the duties of the Auction Agent under this Appendix A.
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"SUFFICIENT BIDS" has the meaning set forth in Section 2.02(a)(iii)(A)
hereof.
"UNITED STATES TREASURY SECURITY RATE" means, for purposes of calculating
the Net Loan Rate applicable to the Auction Notes, that rate of interest per
annum equal to the Bond Equivalent Yield on the applicable United States
Treasury securities sold at the last auction thereof that immediately
precedes the Interest Rate Adjustment Date for the Auction Notes.
"VARIABLE RATE" means the variable rate of interest per annum, including
the Initial Rate, borne by each Class of Auction Notes during the Initial
Period for such Class, and each Interest Period thereafter as such rate of
interest is determined in accordance with the provisions of Article II hereof.
ARTICLE II
TERMS AND ISSUANCE
Section 2.01. AUCTION NOTES. The Initial Rate Adjustment Date for the
Class 1996A-1 Notes shall be March 21, 1996, the Initial Rate Adjustment Date
for the Class 1996A-2 Notes shall be April 2, 1996, the Initial Rate
Adjustment Date for the Class 1996A-3 Notes shall be July 16, 1996 and the
Initial Rate Adjustment Date for the Class 1996A-4 Notes shall be July 30,
1996.
During the Initial Period, each Class of the Auction Notes shall bear
interest at the Initial Rate for such Class. Thereafter, and except with
respect to an Auction Period Adjustment, the Auction Notes shall bear
interest at an Auction Note Interest Rate based on (a) a 7-day Auction Period
for the Class 1996A-1 Notes, (b) a 28-day Auction Period for the Class
1996A-2 Notes, (c) a 28-day Auction Period for the Class 1996A-3 Notes and
(d) a 28-day Auction Period for the Class 1996A-4 Notes, as determined
pursuant to this Section 2.01 and Section 2.02 hereof.
For each Class of the Auction Notes during the Initial Period for such
Class and each Auction Period thereafter, interest at the applicable Auction
Notes Interest Rate shall accrue daily and shall be computed for the actual
number of days elapsed on the basis of a year consisting of 360 days.
The Auction Note Interest Rate to be borne by each Class of the Auction
Notes after such Initial Period for each Auction Period until an Auction
Period Adjustment, if any, shall be determined as described below. Each such
Auction Period after the Initial Period shall commence on and include the day
following the expiration of the immediately preceding Auction Period and
terminate on and include (i) the fourth Business Day of the following week in
the case of the Class 1996A-1 Notes and (ii) the first Business Day of the
fourth following week in the case of the Class 1996A-2 Notes, the Class
1996A-3 Notes and the Class 1996A-4 Notes; provided, however, that in the
case of the Auction Period that immediately follows the Initial Period for a
Class of the Auction Notes, such Auction Period shall commence on the Initial
Rate Adjustment Date for such Class. The Auction Note Interest Rate on each
Class of the Auction
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Notes for each Auction Period shall be the Auction Rate in effect for such
Auction Period as determined in accordance with Section 2.02(a) hereof;
provided that if, on any Interest Rate Determination Date, an Auction is not
held for any reason, then the Auction Note Interest Rate on such Auction
Notes for the next succeeding Auction Period shall be the applicable Maximum
Auction Rate.
Notwithstanding the foregoing:
1. if the ownership of an Auction Note is no longer maintained in
Book-entry Form, the Auction Note Interest Rate on the Auction Notes of
such Class for any Interest Period commencing after the delivery of
certificates representing Auction Notes of such Class pursuant to the
Indenture shall equal the applicable Maximum Auction Rate on the Business
Day immediately preceding the first day of such subsequent Interest Period;
or
2. if a Payment Default shall have occurred, the Auction Note
Interest Rate on a Class of the Auction Notes for the Interest Period for
such Class commencing on or immediately after such Payment Default, and for
each Interest Period thereafter, to and including the Interest Period, if
any, during which, or commencing less than two Business Days after, such
Payment Default is cured, shall equal the applicable Non-Payment Rate on
the first day of each such Interest Period.
In accordance with Section 2.02(a)(iii)(B) hereof, the Auction Agent
shall promptly give written notice to the Trustee and the Issuer of each
Auction Note Interest Rate (unless the Auction Note Interest Rate is the
applicable Non-Payment Rate) and the Maximum Auction Rate when such rate is
not the Auction Note Interest Rate, applicable to each Class of the Auction
Notes. The Trustee shall notify the Registered Owners of Auction Notes of
the applicable Auction Note Interest Rate applicable to each such Class of
Auction Notes for each Auction Period not later than the third Business Day
of such Auction Period.
Notwithstanding any other provision of the Auction Notes or this
Indenture and except for the occurrence of a Payment Default, interest
payable on each Class of the Auction Notes for an Auction Period shall never
exceed for such Auction Period the amount of interest payable at the
applicable Maximum Auction Rate in effect for such Auction Period.
If the Auction Rate for a Class of Auction Notes is greater than the
applicable Maximum Auction Rate, then the Variable Rate applicable to such
Auction Notes for that Interest Period will be the applicable Maximum Auction
Rate. If the Variable Rate applicable to such Auction Notes for any Interest
Period is the applicable Maximum Auction Rate (without regard to the last two
clauses of the definition thereof), the Trustee shall determine the
Carry-over Amount, if any, with respect to such Auction Notes for such
Interest Period. Such determination of the Carry-over Amount shall be made
separately for each Class of the Auction Notes. Such Carry-over Amount shall
bear interest calculated at a rate equal to One-Month LIBOR (as determined by
the Auction Agent, provided the Trustee has received notice of One-Month
LIBOR from the Auction Agent, and if the Trustee shall not have received such
notice from the Auction Agent,
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then as determined by the Trustee) from the Interest Payment Date for the
Interest Period with respect to which such Carry-over Amount was calculated,
until paid. Any payment in respect of Carry-over Amount shall be applied,
first, to any accrued interest payable thereon and, second, in reduction of
such Carry-over Amount. For purposes of this Appendix A, any reference to
"principal" or "interest" herein shall not include within the meaning of such
words Carry-over Amount or any interest accrued on any such Carry-over
Amount. Such Carry-over Amount shall be separately calculated for each
Auction Note of such Class by the Trustee during such Interest Period in
sufficient time for the Trustee to give notice to each Registered Owner of
such Carry-over Amount as required in the next succeeding sentence. Not less
than four days before the Interest Payment Date for an Interest Period with
respect to which such Carry-over Amount has been calculated by the Trustee,
the Trustee shall give written notice to each Registered Owner of the
Carry-over Amount applicable to each Registered Owner's Auction Note of such
Class, which written notice may accompany the payment of interest by check
made to each such Registered Owner on such Interest Payment Date or otherwise
shall be mailed on such Interest Payment Date by first-class mail, postage
prepaid, to each such Registered Owner at such Registered Owner's address as
it appears on the registration records maintained by the Registrar. Such
notice shall state, in addition to such Carry-over Amount, that, unless and
until an Auction Note of such Class has been redeemed (other than by optional
redemption), after which all accrued Carry-over Amounts (and all accrued
interest thereon) that remains unpaid shall be canceled and no Carry-over
Amount (and interest accrued thereon) shall be paid with respect to an
Auction Note of such Class, (a) the Carry-over Amount (and interest accrued
thereon calculated at a rate equal to One-Month LIBOR) shall be paid by the
Trustee on a Auction Note of such Class on the earliest of (i) the date of
defeasance of any of the Auction Notes of such Class or (ii) the first
occurring Interest Payment Date (or on the date of any such optional
redemption) if and to the extent that (A) the Eligible Carry-over Make-Up
Amount with respect to such subsequent Interest Period is greater than zero,
and (B) moneys are available pursuant to the terms of this Appendix A in an
amount sufficient to pay all or a portion of such Carry-over Amount (and
interest accrued thereon), and (b) interest shall accrue on the Carry-over
Amount at a rate equal to One-Month LIBOR until such Carry-over Amount is
paid in full or is cancelled.
The Carry-over Amount (and interest accrued thereon) for a Class of
Auction Notes shall be paid by the Trustee on Outstanding Auction Notes of
such Class on the earliest of (a) the date of defeasance of any of the
Auction Notes of such Class or (b) the first occurring Interest Payment Date
if and to the extent that (i) the Eligible Carry-over Make-Up Amount with
respect to such Interest Period is greater than zero, and (ii) on such
Interest Payment Date there are sufficient moneys in the Senior Interest
Account of the Revenue Fund to pay all interest due on the Auction Notes on
such Interest Payment Date. Any Carry-over Amount (and any interest accrued
thereon) on any Auction Note which is due and payable on an Interest Payment
Date, which Auction Note is to be redeemed (other than by optional
redemption) on said Interest Payment Date, shall be paid to the Registered
Owner thereof on said Interest Payment Date to the extent that moneys are
available therefor in accordance with the provisions of this Appendix A;
provided, however, that any Carry-over Amount (and any interest accrued
thereon) which is not yet due and payable on said Interest Payment Date shall
be cancelled with respect
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to said Auction Note that is to be redeemed (other than by optional
redemption) on said Interest Payment Date and shall not be paid on any
succeeding Interest Payment Date. To the extent that any portion of the
Carry-over Amount (and any interest accrued thereon) remains unpaid after
payment of a portion thereof, such unpaid portion shall be paid in whole or
in part as required hereunder until fully paid by the Trustee on the earliest
of (a) the date of defeasance of any of the Auction Notes of such Class or
(b) the next occurring Interest Payment Date or Dates, as necessary, if and
to the extent that the conditions in the second preceding sentence are
satisfied. On any Interest Payment Date on which the Trustee pays only a
portion of the Carry-over Amount (and any interest accrued thereon) on
Auction Notes of such Class, the Trustee shall give written notice in the
manner set forth in the immediately preceding paragraph to the Registered
Owner of such Auction Note receiving such partial payment of the Carry-over
Amount remaining unpaid on such Auction Note.
The Interest Payment Date or other date on which such Carry-over Amount
(or any interest accrued thereon) for a Class of Auction Notes shall be paid
shall be determined by the Trustee in accordance with the provisions of the
immediately preceding paragraph, and the Trustee shall make payment of the
Carry-over Amount (and any interest accrued thereon) in the same manner as,
and from the same Account from which, it pays interest on the Auction Notes
on an Interest Payment Date. Any payment of Carry-over Amounts (and interest
accrued thereon) shall reduce the amount of Eligible Carry-Over Make-Up
Amount.
In the event that the Auction Agent no longer determines, or fails to
determine, when required, the Auction Note Interest Rate with respect to a
Class of Auction Notes, or, if for any reason such manner of determination
shall be held to be invalid or unenforceable, the Auction Note Interest Rate
for the next succeeding Interest Period, which Interest Period shall be an
Auction Period, for such Class of Auction Notes shall be the applicable
Maximum Auction Rate as determined by the Auction Agent for such next
succeeding Auction Period, and if the Auction Agent shall fail or refuse to
determine the Maximum Auction Rate, the Maximum Auction Rate shall be
determined by the securities dealer appointed by the Issuer capable of making
such a determination in accordance with the provisions hereof and written
notice of such determination shall be given by such securities dealer to the
Trustee.
Section 2.02. AUCTION NOTE INTEREST RATE.
(a) DETERMINING THE AUCTION NOTE INTEREST RATE. By purchasing
Auction Notes, whether in an Auction or otherwise, each purchaser of the
Auction Notes, or its Broker-Dealer, must agree and shall be deemed by such
purchase to have agreed (x) to participate in Auctions on the terms
described herein, (y) to have its beneficial ownership of the Auction Notes
maintained at all times in Book-entry Form for the account of its
Participant, which in turn will maintain records of such beneficial
ownership and (z) to authorize such Participant to disclose to the Auction
Agent such information with respect to such beneficial ownership as the
Auction Agent may request.
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So long as the ownership of a Class of Auction Notes is maintained in
Book-entry Form by the Securities Depository, an Existing Owner may sell,
transfer or otherwise dispose of Auction Notes of such Class only pursuant
to a Bid or Sell Order placed in an Auction or otherwise sell, transfer or
dispose of Auction Notes through a Broker-Dealer, provided that, in the
case of all transfers other than pursuant to Auctions, such Existing Owner,
its Broker-Dealer or its Participant advises the Auction Agent of such
transfer. Auctions shall be conducted on each Auction Date, if there is an
Auction Agent on such Auction Date, in the following manner (such
procedures to be applicable separately to each Class of the Auction Notes):
(i) (A) Prior to the Submission Deadline on each Auction Date;
(1) each Existing Owner of Auction Notes may submit to
a Broker-Dealer by telephone or otherwise any information as
to:
a. the principal amount of Outstanding Auction
Notes, if any, owned by such Existing Owner which such
Existing Owner desires to continue to own without
regard to the Auction Note Interest Rate for the next
succeeding Auction Period;
b. the principal amount of Outstanding Auction
Notes, if any, which such Existing Owner offers to sell
if the Auction Note Interest Rate for the next
succeeding Auction Period shall be less than the rate
per annum specified by such Existing Owner; and/or
c. the principal amount of Outstanding Auction
Notes, if any, owned by such Existing Owner which such
Existing Owner offers to sell without regard to the
Auction Note Interest Rate for the next succeeding
Auction Period;
and
(2) one or more Broker-Dealers may contact Potential
Owners to determine the principal amount of Auction Notes
which each Potential Owner offers to purchase, if the
Auction Note Interest Rate for the next succeeding Auction
Period shall not be less than the rate per annum specified
by such Potential Owner.
The statement of an Existing Owner or a Potential Owner referred to in
(1) or (2) of this paragraph (A) is herein referred to as an "Order," and
each Existing Owner and
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each Potential Owner placing an Order is herein referred to as a "Bidder";
an Order described in clause (1)a is herein referred to as a "Hold Order";
an Order described in clauses (1)b and (2) is herein referred to as a
"Bid"; and an Order described in clause (1)c is herein referred to as a
"Sell Order."
(B) (1) Subject to the provisions of Section 2.02(a)(ii)
hereof, a Bid by an Existing Owner shall constitute an
irrevocable offer to sell:
a. the principal amount of Outstanding Auction
Notes specified in such Bid if the Auction Note
Interest Rate determined as provided in this Section
2.02(a) shall be less than the rate specified therein;
or
b. such principal amount, or a lesser principal
amount of Outstanding Auction Notes to be determined as
set forth in Section 2.02(a)(iv)(A)(4) hereof, if the
Auction Note Interest Rate determined as provided in
this Section 2.02(a) shall be equal to the rate
specified therein; or
c. such principal amount, or a lesser principal
amount of Outstanding Auction Notes to be determined as
set forth in Section 2.02(a)(iv)(B)(3) hereof, if the
rate specified therein shall be higher than the
applicable Maximum Auction Rate and Sufficient Bids
have not been made.
(2) Subject to the provisions of Section 2.02(a)(ii)
hereof, a Sell Order by an Existing Owner shall constitute
an irrevocable offer to sell:
a. the principal amount of Outstanding Auction
Notes specified in such Sell Order; or
b. such principal amount, or a lesser principal
amount of Outstanding Auction Notes set forth in
Section 2.02(a)(iv)(B)(3) hereof, if Sufficient Bids
have not been made.
(3) Subject to the provisions of Section 2.02(a)(ii)
hereof, a Bid by a Potential Owner shall constitute an
irrevocable offer to purchase:
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a. the principal amount of Outstanding Auction
Notes specified in such Bid if the Auction Note
Interest Rate determined as provided in this
Section 2.02(a) shall be higher than the rate specified
in such Bid; or
b. such principal amount, or a lesser principal
amount of Outstanding Auction Notes set forth in
Section 2.02(a)(iv)(A)(5) hereof, if the Auction Note
Interest Rate determined as provided in this
Section 2.02(a) shall be equal to the rate specified in
such Bid.
(ii) (A) Each Broker-Dealer shall submit in writing to the
Auction Agent prior to the Submission Deadline on each Auction
Date all Orders obtained by such Broker-Dealer and shall specify
with respect to each such Order:
(1) the name of the Bidder placing such Order;
(2) the aggregate principal amount of Auction Notes
that are the subject of such Order;
(3) to the extent that such Bidder is an Existing
Owner:
a. the principal amount of Auction Notes, if
any, subject to any Hold Order placed by such Existing
Owner;
b. the principal amount of Auction Notes, if
any, subject to any Bid placed by such Existing Owner
and the rate specified in such Bid; and
c. the principal amount of Auction Notes, if
any, subject to any Sell Order placed by such Existing
Owner;
and
(4) to the extent such Bidder is a Potential Owner,
the rate specified in such Potential Owner's Bid.
(B) If any rate specified in any Bid contains more than
three figures to the right of the decimal point, the Auction
Agent shall round such rate up to the next higher one thousandth
of 1%.
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(C) If an Order or Orders covering all Outstanding Auction
Notes owned by an Existing Owner is not submitted to the Auction
Agent prior to the Submission Deadline, the Auction Agent shall
deem a Hold Order to have been submitted on behalf of such
Existing Owner covering the principal amount of Outstanding
Auction Notes owned by such Existing Owner and not subject to an
Order submitted to the Auction Agent.
(D) Neither the Issuer, the Trustee nor the Auction Agent
shall be responsible for any failure of a Broker-Dealer to submit
an Order to the Auction Agent on behalf of any Existing Owner or
Potential Owner.
(E) If any Existing Owner submits through a Broker-Dealer
to the Auction Agent one or more Orders covering in the aggregate
more than the principal amount of Outstanding Auction Notes owned
by such Existing Owner, such Orders shall be considered valid as
follows and in the following order of priority:
(1) All Hold Orders shall be considered valid, but
only up to the aggregate principal amount of Outstanding
Auction Notes owned by such Existing Owner, and if the
aggregate principal amount of Auction Notes subject to such
Hold Orders exceeds the aggregate principal amount of
Auction Notes owned by such Existing Owner, the aggregate
principal amount of Auction Notes subject to each such Hold
Order shall be reduced pro rata so that the aggregate
principal amount of Auction Notes subject to such Hold Order
equals the aggregate principal amount of Outstanding Auction
Notes owned by such Existing Owner.
(2) a. Any Bid shall be considered valid up to an
amount equal to the excess of the principal amount of
Outstanding Auction Notes owned by such Existing Owner
over the aggregate principal amount of Auction Notes
subject to any Hold Order referred to in clause (A) of
this paragraph (v);
b. subject to subclause (1) of this clause (B),
if more than one Bid with the same rate is submitted on
behalf of such Existing Owner and the aggregate
principal amount of Outstanding Auction Notes subject
to such Bids is greater than such excess, such Bids
shall be considered valid up to an amount equal to such
excess;
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c. subject to subclauses (1) and (2) of this
clause (B), if more than one Bid with different rates
are submitted on behalf of such Existing Owner, such
Bids shall be considered valid first in the ascending
order of their respective rates until the highest rate
is reached at which such excess exists and then at such
rate up to the amount of such excess; and
d. in any such event, the amount of Outstanding
Auction Notes, if any, subject to Bids not valid under
this clause (B) shall be treated as the subject of a
Bid by a Potential Owner at the rate therein specified;
and
(3) All Sell Orders shall be considered valid up to an
amount equal to the excess of the principal amount of
Outstanding Auction Notes owned by such Existing Owner over
the aggregate principal amount of Auction Notes subject to
Hold Orders referred to in clause (1) of this paragraph (v)
and valid Bids referred to in clause (2) of this paragraph
(E).
(F) If more than one Bid for Auction Notes is submitted on
behalf of any Potential Owner, each Bid submitted shall be a
separate Bid with the rate and principal amount therein
specified.
(G) An Existing Owner that offers to purchase additional
Auction Notes is, for purposes of such offer, treated as a
Potential Owner.
(H) Any Bid or Sell Order submitted by an Existing Owner
covering an aggregate principal amount of Auction Notes not equal
to an Authorized Denomination shall be rejected and shall be
deemed a Hold Order. Any Bid submitted by a Potential Owner
covering an aggregate principal amount of Auction Notes not equal
to an Authorized Denomination shall be rejected.
(I) Any Bid specifying a rate higher than the applicable
Maximum Auction Rate will (1) be treated as a Sell Order if
submitted by an Existing Owner and (2) not be accepted if
submitted by a Potential Owner.
(J) Any Order submitted in an Auction by a Broker-Dealer to
the Auction Agent prior to the Submission Deadline on any Auction
Date shall be irrevocable.
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(iii) (A) Not earlier than the Submission Deadline on each
Auction Date, the Auction Agent shall assemble all valid Orders
submitted or deemed submitted to it by the Broker-Dealers (each
such Order as submitted or deemed submitted by a Broker-Dealer
being herein referred to individually as a "Submitted Hold
Order," a "Submitted Bid" or a "Submitted Sell Order," as the
case may be, or as a "Submitted Order," and collectively as
"Submitted Hold Orders," "Submitted Bids" or "Submitted Sell
Orders," as the case may be, or as "Submitted Orders") and shall
determine:
(1) the excess of the total principal amount of
Outstanding Auction Notes over the sum of the aggregate
principal amount of Outstanding Auction Notes subject to
Submitted Hold Orders (such excess being herein referred to
as the "Available Auction Notes"), and
(2) from the Submitted Orders whether:
a. the aggregate principal amount of Outstanding
Auction Notes subject to Submitted Bids by Potential
Owners specifying one or more rates equal to or lower
than the applicable Maximum Auction Rate;
exceeds or is equal to the sum of:
b. the aggregate principal amount of Outstanding
Auction Notes subject to Submitted Bids by Existing
Owners specifying one or more rates higher than the
applicable Maximum Auction Rate; and
c. the aggregate principal amount of Outstanding
Auction Notes subject to Submitted Sell Orders;
(in the event such excess or such equality exists, other
than because all of the Outstanding Auction Notes are
subject to Submitted Hold Orders, such Submitted Bids
described in subclause a. above shall be referred to
collectively as "Sufficient Bids"); and
(3) if Sufficient Bids exist, the Bid Auction Rate,
which shall be the lowest rate specified in such Submitted
Bids such that if:
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a. (x) each Submitted Bid from Existing Owners
specifying such lowest rate and (y) all other Submitted
Bids from Existing Owners specifying lower rates were
rejected, thus entitling such Existing Owners to
continue to own the principal amount of Auction Notes
subject to such Submitted Bids; and
b. (x) each such Submitted Bid from Potential
Owners specifying such lowest rate and (y) all other
Submitted Bids from Potential Owners specifying lower
rates were accepted;
the result would be that such Existing Owners described in
subclause a. above would continue to own an aggregate principal
amount of Outstanding Auction Notes which, when added to the
aggregate principal amount of Outstanding Auction Notes to be
purchased by such Potential Owners described in subclause b.
above, would equal not less than the Available Auction Notes.
(B) Promptly after the Auction Agent has made the
determinations pursuant to Section 2.02(a)(iii)(A) hereof, the
Auction Agent shall advise the Trustee, the Broker-Dealers and
the Issuer of the Maximum Auction Rate and the All Hold Rate and
the components thereof on the Auction Date and, based on such
determinations, the Auction Rate for the next succeeding Interest
Period as follows:
(1) if Sufficient Bids exist, that the Auction Rate
for the next succeeding Interest Period shall be equal to
the Bid Auction Rate so determined;
(2) if Sufficient Bids do not exist (other than
because all of the Outstanding Auction Notes are subject to
Submitted Hold Orders), that the Auction Rate for the next
succeeding Interest Period shall be equal to the applicable
Maximum Auction Rate; or
(3) if all Outstanding Auction Notes are subject to
Submitted Hold Orders, that the Auction Rate for the next
succeeding Interest Period shall be equal to the applicable
All Hold Rate.
(C) Promptly after the Auction Agent has determined the
Auction Rate, the Auction Agent shall determine and advise the
Trustee of the Auction Note Interest Rate, which rate shall be
the Auction Rate;
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provided, however, that in no event shall the Auction Note
Interest Rate exceed the applicable Maximum Auction Rate.
(iv) Existing Owners shall continue to own the principal amount
of Auction Notes that are subject to Submitted Hold Orders. If
Sufficient Bids have been received by the Auction Agent, the Bid
Auction Rate will be the Auction Note Interest Rate, and Submitted
Bids and Submitted Sell Orders will be accepted or rejected and the
Auction Agent will take such other action as described below in
subparagraph (A).
If the Auction Rate is greater than the applicable Maximum
Auction Rate, the Auction Note Interest Rate shall be equal to the
applicable Maximum Auction Rate. If the Auction Agent has not
received Sufficient Bids (other than because all of the Outstanding
Auction Notes are subject to Submitted Hold Orders), the Auction Note
Interest Rate will be the applicable Maximum Auction Rate. In any of
the cases described above, Submitted Orders will be accepted or
rejected and the Auction Agent will take such other action as
described below in subparagraph (B).
(A) If Sufficient Bids have been made and if the applicable
Maximum Auction Rate does not apply (in which case the Auction
Note Interest Rate shall be the Bid Auction Rate), all Submitted
Sell Orders shall be accepted and, subject to the provisions of
clauses (4) and (5) of this Section 2.02(a)(iv), Submitted Bids
shall be accepted or rejected as follows in the following order
of priority, and all other Submitted Bids shall be rejected:
(1) Existing Owners' Submitted Bids specifying any
rate that is higher than the Auction Note Interest Rate
shall be accepted, thus requiring each such Existing Owner
to sell the aggregate principal amount of Auction Notes
subject to such Submitted Bids;
(2) Existing Owners' Submitted Bids specifying any
rate that is lower than the Auction Note Interest Rate shall
be rejected, thus entitling each such Existing Owner to
continue to own the aggregate principal amount of Auction
Notes subject to such Submitted Bids;
(3) Potential Owners' Submitted Bids specifying any
rate that is lower than the Auction Note Interest Rate shall
be accepted;
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<PAGE>
(4) Each Existing Owners' Submitted Bid specifying a
rate that is equal to the Auction Note Interest Rate shall
be rejected, thus entitling such Existing Owner to continue
to own the aggregate principal amount of Auction Notes
subject to such Submitted Bid, unless the aggregate
principal amount of Outstanding Auction Notes subject to all
such Submitted Bids shall be greater than the principal
amount of Auction Notes (the "remaining principal amount")
equal to the excess of the Available Auction Notes over the
aggregate principal amount of Auction Notes subject to
Submitted Bids described in clauses (2) and (3) of this
Section 2.02(a)(iv)(D)(1), in which event such Submitted Bid
of such Existing Owner shall be rejected in part, and such
Existing Owner shall be entitled to continue to own the
principal amount of Auction Notes subject to such Submitted
Bid, but only in an amount equal to the aggregate principal
amount of Auction Notes obtained by multiplying the
remaining principal amount by a fraction, the numerator of
which shall be the principal amount of Outstanding Auction
Notes owned by such Existing Owner subject to such Submitted
Bid and the denominator of which shall be the sum of the
principal amount of Outstanding Auction Notes subject to
such Submitted Bids made by all such Existing Owners that
specified a rate equal to the Auction Note Interest Rate,
subject to the provisions of Section 2.02(a)(iv)(D) hereof;
and
(5) Each Potential Owner's Submitted Bid specifying a
rate that is equal to the Auction Note Interest Rate shall
be accepted, but only in an amount equal to the principal
amount of Auction Notes obtained by multiplying the excess
of the aggregate principal amount of Available Auction Notes
over the aggregate principal amount of Auction Notes subject
to Submitted Bids described in clauses (2), (3) and (4) of
this Section 2.02(a)(iv)(A) by a fraction the numerator of
which shall be the aggregate principal amount of Outstanding
Auction Notes subject to such Submitted Bid and the
denominator of which shall be the sum of the principal
amount of Outstanding Auction Notes subject to Submitted
Bids made by all such Potential Owners that specified a rate
equal to the Auction Note Interest Rate, subject to the
provisions of Section 2.02(a)(iv)(D) hereof.
(B) If Sufficient Bids have not been made (other than
because all of the Outstanding Auction Notes are subject to
submitted Hold Orders), or if the applicable Maximum Auction Rate
applies, subject to the provisions of Section 2.02(a)(iv)(D)
hereof, Submitted Orders shall be
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accepted or rejected as follows in the following order of
priority and all other Submitted Bids shall be rejected:
(1) Existing Owners' Submitted Bids specifying any
rate that is equal to or lower than the Auction Note
Interest Rate shall be rejected, thus entitling such
Existing Owners to continue to own the aggregate principal
amount of Auction Notes subject to such Submitted Bids;
(2) Potential Owners' Submitted Bids specifying (x)
any rate that is equal to or lower than the Auction Note
Interest Rate shall be accepted and (y) any rate that is
higher than the Auction Note Interest Rate shall be
rejected; and
(3) each Existing Owner's Submitted Bid specifying any
rate that is higher than the Auction Note Interest Rate and
the Submitted Sell Order of each Existing Owner shall be
accepted, thus entitling each Existing Owner that submitted
any such Submitted Bid or Submitted Sell Order to sell the
Auction Notes subject to such Submitted Bid or Submitted
Sell Order, but in both cases only in an amount equal to the
aggregate principal amount of Auction Notes obtained by
multiplying the aggregate principal amount of Auction Notes
subject to Submitted Bids described in clause (2)(x) of this
Section 2.02(a)(iv)(B) by a fraction the numerator of which
shall be the aggregate principal amount of Outstanding
Auction Notes owned by such Existing Owner subject to such
submitted Bid or Submitted Sell Order and the denominator of
which shall be the aggregate principal amount of Outstanding
Auction Notes subject to all such Submitted Bids and
Submitted Sell Orders.
(C) If all Auction Notes are subject to Submitted Hold
Orders, all Submitted Bids shall be rejected.
(D) If, as a result of the procedures described in
paragraph (A) or (B) of this Section 2.02(a)(iv), any Existing
Owner would be entitled or required to sell, or any Potential
Owner would be entitled or required to purchase, a principal
amount of Auction Notes that is not equal to an Authorized
Denomination, the Auction Agent shall, in such manner as in its
sole discretion it shall determine, round up or down the
principal amount of Auction Notes to be purchased or sold by any
Existing Owner or Potential Owner so that the principal amount of
Auction Notes purchased or sold by each Existing Owner or
Potential Owner shall be equal to an Authorized Denomination.
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(E) If, as a result of the procedures described in
paragraph (B) of this Section 2.02(a)(iv), any Potential Owner
would be entitled or required to purchase less than an Authorized
Denomination of Auction Notes, the Auction Agent shall, in such
manner as in its sole discretion it shall determine, allocate
Auction Notes for purchase among Potential Owners so that only
Auction Notes in Authorized Denominations are purchased by any
Potential Owner, even if such allocation results in one or more
of such Potential Owners not purchasing any Auction Notes.
(v) Based on the result of each Auction, the Auction Agent shall
determine the aggregate principal amount of Auction Notes to be
purchased and the aggregate principal amount of Auction Notes to be
sold by Potential Owners and Existing Owners on whose behalf each
Broker-Dealer submitted Bids or Sell Orders and, with respect to each
Broker-Dealer, to the extent that such aggregate principal amount of
Auction Notes to be sold differs from such aggregate principal amount
of Auction Notes to be purchased, determine to which other
Broker-Dealer or Broker-Dealers acting for one or more purchasers such
Broker-Dealer shall deliver, or from which other Broker-Dealer or
Broker-Dealers acting for one or more sellers such Broker-Dealer shall
receive, as the case may be, Auction Notes.
(vi) Any calculation by the Auction Agent or the Trustee, as
applicable, of the Auction Note Interest Rate, the Maximum Auction
Rate, the All Hold Rate and the Non-Payment Rate shall, in the absence
of manifest error, be binding on all other parties.
(vii) Notwithstanding anything in this Appendix A to the
contrary, (A) no Auction for the Auction Notes for an Auction Period
of less than 180 days will be held on any Auction Date hereunder on
which there are insufficient moneys in the Senior Interest Account of
the Interest Fund and the Senior Redemption Account of the Note
Redemption Fund to pay, or otherwise held by the Trustee under the
Indenture and available to pay, the principal of and interest due on
the Auction Notes on the Interest Payment Date immediately following
such Auction Date, and (B) no Auction will be held on any Auction Date
hereunder during the continuance of a Payment Default. The Trustee
shall promptly notify the Auction Agent of any such occurrence.
(b) APPLICATION OF INTEREST PAYMENTS FOR THE AUCTION NOTES.
(i) The Trustee shall determine not later than 2:00 p.m.,
eastern time, on the Business Day next succeeding an Interest Payment
Date, whether a Payment Default has occurred. If a Payment Default
has occurred, the Trustee shall, not later than 2:15 p.m., eastern
time, on such Business Day, send a notice thereof in substantially the
form of Exhibit G attached hereto to the Auction
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Agent by telecopy or similar means and, if such Payment Default is
cured, the Trustee shall immediately send a notice in substantially
the form of Exhibit H attached hereto to the Auction Agent by
telecopy or similar means.
(ii) Not later than 2:00 p.m., eastern time, on each anniversary
of the Closing Date, the Trustee shall pay to the Auction Agent, in
immediately available funds out of amounts in the Revenue Fund, an
amount equal to the Auction Agent Fee as set forth in the Auction
Agent Agreement. Not later than 2:00 p.m., eastern time, on each
Auction Date, the Trustee shall pay to the Auction Agent, in
immediately available funds out of amounts in the Revenue Fund, an
amount equal to the Broker-Dealer Fee as calculated in the Auction
Agent Agreement. The Trustee shall, from time to time at the request
of the Auction Agent and at the direction of an Authorized Officer,
reimburse the Auction Agent for its reasonable expenses as provided in
the Auction Agent Agreement, such expenses to be paid out of amounts
in the Revenue Fund.
(c) CALCULATION OF MAXIMUM AUCTION RATE, ALL HOLD RATE AND
NON-PAYMENT RATE. The Auction Agent shall calculate the applicable Maximum
Auction Rate and All Hold Rate, as the case may be, on each Auction Date
and shall notify the Trustee and the Broker-Dealers of the applicable
Maximum Auction Rate and All Hold Rate, as the case may be, as provided in
the Auction Agent Agreement; provided, that if the ownership of the Auction
Notes is no longer maintained in Book-entry Form, or if a Payment Default
has occurred, then the Trustee shall determine the applicable Maximum
Auction Rate, All Hold Rate and Non-Payment Rate for each such Interest
Period. The Market Agent shall calculate the Index (if the Index is other
than the PSA Municipal Swap Index) on each Interest Rate Determination Date
and shall notify the Trustee and the Auction Agent of the Index prior to
9:30 a.m., eastern time, on each Interest Rate Determination Date. If the
ownership of the Auction Notes is no longer maintained in Book-entry Form
by the Securities Depository, the Trustee shall calculate the applicable
Maximum Auction Rate on the Business Day immediately preceding the first
day of each Interest Period after the delivery of certificates representing
the Auction Notes pursuant to the Indenture. If a Payment Default shall
have occurred, the Trustee shall calculate the Non-Payment Rate on the
Interest Rate Determination Date for (i) each Interest Period commencing
after the occurrence and during the continuance of such Payment Default and
(ii) any Interest Period commencing less than two Business Days after the
cure of any Payment Default. The determination by the Trustee or the
Auction Agent, as the case may be, of the applicable Maximum Auction Rate,
All Hold Rate and Non-Payment Rate shall (in the absence of manifest error)
be final and binding upon all parties. If calculated or determined by the
Auction Agent, the Auction Agent shall promptly advise the Trustee of the
applicable Maximum Auction Rate and All Hold Rate. The determination by
the Market Agent of the Index shall (in the absence of manifest error) be
final and binding upon all parties.
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If the Federal Reserve Bank of New York does not make available its
30-day commercial paper rate for purposes of determining the "AA" Composite
Commercial Paper Rate, the Auction Agent shall notify the Trustee of such
fact and the Trustee shall thereupon request that an Authorized Officer
promptly appoint at least two Commercial Paper Dealers (in addition to
Smith Barney Inc.) to provide commercial paper quotes for purposes of
determining the "AA" Composite Commercial Paper Rate. Pending appointment
of both such additional Commercial Paper Dealers, Smith Barney Inc. and any
other Commercial Paper Dealer appointed and serving as such shall provide
the required quotations, and such quotations shall be used for purposes of
this Appendix A. Smith Barney Inc. is hereby appointed as a Commercial
Paper Dealer to provide commercial paper quotes for purposes of determining
the "AA" Composite Commercial Paper Rate as provided above.
(d) NOTIFICATION OF RATES, AMOUNTS AND PAYMENT DATES.
(i) By 12:00 noon, eastern time, on the Business Day following
each Regular Record Date, the Trustee shall determine the aggregate
amounts of interest distributable on the next succeeding Interest
Payment Date to the beneficial owners of Auction Notes.
(ii) At least four days prior to any Interest Payment Date, the
Trustee shall:
(A) confirm with the Auction Agent, so long as no Payment
Default has occurred and is continuing and the ownership of the
Auction Notes is maintained in Book-entry Form by the Securities
Depository, (1) the date of such next Interest Payment Date and
(2) the amount payable to the Auction Agent on the Auction Date
pursuant to Section 2.02(b)(ii) hereof;
(B) pursuant to Section 2.01 hereof, advise the Registered
Owners of a Class of Auction Notes of any Carry-over Amount
accruing on such Auction Notes; and
(C) advise the Securities Depository, so long as the
ownership of the Auction Notes is maintained in Book-entry Form
by the Securities Depository, upon request, of the aggregate
amount of interest distributable on such next Interest Payment
Date to the beneficial owners of each Class of the Auction Notes.
If any day scheduled to be an Interest Payment Date shall be changed
after the Trustee shall have given the notice or confirmation referred to
in clause (i) of the preceding sentence, the Trustee shall, not later than
11:15 a.m., eastern time, on the Business Day next preceding the earlier of
the new Interest Payment Date or the old
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Interest Payment Date, by such means as the Trustee deems practicable, give
notice of such change to the Auction Agent, so long as no Payment Default
has occurred and is continuing and the ownership of the Auction Notes is
maintained in Book-entry Form by the Securities Depository.
(e) AUCTION AGENT.
(i) Bankers Trust Company is hereby appointed as Initial Auction
Agent to serve as agent for the Issuer in connection with Auctions.
The Trustee and the Issuer will, and the Trustee is hereby directed
to, enter into the Initial Auction Agent Agreement with Bankers Trust
Company, as the Initial Auction Agent. Any Substitute Auction Agent
shall be (A) a bank, national banking association or trust company
duly organized under the laws of the United States of America or any
state or territory thereof having its principal place of business in
the Borough of Manhattan, New York, or such other location as approved
by the Trustee in writing and having a combined capital stock or
surplus of at least $50,000,000, or (B) a member of the National
Association of Securities Dealers, Inc., having a capitalization of at
least $50,000,000, and, in either case, authorized by law to perform
all the duties imposed upon it hereunder and under the Auction Agent
Agreement. The Auction Agent may at any time resign and be discharged
of the duties and obligations created by this Appendix A by giving at
least 90 days' notice to the Trustee, the Market Agent and the Issuer.
The Auction Agent may be removed at any time by the Trustee upon the
written direction of an Authorized Officer or the Registered Owners of
51% of the aggregate principal amount of the Auction Notes then
Outstanding, and if by such Registered Owners, by an instrument signed
by such Registered Owners or their attorneys and filed with the
Auction Agent, the Issuer and the Trustee upon at least 90 days'
written notice. Neither resignation nor removal of the Auction Agent
pursuant to the preceding two sentences shall be effective until and
unless a Substitute Auction Agent has been appointed and has accepted
such appointment. If required by the Issuer, a Substitute Auction
Agent Agreement shall be entered into with a Substitute Auction Agent.
Notwithstanding the foregoing, the Auction Agent may terminate the
Auction Agent Agreement if, within 25 days after notifying the
Trustee, the Market Agent and the Issuer in writing that it has not
received payment of any Auction Agent Fee due it in accordance with
the terms of the Auction Agent Agreement, the Auction Agent does not
receive such payment.
(ii) If the Auction Agent shall resign or be removed or be
dissolved, or if the property or affairs of the Auction Agent shall be
taken under the control of any state or federal court or
administrative body because of bankruptcy or insolvency, or for any
other reason, the Trustee at the direction of an Authorized Officer,
shall use its best efforts to appoint a Substitute Auction Agent.
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(iii) The Auction Agent is acting as agent for the Issuer in
connection with Auctions. In the absence of bad faith, negligent
failure to act or negligence on its part, the Auction Agent shall not
be liable for any action taken, suffered or omitted or any error of
judgment made by it in the performance of its duties under the Auction
Agent Agreement and shall not be liable for any error of judgment made
in good faith unless the Auction Agent shall have been negligent in
ascertaining (or failing to ascertain) the pertinent facts.
(f) BROKER-DEALERS.
(i) The Auction Agent will enter into a Broker-Dealer Agreement
with Smith Barney Inc., as the initial Broker-Dealer. An Authorized
Officer may, from time to time, approve one or more additional persons
to serve as Broker-Dealers under Broker-Dealer Agreements and shall be
responsible for providing such Broker-Dealer Agreements to the Trustee
and the Auction Agent, provided, however that while Smith Barney Inc.
is serving as a Broker-Dealer, Smith Barney Inc. shall have the right
to consent to the approval of any additional Broker-Dealers, which
consent will not be unreasonably withheld.
(ii) Any Broker-Dealer may be removed at any time, at the request
of an Authorized Officer, but there shall, at all times, be at least
one Broker-Dealer appointed and acting as such.
(g) CHANGES IN AUCTION PERIOD OR PERIODS AND CERTAIN PERCENTAGES.
(i) While any of the Auction Notes are Outstanding, the Issuer
may, from time to time, change the length of one or more Auction
Periods (an "Auction Period Adjustment"), in order to conform with
then current market practice with respect to similar securities or to
accommodate economic and financial factors that may affect or be
relevant to the length of the Auction Period and the interest rate
borne by the Auction Notes. The Issuer shall not initiate an Auction
Period Adjustment unless it shall have received the written consent of
the Market Agent, which consent shall not be unreasonably withheld,
not later than nine days prior to the Auction Date for such Auction
Period. The Issuer shall initiate the Auction Period Adjustment by
giving written notice by Issuer Order to the Trustee, the Auction
Agent, the Market Agent, each Rating Agency and the Securities
Depository in substantially the form of, or containing substantially
the information contained in, Exhibit I attached hereto at least 10
days prior to the Auction Date for such Auction Period.
(ii) Any such adjusted Auction Period shall not be less than 7
days nor more than 366 days.
A-26
<PAGE>
(iii) An Auction Period Adjustment shall take effect only if
(A) the Trustee and the Auction Agent receive, by 11:00 a.m., eastern
time, on the Business Day before the Auction Date for the first such
Auction Period, an Issuer Certificate in substantially the form
attached as, or containing substantially the same information
contained in, Exhibit J attached hereto, authorizing the Auction
Period Adjustment specified in such certificate along with a copy of
the written consent of the Market Agent and, (B) Sufficient Bids exist
as of the Auction on the Auction Date for such first Auction Period.
If the condition referred to in (A) above is not met, the applicable
Auction Note Interest Rate for the next Auction Period shall be
determined pursuant to the above provisions of this Section 2.02 and
the Auction Period shall be the Auction Period determined without
reference to the proposed change. If the condition referred to in (A)
is met but the condition referred in (B) above is not met, the
applicable Auction Note Interest Rate for the next Auction Period
shall be the applicable Maximum Auction Rate and the Auction Period
shall be the Auction Period determined without reference to the
proposed change.
In connection with any Auction Period Adjustment, the Auction
Agent shall provide such further notice to such parties as is
specified in Section 2.03 of the Auction Agent Agreement.
(h) CHANGES IN THE AUCTION DATE. The Market Agent, with the written
consent of an Authorized Officer and, if applicable, upon receipt of the
opinion of Note Counsel as required below, may specify an earlier Auction
Date (but in no event more than five Business Days earlier) than the
Auction Date that would otherwise be determined in accordance with the
definition of "Auction Date" in Section 1.01 of this Appendix A with
respect to one or more specified Auction Periods in order to conform with
then current market practice with respect to similar securities or to
accommodate economic and financial factors that may affect or be relevant
to the day of the week constituting an Auction Date and the interest rate
borne on the Auction Notes. The Market Agent shall deliver a written
request for consent to such change in the length of the Auction Date to the
Issuer at least 14 days prior to the effective date of such change. If the
Issuer shall have delivered such written consent to the Market Agent, the
Market Agent shall provide notice of its determination to specify an
earlier Auction Date for one or more Auction Periods by means of a written
notice delivered at least 10 days prior to the proposed changed Auction
Date to the Trustee, the Auction Agent, the Issuer, each Rating Agency and
the Securities Depository. Such notice shall be substantially in the form
of, or contain substantially the information contained in, Exhibit K
attached hereto.
In connection with any change described in this Section 2.02(h), the
Auction Agent shall provide such further notice to such parties as is
specified in Section 2.03 of the Auction Agent Agreement.
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<PAGE>
Section 2.03. ADDITIONAL PROVISIONS REGARDING THE INTEREST RATES ON THE
AUCTION NOTES. The determination of a Variable Rate by the Auction Agent or
any other Person pursuant to the provisions of the applicable Section of this
Article II shall be conclusive and binding on the Registered Owners of the
Class of Auction Notes to which such Variable Rate applies, and the Issuer
and the Trustee may rely thereon for all purposes.
In no event shall the cumulative amount of interest paid or payable on a
Class of Auction Notes (including interest calculated as provided herein,
plus any other amounts that constitute interest on the Auction Notes of such
Class under applicable law, which are contracted for, charged, reserved,
taken or received pursuant to the Auction Notes of such Class or related
documents) calculated from the date of issuance of the Auction Notes of such
Class through any subsequent day during the term of the Auction Notes of such
Class or otherwise prior to payment in full of the Auction Notes of such
Class exceed the amount permitted by applicable law. If the applicable law
is ever judicially interpreted so as to render usurious any amount called for
under the Auction Notes of such Class or related documents or otherwise
contracted for, charged, reserved, taken or received in connection with the
Auction Notes of such Class, or if the redemption or acceleration of the
maturity of the Auction Notes of such Class results in payment to or receipt
by the Registered Owner or any former Registered Owner of the Auction Notes
of such Class of any interest in excess of that permitted by applicable law,
then, notwithstanding any provision of the Auction Notes of such Class or
related documents to the contrary, all excess amounts theretofore paid or
received with respect to the Auction Notes of such Class shall be credited on
the principal balance of the Auction Notes of such Class (or, if the Auction
Notes of such Class have been paid or would thereby be paid in full, refunded
by the recipient thereof), and the provisions of the Auction Notes of such
Class and related documents shall automatically and immediately be deemed
reformed and the amounts thereafter collectible hereunder and thereunder
reduced, without the necessity of the execution of any new document, so as to
comply with the applicable law, but so as to permit the recovery of the
fullest amount otherwise called for under the Auction Notes of such Class and
under the related documents.
Section 2.04. QUALIFICATIONS OF MARKET AGENT. The Market Agent shall be
a member of the National Association of Securities Dealers, Inc., have a
capitalization of at least $50,000,000 and be authorized by law to perform
all the duties imposed upon it by this Appendix A. The Market Agent may
resign and be discharged of the duties and obligations created by this
Appendix A by giving at least 30 days notice to the Issuer and the Trustee,
provided that such resignation shall not be effective until the appointment
of a successor market agent by the Issuer and the acceptance of such
appointment by such successor market agent. The Market Agent may be replaced
at the direction of the Issuer, by an instrument signed by an Authorized
Officer, filed with the Market Agent and the Trustee at least 30 days before
the effective date of such replacement, provided that such replacement shall
not be effective until the appointment of a successor market agent by the
Issuer and the acceptance of such appointment by such successor market agent.
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<PAGE>
In the event that the Market Agent shall be removed or be dissolved, or
if the property or affairs of the Market Agent shall be taken under the
control of any state or federal court or administrative body because of
bankruptcy or insolvency, or for any other reason, and there is no Market
Agent and the Issuer shall not have appointed its successor as Market Agent,
the Trustee, notwithstanding the provisions of the first paragraph of this
Section, shall be deemed to be the Market Agent for all purposes of this
Appendix A until the appointment by the Issuer of the successor Market Agent.
Nothing in this Section shall be construed as conferring on the Trustee
additional duties other than as set forth herein.
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APPENDIX B
CERTAIN TERMS AND PROVISIONS OF
THE CLASS 1996B NOTES AND THE CLASS 1996B-2 NOTES
ARTICLE I
Section 1.01. DEFINITIONS. In addition to the terms defined elsewhere in
this Indenture, the following terms shall have the following meanings with
respect to the Class 1996B Notes and the Class 1996B-2 Notes, unless the context
otherwise requires:
"APPLICABLE RATE" shall have the meaning set forth in Section 2.01(b)
hereof.
"AUTHORIZED DENOMINATIONS" shall mean $100,000 and any multiple thereof.
"BOND-EQUIVALENT YIELD" shall mean, in respect of any security with a
maturity of six months or less the rate for which is quoted in THE WALL STREET
JOURNAL on a bank discount basis, a yield (expressed as a percentage) calculated
in accordance with the following formula and rounded up to the nearest one
one-hundredth of one percent:
Bond Equivalent Yield = Q x N x 100
-------------
360 - (T x Q)
where "Q" refers to the per annum rate for the security quoted on a bank
discount basis and expressed as a decimal, "N" refers to 365 or 366 (days),
as the case may be, and "T" refers to the number of days to maturity.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday, holiday
or day on which banks in New York, New York, or the New York Stock Exchange,
the Trustee or the Calculation Agent, are authorized or permitted by law or
executive order to close.
"CALCULATION AGENT" shall mean any person appointed as such pursuant to
Section 2.07 hereof.
"DEPOSITORY" shall mean The Depository Trust Company or any successor
securities depository selected or approved by the Issuer.
"HOLDER" as used in this Appendix B shall mean the beneficial owner of
any Class 1996B Note or any Class 1996B-2 Note.
"INITIAL INTEREST PAYMENT DATE" shall mean April 1, 1996 for the Class
1996B Notes and August 1, 1996 for the Class 1996B-2 Notes.
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"INITIAL INTEREST PERIOD" shall mean (i) for the Series 1996B Notes, the
period from and including the date of delivery of the Class 1996B Notes and
ending on March 31, 1996 and (ii) for the Class 1996B-2 Notes, the period
from and including the date of delivery of the Class 1996B-2 Notes and ending
on July 31, 1996.
"INTEREST AMOUNT" shall mean the amount of interest distributable in
respect of each $100,000 in principal amount (taken, without rounding, to
.0001 of one cent) of Class 1996B Notes and Class 1996B-2 Notes for any
Interest Period or part thereof, as calculated in accordance with Section
2.07 hereof.
"INTEREST PAYMENT DATE" means (i) April 1, 1996 and the first day of each
month thereafter, and the maturity date for any Class 1996B Note, (ii) August 1,
1996 and the first day of each month thereafter, and the maturity date
from any Class 1996B-2 Note, or if any such date is not a Business Day, the
next succeeding Business Day (but only for interest accrued through the last
day of the calendar month next preceding such Interest Payment Date).
"INTEREST PERIOD" means the Initial Interest Period for the Class 1996B
Notes and the Class 1996B-2 Notes and the period beginning on the first day of
each month and ending on the last day of each month.
"LIBOR DETERMINATION DATE" shall mean the Business Day immediately
preceding the first day of each Interest Period.
"LIBOR-BASED RATE" shall mean, for the Class 1996B Notes, One-Month LIBOR
plus 0.75%, and for the Class 1996B-2 Notes, One-Month LIBOR plus .74%.
"MAXIMUM INTEREST RATE" shall mean the lesser of (a) 16% per annum or
(b) the maximum rate of interest permitted under State law for student loan
notes of the Issuer.
"ONE-MONTH LIBOR" means the rate of interest per annum equal to the rate
per annum at which United States dollar deposits having a maturity of one month
are offered to prime banks in the London interbank market which appear on the
Telerate Service LIBOR Page as of approximately 11:00 a.m., London time, on the
LIBOR Determination Date. If at least two such quotations appear, One-Month
LIBOR will be the arithmetic mean (rounded upwards, if necessary, to the nearest
one-hundredth of one percent) of such offered rates. If fewer than two such
quotes appear, One-Month LIBOR with respect to such Interest Period will be
determined at approximately 11:00 a.m., London time, on such LIBOR Determination
Date on the basis of the rate at which deposits in United States dollars having
a maturity of three months are offered to prime banks in the London interbank
market by four major banks in the London interbank market selected by (i) the
Calculation Agent (if the Calculation Agent is other than the Trustee) or (ii)
the Trustee, and in a principal amount of not less than U.S. $1,000,000 and that
is representative for a single transaction in such market at such time. The
Calculation Agent or the Trustee, as applicable, will request the principal
London office of each of such banks to provide a quotation of its rate. If at
least two quotations are provided, One-Month LIBOR will
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be the arithmetic mean (rounded upwards, if necessary, to the nearest
one-hundredth of one percent) of such offered rates. If fewer than two
quotations are provided, One-Month LIBOR with respect to such Interest Period
will be the arithmetic mean (rounded upwards, if necessary, to the nearest
one-hundredth of one percent) of the rates quoted at approximately 11:00
a.m., New York City time on such LIBOR Determination Date by three major
banks in New York, New York selected by (x) the Calculation Agent or (y) the
Trustee, as applicable, for loans in United States dollars to leading
European banks having a maturity of three months and in a principal amount
equal to an amount of not less than U.S. $1,000,000 and that is
representative for a single transaction in such market at such time;
provided, however, that if the banks selected as aforesaid are not quoting as
mentioned in this sentence, One-Month LIBOR in effect for the applicable
Interest Period, will be One-Month LIBOR in effect for the immediately
preceding Interest Period.
"PARTICIPANT" shall mean a member of or participant in, the Depository.
"PAYMENT DEFAULT" shall mean failure to make payment of interest on,
premium, if any, and principal of the Class 1996B Notes or the Class 1996B-2
Notes when due, by the Issuer.
"PERSON" means and includes, unless otherwise specified, an individual,
corporation, company, trust, estate partnership or association.
"RECORD DATE" shall mean the Business Day immediately preceding the
Interest Payment Date.
"REDEMPTION DATE," when used with respect to any Class 1996B Notes or any
Class 1996B-2 Notes to be redeemed, shall mean the date fixed for such
redemption.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended.
ARTICLE II
TERMS AND ISSUANCE
Section 2.01. INTEREST ON THE CLASS 1996B NOTES AND THE CLASS 1996B-2
NOTES.
(a) Interest on the Class 1996B Notes and the Class 1996B-2 Notes
shall accrue for each Interest Period and shall be payable in arrears, on
each Interest Payment Date.
(b) The rate of interest on the Class 1996B Notes for the first
Interest Period shall be 6.0625%. The rate of interest on the Class 1996B-2
Notes for the first Interest Period shall be 6.1892%. The rate of
interest on the Class 1996B Notes and the Class
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<PAGE>
1996B-2 Notes for each subsequent Interest Period shall be determined by
the Calculation Agent on the LIBOR Determination Date and shall be the
LIBOR-Based Rate.
If a Payment Default occurs, the Applicable Rate (as defined below) with
respect to the Class 1996B Notes or the Class 1996B-2 Notes shall be the same
rate per annum as if no such Payment Default had occurred.
The rate per annum at which interest is payable on the Class 1996B Notes
and the Class 1996B-2 Notes for any Interest Period is herein referred to as the
"Applicable Rate." Notwithstanding anything herein to the contrary, the
Applicable Rate cannot exceed the Maximum Interest Rate.
Section 2.02. PAYMENTS. So long as the Class 1996B Notes and the Class
1996B-2 Notes are registered in the name of the Depository or the nominee
thereof, payment of interest (other than at maturity) and premium, if any, on,
and of principal at redemption of, the Class 1996B Notes and the Class 1996B-2
Notes shall be made to the Depository by wire transfer provided proper wire
instructions are received. Each Holder of Class 1996B Notes and Class 1996B-2
Notes, by such Holder's purchase of Class 1996B Notes and Class 1996B-2 Notes,
appoints the Trustee as its agent in connection with the payment by such Holder
of its share, if any, of the amounts payable to the Calculation Agent pursuant
to Section 2.07(a) hereof.
Section 2.03. NOTICE OF PAYMENT DEFAULTS AND CURES. By 12:30 p.m. on the
Business Day immediately succeeding each Interest Payment Date, the Trustee will
determine if a Payment Default has occurred. If a Payment Default has occurred,
the Trustee shall, if the Calculation Agent is other than the Trustee, notify
the Calculation Agent by 1:00 p.m. of such Payment Default. If a Payment
Default has been cured, the Trustee shall, if the Calculation Agent is other
than the Trustee, so notify the Calculation Agent by 5:00 p.m. on the day such
Payment Default is cured.
Section 2.04. CALCULATION OF RATES; TERMINATION OF BOOK ENTRY SYSTEM. The
Calculation Agent shall calculate the LIBOR-Based Rate on the Business Day
immediately preceding the first day of each Interest Period. The determination
by the Calculation Agent of the Applicable Rate will (in the absence of manifest
error) be final and binding upon the Owners of the Class 1996B Notes and the
Class 1996B-2 Notes and all other parties.
If the ownership of the Class 1996B Notes or the Class 1996B-2 Notes is
no longer maintained in book-entry form such Class 1996B Notes or such Class
1996B-2 Notes may be exchanged for other Class 1996B Notes or Class 1996B-2
Notes, in Authorized Denominations, and of a like aggregate principal amount,
upon surrender of the Class 1996B Notes or the Class 1996B-2 Notes to be
exchanged at the principal office of the Trustee. Class 1996B Notes and
Class 1996B-2 Notes, upon surrender thereof at the principal office of the
Trustee, duly endorsed for transfer or accompanied by an assignment duly
executed by the Holder of its attorney duly authorized in writing, will be
transferred to a transferee or transferees, in the form of one or more new
fully registered Class 1996B Notes or Class 1996B-2 Notes, in Authorized
B-4
<PAGE>
Denomination, and of a like aggregate principal amount having the same
interest rate and bearing numbers not previously assigned.
In all cases in which the privilege of exchanging or transferring Class
1996B Notes or Class 1996B-2 Notes is exercised, the Issuer will cause to be
executed and delivered Class 1996B Notes or Class 1996B-2 Notes in accordance
with the provisions of the Resolution. For every such exchange or transfer of
Class 1996B Notes or Class 1996B-2 Notes, the Trustee will require payment by
the Holder of any tax or other governmental charge required to be paid with
respect to such exchange or transfer. All expenses, other than any tax or other
government charge, incurred by the Trustee or the Issuer with respect to each
such transfer or exchange will be paid by the Issuer.
The Trustee will not be required to transfer any Class 1996B Note or any
Class 1996B-2 Note during the period of five Business Days next preceding the
mailing of notice of redemption as described herein. After giving of such
notice of redemption, the Trustee will not be required to transfer or exchange
any Class 1996B Note or any Class 1996B-2 Note, which Class 1996B Note or Class
1996B-2 Note or portion thereof has been called for redemption.
Section 2.05. COMPUTATION OF INTEREST. The amount of interest
distributable to Holders of Class 1996B Notes and Class 1996B-2 Notes in respect
of each $100,000 in principal amount thereof for any Interest Period or part
thereof shall be calculated by applying the Applicable Rate for such Interest
Period or part thereof to the principal amount of $100,000, multiplying such
product by the actual number of days in the Interest Period or part thereof
concerned divided by 360, and truncating the resultant figure to the nearest one
cent. Interest on the Class 1996B Notes and the Class 1996B-2 Notes shall be
computed by the Trustee on the basis of a 360-day year for the number of days
actually elapsed. In the event an Interest Payment Date occurs with respect to
any Interest Period on a date other than the first day of the next Interest
Period, the Trustee, after confirming the calculation required above, shall
calculate the portion of the Interest Amount payable on such Interest Payment
Date and the portion payable on the next succeeding Interest Payment Date.
Section 2.06. NOTIFICATION OF RATES, AMOUNTS AND PAYMENT DATES.
(a) The Trustee shall determine the aggregate amount of interest
distributable on the next succeeding Interest Payment Date to the Holders
of the Class 1996B Notes and the Class 1996B-2 Notes. So long as the
ownership of the Class 1996B Notes or the Class 1996B-2 Notes is maintained
in book-entry form by the Depository, the Trustee shall advise the
Depository of each Record Date for the Class 1996B Notes or the
Class 1996B-2 Notes at least two Business Days prior thereto.
(b) Promptly after the Date of Issue and each Interest Payment Date,
and in any event at least 10 days prior to each Interest Payment Date
following the Initial Interest Payment Date, the Trustee shall:
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<PAGE>
(i) so long as no Payment Default has occurred and is continuing
and the ownership of the Class 1996B Notes or the Class 1996B-2 Notes
is maintained in book-entry form by the Depository, confirm the
Calculation Agent's determination of (1) the date of such next
Interest Payment Date and (2) the amount payable to the Calculation
Agent and notify the Calculation Agent of any discrepancy therein; and
(ii) advise the Depository, so long as the ownership of the Class
1996B Notes or the Class 1996B-2 Notes is maintained in book-entry
form by the Depository, of the Applicable Rate and the Interest Amount
in respect of the next succeeding Interest Period.
Section 2.07. CALCULATION AGENT.
(a) Smith Barney Inc. shall serve as the initial Calculation Agent
for the Class 1996B Notes and the Class 1996B-2 Notes. The Calculation
Agent shall be (i) a bank or trust company duly organized under the laws of
the United States of America or any state or territory thereof, and having
a combined capital stock, surplus and undivided profits of at least
$15,000,000 or (ii) a member of the National Association of Securities
Dealers, Inc., having a capitalization of at least $15,000,000 and, in
either case, authorized by law to perform all the duties imposed upon it
hereunder. The Calculation Agent may resign and be discharged of the
duties and obligations created hereunder by giving at least 90 days'
written notice to the Issuer and the Trustee (30 days' written notice if
the Calculation Agent has not been paid its fee for more than 30 days). The
Calculation Agent may be removed at any time by the Trustee if the
Calculation Agent is an entity other than the Trustee, acting at the
direction of the Issuer or the holders of 51% of the aggregate principal
amount of the Class 1996B Notes or the Class 1996B-2 Notes, by an
instrument signed by the Trustee and filed with the Calculation Agent and
the Issuer upon at least 90 days' notice. If the Calculation Agent and the
Trustee are the same entity, the Calculation Agent may be removed as
described above, with the Issuer acting in lieu of the Trustee.
(b) In the event that the Calculation Agent shall resign or be
removed or dissolved, or if the property or affairs of the Calculation
Agent shall be taken under the control of any state or federal court or
administrative body because of bankruptcy or insolvency, or for any other
reason, the Issuer shall use its best efforts to appoint a successor as
Calculation Agent, and the Trustee shall thereupon enter into an agreement
with such successor to perform the duties of the Calculation Agent as
described herein.
(c) The Calculation Agent (if other than the Trustee) shall be acting
as agent for the Trustee, as trustee, registrar and paying agent for the
Class 1996B Notes and the Class 1996B-2 Notes, in connection with its
duties hereunder. In the absence of bad faith or negligence on its part,
the Calculation Agent shall not be liable for any action taken, suffered or
omitted or for any error of judgment made by it in the performance
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of its duties hereunder and shall not be liable for any error of judgment
made in good faith unless the Calculation Agent shall have been negligent in
ascertaining (or failing to ascertain) the pertinent facts necessary to
make such judgment.
Section 2.08. CREDIT RATINGS. The Issuer shall take all reasonable action
necessary to enable at least one nationally recognized statistical rating
organization (as that term is used in the rules and regulations of the SEC under
the Securities Exchange Act) to provide credit ratings for the Class 1996B Notes
and the Class 1996B-2 Notes.
Section 2.09. NOTICE. The Issuer shall use its best efforts to provide
the Trustee and, so long as no Payment Default has occurred and is continuing
and the ownership of the Class 1996B Notes or the Class 1996B-2 Notes is
maintained in book-entry form by the Depository, the Calculation Agent with
notice of any change in the maximum rate permitted by law on the Class 1996B
Notes and the Class 1996B-2 Notes.
Section 2.10. NOTICE OF PAYMENT DEFAULT.
(a) If the Issuer determines that a Payment Default has occurred the
Issuer shall promptly notify the Trustee thereof.
(b) So long as the ownership of the Class 1996B Notes or the Class
1996B-2 Notes is maintained in book-entry form by the Depository, upon the
occurrence of a Payment Default the Trustee shall immediately send a notice
thereof to the Calculation Agent by telecopy or similar means.
(c) So long as the ownership of the Class 1996B Notes or the Class
1996B-2 Notes is maintained in book-entry form by the Depository, the
Trustee shall immediately send notice to the Calculation Agent by telecopy
or similar means if a Payment Default is cured.
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EXHIBIT A-1
FORM OF CLASS 1996A[-1][-2] SENIOR
(AUCTION RATE SECURITIES (ARS-SM-))
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), IN RELIANCE UPON EXEMPTIONS PROVIDED BY THE ACT. AS
PROVIDED IN THE INDENTURE DESCRIBED BELOW, NO RESALE OR OTHER TRANSFER OF
THIS NOTE MAY BE MADE UNLESS SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR IN A TRANSACTION COMPLYING WITH THE
PROVISIONS OF RULE 144A UNDER THE ACT OR TO INSTITUTIONAL ACCREDITED
INVESTORS AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE ACT AND
EXEMPT FROM APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS AND IN ACCORDANCE
WITH THE INDENTURE. NEITHER THE ISSUER NOR THE TRUSTEE IS OBLIGATED TO
REGISTER THE NOTES UNDER THE ACT OR ANY OTHER SECURITIES OR "BLUE SKY" LAW.
EXCEPT AS OTHERWISE PROVIDED IN THE INDENTURE, THIS GLOBAL NOTE MAY BE
TRANSFERRED, IN WHOLE BUT NOT IN PART, ONLY TO ANOTHER NOMINEE OF THE
SECURITIES DEPOSITORY (AS DEFINED HEREIN) OR TO A SUCCESSOR SECURITIES
DEPOSITORY OR TO A NOMINEE OF A SUCCESSOR SECURITIES DEPOSITORY.
UNION FINANCIAL SERVICES-1, INC.
TAXABLE STUDENT LOAN ASSET-BACKED NOTE
SENIOR CLASS 1996A[-1] [-2]
AUCTION RATE SECURITIES
(ARS-SM-)
REGISTERED NO. R- REGISTERED $__________
MATURITY DATE: INTEREST RATE: ORIGINAL ISSUE DATE CUSIP NO.
July 1, 2014 Variable March 8, 1996 906619A__
PRINCIPAL SUM: DOLLARS
REGISTERED OWNER: CEDE & CO.
UNION FINANCIAL SERVICES-1, INC., a corporation organized under the
corporation laws of the State of Nevada (the "Issuer," which term includes any
successor corporation under
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the Second Amended and Restated Indenture of Trust, dated as of November 1,
1996 (as amended, the "Indenture"), between the Issuer and Norwest Bank
Minnesota, National Association, as trustee (the "Trustee," which term
includes any successor trustee under the Indenture)) for value received,
hereby promises to pay to the Registered Owner (stated above) or registered
assigns, the Principal Sum of (stated above), but solely from the revenues
and receipts hereinafter specified and not otherwise, on the Maturity Date
specified above (subject to the right of prior redemption hereinafter
described), upon presentation and surrender of this note at the Principal
Office of the Trustee, as paying agent, trustee, authenticating agent and
registrar for the Notes, or a duly appointed successor paying agent, and to
pay interest in arrears on said Principal Sum, but solely from the revenues
and receipts hereinafter specified and not otherwise, to the Registered Owner
hereof from the most recent Interest Payment Date to which interest has been
paid hereon, until the payment of said principal sum in full.
Any capitalized words and terms used as defined words and terms in this
note and not otherwise defined herein shall have the meanings given them in
the Indenture.
This note shall initially bear interest at the rate of interest per annum
established by the Broker-Dealer for the initial Auction Period pursuant to
the Broker-Dealer Agreement, written notice of which shall be given to the
Trustee. For each Auction Period thereafter, the unpaid principal amount
hereof from time to time outstanding shall bear interest at the Auction Rate
determined in accordance with the provisions of Appendix A of the Indenture,
payable on each Interest Payment Date and on the date of payment or
redemption of principal hereof to the extent of interest accrued on the
principal then being paid or redeemed, such interest to accrue from the later
of the date hereof or the date through which interest has been paid or duly
provided for. Interest at the Auction Rate established from time to time
pursuant to Appendix A of the Indenture shall be computed for the actual
number of days elapsed on the basis of a year consisting of 360 days.
This note shall bear interest at an Auction Rate based on an Auction
Period that shall, until adjusted pursuant to Appendix A of the Indenture,
generally consist of [7 or 28] days, all as determined in Appendix A of the
Indenture.
THE AUCTION PERIOD, THE AUCTION RATE, THE METHOD OF DETERMINING THE
AUCTION RATE ON THIS NOTE AND THE AUCTION PROCEDURES RELATED THERETO, AN
AUCTION PERIOD ADJUSTMENT, A CHANGE IN THE AUCTION DATE AND THE INTEREST
PAYMENT DATES WILL BE DETERMINED IN ACCORDANCE WITH THE TERMS, CONDITIONS AND
PROVISIONS OF, INCLUDING, WITHOUT LIMITATION, REQUIRED NOTICES THEREOF TO THE
EXISTING OWNERS OF THE AUCTION NOTES, THE INDENTURE AND THE AUCTION AGENT
AGREEMENT, TO WHICH TERMS, CONDITIONS AND PROVISIONS SPECIFIC REFERENCE IS
HEREBY MADE, AND ALL OF WHICH TERMS, CONDITIONS AND PROVISIONS ARE HEREBY
SPECIFICALLY INCORPORATED HEREIN BY REFERENCE.
Such interest is payable by check or draft drawn upon the Trustee and
mailed or wire transfer on the Interest Payment Date to the person who is the
Registered Owner hereof on the
A-1-2
<PAGE>
Record Date at the address of such Registered Owner as it appears on the
registration books (the "Note Register") maintained by the Trustee.
The principal of and interest on this note are payable in lawful money of
the United States of America. If the specified date for any payment of
principal or interest accrued to such specified date shall be a day other
than a Business Day then such payment may be made on the next succeeding
Business Day, with the same force and effect as if made on the specified date
for such payment without additional interest.
This note is one of a series of notes of the Issuer designated Taxable
Student Loan Asset-Backed Notes, Senior Class 1996A[-1] [-2] Auction Rate
Securities (ARS-SM-), dated the Original Issue Date, in the aggregate
original principal amount of $48,300,000 (the "Class 1996A[-1][-2] Notes")
which, together with the Issuer's Taxable Student Loan Asset-Backed Notes,
Senior Class 1996A[-1][-2] Auction Rate Securities (ARS-SM-) issued in the
collective aggregate principal amount of $48,300,000 (the "Class 1996A[-1][-2]
") (collectively, the "Class 1996A Notes") and the Issuer's Taxable Student
Loan Asset-Backed Notes, Subordinate Class 1996B LIBOR Rate issued in the
aggregate principal amount of $11,100,000 (the "Class 1996B Notes") have been
authorized by the Issuer under a certain resolution, and issued by the Issuer
pursuant to the Indenture. The proceeds of such notes will be used by the
Issuer, together with other moneys of the Issuer, for the purpose of
financing the acquisition of student loans, fund a reserve fund and to pay
certain costs and expenses in connection with the issuance of such notes.
The Indenture provides for the issuance of additional notes (the "Additional
Notes") which may be secured on a parity with or subordinate to the Class
1996A Notes and the Class 1996B Notes as may be determined by the Issuer.
The Class 1996A Notes and the Class 1996B Notes and any Additional Notes are
collectively referred to herein as the "Notes."
MANDATORY REDEMPTION. This note is subject to mandatory redemption by
the Issuer, in whole or in part, on any Interest Payment Date from certain
moneys in the Senior Note Redemption Account of the Note Redemption Fund
created pursuant to the Indenture at a redemption price equal to the
principal amount thereof plus accrued interest to the redemption date.
This note is also subject to mandatory redemption by the Issuer at a
redemption price equal to the principal amount thereof plus accrued interest,
if any, to the date of redemption thereof from moneys in the Senior Note
Redemption Account of the Note Redemption Fund on the Interest Payment Date
next succeeding January 1, 1998, to the extent that moneys remain in the
Series 1996 Loan Account of the Student Loan Fund on such date, unless, no
such mandatory redemption is needed to maintain the ratings on certain of the
Notes as provided in the Indenture.
This note is also subject to mandatory redemption at a redemption price
equal to the principal amount thereof plus accrued interest on any Interest
Payment Date when excess revenue moneys are deposited in the Senior Note
Redemption Account from the Revenue Fund.
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<PAGE>
OPTIONAL REDEMPTION. This note is subject to redemption at the option of
the Issuer, in whole or in part, from any source of funds on any Interest
Payment Date at a redemption price equal to the principal amount of this note
being redeemed, plus accrued interest, if any, to the redemption date.
EXTRAORDINARY OPTIONAL REDEMPTION. This note is also subject to
extraordinary optional redemption, at the option of the Issuer, at a
redemption price equal to the principal amount of this note being redeemed,
plus accrued interest to the date of redemption, without premium in whole or
in part on any Interest Payment Date, if the Issuer reasonably determines
that it is unable to acquire Financed Eligible Loans, that the rate of return
on Financed Eligible Loans has materially decreased, or that the costs of
administering the Trust have place unreasonable burdens upon the ability of
the Issuer to perform its obligations under the Indenture.
OPTIONAL PURCHASE. The Issuer may purchase or cause to be purchased all
of the Notes on any Interest Payment Date on which the aggregate current
principal balance of the Notes shall be less than or equal to 10% of the
initial aggregate principal balance of the Notes on the Date of Issuance, at
a purchase price equal to the aggregate current principal balance of such
Notes, plus accrued interest on the Notes through the day preceding the
Interest Payment Date on which the purchase occurs.
NOTICE OF REDEMPTION OR PURCHASE. Notice of the call for redemption
shall be given by the Trustee by mailing a copy of the notice at least 15
days prior to the redemption or purchase date to the Registered Owners of the
Notes to be redeemed in whole or in part at the address of such Registered
Owner last showing on the registration books. Failure to give such notice or
any defect therein shall not affect the validity of any proceedings for the
redemption or purchase of such Auction Notes for which no such failure or
defect occurs. All Notes called for redemption or purchase will cease to
bear interest after the specified redemption or purchase date, provided funds
for their payment are on deposit at the place of payment at the time. If
less than all Notes are to be redeemed or purchased, Notes shall be selected
for redemption or purchase as provided in the Indenture.
MANDATORY EXCHANGE OF NOTES. The Notes are subject to mandatory
exchange, from time to time, in whole or in part, for Exchange Notes on any
Exchange Date. Such mandatory exchange shall be effective on the Exchange
Date specified by the Trustee in a notice, upon receipt by the Trustee of
immediately available funds from the Issuer equal to the amount of accrued
interest to the Exchange Date due and payable with respect to the Notes
subject to mandatory exchange. Notice of exchange of the Notes will be given
by the Trustee not less than 10 calendar days prior to the Exchange Date to
the Registered Owners of the Notes.
SWAP AGREEMENTS. The Indenture provides that the Issuer may enter into
an interest rate swap or basis agreement between the Issuer and a swap
provider (a "Swap Counterparty"), as originally executed and as amended or
supplemented, or other interest rate hedge agreement between the Issuer and a
Swap Counterparty, as originally executed and as amended or supplemented, in
each case approved in writing by the Rating Agency, for the purpose of
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<PAGE>
converting in whole or in part the Issuer's variable interest rate liability
on all or a portion of the Notes bearing interest at a variable rate issued
on a parity therewith to a fixed rate liability or for the purpose of
converting in whole or in part the Issuer's fixed interest rate liability on
all or a portion of any Additional Notes bearing interest at a fixed rate
issued on a parity therewith to a variable rate liability. Payments due to a
Swap Counterparty from the Issuer pursuant to the applicable Swap Agreement
(including, but not limited to, payments in respect of an Early Termination
Date, as defined in the applicable Swap Agreement) are referred to herein as
"Issuer Swap Payments."
The principal of and interest on the Class 1996A Notes and any Additional
Notes issued on a parity with the Class 1996A Notes and any Issuer Swap
Payments secured on a parity with the Class 1996A Notes are payable on a
superior basis to such payments on the Class 1996B Notes and any Additional
Notes issued on a parity or subordinate to the Class 1996B Notes; provided,
however, that current principal and interest may be paid on the Class 1996B
Notes and any Additional Notes issued on a parity with the Class 1996B Notes
or subordinate to the Class 1996B Notes if all principal and interest
payments due and owing at such time on the Class 1996A Notes and any
Additional Notes issued on a parity with the Class 1996A Notes and any Issuer
Swap Payments secured on a parity with the Class 1996A Notes have been
previously made or provided for as provided in the Indenture.
Reference is hereby made to the Indenture, copies of which are on file in
the Principal Office of the Trustee, and to all of the provisions of which
any Registered Owner of this note by his acceptance hereof hereby assents,
for definitions of terms; the description of and the nature and extent of the
security for the Notes; the Issuer's student loan origination and acquisition
program; the revenues and other money pledged to the payment of the principal
of and interest on the Notes; the nature and extent and manner of enforcement
of the pledge; the conditions upon which the Indenture may be amended or
supplemented with or without the consent of the Registered Owners of the
Notes and any Swap Counterparty; the rights and remedies of the Registered
Owner hereof with respect hereto and thereto, including the limitations upon
the right of a Registered Owner hereof to institute any suit, action, or
proceeding in equity or at law with respect hereto and thereto; the rights,
duties, and obligations of the Issuer and the Trustee thereunder; the terms
and provisions upon which the liens, pledges, charges, trusts, and covenants
made therein may be discharged at or prior to the stated maturity or earlier
redemption of this note, and this note thereafter shall no longer be secured
by the Indenture or be deemed to be Outstanding, as defined in the Indenture,
thereunder; and for the other terms and provisions thereof.
THE NOTES ARE LIMITED OBLIGATIONS OF THE ISSUER, PAYABLE SOLELY FROM, AND
FURTHER SECURED BY, THE TRUST ESTATE, AS DEFINED IN THE INDENTURE.
No recourse, either directly or indirectly, shall be had for the payment of
the principal of and interest on this note or any claim based hereon or in
respect hereof or of the Indenture, against the Trustee, or any incorporator,
director, officer, employee, or agent of the Issuer, nor
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<PAGE>
against the State of Nevada, or any official thereof, but the obligation to
pay all amounts required by the Indenture securing this note and the
obligation to do and perform the covenants and acts required of the Issuer
therein and herein shall be and remain the responsibility and obligation of
said Issuer, limited as herein set forth.
This note is transferable on the Note Register kept for that purpose by
the Trustee, as registrar, upon surrender of this note for transfer at the
principal office of the Trustee, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Trustee duly
executed by, the Registered Owner hereof or his attorney duly authorized in
writing, and thereupon one or more new Notes of the same series, Stated
Maturity, of authorized denominations, bearing interest at the same rate, and
for the same aggregate principal amount will be issued to the designated
transferee or transferees. At the option of the Registered Owner, any Note
may be exchanged for other Notes in authorized denominations upon surrender
of the Note to be exchanged at the principal office of the Trustee. Upon any
such presentation for exchange, one or more new Notes of the same series,
Stated Maturity, in authorized denominations, bearing interest at the same
rate, and for the same aggregate principal amount as the Note or Notes so
surrendered will be issued to the Registered Owner of the Note or Notes so
surrendered; and the Note or Notes so surrendered shall thereupon be
cancelled by the Trustee.
Notwithstanding the foregoing, so long as the ownership of the Notes is
maintained in book-entry form by The Depository Trust Company (the
"Securities Depository") or a nominee thereof, this note may be transferred
in whole but not in part only to the Securities Depository or a nominee
thereof or to a successor Securities Depository or its nominee.
The Issuer, the Trustee, and any agent of either of them shall treat the
Person in whose name this note is registered as the Registered Owner hereof
(i) on the record date for purposes of receiving timely payment of interest
hereon, and (ii) on the date of surrender of this note for purposes of
receiving payment of principal hereof at its stated maturity and (iii) for
all other purposes, whether or not this note is overdue, and neither the
Issuer, the Trustee, nor any such agent shall be affected by notice to the
contrary.
To the extent permitted by the Indenture, modifications or alterations of
the Indenture and any supplemental indenture may be made with the consent of
less than all of the Registered Owners of the Notes then outstanding or
without the consent of any of such Registered Owners (by reason of a change
in the Act or Regulation or to cure ambiguities or conflicts), but such
modification or alteration is not permitted to affect the maturity date,
Stated Maturity, amount, Interest Payment Date, or rate of interest on any
outstanding Notes or affect the rights of the Registered Owners of less than
all of the Notes outstanding.
The Registered Owner hereof shall not have the right to demand payment of
this note or any interest hereon out of funds raised or to be raised by
taxation.
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<PAGE>
Any capitalized term used herein and not otherwise defined herein shall
have the same meaning ascribed to such term in the herein defined Indenture
unless the context shall clearly indicate otherwise.
It is hereby certified and recited that all acts and things required by
the laws of the State of Nevada to happen, exist, and be performed precedent
to and in the issuance of this note, and the passage of said resolution and
the execution of said Indenture, have happened, exist and have been performed
as so required.
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<PAGE>
IN TESTIMONY WHEREOF, the Board of Directors of UNION FINANCIAL SERVICES-1,
INC. has caused the seal of the Issuer to be impressed or a facsimile thereof to
be printed hereon, and this note to be executed by the President and Secretary
of the Issuer all as of the Original Issue Date.
[SEAL] UNION FINANCIAL SERVICES-1, INC.
By
-------------------------------------------
Stephen F. Butterfield
President
By
-------------------------------------------
Ronald W. Page
Secretary
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<PAGE>
CERTIFICATE OF AUTHENTICATION
This note is one of the Class 1996A[-1][-2] Notes designated therein and
described in the within-mentioned Indenture.
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as
Trustee
By
---------------------------------------------
Authorized Signatory
AUTHENTICATION DATE:
- ---------------------------
A-1-9
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
unto __________ (Social Security or other identifying number __________) the
within note and all rights thereunder and hereby irrevocably appoints
__________ attorney to transfer the within note on the books kept for
registration thereof, with full power of substitution in the premises.
DATED: SIGNED:
-------------------- ----------------------------------------
NOTICE: The signature on this Assignment must
correspond with the name of the Registered Owner
as it appears on the face of the within note in
every particular.
Signature Guaranteed by:
- ------------------------------
A Member of The New York Stock
Exchange or a State or National
Bank
A-1-10
<PAGE>
<PAGE>
EXHIBIT A-2
FORM OF CLASS 1996B SUBORDINATE LIBOR RATE NOTES
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), IN RELIANCE UPON EXEMPTIONS PROVIDED BY THE ACT. AS
PROVIDED IN THE INDENTURE DESCRIBED BELOW, NO RESALE OR OTHER TRANSFER OF
THIS NOTE MAY BE MADE UNLESS SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR IN A TRANSACTION COMPLYING WITH THE
PROVISIONS OF RULE 144A UNDER THE ACT OR TO INSTITUTIONAL ACCREDITED
INVESTORS AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE ACT AND
EXEMPT FROM APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS AND IN ACCORDANCE
WITH THE INDENTURE. NEITHER THE ISSUER NOR THE TRUSTEE IS OBLIGATED TO
REGISTER THE NOTES UNDER THE ACT OR ANY OTHER SECURITIES OR "BLUE SKY" LAW.
EXCEPT AS OTHERWISE PROVIDED IN THE INDENTURE, THIS GLOBAL NOTE MAY BE
TRANSFERRED, IN WHOLE BUT NOT IN PART, ONLY TO ANOTHER NOMINEE OF THE
SECURITIES DEPOSITORY (AS DEFINED HEREIN) OR TO A SUCCESSOR SECURITIES
DEPOSITORY OR TO A NOMINEE OF A SUCCESSOR SECURITIES DEPOSITORY.
UNION FINANCIAL SERVICES-1, INC.
TAXABLE STUDENT LOAN ASSET-BACKED NOTE
SUBORDINATE CLASS 1996B
LIBOR RATE
REGISTERED NO. R-1 REGISTERED $__________
MATURITY DATE: INTEREST RATE: ORIGINAL ISSUE DATE CUSIP NO.
July 1, 2014 Variable March 8, 1996 906619 AC5
PRINCIPAL SUM: DOLLARS
REGISTERED OWNER: CEDE & CO.
UNION FINANCIAL SERVICES-1, INC., a corporation organized under the
corporation laws of the State of Nevada (the "Issuer," which term includes any
successor corporation under the Second Amended and Restated Indenture of Trust,
dated as of November 1, 1996 (as amended, the "Indenture"), between the Issuer
and Norwest Bank Minnesota, National
A-2-1
<PAGE>
Association, as trustee (the "Trustee," which term includes any successor
trustee under the Indenture)), for value received, hereby promises to pay to
the Registered Owner (stated above) or registered assigns, the Principal Sum
of (stated above), but solely from the revenues and receipts hereinafter
specified and not otherwise, on the Maturity Date specified above (subject to
the right of prior redemption hereinafter described), upon presentation and
surrender of this note at the Principal Office of the Trustee, as paying
agent, trustee, authenticating agent and registrar for the Notes, or a duly
appointed successor paying agent, and to pay interest in arrears on said
Principal Sum, but solely from the revenues and receipts hereinafter
specified and not otherwise, to the Registered Owner hereof from the most
recent Interest Payment Date to which interest has been paid hereon, until
the payment of said principal sum in full, at the LIBOR-Based Rate on the
first Business Day of each month (each an "Interest Payment Date"),
commencing April 1, 1996. Such interest is payable by check or draft drawn
upon the Trustee and mailed on the Interest Payment Date to the person who is
the Registered Owner hereof on the Record Date at the address of such
Registered Owner as it appears on the registration books (the "Note
Register") maintained by the Trustee.
Any capitalized words and terms used as defined words and terms in this
note and not otherwise defined herein shall have the meanings given them in the
Indenture.
This note shall bear interest at LIBOR-Based Rate until adjusted pursuant
to the Indenture, all as determined in Appendix B of the Indenture.
The principal of and interest on this note are payable in lawful money of
the United States of America. If the specified date for any payment of
principal or interest accrued to such specified date shall be a day other than a
Business Day then such payment may be made on the next succeeding Business Day,
with the same force and effect as if made on the specified date for such payment
without additional interest.
Interest payable on this note shall be computed on the assumption that each
year contains 360 days and actual days elapsed.
This note is one of a series of notes of the Issuer designated Taxable
Student Loan Asset-Backed Notes, Subordinate Class 1996B LIBOR Rate, dated the
Original Issue Date, in the aggregate original principal amount of $11,100,000
(the "Class 1996B Notes") which, together with the Issuer's Taxable Student Loan
Asset-Backed Notes, Senior Class 1996A Auction Rate issued in the aggregate
principal amount of $96,600,000 (the "Class 1996A Notes") have been authorized
by the Issuer under a certain resolution, and issued by the Issuer pursuant to
the Indenture. The proceeds of such notes will be used by the Issuer, together
with other moneys of the Issuer, for the purpose of providing funds to finance
the acquisition of student loans, fund a reserve fund and to pay certain costs
and expenses in connection with the issuance of such notes. The Indenture
provides for the issuance of additional notes (the "Additional Notes") which may
be secured on a parity with or subordinate to the Class 1996A Notes or the Class
1996B Notes as determined by the Issuer. The Class 1996A Notes and the Class
1996B Notes and any Additional Notes are collectively referred to herein as the
"Notes."
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<PAGE>
MANDATORY REDEMPTION. This note is subject to redemption by the Issuer,
in whole or in part, on any Interest Payment Date on or after May 1, 1999,
from certain moneys in the Subordinate Note Redemption Account of the Note
Redemption Fund created pursuant to the Indenture at a redemption price equal
to the principal amount thereof plus accrued interest to the redemption date.
This note is also subject to mandatory redemption by the Issuer at a
redemption price equal to the principal amount thereof plus accrued interest, if
any, to the date of redemption thereof from moneys in the Subordinate Note
Redemption Account of the Note Redemption Fund on an Interest Payment Date
succeeding January 1, 1998, to the extent that moneys remain in the Series 1996
Loan Account of the Student Loan Fund on such date; unless no such mandatory
redemption is needed to maintain the ratings on certain of the Notes as provided
in the Indenture.
EXTRAORDINARY OPTIONAL REDEMPTION. This note is subject to extraordinary
optional redemption, at the option of the Issuer, at a redemption price equal
to the principal amount of this note being redeemed, plus accrued interest to
the date of redemption, without premium in whole or in part on any Interest
Payment Date, if the Issuer reasonably determines that it is unable to
acquire Financed Eligible Loans, that the rate of return on Financed Eligible
Loans has materially decreased, or that the costs of administering the Trust
have placed unreasonable burdens upon the ability of the Issuer to perform
its obligations under the Indenture.
OPTIONAL REDEMPTION. This note is subject to redemption at the option of
the Issuer from any source of funds, in whole or in part, on any Interest
Payment Date on or after May 1, 1999, at a redemption price equal to the
principal amount of this note being redeemed, plus accrued interest on the
date of redemption.
OPTIONAL PURCHASE. The Issuer may purchase or cause to be purchased all
of the Notes on any Interest Payment Date on which the aggregate current
principal balance of the Notes shall be less than or equal to 10% of the
initial aggregate principal balance of the Notes on the Date of Issuance, at
a purchase price equal to the aggregate current principal balance of such
Notes, plus accrued interest on the Notes through the day preceding the
Interest Payment Date on which the purchase occurs.
NOTICE OF REDEMPTION OR PURCHASE. Notice of the call for redemption or
purchase shall be given by the Trustee by mailing a copy of the notice at
least 15 days prior to the redemption or purchase date to the Registered
Owners of Notes to be redeemed or purchased in whole or in part at the
address of such Registered Owner last showing on the registration books.
Failure to give such notice or any defect therein shall not affect the
validity of any proceedings for the redemption or purchase of such Notes for
which no such failure or defect occurs. All Notes called for redemption or
purchase will cease to bear interest after the specified redemption or
purchase date, provided funds for their payment are on deposit at the place
of payment at the time. If less than all Notes are to be redeemed or
purchased, Notes shall be selected for redemption or purchase as provided in
the Indenture.
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<PAGE>
MANDATORY EXCHANGE OF NOTES. The Notes are subject to mandatory exchange,
from time to time, in whole, for Exchange Notes on any Exchange Date. Such
mandatory exchange shall be effective on the Exchange Date specified by the
Trustee in a notice, upon receipt by the Trustee of immediately available funds
from the Issuer equal to the amount of accrued interest to the Exchange Date due
and payable with respect to the Notes subject to mandatory exchange. Notice of
exchange of the Notes will be given by the Trustee not less than 10 calendar
days prior to the Exchange Date to the Registered Owners of the Notes.
SWAP AGREEMENTS. The Indenture provides that the Issuer may enter into an
interest rate swap or basis agreement between the Issuer and a swap provider (a
"Swap Counterparty"), as originally executed and as amended or supplemented, or
other interest rate hedge agreement between the Issuer and a Swap Counterparty,
as originally executed and as amended or supplemented, in each case approved in
writing by each of the Rating Agency, for the purpose of converting in whole or
in part the Issuer's variable interest rate liability on all or a portion of the
Notes bearing interest at a variable rate issued on a parity therewith to a
fixed rate liability or for the purpose of converting in whole or in part the
Issuer's fixed interest rate liability on all or a portion of any Additional
Notes bearing interest at a fixed rate issued on a parity therewith or
subordinate to a variable rate liability. Payments due to a Swap Counterparty
from the Issuer pursuant to the applicable Swap Agreement (including, but not
limited to, payments in respect of an Early Termination Date, as defined in the
applicable Swap Agreement) are referred to herein as "Issuer Swap Payments."
The principal of and interest on the Class 1996A Notes and any Additional
Notes issued on a parity with the Class 1996A Notes and any Issuer Swap Payments
secured on a parity with the Class 1996A Notes are payable on a superior basis
to such payments on the Class 1996B Notes and any Additional Notes issued on a
parity with or subordinate to the Class 1996B Notes; provided, however, that
current principal and interest may be paid on the Class 1996B Notes and any
Additional Notes issued on a parity with or subordinate to the Class 1996B Notes
if all principal and interest payments due and owing at such time on the Class
1996A Notes and any Additional Notes issued on a parity with the Class 1996A
Notes and any Issuer Swap Payments secured on a parity with the Class 1996A
Notes have been previously made or provided for as provided in the Indenture.
The principal of and interest on the Class 1996B Notes and any Additional Notes
issued on a parity with the Class 1996B Notes and any Issuer Swap Payments
secured on a parity with the Class 1996B Notes are payable on a superior basis
to such payments on any Additional Notes issued subordinate to the Class 1996B
Notes.
Reference is hereby made to the Indenture, copies of which are on file in
the Principal Office of the Trustee, and to all of the provisions of which any
Registered Owner of this note by his acceptance hereof hereby assents, for
definitions of terms; the description of and the nature and extent of the
security for the Notes; the Issuer's student loan origination and acquisition
program; the revenues and other money pledged to the payment of the principal of
and interest on the Notes; the nature and extent and manner of enforcement of
the pledge; the conditions upon which the Indenture may be amended or
supplemented with or without the consent of the Registered Owners of the Notes
and any Swap Counterparty; the rights and
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<PAGE>
remedies of the Registered Owner hereof with respect hereto and thereto,
including the limitations upon the right of a Registered Owner hereof to
institute any suit, action, or proceeding in equity or at law with respect
hereto and thereto; the rights, duties, and obligations of the Issuer and the
Trustee thereunder; the terms and provisions upon which the liens, pledges,
charges, trusts, and covenants made therein may be discharged at or prior to
the stated maturity or earlier redemption of this note, and this note
thereafter shall no longer be secured by the Indenture or be deemed to be
Outstanding, as defined in the Indenture, thereunder; and for the other terms
and provisions thereof.
THE NOTES ARE LIMITED OBLIGATIONS OF THE ISSUER, PAYABLE SOLELY FROM, AND
FURTHER SECURED BY, THE TRUST ESTATE, AS DEFINED IN THE INDENTURE.
No recourse, either directly or indirectly, shall be had for the payment
of the principal of and interest on this note or any claim based hereon or in
respect hereof or of the Indenture, against the Trustee, or any incorporator,
director, officer, employee, or agent of the Issuer, but the obligation to
pay all amounts required by the Indenture securing this note and the
obligation to do and perform the covenants and acts required of the Issuer
therein and herein shall be and remain the responsibility and obligation of
said Issuer, limited as herein set forth.
This note is transferable on the Note Register kept for that purpose by
the Trustee, as registrar, upon surrender of this note for transfer at the
principal office of the Trustee, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Trustee duly
executed by, the Registered Owner hereof or his attorney duly authorized in
writing, and thereupon one or more new Notes of the same series, Stated
Maturity, of authorized denominations, bearing interest at the same rate, and
for the same aggregate principal amount will be issued to the designated
transferee or transferees. At the option of the Registered Owner, any Note
may be exchanged for other Notes in authorized denominations upon surrender
of the Note to be exchanged at the principal office of the Trustee. Upon any
such presentation for exchange, one or more new Notes of the same series,
Stated Maturity, in authorized denominations, bearing interest at the same
rate, and for the same aggregate principal amount as the Note or Notes so
surrendered will be issued to the Registered Owner of the Note or Notes so
surrendered; and the Note or Notes so surrendered shall thereupon be
cancelled by the Trustee.
Notwithstanding the foregoing, so long as the ownership of the Notes is
maintained in book-entry form by The Depository Trust Company (the
"Securities Depository") or a nominee thereof, this note may be transferred
in whole but not in part only to the Securities Depository or a nominee
thereof or to a successor Securities Depository or its nominee.
The Issuer, the Trustee, and any agent of either of them shall treat the
Person in whose name this note is registered as the Registered Owner hereof (i)
on the record date for purposes of receiving timely payment of interest hereon,
and (ii) on the date of surrender of this note for purposes of receiving payment
of principal hereof at its stated maturity and (iii) for all other
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<PAGE>
purposes,whether or not this note is overdue, and neither the Issuer, the
Trustee, nor any such agent shall be affected by notice to the contrary.
To the extent permitted by the Indenture, modifications or alterations of
the Indenture and any supplemental indenture may be made with the consent of
less than all of the Registered Owners of the Notes then outstanding or without
the consent of any of such Registered Owners (by reason of a change in the Act
or Regulation or to cure ambiguities or conflicts), but such modification or
alteration is not permitted to affect the maturity date, Stated Maturity,
amount, Interest Payment Date, or rate of interest on any outstanding Notes or
affect the rights of the Registered Owners of less than all of the Notes
outstanding.
The Registered Owner hereof shall not have the right to demand payment of
this note or any interest hereon out of funds raised or to be raised by
taxation.
Any capitalized term used herein and not otherwise defined herein shall
have the same meaning ascribed to such term in the herein defined Indenture
unless the context shall clearly indicate otherwise.
It is hereby certified and recited that all acts and things required by the
laws of the State of Nevada to happen, exist, and be performed precedent to and
in the issuance of this note, and the passage of said resolution and the
execution of said Indenture, have happened, exist and have been performed as so
required.
A-2-6
<PAGE>
IN TESTIMONY WHEREOF, the Board of Directors of UNION FINANCIAL
SERVICES-1, INC. has caused the seal of the Issuer to be impressed or a
facsimile thereof to be printed hereon, and this note to be executed by the
President and Secretary of the Issuer all as of the Original Issue Date.
[SEAL] UNION FINANCIAL SERVICES-1, INC.
By ------------------------------------------
Stephen F. Butterfield
President
By ------------------------------------------
Ronald W. Page
Secretary
A-2-7
<PAGE>
CERTIFICATE OF AUTHENTICATION
This note is one of the Class 1996B Notes designated therein and described
in the within-mentioned Indenture.
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as
Trustee
By ------------------------------------------
Authorized Signatory
AUTHENTICATION DATE:
- --------------------------
A-2-8
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
unto __________ (Social Security or other identifying number __________) the
within note and all rights thereunder and hereby irrevocably appoints __________
attorney to transfer the within note on the books kept for registration thereof,
with full power of substitution in the premises.
DATED: SIGNED:
------------------- ----------------------------------------
NOTICE: The signature on this Assignment must
correspond with the name of the Registered Owner
as it appears on the face of the within note in
every particular.
Signature Guaranteed by:
- -------------------------
A Member of The New York Stock
Exchange or a State or National
Bank
(End of Form of Class 1996B Note)
A-2-9
<PAGE>
EXHIBIT A-3
FORM OF CLASS 1996A[-3][-4] SENIOR
(AUCTION RATE SECURITIES (ARS-SM-))
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), IN RELIANCE UPON EXEMPTIONS PROVIDED BY THE ACT. AS
PROVIDED IN THE INDENTURE DESCRIBED BELOW, NO RESALE OR OTHER TRANSFER OF THIS
NOTE MAY BE MADE UNLESS SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR IN A TRANSACTION COMPLYING WITH THE
PROVISIONS OF RULE 144A UNDER THE ACT OR TO INSTITUTIONAL ACCREDITED INVESTORS
AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE ACT AND EXEMPT FROM
APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS AND IN ACCORDANCE WITH THE
INDENTURE. NEITHER THE ISSUER NOR THE TRUSTEE IS OBLIGATED TO REGISTER THE
NOTES UNDER THE ACT OR ANY OTHER SECURITIES OR "BLUE SKY" LAW.
EXCEPT AS OTHERWISE PROVIDED IN THE INDENTURE, THIS GLOBAL NOTE MAY BE
TRANSFERRED, IN WHOLE BUT NOT IN PART, ONLY TO ANOTHER NOMINEE OF THE SECURITIES
DEPOSITORY (AS DEFINED HEREIN) OR TO A SUCCESSOR SECURITIES DEPOSITORY OR TO A
NOMINEE OF A SUCCESSOR SECURITIES DEPOSITORY.
UNION FINANCIAL SERVICES-1, INC.
TAXABLE STUDENT LOAN ASSET-BACKED NOTE
SENIOR CLASS 1996A[-3][-4]
AUCTION RATE SECURITIES
(ARS-SM-)
REGISTERED NO. R- REGISTERED $__________
MATURITY DATE: INTEREST RATE: ORIGINAL ISSUE DATE CUSIP NO.
July 1, 2014 Variable June 19, 1996 906619A__
PRINCIPAL SUM: DOLLARS
REGISTERED OWNER: CEDE & CO.
UNION FINANCIAL SERVICES-1, INC., a corporation organized under the
corporation laws of the State of Nevada (the "Issuer," which term includes any
successor corporation under
A-3-1
<PAGE>
the Second Amended and Restated Indenture of Trust, dated as of November 1,
1996 (as amended, the "Indenture"), between the Issuer and Norwest Bank
Minnesota, National Association, as trustee (the "Trustee," which term
includes any successor trustee under the Indenture)) for value received,
hereby promises to pay to the Registered Owner (stated above) or registered
assigns, the Principal Sum of (stated above), but solely from the revenues
and receipts hereinafter specified and not otherwise, on the Maturity Date
specified above (subject to the right of prior redemption hereinafter
described), upon presentation and surrender of this note at the Principal
Office of the Trustee, as paying agent, trustee, authenticating agent and
registrar for the Notes, or a duly appointed successor paying agent, and to
pay interest in arrears on said Principal Sum, but solely from the revenues
and receipts hereinafter specified and not otherwise, to the Registered Owner
hereof from the most recent Interest Payment Date to which interest has been
paid hereon, until the payment of said principal sum in full.
Any capitalized words and terms used as defined words and terms in this
note and not otherwise defined herein shall have the meanings given them in the
Indenture.
This note shall initially bear interest at the rate of interest per annum
established by the Broker-Dealer for the initial Auction Period pursuant to the
Broker-Dealer Agreement, written notice of which shall be given to the Trustee.
For each Auction Period thereafter, the unpaid principal amount hereof from time
to time outstanding shall bear interest at the Auction Rate determined in
accordance with the provisions of Appendix A of the Indenture, payable on each
Interest Payment Date and on the date of payment or redemption of principal
hereof to the extent of interest accrued on the principal then being paid or
redeemed, such interest to accrue from the later of the date hereof or the date
through which interest has been paid or duly provided for. Interest at the
Auction Rate established from time to time pursuant to Appendix A of the
Indenture shall be computed for the actual number of days elapsed on the basis
of a year consisting of 360 days.
This note shall bear interest at an Auction Rate based on an Auction Period
that shall, until adjusted pursuant to Appendix A of the Indenture, generally
consist of 28 days, all as determined in Appendix A of the Indenture.
THE AUCTION PERIOD, THE AUCTION RATE, THE METHOD OF DETERMINING THE AUCTION
RATE ON THIS NOTE AND THE AUCTION PROCEDURES RELATED THERETO, AN AUCTION PERIOD
ADJUSTMENT, A CHANGE IN THE AUCTION DATE AND THE INTEREST PAYMENT DATES WILL BE
DETERMINED IN ACCORDANCE WITH THE TERMS, CONDITIONS AND PROVISIONS OF,
INCLUDING, WITHOUT LIMITATION, REQUIRED NOTICES THEREOF TO THE EXISTING OWNERS
OF THE AUCTION NOTES, THE INDENTURE AND THE AUCTION AGENT AGREEMENT, TO WHICH
TERMS, CONDITIONS AND PROVISIONS SPECIFIC REFERENCE IS HEREBY MADE, AND ALL OF
WHICH TERMS, CONDITIONS AND PROVISIONS ARE HEREBY SPECIFICALLY INCORPORATED
HEREIN BY REFERENCE.
Such interest is payable by check or draft drawn upon the Trustee and
mailed or wire transfer on the Interest Payment Date to the person who is the
Registered Owner hereof on the
A-3-2
<PAGE>
Record Date at the address of such Registered Owner as it appears on the
registration books (the "Note Register") maintained by the Trustee.
The principal of and interest on this note are payable in lawful money of
the United States of America. If the specified date for any payment of
principal or interest accrued to such specified date shall be a day other than a
Business Day then such payment may be made on the next succeeding Business Day,
with the same force and effect as if made on the specified date for such payment
without additional interest.
This note is one of a series of notes of the Issuer designated Taxable
Student Loan Asset-Backed Notes, Senior Class 1996A[-3][-4] Auction Rate
Securities (ARS-SM-), dated the Original Issue Date, in the aggregate
original principal amount of $__________ (the "Class A[-3][-4] Notes") which,
together with the Issuer's Taxable Student Loan Asset-Backed Notes, Senior
Class A[-3][-4] Auction Rate Securities (ARS-SM-) issued in the collective
aggregate principal amount of $__________ (the "Class 1996A[-3][-4]")
(collectively, the "Class A Notes") and the Issuer's Taxable Student Loan
Asset-Backed Notes, Subordinate Class 1996B-2 LIBOR Rate issued in the
aggregate principal amount of $14,200,000 (the "Class B-2 Notes") have been
authorized by the Issuer under a certain resolution, and issued by the Issuer
pursuant to the Indenture. The proceeds of such notes will be used by the
Issuer, together with other moneys of the Issuer, for the purpose of
financing the acquisition of student loans, fund a reserve fund and to pay
certain costs and expenses in connection with the issuance of such notes.
The Issuer has previously issued $48,300,000 of its Taxable Student Loan
Asset-Backed Notes, Senior Class 1996A-1 Auction Rate Securities (ARS-SM-)
(the "Class A-1 Notes"), $48,300,000 of its Taxable Student Loan Asset-Backed
Notes, Senior Class 1996A-2 Auction Rate Securities (ARS-SM-) (the "Class A-2
Notes") and $11,100,000 of its Taxable Student Loan Asset-Backed Notes,
Subordinate Class 1996B LIBOR Rate (the "Class B Notes"). The Class A-1
Notes, the Class A-2 Notes and the Class A Notes are collectively referred to
herein as the "Class 1996A Notes." The Class B Notes and the Class B-2 Notes
are collectively referred to herein as the "Class 1996B Notes." The
Indenture provides for the issuance of additional notes (the "Additional
Notes") which may be secured on a parity with or subordinate to the Class
1996A Notes and the Class 1996B Notes as may be determined by the Issuer.
The Class 1996A Notes and the Class 1996B Notes and any Additional Notes are
collectively referred to herein as the "Notes."
MANDATORY REDEMPTION. This note is subject to mandatory redemption by the
Issuer, in whole or in part, on any Interest Payment Date from certain moneys in
the Senior Note Redemption Account of the Note Redemption Fund created pursuant
to the Indenture at a redemption price equal to the principal amount thereof
plus accrued interest to the redemption date.
This note is also subject to mandatory redemption by the Issuer at a
redemption price equal to the principal amount thereof plus accrued interest, if
any, to the date of redemption thereof from moneys in the Senior Note Redemption
Account of the Note Redemption Fund on the Interest Payment Date next succeeding
January 1, 1998, to the extent that moneys remain in the Series 1996 Loan
Account of the Student Loan Fund on such date, unless, no such
A-3-3
<PAGE>
mandatory redemption is needed to maintain the ratings on certain of the
Notes as provided in the Indenture.
This note is also subject to mandatory redemption at a redemption price
equal to the principal amount thereof plus accrued interest on any Interest
Payment Date when excess revenue moneys are deposited in the Senior Note
Redemption Account from the Revenue Fund.
OPTIONAL REDEMPTION. This note is subject to redemption at the option of
the Issuer, in whole or in part, from any source of funds on any Interest
Payment Date at a redemption price equal to the principal amount of this note
being redeemed, plus accrued interest, if any, to the redemption date.
EXTRAORDINARY OPTIONAL REDEMPTION. This note is also subject to
extraordinary optional redemption, at the option of the Issuer, at a redemption
price equal to the principal amount of this note being redeemed, plus accrued
interest to the date of redemption, without premium in whole or in part on any
Interest Payment Date, if the Issuer reasonably determines that it is unable to
acquire Financed Eligible Loans, that the rate of return on Financed Eligible
Loans has materially decreased, or that the costs of administering the Trust
have place unreasonable burdens upon the ability of the Issuer to perform its
obligations under the Indenture.
OPTIONAL PURCHASE. The Issuer may purchase or cause to be purchased all of
the Notes on any Interest Payment Date on which the aggregate current principal
balance of the Notes shall be less than or equal to 10% of the initial aggregate
principal balance of the Notes on the Date of Issuance, at a purchase price
equal to the aggregate current principal balance of such Notes, plus accrued
interest on the Notes through the day preceding the Interest Payment Date on
which the purchase occurs.
NOTICE OF REDEMPTION OR PURCHASE. Notice of the call for redemption shall
be given by the Trustee by mailing a copy of the notice at least 15 days prior
to the redemption or purchase date to the Registered Owners of the Notes to be
redeemed in whole or in part at the address of such Registered Owner last
showing on the registration books. Failure to give such notice or any defect
therein shall not affect the validity of any proceedings for the redemption or
purchase of such Auction Notes for which no such failure or defect occurs. All
Notes called for redemption or purchase will cease to bear interest after the
specified redemption or purchase date, provided funds for their payment are on
deposit at the place of payment at the time. If less than all Notes are to be
redeemed or purchased, Notes shall be selected for redemption or purchase as
provided in the Indenture.
MANDATORY EXCHANGE OF NOTES. The Notes are subject to mandatory
exchange, from time to time, in whole or in part, for Exchange Notes on any
Exchange Date. Such mandatory exchange shall be effective on the Exchange
Date specified by the Trustee in a notice, upon receipt by the Trustee of
immediately available funds from the Issuer equal to the amount of accrued
interest to the Exchange Date due and payable with respect to the Notes
subject to
A-3-4
<PAGE>
mandatory exchange. Notice of exchange of the Notes will be given by the
Trustee not less than 10 calendar days prior to the Exchange Date to the
Registered Owners of the Notes.
SWAP AGREEMENTS. The Indenture provides that the Issuer may enter into an
interest rate swap or basis agreement between the Issuer and a swap provider (a
"Swap Counterparty"), as originally executed and as amended or supplemented, or
other interest rate hedge agreement between the Issuer and a Swap Counterparty,
as originally executed and as amended or supplemented, in each case approved in
writing by the Rating Agency, for the purpose of converting in whole or in part
the Issuer's variable interest rate liability on all or a portion of the Notes
bearing interest at a variable rate issued on a parity therewith to a fixed rate
liability or for the purpose of converting in whole or in part the Issuer's
fixed interest rate liability on all or a portion of any Additional Notes
bearing interest at a fixed rate issued on a parity therewith to a variable rate
liability. Payments due to a Swap Counterparty from the Issuer pursuant to the
applicable Swap Agreement (including, but not limited to, payments in respect of
an Early Termination Date, as defined in the applicable Swap Agreement) are
referred to herein as "Issuer Swap Payments."
The principal of and interest on the Class 1996A Notes and any Additional
Notes issued on a parity with the Class 1996A Notes and any Issuer Swap Payments
secured on a parity with the Class 1996A Notes are payable on a superior basis
to such payments on the Class 1996B Notes and any Additional Notes issued on a
parity or subordinate to the Class 1996B Notes; provided, however, that current
principal and interest may be paid on the Class 1996B Notes and any Additional
Notes issued on a parity with the Class 1996B Notes or subordinate to the Class
1996B Notes if all principal and interest payments due and owing at such time on
the Class 1996A Notes and any Additional Notes issued on a parity with the Class
1996A Notes and any Issuer Swap Payments secured on a parity with the Class
1996A Notes have been previously made or provided for as provided in the
Indenture.
Reference is hereby made to the Indenture, copies of which are on file in
the Principal Office of the Trustee, and to all of the provisions of which any
Registered Owner of this note by his acceptance hereof hereby assents, for
definitions of terms; the description of and the nature and extent of the
security for the Notes; the Issuer's student loan origination and acquisition
program; the revenues and other money pledged to the payment of the principal of
and interest on the Notes; the nature and extent and manner of enforcement of
the pledge; the conditions upon which the Indenture may be amended or
supplemented with or without the consent of the Registered Owners of the Notes
and any Swap Counterparty; the rights and remedies of the Registered Owner
hereof with respect hereto and thereto, including the limitations upon the right
of a Registered Owner hereof to institute any suit, action, or proceeding in
equity or at law with respect hereto and thereto; the rights, duties, and
obligations of the Issuer and the Trustee thereunder; the terms and provisions
upon which the liens, pledges, charges, trusts, and covenants made therein may
be discharged at or prior to the stated maturity or earlier redemption of this
note, and this note thereafter shall no longer be secured by the Indenture or be
deemed to be Outstanding, as defined in the Indenture, thereunder; and for the
other terms and provisions thereof.
A-3-5
<PAGE>
THE NOTES ARE LIMITED OBLIGATIONS OF THE ISSUER, PAYABLE SOLELY FROM, AND
FURTHER SECURED BY, THE TRUST ESTATE, AS DEFINED IN THE INDENTURE.
No recourse, either directly or indirectly, shall be had for the payment of
the principal of and interest on this note or any claim based hereon or in
respect hereof or of the Indenture, against the Trustee, or any incorporator,
director, officer, employee, or agent of the Issuer, nor against the State of
Nevada, or any official thereof, but the obligation to pay all amounts required
by the Indenture securing this note and the obligation to do and perform the
covenants and acts required of the Issuer therein and herein shall be and remain
the responsibility and obligation of said Issuer, limited as herein set forth.
Subject to the restrictions specified in the Indenture, this note is
transferable on the Note Register kept for that purpose by the Trustee, as
registrar, upon surrender of this note for transfer at the principal office of
the Trustee, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Trustee duly executed by, the Registered
Owner hereof or his attorney duly authorized in writing, and thereupon one or
more new Notes of the same series, Stated Maturity, of authorized denominations,
bearing interest at the same rate, and for the same aggregate principal amount
will be issued to the designated transferee or transferees. At the option of
the Registered Owner, any Note may be exchanged for other Notes in authorized
denominations upon surrender of the Note to be exchanged at the principal office
of the Trustee. Upon any such presentation for exchange, one or more new Notes
of the same series, Stated Maturity, in authorized denominations, bearing
interest at the same rate, and for the same aggregate principal amount as the
Note or Notes so surrendered will be issued to the Registered Owner of the Note
or Notes so surrendered; and the Note or Notes so surrendered shall thereupon be
cancelled by the Trustee.
Notwithstanding the foregoing, so long as the ownership of the Notes is
maintained in book-entry form by The Depository Trust Company (the "Securities
Depository") or a nominee thereof, this note may be transferred in whole but not
in part only to the Securities Depository or a nominee thereof or to a successor
Securities Depository or its nominee.
The Issuer, the Trustee, and any agent of either of them shall treat the
Person in whose name this note is registered as the Registered Owner hereof (i)
on the record date for purposes of receiving timely payment of interest hereon,
and (ii) on the date of surrender of this note for purposes of receiving payment
of principal hereof at its stated maturity and (iii) for all other purposes,
whether or not this note is overdue, and neither the Issuer, the Trustee, nor
any such agent shall be affected by notice to the contrary.
To the extent permitted by the Indenture, modifications or alterations of
the Indenture and any supplemental indenture may be made with the consent of
less than all of the Registered Owners of the Notes then outstanding or without
the consent of any of such Registered Owners (by reason of a change in the Act
or Regulation or to cure ambiguities or conflicts), but such modification or
alteration is not permitted to affect the maturity date, Stated Maturity,
amount,
A-3-6
<PAGE>
Interest Payment Date, or rate of interest on any outstanding Notes or affect
the rights of the Registered Owners of less than all of the Notes outstanding.
The Registered Owner hereof shall not have the right to demand payment of
this note or any interest hereon out of funds raised or to be raised by
taxation.
Any capitalized term used herein and not otherwise defined herein shall
have the same meaning ascribed to such term in the herein defined Indenture
unless the context shall clearly indicate otherwise.
It is hereby certified and recited that all acts and things required by the
laws of the State of Nevada to happen, exist, and be performed precedent to and
in the issuance of this note, and the passage of said resolution and the
execution of said Indenture, have happened, exist and have been performed as so
required.
A-3-7
<PAGE>
IN TESTIMONY WHEREOF, the Board of Directors of UNION FINANCIAL SERVICES-1,
INC. has caused the seal of the Issuer to be impressed or a facsimile thereof to
be printed hereon, and this note to be executed by the President and Secretary
of the Issuer all as of the Original Issue Date.
[SEAL] UNION FINANCIAL SERVICES-1, INC.
By
-------------------------------------------
Stephen F. Butterfield
President
By
-------------------------------------------
Ronald W. Page
Secretary
A-3-8
<PAGE>
CERTIFICATE OF AUTHENTICATION
This note is one of the Class 1996A[-3][-4] Notes designated therein and
described in the within-mentioned Indenture.
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as
Trustee
By
-------------------------------------------
Authorized Signatory
AUTHENTICATION DATE:
- ---------------------------
A-3-9
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
unto __________ (Social Security or other identifying number __________) the
within note and all rights thereunder and hereby irrevocably appoints __________
attorney to transfer the within note on the books kept for registration thereof,
with full power of substitution in the premises.
DATED: SIGNED:
-------------------- ----------------------------------------
NOTICE: The signature on this Assignment must
correspond with the name of the Registered Owner
as it appears on the face of the within note in
every particular.
Signature Guaranteed by:
- -------------------------------
A Member of The New York Stock
Exchange or a State or National
Bank
A-3-10
<PAGE>
EXHIBIT A-4
FORM OF CLASS 1996B-2 SUBORDINATE LIBOR RATE NOTES
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), IN RELIANCE UPON EXEMPTIONS PROVIDED BY THE ACT. AS
PROVIDED IN THE INDENTURE DESCRIBED BELOW, NO RESALE OR OTHER TRANSFER OF THIS
NOTE MAY BE MADE UNLESS SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT IN A TRANSACTION COMPLYING WITH THE
PROVISIONS OF RULE 144A UNDER THE ACT OR TO INSTITUTIONAL ACCREDITED INVESTORS
AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE ACT AND EXEMPT FROM
APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS AND IN ACCORDANCE WITH THE
INDENTURE. NEITHER THE ISSUER NOR THE TRUSTEE IS OBLIGATED TO REGISTER THE
NOTES UNDER THE ACT OR ANY OTHER SECURITIES OR "BLUE SKY" LAW.
EXCEPT AS OTHERWISE PROVIDED IN THE INDENTURE, THIS GLOBAL NOTE MAY BE
TRANSFERRED, IN WHOLE BUT NOT IN PART, ONLY TO ANOTHER NOMINEE OF THE SECURITIES
DEPOSITORY (AS DEFINED HEREIN) OR TO A SUCCESSOR SECURITIES DEPOSITORY OR TO A
NOMINEE OF A SUCCESSOR SECURITIES DEPOSITORY.
UNION FINANCIAL SERVICES-1, INC.
TAXABLE STUDENT LOAN ASSET-BACKED NOTE
SUBORDINATE CLASS 1996B-2
LIBOR RATE
REGISTERED NO. R-1 REGISTERED $__________
MATURITY DATE: INTEREST RATE: ORIGINAL ISSUE DATE CUSIP NO.
July 1, 2014 Variable June 19, 1996 906619 AF8
PRINCIPAL SUM: DOLLARS
REGISTERED OWNER: CEDE & CO.
UNION FINANCIAL SERVICES-1, INC., a corporation organized under the
corporation laws of the State of Nevada (the "Issuer," which term includes any
successor corporation under the Second Amended and Restated Indenture of Trust,
dated as of November 1, 1996 (as amended, the "Indenture"), between the Issuer
and Norwest Bank Minnesota, National
A-4-1
<PAGE>
Association, as trustee (the "Trustee," which term includes any successor
trustee under the Indenture)), for value received, hereby promises to pay to
the Registered Owner (stated above) or registered assigns, the Principal Sum
of (stated above), but solely from the revenues and receipts hereinafter
specified and not otherwise, on the Maturity Date specified above (subject to
the right of prior redemption hereinafter described), upon presentation and
surrender of this note at the Principal Office of the Trustee, as paying
agent, trustee, authenticating agent and registrar for the Notes, or a duly
appointed successor paying agent, and to pay interest in arrears on said
Principal Sum, but solely from the revenues and receipts hereinafter
specified and not otherwise, to the Registered Owner hereof from the most
recent Interest Payment Date to which interest has been paid hereon, until
the payment of said principal sum in full, at the LIBOR-Based Rate on the
first Business Day of each month (each an "Interest Payment Date"),
commencing August 1, 1996. Such interest is payable by check or draft drawn
upon the Trustee and mailed on the Interest Payment Date to the person who is
the Registered Owner hereof on the Record Date at the address of such
Registered Owner as it appears on the registration books (the "Note
Register") maintained by the Trustee.
Any capitalized words and terms used as defined words and terms in this
note and not otherwise defined herein shall have the meanings given them in the
Indenture.
This note shall bear interest at LIBOR-Based Rate until adjusted pursuant
to the Indenture, all as determined in Appendix B of the Indenture.
The principal of and interest on this note are payable in lawful money of
the United States of America. If the specified date for any payment of
principal or interest accrued to such specified date shall be a day other than a
Business Day then such payment may be made on the next succeeding Business Day,
with the same force and effect as if made on the specified date for such payment
without additional interest.
Interest payable on this note shall be computed on the assumption that each
year contains 360 days and actual days elapsed.
This note is one of a series of notes of the Issuer designated Taxable
Student Loan Asset-Backed Notes, Subordinate Class 1996B-2 LIBOR Rate, dated the
Original Issue Date, in the aggregate original principal amount of $14,200,000
(the "Class 1996B-2 Notes") which, together with the Issuer's Taxable Student
Loan Asset-Backed Notes, Senior Class 1996A Auction Rate issued in the aggregate
principal amount of $128,000,000 (the "Class A Notes") have been authorized by
the Issuer under a certain resolution, and issued by the Issuer pursuant to the
Indenture. The Issuer has previously issued $48,300,000 of its Taxable Student
Loan Asset-Backed Notes, Senior Class 1996A-1 Auction Rate Securities (ARS-SM-)
(the "Class A-1 Notes"), $48,300,000 of its Taxable Student Loan Asset-Backed
Notes, Senior Class 1996A-2 Auction Rate Securities (ARS-SM-) (the "Class A-2
Notes") and $11,100,000 of its Taxable Student Loan Asset-Backed Notes,
Subordinate Class 1996B LIBOR Rate (the "Class B Notes"). The Class A-1 Notes,
the Class A-2 Notes and the Class A Notes are collectively referred to herein as
the "Class 1996A Notes." The Class B Notes and the Class B-2 Notes are
collectively referred to
A-4-2
<PAGE>
herein as the "Class 1996B Notes." The proceeds of such notes will be used
by the Issuer, together with other moneys of the Issuer, for the purpose of
providing funds to finance the acquisition of student loans, fund a reserve
fund and to pay certain costs and expenses in connection with the issuance of
such notes. The Indenture provides for the issuance of additional notes (the
"Additional Notes") which may be secured on a parity with or subordinate to
the Class 1996A Notes or the Class 1996B Notes as determined by the Issuer.
The Class 1996A Notes and the Class 1996B Notes and any Additional Notes are
collectively referred to herein as the "Notes."
MANDATORY REDEMPTION. This note is subject to redemption by the Issuer, in
whole or in part, on any Interest Payment Date on or after May 1, 1999, from
certain moneys in the Subordinate Note Redemption Account of the Note Redemption
Fund created pursuant to the Indenture at a redemption price equal to the
principal amount thereof plus accrued interest to the redemption date.
This note is also subject to mandatory redemption by the Issuer at a
redemption price equal to the principal amount thereof plus accrued interest, if
any, to the date of redemption thereof from moneys in the Subordinate Note
Redemption Account of the Note Redemption Fund on an Interest Payment Date
succeeding January 1, 1998, to the extent that moneys remain in the Series 1996
Loan Account of the Student Loan Fund on such date; unless no such mandatory
redemption is needed to maintain the ratings on certain of the Notes as provided
in the Indenture.
EXTRAORDINARY OPTIONAL REDEMPTION. This note is subject to extraordinary
optional redemption, at the option of the Issuer, at a redemption price equal to
the principal amount of this note being redeemed, plus accrued interest to the
date of redemption, without premium in whole or in part on any Interest Payment
Date, if the Issuer reasonably determines that it is unable to acquire Financed
Eligible Loans, that the rate of return on Financed Eligible Loans has
materially decreased, or that the costs of administering the Trust have placed
unreasonable burdens upon the ability of the Issuer to perform its obligations
under the Indenture.
OPTIONAL REDEMPTION. This note is subject to redemption at the option of
the Issuer from any source of funds, in whole or in part, on any Interest
Payment Date on or after May 1, 1999, at a redemption price equal to the
principal amount of this note being redeemed, plus accrued interest on the date
of redemption.
OPTIONAL PURCHASE. The Issuer may purchase or cause to be purchased all of
the Notes on any Interest Payment Date on which the aggregate current principal
balance of the Notes shall be less than or equal to 10% of the initial aggregate
principal balance of the Notes on the Date of Issuance, at a purchase price
equal to the aggregate current principal balance of such Notes, plus accrued
interest on the Notes through the day preceding the Interest Payment Date on
which the purchase occurs.
A-4-3
<PAGE>
NOTICE OF REDEMPTION OR PURCHASE. Notice of the call for redemption or
purchase shall be given by the Trustee by mailing a copy of the notice at least
15 days prior to the redemption or purchase date to the Registered Owners of
Notes to be redeemed or purchased in whole or in part at the address of such
Registered Owner last showing on the registration books. Failure to give such
notice or any defect therein shall not affect the validity of any proceedings
for the redemption or purchase of such Notes for which no such failure or defect
occurs. All Notes called for redemption or purchase will cease to bear interest
after the specified redemption or purchase date, provided funds for their
payment are on deposit at the place of payment at the time. If less than all
Notes are to be redeemed or purchased, Notes shall be selected for redemption or
purchase as provided in the Indenture.
MANDATORY EXCHANGE OF NOTES. The Notes are subject to mandatory exchange,
from time to time, in whole, for Exchange Notes on any Exchange Date. Such
mandatory exchange shall be effective on the Exchange Date specified by the
Trustee in a notice, upon receipt by the Trustee of immediately available funds
from the Issuer equal to the amount of accrued interest to the Exchange Date due
and payable with respect to the Notes subject to mandatory exchange. Notice of
exchange of the Notes will be given by the Trustee not less than 10 calendar
days prior to the Exchange Date to the Registered Owners of the Notes.
SWAP AGREEMENTS. The Indenture provides that the Issuer may enter into an
interest rate swap or basis agreement between the Issuer and a swap provider (a
"Swap Counterparty"), as originally executed and as amended or supplemented, or
other interest rate hedge agreement between the Issuer and a Swap Counterparty,
as originally executed and as amended or supplemented, in each case approved in
writing by each of the Rating Agency, for the purpose of converting in whole or
in part the Issuer's variable interest rate liability on all or a portion of the
Notes bearing interest at a variable rate issued on a parity therewith to a
fixed rate liability or for the purpose of converting in whole or in part the
Issuer's fixed interest rate liability on all or a portion of any Additional
Notes bearing interest at a fixed rate issued on a parity therewith or
subordinate to a variable rate liability. Payments due to a Swap Counterparty
from the Issuer pursuant to the applicable Swap Agreement (including, but not
limited to, payments in respect of an Early Termination Date, as defined in the
applicable Swap Agreement) are referred to herein as "Issuer Swap Payments."
The principal of and interest on the Class 1996A Notes and any Additional
Notes issued on a parity with the Class 1996A Notes and any Issuer Swap Payments
secured on a parity with the Class 1996A Notes are payable on a superior basis
to such payments on the Class 1996B Notes and any Additional Notes issued on a
parity with or subordinate to the Class 1996B Notes; provided, however, that
current principal and interest may be paid on the Class 1996B Notes and any
Additional Notes issued on a parity with or subordinate to the Class 1996B Notes
if all principal and interest payments due and owing at such time on the Class
1996A Notes and any Additional Notes issued on a parity with the Class 1996A
Notes and any Issuer Swap Payments secured on a parity with the Class 1996A
Notes have been previously made or provided for as provided in the Indenture.
The principal of and interest on the Class 1996B Notes and any Additional Notes
issued on a parity with the Class 1996B Notes and any Issuer Swap Payments
A-4-4
<PAGE>
secured on a parity with the Class 1996B Notes are payable on a superior basis
to such payments on any Additional Notes issued subordinate to the Class 1996B
Notes.
Reference is hereby made to the Indenture, copies of which are on file in
the Principal Office of the Trustee, and to all of the provisions of which any
Registered Owner of this note by his acceptance hereof hereby assents, for
definitions of terms; the description of and the nature and extent of the
security for the Notes; the Issuer's student loan origination and acquisition
program; the revenues and other money pledged to the payment of the principal of
and interest on the Notes; the nature and extent and manner of enforcement of
the pledge; the conditions upon which the Indenture may be amended or
supplemented with or without the consent of the Registered Owners of the Notes
and any Swap Counterparty; the rights and remedies of the Registered Owner
hereof with respect hereto and thereto, including the limitations upon the right
of a Registered Owner hereof to institute any suit, action, or proceeding in
equity or at law with respect hereto and thereto; the rights, duties, and
obligations of the Issuer and the Trustee thereunder; the terms and provisions
upon which the liens, pledges, charges, trusts, and covenants made therein may
be discharged at or prior to the stated maturity or earlier redemption of this
note, and this note thereafter shall no longer be secured by the Indenture or be
deemed to be Outstanding, as defined in the Indenture, thereunder; and for the
other terms and provisions thereof.
THE NOTES ARE LIMITED OBLIGATIONS OF THE ISSUER, PAYABLE SOLELY FROM, AND
FURTHER SECURED BY, THE TRUST ESTATE, AS DEFINED IN THE INDENTURE.
No recourse, either directly or indirectly, shall be had for the payment of
the principal of and interest on this note or any claim based hereon or in
respect hereof or of the Indenture, against the Trustee, or any incorporator,
director, officer, employee, or agent of the Issuer, but the obligation to pay
all amounts required by the Indenture securing this note and the obligation to
do and perform the covenants and acts required of the Issuer therein and herein
shall be and remain the responsibility and obligation of said Issuer, limited as
herein set forth.
Subject to the restrictions specified in the Indenture, this note is
transferable on the Note Register kept for that purpose by the Trustee, as
registrar, upon surrender of this note for transfer at the principal office of
the Trustee, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Trustee duly executed by, the Registered
Owner hereof or his attorney duly authorized in writing, and thereupon one or
more new Notes of the same series, Stated Maturity, of authorized denominations,
bearing interest at the same rate, and for the same aggregate principal amount
will be issued to the designated transferee or transferees. At the option of
the Registered Owner, any Note may be exchanged for other Notes in authorized
denominations upon surrender of the Note to be exchanged at the principal office
of the Trustee. Upon any such presentation for exchange, one or more new Notes
of the same series, Stated Maturity, in authorized denominations, bearing
interest at the same rate, and for the same aggregate principal amount as the
Note or Notes so surrendered will be issued to the
A-4-5
<PAGE>
Registered Owner of the Note or Notes so surrendered; and the Note or Notes
so surrendered shall thereupon be cancelled by the Trustee.
Notwithstanding the foregoing, so long as the ownership of the Notes is
maintained in book-entry form by The Depository Trust Company (the "Securities
Depository") or a nominee thereof, this note may be transferred in whole but not
in part only to the Securities Depository or a nominee thereof or to a successor
Securities Depository or its nominee.
The Issuer, the Trustee, and any agent of either of them shall treat the
Person in whose name this note is registered as the Registered Owner hereof (i)
on the record date for purposes of receiving timely payment of interest hereon,
and (ii) on the date of surrender of this note for purposes of receiving payment
of principal hereof at its stated maturity and (iii) for all other purposes,
whether or not this note is overdue, and neither the Issuer, the Trustee, nor
any such agent shall be affected by notice to the contrary.
To the extent permitted by the Indenture, modifications or alterations of
the Indenture and any supplemental indenture may be made with the consent of
less than all of the Registered Owners of the Notes then outstanding or without
the consent of any of such Registered Owners (by reason of a change in the Act
or Regulation or to cure ambiguities or conflicts), but such modification or
alteration is not permitted to affect the maturity date, Stated Maturity,
amount, Interest Payment Date, or rate of interest on any outstanding Notes or
affect the rights of the Registered Owners of less than all of the Notes
outstanding.
The Registered Owner hereof shall not have the right to demand payment of
this note or any interest hereon out of funds raised or to be raised by
taxation.
Any capitalized term used herein and not otherwise defined herein shall
have the same meaning ascribed to such term in the herein defined Indenture
unless the context shall clearly indicate otherwise.
It is hereby certified and recited that all acts and things required by the
laws of the State of Nevada to happen, exist, and be performed precedent to and
in the issuance of this note, and the passage of said resolution and the
execution of said Indenture, have happened, exist and have been performed as so
required.
A-4-6
<PAGE>
IN TESTIMONY WHEREOF, the Board of Directors of UNION FINANCIAL SERVICES-1,
INC. has caused the seal of the Issuer to be impressed or a facsimile thereof to
be printed hereon, and this note to be executed by the President and Secretary
of the Issuer all as of the Original Issue Date.
[SEAL] UNION FINANCIAL SERVICES-1, INC.
By
------------------------------------
Stephen F. Butterfield
President
By
------------------------------------
Ronald W. Page
Secretary
A-4-7
<PAGE>
CERTIFICATE OF AUTHENTICATION
This note is one of the Class 1996B-2 Notes designated therein and
described in the within-mentioned Indenture.
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as
Trustee
By
------------------------------------
Authorized Signatory
AUTHENTICATION DATE:
- ----------------------------------------
A-4-8
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
unto __________ (Social Security or other identifying number __________) the
within note and all rights thereunder and hereby irrevocably appoints __________
attorney to transfer the within note on the books kept for registration thereof,
with full power of substitution in the premises.
DATED: SIGNED:
------------------ ------------------------------------------
NOTICE: The signature on this Assignment must
correspond with the name of the Registered Owner
as it appears on the face of the within note in
every particular.
Signature Guaranteed by:
- ----------------------------------
A Member of The New York Stock
Exchange or a State or National
Bank
(End of Form of Class 1996B-2 Note)
A-4-9
<PAGE>
EXHIBIT B-1
FORM OF SERIES 1996A INVESTMENT LETTER
March __, 1996
Union Financial Services-1, Inc.
6991 East Camelback Road, Suite B290
Scottsdale, Arizona 85251
Smith Barney Inc.
390 Greenwich Street
New York, New York 10013
Re: Taxable Student Loan Asset-Backed Notes, Series 1996A
Dear Sirs:
The undersigned (the "Purchaser") has purchased, or intends to purchase,
Taxable Student Loan Asset-Backed Notes, Series 1996A (the "Notes") with an
aggregate initial Principal Balance of $__________ issued pursuant to the
Indenture of Trust dated as of March 1, 1996 (the "Indenture"), between Union
Financial Services-1, Inc. (the "Issuer"), and Norwest Bank Minnesota,
National Association, as Trustee (the "Trustee"), relating to the
above-referenced series of Notes. Terms used and not otherwise defined
herein shall have the respective meanings ascribed to them in the Indenture.
THIS LETTER, DATED AS OF MARCH __, 1996, OR A FACSIMILE COPY HEREOF, WILL
BE DELIVERED TO THE ABOVE ADDRESSEES NO LATER THAN MARCH 8, 1996.
CERTIFICATION
The undersigned, as an authorized officer or agent of the Purchaser,
hereby certifies, represents, warrants and agrees on behalf of the Purchaser
as follows:
1. The Purchaser is duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it was incorporated
and is authorized to invest
B-1-1
<PAGE>
in the Notes being purchased hereby. The person executing this letter
on behalf of the Purchaser is duly authorized to do so on the Purchaser's
behalf.
2. The Purchaser has received (a) copies of the Preliminary Private
Placement Memorandum, dated March 2, 1996, and the Private Placement
Memorandum (the latter being herein called the "Private Placement
Memorandum") relating to the Notes issued pursuant to the Indenture, and
(b) the other written information, if any, described under Schedule I
below, that has been requested by the Purchaser concerning the Indenture,
the Notes, the Seller, the Issuer, the Servicer, the Guaranty Agencies and
the Trustee. The Purchaser has reviewed and understands the material to
which reference is made in this paragraph 2 and Schedule I below, and
understands that risks are involved in an investment in the Notes. The
Purchaser represents that in making its investment decision to acquire the
Notes, the Purchaser has not relied on representations, warranties,
opinions, projections, financial or other information or analyses, if any,
supplied to it by any person, including Smith Barney Inc., as placement
agent (the "Placement Agent"), the Seller, the Issuer, the Servicer, any
Guaranty Agency, the Trustee or any of their respective affiliates, except
as expressly contained in the Private Placement Memorandum and in the other
written information, if any, described on Schedule I below.
3. The Purchaser has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of an
investment in the Notes, and the Purchaser (or any account referred to
below) is able to bear the economic risks of such an investment.
4. The Purchaser is acquiring the Notes for its own account or for
accounts for which it exercises sole investment discretion and not with a
view to or for sale in connection with any distribution thereof, subject
nevertheless to any requirement of law that the disposition of the
Purchaser's property shall at all times be and remain within its control.
5. The Purchaser understands that the Notes have not been and will
not be registered or qualified under the Securities Act or any state
securities act or any other federal or state laws, that none of the
Placement Agent, the Seller, the Issuer, the Servicer, the Guaranty Agency
or the Trustee is required to so register the Notes, and that the Notes may
be resold only if registered pursuant to the provisions of the Securities
Act and all other applicable federal and state securities laws or if an
exemption from any requirement of registration is available.
6. The Purchaser will comply with all applicable federal and state
securities laws, rules and regulations in connection with any subsequent
resale of the Notes by the Purchaser.
7. The Purchaser understands and agrees that it may resell or
otherwise transfer all or any part of its Notes only to an institution
(A) (i) which the Purchaser
B-1-2
<PAGE>
reasonably believes is a "qualified institutional buyer" (as defined in
Rule 144A under the Securities Act) that will be purchasing such Notes in
compliance with Rule 144A for its own account or for the account of a
"qualified institutional buyer," and (ii) which is made aware that such
resale or other transfer is being made in reliance on Rule 144A, or (B) is
an Institutional Accredited Investor (as defined in Rule 501(a)(1), (2),
(3) or (7) under the Securities Act).
8. The Purchaser acknowledges that any proposed assignee of a
beneficial ownership interest in the Notes will be deemed under the
Indenture to have made agreements and representations substantially similar
to those set forth in paragraph 8 above.
9. If the Purchaser is an Accredited Investor, the Purchaser is
(please check one):
(A) A bank (as defined in Section 3(a)(2) of the Securities Act
- ----- of 1933) or a savings and loan association or other
institution (as defined in Section 3(a)(5)(A) of the Act).
(B) A broker or dealer registered pursuant to Section 15 of the
- ----- Securities Exchange Act of 1934.
(C) An insurance company (as defined in Section 2(13) of the
- ----- Act).
(D) An investment company registered under the Investment
- ----- Company Act of 1940.
(E) A business development company (as defined in Section
- ----- 2(a)(48) of the Investment Company Act of 1940).
(F) A Small Business Investment Company licensed by the U.S.
- ----- Small Business Administration under Section 301(c) or (d) of
the Small Business Investment Act of 1958.
(G) A plan established and maintained by a state, its political
- ----- subdivision, or any agency or instrumentality of a state or
its political subdivisions, for the benefit of its
employees, if such plan has total assets in excess of
$5,000,000.
(H) An employee benefit plan within the meaning of Title I of
- ----- the Employee Retirement Income Security Act of 1974
("ERISA") whose investment decision to purchase the Shares
is made by a plan fiduciary, as defined in Section 3(21) of
ERISA, that is either a bank, a savings and loan
association, an insurance company, or a registered
investment advisor.
B-1-3
<PAGE>
(I) An employee benefit plan within the meaning of Title I of
- ----- ERISA with total assets in excess of $5,000,000.
(J) A self-directed employee benefit plan within the meaning of
- ----- Title I of ERISA whose investment decisions are made solely
by persons that are accredited investors as that term is
defined in Regulation D as promulgated by the Securities and
Exchange Commission.
(K) A private business development company (as defined in
- ----- Section 202(a)(22) of the Investment Advisers Act of 1940).
(L) An organization described in Section 501(c)(3) of the
- ----- Internal Revenue Code (tax exempt organization),
corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of
acquiring the Shares, having total assets in excess of
$5,000,000.
(M) The undersigned is a trust, with total assets in excess of
- ----- $5,000,000, not formed for the specific purpose of acquiring
the Shares, if the purchase of the Shares is directed by a
person who either alone or with his purchaser
representative(s), has such knowledge and experience in
financial and business matters that he is capable of
evaluating the merits and risks of an investment in the
Shares.
(N) The undersigned is an entity, all the equity owners of which
- ----- are "accredited investors" within one or more of the above
categories. NOTE: An irrevocable trust cannot qualify under
this category. The equity owners of a revocable trust are
its grantors. IF RELYING UPON THIS CATEGORY ALONE, EACH
EQUITY OWNER MUST COMPLETE A SEPARATE COPY OF THIS
TRANSFEREE'S AGREEMENT.
10. The Purchaser understands that each of the Purchaser's Notes will
bear a legend restricting transfer of the Notes.
B-1-4
<PAGE>
11. Attached hereto as Schedule A specifying the payment and notice
instructions with respect to the Purchaser.
Very truly yours,
-----------------------------------
By
--------------------------------
Name:
------------------------------
Title:
----------------------------
B-1-5
<PAGE>
SCHEDULE I
Description of other written information that has been requested by the
Purchaser:
None, unless otherwise indicated below.
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Very truly yours,
-----------------------------------
[Printed Name of Purchaser]
By:
-------------------------------
Title:
----------------------------
Address of Purchaser:
-----------------------------------
-----------------------------------
-----------------------------------
B-1-6
<PAGE>
EXHIBIT B-2
FORM OF SERIES 1996B INVESTMENT LETTER
June __, 1996
Union Financial Services-1, Inc.
6991 East Camelback Road, Suite B290
Scottsdale, Arizona 85251
Smith Barney Inc.
390 Greenwich Street
New York, New York 10013
Norwest Bank Minnesota, National Association
Minneapolis, Minnesota
Re: Taxable Student Loan Asset-Backed Notes, Series 1996B
Dear Sirs:
The undersigned (the "Purchaser") has purchased, or intends to purchase,
Taxable Student Loan Asset-Backed Notes, Series 1996B (the "Notes") with an
aggregate initial Principal Balance of $__________ issued pursuant to the
Amended and Restated Indenture of Trust dated as of June 15, 1996 (the
"Indenture"), between Union Financial Services-1, Inc. (the "Issuer"), and
Norwest Bank Minnesota, National Association, as Trustee (the "Trustee"),
relating to the above-referenced series of Notes. Terms used and not
otherwise defined herein shall have the respective meanings ascribed to them
in the Indenture.
THIS LETTER, DATED AS OF JUNE __, 1996, OR A FACSIMILE COPY HEREOF, WILL
BE DELIVERED TO THE ABOVE ADDRESSEES NO LATER THAN JUNE __, 1996.
CERTIFICATION
The undersigned, as an authorized officer or agent of the Purchaser,
hereby certifies, represents, warrants and agrees on behalf of the Purchaser
as follows:
B-2-1
<PAGE>
1. The Purchaser is duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it was incorporated
and is authorized to invest in the Notes being purchased hereby. The
person executing this letter on behalf of the Purchaser is duly authorized
to do so on the Purchaser's behalf.
2. The Purchaser has received (a) copies of the Preliminary Private
Placement Memorandum, dated June 12, 1996, and the Private Placement
Memorandum (the latter being herein called the "Private Placement
Memorandum") relating to the Notes issued pursuant to the Indenture, and
(b) the other written information, if any, described under Schedule I
below, that has been requested by the Purchaser concerning the Indenture,
the Notes, the Seller, the Issuer, the Servicer, the Guaranty Agency and
the Trustee. The Purchaser has reviewed and understands the material to
which reference is made in this paragraph 2 and Schedule I below, and
understands that risks are involved in an investment in the Notes. The
Purchaser represents that in making its investment decision to acquire the
Notes, the Purchaser has not relied on representations, warranties,
opinions, projections, financial or other information or analyses, if any,
supplied to it by any person, including Smith Barney Inc., as placement
agent (collectively, the "Placement Agent"), the Seller, the Issuer, the
Servicer, the Guaranty Agency, the Trustee or any of their respective
affiliates, except as expressly contained in the Private Placement
Memorandum and in the other written information, if any, described on
Schedule I below.
3. The Purchaser has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of an
investment in the Notes, and the Purchaser (or any account referred to
below) is able to bear the economic risks of such an investment.
4. The Purchaser is acquiring the Notes for its own account or for
accounts for which it exercises sole investment discretion and not with a
view to or for sale in connection with any distribution thereof, subject
nevertheless to any requirement of law that the disposition of the
Purchaser's property shall at all times be and remain within its control.
5. The Purchaser understands that the Notes have not been and will
not be registered or qualified under the Securities Act or any state
securities act or any other federal or state laws, that none of the
Placement Agent, the Seller, the Issuer, the Servicer, the Guaranty Agency
or the Trustee is required to so register the Notes, and that the Notes may
be resold only if registered pursuant to the provisions of the Securities
Act and all other applicable federal and state securities laws or if an
exemption from any requirement of registration is available.
6. The Purchaser will comply with all applicable federal and state
securities laws, rules and regulations in connection with any subsequent
resale of the Notes by the Purchaser.
B-2-2
<PAGE>
7. The Purchaser understands and agrees that it may resell or
otherwise transfer all or any part of its Notes only to an institution
(A) (i) which the Purchaser reasonably believes is a "qualified
institutional buyer" (as defined in Rule 144A under the Securities Act)
that will be purchasing such Notes in compliance with Rule 144A for its own
account or for the account of a "qualified institutional buyer," and
(ii) which is made aware that such resale or other transfer is being made
in reliance on Rule 144A or (B) is an Institutional Accredited Investor (as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act), and
who in either case delivers to the Trustee, the Issuer and Smith Barney
Inc. an executed Investment Letter.
8. The Purchaser acknowledges that any proposed assignee of a
beneficial ownership interest in the Notes will be deemed under the
Indenture to have made agreements and representations substantially similar
to those set forth in paragraph 8 above.
9. If the Purchaser is an Accredited Investor, the Purchaser is
(please check one):
(A) A bank (as defined in Section 3(a)(2) of the Securities Act
- ----- of 1933) or a savings and loan association or other
institution (as defined in Section 3(a)(5)(A) of the Act).
(B) A broker or dealer registered pursuant to Section 15 of the
- ----- Securities Exchange Act of 1934.
(C) An insurance company (as defined in Section 2(13) of the
- ----- Act).
(D) An investment company registered under the Investment
- ----- Company Act of 1940.
(E) A business development company (as defined in Section
- ----- 2(a)(48) of the Investment Company Act of 1940).
(F) A Small Business Investment Company licensed by the U.S.
- ----- Small Business Administration under Section 301(c) or (d) of
the Small Business Investment Act of 1958.
(G) A plan established and maintained by a state, its political
- ----- subdivision, or any agency or instrumentality of a state or
its political subdivisions, for the benefit of its
employees, if such plan has total assets in excess of
$5,000,000.
(H) An employee benefit plan within the meaning of Title I of
- ----- the Employee Retirement Income Security Act of 1974
("ERISA") whose investment
B-2-3
<PAGE>
decision to purchase the Shares is made by a plan fiduciary,
as defined in Section 3(21) of ERISA, that is either a bank,
a savings and loan association, an insurance company, or a
registered investment advisor.
(I) An employee benefit plan within the meaning of Title I of
- ----- ERISA with total assets in excess of $5,000,000.
(J) A self-directed employee benefit plan within the meaning of
- ----- Title I of ERISA whose investment decisions are made solely
by persons that are accredited investors as that term is
defined in Regulation D as promulgated by the Securities and
Exchange Commission.
(K) A private business development company (as defined in
- ----- Section 202(a)(22) of the Investment Advisers Act of 1940).
(L) An organization described in Section 501(c)(3) of the
- ----- Internal Revenue Code (tax exempt organization),
corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of
acquiring the Shares, having total assets in excess of
$5,000,000.
(M) The undersigned is a trust, with total assets in excess of
- ----- $5,000,000, not formed for the specific purpose of acquiring
the Shares, if the purchase of the Shares is directed by a
person who either alone or with his purchaser
representative(s), has such knowledge and experience in
financial and business matters that he is capable of
evaluating the merits and risks of an investment in the
Shares.
(N) The undersigned is an entity, all the equity owners of which
- ----- are "accredited investors" within one or more of the above
categories. NOTE: An irrevocable trust cannot qualify under
this category. The equity owners of a revocable trust are
its grantors. IF RELYING UPON THIS CATEGORY ALONE, EACH
EQUITY OWNER MUST COMPLETE A SEPARATE COPY OF THIS
TRANSFEREE'S AGREEMENT.
10. The Purchaser understands that each of the Purchaser's Notes will
bear a legend restricting transfer of the Notes.
B-2-4
<PAGE>
11. Attached hereto as Schedule A specifying the payment and notice
instructions with respect to the Purchaser.
Very truly yours,
-----------------------------------
By
--------------------------------
Name:
-----------------------------
Title:
----------------------------
B-2-5
<PAGE>
SCHEDULE I
Description of other written information that has been requested by the
Purchaser:
None, unless otherwise indicated below.
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Very truly yours,
-----------------------------------
[Printed Name of Purchaser]
By:
-------------------------------
Title:
----------------------------
Address of Purchaser:
-----------------------------------
-----------------------------------
-----------------------------------
B-2-6
<PAGE>
EXHIBIT C-1
FORM OF SERIES 1996A TRANSFEREE AGREEMENT
(Date)
Norwest Bank Minnesota, National Association
Norwest Center
6th and Market
Minneapolis, MN 55479-0069
Attention: Corporate Trust Department
Ladies and Gentlemen:
The undersigned (the "Purchaser") proposes to purchase Notes (the
"Purchaser's Notes") representing $_______________ original aggregate
principal amount of the $107,700,000 Taxable Student Loan Asset-Backed Notes,
Series 1996 ("Notes") of Union Financial Services-1, Inc., a Nevada
corporation (the "Issuer"). The Notes were issued pursuant to an Indenture
of Trust dated as of March 1, 1996 between the Issuer and Norwest Bank
Minnesota, National Association, as trustee for the Registered Owners (the
"Trustee") (the "Indenture"). Capitalized terms used herein but not
otherwise defined shall have the same meaning as in the Indenture.
In connection with the purchase, the Purchaser agrees to the following
terms and conditions and makes the representations and warranties stated
herein with the express understanding that they will be relied upon by the
seller of the Purchaser's Notes, the Issuer and the Trustee.
1. The Purchaser is purchasing the Purchaser's Notes solely for the
Purchaser's own account and the account of its affiliated entities and with
no present intention of distributing the Notes or any portion thereof,
subject, nevertheless, to the understanding that the disposition of the
Purchaser's property shall at all times be and remain within its control.
2. The Purchaser is either:
(A) a Qualified Institutional Buyer as follows (please check one):
C-1-1
<PAGE>
_____ (a) Any of the following entities, acting for its own account or
the accounts of other qualified institutional buyers, that in the aggregate
owns and invests on a discretionary basis at least $100 million in
securities of issuers that are not affiliated with the entity (PLEASE CHECK
ONE):
_____ (i) Any insurance company as defined in Section 2(13) of
the Securities Act;
_____ (ii) Any investment company registered under the Investment
Company Act of 1940 (the "Investment Company Act") or any business
development company as defined in Section 2(A)(48) of that Act;
_____ (iii) Any Small Business Investment Company licensed by
the U.S. Small Business Administration under section 301(c) or (d) of
the Small Business Investment Act of 1958;
_____ (iv) Any plan established and maintained by a state, its
political subdivisions, or any agency or instrumentality of a state or
its political subdivisions, for the benefit of its employees;
_____ (v) Any employee benefit plan within the meaning of Title I
of the Employee Retirement Income Security Act of 1974;
_____ (vi) Any business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940;
_____ (vii) Any organization described in Section 501(c)(3) of
the Internal Revenue Code, corporation (other than a bank as defined
in Section 3(a)(2) of the Act or a savings and loan association or
other institution referenced in Section 3(a)(5)(A) of the Act or a
foreign bank or savings and loan association or equivalent
institution), partnership, or Massachusetts or similar business
trust; or
_____ (viii) Any investment adviser registered under the
Investment Advisers Act; or
(B) an Institutional Accredited Investor as follows (please check one):
_____ (i) A bank (as defined in Section 3(a)(2) of the Securities
Act of 1933) or a savings and loan association or other institution
(as defined in Section 3(a)(5)(A) of the Act).
_____ (ii) A broker or dealer registered pursuant to Section 15 of
the Securities Exchange Act of 1934.
C-1-2
<PAGE>
_____ (iii) An insurance company (as defined in Section 2(13)
of the Act).
_____ (iv) An investment company registered under the Investment
Company Act of 1940.
_____ (v) A business development company (as defined in Section
2(a)(48) of the Investment Company Act of 1940).
_____ (vi) A Small Business Investment Company licensed by the
U.S. Small Business Administration under Section 301(c) or (d) of the
Small Business Investment Act of 1958.
_____ (vii) A plan established and maintained by a state, its
political subdivision, or any agency or instrumentality of a state or
its political subdivisions, for the benefit of its employees, if such
plan has total assets in excess of $5,000,000.
_____ (viii) An employee benefit plan within the meaning of
Title I of the Employee Retirement Income Security Act of 1974
("ERISA") whose investment decision to purchase the Shares is made by
a plan fiduciary, as defined in Section 3(21) of ERISA, that is either
a bank, a savings and loan association, an insurance company, or a
registered investment advisor.
_____ (ix) An employee benefit plan within the meaning of Title I
of ERISA with total assets in excess of $5,000,000.
_____ (x) A self-directed employee benefit plan within the
meaning of Title I of ERISA whose investment decisions are made solely
by persons that are accredited investors as that term is defined in
Regulation D as promulgated by the Securities and Exchange Commission.
_____ (xi) A private business development company (as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940).
_____ (xii) An organization described in Section 501(c)(3) of
the Internal Revenue Code (tax exempt organization), corporation,
Massachusetts or similar business trust, or partnership, not formed
for the specific purpose of acquiring the Shares, having total assets
in excess of $5,000,000.
_____ (xiii) The undersigned is a trust, with total assets in
excess of $5,000,000, not formed for the specific purpose of acquiring
the Shares, if the purchase of the Shares is directed by a person who
either alone or with his purchaser representative(s), has such
knowledge and experience in financial and
C-1-3
<PAGE>
business matters that he is capable of evaluating the merits and
risks of an investment in the Shares.
_____ (xiv) The undersigned is an entity, all the equity
owners of which are "accredited investors" within one or more of the
above categories. NOTE: An irrevocable trust cannot qualify under
this category. The equity owners of a revocable trust are its
grantors. IF RELYING UPON THIS CATEGORY ALONE, EACH EQUITY OWNER MUST
COMPLETE A SEPARATE COPY OF THIS TRANSFEREE'S AGREEMENT.
_____ (b) Any investment company registered under the Investment
Company Act, acting for its own account or for the accounts of other
qualified institutional buyers, that is part of a family of investment
companies which own in the aggregate at least $100 million in securities of
issuers, other than issuers that are affiliated with the investment company
or are part of such family of investment companies. "Family of investment
companies" means any two or more investment companies registered under the
Investment Company Act, except for a unit investment trust whose assets
consist solely of shares of one or more registered investment companies,
that have the same investment adviser (or, in the case of unit investment
trusts, the same depositor), provided that, for the purposes of this
section:
(i) Each series of a series company (as defined in Rule 18f-2
under the Investment Company Act) shall be deemed to be a separate
investment company; and
(ii) Investment companies shall be deemed to have the same
adviser (or depositor) if their advisers (or depositors) are
majority-owned subsidiaries of the same parent, or if one investment
company's adviser (or depositor) is a majority-owned subsidiary of the
other investment company's adviser (or depositor);
_____ (c) Any entity, all of the equity owners of which are qualified
institutional buyers, acting for its own account or the accounts of other
qualified institutional buyers;
_____ (d) Any bank as defined in section 3(a)(2) of the Securities
Act, any savings and loan association or other institution as referenced in
section 3(a)(5)(A) of the Act, or any foreign bank or savings and loan
association or equivalent institution, acting for its own account or the
accounts of other qualified institutional buyers, that in the aggregate
owns and invests on a discretionary basis at least $100 million in
securities of issuers that are not affiliated with it and that has an
audited net worth of at least $25 million as demonstrated in its latest
annual financial statements, as of a date not more than 16 months preceding
the date of sale under the Rule in the case of a U.S. bank or savings and
loan association, and not more than 18 months preceding such date of sale
for a foreign bank or savings and loan association or for a equivalent
institution;
C-1-4
<PAGE>
_____ (e) Any dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), acting
for its own account or the accounts of other qualified institutional
buyers, that in the aggregate owns and invests on a discretionary basis at
least $10 million of securities of issuers that are not affiliated with the
dealer; provided, that securities constituting the whole or a part of an
unsold allotment to or subscription by a dealer as a participant in a
public offering shall not be deemed to be owned by such dealer; and
_____ (f) Any dealer registered pursuant to Section 15 of the Exchange
Act acting in a riskless principal transaction on behalf of a Qualified
Institutional Buyer.
3. The Purchaser understands that the Issuer, any person acting on its
behalf and the seller of the Purchaser's Notes shall be entitled to rely upon
certain non-exclusive methods of establishing the Purchaser's ownership and
discretionary investments of securities as stated in Rule 144A promulgated
under the Securities Act of 1933, as amended ("Rule 144A").
4. The Purchaser represents that, if it has so requested, it has
received the following reasonably current information: a brief statement of
the nature of the business of the Issuer and the products and services it
offers; the Issuer's most recent balance sheet and profit and loss and
retained earnings statement, and similar financial statements for such part
of the two preceding fiscal years as the Issuer has been in operation; and
Servicer Statements of payments on the Notes on each Payment Date or for a
shorter period as may be requested by the Purchaser.
5. The Purchaser understands that the Purchaser's Notes have not been
registered under the Securities Act or any state securities or "Blue Sky"
laws and are being sold in reliance on exemptions from the registration
requirements of the Securities Act and any such laws for nonpublic offerings.
The Purchaser understands that the exemptions from the registration
requirements under state securities laws upon which the Issuer is relying
require that the Purchaser be one of the types of investors specified in
paragraph 2 above under the applicable state securities law and the Purchaser
is such an investor. The Purchaser further understands that the Purchaser's
Notes must be held indefinitely unless subsequently registered under the
Securities Act, any applicable state securities or "Blue Sky" laws or unless
exemptions from the registration requirements of the Securities Act
(particularly, Rule 144A) and such laws are available. If at some future
time the Purchaser wishes to dispose of or exchange any of the Purchaser's
Notes, the Purchaser will not do so unless before any such sale, transfer or
other disposition the Purchaser has furnished to the Issuer and the Trustee
an express agreement substantially in the form of this Transferee's Agreement
by the proposed transferee to be bound by and to abide by the provisions of
the Indenture, the restrictions noted on the face of the Purchaser's Notes
and the Transferee's Agreement.
6. The Purchaser understands that each of the Purchaser's Notes will
bear a legend restricting transfer of the Notes.
C-1-5
<PAGE>
7. The Purchaser understands that there may be restrictions on the
ability of certain investors, including, without limitation, depository
institutions, either to purchase the Purchaser's Notes or to purchase
investments having characteristics similar to those of the Purchaser's Notes
representing more than a specified percentage of the investor's assets. The
Purchaser has consulted, and relied on the advice of, the Purchaser's own
legal advisor in determining whether and to what extent the Purchaser's Notes
constitute a legal investment for the Purchaser.
8. The Purchaser recognizes that an investment in the Purchaser's
Notes involves significant risks.
9. The Purchaser understands that there is no established market for
the Purchaser's Notes and that none will develop and, accordingly, that the
Purchaser must bear the economic risk of an investment in the Purchaser's
Notes for an indefinite period of time unless the Notes are sold to a
Qualified Institutional Buyer of the type specified in Paragraph 2 above.
10. The Purchaser agrees that the Purchaser is bound by and will abide
by the provisions of the Indenture, the restrictions noted on the face of the
Purchaser's Notes and this Transferee's Agreement.
Very truly yours,
-----------------------------------
By
--------------------------------
Name:
------------------------------
Title:
----------------------------
C-1-6
<PAGE>
EXHIBIT C-2
FORM OF SERIES 1996B TRANSFEREE AGREEMENT
(Date)
Norwest Bank Minnesota, National Association
Norwest Center
6th and Market
Minneapolis, MN 55479-0069
Attention: Corporate Trust Department
Ladies and Gentlemen:
The undersigned (the "Purchaser") proposes to purchase Notes (the
"Purchaser's Notes") representing $_______________ original aggregate
principal amount of the $142,200,000 Taxable Student Loan Asset-Backed Notes,
Series 1996B ("Notes") of Union Financial Services-1, Inc., a Nevada
corporation (the "Issuer"). The Notes were issued pursuant to an Amended and
Restated Indenture of Trust dated as of June 15, 1996 between the Issuer and
Norwest Bank Minnesota, National Association, as trustee for the Registered
Owners (the "Trustee") (the "Indenture"). Capitalized terms used herein but
not otherwise defined shall have the same meaning as in the Indenture.
In connection with the purchase, the Purchaser agrees to the following
terms and conditions and makes the representations and warranties stated
herein with the express understanding that they will be relied upon by the
seller of the Purchaser's Notes, the Issuer and the Trustee.
1. The Purchaser is purchasing the Purchaser's Notes solely for the
Purchaser's own account and the account of its affiliated entities and with no
present intention of distributing the Notes or any portion thereof, subject,
nevertheless, to the understanding that the disposition of the Purchaser's
property shall at all times be and remain within its control.
2. The Purchaser is either:
(A) a Qualified Institutional Buyer as follows (please check one):
C-2-1
<PAGE>
_____ (a) Any of the following entities, acting for its own account or
the accounts of other qualified institutional buyers, that in the aggregate
owns and invests on a discretionary basis at least $100 million in
securities of issuers that are not affiliated with the entity (please check
one):
_____ (i) Any insurance company as defined in Section 2(13) of
the Securities Act;
_____ (ii) Any investment company registered under the Investment
Company Act of 1940 (the "Investment Company Act") or any business
development company as defined in Section 2(A)(48) of that Act;
_____ (iii) Any Small Business Investment Company licensed by
the U.S. Small Business Administration under section 301(c) or (d) of
the Small Business Investment Act of 1958;
_____ (iv) Any plan established and maintained by a state, its
political subdivisions, or any agency or instrumentality of a state or
its political subdivisions, for the benefit of its employees;
_____ (v) Any employee benefit plan within the meaning of Title I
of the Employee Retirement Income Security Act of 1974;
_____ (vi) Any business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940;
_____ (vii) Any organization described in Section 501(c)(3) of
the Internal Revenue Code, corporation (other than a bank as defined
in Section 3(a)(2) of the Act or a savings and loan association or
other institution referenced in Section 3(a)(5)(A) of the Act or a
foreign bank or savings and loan association or equivalent
institution), partnership, or Massachusetts or similar business trust;
or
_____ (viii) Any investment adviser registered under the
Investment Advisers Act; or
(B) an Institutional Accredited Investor as follows (please check one):
_____ (i) A bank (as defined in Section 3(a)(2) of the Securities
Act of 1933) or a savings and loan association or other institution
(as defined in Section 3(a)(5)(A) of the Act).
_____ (ii) A broker or dealer registered pursuant to Section 15 of
the Securities Exchange Act of 1934.
C-2-2
<PAGE>
_____ (iii) An insurance company (as defined in Section 2(13)
of the Act).
_____ (iv) An investment company registered under the Investment
Company Act of 1940.
_____ (v) A business development company (as defined in Section
2(a)(48) of the Investment Company Act of 1940).
_____ (vi) A Small Business Investment Company licensed by the
U.S. Small Business Administration under Section 301(c) or (d) of the
Small Business Investment Act of 1958.
_____ (vii) A plan established and maintained by a state, its
political subdivision, or any agency or instrumentality of a state or
its political subdivisions, for the benefit of its employees, if such
plan has total assets in excess of $5,000,000.
_____ (viii) An employee benefit plan within the meaning of
Title I of the Employee Retirement Income Security Act of 1974
("ERISA") whose investment decision to purchase the Shares is made by
a plan fiduciary, as defined in Section 3(21) of ERISA, that is either
a bank, a savings and loan association, an insurance company, or a
registered investment advisor.
_____ (ix) An employee benefit plan within the meaning of Title I
of ERISA with total assets in excess of $5,000,000.
_____ (x) A self-directed employee benefit plan within the
meaning of Title I of ERISA whose investment decisions are made solely
by persons that are accredited investors as that term is defined in
Regulation D as promulgated by the Securities and Exchange Commission.
_____ (xi) A private business development company (as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940).
_____ (xii) An organization described in Section 501(c)(3) of
the Internal Revenue Code (tax exempt organization), corporation,
Massachusetts or similar business trust, or partnership, not formed
for the specific purpose of acquiring the Shares, having total assets
in excess of $5,000,000.
_____ (xiii) The undersigned is a trust, with total assets in
excess of $5,000,000, not formed for the specific purpose of acquiring
the Shares, if the purchase of the Shares is directed by a person who
either alone or with his purchaser representative(s), has such
knowledge and experience in financial and
C-2-3
<PAGE>
business matters that he is capable of evaluating the merits and
risks of an investment in the Shares.
_____ (xiv) The undersigned is an entity, all the equity
owners of which are "accredited investors" within one or more of the
above categories. NOTE: An irrevocable trust cannot qualify under
this category. The equity owners of a revocable trust are its
grantors. If relying upon this category alone, each equity owner must
complete a separate copy of this Transferee's Agreement.
_____ (b) Any investment company registered under the Investment
Company Act, acting for its own account or for the accounts of other
qualified institutional buyers, that is part of a family of investment
companies which own in the aggregate at least $100 million in securities of
issuers, other than issuers that are affiliated with the investment company
or are part of such family of investment companies. "Family of investment
companies" means any two or more investment companies registered under the
Investment Company Act, except for a unit investment trust whose assets
consist solely of shares of one or more registered investment companies,
that have the same investment adviser (or, in the case of unit investment
trusts, the same depositor), provided that, for the purposes of this
section:
(i) Each series of a series company (as defined in Rule 18f-2
under the Investment Company Act) shall be deemed to be a separate
investment company; and
(ii) Investment companies shall be deemed to have the same
adviser (or depositor) if their advisers (or depositors) are
majority-owned subsidiaries of the same parent, or if one investment
company's adviser (or depositor) is a majority-owned subsidiary of the
other investment company's adviser (or depositor);
_____ (c) Any entity, all of the equity owners of which are qualified
institutional buyers, acting for its own account or the accounts of other
qualified institutional buyers;
_____ (d) Any bank as defined in section 3(a)(2) of the Securities
Act, any savings and loan association or other institution as referenced in
section 3(a)(5)(A) of the Act, or any foreign bank or savings and loan
association or equivalent institution, acting for its own account or the
accounts of other qualified institutional buyers, that in the aggregate
owns and invests on a discretionary basis at least $100 million in
securities of issuers that are not affiliated with it and that has an
audited net worth of at least $25 million as demonstrated in its latest
annual financial statements, as of a date not more than 16 months preceding
the date of sale under the Rule in the case of a U.S. bank or savings and
loan association, and not more than 18 months preceding such date of sale
for a foreign bank or savings and loan association or for a equivalent
institution;
C-2-4
<PAGE>
_____ (e) Any dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), acting
for its own account or the accounts of other qualified institutional
buyers, that in the aggregate owns and invests on a discretionary basis at
least $10 million of securities of issuers that are not affiliated with the
dealer; provided, that securities constituting the whole or a part of an
unsold allotment to or subscription by a dealer as a participant in a
public offering shall not be deemed to be owned by such dealer; and
_____ (f) Any dealer registered pursuant to Section 15 of the Exchange
Act acting in a riskless principal transaction on behalf of a Qualified
Institutional Buyer.
3. The Purchaser understands that the Issuer, any person acting on its
behalf and the seller of the Purchaser's Notes shall be entitled to rely upon
certain non-exclusive methods of establishing the Purchaser's ownership and
discretionary investments of securities as stated in Rule 144A promulgated
under the Securities Act of 1933, as amended ("Rule 144A").
4. The Purchaser represents that, if it has so requested, it has
received the following reasonably current information: a brief statement of
the nature of the business of the Issuer and the products and services it
offers; the Issuer's most recent balance sheet and profit and loss and
retained earnings statement, and similar financial statements for such part
of the two preceding fiscal years as the Issuer has been in operation; and
Servicer Statements of payments on the Notes on each Payment Date or for a
shorter period as may be requested by the Purchaser.
5. The Purchaser understands that the Purchaser's Notes have not been
registered under the Securities Act or any state securities or "Blue Sky"
laws and are being sold in reliance on exemptions from the registration
requirements of the Securities Act and any such laws for nonpublic offerings.
The Purchaser understands that the exemptions from the registration
requirements under state securities laws upon which the Issuer is relying
require that the Purchaser be one of the types of investors specified in
paragraph 2 above under the applicable state securities law and the Purchaser
is such an investor. The Purchaser further understands that the Purchaser's
Notes must be held indefinitely unless subsequently registered under the
Securities Act, any applicable state securities or "Blue Sky" laws or unless
exemptions from the registration requirements of the Securities Act
(particularly, Rule 144A) and such laws are available. If at some future
time the Purchaser wishes to dispose of or exchange any of the Purchaser's
Notes, the Purchaser will not do so unless before any such sale, transfer or
other disposition the Purchaser has furnished to the Issuer and the Trustee
an express agreement substantially in the form of this Transferee's Agreement
by the proposed transferee to be bound by and to abide by the provisions of
the Indenture, the restrictions noted on the face of the Purchaser's Notes
and the Transferee's Agreement.
6. The Purchaser understands that each of the Purchaser's Notes will
bear a legend restricting transfer of the Notes.
C-2-5
<PAGE>
7. The Purchaser understands that there may be restrictions on the
ability of certain investors, including, without limitation, depository
institutions, either to purchase the Purchaser's Notes or to purchase
investments having characteristics similar to those of the Purchaser's Notes
representing more than a specified percentage of the investor's assets. The
Purchaser has consulted, and relied on the advice of, the Purchaser's own legal
advisor in determining whether and to what extent the Purchaser's Notes
constitute a legal investment for the Purchaser.
8. The Purchaser recognizes that an investment in the Purchaser's Notes
involves significant risks.
9. The Purchaser understands that there is no established market for the
Purchaser's Notes and that none will develop and, accordingly, that the
Purchaser must bear the economic risk of an investment in the Purchaser's Notes
for an indefinite period of time unless the Notes are sold to a Qualified
Institutional Buyer of the type specified in Paragraph 2 above.
10. The Purchaser agrees that the Purchaser is bound by and will abide
by the provisions of the Indenture, the restrictions noted on the face of the
Purchaser's Notes and this Transferee's Agreement.
Very truly yours,
-----------------------------------
By
--------------------------------
Name:
-----------------------------
Title:
-----------------------------
C-2-6
<PAGE>
EXHIBIT C-3
FORM OF MASTER PURCHASER'S LETTER
TO BE SUBMITTED TO YOUR BROKER-DEALER
Relating to Securities Involving Rate Settings
Through Auctions or Remarketings
To: The Issuer
Remarketing Agent
The Trust Issuer
A Broker-Dealer
An Agent Member
Other Persons
Dear Sirs:
1. This letter is designed to apply to publicly or privately offered
debt or equity securities ("Securities") of any issuer (the "Issuer") which
are described in any final prospectus, private placement memorandum, offering
circular or other offering materials relating to such Securities as the same
may be amended or supplemented (collectively, with respect to the particular
Securities concerned, the "Prospectus") and which involve periodic rate
auctions ("Auctions") or remarketing procedures ("Remarketing"). This letter
shall be for the benefit of the Issuer and of any trust company, auction
agent, paying agent (collectively, "trust company"), remarketing agent,
broker-dealer, agent member, securities depository or other interested person
in connection with any Securities and related Auctions or Remarketings (it
being understood that such persons may be required to execute specified
agreements and nothing herein shall alter such requirements). The
terminology used herein is intended to be general in its application and not
to exclude any Securities in respect of which (in the Prospectus or
otherwise) alternative terminology is used.
2. We may from time to time offer to purchase, purchase, offer to sell
and/or sell Securities of the Issuer as described in the Prospectus relating
thereto. We agree that this letter shall apply to all such purchases, sales
and offers and to Securities owned by us. We understand that the
dividend/interest rate on Securities may be based from time to time on the
results of Auctions or Remarketings as set forth in the Prospectus.
3. We agree that any bid or sell order placed by us in an Auction or a
Remarketing shall constitute an irrevocable offer (except as otherwise
described in the Prospectus) by us to purchase or sell the Securities subject
to such bid or sell order, or such lesser amount of Securities as we shall be
required to sell or purchase as a result of such Auction or Remarketing, at
the applicable price, all as set forth in the Prospectus, and that if we fail
to place a bid or sell
C-3-1
<PAGE>
order with respect to Securities owned by us with a broker-dealer on any
Auction or Remarketing date, or a broker-dealer to which we communicate a bid
or sell order fails to submit such bid or sell order to the trust company or
remarketing agent concerned, we shall be deemed to have placed a hold order
with respect to such Securities as described in the Prospectus. We authorize
any broker-dealer that submits a bid or sell order as our agent in Auctions
or Remarketings to execute contracts for the sale of Securities covered by
such bid or sell order. We recognize that the payment by such broker-dealer
with respect to Securities purchased on our behalf shall not relieve us of
any liability to such broker-dealer for payment for such Securities.
4. We understand that in a Remarketing, the dividend or interest rate
or rates on the Securities and the allocation of Securities tendered for sale
between dividend or interest periods of different lengths will be based from
time to time on the determinations of one or more remarketing agent(s), and
we agree to be conclusively bound by such determinations. We further agree
to the payment of different dividend or interest rates to different holders
of Securities depending on the length of the dividend or interest period
elected by such holders. We agree that any notice given by us to a
remarketing agent (or to a broker-dealer for transmission to a remarketing
agent) of our desire to tender Securities in a Remarketing shall constitute
an irrevocable (except to the limited extent set forth in the Prospectus)
offer by us to sell the Securities specified in such notice, or such lesser
number of Securities as we shall be required to sell as a result of such
Remarketing, in accordance with the terms set forth in the Prospectus, and we
authorize the remarketing agent to sell, transfer or otherwise dispose of
such Securities as set forth in the Prospectus.
5. We agree that, during the applicable period as described in the
Prospectus, dispositions of Securities can be made only in the denominations
set forth in the Prospectus and we will sell, transfer or otherwise dispose
of any Securities held by us from time to time only pursuant to a bid or sell
order placed in an Auction, in a Remarketing, to or through a broker-dealer
or, when permitted in the Prospectus, to a person that has signed and
delivered to the applicable trust company or remarketing agent a letter
substantially in the form of this letter (or other applicable purchaser's
letter), provided that in the case of all transfers, other than pursuant to
Auctions, the form of this letter (or other applicable purchaser's letter),
provided that in the case of all transfers other than pursuant to Auctions or
Remarketings we or our broker-dealer or our agent member shall advise such
trust company or remarketing agent of such transfer. We understand that a
restrictive legend will be placed on certificates representing the Securities
and stop-transfer instructions will be issued to the transfer agent and/or
registrar, all as set forth in the Prospectus.
6. We agree that, during the applicable period as described in the
Prospectus, ownership of Securities shall be represented by one or more
global certificates registered in the name of the applicable securities
depository or its nominee, that we will not be entitled to receive any
certificate representing the Securities and that our ownership of any
Securities will be maintained in book-entry form by the securities depository
for the account of our agent member, which in turn will maintain records of
our beneficial ownership. We authorize and
C-3-2
<PAGE>
instruct our agent member to disclose to the applicable trust company or
remarketing agent such information concerning our beneficial ownership of
Securities as such trust company shall request.
7. We acknowledge that partial deliveries of Securities purchased in
Auctions or Remarketings may be made to us and such deliveries shall
constitute good delivery as set forth in the Prospectus.
8. This letter is not a commitment by us to purchase any Securities.
9. This letter supersedes any prior-dated version of this master
purchaser's letter, and supplements any prior or postdated purchaser's letter
specific to any particular Securities, and this letter may only be revoked by
a signed writing delivered to the original recipients hereof.
10. The descriptions of Auction or Remarketing Procedures set forth in
each applicable Prospectus are incorporated by reference herein and in case
of any conflict between this letter, any purchaser's letter specific to
particular Securities and any such description, such description shall
control.
11. Any xerographic or other copy of this letter shall be deemed of equal
effect as a signed original.
12. In the case of each offer to purchase, purchase, offer to sell or sale
by us of Securities not registered under the Securities Act of 1933, as amended
(the "Securities Act"), we represent and agree as follows:
(a) We understand and expressly acknowledge that the Securities have
not been and will not be registered under the Securities Act and,
accordingly, that the Securities may not be reoffered, resold or otherwise
pledged, hypothecated or transferred unless an applicable exemption from
the registration requirements of the Securities Act is available.
(b) We hereby confirm that any purchase of Securities made by us will
be for our own account, or for the account of one or more parties for which
we are acting as trustee or agent with complete investment discretion and
with authority to bind such parties, and not with a view to any public
resale or distribution thereof. We and each other party for which we are
acting which will acquire Securities will be "accredited investors" within
the meaning of Regulation D under the Securities Act with respect to the
Securities to be purchased by us or such party, as the case may be, will
have previously invested in similar types of instruments and will be able
and prepared to bear the economic risk of investing in and holding such
Securities.
C-3-3
<PAGE>
(c) We acknowledge that prior to purchasing any Securities we have
had access to such financial and other information as we deem necessary in
connection with our decision to purchase Securities.
(d) We recognize that the Issuer and broker-dealers or remarketing
agents will rely upon the truth and accuracy of the foregoing investment
representations and agreements, and we agree that each of our purchases of
Securities now or in the future shall be deemed to constitute our
concurrence in, and affirmation of, all of the foregoing, which shall be
binding on us and each party for which we are acting as set forth in
subparagraph (b) above.
Date:
--------------------------- --------------------------------------
(Name of Institution, if applicable)
By
-----------------------------------
Print Name:
--------------------------
Title:
-------------------------------
SMITH BARNEY
Account Number
--------------------------------------
--------------------------------------
--------------------------------------
C-3-4
<PAGE>
EXHIBIT D-1
COMPLIANCE CERTIFICATE
Norwest Bank Minnesota, National Association,
as the Trustee under the
Indenture identified below
Minneapolis, Minnesota
This Compliance Certificate is submitted pursuant to the provisions of
Section 5.02 of the Second Amended and Restated Indenture of Trust, dated as
of November 1, 1996 (the "Indenture"), by and between Union Financial
Services-1, Inc. (the "Issuer") and Norwest Bank Minnesota, National
Association, as the Trustee. All capitalized terms used in this Certificate
and not otherwise defined herein shall have the same meanings given to such
terms in the Indenture. In your capacity as the Trustee, you are hereby
authorized and requested to disburse to __________ (the "Eligible Lender")
the sum of $__________ from the [specify Series 1996 Loan Account and/or
Series 1996 Recycling Account] for the acquisition of Eligible Loans. With
respect to the Eligible Loans so to be acquired, the Issuer hereby certifies
as follows:
1. The Eligible Loans to be acquired are those specified in Schedule l
attached hereto (the "Financed Eligible Loans").
2. The remaining unpaid principal amount of each Financed Eligible Loan
is as shown on said Schedule l attached hereto.
3. Each Financed Eligible Loan is an Eligible Loan authorized by the
Indenture to be so acquired.
4. Except as previously furnished to you, attached hereto, if an
acquisition, is a copy of the form of the applicable Student Loan Purchase
Agreement between the Issuer and the Eligible Lender with respect to the
Financed Eligible Loans.
5. The promissory note evidencing each Financed Eligible Loan is
subject to a blanket endorsement and that Uniform Commercial Code Financing
Statements with respect thereto have been filed in such place or places
specified by the opinion of counsel for the Issuer.
6. Each action necessary to perfect a first security interest in each
Financed Eligible Loan in favor of the Trustee has been accomplished.
7. The Issuer is not, on the date hereof, in default under the
Indenture or any applicable Student Loan Purchase Agreement applicable to the
Financed Eligible Loans, and,
D-1-1
<PAGE>
to the best knowledge of the Issuer, the Eligible Lender is not in default
under any Student Loan Purchase Agreement applicable to the Financed Eligible
Loans. No Event of Default, or event or condition which, with the passage of
time or giving of notice or both, would be an Event of Default, has occurred
and is continuing under and as defined in the Indenture, and each
representation and warranty of the Issuer contained in any such document is
true and correct on and as of the date hereof as if made on and as of such
date. With respect to all Financed Eligible Loans that are Insured, the
insurance is in effect with respect thereto and the applicable Contract of
Insurance and Certificate of Insurance are valid and binding upon the parties
thereto in all respects material to the security of the Notes. With respect
to all Financed Eligible Loans that are Guaranteed Student Loans, the
Guarantee Agreements are in effect with respect thereto and are valid and
binding on the parties thereto in all respects material to the security of
the Notes. The Issuer is not in default in the performance of any of its
covenants and agreements made in the Guarantee Agreements applicable to the
Financed Eligible Loans.
8. All the conditions specified in the Student Loan Purchase Agreements
applicable to the acquired Financed Eligible Loans and in the Indenture for
the acquisition or origination of the Financed Eligible Loans and the
disbursement hereby authorized and requested have been duly satisfied.
9. The Servicer has received the following for each Financed Eligible
Loan: (a) copy of original student application; (b) original promissory note
and, if applicable, disclosure statement and loan information statement; (c)
evidence of disbursement; (d) if applicable, notice of deferment; and (e) the
Certificate of Insurance (with respect to each Insured Loan) and the
Notification of Loan Approval by the Guarantee Agency with respect to each
Guaranteed Loan.
10. All origination fees with respect to each Financed Eligible Loan
have been paid and all guarantee fees with respect thereto have been paid or,
if an origination, will be paid by the Issuer within 45 days.
11. The undersigned, as an Authorized Officer of the Issuer, is
authorized to sign and submit this Certificate on behalf of the Issuer.
WITNESS my hand this ____ day of _____________.
UNION FINANCIAL SERVICES-1, INC.
By
--------------------------------
Name:
-----------------------------
Title:
----------------------------
D-1-2
<PAGE>
EXHIBIT D-2
CONSOLIDATION LOAN COMPLIANCE CERTIFICATE
Norwest Bank Minnesota, National Association,
as the Trustee under the Indenture identified below
Minneapolis, Minnesota
This Consolidation Loan Compliance Certificate is submitted pursuant to
the provisions of Section 5.02 of the Second Amended and Restated Indenture
of Trust, dated as of November 1, 1996 (the "Indenture"), by and between
Union Financial Services-1, Inc. (the "Issuer") and Norwest Bank Minnesota,
National Association, as the Trustee. All capitalized terms used in this
Certificate and not otherwise defined herein shall have the same meanings
given to such terms in the Indenture. In your capacity as the Trustee, you
are hereby authorized and requested to disburse to UniPac Service Corp. (the
"Eligible Lender") the sum of $__________ for the acquisition of Eligible
Loans which are Consolidation Loans. With respect to the Consolidation Loans
so to be acquired, the Issuer hereby certifies as follows:
1. The Consolidation Loans to be acquired are those specified in
Schedule 1 attached hereto (the "Financed Eligible Loans").
2. The remaining unpaid principal amount of each Financed Eligible Loan
is as shown on said Schedule 1 attached hereto.
3. Each Financed Eligible Loan is an Eligible Loan authorized by the
Indenture to be so acquired.
4. The promissory note evidencing each Financed Eligible Loan is
subject to proper documentation for a Consolidation Loan.
5. Each action necessary to perfect a first security interest in each
Financed Eligible Loan in favor of the Trustee has been accomplished.
6. The Issuer is not, on the date hereof, in default under the
Indenture or any applicable Student Loan Purchase Agreement applicable to the
Financed Eligible Loans, and to the best knowledge of the Issuer, the
Eligible Lender is not in default under any Student Loan Purchase Agreement
applicable to the Financed Eligible Loans. No Event of Default, or event or
condition which, with the passage of time or giving of notice or both, would
be an Event of Default, has occurred and is continuing under and as defined
in the Indenture, and each representation and warranty of the Issuer
contained in any such document is true and correct on and as of the date
hereof as if made on and as of such date. With respect to all Financed
Eligible Loans that are Insured, the insurance is in effect with respect
thereto and the applicable Contract of Insurance and Certificate of Insurance
are valid and binding upon the parties thereto in all respects material to
the security of the Notes. With respect to all Financed Eligible Loans that
are Guaranteed Student Loans, the Guarantee Agreements are in effect with
respect thereto and are valid and binding on the parties thereto
D-2-1
<PAGE>
in all respects material to the security of the Notes. The Issuer is not in
default in the performance of any of its covenants and agreements made in the
Guarantee Agreements applicable to the Financed Eligible Loans.
7. All the conditions specified in the Indenture for the acquisition or
origination of the Financed Eligible Loans and the disbursement hereby
authorized and requested have been duly satisfied.
8. The Servicer has received the following for each Financed Eligible
Loan: (a) copy of original student application; (b) original promissory note
and, if applicable, disclosure statement and loan information statement; (c)
evidence of disbursement; (d) if applicable, notice of deferment; and (e) the
Certificate of Insurance (with respect to each Insured Loan) and the
Notification of Loan Approval by the Guarantee Agency with respect to each
Guaranteed Loan.
9. All origination fees with respect to each Financed Eligible Loan
have been paid and all guarantee fees with respect thereto have been paid or,
if an origination, will be paid by the Issuer within 45 days.
10. The undersigned, as an Authorized Officer of the Issuer, is
authorized to sign and submit this Certificate on behalf of the Issuer.
WITNESS my hand this ____ day of __________________.
UNION FINANCIAL SERVICES-1, INC.
By
--------------------------------
Name:
------------------------------
Title:
----------------------------
D-2-2
<PAGE>
EXHIBIT E-1
SERIES 1996A CASH FLOW ASSUMPTIONS
E-1-1
<PAGE>
EXHIBIT E-2
SERIES 1996B CASH FLOW ASSUMPTIONS
E-2-1
<PAGE>
EXHIBIT F-1
SERIES 1996A CLOSING CASH FLOW PROJECTIONS
F-1-1
<PAGE>
EXHIBIT F-2
SERIES 1996B CLOSING CASH FLOW PROJECTIONS
F-2-1
<PAGE>
EXHIBIT G
NOTICE OF PAYMENT DEFAULT
UNION FINANCIAL SERVICES-1, INC.
TAXABLE STUDENT LOAN ASSET-BACKED NOTES,
CLASS 1996[A-1][A-2][A-3][A-4]
AUCTION RATE SECURITIES
(ARS-SM-)
NOTICE IS HEREBY GIVEN that a Payment Default has occurred and is
continuing with respect to the Auction Notes identified above. The next Auction
for the Auction Notes will not be held. The Auction Rate for the Auction Notes
for the next succeeding Interest Period shall be the Non-Payment Rate.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
Dated: By
---------------------- ---------------------------------
G-1
<PAGE>
EXHIBIT H
NOTICE OF CURE OF PAYMENT DEFAULT
UNION FINANCIAL SERVICES-1, INC.
TAXABLE STUDENT LOAN ASSET-BACKED NOTES, SERIES 1996A[-1][-2][-3][-4]
AUCTION RATE SECURITIES
(ARS-SM-)
NOTICE IS HEREBY GIVEN that a Payment Default with respect to the Auction
Notes identified above has been waived or cured. The next Interest Payment Date
is ____________________ and the Auction Date is __________________________.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
Dated: By
---------------------- ---------------------------------
H-1
<PAGE>
EXHIBIT I
NOTICE OF PROPOSED CHANGE IN LENGTH
OF ONE OR MORE AUCTION PERIODS
UNION FINANCIAL SERVICES-1, INC.
TAXABLE STUDENT LOAN ASSET-BACKED NOTES, CLASS 1996A[-1][-2][-3][-4]
AUCTION RATE SECURITIES
(ARS-SM-)
Notice is hereby given that the Issuer proposes to change the length of
one or more Auction Periods pursuant to the Second Amended and Restated
Indenture of Trust as follows:
1. The change shall take effect on _______________, the Interest Rate
Adjustment Date for the next Auction Period (the "Effective Date").
2. The Auction Period Adjustment in Paragraph 1 shall take place only if
(a) the Trustee and the Auction Agent receive, by 11:00 a.m., eastern time, on
the Business Day before the Auction Date for the Auction Period commencing on
the Effective Date, a certificate from the Issuer, as required by the Indenture
authorizing the change in length of one or more Auction Periods and (b)
Sufficient Bids exist on the Auction Date for the Auction Period commencing on
the Effective Date.
3. If the condition referred to in (a) above is not met, the Auction Rate
for the Auction Period commencing on the Effective Date will be determined
pursuant to the Auction Procedures and the Auction Period shall be the Auction
Period determined without reference to the proposed change. If the condition
referred to in (a) is met but the condition referred to in (b) above is not met,
the Auction Rate for the Auction Period commencing on the Effective Date shall
be the Maximum Rate and the Auction Period shall be the Auction Period
determined without reference to the proposed change.
4. It is hereby represented, upon advice of the Auction Agent for the
Class 1996A[-1][-2][-3][-4] Notes described herein, that there were Sufficient
Bids for such Class 1996A[-1][-2][-3][-4] Notes at the Auction immediately
preceding the date of this Notice.
5. Terms not defined in this Notice shall have the meanings set forth in
the Indenture entered into in connection with the Class 1996A[-1][-2][-3][-4]
Notes.
UNION FINANCIAL SERVICES-1, INC.
Dated: By
---------------------- ---------------------------------
I-1
<PAGE>
EXHIBIT J
NOTICE ESTABLISHING CHANGE IN LENGTH
OF ONE OR MORE AUCTION PERIODS
UNION FINANCIAL SERVICES-1, INC.
TAXABLE STUDENT LOAN ASSET-BACKED NOTES, CLASS 1996A[-1][-2][-3][-4]
AUCTION RATE SECURITIES
(ARS-SM-)
Notice is hereby given that the Issuer hereby establishes new lengths for
one or more Auction Periods pursuant to the Second Amended and Restated
Indenture of Trust:
1. The change shall take effect on _______________, the Interest Rate
Adjustment Date for the next Auction Period (the "Effective Date").
2. For the Auction Period commencing on the Effective Date, the Interest
Rate Adjustment Date shall be _______________, or the next succeeding Business
Day if such date is not a Business Day.
3. For Auction Periods occurring after the Auction Period commencing on
the Effective Date, the Interest Rate Adjustment Date shall be
[_______________(date) and every ______________(number) ______________(day of
week) thereafter] [every ______________(number) ______________(day of week)
after the date set forth in paragraph 2 above], or the next Business Day if any
such day is not a Business Day; provided, however, that the length of subsequent
Auction Periods shall be subject to further change hereafter as provided in the
Indenture of Trust.
4. The changes described in paragraphs 2 and 3 above shall take place
only upon delivery of this Notice and the satisfaction of other conditions set
forth in the Indenture of Trust and our prior notice dated _______________
regarding the proposed change.
5. Terms not defined in this Notice shall have the meanings set forth in
the Indenture of Trust relating to the Class 1996A[-1][-2][-3][-4] Notes.
UNION FINANCIAL SERVICES-1, INC.
Dated: By
---------------------- ---------------------------------
J-1
<PAGE>
EXHIBIT K
NOTICE OF CHANGE IN AUCTION DATE
UNION FINANCIAL SERVICES-1, INC.
TAXABLE STUDENT LOAN ASSET-BACKED NOTES, CLASS 1996A[-1][-2][-3][-4]
AUCTION RATE SECURITIES
(ARS-SM-)
Notice is hereby given by SMITH BARNEY INC., as Market Agent for the
Auction Notes, that with respect to the Auction Notes, the Auction Date is
hereby changed as follows:
1. With respect to Class 1996A[-1][-2][-3][-4] Notes, the definition of
"Auction Date" shall be deemed amended by substituting "_______________(number)
Business Day" in the second line thereof and by substituting
"_______________(number) Business Days" for "two Business Days" in subsection
(d) thereof.
2. This change shall take effect on _______________ which shall be the
Auction Date for the Auction Period commencing on _______________.
3. The Auction Date for the Class 1996A[-1][-2][-3][-4] Notes shall be
subject to further change hereafter as provided in the Indenture of Trust.
4. Terms not defined in this Notice shall have the meaning set forth in
the Second Amended and Restated Indenture of Trust relating to the Class
1996A[-1][-2][-3][-4] Notes.
SMITH BARNEY INC., as Market Agent
Dated: By
---------------------- ---------------------------------
K-1
<PAGE>
EXHIBIT L
NOTICE OF PROPOSED ADJUSTMENT TO PERCENTAGE
USED IN DETERMINING [MAXIMUM AUCTION RATE]
[ALL HOLD RATE] [NON-PAYMENT RATE]
UNION FINANCIAL SERVICES-1, INC.
TAXABLE STUDENT LOAN ASSET-BACKED NOTES, CLASS 1996A[-1][-2][-3][-4]
AUCTION RATE SECURITIES
(ARS-SM-)
Notice is hereby given that the Market Agent hereby proposes to change the
[percentage] [Applicable Percentage] used in determining the [Maximum Auction
Rate] [All Hold Rate] [Non-Payment Rate] with respect to the captioned Auction
Notes pursuant to the Second Amended and Restated Indenture of Trust (the
"Indenture") relating to such Auction Notes:
1. The change shall take effect on the date of commencement of the next
Auction Period (the "Effective Date").
2. For the Auction Period commencing on the Effective Date, and each
Auction Period thereafter, it is proposed that the percentage used in
determining the [Maximum Auction Rate] [All Hold Rate] [Non-Payment Rate] shall
be ____________________.
3. The adjustment to the percentage used in determining the [Maximum
Auction Rate] [All Hold Rate] [Non-Payment Rate] in paragraph 2 above shall take
place only if (A) the Trustee, the Auction Agent and the Market Agent receive,
by 11:00 a.m., eastern time, on the Business Day immediately preceding the
Effective Date, an Issuer Certificate authorizing the adjustment of such
percentage as specified in such Certificate, together with a copy of the Issuer
consent thereto and the opinion of Note Counsel as required by the Indenture;
and (B) the Trustee and the Issuer have received written confirmation from each
of the Rating Agencies then rating the Auction Notes that such proposed
adjustment will not adversely affect its ratings then applicable to any of the
Auction Notes.
4. If any of the conditions referred to in paragraph 3(A) and (B) above
are not met, the existing percentage used to determine the [Maximum Auction
Rate] [All Hold Rate] [Non-Payment Rate] shall remain in effect, and the rate of
interest on the captioned Auction Notes for the next succeeding Interest Period
shall be determined in accordance with the Auction Procedures.
Terms used herein have the meanings set forth in the Indenture.
SMITH BARNEY INC., as Market Agent
Dated: By
---------------------- ---------------------------------
L-1
<PAGE>
EXHIBIT M
NOTICE ESTABLISHING NEW PERCENTAGE USED IN DETERMINING
[MAXIMUM AUCTION RATE] [ALL HOLD RATE] [NON-PAYMENT RATE]
UNION FINANCIAL SERVICES-1, INC.
TAXABLE STUDENT LOAN ASSET-BACKED NOTES, CLASS 1996A[-1][-2][-3][-4]
AUCTION RATE SECURITIES
(ARS-SM-)
Notice is hereby given that the Issuer hereby establishes a new
[percentage] [Applicable Percentage] to be used in determining the [Maximum
Auction Rate] [All Hold Rate] [Non-Payment Rate] with respect to the captioned
Auction Notes pursuant to the Amended and Restated Indenture of Trust (the
"Indenture") relating to such Auction Notes:
1. The change shall take effect on ______________________, the
commencement of the next Auction Period (the "Effective Date").
2. For the Auction Period commencing on the Effective Date, and each
Auction Period thereafter, the percentage used in determining the [Maximum
Auction Rate] [All Hold Rate] [Non-Payment Rate] shall be ____________________.
3. The change described in paragraph 2 above shall take place only upon
delivery of this Notice and the satisfaction of other conditions set forth in
the Indenture and the Market Agent's prior notice dated ___________________
regarding the proposed change.
Terms used herein have the meanings set forth in the Indenture.
UNION FINANCIAL SERVICES-1, INC.
Dated: By
---------------------- ---------------------------------
M-1
<PAGE>
- -------------------------------------------------------------------------------
SERIES 1996C SUPPLEMENTAL INDENTURE OF TRUST
BY AND BETWEEN
UNION FINANCIAL SERVICES-1, INC.
AND
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
AS TRUSTEE
----------------------------
DATED AS OF NOVEMBER 1, 1996
----------------------------
AUTHORIZING THE ISSUANCE OF
$316,100,000
UNION FINANCIAL SERVICES-1, INC.
TAXABLE STUDENT LOAN ASSET-BACKED NOTES
SERIES 1996C
SENIOR TREASURY RATE CLASS A-5 NOTES
SENIOR AUCTION RATE CLASS A-6 NOTES
SUBORDINATE LIBOR RATE CLASS B-3 NOTES
- -------------------------------------------------------------------------------
<PAGE>
-----------------------------
TABLE OF CONTENTS
-----------------------------
(This Table of Contents is for convenience of reference only and is not
intended to define, limit or describe the purpose or intent of any provisions of
this Supplemental Indenture of Trust.)
<TABLE>
Page
----
<S> <C>
PARTIES AND PREAMBLES AND RECITALS . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I
DEFINITIONS AND USE OF PHRASES . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
SERIES 1996C NOTE DETAILS,
FORM OF SERIES 1996C NOTES,
REDEMPTION OF SERIES 1996C NOTES
AND USE OF PROCEEDS OF SERIES 1996C NOTES
Section 2.01. Series 1996C Note Details. . . . . . . . . . . . . . . . . . . . . . 3
Section 2.02. Redemption of the Series 1996C Notes . . . . . . . . . . . . . . . . 6
Section 2.03. Delivery of Series 1996C Notes . . . . . . . . . . . . . . . . . . . 9
Section 2.04. Trustee's Authentication Certificate . . . . . . . . . . . . . . . . 10
Section 2.05. Deposit of Series 1996C Note Proceeds. . . . . . . . . . . . . . . . 10
Section 2.06. Forms of Series 1996C Notes. . . . . . . . . . . . . . . . . . . . . 10
ARTICLE III
AMENDMENT OF INDENTURE
Section 3.01. Amendment of Indenture . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE IV
GENERAL PROVISIONS
Section 4.01. Date of Execution. . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4.02. Laws Governing . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4.03. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4.04. Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
i
<PAGE>
ARTICLE V
APPLICABILITY OF INDENTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
TESTIMONIUM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SIGNATURES AND SEALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ACKNOWLEDGMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
APPENDIX A-- Certain Terms and Provisions of the Class 1996A-5 Senior
Treasury Rate Notes. . . . . . . . . . . . . . . . . . . . . . . . . A-1
APPENDIX B-- Certain Terms and Provisions of the Class 1996A-6 Senior
Auction Rate Notes . . . . . . . . . . . . . . . . . . . . . . . . . B-1
APPENDIX C-- Certain Terms and Provisions of the Class 1996B-3 Subordinate
LIBOR Rate Notes . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
EXHIBIT A-- Form of Class 1996A-5 Senior Treasury Rate Notes . . . . . . . . . . A-1
EXHIBIT B-- Form of Class 1996A-6 Senior Auction Rate Notes. . . . . . . . . . . B-1
EXHIBIT C-- Form of Class 1996B-3 Subordinate LIBOR Rate Notes . . . . . . . . . C-1
EXHIBIT D-- Series 1996C Closing Cash Flow Projections . . . . . . . . . . . . . D-1
EXHIBIT E-- Series 1996C Closing Cash Flow Projections . . . . . . . . . . . . . E-1
EXHIBIT F-- Notice of Payment Default. . . . . . . . . . . . . . . . . . . . . . F-1
EXHIBIT G-- Notice of Cure of Payment Default. . . . . . . . . . . . . . . . . . G-1
EXHIBIT H-- Notice of Proposed Change in Length of One or More Auction
Periods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . H-1
EXHIBIT I-- Notice Establishing Change in Length of One or More Auction
Periods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1
EXHIBIT J-- Notice of Change in Auction Date . . . . . . . . . . . . . . . . . . J-1
EXHIBIT K-- Notice of Proposed Adjustment to Percentage Used in Determining
[Maximum Auction Rate] [All Hold Rate] [Non-Payment Rate]. . . . . . K-1
EXHIBIT L-- Notice Establishing New Percentage Used in Determining [Maximum
Auction Rate] [All Hold Rate] [Non-Payment Rate] . . . . . . . . . . L-1
</TABLE>
ii
<PAGE>
------------------------------------------------
SERIES 1996C SUPPLEMENTAL INDENTURE OF TRUST
------------------------------------------------
THIS SERIES 1996C SUPPLEMENTAL INDENTURE OF TRUST (this "Supplemental
Indenture"), dated as of November 1, 1996, is by and between UNION FINANCIAL
SERVICES-1, INC., a corporation duly organized and existing under the laws of
the State of Nevada (the "Issuer"), and NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, a national banking association duly organized and operating
under the laws of the United States of America and authorized to exercise
corporate trust powers, with its principal place of business and corporate
trust office located in Minneapolis, Minnesota (together with its successors,
the "Trustee"), as trustee hereunder (all capitalized terms used in these
preambles, recitals and granting clauses shall have the same meanings
assigned thereto in Article I hereof);
W I T N E S S E T H:
WHEREAS, the Issuer has previously entered into a Second Amended and
Restated Indenture of Trust dated as of November 1, 1996 (as previously
supplemented and amended, the "Indenture") between the Issuer and the Trustee;
WHEREAS, the Issuer desires to enter into this Supplemental Indenture in
order to issue Additional Notes pursuant to the terms of the Indenture,
including Section 2.12 thereof;
WHEREAS, the Issuer represents that it is duly created as a corporation
under the laws of the State and that by proper action it has duly authorized
the issuance of $316,100,000 of its Taxable Student Loan Asset-Backed Notes,
Series 1996C consisting of three Subclasses, designated as Class 1996A-5
Notes (the "Class 1996A-5 Notes"), Class 1996A-6 Notes (the "Class 1996A-6
Notes") and Class 1996B-3 Notes (the "Class 1996B-3 Notes") (collectively,
the "Series 1996C Notes"), and it has by proper corporate action authorized
the execution and delivery of this Supplemental Indenture;
WHEREAS, the Series 1996C Notes constitute Additional Notes as defined in
the Indenture;
WHEREAS, the Trustee has agreed to accept the trusts herein created upon
the terms herein set forth; and
NOW, THEREFORE, it is mutually covenanted and agreed as follows:
<PAGE>
ARTICLE I
DEFINITIONS AND USE OF PHRASES
All words and phrases defined in Article I of the Indenture shall have
the same meaning in this Supplemental Indenture, except as otherwise appears
in this Article. In addition, the following terms have the following
meanings in this Supplemental Indenture unless the context clearly requires
otherwise:
"AUTHORIZED DENOMINATIONS" means the denominations set forth in the
Appendices hereto.
"CUSTODIAN AGREEMENT" means the Custodian Agreement dated as of March 1,
1996, between the Trustee and UNIPAC Service Corporation.
"RATING AGENCY" means, collectively, Fitch Investors Service, L.P. and
Standard & Poor's Ratings Services.
"RESERVE FUND REQUIREMENT" means an amount equal to 2% of the aggregate
principal amount of the Series 1996C Notes then Outstanding.
"SELLER" means, with respect to the Financed Eligible Loans acquired from
the proceeds of the Series 1996C Notes, Union Bank and Trust Company.
"SERIES 1996C NOTES" means the Union Financial Services-1, Inc., Taxable
Student Loan Asset-Backed Notes, Series 1996C issued pursuant to the
Indenture and this Supplemental Indenture in the aggregate principal amount
of $316,100,000, consisting of Senior Treasury Rate Class 1996A-5 Notes,
Senior Auction Rate Class 1996A-6 Notes and Subordinate LIBOR Rate Class
1996B-3 Notes.
"SERVICER" means, with respect to the Financed Eligible Loans acquired
from the proceeds of the Series 1996C Notes, Union Bank and Trust Company.
"SERVICING AGREEMENT" means, collectively, the Amended and Restated
Servicing Agreement dated as of June 19, 1996, as supplemented and amended,
between the Issuer and the Servicer and the Servicing Agreement dated as of
January 1, 1995, as supplemented and amended, between the Servicer and the
Subservicer.
"STUDENT LOAN PURCHASE AGREEMENT" means that certain Loan Sale and
Commitment Agreement dated as of November 1, 1996 between the Issuer and the
Seller.
"SUBSERVICER" means UNIPAC Service Corporation, a Nebraska corporation.
"UNDERWRITER" means Smith Barney Inc.
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Words importing the masculine gender include the feminine gender. Words
importing persons include firms, associations and corporations. Words
importing the singular number include the plural number and vice versa.
Additional terms are defined in the body of this Supplemental Indenture and
the Appendices hereto.
In the event that any term or provision contained herein with respect to
the Series 1996C Notes shall conflict with or be inconsistent with any term
or provision contained in the Indenture, the terms and provisions of this
Supplemental Indenture shall govern.
ARTICLE II
SERIES 1996C NOTE DETAILS,
FORM OF SERIES 1996C NOTES,
REDEMPTION OF SERIES 1996C NOTES
AND USE OF PROCEEDS OF SERIES 1996C NOTES
Section 2.01. SERIES 1996C NOTE DETAILS.
(a) The aggregate principal amount of the Series 1996C Notes which
may be initially authenticated and delivered under this Supplemental
Indenture is limited to $316,100,000 consisting of $225,000,000 of
Class 1996A-5 Notes, $75,500,000 of Class 1996A-6 Notes and $15,600,000 of
Class 1996B-3 Notes, except for Series 1996C Notes authenticated and
delivered upon transfer of, or in exchange for, or in lieu of Notes
pursuant to Sections 2.03 and 2.04 of the Indenture. The Class 1996A Notes
shall be known and designated as "Union Financial Services-1, Inc., Taxable
Student Loan Asset-Backed Notes, Class 1996A-5 Senior Treasury Rate" and
the Class 1996A-6 Notes shall be known and designated as "Union Financial
Services-1, Inc., Taxable Student Loan Asset-Backed Notes, Class 1996A-6
Senior Auction Rate" and issued as Auction Rate Securities (ARS-SM-). The
Class 1996B Notes shall be known and designated as "Union Financial
Services-1, Inc., Taxable Student Loan Asset-Backed Notes, Class 1996B-3
Subordinate LIBOR Rate." The Series 1996C Notes shall be issuable only as
fully registered notes in the Authorized Denominations. The Series 1996C
Notes of each class and subclass shall each be lettered "R" and shall be
numbered separately from 1 upwards.
The Class 1996A-5 Notes (also known as "Treasury Rate Notes") shall be
dated their Date of Issuance and shall bear interest, payable on each
Interest Payment Date, commencing December 1, 1996, except that Treasury
Rate Notes which are issued upon transfer, exchange or other replacement
shall bear interest from the most recent Interest Payment Date to which
interest has been paid, or if no interest has been paid, from the date of
the Treasury Rate Notes. The Class 1996A-5 Notes shall mature on July 1,
2005. Interest on the Treasury Rate Notes shall be computed on the basis
of a year consisting of 365 or 366 days, as applicable, and actual days
elapsed. The terms of and
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definitions related to the Treasury Rate Notes are found in Article I
hereof and Appendix A to this Supplemental Indenture.
The Class 1996A-6 Notes (also known as "Auction Rate Notes") shall be
dated their Date of Issuance and shall bear interest payable on each
Interest Payment Date, commencing November 13, 1996, except that Auction
Rate Notes issued upon transfer, exchange or other replacement shall bear
interest from the most recent Interest Payment Date to which interest has
been paid, or if no interest has been paid, from the Date of Issuance. The
Class 1996A-6 Notes shall mature on July 1, 2014. Interest on the
Class 1996A-6 Notes shall be computed on the basis of a 360-day year and
actual days elapsed. The terms of and definitions related to the Auction
Rate Notes are found in Article I hereof and Appendix B to this
Supplemental Indenture.
The Class 1996B-3 Notes (also known as "Class 1996B-3 LIBOR Rate
Notes") shall be dated their Date of Issuance and shall bear interest,
payable on each Interest Payment Date, commencing December 1, 1996, except
that Class 1996B-3 Notes which are issued upon transfer, exchange or other
replacement shall bear interest from the most recent Interest Payment Date
to which interest has been paid, or if no interest has been paid, from the
date of the Class 1996B-3 Notes. The Class 1996B-3 Notes shall mature on
July 1, 2025. Interest on the Class 1996B-3 Notes shall be computed on the
basis of a 360-day year and actual days elapse. The terms of and
definitions related to the Class 1996B-3 Notes are found in Article I
hereof and Appendix C to this Supplemental Indenture.
The principal of the Series 1996C Notes due at its Stated Maturity or
redemption in whole shall be payable at the Principal Office of the Trustee
in Minneapolis, Minnesota, or at the Principal Office of its successor in
trust upon presentation and surrender of the Series 1996C Notes. Payment
of interest and principal paid subject to a redemption on any Series 1996C
Note shall be made to the Registered Owner thereof by check or draft mailed
on the Interest Payment Date by the Trustee to the Registered Owner at his
address as it last appears on the registration books kept by the Trustee at
the close of business on the Record Date for such interest payment date,
but any such interest not so timely paid or duly provided for shall cease
to be payable to the Registered Owner thereof at the close of business on
the Record Date and shall be payable to the Registered Owner thereof at the
close of business on a special record date (a "Special Record Date") for
the payment of any such defaulted interest. Such Special Record Date shall
be fixed by the Trustee whenever moneys become available for payment of the
defaulted interest, and notice of such Special Record Date shall be given
to the Registered Owners of the Series 1996C Notes not less than 10 days
prior thereto by first-class mail to each such Registered Owner as shown on
the Trustee's registration books on the date selected by the Trustee,
stating the date of the Special Record Date and the date fixed for the
payment of such defaulted interest. Payment of interest to the Securities
Depository or its nominee shall, and at the written request addressed to
the Trustee of any other Registered Owner owning at least $1,000,000
principal amount of
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the Series 1996C Notes, payments of interest shall, be paid by wire
transfer within the United States to the bank account number filed no
later than the Record Date or Special Record Date with the Trustee
for such purpose. All payments on the Series 1996C Notes shall be made in
lawful money of the United States of America.
(b) Except as otherwise provided in this Section, the Series 1996C
Notes in the form of one global note (or, with respect to the Class 1996A-5
Notes, one global note in the original proposal amount of $200,000,000 and
one global note for the remainder of the original principal amount of such
Class) for each Stated Maturity date of each such series or subclass shall
be registered in the name of the Securities Depository or its nominee and
ownership thereof shall be maintained in book-entry form by the Securities
Depository for the account of the Agent Members. Initially, each
Series 1996C Note and each Series 1996C Note shall be registered in the
name of CEDE & Co., as the nominee of The Depository Trust Company. Except
as provided in subsection (d) of this Section, the Series 1996C Notes may
be transferred, in whole but not in part, only to the Securities Depository
or a nominee of the Securities Depository or to a successor Securities
Depository selected or approved by the Issuer or to a nominee of such
successor Securities Depository. Each global note shall bear a legend
substantially to the following effect: "Except as otherwise provided in the
Indenture, this global note may be transferred, in whole but not in part,
only to another nominee of the Securities Depository (as defined in the
Indenture) or to a successor Securities Depository or to a nominee of a
successor Securities Depository."
(c) Except as otherwise provided herein, the Issuer and the Trustee
shall have no responsibility or obligation with respect to (i) the accuracy
of the records of the Securities Depository or any Agent Member with
respect to any beneficial ownership interest in the Series 1996C Notes,
(ii) the delivery to any Agent Member, beneficial owner of the Series 1996C
Notes or other Person, other than the Securities Depository, of any notice
with respect to the Series 1996C Notes or (iii) the payment to any Agent
Member, beneficial owner of the Series 1996C Notes or other Person, other
than the Securities Depository, of any amount with respect to the principal
of or interest on the Series 1996C Notes. So long as the certificates for
the Series 1996C Notes issued under this Supplemental Indenture are not
issued pursuant to subsection (d) of this Section the Issuer and the
Trustee may treat the Securities Depository as, and deem the Securities
Depository to be, the absolute owner of the Series 1996C Notes for all
purposes whatsoever, including, without limitation, (A) the payment of
principal of and interest on such Series 1996C Notes, (B) giving notices of
redemption and other matters with respect to such Series 1996C Notes and
(C) registering transfers with respect to such Series 1996C Notes. In
connection with any notice or other communication to be provided to the
Registered Owners pursuant to this Supplemental Indenture by the Issuer or
the Trustee with respect to any consent or other action to be taken by the
Registered Owners, the Issuer or the Trustee, as the case may be, shall
establish a record date for such consent or other action and, if the
Securities Depository shall hold all of the Series 1996C Notes, give the
Securities Depository notice of such record date not less
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<PAGE>
than fifteen (15) calendar days in advance of such record date to the
extent possible. Such notice to the Securities Depository shall be
given only when the Securities Depository is the sole Registered Owner.
(d) If at any time the Securities Depository notifies the Issuer and
the Trustee that it is unwilling or unable to continue as Securities
Depository with respect to any or all of the Series 1996C Notes or if at
any time the Securities Depository shall no longer be registered or in good
standing under the Securities Exchange Act or other applicable statute or
regulation and a successor Securities Depository is not appointed by the
Issuer within 90 days after the Issuer receives notice or becomes aware of
such condition, as the case may be, subsections (b) and (c) of this Section
shall no longer be applicable and the Issuer shall execute and the Trustee
shall authenticate and deliver certificates representing the Series 1996C
Notes as provided below. In addition, the Issuer may determine at any time
that the Series 1996C Notes shall no longer be represented by global
certificates and that the provisions of subsections (b) and (c) of this
Section shall no longer apply to the Series 1996C Notes. In such event,
the Issuer shall execute and the Trustee shall authenticate and deliver
certificates representing the Series 1996C Notes as provided below.
Certificates for the Series 1996C Notes issued in exchange for a global
certificate pursuant to this subsection shall be registered in such names
and authorized denominations as the Securities Depository, pursuant to
instructions from the Agent Members or otherwise, shall instruct in writing
the Issuer and the Trustee, and upon which written instructions the Trustee
may rely without investigation. The Trustee shall promptly deliver such
certificates representing the Series 1996C Notes to the Persons in whose
names such Notes are so registered.
Section 2.02. REDEMPTION OF THE SERIES 1996C NOTES.
(a) MANDATORY REDEMPTION.
(i) Subject to the provisions of Section 2.02(d) hereof, the
Class 1996A-5 Notes are subject to mandatory redemption by the Issuer,
in whole or in part, on any Interest Payment Date on or after April 1,
1999, at a redemption price equal to the principal amount thereof plus
interest accrued, if any, to the date of redemption thereof from
moneys in the Senior Note Redemption Account of the Note Redemption
Fund available therefor pursuant to Sections 5.06 and 5.03(j) of the
Indenture.
(ii) Subject to the provisions of Section 2.02(d) hereof, the
Class 1996A-6 Notes are subject to mandatory redemption by the Issuer,
in whole or in part, on any Interest Payment Date, at a redemption
price equal to the principal amount thereof plus interest accrued, if
any, to the date of redemption thereof (i) from moneys in the Senior
Note Redemption Account of the Note Redemption Fund available therefor
pursuant to Sections 5.06 and 5.03(j) and (ii) on the next Interest
Payment Date subsequent to February 15, 1997, to the
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extent that a balance exists in the Series 1996C Loan Account of the
Student Loan Fund, such anticipated excesses to be determined by
estimate as of 30 days prior to said Interest Payment Dates; provided,
however, that if 30 days prior to said Interest Payment Dates, the
Issuer files with the Trustee a certificate that such balances may be
invested at a rate of return until a subsequent Interest Payment Date
which, together with other available Revenues and cash balances, will
produce sufficient cash flows to permit the timely retirement of the
Series 1996C Notes, which cash flows shall not assume the refunding of
the Series 1996C Notes, and such conclusions are approved by each
Rating Agency, then such call for redemption need not be made; and
provided that the Trustee shall have received an opinion of Note
Counsel to the effect that the failure to redeem Notes as provided in
this Section 2.02(a)(ii)(A) would not cause the Notes to fail to be
characterized as indebtedness of the Issuer for federal income tax
purposes.
(iii) Subject to the provisions of Section 2.02(d) hereof,
the Class 1996B-3 Notes shall be subject to mandatory redemption by
the Issuer, in whole or in part, on any Interest Payment Date on or
after May 1, 1999, at a redemption price equal to the principal amount
thereof plus accrued interest from moneys deposited in the Subordinate
Note Redemption Account of the Note Redemption Fund available therefor
pursuant to Sections 5.06 and 5.03(j) of the Indenture.
(b) OPTIONAL REDEMPTIONS AND OPTIONAL PURCHASE.
(i) OPTIONAL REDEMPTION OF CLASS 1996A-5 NOTES. Subject to the
provisions of Section 2.02(d) hereof, the Class 1996A-5 Notes are
subject to redemption at the option of the Issuer, from funds received
by the Trustee constituting interest on Financed Eligible Loans
remaining in the Revenue Fund after all other prior required payments
have been made from the Revenue Fund, in whole or in part, on any
Interest Payment Date on or after April 1, 1999, at a redemption price
equal to the principal amount thereof being redeemed, plus interest
accrued, if any, to the date of redemption.
(ii) OPTIONAL REDEMPTION OF CLASS 1996A-6 NOTES. Subject to the
provisions of Section 2.02(d) hereof, the Class 1996A-6 Notes are
subject to redemption at the option of the Issuer, from funds received
by the Trustee constituting interest on Financed Eligible Loans
remaining in the Revenue Fund after all other prior required payments
have been made from the Revenue Fund, in whole or in part, on any
Interest Payment Date, at a redemption price equal to the principal
amount thereof being redeemed, plus interest accrued, if any, to the
date of redemption.
(iii) OPTIONAL REDEMPTION OF CLASS 1996B-3 NOTES. Subject to
the provisions of Section 2.02(d) hereof, the Class 1996B-3 Notes are
subject to
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redemption at the option of the Issuer, from funds received
by the Trustee constituting interest on Financed Eligible Loans
remaining in the Revenue Fund after all other prior required payments
have been made from the Revenue Fund, in whole or in part, on any
Interest Payment Date on or after May 1, 1999, at a redemption price
equal to the principal amount of the Class 1996B-3 Notes being
redeemed, plus interest accrued, if any, to the date of redemption.
(iv) EXTRAORDINARY OPTIONAL REDEMPTION OF SERIES 1996C NOTES.
Subject to the provisions of Section 2.02(d) hereof, the Series 1996C
Notes shall also be subject to extraordinary optional redemption, at
the option of the Issuer, from any unallocated and available moneys in
the Trust Estate, at a redemption price equal to the principal amount
of the Series 1996C Notes being redeemed, plus accrued interest to the
date of redemption, without premium in whole or in part on any
Interest Payment Date, if the Issuer reasonably determines that it is
unable to acquire Financed Eligible Loans, that the rate of return on
Financed Eligible Loans has materially decreased, or that the costs of
administering the Trust Estate have placed unreasonable burdens upon
the ability of the Issuer to perform its obligations under the
Indenture.
(v) OPTIONAL PURCHASE OF SERIES 1996C NOTES. Subject to the
provisions of Section 2.02(d) hereof, the Issuer may purchase or cause
to be purchased all of the Series 1996C Notes on any Interest Payment
Date on which the aggregate current principal balance of the
Series 1996C Notes shall be less than or equal to 10% of the initial
aggregate principal balance of the Series 1996C Notes on their Date of
Issuance, at a purchase price equal to the aggregate current principal
balance of such Series 1996C Notes, plus accrued interest on the
Series 1996C Notes through the day preceding the Interest Payment Date
on which the purchase occurs. The amount deposited pursuant to this
subsection (iv) shall be paid to the Registered Owners on the related
Interest Payment Date following the date of such deposit. All
Series 1996C Notes which are purchased pursuant to this subsection
(iv) shall be delivered by the Issuer upon such purchase to, and be
canceled by, the Trustee and be disposed of in a manner satisfactory
to the Trustee and the Issuer.
(c) NOTICE OF REDEMPTION AND PURCHASE. The Trustee shall cause
notice of any redemption or purchase to be given by mailing a copy of the
notice to the Registered Owner of any Series 1996C Notes, and the Auction
Agent in the case of the Auction Rate Notes, designated for redemption or
purchase in whole or in part, at their address as the same shall last
appear upon the registration books, in each case not less than 15 days
prior to the redemption or purchase date; provided, however, that failure
to give such notice, or any defect therein, shall not affect the validity
of any proceedings for the redemption or purchase date of such Series 1996C
Notes for which no such failure or defect occurs.
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(d) PARTIAL REDEMPTION.
(i) If less than all of the Series 1996C Notes are to be
redeemed pursuant to Section 2.02(a) or 2.02(b) hereof, the class or
subclass of Series 1996C Notes to be redeemed shall be redeemed as
directed by an Issuer Order. If less than all of the Series 1996C
Notes of any Stated Maturity of any class or subclass of the
Series 1996C Notes are to be redeemed, such Series 1996C Notes of the
same Stated Maturity to be redeemed shall be selected by lot in such
manner as the Trustee shall determine. Notwithstanding the foregoing,
the Series 1996C Notes may only be redeemed pursuant to the provisions
of Section 5.06 of the Indenture.
(ii) In case a Series 1996C Note is of a denomination larger than
$100,000, a portion of such Note ($100,000, or integral multiples
thereof) may be redeemed. Upon surrender of any Series 1996C Note for
redemption in part only, the Issuer shall execute and the Trustee
shall authenticate and deliver to the Registered Owner thereof, the
cost of which shall be paid by the Issuer, a new Series 1996C Note or
Series 1996C Notes of the same series, maturity and of authorized
denominations, in an aggregate principal amount equal to the
unredeemed portion of the Series 1996C Note surrendered.
Section 2.03. DELIVERY OF SERIES 1996C NOTES. Upon the execution and
delivery of this Supplemental Indenture, the Issuer shall execute and deliver to
the Trustee and the Trustee shall authenticate the Series 1996C Notes and
deliver them to The Depository Trust Company and as hereinafter in this Section
provided.
Prior to the delivery by the Trustee of any of the Series 1996C Notes,
there shall have been filed with or delivered to the Trustee the following:
(a) A resolution duly adopted by the Issuer, certified by the
Secretary or other Authorized Officer thereof, authorizing the execution
and delivery of this Supplemental Indenture and the issuance of the
Series 1996C Notes.
(b) Duly executed copies of this Supplemental Indenture and a
certified copy of the Indenture.
(c) The written order of the Issuer as to the delivery of the
Series 1996C Notes, signed by an Authorized Officer.
(d) A Cash Flow Certificate pursuant to Section 2.12(b)(ii) of the
Indenture.
(e) Rating letters from each Rating Agency pursuant to Section
2.12(b)(iii) of the Indenture.
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(f) An opinion of Note Counsel pursuant to Sections 2.12(b)(iv) and
(vi) of the Indenture.
Section 2.04. TRUSTEE'S AUTHENTICATION CERTIFICATE. The Trustee's
authentication certificate upon the Series 1996C Notes shall be substantially in
the forms provided in Exhibits A, B and C hereof. No Series 1996C Note shall be
secured hereby or entitled to the benefit hereof, or shall be valid or
obligatory for any purpose, unless a certificate of authentication,
substantially in such form, has been duly executed by the Trustee; and such
certificate of the Trustee upon any Series 1996C Note shall be conclusive
evidence and the only competent evidence that such Bond has been authenticated
and delivered hereunder. The Trustee's certificate of authentication shall be
deemed to have been duly executed by it if manually signed by an authorized
officer of the Trustee, but it shall not be necessary that the same person sign
the certificate of authentication on all of the Series 1996C Notes issued
hereunder.
Section 2.05. DEPOSIT OF SERIES 1996C NOTE PROCEEDS. Upon the issuance
and delivery of the Series 1996C Notes, the Trustee shall deposit the net
proceeds thereof (i.e., net of Underwriter's discount of $1,136,925.00):
(a) an amount equal to $1,459,564 shall be deposited in the Revenue
Fund;
(b) an amount equal to $1,050,000 shall be deposited to the Operating
Fund;
(c) an amount equal to $822,500 shall be deposited to the Cost of
Issuance Fund;
(d) an amount equal to $6,322,000 shall be deposited to the Reserve
Fund; and
(e) the balance of the proceeds of the Series 1996C Notes
($305,309,011) shall be deposited to the Series 1996C Loan Account of the
Student Loan Fund.
Section 2.06. FORMS OF SERIES 1996C NOTES. The Class 1996A-5 Notes and
Class 1996A-6 Notes bearing interest at a Treasury Rate shall be in
substantially the form set forth in Exhibit A hereto, with such variations,
omissions and insertions as may be necessary. The Class 1996A-6 Notes bearing
interest at an Auction Rate shall be in substantially the form set forth in
Exhibit B hereto, each with such variations, omissions and insertions as may be
necessary. The Class 1996B-3 Notes bearing interest at a LIBOR Rate shall be in
substantially the form set forth in Exhibit C hereto, each with such variations,
omissions and insertions as may be necessary.
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ARTICLE III
AMENDMENT OF INDENTURE
Section 3.01. AMENDMENT OF INDENTURE. The Indenture is hereby amended and
supplemented hereby, as provided in Sections 2.12 and 8.01(i) and 8.01(m)
thereof, as follows:
(a) Section 5.01(a)(i) of the Indenture shall be supplemented to
create the following Accounts:
(i) a Series 1996C Loan Account;
(ii) a Series 1996C Note Account; and
(iii) a Series 1996C Recycling Account.
(b) Section 5.02 of the Indenture shall be supplemented to include
the following:
Notwithstanding anything herein to the contrary, on February
15, 1997, the Trustee shall transfer to the Note Redemption
Fund, moneys in the Series 1996C Loan Account of the Student
Loan Fund specified in Section 2.02(a)(ii) of the
Series 1996C Supplemental Indenture of Trust.
On April 1,1999, all moneys and investments remaining in the
Series 1996C Recycling Account of the Student Loan Fund
shall be transferred to the Note Redemption Fund.
(c) Section 5.03(g) of the Indenture shall be supplemented to include
the following:
(iii) to the Series 1996C Recycling Account of the
Student Loan Fund prior to April 1, 1999 and (iv) to the
Note Redemption Fund on and after April 1, 1999.
(d) Section 5.03(k) of the Indenture shall be supplemented to include
the following:
or, prior to April 1, 1999, to the Series 1996C Recycling
Account of the Student Loan Fund.
(e) Section 5.08 of the Indenture shall be supplemental to include
the following:
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The Trustee shall deposit in the Cost of Issuance Fund on
the Date of Issuance the amounts set forth in Section
2.05(c) of the Series 1996C Supplemental Indenture of Trust.
Moneys in the Cost of Issuance Fund shall be used by the
Trustee, upon the written direction of an Authorized Officer
of the Issuer, solely for the purpose of paying costs of
issuance of the Series 1996C Notes, including without
limitation any compensation of the Underwriter not paid from
the proceeds of the Notes. If any moneys remain in the Cost
of Issuance Fund on February 1, 1997, such amounts shall be
paid by the Trustee without further direction to the Issuer.
ARTICLE IV
GENERAL PROVISIONS
Section 4.01. DATE OF EXECUTION. Although this Supplemental Indenture for
convenience and for the purpose of reference is dated as of November 1, 1996,
the actual dates of execution by the Issuer and by the Trustee are as indicated
by their respective acknowledgments hereto annexed.
Section 4.02. LAWS GOVERNING. It is the intent of the parties hereto that
this Supplemental Indenture shall in all respects be governed by the laws of the
State.
Section 4.03. SEVERABILITY. Of any covenant, agreement, waiver, or part
thereof in this Supplemental Indenture contained be forbidden by any pertinent
law or under any pertinent law be effective to render this Supplemental
Indenture invalid or unenforceable or to impair the lien hereof, then each such
covenant, agreement, waiver, or part thereof shall itself be and is hereby
declared to be wholly ineffective, and this Supplemental Indenture shall be
construed as if the same were not included herein.
Section 4.04. EXHIBITS. The terms of the Exhibits attached to this
Supplemental Indenture are incorporated herein in all particulars.
ARTICLE V
APPLICABILITY OF INDENTURE
The provisions of the Indenture are hereby ratified, approved and
confirmed, except as otherwise expressly modified by this Supplemental
Indenture. The representations, warranties and covenants contained in the
Indenture (except as expressly modified herein) are hereby reaffirmed with the
same force and effect as if fully set forth herein and made again as of the date
hereof.
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IN WITNESS WHEREOF, the Issuer has caused this Supplemental Indenture to be
executed in its corporate name and behalf by the President, and the Trustee, to
evidence its acceptance of the trusts hereby created, has caused this
Supplemental Indenture to be executed in its corporate name and behalf, has
caused its corporate seal to be hereunto affixed by its duly authorized officer,
all in multiple counterparts, each of which shall be deemed an original, and the
Issuer and the Trustee have caused this Supplemental Indenture to be dated as of
the date herein above first shown, although actually executed on the dates shown
in the acknowledgments hereafter appearing.
[SEAL] UNION FINANCIAL SERVICES-1, INC.
By /s/ Stephen F. Butterfield
---------------------------------------------
President
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as
Trustee
By /s/ Roxanne Rouleau
---------------------------------------------
Assistant Vice President
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APPENDIX A
CERTAIN TERMS AND PROVISIONS OF
THE CLASS 1996A-5 SENIOR TREASURY RATE NOTES
ARTICLE I
Section 1.01. DEFINITIONS. In addition to the terms defined elsewhere in
the Indenture and this Supplemental Indenture, the following terms shall have
the following meanings with respect to the Class 1996A-5 Notes, unless the
context otherwise requires:
"AUTHORIZED DENOMINATIONS" shall mean $100,000 and any multiple thereof.
"BOND-EQUIVALENT YIELD-91-DAY T-BILL" shall mean, in respect of any
security with a maturity of six months or less the rate for which is quoted in
THE WALL STREET JOURNAL on a bank discount basis, a yield (expressed as a
percentage) calculated in accordance with the following formula and rounded up
to the nearest one one-hundredth of one percent:
Bond Equivalent Yield = Q x N x 100
-------------
360 - (91 x Q)
where "Q" refers to the per annum rate for the security quoted on a bank
discount basis and expressed as a decimal and "N" refers to 365 or 366 (days),
as the case may be.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday, holiday or
day on which banks in New York, New York, or the New York Stock Exchange, the
Trustee or the Calculation Agent, are authorized or permitted by law or
executive order to close.
"CALCULATION AGENT" shall mean any person appointed as such pursuant to
Section 2.07 hereof.
"DEPOSITORY" shall mean The Depository Trust Company or any successor
securities depository selected or approved by the Issuer.
"HOLDER" as used in this Appendix A shall mean the beneficial owner of any
Class 1996A-5 Note.
"INITIAL INTEREST PAYMENT DATE" shall mean December 1, 1996 for the Class
1996A-5 Notes.
"INITIAL INTEREST PERIOD" shall mean, for the Class 1996A-5 Notes, the
period from and including the Date of Issuance of the Class 1996A-5 Notes and
ending on November 30, 1996.
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"INTEREST AMOUNT" shall mean the amount of interest distributable in
respect of each $100,000 in principal amount (taken, without rounding, to .0001
of one cent) of Class 1996A-5 Notes for any Interest Period or part thereof, as
calculated in accordance with Section 2.01 hereof.
"INTEREST PAYMENT DATE" means December 1, 1996 and the first day of each
month thereafter, and the maturity date for the Class 1996A-5 Notes, or if any
such date is not a Business Day, the next succeeding Business Day (but only for
interest accrued through the last day of the calendar month next preceding such
Interest Payment Date).
"INTEREST PERIOD" means the Initial Interest Period for the Class 1996A-5
Notes and the period beginning on the first day of each month and ending on the
last day of each month.
"MAXIMUM INTEREST RATE" shall mean the lesser of (a) 16% per annum or (b)
the maximum rate of interest permitted under State law for student loan notes of
the Issuer.
"PARTICIPANT" shall mean a member of or participant in, the Depository.
"PAYMENT DEFAULT" shall mean failure to make payment of interest on,
premium, if any, and principal of the Class 1996A-5 Notes when due, by the
Issuer.
"PERSON" means and includes, unless otherwise specified, an individual,
corporation, company, trust, estate partnership or association.
"RATE ADJUSTMENT DATE" shall mean the Initial Rate Adjustment Date for the
Class 1996A-5 Notes (November 5, 1996) and thereafter, the day immediately
following each Rate Determination Date.
"RATE DETERMINATION DATE" shall mean the Initial Rate Determination Date
for the Class 1996A-5 Notes (November 4, 1996) and thereafter, the first day of
each calendar week on which the United States Treasury conducts an auction or
other sale of United States 91-day Treasury Bills, subject to adjustment as
described in Section 2.01 hereof, if such auction or sale cases to occur.
"RECORD DATE" shall mean the Business Day immediately preceding the
Interest Payment Date.
"REDEMPTION DATE," when used with respect to any Class 1996A-5 Notes to be
redeemed, shall mean the date fixed for such redemption.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended.
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"T-BILL RATE" shall mean the variable rate of interest per annum,
applicable during each Interest Period after the Initial Period, equal to Bond
Equivalent Yield - 91-Day T-Bill, as calculated by the Calculation Agent, of
auctions of 91-day United States Treasury Bills held on the most recent Rate
Determination Date plus .56% (subject to the Maximum Interest Rate).
"T-BILL RATE PERIOD," with respect to the Class 1996A-5 Notes, shall mean
the Interest Period, commencing on the Date of Issuance or a Rate Adjustment
Date and ending on, and including, the subsequent Rate Determination Date,
applicable to the Class 1996A-5 Notes, with respect to which, after the Initial
Period, the Interest Rate is determined pursuant to Section 2.01 hereof.
ARTICLE II
TERMS AND ISSUANCE
Section 2.01. INTEREST ON THE CLASS 1996A-5 NOTES.
(a) Interest on the Class 1996A-5 Notes shall accrue for each
Interest Period and shall be payable in arrears, on each Interest Payment
Date.
(b) The rate of interest on the Class 1996A-5 Notes for the first
Interest Period shall be 5.735%. The rate of interest on the Class 1996A-5
Notes for each subsequent Interest Period shall be determined by the
Calculation Agent on each Rate Determination Date and shall be equal to the
T-Bill Rate subject to the Maximum Interest Rate. Such T-Bill Rate shall
be calculated by the Calculation Agent and announced to the Issuer and the
Trustee in writing no later than the Business Day immediately following
each Rate Determination Date. The T-Bill Rate shall take effect on the
Rate Adjustment Date for such T-Bill Rate Period and shall be the Interest
Rate borne by the Class 1996A-5 Notes, respectively, for the T-Bill Rate
Period for which such determination was made.
(c) If the Calculation Agent shall fail or refuse to determine the
T-Bill Rate on any Rate Determination Date, the T-Bill Rate shall be
determined by a securities dealer appointed by the Issuer and capable, in
the reasonable judgment of the Issuer, of making such a determination in
accordance with the provisions of this Supplemental Indenture and written
notice of such determination shall be given by such securities dealer to
the Trustee.
If the United States Treasury ceases to auction or sell 91-day United
States Treasury Bills for a period of 21 consecutive days, such twenty-
first day shall be a Rate Determination Date, and the Interest Rate on the
Class 1996A-5 Notes shall be calculated by the Calculation Agent on such
Rate Determination Date to be equal to the sum of the Bond Equivalent Yield
- 91-Day T-Bill on the most recently auctioned United States
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Treasury Bills having a maturity nearest to 91 days, plus .56% (subject to
the Maximum Interest Rate).
(d) Notwithstanding any other provision of the Class 1996A-5 Notes or
this Supplemental Indenture, interest payable on each class of the
Class 1996A-5 Notes for a T-Bill Rate Period shall never exceed for such
T-Bill Rate Period the amount of interest payable at the Maximum Interest
Rate for such T-Bill Rate Period.
Section 2.02. PAYMENTS. So long as the Class 1996A-5 Notes are registered
in the name of the Depository or the nominee thereof, payment of interest (other
than at maturity) and premium, if any, on, and of principal at redemption of,
the Class 1996A-5 Notes shall be made to the Depository by wire transfer
provided proper wire instructions are received. Each Holder of the Class
1996A-5 Notes, by such Holder's purchase of the Class 1996A-5 Notes, appoints
the Trustee as its agent in connection with the payment by such Holder of its
share, if any, of the amounts payable to the Calculation Agent pursuant to
Section 2.07(a) hereof.
Section 2.03. NOTICE OF PAYMENT DEFAULTS AND CURES. By 12:30 p.m. on the
Business Day immediately succeeding each Interest Payment Date, the Trustee will
determine if a Payment Default has occurred. If a Payment Default has occurred,
the Trustee shall, if the Calculation Agent is other than the Trustee, notify
the Calculation Agent by 1:00 p.m. of such Payment Default. If a Payment
Default has been cured, the Trustee shall, if the Calculation Agent is other
than the Trustee, so notify the Calculation Agent by 5:00 p.m. on the day such
Payment Default is cured.
Section 2.04. TERMINATION OF BOOK ENTRY SYSTEM. If the ownership of the
Class 1996A-5 Notes is no longer maintained in book-entry form, such Class
1996A-5 Notes may be exchanged for other Class 1996A-5 Notes, in Authorized
Denominations, and of a like aggregate principal amount, upon surrender of the
Class 1996A-5 Notes to be exchanged at the principal office of the Trustee. The
Class 1996A-5 Notes, upon surrender thereof at the principal office of the
Trustee, duly endorsed for transfer or accompanied by an assignment duly
executed by the Holder of its attorney duly authorized in writing, will be
transferred to a transferee or transferees, in the form of one or more new fully
registered Class 1996A-5 Notes, in Authorized Denomination, and of a like
aggregate principal amount having the same interest rate and bearing numbers not
previously assigned.
In all cases in which the privilege of exchanging or transferring the Class
1996A-5 Notes is exercised, the Issuer will cause to be executed and delivered
the Class 1996A-5 Notes in accordance with the provisions of the Resolution.
For every such exchange or transfer of the Class 1996A-5 Notes, the Trustee will
require payment by the Holder of any tax or other governmental charge required
to be paid with respect to such exchange or transfer. All expenses, other than
any tax or other government charge, incurred by the Trustee or the Issuer with
respect to each such transfer or exchange will be paid by the Issuer.
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The Trustee will not be required to transfer any Class 1996A-5 Note during
the period of five Business Days next preceding the mailing of notice of
redemption as described herein. After giving of such notice of redemption, the
Trustee will not be required to transfer or exchange any Class 1996A-5 Note,
which Class 1996A-5 Note or portion thereof has been called for redemption.
Section 2.05. COMPUTATION OF INTEREST. The amount of interest
distributable to Holders of the Class 1996A-5 Notes in respect of each $100,000
in principal amount thereof for any Interest Period or part thereof shall be
calculated by applying the T-Bill Rate for such Interest Period or part thereof
to the principal amount of $100,000 multiplying such product by the actual
number of days in the Interest Period or part thereof concerned divided by 365
or 366, as applicable, and truncating the resultant figure to the nearest one
cent. Interest on the Class 1996A-5 Notes shall be computed by the Trustee on
the basis of a year consisting of 365 or 366 days, as applicable. In the event
an Interest Payment Date occurs with respect to any Interest Period on a date
other than the first day of the next Interest Period, the Trustee, after
confirming the calculation required above, shall calculate the portion of the
Interest Amount payable on such Interest Payment Date and the portion payable on
the next succeeding Interest Payment Date.
Section 2.06. NOTIFICATION OF RATES, AMOUNTS AND PAYMENT DATES.
(a) The Trustee shall determine the aggregate amount of interest
distributable on the next succeeding Interest Payment Date to the Holders
of the Class 1996A-5 Notes. So long as the ownership of the Class 1996A-5
Notes is maintained in book-entry form by the Depository, the Trustee shall
advise the Depository of each Record Date for the Class 1996A-5 Notes at
least two Business Days prior thereto.
(b) Promptly after the Date of Issuance and each Interest Payment
Date, and in any event at least 10 days prior to each Interest Payment Date
following the Initial Interest Payment Date, the Trustee shall:
(i) so long as no Payment Default has occurred and is continuing
and the ownership of the Class 1996A-5 Notes is maintained in
book-entry form by the Depository, confirm the Calculation Agent's
determination of (1) the date of such next Interest Payment Date and
(2) the amount payable to the Calculation Agent and notify the
Calculation Agent of any discrepancy therein; and
(ii) advise the Depository, so long as the ownership of the
Class 1996A-5 Notes is maintained in book-entry form by the
Depository, of the T-Bill Rate and the Interest Amount in respect of
the next succeeding Interest Period.
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Section 2.07. CALCULATION AGENT.
(a) Smith Barney Inc. shall serve as the initial Calculation Agent
for the Class 1996A-5 Notes. The Calculation Agent shall be (i) a bank or
trust company duly organized under the laws of the United States of America
or any state or territory thereof, and having a combined capital stock,
surplus and undivided profits of at least $15,000,000 or (ii) a member of
the National Association of Securities Dealers, Inc., having a
capitalization of at least $15,000,000 and, in either case, authorized by
law to perform all the duties imposed upon it hereunder. The Calculation
Agent may resign and be discharged of the duties and obligations created
hereunder by giving at least 90 days' written notice to the Issuer and the
Trustee (30 days' written notice if the Calculation Agent has not been paid
its fee for more than 30 days). The Calculation Agent may be removed at any
time by the Trustee if the Calculation Agent is an entity other than the
Trustee, acting at the direction of the Issuer or the Holders of 51% of the
aggregate principal amount of the Class 1996A-5 Notes, by an instrument
signed by the Trustee and filed with the Calculation Agent and the Issuer
upon at least 90 days' notice. If the Calculation Agent and the Trustee
are the same entity, the Calculation Agent may be removed as described
above, with the Issuer acting in lieu of the Trustee.
(b) In the event that the Calculation Agent shall resign or be
removed or dissolved, or if the property or affairs of the Calculation
Agent shall be taken under the control of any state or federal court or
administrative body because of bankruptcy or insolvency, or for any other
reason, the Issuer shall use its best efforts to appoint a successor as
Calculation Agent, and the Trustee shall thereupon enter into an agreement
with such successor to perform the duties of the Calculation Agent as
described herein.
(c) The Calculation Agent (if other than the Trustee) shall be acting
as agent for the Trustee, as trustee, registrar and paying agent for the
Class 1996A-5 Notes, in connection with its duties hereunder. In the
absence of bad faith or negligence on its part, the Calculation Agent shall
not be liable for any action taken, suffered or omitted or for any error of
judgment made by it in the performance of its duties hereunder and shall
not be liable for any error of judgment made in good faith unless the
Calculation Agent shall have been negligent in ascertaining (or failing to
ascertain) the pertinent facts necessary to make such judgment.
Section 2.08. CREDIT RATINGS. The Issuer shall take all reasonable action
necessary to enable at least one nationally recognized statistical rating
organization (as that term is used in the rules and regulations of the SEC under
the Securities Exchange Act) to provide credit ratings for the Class 1996A-5
Notes.
Section 2.09. NOTICE. The Issuer shall use its best efforts to provide
the Trustee and, so long as no Payment Default has occurred and is continuing
and the ownership of the Class 1996A-5 Notes is maintained in book-entry form by
the Depository, the Calculation Agent with notice of any change in the maximum
rate permitted by law on the Class 1996A-5 Notes.
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Section 2.10. NOTICE OF PAYMENT DEFAULT.
(a) If the Issuer determines that a Payment Default has occurred the
Issuer shall promptly notify the Trustee thereof.
(b) So long as the ownership of the Class 1996A-5 Notes is maintained
in book-entry form by the Depository, upon the occurrence of a Payment
Default the Trustee shall immediately send a notice thereof to the
Calculation Agent by telecopy or similar means.
(c) So long as the ownership of the Class 1996A-5 Notes is maintained
in book-entry form by the Depository, the Trustee shall immediately send
notice to the Calculation Agent by telecopy or similar means if a Payment
Default is cured.
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APPENDIX B
CERTAIN TERMS AND PROVISIONS OF THE
CLASS 1996A-6 SENIOR AUCTION RATE NOTES
ARTICLE I
Section 1.01. DEFINITIONS. Except as provided below in this Section,
all terms which are defined in Article I of the Indenture and Article I of
this Supplemental Indenture shall have the same meanings, respectively, in
this Appendix A as such terms are given in the Indenture and Article I of
this Supplemental Indenture. In addition, the following terms shall have the
following respective meanings:
"AFTER-TAX EQUIVALENT" means the "AA" Composite Commercial Paper Rate.
"ALL HOLD RATE" means the Applicable LIBOR Rate less .20%; provided that
in no event shall the applicable All Hold Rate be greater than the applicable
Maximum Auction Rate.
"APPLICABLE LIBOR RATE" means, (a) for Auction Periods of 35 days or
less, One-Month LIBOR, (b) for Auction Periods of more than 35 days but less
than 91 days, Three-Month LIBOR, (c) for Auction Periods of more than 90 days
but less than 181 days, Six-Month LIBOR, and (d) for Auction Periods of more
than 180 days, One-Year LIBOR.
"AUCTION" means the implementation of the Auction Procedures on an
Auction Date.
"AUCTION AGENT" means the Initial Auction Agent under the Initial Auction
Agent Agreement unless and until a Substitute Auction Agent Agreement becomes
effective, after which "Auction Agent" shall mean the Substitute Auction
Agent.
"AUCTION AGENT AGREEMENT" means the Initial Auction Agent Agreement
unless and until a Substitute Auction Agent Agreement is entered into, after
which "Auction Agent Agreement" shall mean such Substitute Auction Agent
Agreement.
"AUCTION AGENT FEE" has the meaning set forth in the Auction Agent
Agreement.
"AUCTION DATE" means, initially, November 12, 1996 with respect to the
Class 1996A-6 Notes, and thereafter, the Business Day immediately preceding
the first day of each Auction Period for each respective Class, other than:
(a) each Auction Period commencing after the ownership of the
applicable Auction Rate Notes is no longer maintained in Book-entry Form by
the Securities Depository;
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(b) each Auction Period commencing after and during the continuance
of a Payment Default; or
(c) each Auction Period commencing less than two Business Days after
the cure or waiver of a Payment Default.
Notwithstanding the foregoing, the Auction Date for one or more Auction Periods
may be changed pursuant to Section 2.02(h) of this Appendix B.
"AUCTION RATE NOTES" means the Class 1996A-6 Notes.
"AUCTION NOTE INTEREST RATE" means each variable rate of interest per
annum borne by an Auction Rate Note for each Auction Period and determined in
accordance with the provisions of Sections 2.01 and 2.02 hereof; provided,
however, that in the event of a Payment Default, the Auction Note Interest
Rate shall equal the applicable Non-Payment Rate; provided, further, however
that such Auction Note Interest Rate shall in no event exceed the applicable
Maximum Auction Rate.
"AUCTION PERIOD" means the Interest Period applicable to the Auction Rate
Notes during which time the Interest Rate is determined pursuant to Section
2.02(a) hereof, which Auction Period (after the Initial Period for such
Class) initially shall consist generally of seven days for the Class 1996A-6
Notes, as the same may be adjusted pursuant to Section 2.02(g) hereof.
"AUCTION PERIOD ADJUSTMENT" means an adjustment to the Auction Period as
provided in Section 2.02(g) hereof.
"AUCTION PROCEDURES" means the procedures set forth in Section 2.02(a)
hereof by which the Auction Rate is determined.
"AUCTION RATE" means the rate of interest per annum that results from
implementation of the Auction Procedures and is determined as described in
Section 2.02(a)(iii)(B) hereof.
"AUTHORIZED DENOMINATIONS" means $100,000 and any integral multiple
thereof.
"AVAILABLE AUCTION RATE NOTES" has the meaning set forth in Section
2.02(a)(iii)(A)(1) hereof.
"BID" has the meaning set forth in Section 2.02(a)(i)(A) hereof.
"BID AUCTION RATE" has the meaning set forth in Section 2.02(a)(iii)(A)
hereof.
"BIDDER" has the meaning set forth in Section 2.02(a)(i)(A) hereof.
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"BOND EQUIVALENT YIELD" means, in respect of any security the rate for
which is quoted in THE WALL STREET JOURNAL on a bank discount basis, the
"bond equivalent yield" (expressed as a percentage) for such security which
appears on Telerate's United States Treasury and Money Market Composite Page
0223, rounded up to the nearest one one-hundredth of one percent.
"BOOK-ENTRY FORM" or "BOOK-ENTRY SYSTEM" means a form or system under
which (a) the beneficial right to principal and interest may be transferred
only through a book entry, (b) physical securities in registered form are
issued only to a Securities Depository or its nominee as registered owner,
with the securities "immobilized" to the custody of the Securities
Depository, and (c) the book entry is the record that identifies the owners
of beneficial interests in that principal and interest.
"BROKER-DEALER" means, Smith Barney Inc., or any other broker or dealer
(each as defined in the Securities Exchange Act of 1934, as amended),
commercial bank or other entity permitted by law to perform the functions
required of a Broker-Dealer set forth in the Auction Procedures that (a) is a
Participant (or an affiliate of a Participant), (b) has been appointed as
such by the Issuer pursuant to Section 2.02(f) hereof and by Smith Barney
Inc., if applicable, and (c) has entered into a Broker-Dealer Agreement that
is in effect on the date of reference.
"BROKER-DEALER AGREEMENT" means each agreement between the Auction Agent
and a Broker-Dealer, and approved by the Issuer, pursuant to which the
Broker-Dealer agrees to participate in Auctions as set forth in the Auction
Procedures, as from time to time amended or supplemented. Each Broker-Dealer
Agreement shall be in substantially the form of the Broker-Dealer Agreement
dated as of November 1, 1996, among the Issuer, Bankers Trust Company, as
Auction Agent, and Smith Barney Inc., as Broker-Dealer.
"BROKER-DEALER FEE" has the meaning set forth in the Auction Agent
Agreement.
"BROKER-DEALER FEE RATE" has the meaning set forth in the Auction Agent
Agreement.
"BUSINESS DAY" means a day of the year on which (a) banks located in the
city in which the Principal Office of the Trustee is located are not required
or authorized to remain closed, (b) banks located in the city in which the
Principal Office of the Auction Agent, as set forth in and for purposes of
the Auction Agent Agreement, is located are not required or authorized to
remain closed and (c) The New York Stock Exchange is not closed.
"CARRY-OVER AMOUNT" means the excess, if any, of (a) the amount of
interest on an Auction Rate Note that would have accrued with respect to the
related Interest Period at the applicable Auction Rate over (b) the amount of
interest on such Auction Rate Note actually accrued with respect to such
Auction Rate Note with respect to such Interest Period based on the
applicable Maximum Auction Rate (without regard to the last two clauses of
the definition thereof) together with the unreduced portion of any such
excess from prior Interest Periods; provided that any reference to
"principal" or "interest" in this Appendix B and the Auction Rate
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Notes shall not include within the meanings of such words any Carry-over
Amount or any interest accrued on any Carry-over Amount.
"CLOSING DATE" means the Date of Issuance of the Class 1996A-6 Notes
(November 1, 1996).
"COMMERCIAL PAPER DEALER" means Smith Barney Inc., its successors and
assigns, and any other commercial paper dealer appointed pursuant to Section
2.02(c) of this Appendix B.
"ELIGIBLE CARRY-OVER MAKE-UP AMOUNT" means, with respect to each Interest
Period relating to the Auction Rate Notes as to which, as of the first day of
such Interest Period, there is any unpaid Carry-over Amount, an amount equal
to the lesser of (a) interest computed on the principal balance of the
Auction Rate Notes in respect to such Interest Period at a per annum rate
equal to the excess, if any, of applicable Maximum Auction Rate (without
regard to the last two clauses of the definition thereof) over the Auction
Rate, together with the unreduced portion of any such excess from prior
Interest Periods and (b) the aggregate Carry-over Amount remaining unpaid as
of the first day of such Interest Period together with interest accrued and
unpaid thereon through the end of such Interest Period.
"EXISTING OWNER" means (a) with respect to and for the purpose of dealing
with the Auction Agent in connection with an Auction, a Person who is a
Broker-Dealer listed in the Existing Owner Registry at the close of business
on the Business Day immediately preceding the Auction Date for such Auction
and (b) with respect to and for the purpose of dealing with the Broker-Dealer
in connection with an Auction, a Person who is a beneficial owner of Auction
Rate Notes.
"EXISTING OWNER REGISTRY" means the registry of Persons who are owners of
the Auction Rate Notes, maintained by the Auction Agent as provided in the
Auction Agent Agreement.
"HOLD ORDER" has the meaning set forth in Section 2.02(a)(i)(A) hereof.
"INITIAL AUCTION AGENT" means Bankers Trust Company, a New York banking
corporation, its successors and assigns.
"INITIAL AUCTION AGENT AGREEMENT" means, collectively, the Auction Agent
Agreement dated as of November 1, 1996, by and among the Issuer, the Trustee
and the Initial Auction Agent, including any amendment thereof or supplement
thereto.
"INITIAL PERIOD" means, as to Auction Rate Notes, the period commencing
on the Closing Date and continuing through the day immediately preceding the
Initial Rate Adjustment Date for such Auction Rate Notes.
"INITIAL RATE" means 5.375% for the Class 1996A-6 Notes.
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"INITIAL RATE ADJUSTMENT DATE" means, with respect to the Class 1996A-6
Notes, November 13, 1996.
"INTEREST PAYMENT DATE" means (a) so long as the Auction Rate Notes bear
interest at an Auction Note Interest Rate for an Interest Period of not
greater than 180 days, the Business Day immediately following the expiration
of the Initial Period for such Class, and each related Auction Period
thereafter and (b) if and for so long as the Auction Rate Notes bear interest
at an Auction Note Interest Rate for an Interest Period of greater than 180
days, each January 1 and July 1.
"INTEREST PERIOD" means, with respect to the Auction Rate Notes, the
Initial Period and each period commencing on an Interest Rate Adjustment Date
for such Class and ending on the day before (a) the next Interest Rate
Adjustment Date for such Class or (b) the Stated Maturity of such Class, as
applicable.
"INTEREST RATE ADJUSTMENT DATE" means the date on which an Auction Note
Interest Rate is effective, and means, with respect to the Auction Rate
Notes, the date of commencement of each Auction Period.
"INTEREST RATE DETERMINATION DATE" means, with respect to the Auction
Rate Notes, the Auction Date, or if no Auction Date is applicable to such
Class, the Business Day immediately preceding the date of commencement of an
Auction Period.
"MARKET AGENT" means Smith Barney Inc., New York, New York, in such
capacity hereunder, or any successor to it in such capacity hereunder.
"MAXIMUM AUCTION RATE" means the least of (a) either (i) the Applicable
LIBOR Rate plus 1.50% (if the ratings assigned by the Rating Agency to the
Auction Rate Notes are "Aa3" and "AA-," respectively, or better) or (ii) the
Applicable LIBOR Rate plus 2.50% (if any one of the ratings assigned by the
Rating Agency to the Auction Rate Notes is less than "Aa3" or "AA-,"
respectively), (b) the Net Loan Rate, (c) 18% and (d) the highest rate the
Issuer may legally pay, from time to time, as interest on the Auction Rate
Notes. For purposes of the Auction Agent and the Auction Procedures, the
ratings referred to in this definition shall be the last ratings of which the
Auction Agent has been given written notice pursuant to the Auction Agent
Agreement.
"NET LOAN RATE" means, with respect to the Auction Rate Notes, the rate
of interest per annum (rounded to the next highest one one-hundredth of one
percent) equal to the applicable United States Treasury Security Rate plus
1.50%. For Auction Periods of 180 days or less, the applicable United States
Treasury Security Rate is for 91-day United States Treasury securities, and
for Auction Periods of more than 180 days, the applicable United States
Treasury Security Rate is for one-year United States Treasury securities.
"NON-PAYMENT RATE" means One-Month LIBOR plus 1.50%.
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"ONE-MONTH LIBOR," "THREE-MONTH LIBOR," "SIX-MONTH LIBOR" or "ONE-YEAR
LIBOR," means the rate of interest per annum equal to the rate per annum at
which United States dollar deposits having a maturity of one month, three
months, six months or one year, respectively, are offered to prime banks in
the London interbank market which appear on the Reuters Screen LIBOR Page as
of approximately 11:00 a.m., London time, on the Interest Rate Determination
Date. If at least two such quotations appear, One-Month LIBOR, Three-Month
LIBOR, Six-Month LIBOR or One-Year LIBOR, respectively, will be the
arithmetic mean (rounded upwards, if necessary, to the nearest one-hundredth
of one percent) of such offered rates. If fewer than two such quotes appear,
One-Month LIBOR, Three-Month LIBOR, Six-Month LIBOR or One-Year LIBOR,
respectively, with respect to such Interest Period will be determined at
approximately 11:00 a.m., London time, on such Interest Rate Determination
Date on the basis of the rate at which deposits in United States dollars
having a maturity of one month, three months, six months or one year,
respectively, are offered to prime banks in the London interbank market by
four major banks in the London interbank market selected by (a) the Auction
Agent or (b) the Trustee, as applicable, and in a principal amount of not
less than U.S. $1,000,000 and that is representative for a single transaction
in such market at such time. The Auction Agent or the Trustee, as
applicable, will request the principal London office of each of such banks to
provide a quotation of its rate. If at least two quotations are provided,
One-Month LIBOR, Three-Month LIBOR, Six-Month LIBOR or One-Year LIBOR,
respectively, will be the arithmetic mean (rounded upwards, if necessary, to
the nearest one-hundredth of one percent) of such offered rates. If fewer
than two quotations are provided, One-Month LIBOR, Three-Month LIBOR,
Six-Month LIBOR or One-Year LIBOR, respectively, with respect to such
Interest Period will be the arithmetic mean (rounded upwards, if necessary,
to the nearest one-hundredth of one percent) of the rates quoted at
approximately 11:00 a.m., New York City time on such Interest Rate
Determination Date by three major banks in New York, New York selected by (i)
the Auction Agent or (ii) the Trustee, as applicable, for loans in United
States dollars to leading European banks having a maturity of one month,
three months, six months or one year, respectively, and in a principal amount
equal to an amount of not less than U.S. $1,000,000 and that is
representative for a single transaction in such market at such time;
provided, however, that if the banks selected as aforesaid are not quoting as
mentioned in this sentence, One-Month LIBOR, Three-Month LIBOR, Six-Month
LIBOR or One-Year LIBOR, respectively, in effect for the applicable Interest
Period will be One-Month LIBOR, Three-Month LIBOR, Six-Month LIBOR or
One-Year LIBOR, respectively, in effect for the immediately preceding
Interest Period.
"ORDER" has the meaning set forth in Section 2.02(a)(i)(A) hereof.
"PAYMENT DEFAULT" means, with respect to the Auction Rate Notes, (a) a
default in the due and punctual payment of any installment of interest on
such Auction Rate Notes, or (b) a default in the due and punctual payment of
any interest on and principal of such Auction Rate Notes at their maturity.
"POTENTIAL OWNER" means any Person (including an Existing Owner that is
(a) a Broker-Dealer when dealing with the Auction Agent and (b) a potential
beneficial owner when dealing
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with a Broker-Dealer) who may be interested in acquiring Auction Rate Notes
(or, in the case of an Existing Owner thereof, an additional principal amount
of Auction Rate Notes).
"PSA" means the Public Securities Association, its successors and assigns.
"QUARTERLY AVERAGE AUCTION RATE" means the simple average of the Auction
Rates for the Auction Dates preceding the current Auction Date by 91 days or
less, including the current Auction Date.
"QUARTERLY AVERAGE T-BILL RATE" means the simple average of the Bond
Equivalent Yields of 91-day Treasury bills auctioned in the 91 days preceding
(but not including) the current Auction Date.
"REGULAR RECORD DATE" means the Business Day next preceding the
applicable Auction Date.
"REUTERS SCREEN LIBOR PAGE" means the display designated as page "LIBOR"
on the Reuters Monitor Money Rates Service (or such other page as may replace
the LIBOR page for the purposes of displaying London interbank offered rates
of major banks).
"S&P" means Standard & Poor's Ratings Services, a Division of The
McGraw-Hill Companies, Inc., its successors and assigns.
"SELL ORDER" has the meaning set forth in Section 2.02(a)(i)(A) hereof.
"SUBMISSION DEADLINE" means 12:30 p.m., eastern time, on any Auction Date
or such other time on any Auction Date by which Broker-Dealers are required
to submit Orders to the Auction Agent as specified by the Auction Agent from
time to time.
"SUBMITTED BID" has the meaning set forth in Section 2.02(a)(iii)(A)
hereof.
"SUBMITTED HOLD ORDER" has the meaning set forth in Section
2.02(a)(iii)(A) hereof.
"SUBMITTED ORDER" has the meaning set forth in Section 2.02(a)(iii)(A)
hereof.
"SUBMITTED SELL ORDER" has the meaning set forth in Section
2.02(a)(iii)(A) hereof.
"SUBSTITUTE AUCTION AGENT" means the Person with whom the Issuer and the
Trustee enter into a Substitute Auction Agent Agreement.
"SUBSTITUTE AUCTION AGENT AGREEMENT" means an auction agent agreement
containing terms substantially similar to the terms of the Initial Auction
Agent Agreement, whereby a Person having the qualifications required by
Section 2.02(e) of this Appendix B agrees with the Trustee and the Issuer to
perform the duties of the Auction Agent under this Appendix B.
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"SUFFICIENT BIDS" has the meaning set forth in Section 2.02(a)(iii)(A)
hereof.
"UNITED STATES TREASURY SECURITY RATE" means, for purposes of calculating
the Net Loan Rate applicable to the Auction Rate Notes, that rate of interest
per annum equal to the Bond Equivalent Yield on the applicable United States
Treasury securities sold at the last auction thereof that immediately
precedes the Interest Rate Adjustment Date for the Auction Rate Notes.
"VARIABLE RATE" means the variable rate of interest per annum, including
the Initial Rate, borne by each Class of Auction Rate Notes during the
Initial Period for such Class, and each Interest Period thereafter as such
rate of interest is determined in accordance with the provisions of Article II
hereof.
ARTICLE II
TERMS AND ISSUANCE
Section 2.01. AUCTION RATE NOTES. The Initial Rate Adjustment Date for
the Class 1996A-6 Notes shall be November 13, 1996.
During the Initial Period, the Auction Rate Notes shall bear interest at
the Initial Rate for such Class. Thereafter, and except with respect to an
Auction Period Adjustment, the Auction Rate Notes shall bear interest at an
Auction Note Interest Rate based on a seven-day Auction Period for the Class
1996A-6 Notes, as determined pursuant to this Section 2.01 and Section 2.02
hereof.
For the Auction Rate Notes during the Initial Period and each Auction
Period thereafter, interest at the applicable Auction Rate Notes Interest
Rate shall accrue daily and shall be computed for the actual number of days
elapsed on the basis of a year consisting of 360 days.
The Auction Note Interest Rate to be borne by the Auction Rate Notes
after such Initial Period for each Auction Period until an Auction Period
Adjustment, if any, shall be determined as described below. Each such
Auction Period after the Initial Period shall commence on and include the day
following the expiration of the immediately preceding Auction Period and
terminate on and include the fourth Business Day of the following week in the
case of the Class 1996A-6 Notes; provided, however, that in the case of the
Auction Period that immediately follows the Initial Period for the Auction
Rate Notes, such Auction Period shall commence on the Initial Rate Adjustment
Date. The Auction Note Interest Rate of the Auction Rate Notes for each
Auction Period shall be the Auction Rate in effect for such Auction Period as
determined in accordance with Section 2.02(a) hereof; provided that if, on
any Interest Rate Determination Date, an Auction is not held for any reason,
then the Auction Note Interest Rate on such Auction Rate Notes for the next
succeeding Auction Period shall be the applicable Maximum Auction Rate.
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Notwithstanding the foregoing:
(i) if the ownership of an Auction Rate Note is no longer maintained
in Book-entry Form, the Auction Note Interest Rate on the Auction Rate
Notes for any Interest Period commencing after the delivery of certificates
representing Auction Rate Notes pursuant to this Supplemental Indenture
shall equal the applicable Maximum Auction Rate on the Business Day
immediately preceding the first day of such subsequent Interest Period; or
(ii) if a Payment Default shall have occurred, the Auction Note
Interest Rate on the Auction Rate Notes for the Interest Period commencing
on or immediately after such Payment Default, and for each Interest Period
thereafter, to and including the Interest Period, if any, during which, or
commencing less than two Business Days after, such Payment Default is
cured, shall equal the applicable Non-Payment Rate on the first day of each
such Interest Period.
In accordance with Section 2.02(a)(iii)(B) hereof, the Auction Agent
shall promptly give written notice to the Trustee and the Issuer of each
Auction Note Interest Rate (unless the Auction Note Interest Rate is the
applicable Non-Payment Rate) and the Maximum Auction Rate when such rate is
not the Auction Note Interest Rate, applicable to the Auction Rate Notes.
The Trustee shall notify the Registered Owners of Auction Rate Notes of the
applicable Auction Note Interest Rate applicable to such Auction Rate Notes
for each Auction Period not later than the third Business Day of such Auction
Period.
Notwithstanding any other provision of the Auction Rate Notes or this
Supplemental Indenture and except for the occurrence of a Payment Default,
interest payable on the Auction Rate Notes for an Auction Period shall never
exceed for such Auction Period the amount of interest payable at the applicable
Maximum Auction Rate in effect for such Auction Period.
If the Auction Rate for the Auction Rate Notes is greater than the
applicable Maximum Auction Rate, then the Variable Rate applicable to such
Auction Rate Notes for that Interest Period will be the applicable Maximum
Auction Rate. If the Variable Rate applicable to such Auction Rate Notes for
any Interest Period is the applicable Maximum Auction Rate (without regard to
the last two clauses of the definition thereof), the Trustee shall determine the
Carry-over Amount, if any, with respect to such Auction Rate Notes for such
Interest Period. Such Carry-over Amount shall bear interest calculated at a
rate equal to One-Month LIBOR (as determined by the Auction Agent, provided the
Trustee has received notice of One-Month LIBOR from the Auction Agent, and if
the Trustee shall not have received such notice from the Auction Agent, then as
determined by the Trustee) from the Interest Payment Date for the Interest
Period with respect to which such Carry-over Amount was calculated, until paid.
Any payment in respect of Carry-over Amount shall be applied, first, to any
accrued interest payable thereon and, second, in reduction of such Carry-over
Amount. For purposes of this Appendix B, any reference to "principal" or
"interest" herein shall not include within the meaning of such words Carry-over
Amount or any interest accrued on any such Carry-over
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Amount. Such Carry-over Amount shall be separately calculated for each
Auction Rate Note by the Trustee during such Interest Period in sufficient
time for the Trustee to give notice to each Registered Owner of such
Carry-over Amount as required in the next succeeding sentence. Not less than
four days before the Interest Payment Date for an Interest Period with
respect to which such Carry-over Amount has been calculated by the Trustee,
the Trustee shall give written notice to each Registered Owner of the
Carry-over Amount applicable to each Registered Owner's Auction Rate Note,
which written notice may accompany the payment of interest by check made to
each such Registered Owner on such Interest Payment Date or otherwise shall
be mailed on such Interest Payment Date by first-class mail, postage prepaid,
to each such Registered Owner at such Registered Owner's address as it
appears on the registration records maintained by the Registrar. Such notice
shall state, in addition to such Carry-over Amount, that, unless and until an
Auction Rate Note has been redeemed (other than by optional redemption),
after which all accrued Carry-over Amounts (and all accrued interest thereon)
that remains unpaid shall be canceled and no Carry-over Amount (and interest
accrued thereon) shall be paid with respect to an Auction Rate Note, (a) the
Carry-over Amount (and interest accrued thereon calculated at a rate equal to
One-Month LIBOR) shall be paid by the Trustee on an Auction Rate Note on the
earliest of (i) the date of defeasance of the Auction Rate Notes or (ii) the
first occurring Interest Payment Date (or on the date of any such optional
redemption) if and to the extent that (A) the Eligible Carry-over Make-Up
Amount with respect to such subsequent Interest Period is greater than zero,
and (B) moneys are available pursuant to the terms of this Appendix B in an
amount sufficient to pay all or a portion of such Carry-over Amount (and
interest accrued thereon), and (b) interest shall accrue on the Carry-over
Amount at a rate equal to One-Month LIBOR until such Carry-over Amount is
paid in full or is cancelled.
The Carry-over Amount (and interest accrued thereon) for Auction Rate
Notes shall be paid by the Trustee on Outstanding Auction Rate Notes on the
earliest of (a) the date of defeasance of any of the Auction Rate Notes or
(b) the first occurring Interest Payment Date if and to the extent that (i)
the Eligible Carry-over Make-Up Amount with respect to such Interest Period
is greater than zero, and (ii) on such Interest Payment Date there are
sufficient moneys in the Senior Interest Account of the Interest Fund to pay
all interest due on the Auction Rate Notes on such Interest Payment Date.
Any Carry-over Amount (and any interest accrued thereon) on any Auction Rate
Note which is due and payable on an Interest Payment Date, which Auction Rate
Note is to be redeemed (other than by optional redemption) on said Interest
Payment Date, shall be paid to the Registered Owner thereof on said Interest
Payment Date to the extent that moneys are available therefor in accordance
with the provisions of this Appendix B; provided, however, that any
Carry-over Amount (and any interest accrued thereon) which is not yet due and
payable on said Interest Payment Date shall be cancelled with respect to said
Auction Rate Note that is to be redeemed (other than by optional redemption)
on said Interest Payment Date and shall not be paid on any succeeding
Interest Payment Date. To the extent that any portion of the Carry-over
Amount (and any interest accrued thereon) remains unpaid after payment of a
portion thereof, such unpaid portion shall be paid in whole or in part as
required hereunder until fully paid by the Trustee on the earliest of (a) the
date of defeasance of any of the Auction Rate Notes or (b) the next occurring
Interest Payment Date or Dates, as necessary, if and to the extent that the
conditions in the second preceding sentence are satisfied.
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On any Interest Payment Date on which the Trustee pays only a portion of the
Carry-over Amount (and any interest accrued thereon) on Auction Rate Notes,
the Trustee shall give written notice in the manner set forth in the
immediately preceding paragraph to the Registered Owner of such Auction Rate
Note receiving such partial payment of the Carry-over Amount remaining unpaid
on such Auction Rate Note.
The Interest Payment Date or other date on which such Carry-over Amount (or
any interest accrued thereon) for Auction Rate Notes shall be paid shall be
determined by the Trustee in accordance with the provisions of the immediately
preceding paragraph, and the Trustee shall make payment of the Carry-over Amount
(and any interest accrued thereon) in the same manner as, and from the same
Account from which, it pays interest on the Auction Rate Notes on an Interest
Payment Date. Any payment of Carry-over Amounts (and interest accrued thereon)
shall reduce the amount of Eligible Carry-Over Make-Up Amount.
In the event that the Auction Agent no longer determines, or fails to
determine, when required, the Auction Note Interest Rate with respect to Auction
Rate Notes, or, if for any reason such manner of determination shall be held to
be invalid or unenforceable, the Auction Note Interest Rate for the next
succeeding Interest Period, which Interest Period shall be an Auction Period,
for Auction Rate Notes shall be the applicable Maximum Auction Rate as
determined by the Auction Agent for such next succeeding Auction Period, and if
the Auction Agent shall fail or refuse to determine the Maximum Auction Rate,
the Maximum Auction Rate shall be determined by the securities dealer appointed
by the Issuer capable of making such a determination in accordance with the
provisions hereof and written notice of such determination shall be given by
such securities dealer to the Trustee.
Section 2.02. AUCTION RATE NOTE INTEREST RATE.
(a) DETERMINING THE AUCTION RATE NOTE INTEREST RATE. By purchasing
Auction Rate Notes, whether in an Auction or otherwise, each purchaser of
the Auction Rate Notes, or its Broker-Dealer, must agree and shall be
deemed by such purchase to have agreed (x) to participate in Auctions on
the terms described herein, (y) to have its beneficial ownership of the
Auction Rate Notes maintained at all times in Book-entry Form for the
account of its Participant, which in turn will maintain records of such
beneficial ownership and (z) to authorize such Participant to disclose to
the Auction Agent such information with respect to such beneficial
ownership as the Auction Agent may request.
So long as the ownership of Auction Rate Notes is maintained in
Book-entry Form by the Securities Depository, an Existing Owner may sell,
transfer or otherwise dispose of Auction Rate Notes only pursuant to a Bid
or Sell Order placed in an Auction or otherwise sell, transfer or dispose
of Auction Rate Notes through a Broker-Dealer, provided that, in the case
of all transfers other than pursuant to Auctions, such Existing Owner, its
Broker-Dealer or its Participant advises the Auction Agent of such
transfer.
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Auctions shall be conducted on each Auction Date, if there is an
Auction Agent on such Auction Date, in the following manner:
(i) (A) Prior to the Submission Deadline on each Auction Date;
(1) each Existing Owner of Auction Rate Notes may
submit to a Broker-Dealer by telephone or otherwise any
information as to:
a. the principal amount of Outstanding Auction
Rate Notes, if any, owned by such Existing Owner which
such Existing Owner desires to continue to own without
regard to the Auction Note Interest Rate for the next
succeeding Auction Period;
b. the principal amount of Outstanding Auction
Rate Notes, if any, which such Existing Owner offers to
sell if the Auction Note Interest Rate for the next
succeeding Auction Period shall be less than the rate
per annum specified by such Existing Owner; and/or
c. the principal amount of Outstanding Auction
Rate Notes, if any, owned by such Existing Owner which
such Existing Owner offers to sell without regard to
the Auction Note Interest Rate for the next succeeding
Auction Period;
and
(2) one or more Broker-Dealers may contact Potential
Owners to determine the principal amount of Auction Rate
Notes which each Potential Owner offers to purchase, if the
Auction Note Interest Rate for the next succeeding Auction
Period shall not be less than the rate per annum specified
by such Potential Owner.
The statement of an Existing Owner or a Potential Owner referred to in
(1) or (2) of this paragraph (A) is herein referred to as an "Order," and
each Existing Owner and each Potential Owner placing an Order is herein
referred to as a "Bidder"; an Order described in clause (1)a is herein
referred to as a "Hold Order"; an Order described in clauses (1)b and (2)
is herein referred to as a "Bid"; and an Order described in clause (1)c is
herein referred to as a "Sell Order."
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(B) (1) Subject to the provisions of Section 2.02(a)(ii)
hereof, a Bid by an Existing Owner shall constitute an
irrevocable offer to sell:
a. the principal amount of Outstanding Auction
Rate Notes specified in such Bid if the Auction Note
Interest Rate determined as provided in this Section
2.02(a) shall be less than the rate specified therein;
or
b. such principal amount, or a lesser principal
amount of Outstanding Auction Rate Notes to be
determined as set forth in Section 2.02(a)(iv)(A)(4)
hereof, if the Auction Note Interest Rate determined as
provided in this Section 2.02(a) shall be equal to the
rate specified therein; or
c. such principal amount, or a lesser principal
amount of Outstanding Auction Rate Notes to be
determined as set forth in Section 2.02(a)(iv)(B)(3)
hereof, if the rate specified therein shall be higher
than the applicable Maximum Auction Rate and Sufficient
Bids have not been made.
(2) Subject to the provisions of Section 2.02(a)(ii)
hereof, a Sell Order by an Existing Owner shall constitute
an irrevocable offer to sell:
a. the principal amount of Outstanding Auction
Rate Notes specified in such Sell Order; or
b. such principal amount, or a lesser principal
amount of Outstanding Auction Rate Notes set forth in
Section 2.02(a)(iv)(B)(3) hereof, if Sufficient Bids
have not been made.
(3) Subject to the provisions of Section 2.02(a)(ii)
hereof, a Bid by a Potential Owner shall constitute an
irrevocable offer to purchase:
a. the principal amount of Outstanding Auction
Rate Notes specified in such Bid if the Auction Note
Interest Rate determined as provided in this
Section 2.02(a) shall be higher than the rate specified
in such Bid; or
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b. such principal amount, or a lesser principal
amount of Outstanding Auction Rate Notes set forth in
Section 2.02(a)(iv)(A)(5) hereof, if the Auction Note
Interest Rate determined as provided in this
Section 2.02(a) shall be equal to the rate specified in
such Bid.
(ii) (A) Each Broker-Dealer shall submit in writing to the
Auction Agent prior to the Submission Deadline on each Auction
Date all Orders obtained by such Broker-Dealer and shall specify
with respect to each such Order:
(1) the name of the Bidder placing such Order;
(2) the aggregate principal amount of Auction Rate
Notes that are the subject of such Order;
(3) to the extent that such Bidder is an Existing
Owner:
a. the principal amount of Auction Rate Notes,
if any, subject to any Hold Order placed by such
Existing Owner;
b. the principal amount of Auction Rate Notes,
if any, subject to any Bid placed by such Existing
Owner and the rate specified in such Bid; and
c. the principal amount of Auction Rate Notes,
if any, subject to any Sell Order placed by such
Existing Owner;
and
(4) to the extent such Bidder is a Potential Owner,
the rate specified in such Potential Owner's Bid.
(B) If any rate specified in any Bid contains more than
three figures to the right of the decimal point, the Auction
Agent shall round such rate up to the next higher one thousandth
of 1%.
(C) If an Order or Orders covering all Outstanding Auction
Rate Notes owned by an Existing Owner is not submitted to the
Auction Agent prior to the Submission Deadline, the Auction Agent
shall deem a Hold Order to have been submitted on behalf of such
Existing Owner covering the principal amount of Outstanding
Auction Rate Notes owned
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by such Existing Owner and not subject to an Order submitted
to the Auction Agent.
(D) Neither the Issuer, the Trustee nor the Auction Agent
shall be responsible for any failure of a Broker-Dealer to submit
an Order to the Auction Agent on behalf of any Existing Owner or
Potential Owner.
(E) If any Existing Owner submits through a Broker-Dealer
to the Auction Agent one or more Orders covering in the aggregate
more than the principal amount of Outstanding Auction Rate Notes
owned by such Existing Owner, such Orders shall be considered
valid as follows and in the following order of priority:
(1) All Hold Orders shall be considered valid, but
only up to the aggregate principal amount of Outstanding
Auction Rate Notes owned by such Existing Owner, and if the
aggregate principal amount of Auction Rate Notes subject to
such Hold Orders exceeds the aggregate principal amount of
Auction Rate Notes owned by such Existing Owner, the
aggregate principal amount of Auction Rate Notes subject to
each such Hold Order shall be reduced pro rata so that the
aggregate principal amount of Auction Rate Notes subject to
such Hold Order equals the aggregate principal amount of
Outstanding Auction Rate Notes owned by such Existing Owner.
(2) a. Any Bid shall be considered valid up to an
amount equal to the excess of the principal amount of
Outstanding Auction Rate Notes owned by such Existing
Owner over the aggregate principal amount of Auction
Rate Notes subject to any Hold Order referred to in
clause (A) of this paragraph (v);
b. subject to subclause (1) of this clause (B),
if more than one Bid with the same rate is submitted on
behalf of such Existing Owner and the aggregate
principal amount of Outstanding Auction Rate Notes
subject to such Bids is greater than such excess, such
Bids shall be considered valid up to an amount equal to
such excess;
c. subject to subclauses (1) and (2) of this
clause (B), if more than one Bid with different rates
are submitted on behalf of such Existing Owner, such
Bids shall be considered valid first in the ascending
order of their respective rates until the highest rate
is reached at
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which such excess exists and then at such rate up to
the amount of such excess; and
d. in any such event, the amount of Outstanding
Auction Rate Notes, if any, subject to Bids not valid
under this clause (B) shall be treated as the subject
of a Bid by a Potential Owner at the rate therein
specified; and
(3) All Sell Orders shall be considered valid up to an
amount equal to the excess of the principal amount of
Outstanding Auction Rate Notes owned by such Existing Owner
over the aggregate principal amount of Auction Rate Notes
subject to Hold Orders referred to in clause (1) of this
paragraph (v) and valid Bids referred to in clause (2) of
this paragraph (E).
(F) If more than one Bid for Auction Rate Notes is
submitted on behalf of any Potential Owner, each Bid submitted
shall be a separate Bid with the rate and principal amount
therein specified.
(G) An Existing Owner that offers to purchase additional
Auction Rate Notes is, for purposes of such offer, treated as a
Potential Owner.
(H) Any Bid or Sell Order submitted by an Existing Owner
covering an aggregate principal amount of Auction Rate Notes not
equal to an Authorized Denomination shall be rejected and shall
be deemed a Hold Order. Any Bid submitted by a Potential Owner
covering an aggregate principal amount of Auction Rate Notes not
equal to an Authorized Denomination shall be rejected.
(I) Any Bid specifying a rate higher than the applicable
Maximum Auction Rate will (1) be treated as a Sell Order if
submitted by an Existing Owner and (2) not be accepted if
submitted by a Potential Owner.
(J) Any Order submitted in an Auction by a Broker-Dealer to
the Auction Agent prior to the Submission Deadline on any Auction
Date shall be irrevocable.
(iii) (A) Not earlier than the Submission Deadline on each
Auction Date, the Auction Agent shall assemble all valid Orders
submitted or deemed submitted to it by the Broker-Dealers (each
such Order as submitted or deemed submitted by a Broker-Dealer
being herein referred to individually as a "Submitted Hold
Order," a "Submitted Bid" or a
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"Submitted Sell Order," as the case may be, or as a "Submitted
Order," and collectively as "Submitted Hold Orders," "Submitted
Bids" or "Submitted Sell Orders," as the case may be, or as
"Submitted Orders") and shall determine:
(1) the excess of the total principal amount of
Outstanding Auction Rate Notes over the sum of the aggregate
principal amount of Outstanding Auction Rate Notes subject
to Submitted Hold Orders (such excess being herein referred
to as the "Available Auction Rate Notes"), and
(2) from the Submitted Orders whether:
a. the aggregate principal amount of Outstanding
Auction Rate Notes subject to Submitted Bids by
Potential Owners specifying one or more rates equal to
or lower than the applicable Maximum Auction Rate;
exceeds or is equal to the sum of:
b. the aggregate principal amount of Outstanding
Auction Rate Notes subject to Submitted Bids by
Existing Owners specifying one or more rates higher
than the applicable Maximum Auction Rate; and
c. the aggregate principal amount of Outstanding
Auction Rate Notes subject to Submitted Sell Orders;
(in the event such excess or such equality exists, other
than because all of the Outstanding Auction Rate Notes are
subject to Submitted Hold Orders, such Submitted Bids
described in subclause a. above shall be referred to
collectively as "Sufficient Bids"); and
(3) if Sufficient Bids exist, the Bid Auction Rate,
which shall be the lowest rate specified in such Submitted
Bids such that if:
a. (x) each Submitted Bid from Existing Owners
specifying such lowest rate and (y) all other Submitted
Bids from Existing Owners specifying lower rates were
rejected, thus entitling such Existing Owners to
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continue to own the principal amount of Auction Rate
Notes subject to such Submitted Bids; and
b. (x) each such Submitted Bid from Potential
Owners specifying such lowest rate and (y) all other
Submitted Bids from Potential Owners specifying lower
rates were accepted;
the result would be that such Existing Owners described in
subclause a. above would continue to own an aggregate principal
amount of Outstanding Auction Rate Notes which, when added to the
aggregate principal amount of Outstanding Auction Rate Notes to
be purchased by such Potential Owners described in subclause b.
above, would equal not less than the Available Auction Rate
Notes.
(B) Promptly after the Auction Agent has made the
determinations pursuant to Section 2.02(a)(iii)(A) hereof, the
Auction Agent shall advise the Trustee, the Broker-Dealers and
the Issuer of the Maximum Auction Rate and the All Hold Rate and
the components thereof on the Auction Date and, based on such
determinations, the Auction Rate for the next succeeding Interest
Period as follows:
(1) if Sufficient Bids exist, that the Auction Rate
for the next succeeding Interest Period shall be equal to
the Bid Auction Rate so determined;
(2) if Sufficient Bids do not exist (other than
because all of the Outstanding Auction Rate Notes are
subject to Submitted Hold Orders), that the Auction Rate for
the next succeeding Interest Period shall be equal to the
applicable Maximum Auction Rate; or
(3) if all Outstanding Auction Rate Notes are subject
to Submitted Hold Orders, that the Auction Rate for the next
succeeding Interest Period shall be equal to the applicable
All Hold Rate.
(C) Promptly after the Auction Agent has determined the
Auction Rate, the Auction Agent shall determine and advise the
Trustee of the Auction Note Interest Rate, which rate shall be
the Auction Rate; provided, however, that in no event shall the
Auction Note Interest Rate exceed the applicable Maximum Auction
Rate.
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(iv) Existing Owners shall continue to own the principal amount
of Auction Rate Notes that are subject to Submitted Hold Orders. If
Sufficient Bids have been received by the Auction Agent, the Bid
Auction Rate will be the Auction Note Interest Rate, and Submitted
Bids and Submitted Sell Orders will be accepted or rejected and the
Auction Agent will take such other action as described below in
subparagraph (A).
If the Auction Rate is greater than the applicable Maximum
Auction Rate, the Auction Note Interest Rate shall be equal to the
applicable Maximum Auction Rate. If the Auction Agent has not
received Sufficient Bids (other than because all of the Outstanding
Auction Rate Notes are subject to Submitted Hold Orders), the Auction
Note Interest Rate will be the applicable Maximum Auction Rate. In
any of the cases described above, Submitted Orders will be accepted or
rejected and the Auction Agent will take such other action as
described below in subparagraph (B).
(A) If Sufficient Bids have been made and if the applicable
Maximum Auction Rate does not apply (in which case the Auction
Note Interest Rate shall be the Bid Auction Rate), all Submitted
Sell Orders shall be accepted and, subject to the provisions of
clauses (4) and (5) of this Section 2.02(a)(iv), Submitted Bids
shall be accepted or rejected as follows in the following order
of priority, and all other Submitted Bids shall be rejected:
(1) Existing Owners' Submitted Bids specifying any
rate that is higher than the Auction Note Interest Rate
shall be accepted, thus requiring each such Existing Owner
to sell the aggregate principal amount of Auction Rate Notes
subject to such Submitted Bids;
(2) Existing Owners' Submitted Bids specifying any
rate that is lower than the Auction Note Interest Rate shall
be rejected, thus entitling each such Existing Owner to
continue to own the aggregate principal amount of Auction
Rate Notes subject to such Submitted Bids;
(3) Potential Owners' Submitted Bids specifying any
rate that is lower than the Auction Note Interest Rate shall
be accepted;
(4) Each Existing Owners' Submitted Bid specifying a
rate that is equal to the Auction Note Interest Rate shall
be rejected, thus entitling such Existing Owner to continue
to own the aggregate principal amount of Auction Rate Notes
subject to such
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Submitted Bid, unless the aggregate principal amount of
Outstanding Auction Rate Notes subject to all such
Submitted Bids shall be greater than the principal amount
of Auction Rate Notes (the "remaining principal amount")
equal to the excess of the Available Auction Rate Notes
over the aggregate principal amount of Auction Rate Notes
subject to Submitted Bids described in clauses (2) and
(3) of this Section 2.02(a)(iv)(D)(1), in which event
such Submitted Bid of such Existing Owner shall be
rejected in part, and such Existing Owner shall be
entitled to continue to own the principal amount of
Auction Rate Notes subject to such Submitted Bid, but
only in an amount equal to the aggregate principal amount
of Auction Rate Notes obtained by multiplying the
remaining principal amount by a fraction, the numerator
of which shall be the principal amount of Outstanding
Auction Rate Notes owned by such Existing Owner subject
to such Submitted Bid and the denominator of which shall
be the sum of the principal amount of Outstanding Auction
Rate Notes subject to such Submitted Bids made by all
such Existing Owners that specified a rate equal to the
Auction Note Interest Rate, subject to the provisions of
Section 2.02(a)(iv)(D) hereof; and
(5) Each Potential Owner's Submitted Bid specifying a
rate that is equal to the Auction Note Interest Rate shall
be accepted, but only in an amount equal to the principal
amount of Auction Rate Notes obtained by multiplying the
excess of the aggregate principal amount of Available
Auction Rate Notes over the aggregate principal amount of
Auction Rate Notes subject to Submitted Bids described in
clauses (2), (3) and (4) of this Section 2.02(a)(iv)(A) by a
fraction the numerator of which shall be the aggregate
principal amount of Outstanding Auction Rate Notes subject
to such Submitted Bid and the denominator of which shall be
the sum of the principal amount of Outstanding Auction Rate
Notes subject to Submitted Bids made by all such Potential
Owners that specified a rate equal to the Auction Note
Interest Rate, subject to the provisions of Section
2.02(a)(iv)(D) hereof.
(B) If Sufficient Bids have not been made (other than
because all of the Outstanding Auction Rate Notes are subject to
submitted Hold Orders), or if the applicable Maximum Auction Rate
applies, subject to the provisions of Section 2.02(a)(iv)(D)
hereof, Submitted Orders shall be accepted or rejected as follows
in the following order of priority and all other Submitted Bids
shall be rejected:
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(1) Existing Owners' Submitted Bids specifying any
rate that is equal to or lower than the Auction Note
Interest Rate shall be rejected, thus entitling such
Existing Owners to continue to own the aggregate principal
amount of Auction Rate Notes subject to such Submitted Bids;
(2) Potential Owners' Submitted Bids specifying (x)
any rate that is equal to or lower than the Auction Note
Interest Rate shall be accepted and (y) any rate that is
higher than the Auction Note Interest Rate shall be
rejected; and
(3) each Existing Owner's Submitted Bid specifying any
rate that is higher than the Auction Note Interest Rate and
the Submitted Sell Order of each Existing Owner shall be
accepted, thus entitling each Existing Owner that submitted
any such Submitted Bid or Submitted Sell Order to sell the
Auction Rate Notes subject to such Submitted Bid or
Submitted Sell Order, but in both cases only in an amount
equal to the aggregate principal amount of Auction Rate
Notes obtained by multiplying the aggregate principal amount
of Auction Rate Notes subject to Submitted Bids described in
clause (2)(x) of this Section 2.02(a)(iv)(B) by a fraction
the numerator of which shall be the aggregate principal
amount of Outstanding Auction Rate Notes owned by such
Existing Owner subject to such submitted Bid or Submitted
Sell Order and the denominator of which shall be the
aggregate principal amount of Outstanding Auction Rate Notes
subject to all such Submitted Bids and Submitted Sell
Orders.
(C) If all Auction Rate Notes are subject to Submitted Hold
Orders, all Submitted Bids shall be rejected.
(D) If, as a result of the procedures described in
paragraph (A) or (B) of this Section 2.02(a)(iv), any Existing
Owner would be entitled or required to sell, or any Potential
Owner would be entitled or required to purchase, a principal
amount of Auction Rate Notes that is not equal to an Authorized
Denomination, the Auction Agent shall, in such manner as in its
sole discretion it shall determine, round up or down the
principal amount of Auction Rate Notes to be purchased or sold by
any Existing Owner or Potential Owner so that the principal
amount of Auction Rate Notes purchased or sold by each Existing
Owner or Potential Owner shall be equal to an Authorized
Denomination.
(E) If, as a result of the procedures described in
paragraph (B) of this Section 2.02(a)(iv), any Potential Owner
would be entitled or
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required to purchase less than an Authorized Denomination
of Auction Rate Notes, the Auction Agent shall, in
such manner as in its sole discretion it shall determine,
allocate Auction Rate Notes for purchase among Potential Owners
so that only Auction Rate Notes in Authorized Denominations are
purchased by any Potential Owner, even if such allocation results
in one or more of such Potential Owners not purchasing any
Auction Rate Notes.
(v) Based on the result of each Auction, the Auction Agent shall
determine the aggregate principal amount of Auction Rate Notes to be
purchased and the aggregate principal amount of Auction Rate Notes to
be sold by Potential Owners and Existing Owners on whose behalf each
Broker-Dealer submitted Bids or Sell Orders and, with respect to each
Broker-Dealer, to the extent that such aggregate principal amount of
Auction Rate Notes to be sold differs from such aggregate principal
amount of Auction Rate Notes to be purchased, determine to which other
Broker-Dealer or Broker-Dealers acting for one or more purchasers such
Broker-Dealer shall deliver, or from which other Broker-Dealer or
Broker-Dealers acting for one or more sellers such Broker-Dealer shall
receive, as the case may be, Auction Rate Notes.
(vi) Any calculation by the Auction Agent or the Trustee, as
applicable, of the Auction Note Interest Rate, the Maximum Auction
Rate, the All Hold Rate and the Non-Payment Rate shall, in the absence
of manifest error, be binding on all other parties.
(vii) Notwithstanding anything in this Appendix A to the
contrary, (A) no Auction for the Auction Rate Notes for an Auction
Period of less than 180 days will be held on any Auction Date
hereunder on which there are insufficient moneys in the Senior
Interest Account of the Interest Fund and the Senior Redemption
Account of the Note Redemption Fund to pay, or otherwise held by the
Trustee under the Indenture and available to pay, the principal of and
interest due on the Auction Rate Notes on the Interest Payment Date
immediately following such Auction Date, and (B) no Auction will be
held on any Auction Date hereunder during the continuance of a Payment
Default. The Trustee shall promptly notify the Auction Agent of any
such occurrence.
(b) APPLICATION OF INTEREST PAYMENTS FOR THE AUCTION RATE NOTES.
(i) The Trustee shall determine not later than 2:00 p.m.,
eastern time, on the Business Day next succeeding an Interest Payment
Date, whether a Payment Default has occurred. If a Payment Default
has occurred, the Trustee shall, not later than 2:15 p.m., eastern
time, on such Business Day, send a notice thereof in substantially the
form of Exhibit F attached hereto to the Auction Agent by telecopy or
similar means and, if such Payment Default is cured, the Trustee
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shall immediately send a notice in substantially the form of Exhibit G
attached hereto to the Auction Agent by telecopy or similar means.
(ii) Not later than 2:00 p.m., eastern time, on each anniversary
of the Closing Date, the Trustee shall pay to the Auction Agent, in
immediately available funds out of amounts in the Revenue Fund, an
amount equal to the Auction Agent Fee as set forth in the Auction
Agent Agreement. Not later than 2:00 p.m., eastern time, on each
Auction Date, the Trustee shall pay to the Auction Agent, in
immediately available funds out of amounts in the Revenue Fund, an
amount equal to the Broker-Dealer Fee as calculated in the Auction
Agent Agreement. The Trustee shall, from time to time at the request
of the Auction Agent and at the direction of an Authorized Officer,
reimburse the Auction Agent for its reasonable expenses as provided in
the Auction Agent Agreement, such expenses to be paid out of amounts
in the Revenue Fund.
(c) CALCULATION OF MAXIMUM AUCTION RATE, ALL HOLD RATE AND NON-PAYMENT
RATE. The Auction Agent shall calculate the applicable Maximum
Auction Rate and All Hold Rate, as the case may be, on each Auction Date
and shall notify the Trustee and the Broker-Dealers of the applicable
Maximum Auction Rate and All Hold Rate, as the case may be, as provided in
the Auction Agent Agreement; provided, that if the ownership of the Auction
Rate Notes is no longer maintained in Book-entry Form, or if a Payment
Default has occurred, then the Trustee shall determine the applicable
Maximum Auction Rate, All Hold Rate and Non-Payment Rate for each such
Interest Period. The Market Agent shall calculate the Index (if the Index
is other than the PSA Municipal Swap Index) on each Interest Rate
Determination Date and shall notify the Trustee and the Auction Agent of
the Index prior to 9:30 a.m., eastern time, on each Interest Rate
Determination Date. If the ownership of the Auction Rate Notes is no
longer maintained in Book-entry Form by the Securities Depository, the
Trustee shall calculate the applicable Maximum Auction Rate on the Business
Day immediately preceding the first day of each Interest Period after the
delivery of certificates representing the Auction Rate Notes pursuant to
the Indenture. If a Payment Default shall have occurred, the Trustee shall
calculate the Non-Payment Rate on the Interest Rate Determination Date for
(i) each Interest Period commencing after the occurrence and during the
continuance of such Payment Default and (ii) any Interest Period commencing
less than two Business Days after the cure of any Payment Default. The
determination by the Trustee or the Auction Agent, as the case may be, of
the applicable Maximum Auction Rate, All Hold Rate and Non-Payment Rate
shall (in the absence of manifest error) be final and binding upon all
parties. If calculated or determined by the Auction Agent, the Auction
Agent shall promptly advise the Trustee of the applicable Maximum Auction
Rate and All Hold Rate. The determination by the Market Agent of the Index
shall (in the absence of manifest error) be final and binding upon all
parties.
If the Federal Reserve Bank of New York does not make available its
30-day commercial paper rate for purposes of determining the "AA" Composite
Commercial
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Paper Rate, the Auction Agent shall notify the Trustee of such
fact and the Trustee shall thereupon request that an Authorized Officer
promptly appoint at least two Commercial Paper Dealers (in addition to
Smith Barney Inc.) to provide commercial paper quotes for purposes of
determining the "AA" Composite Commercial Paper Rate. Pending appointment
of both such additional Commercial Paper Dealers, Smith Barney Inc. and any
other Commercial Paper Dealer appointed and serving as such shall provide
the required quotations, and such quotations shall be used for purposes of
this Appendix A. Smith Barney Inc. is hereby appointed as a Commercial
Paper Dealer to provide commercial paper quotes for purposes of determining
the "AA" Composite Commercial Paper Rate as provided above.
(d) NOTIFICATION OF RATES, AMOUNTS AND PAYMENT DATES.
(i) By 12:00 noon, eastern time, on the Business Day following
each Regular Record Date, the Trustee shall determine the aggregate
amounts of interest distributable on the next succeeding Interest
Payment Date to the beneficial owners of Auction Rate Notes.
(ii) At least four days prior to any Interest Payment Date, the
Trustee shall:
(A) confirm with the Auction Agent, so long as no Payment
Default has occurred and is continuing and the ownership of the
Auction Rate Notes is maintained in Book-entry Form by the
Securities Depository, (1) the date of such next Interest Payment
Date and (2) the amount payable to the Auction Agent on the
Auction Date pursuant to Section 2.02(b)(ii) hereof;
(B) pursuant to Section 2.01 hereof, advise the Registered
Owners of a Class of Auction Rate Notes of any Carry-over Amount
accruing on such Auction Rate Notes; and
(C) advise the Securities Depository, so long as the
ownership of the Auction Rate Notes is maintained in Book-entry
Form by the Securities Depository, upon request, of the aggregate
amount of interest distributable on such next Interest Payment
Date to the beneficial owners of each Class of the Auction Rate
Notes.
If any day scheduled to be an Interest Payment Date shall be changed
after the Trustee shall have given the notice or confirmation referred to
in clause (i) of the preceding sentence, the Trustee shall, not later than
11:15 a.m., eastern time, on the Business Day next preceding the earlier of
the new Interest Payment Date or the old Interest Payment Date, by such
means as the Trustee deems practicable, give notice of such change to the
Auction Agent, so long as no Payment Default has occurred and is
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continuing and the ownership of the Auction Rate Notes is maintained in
Book-entry Form by the Securities Depository.
(e) AUCTION AGENT.
(i) Bankers Trust Company is hereby appointed as Initial Auction
Agent to serve as agent for the Issuer in connection with Auctions.
The Trustee and the Issuer will, and the Trustee is hereby directed
to, enter into the Initial Auction Agent Agreement with Bankers Trust
Company, as the Initial Auction Agent. Any Substitute Auction Agent
shall be (A) a bank, national banking association or trust company
duly organized under the laws of the United States of America or any
state or territory thereof having its principal place of business in
the Borough of Manhattan, New York, or such other location as approved
by the Trustee in writing and having a combined capital stock or
surplus of at least $50,000,000, or (B) a member of the National
Association of Securities Dealers, Inc., having a capitalization of at
least $50,000,000, and, in either case, authorized by law to perform
all the duties imposed upon it hereunder and under the Auction Agent
Agreement. The Auction Agent may at any time resign and be discharged
of the duties and obligations created by this Appendix A by giving at
least 90 days' notice to the Trustee, the Market Agent and the Issuer.
The Auction Agent may be removed at any time by the Trustee upon the
written direction of an Authorized Officer or the Registered Owners of
51% of the aggregate principal amount of the Auction Rate Notes then
Outstanding, and if by such Registered Owners, by an instrument signed
by such Registered Owners or their attorneys and filed with the
Auction Agent, the Issuer and the Trustee upon at least 90 days'
written notice. Neither resignation nor removal of the Auction Agent
pursuant to the preceding two sentences shall be effective until and
unless a Substitute Auction Agent has been appointed and has accepted
such appointment. If required by the Issuer, a Substitute Auction
Agent Agreement shall be entered into with a Substitute Auction Agent.
Notwithstanding the foregoing, the Auction Agent may terminate the
Auction Agent Agreement if, within 25 days after notifying the
Trustee, the Market Agent and the Issuer in writing that it has not
received payment of any Auction Agent Fee due it in accordance with
the terms of the Auction Agent Agreement, the Auction Agent does not
receive such payment.
(ii) If the Auction Agent shall resign or be removed or be
dissolved, or if the property or affairs of the Auction Agent shall be
taken under the control of any state or federal court or
administrative body because of bankruptcy or insolvency, or for any
other reason, the Trustee at the direction of an Authorized Officer,
shall use its best efforts to appoint a Substitute Auction Agent.
(iii) The Auction Agent is acting as agent for the Issuer in
connection with Auctions. In the absence of bad faith, negligent
failure to act or negligence
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on its part, the Auction Agent shall not be liable for any action
taken, suffered or omitted or any error of judgment made by it in
the performance of its duties under the Auction Agent Agreement and
shall not be liable for any error of judgment made in good faith
unless the Auction Agent shall have been negligent in ascertaining
(or failing to ascertain) the pertinent facts.
(f) BROKER-DEALERS.
(i) The Auction Agent will enter into a Broker-Dealer Agreement
with Smith Barney Inc., as the initial Broker-Dealer. An Authorized
Officer may, from time to time, approve one or more additional persons
to serve as Broker-Dealers under Broker-Dealer Agreements and shall be
responsible for providing such Broker-Dealer Agreements to the Trustee
and the Auction Agent, provided, however that while Smith Barney Inc.
is serving as a Broker-Dealer, Smith Barney Inc. shall have the right
to consent to the approval of any additional Broker-Dealers, which
consent will not be unreasonably withheld.
(ii) Any Broker-Dealer may be removed at any time, at the request
of an Authorized Officer, but there shall, at all times, be at least
one Broker-Dealer appointed and acting as such.
(g) CHANGES IN AUCTION PERIOD OR PERIODS AND CERTAIN PERCENTAGES.
(i) While any of the Auction Rate Notes are Outstanding, the
Issuer may, from time to time, change the length of one or more
Auction Periods (an "Auction Period Adjustment"), in order to conform
with then current market practice with respect to similar securities
or to accommodate economic and financial factors that may affect or be
relevant to the length of the Auction Period and the interest rate
borne by the Auction Rate Notes. The Issuer shall not initiate an
Auction Period Adjustment unless it shall have received the written
consent of the Market Agent, which consent shall not be unreasonably
withheld, not later than nine days prior to the Auction Date for such
Auction Period. The Issuer shall initiate the Auction Period
Adjustment by giving written notice by Issuer Order to the Trustee,
the Auction Agent, the Market Agent, each Rating Agency and the
Securities Depository in substantially the form of, or containing
substantially the information contained in, Exhibit H attached hereto
at least 10 days prior to the Auction Date for such Auction Period.
(ii) Any such adjusted Auction Period shall not be less than 7
days nor more than 366 days.
(iii) An Auction Period Adjustment shall take effect only if
(A) the Trustee and the Auction Agent receive, by 11:00 a.m., eastern
time, on the Business Day before the Auction Date for the first such
Auction Period, an Issuer
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Certificate in substantially the form attached as, or containing
substantially the same information contained in, Exhibit I attached
hereto, authorizing the Auction Period Adjustment specified in such
certificate along with a copy of the written consent of the Market
Agent and, (B) Sufficient Bids exist as of the Auction on the
Auction Date for such first Auction Period. If the condition
referred to in (A) above is not met, the applicable Auction Note
Interest Rate for the next Auction Period shall be determined
pursuant to the above provisions of this Section 2.02 and the
Auction Period shall be the Auction Period determined without
reference to the proposed change. If the condition referred to in
(A) is met but the condition referred in (B) above is not met, the
applicable Auction Note Interest Rate for the next Auction Period
shall be the applicable Maximum Auction Rate and the Auction Period
shall be the Auction Period determined without reference to the
proposed change.
In connection with any Auction Period Adjustment, the Auction
Agent shall provide such further notice to such parties as is
specified in Section 2.03 of the Auction Agent Agreement.
(h) CHANGES IN THE AUCTION DATE. The Market Agent, with the written
consent of an Authorized Officer and, if applicable, upon receipt of the
opinion of Note Counsel as required below, may specify an earlier Auction
Date (but in no event more than five Business Days earlier) than the
Auction Date that would otherwise be determined in accordance with the
definition of "Auction Date" in Section 1.01 of this Appendix B with
respect to one or more specified Auction Periods in order to conform with
then current market practice with respect to similar securities or to
accommodate economic and financial factors that may affect or be relevant
to the day of the week constituting an Auction Date and the interest rate
borne on the Auction Rate Notes. The Market Agent shall deliver a written
request for consent to such change in the length of the Auction Date to the
Issuer at least 14 days prior to the effective date of such change. If the
Issuer shall have delivered such written consent to the Market Agent, the
Market Agent shall provide notice of its determination to specify an
earlier Auction Date for one or more Auction Periods by means of a written
notice delivered at least 10 days prior to the proposed changed Auction
Date to the Trustee, the Auction Agent, the Issuer, each Rating Agency and
the Securities Depository. Such notice shall be substantially in the form
of, or contain substantially the information contained in, Exhibit J
attached hereto.
In connection with any change described in this Section 2.02(h), the
Auction Agent shall provide such further notice to such parties as is
specified in Section 2.03 of the Auction Agent Agreement.
Section 2.03. ADDITIONAL PROVISIONS REGARDING THE INTEREST RATES ON THE
AUCTION RATE NOTES. The determination of a Variable Rate by the Auction Agent
or any other Person pursuant to the provisions of the applicable Section of this
Article II shall be conclusive and binding on
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the Registered Owners of the Auction Rate Notes to which such Variable Rate
applies, and the Issuer and the Trustee may rely thereon for all purposes.
In no event shall the cumulative amount of interest paid or payable on the
Auction Rate Notes (including interest calculated as provided herein, plus any
other amounts that constitute interest on the Auction Rate Notes under
applicable law, which are contracted for, charged, reserved, taken or received
pursuant to the Auction Rate Notes or related documents) calculated from the
Date of Closing of the Auction Rate Notes through any subsequent day during the
term of the Auction Rate Notes or otherwise prior to payment in full of the
Auction Rate Notes exceed the amount permitted by applicable law. If the
applicable law is ever judicially interpreted so as to render usurious any
amount called for under the Auction Rate Notes or related documents or otherwise
contracted for, charged, reserved, taken or received in connection with the
Auction Rate Notes, or if the redemption or acceleration of the maturity of the
Auction Rate Notes results in payment to or receipt by the Registered Owner or
any former Registered Owner of the Auction Rate Notes of any interest in excess
of that permitted by applicable law, then, notwithstanding any provision of the
Auction Rate Notes or related documents to the contrary, all excess amounts
theretofore paid or received with respect to the Auction Rate Notes shall be
credited on the principal balance of the Auction Rate Notes (or, if the Auction
Rate Notes have been paid or would thereby be paid in full, refunded by the
recipient thereof), and the provisions of the Auction Rate Notes and related
documents shall automatically and immediately be deemed reformed and the amounts
thereafter collectible hereunder and thereunder reduced, without the necessity
of the execution of any new document, so as to comply with the applicable law,
but so as to permit the recovery of the fullest amount otherwise called for
under the Auction Rate Notes and under the related documents.
Section 2.04. QUALIFICATIONS OF MARKET AGENT. The Market Agent shall be a
member of the National Association of Securities Dealers, Inc., have a
capitalization of at least $50,000,000 and be authorized by law to perform all
the duties imposed upon it by this Appendix B. The Market Agent may resign and
be discharged of the duties and obligations created by this Appendix B by giving
at least 30 days notice to the Issuer and the Trustee, provided that such
resignation shall not be effective until the appointment of a successor market
agent by the Issuer and the acceptance of such appointment by such successor
market agent. The Market Agent may be replaced at the direction of the Issuer,
by an instrument signed by an Authorized Officer, filed with the Market Agent
and the Trustee at least 30 days before the effective date of such replacement,
provided that such replacement shall not be effective until the appointment of a
successor market agent by the Issuer and the acceptance of such appointment by
such successor market agent.
In the event that the Market Agent shall be removed or be dissolved, or if
the property or affairs of the Market Agent shall be taken under the control of
any state or federal court or administrative body because of bankruptcy or
insolvency, or for any other reason, and there is no Market Agent and the Issuer
shall not have appointed its successor as Market Agent, the Trustee,
notwithstanding the provisions of the first paragraph of this Section, shall be
deemed to be the Market Agent for all purposes of this Appendix B until the
appointment by the Issuer
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of the successor Market Agent. Nothing in this Section shall be construed as
conferring on the Trustee additional duties other than as set forth herein.
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APPENDIX C
CERTAIN TERMS AND PROVISIONS OF
THE CLASS 1996B-3 SUBORDINATE LIBOR RATE NOTES
ARTICLE I
Section 1.01. DEFINITIONS. In addition to the terms defined elsewhere in
the Indenture and this Supplemental Indenture, the following terms shall have
the following meanings with respect to the Class 1996B-3 Notes, unless the
context otherwise requires:
"APPLICABLE RATE" shall have the meaning set forth in Section 2.01(b)
hereof.
"AUTHORIZED DENOMINATIONS" shall mean $325,000 and any multiple thereof.
"BOND-EQUIVALENT YIELD" shall mean, in respect of any security with a
maturity of six months or less the rate for which is quoted in THE WALL STREET
JOURNAL on a bank discount basis, a yield (expressed as a percentage) calculated
in accordance with the following formula and rounded up to the nearest one
one-hundredth of one percent:
Bond Equivalent Yield = Q x N x 100
---------------
360 - (T x Q)
where "Q" refers to the per annum rate for the security quoted on a bank
discount basis and expressed as a decimal, "N" refers to 365 or 366 (days), as
the case may be, and "T" refers to the number of days to maturity.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday, holiday or
day on which banks in New York, New York, or the New York Stock Exchange, the
Trustee or the Calculation Agent, are authorized or permitted by law or
executive order to close.
"CALCULATION AGENT" shall mean any person appointed as such pursuant to
Section 2.07 hereof.
"DEPOSITORY" shall mean The Depository Trust Company or any successor
securities depository selected or approved by the Issuer.
"HOLDER" as used in this Appendix C shall mean the beneficial owner of any
Class 1996B-3 Note.
"INITIAL INTEREST PAYMENT DATE" shall mean December 1, 1996 for the Class
1996B-3 Notes.
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"INITIAL INTEREST PERIOD" shall mean, for the Class 1996B-3 Notes, the
period from and including the date of delivery of the Class 1996B-3 Notes and
ending on November 30, 1996.
"INTEREST AMOUNT" shall mean the amount of interest distributable in
respect of each $325,000 in principal amount (taken, without rounding, to .0001
of one cent) of Class 1996B-3 Notes for any Interest Period or part thereof, as
calculated in accordance with Section 2.07 hereof.
"INTEREST PAYMENT DATE" means December 1, 1996 and the first day of each
month thereafter, and the maturity date for any Class 1996B-3 Note, or if any
such date is not a Business Day, the next succeeding Business Day (but only for
interest accrued through the last day of the calendar month next preceding such
Interest Payment Date).
"INTEREST PERIOD" means the Initial Interest Period for the Class 1996B-3
Notes and the period beginning on the first day of each month and ending on the
last day of each month.
"LIBOR DETERMINATION DATE" shall mean the Business Day immediately
preceding the first day of each Interest Period.
"LIBOR-BASED RATE" shall mean One-Month LIBOR plus .48%.
"MAXIMUM INTEREST RATE" shall mean the lesser of (a) 18% per annum or (b)
the maximum rate of interest permitted under State law for student loan notes of
the Issuer.
"ONE-MONTH LIBOR" means the rate of interest per annum equal to the rate
per annum at which United States dollar deposits having a maturity of one month
are offered to prime banks in the London interbank market which appear on the
Telerate Service LIBOR Page as of approximately 11:00 a.m., London time, on the
LIBOR Determination Date. If at least two such quotations appear, One-Month
LIBOR will be the arithmetic mean (rounded upwards, if necessary, to the nearest
one-hundredth of one percent) of such offered rates. If fewer than two such
quotes appear, One-Month LIBOR with respect to such Interest Period will be
determined at approximately 11:00 a.m., London time, on such LIBOR Determination
Date on the basis of the rate at which deposits in United States dollars having
a maturity of three months are offered to prime banks in the London interbank
market by four major banks in the London interbank market selected by (i) the
Calculation Agent (if the Calculation Agent is other than the Trustee) or (ii)
the Trustee, and in a principal amount of not less than U.S. $1,000,000 and that
is representative for a single transaction in such market at such time. The
Calculation Agent or the Trustee, as applicable, will request the principal
London office of each of such banks to provide a quotation of its rate. If at
least two quotations are provided, One-Month LIBOR will be the arithmetic mean
(rounded upwards, if necessary, to the nearest one-hundredth of one percent) of
such offered rates. If fewer than two quotations are provided, One-Month LIBOR
with respect to such Interest Period will be the arithmetic mean (rounded
upwards, if necessary, to the nearest one-hundredth of one percent) of the rates
quoted at approximately 11:00 a.m., New York City time on such LIBOR
Determination Date by three major banks in New York,
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New York selected by (x) the Calculation Agent or (y) the Trustee, as
applicable, for loans in United States dollars to leading European banks
having a maturity of three months and in a principal amount equal to an
amount of not less than U.S. $1,000,000 and that is representative for a
single transaction in such market at such time; provided, however, that if
the banks selected as aforesaid are not quoting as mentioned in this
sentence, One-Month LIBOR in effect for the applicable Interest Period, will
be One-Month LIBOR in effect for the immediately preceding Interest Period.
"PARTICIPANT" shall mean a member of or participant in, the Depository.
"PAYMENT DEFAULT" shall mean failure to make payment of interest on,
premium, if any, and principal of the Class 1996B-3 Notes when due, by the
Issuer.
"PERSON" means and includes, unless otherwise specified, an individual,
corporation, company, trust, estate partnership or association.
"RECORD DATE" shall mean the Business Day immediately preceding the
Interest Payment Date.
"REDEMPTION DATE," when used with respect to any Class 1996B-3 Notes to be
redeemed, shall mean the date fixed for such redemption.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended.
ARTICLE II
TERMS AND ISSUANCE
Section 2.01. INTEREST ON THE CLASS 1996B-3 NOTES.
(a) Interest on the Class 1996B-3 Notes shall accrue for each
Interest Period and shall be payable in arrears, on each Interest Payment
Date.
(b) The rate of interest on the Class 1996B-3 Notes for the Initial
Interest Period shall be 5.855%. The rate of interest on the Class 1996B-3
Notes for each subsequent Interest Period shall be determined by the
Calculation Agent on the LIBOR Determination Date and shall be the
LIBOR-Based Rate.
If a Payment Default occurs, the Applicable Rate (as defined below) with
respect to the Class 1996B-3 Notes shall be the same rate per annum as if no
such Payment Default had occurred.
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The rate per annum at which interest is payable on the Class 1996B-3 Notes
for any Interest Period is herein referred to as the "Applicable Rate."
Notwithstanding anything herein to the contrary, the Applicable Rate cannot
exceed the Maximum Interest Rate.
Section 2.02. PAYMENTS. So long as the Class 1996B-3 Notes are registered
in the name of the Depository or the nominee thereof, payment of interest (other
than at maturity) and premium, if any, on, and of principal at redemption of,
the Class 1996B-3 Notes shall be made to the Depository by wire transfer
provided proper wire instructions are received. Each Holder of Class 1996B-3
Notes, by such Holder's purchase of Class 1996B-3 Notes, appoints the Trustee as
its agent in connection with the payment by such Holder of its share, if any, of
the amounts payable to the Calculation Agent pursuant to Section 2.07(a) hereof.
Section 2.03. NOTICE OF PAYMENT DEFAULTS AND CURES. By 12:30 p.m. on the
Business Day immediately succeeding each Interest Payment Date, the Trustee will
determine if a Payment Default has occurred. If a Payment Default has occurred,
the Trustee shall, if the Calculation Agent is other than the Trustee, notify
the Calculation Agent by 1:00 p.m. of such Payment Default. If a Payment
Default has been cured, the Trustee shall, if the Calculation Agent is other
than the Trustee, so notify the Calculation Agent by 5:00 p.m. on the day such
Payment Default is cured.
Section 2.04. CALCULATION OF RATES; TERMINATION OF BOOK ENTRY SYSTEM. The
Calculation Agent shall calculate the LIBOR-Based Rate on the Business Day
immediately preceding the first day of each Interest Period. The determination
by the Calculation Agent of the Applicable Rate will (in the absence of manifest
error) be final and binding upon the Owners of the Class 1996B-3 Notes and all
other parties.
If the ownership of the Class 1996B-3 Notes is no longer maintained in
book-entry form such Class 1996B-3 Notes may be exchanged for other Class
1996B-3 Notes, in Authorized Denominations, and of a like aggregate principal
amount, upon surrender of the Class 1996B-3 Notes to be exchanged at the
principal office of the Trustee. Class 1996B-3 Notes, upon surrender thereof at
the principal office of the Trustee, duly endorsed for transfer or accompanied
by an assignment duly executed by the Holder of its attorney duly authorized in
writing, will be transferred to a transferee or transferees, in the form of one
or more new fully registered Class 1996B-3 Notes, in Authorized Denomination,
and of a like aggregate principal amount having the same interest rate and
bearing numbers not previously assigned.
In all cases in which the privilege of exchanging or transferring Class
1996B-3 Notes is exercised, the Issuer will cause to be executed and delivered
Class 1996B-3 Notes in accordance with the provisions of the Resolution. For
every such exchange or transfer of Class 1996B-3 Notes, the Trustee will require
payment by the Holder of any tax or other governmental charge required to be
paid with respect to such exchange or transfer. All expenses, other than any
tax or other government charge, incurred by the Trustee or the Issuer with
respect to each such transfer or exchange will be paid by the Issuer.
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<PAGE>
The Trustee will not be required to transfer any Class 1996B-3 Note during
the period of five Business Days next preceding the mailing of notice of
redemption as described herein. After giving of such notice of redemption, the
Trustee will not be required to transfer or exchange any Class 1996B-3 Note,
which Class 1996B-3 Note or portion thereof has been called for redemption.
Section 2.05. COMPUTATION OF INTEREST. The amount of interest
distributable to Holders of Class 1996B-3 Notes in respect of each $325,000 in
principal amount thereof for any Interest Period or part thereof shall be
calculated by applying the Applicable Rate for such Interest Period or part
thereof to the principal amount of $325,000 multiplying such product by the
actual number of days in the Interest Period or part thereof concerned divided
by 360, and truncating the resultant figure to the nearest one cent. Interest
on the Class 1996B-3 Notes shall be computed by the Trustee on the basis of a
360-day year for the number of days actually elapsed. In the event an Interest
Payment Date occurs with respect to any Interest Period on a date other than the
first day of the next Interest Period, the Trustee, after confirming the
calculation required above, shall calculate the portion of the Interest Amount
payable on such Interest Payment Date and the portion payable on the next
succeeding Interest Payment Date.
Section 2.06. NOTIFICATION OF RATES, AMOUNTS AND PAYMENT DATES.
(a) The Trustee shall determine the aggregate amount of interest
distributable on the next succeeding Interest Payment Date to the Holders
of the Class 1996B-3 Notes. So long as the ownership of the Class 1996B-3
Notes is maintained in book-entry form by the Depository, the Trustee shall
advise the Depository of each Record Date for the Class 1996B-3 Notes at
least two Business Days prior thereto.
(b) Promptly after the Date of Issue and each Interest Payment Date,
and in any event at least 10 days prior to each Interest Payment Date
following the Initial Interest Payment Date, the Trustee shall:
(i) so long as no Payment Default has occurred and is continuing
and the ownership of the Class 1996B-3 Notes is maintained in
book-entry form by the Depository, confirm the Calculation Agent's
determination of (1) the date of such next Interest Payment Date and
(2) the amount payable to the Calculation Agent and notify the
Calculation Agent of any discrepancy therein; and
(ii) advise the Depository, so long as the ownership of the Class
1996B-3 Notes is maintained in book-entry form by the Depository, of
the Applicable Rate and the Interest Amount in respect of the next
succeeding Interest Period.
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<PAGE>
Section 2.07. CALCULATION AGENT.
(a) Smith Barney Inc. shall serve as the initial Calculation Agent
for the Class 1996B-3 Notes. The Calculation Agent shall be (i) a bank or
trust company duly organized under the laws of the United States of America
or any state or territory thereof, and having a combined capital stock,
surplus and undivided profits of at least $15,000,000 or (ii) a member of
the National Association of Securities Dealers, Inc., having a
capitalization of at least $15,000,000 and, in either case, authorized by
law to perform all the duties imposed upon it hereunder. The Calculation
Agent may resign and be discharged of the duties and obligations created
hereunder by giving at least 90 days' written notice to the Issuer and the
Trustee (30 days' written notice if the Calculation Agent has not been paid
its fee for more than 30 days). The Calculation Agent may be removed at any
time by the Trustee if the Calculation Agent is an entity other than the
Trustee, acting at the direction of the Issuer or the holders of 51% of the
aggregate principal amount of the Class 1996B-3 Notes, by an instrument
signed by the Trustee and filed with the Calculation Agent and the Issuer
upon at least 90 days' notice. If the Calculation Agent and the Trustee
are the same entity, the Calculation Agent may be removed as described
above, with the Issuer acting in lieu of the Trustee.
(b) In the event that the Calculation Agent shall resign or be
removed or dissolved, or if the property or affairs of the Calculation
Agent shall be taken under the control of any state or federal court or
administrative body because of bankruptcy or insolvency, or for any other
reason, the Issuer shall use its best efforts to appoint a successor as
Calculation Agent, and the Trustee shall thereupon enter into an agreement
with such successor to perform the duties of the Calculation Agent as
described herein.
(c) The Calculation Agent (if other than the Trustee) shall be acting
as agent for the Trustee, as trustee, registrar and paying agent for the
Class 1996B-3 Notes, in connection with its duties hereunder. In the
absence of bad faith or negligence on its part, the Calculation Agent shall
not be liable for any action taken, suffered or omitted or for any error of
judgment made by it in the performance of its duties hereunder and shall
not be liable for any error of judgment made in good faith unless the
Calculation Agent shall have been negligent in ascertaining (or failing to
ascertain) the pertinent facts necessary to make such judgment.
Section 2.08. CREDIT RATINGS. The Issuer shall take all reasonable action
necessary to enable at least one nationally recognized statistical rating
organization (as that term is used in the rules and regulations of the SEC under
the Securities Exchange Act) to provide credit ratings for the Class 1996B-3
Notes.
Section 2.09. NOTICE. The Issuer shall use its best efforts to provide
the Trustee and, so long as no Payment Default has occurred and is continuing
and the ownership of the Class 1996B-3 Notes is maintained in book-entry form by
the Depository, the Calculation Agent with notice of any change in the maximum
rate permitted by law on the Class 1996B-3 Notes.
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<PAGE>
Section 2.10. NOTICE OF PAYMENT DEFAULT.
(a) If the Issuer determines that a Payment Default has occurred the
Issuer shall promptly notify the Trustee thereof.
(b) So long as the ownership of the Class 1996B-3 Notes is maintained
in book-entry form by the Depository, upon the occurrence of a Payment
Default the Trustee shall immediately send a notice thereof to the
Calculation Agent by telecopy or similar means.
(c) So long as the ownership of the Class 1996B-3 Notes is maintained
in book-entry form by the Depository, the Trustee shall immediately send
notice to the Calculation Agent by telecopy or similar means if a Payment
Default is cured.
C-7
<PAGE>
EXHIBIT A
FORM OF CLASS 1996A-5 SENIOR TREASURY RATE NOTES
EXCEPT AS OTHERWISE PROVIDED IN THE INDENTURE, THIS GLOBAL NOTE MAY BE
TRANSFERRED, IN WHOLE BUT NOT IN PART, ONLY TO ANOTHER NOMINEE OF THE SECURITIES
DEPOSITORY (AS DEFINED HEREIN) OR TO A SUCCESSOR SECURITIES DEPOSITORY OR TO A
NOMINEE OF A SUCCESSOR SECURITIES DEPOSITORY.
UNION FINANCIAL SERVICES-1, INC.
TAXABLE STUDENT LOAN ASSET-BACKED NOTE
SENIOR CLASS 1996A-5
TREASURY RATE NOTE
REGISTERED NO. R-[1][2] REGISTERED [$200,000,000][$25,000,000]
MATURITY DATE: INTEREST RATE: ORIGINAL ISSUE DATE CUSIP NO.
July 1, 2005 Variable November 1, 1996 906619 AG6
PRINCIPAL SUM: ____________________________________________ DOLLARS
REGISTERED OWNER: CEDE & CO.
UNION FINANCIAL SERVICES-1, INC., a corporation organized under the
corporation laws of the State of Nevada (the "Issuer," which term includes any
successor corporation under the Second Amended and Restated Indenture of Trust,
dated as of November 1, 1996 (as amended, the "Indenture"), between the Issuer
and Norwest Bank Minnesota, National Association, as trustee (the "Trustee,"
which term includes any successor trustee under the Indenture)), for value
received, hereby promises to pay to the Registered Owner (stated above) or
registered assigns, the Principal Sum of (stated above), but solely from the
revenues and receipts hereinafter specified and not otherwise, on the Maturity
Date specified above (subject to the right of prior redemption hereinafter
described), upon presentation and surrender of this note at the Principal Office
of the Trustee, as paying agent, trustee, authenticating agent and registrar for
the Notes, or a duly appointed successor paying agent, and to pay interest in
arrears on said Principal Sum, but solely from the revenues and receipts
hereinafter specified and not otherwise, to the Registered Owner hereof from the
most recent Interest Payment Date to which interest has been paid hereon, until
the payment of said principal sum in full, at the T-Bill Rate on the first
Business Day of each month (each an "Interest Payment Date"), commencing
December 2, 1996. Such interest is payable by check or draft drawn upon the
Trustee and mailed on the Interest Payment Date to the person who is the
Registered Owner hereof on the
A-1
<PAGE>
Record Date at the address of such Registered Owner as it appears on the
registration books (the "Note Register") maintained by the Trustee.
Any capitalized words and terms used as defined words and terms in this
note and not otherwise defined herein shall have the meanings given them in the
Indenture.
This note shall bear interest at the T-Bill Rate, all as determined in
Appendix A of the Indenture.
The principal of and interest on this note are payable in lawful money of
the United States of America. If the specified date for any payment of
principal or interest accrued to such specified date shall be a day other than a
Business Day then such payment may be made on the next succeeding Business Day,
with the same force and effect as if made on the specified date for such payment
without additional interest.
Interest payable on this note shall be computed on the basis of a year
consisting of 365 or 366 days, as applicable.
This note is one of a series of notes of the Issuer designated Taxable
Student Loan Asset-Backed Notes, Senior Class 1996A-5 Treasury Rate, dated
the Original Issue Date, in the aggregate original principal amount of
$225,000,000 (the "Class 1996A-5 Notes") which, together with the Issuer's
Taxable Student Loan Asset-Backed Notes, Senior Class 1996A-6 Auction Rate
Securities (ARS-SM-) issued in the aggregate principal amount of $75,500,000
(collectively, the "Class 1996A Notes") and the Issuer's Taxable Student Loan
Asset-Backed Notes, Subordinate Class 1996B-3 LIBOR Rate issued in the
aggregate principal amount of $15,600,000 (the "Class 1996B-3 Notes") have
been authorized by the Issuer under a certain resolution, and issued by the
Issuer pursuant to the Indenture. The Issuer has previously issued
$48,300,000 of its Taxable Student Loan Asset-Backed Notes, Senior Class
1996A-1 Auction Rate Securities (ARS-SM-) (the "Class 1996A-1 Notes"),
$48,300,000 of its Taxable Student Loan Asset-Backed Notes, Senior Class
1996A-2 Auction Rate Securities (ARS-SM-) (the "Class 1996A-2 Notes"),
$11,100,000 of its Taxable Student Loan Asset-Backed Notes, Subordinate Class
1996B LIBOR Rate (the "Class 1996B Notes"), $73,700,000 of its Taxable
Student Loan Asset-Backed Notes, Senior Class 1996A-3 Auction Rate Securities
(ARS-SM-) (the "Class 1996A-3 Notes"),$54,300,000 of its Taxable Student Loan
Asset-Backed Notes, Senior Class 1996A-4 Auction Rate Securities (ARS-SM-)
(the "Class 1996A-4 Notes") and $14,200,000 of its Taxable Student Loan
Asset-Backed Notes, Subordinate Class 1996B-2 LIBOR Rate (the "Class 1996B-2
Notes"). The Class 1996A-1 Notes, the Class 1996A-2 Notes, the Class 1996A-3
Notes, the Class 1996A-4 Notes and the Class 1996A Notes are collectively
referred to herein as the "Class A Notes." The Class 1996B Notes, the Class
1996B-2 Notes and the Class 1996B-3 Notes are collectively referred to herein
as the "Class B Notes." The proceeds of such notes will be used by the
Issuer, together with other moneys of the Issuer, for the purpose of
providing funds to finance the acquisition of student loans, fund a reserve
fund and to pay certain costs and expenses in connection with the issuance of
such notes. The Indenture provides for the issuance of additional notes (the
"Additional Notes") which may be secured on a parity
A-2
<PAGE>
with or subordinate to the Class A Notes or the Class B Notes as determined
by the Issuer. The Class A Notes, the Class B Notes and any Additional Notes
are collectively referred to herein as the "Notes."
MANDATORY REDEMPTION. This note is subject to redemption by the Issuer,
in whole or in part, on any Interest Payment Date subsequent to April 1,
1999, from certain moneys in the Senior Note Redemption Account of the Note
Redemption Fund created pursuant to the Indenture at a redemption price equal
to the principal amount thereof plus accrued interest to the redemption date.
This note is also subject to mandatory redemption at a redemption price
equal to the principal amount thereof plus accrued interest on any Interest
Payment Date subsequent to April 1, 1999 when excess revenue moneys are
deposited in the Senior Note Redemption Account from the Revenue Fund.
EXTRAORDINARY OPTIONAL REDEMPTION. This note is subject to extraordinary
optional redemption, at the option of the Issuer, at a redemption price equal
to the principal amount of this note being redeemed, plus accrued interest to
the date of redemption, without premium in whole or in part on any Interest
Payment Date, if the Issuer reasonably determines that it is unable to
acquire Financed Eligible Loans, that the rate of return on Financed Eligible
Loans has materially decreased, or that the costs of administering the Trust
have placed unreasonable burdens upon the ability of the Issuer to perform
its obligations under the Indenture.
OPTIONAL REDEMPTION. This note is subject to redemption at the option of
the Issuer, in whole or in part, on any Interest Payment Date subsequent to
April 1, 1999 at a redemption price equal to the principal amount of this
note being redeemed, plus accrued interest on the date of redemption.
OPTIONAL PURCHASE. The Issuer may purchase or cause to be purchased all
of the Notes on any Interest Payment Date on which the aggregate current
principal balance of the Notes shall be less than or equal to 10% of the
initial aggregate principal balance of the Notes on the Date of Issuance, at
a purchase price equal to the aggregate current principal balance of such
Notes, plus accrued interest on the Notes through the day preceding the
Interest Payment Date on which the purchase occurs.
NOTICE OF REDEMPTION OR PURCHASE. Notice of the call for redemption or
purchase shall be given by the Trustee by mailing a copy of the notice at
least 15 days prior to the redemption or purchase date to the Registered
Owners of Notes to be redeemed or purchased in whole or in part at the
address of such Registered Owner last showing on the registration books.
Failure to give such notice or any defect therein shall not affect the
validity of any proceedings for the redemption or purchase of such Notes for
which no such failure or defect occurs. All Notes called for redemption or
purchase will cease to bear interest after the specified redemption or
purchase date, provided funds for their payment are on deposit at the place
of payment at the
A-3
<PAGE>
time. If less than all Notes are to be redeemed or purchased, Notes shall be
selected for redemption or purchase as provided in the Indenture.
SWAP AGREEMENTS. The Indenture provides that the Issuer may enter into
an interest rate swap or basis agreement between the Issuer and a swap
provider (a "Swap Counterparty"), as originally executed and as amended or
supplemented, or other interest rate hedge agreement between the Issuer and a
Swap Counterparty, as originally executed and as amended or supplemented, in
each case approved in writing by each of the Rating Agency, for the purpose
of converting in whole or in part the Issuer's variable interest rate
liability on all or a portion of the Notes bearing interest at a variable
rate issued on a parity therewith to a fixed rate liability or for the
purpose of converting in whole or in part the Issuer's fixed interest rate
liability on all or a portion of any Additional Notes bearing interest at a
fixed rate issued on a parity therewith or subordinate to a variable rate
liability. Payments due to a Swap Counterparty from the Issuer pursuant to
the applicable Swap Agreement (including, but not limited to, payments in
respect of an Early Termination Date, as defined in the applicable Swap
Agreement) are referred to herein as "Issuer Swap Payments."
The principal of and interest on the Class A Notes and any Additional
Notes issued on a parity with the Class A Notes and any Issuer Swap Payments
secured on a parity with the Class A Notes are payable on a superior basis to
such payments on the Class B Notes and any Additional Notes issued on a
parity with or subordinate to the Class B Notes; provided, however, that
current principal and interest may be paid on the Class B Notes and any
Additional Notes issued on a parity with or subordinate to the Class B Notes
only if all principal and interest payments due and owing at such time on the
Class A Notes and any Additional Notes issued on a parity with the Class A
Notes and any Issuer Swap Payments secured on a parity with the Class A Notes
have been previously made or provided for as provided in the Indenture.
Reference is hereby made to the Indenture, copies of which are on file in
the Principal Office of the Trustee, and to all of the provisions of which
any Registered Owner of this note by his acceptance hereof hereby assents,
for definitions of terms; the description of and the nature and extent of the
security for the Notes; the Issuer's student loan origination and acquisition
program; the revenues and other money pledged to the payment of the principal
of and interest on the Notes; the nature and extent and manner of enforcement
of the pledge; the conditions upon which the Indenture may be amended or
supplemented with or without the consent of the Registered Owners of the
Notes and any Swap Counterparty; the rights and remedies of the Registered
Owner hereof with respect hereto and thereto, including the limitations upon
the right of a Registered Owner hereof to institute any suit, action, or
proceeding in equity or at law with respect hereto and thereto; the rights,
duties, and obligations of the Issuer and the Trustee thereunder; the terms
and provisions upon which the liens, pledges, charges, trusts, and covenants
made therein may be discharged at or prior to the stated maturity or earlier
redemption of this note, and this note thereafter shall no longer be secured
by the Indenture or be deemed to be Outstanding, as defined in the Indenture,
thereunder; and for the other terms and provisions thereof.
A-4
<PAGE>
THE NOTES ARE LIMITED OBLIGATIONS OF THE ISSUER, PAYABLE SOLELY FROM, AND
FURTHER SECURED BY, THE TRUST ESTATE, AS DEFINED IN THE INDENTURE.
No recourse, either directly or indirectly, shall be had for the payment
of the principal of and interest on this note or any claim based hereon or in
respect hereof or of the Indenture, against the Trustee, or any incorporator,
director, officer, employee, or agent of the Issuer, but the obligation to
pay all amounts required by the Indenture securing this note and the
obligation to do and perform the covenants and acts required of the Issuer
therein and herein shall be and remain the responsibility and obligation of
said Issuer, limited as herein set forth.
Subject to the restrictions specified in the Indenture, this note is
transferable on the Note Register kept for that purpose by the Trustee, as
registrar, upon surrender of this note for transfer at the principal office
of the Trustee, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Trustee duly executed by, the Registered
Owner hereof or his attorney duly authorized in writing, and thereupon one or
more new Notes of the same series, Stated Maturity, of authorized
denominations, bearing interest at the same rate, and for the same aggregate
principal amount will be issued to the designated transferee or transferees.
At the option of the Registered Owner, any Note may be exchanged for other
Notes in authorized denominations upon surrender of the Note to be exchanged
at the principal office of the Trustee. Upon any such presentation for
exchange, one or more new Notes of the same series, Stated Maturity, in
authorized denominations, bearing interest at the same rate, and for the same
aggregate principal amount as the Note or Notes so surrendered will be issued
to the Registered Owner of the Note or Notes so surrendered; and the Note or
Notes so surrendered shall thereupon be cancelled by the Trustee.
Notwithstanding the foregoing, so long as the ownership of the Notes is
maintained in book-entry form by The Depository Trust Company (the
"Securities Depository") or a nominee thereof, this note may be transferred
in whole but not in part only to the Securities Depository or a nominee
thereof or to a successor Securities Depository or its nominee.
The Issuer, the Trustee, and any agent of either of them shall treat the
Person in whose name this note is registered as the Registered Owner hereof
(i) on the record date for purposes of receiving timely payment of interest
hereon, and (ii) on the date of surrender of this note for purposes of
receiving payment of principal hereof at its stated maturity and (iii) for
all other purposes, whether or not this note is overdue, and neither the
Issuer, the Trustee, nor any such agent shall be affected by notice to the
contrary.
To the extent permitted by the Indenture, modifications or alterations of
the Indenture and any supplemental indenture may be made with the consent of
less than all of the Registered Owners of the Notes then outstanding or
without the consent of any of such Registered Owners (by reason of a change
in the Act or Regulation or to cure ambiguities or conflicts), but such
modification or alteration is not permitted to affect the maturity date,
Stated Maturity, amount,
A-5
<PAGE>
Interest Payment Date, or rate of interest on any outstanding Notes or affect
the rights of the Registered Owners of less than all of the Notes outstanding.
The Registered Owner hereof shall not have the right to demand payment of
this note or any interest hereon out of funds raised or to be raised by
taxation.
Any capitalized term used herein and not otherwise defined herein shall
have the same meaning ascribed to such term in the herein defined Indenture
unless the context shall clearly indicate otherwise.
It is hereby certified and recited that all acts and things required by the
laws of the State of Nevada to happen, exist, and be performed precedent to and
in the issuance of this note, and the passage of said resolution and the
execution of said Indenture, have happened, exist and have been performed as so
required.
A-6
<PAGE>
IN TESTIMONY WHEREOF, the Board of Directors of UNION FINANCIAL SERVICES-1,
INC. has caused the seal of the Issuer to be impressed or a facsimile thereof to
be printed hereon, and this note to be executed by the President and Secretary
of the Issuer all as of the Original Issue Date.
[SEAL] UNION FINANCIAL SERVICES-1, INC.
By
-------------------------------------
President
By
-------------------------------------
Secretary
A-7
<PAGE>
CERTIFICATE OF AUTHENTICATION
This note is one of the Class 1996A-5 Notes designated therein and
described in the within-mentioned Indenture.
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee
By
-----------------------------------------
Authorized Signatory
AUTHENTICATION DATE:
- ----------------------------
A-8
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
unto __________ (Social Security or other identifying number __________) the
within note and all rights thereunder and hereby irrevocably appoints
__________ attorney to transfer the within note on the books kept for
registration thereof, with full power of substitution in the premises.
DATED: SIGNED:
------------------- ---------------------------------------
NOTICE: The signature on this Assignment must
correspond with the name of the Registered Owner
as it appears on the face of the within note in
every particular.
Signature Guaranteed by:
- -------------------------------
A Member of The New York Stock
Exchange or a State or National
Bank
A-9
<PAGE>
EXHIBIT B
FORM OF CLASS 1996A-6 SENIOR
AUCTION RATE NOTES
EXCEPT AS OTHERWISE PROVIDED IN THE INDENTURE, THIS GLOBAL NOTE MAY BE
TRANSFERRED, IN WHOLE BUT NOT IN PART, ONLY TO ANOTHER NOMINEE OF THE SECURITIES
DEPOSITORY (AS DEFINED HEREIN) OR TO A SUCCESSOR SECURITIES DEPOSITORY OR TO A
NOMINEE OF A SUCCESSOR SECURITIES DEPOSITORY.
UNION FINANCIAL SERVICES-1, INC.
TAXABLE STUDENT LOAN ASSET-BACKED NOTE
SENIOR CLASS 1996A-6
AUCTION RATE SECURITIES (ARS-SM-)
REGISTERED NO. R-1 REGISTERED $75,500,000
MATURITY DATE: INTEREST RATE: ORIGINAL ISSUE DATE CUSIP NO.
July 1, 2014 Variable November 1, 1996 906619 AH4
PRINCIPAL SUM: SEVENTY-FIVE MILLION FIVE HUNDRED THOUSAND DOLLARS
REGISTERED OWNER: CEDE & CO.
UNION FINANCIAL SERVICES-1, INC., a corporation organized under the
corporation laws of the State of Nevada (the "Issuer," which term includes any
successor corporation under the Second Amended and Restated Indenture of Trust,
dated as of November 1, 1996 (as amended, the "Indenture"), between the Issuer
and Norwest Bank Minnesota, National Association, as trustee (the "Trustee,"
which term includes any successor trustee under the Indenture)) for value
received, hereby promises to pay to the Registered Owner (stated above) or
registered assigns, the Principal Sum of (stated above), but solely from the
revenues and receipts hereinafter specified and not otherwise, on the Maturity
Date specified above (subject to the right of prior redemption hereinafter
described), upon presentation and surrender of this note at the Principal Office
of the Trustee, as paying agent, trustee, authenticating agent and registrar for
the Notes, or a duly appointed successor paying agent, and to pay interest in
arrears on said Principal Sum, but solely from the revenues and receipts
hereinafter specified and not otherwise, to the Registered Owner hereof from the
most recent Interest Payment Date to which interest has been paid hereon, until
the payment of said principal sum in full.
B-1
<PAGE>
Any capitalized words and terms used as defined words and terms in this
note and not otherwise defined herein shall have the meanings given them in the
Indenture.
This note shall initially bear interest at the rate of interest per annum
established by the Broker-Dealer for the initial Auction Period pursuant to
the Broker-Dealer Agreement, written notice of which shall be given to the
Trustee. For each Auction Period thereafter, the unpaid principal amount
hereof from time to time outstanding shall bear interest at the Auction Rate
determined in accordance with the provisions of Appendix B of the Indenture,
payable on each Interest Payment Date and on the date of payment or
redemption of principal hereof to the extent of interest accrued on the
principal then being paid or redeemed, such interest to accrue from the later
of the date hereof or the date through which interest has been paid or duly
provided for. Interest at the Auction Rate established from time to time
pursuant to Appendix B of the Indenture shall be computed for the actual
number of days elapsed on the basis of a year consisting of 360 days.
This note shall bear interest at an Auction Rate based on an Auction
Period that shall, until adjusted pursuant to Appendix B of the Indenture,
generally consist of seven days, all as determined in the Indenture.
THE AUCTION PERIOD, THE AUCTION RATE, THE METHOD OF DETERMINING THE
AUCTION RATE ON THIS NOTE AND THE AUCTION PROCEDURES RELATED THERETO, AN
AUCTION PERIOD ADJUSTMENT, A CHANGE IN THE AUCTION DATE AND THE INTEREST
PAYMENT DATES WILL BE DETERMINED IN ACCORDANCE WITH THE TERMS, CONDITIONS AND
PROVISIONS OF, INCLUDING, WITHOUT LIMITATION, REQUIRED NOTICES THEREOF TO THE
EXISTING OWNERS OF THE AUCTION RATE NOTES, THE INDENTURE AND THE AUCTION
AGENT AGREEMENT, TO WHICH TERMS, CONDITIONS AND PROVISIONS SPECIFIC REFERENCE
IS HEREBY MADE, AND ALL OF WHICH TERMS, CONDITIONS AND PROVISIONS ARE HEREBY
SPECIFICALLY INCORPORATED HEREIN BY REFERENCE.
Such interest is payable by check or draft drawn upon the Trustee and
mailed or wire transfer on the Interest Payment Date to the person who is the
Registered Owner hereof on the Record Date at the address of such Registered
Owner as it appears on the registration books (the "Note Register")
maintained by the Trustee.
The principal of and interest on this note are payable in lawful money of
the United States of America. If the specified date for any payment of
principal or interest accrued to such specified date shall be a day other
than a Business Day then such payment may be made on the next succeeding
Business Day, with the same force and effect as if made on the specified date
for such payment without additional interest.
This note is one of a series of notes of the Issuer designated Taxable
Student Loan Asset-Backed Notes, Senior Class 1996A-6 Auction Rate Securities
(ARS-SM-), dated the Original Issue Date, in the aggregate original principal
amount of $75,500,000 (the "Class 1996A-6 Notes") which, together with the
Issuer's Taxable Student Loan Asset-Backed Notes, Senior Class 1996A-5
Treasury Rate issued in the aggregate principal amount of $225,000,000
B-2
<PAGE>
(collectively, the "Class 1996A Notes") and the Issuer's Taxable Student Loan
Asset-Backed Notes, Subordinate Class 1996B-3 LIBOR Rate issued in the
aggregate principal amount of $15,600,000 (the "Class 1996B-3 Notes") have
been authorized by the Issuer under a certain resolution, and issued by the
Issuer pursuant to the Indenture. The proceeds of such notes will be used by
the Issuer, together with other moneys of the Issuer, for the purpose of
financing the acquisition of student loans, fund a reserve fund and to pay
certain costs and expenses in connection with the issuance of such notes.
The Issuer has previously issued $48,300,000 of its Taxable Student Loan
Asset-Backed Notes, Senior Class 1996A-1 Auction Rate Securities (ARS-SM-)
(the "Class 1996A-1 Notes"), $48,300,000 of its Taxable Student Loan
Asset-Backed Notes, Senior Class 1996A-2 Auction Rate Securities (ARS-SM-)
(the "Class 1996A-2 Notes"), $11,100,000 of its Taxable Student Loan
Asset-Backed Notes, Subordinate Class 1996B LIBOR Rate (the "Class 1996B
Notes") $73,700,000 of its Taxable Student Loan Asset-Backed Notes, Senior
Class 1996A-3 Auction Rate Securities (ARS-SM-) (the "Class 1996A-3 Notes"),
$54,300,000 of its Taxable Student Loan Asset-Backed Notes, Senior Class
1996A-4 Auction Rate Securities (ARS-SM-) (the "Class 1996A-4 Notes") and
$14,200,000 of its Taxable Student Loan Asset-Backed Notes, Subordinate Class
1996B-2 LIBOR Rate (the "Class 1996B-2 Notes"). The Class 1996A-1 Notes, the
Class 1996A-2 Notes, the Class 1996A-3 Notes, the Class 1996A-4 Notes and the
Class 1996A Notes are collectively referred to herein as the "Class A Notes."
The Class 1996B Notes, the Class 1996B-2 Notes and the Class 1996B-3 Notes
are collectively referred to herein as the "Class B Notes." The Indenture
provides for the issuance of additional notes (the "Additional Notes") which
may be secured on a parity with or subordinate to the Class A Notes and the
Class B Notes as may be determined by the Issuer. The Class A Notes and the
Class B Notes and any Additional Notes are collectively referred to herein as
the "Notes."
MANDATORY REDEMPTION. This note is subject to mandatory redemption by
the Issuer, in whole or in part, on any Interest Payment Date from certain
moneys in the Senior Note Redemption Account of the Note Redemption Fund
created pursuant to the Indenture at a redemption price equal to the
principal amount thereof plus accrued interest to the redemption date.
This note is also subject to mandatory redemption by the Issuer at a
redemption price equal to the principal amount thereof plus accrued interest,
if any, to the date of redemption thereof from moneys in the Senior Note
Redemption Account of the Note Redemption Fund on the Interest Payment Date
next succeeding February 15, 1997, to the extent that moneys remain in the
Series 1996C Loan Account of the Student Loan Fund on such date, unless, no
such mandatory redemption is needed to maintain the ratings on certain of the
Notes as provided in the Indenture.
This note is also subject to mandatory redemption at a redemption price
equal to the principal amount thereof plus accrued interest on any Interest
Payment Date when excess revenue moneys are deposited in the Senior Note
Redemption Account from the Revenue Fund.
B-3
<PAGE>
OPTIONAL REDEMPTION. This note is subject to redemption at the option of
the Issuer, in whole or in part, on any Interest Payment Date at a redemption
price equal to the principal amount of this note being redeemed, plus accrued
interest, if any, to the redemption date.
EXTRAORDINARY OPTIONAL REDEMPTION. This note is also subject to
extraordinary optional redemption, at the option of the Issuer, at a
redemption price equal to the principal amount of this note being redeemed,
plus accrued interest to the date of redemption, without premium in whole or
in part on any Interest Payment Date, if the Issuer reasonably determines
that it is unable to acquire Financed Eligible Loans, that the rate of return
on Financed Eligible Loans has materially decreased, or that the costs of
administering the Trust have place unreasonable burdens upon the ability of
the Issuer to perform its obligations under the Indenture.
OPTIONAL PURCHASE. The Issuer may purchase or cause to be purchased all
of the Notes on any Interest Payment Date on which the aggregate current
principal balance of the Notes shall be less than or equal to 10% of the
initial aggregate principal balance of the Notes on the Date of Issuance, at
a purchase price equal to the aggregate current principal balance of such
Notes, plus accrued interest on the Notes through the day preceding the
Interest Payment Date on which the purchase occurs.
NOTICE OF REDEMPTION OR PURCHASE. Notice of the call for redemption
shall be given by the Trustee by mailing a copy of the notice at least 15
days prior to the redemption or purchase date to the Registered Owners of the
Notes to be redeemed in whole or in part at the address of such Registered
Owner last showing on the registration books. Failure to give such notice or
any defect therein shall not affect the validity of any proceedings for the
redemption or purchase of such Auction Rate Notes for which no such failure
or defect occurs. All Notes called for redemption or purchase will cease to
bear interest after the specified redemption or purchase date, provided funds
for their payment are on deposit at the place of payment at the time. If
less than all Notes are to be redeemed or purchased, Notes shall be selected
for redemption or purchase as provided in the Indenture.
SWAP AGREEMENTS. The Indenture provides that the Issuer may enter into
an interest rate swap or basis agreement between the Issuer and a swap
provider (a "Swap Counterparty"), as originally executed and as amended or
supplemented, or other interest rate hedge agreement between the Issuer and a
Swap Counterparty, as originally executed and as amended or supplemented, in
each case approved in writing by the Rating Agency, for the purpose of
converting in whole or in part the Issuer's variable interest rate liability
on all or a portion of the Notes bearing interest at a variable rate issued
on a parity therewith to a fixed rate liability or for the purpose of
converting in whole or in part the Issuer's fixed interest rate liability on
all or a portion of any Additional Notes bearing interest at a fixed rate
issued on a parity therewith to a variable rate liability. Payments due to a
Swap Counterparty from the Issuer pursuant to the applicable Swap Agreement
(including, but not limited to, payments in respect of an Early Termination
Date, as defined in the applicable Swap Agreement) are referred to herein as
"Issuer Swap Payments."
B-4
<PAGE>
The principal of and interest on the Class A Notes and any Additional
Notes issued on a parity with the Class A Notes and any Issuer Swap Payments
secured on a parity with the Class A Notes are payable on a superior basis to
such payments on the Class B Notes and any Additional Notes issued on a
parity or subordinate to the Class B Notes; provided, however, that current
principal and interest may be paid on the Class B Notes and any Additional
Notes issued on a parity with the Class B Notes or subordinate to the Class B
Notes if all principal and interest payments due and owing at such time on
the Class A Notes and any Additional Notes issued on a parity with the Class
A Notes and any Issuer Swap Payments secured on a parity with the Class A
Notes have been previously made or provided for as provided in the Indenture.
Reference is hereby made to the Indenture, copies of which are on file in
the Principal Office of the Trustee, and to all of the provisions of which
any Registered Owner of this note by his acceptance hereof hereby assents,
for definitions of terms; the description of and the nature and extent of the
security for the Notes; the Issuer's student loan origination and acquisition
program; the revenues and other money pledged to the payment of the principal
of and interest on the Notes; the nature and extent and manner of enforcement
of the pledge; the conditions upon which the Indenture may be amended or
supplemented with or without the consent of the Registered Owners of the
Notes and any Swap Counterparty; the rights and remedies of the Registered
Owner hereof with respect hereto and thereto, including the limitations upon
the right of a Registered Owner hereof to institute any suit, action, or
proceeding in equity or at law with respect hereto and thereto; the rights,
duties, and obligations of the Issuer and the Trustee thereunder; the terms
and provisions upon which the liens, pledges, charges, trusts, and covenants
made therein may be discharged at or prior to the stated maturity or earlier
redemption of this note, and this note thereafter shall no longer be secured
by the Indenture or be deemed to be Outstanding, as defined in the Indenture,
thereunder; and for the other terms and provisions thereof.
THE NOTES ARE LIMITED OBLIGATIONS OF THE ISSUER, PAYABLE SOLELY FROM, AND
FURTHER SECURED BY, THE TRUST ESTATE, AS DEFINED IN THE INDENTURE.
No recourse, either directly or indirectly, shall be had for the payment
of the principal of and interest on this note or any claim based hereon or in
respect hereof or of the Indenture, against the Trustee, or any incorporator,
director, officer, employee, or agent of the Issuer, nor against the State of
Nevada, or any official thereof, but the obligation to pay all amounts
required by the Indenture securing this note and the obligation to do and
perform the covenants and acts required of the Issuer therein and herein
shall be and remain the responsibility and obligation of said Issuer, limited
as herein set forth.
Subject to the restrictions specified in the Indenture, this note is
transferable on the Note Register kept for that purpose by the Trustee, as
registrar, upon surrender of this note for transfer at the principal office of
the Trustee, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Trustee duly executed by, the Registered
Owner hereof or his attorney duly authorized in writing, and thereupon one or
more new Notes of the
B-5
<PAGE>
same series, Stated Maturity, of authorized denominations, bearing interest
at the same rate, and for the same aggregate principal amount will be issued
to the designated transferee or transferees. At the option of the Registered
Owner, any Note may be exchanged for other Notes in authorized denominations
upon surrender of the Note to be exchanged at the principal office of the
Trustee. Upon any such presentation for exchange, one or more new Notes of
the same series, Stated Maturity, in authorized denominations, bearing
interest at the same rate, and for the same aggregate principal amount as the
Note or Notes so surrendered will be issued to the Registered Owner of the
Note or Notes so surrendered; and the Note or Notes so surrendered shall
thereupon be cancelled by the Trustee.
Notwithstanding the foregoing, so long as the ownership of the Notes is
maintained in book-entry form by The Depository Trust Company (the
"Securities Depository") or a nominee thereof, this note may be transferred
in whole but not in part only to the Securities Depository or a nominee
thereof or to a successor Securities Depository or its nominee.
The Issuer, the Trustee, and any agent of either of them shall treat the
Person in whose name this note is registered as the Registered Owner hereof
(i) on the record date for purposes of receiving timely payment of interest
hereon, and (ii) on the date of surrender of this note for purposes of
receiving payment of principal hereof at its stated maturity and (iii) for
all other purposes, whether or not this note is overdue, and neither the
Issuer, the Trustee, nor any such agent shall be affected by notice to the
contrary.
To the extent permitted by the Indenture, modifications or alterations of
the Indenture and any supplemental indenture may be made with the consent of
less than all of the Registered Owners of the Notes then outstanding or
without the consent of any of such Registered Owners (by reason of a change
in the Act or Regulation or to cure ambiguities or conflicts), but such
modification or alteration is not permitted to affect the maturity date,
Stated Maturity, amount, Interest Payment Date, or rate of interest on any
outstanding Notes or affect the rights of the Registered Owners of less than
all of the Notes outstanding.
The Registered Owner hereof shall not have the right to demand payment of
this note or any interest hereon out of funds raised or to be raised by
taxation.
Any capitalized term used herein and not otherwise defined herein shall
have the same meaning ascribed to such term in the herein defined Indenture
unless the context shall clearly indicate otherwise.
It is hereby certified and recited that all acts and things required by
the laws of the State of Nevada to happen, exist, and be performed precedent
to and in the issuance of this note, and the passage of said resolution and
the execution of said Indenture, have happened, exist and have been performed
as so required.
B-6
<PAGE>
IN TESTIMONY WHEREOF, the Board of Directors of UNION FINANCIAL
SERVICES-1, INC. has caused the seal of the Issuer to be impressed or a
facsimile thereof to be printed hereon, and this note to be executed by the
President and Secretary of the Issuer all as of the Original Issue Date.
[SEAL] UNION FINANCIAL SERVICES-1, INC.
By
--------------------------------------
President
By
--------------------------------------
Secretary
B-7
<PAGE>
CERTIFICATE OF AUTHENTICATION
This note is one of the Class 1996A-6 Notes designated therein and
described in the within-mentioned Indenture.
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee
By
------------------------------------------
Authorized Signatory
AUTHENTICATION DATE:
- ---------------------------
B-8
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
unto __________ (Social Security or other identifying number __________) the
within note and all rights thereunder and hereby irrevocably appoints
__________ attorney to transfer the within note on the books kept for
registration thereof, with full power of substitution in the premises.
DATED: SIGNED:
------------------- ----------------------------------------
NOTICE: The signature on this Assignment must
correspond with the name of the Registered Owner
as it appears on the face of the within note in
every particular.
Signature Guaranteed by:
- -------------------------------
A Member of The New York Stock
Exchange or a State or National
Bank
B-9
<PAGE>
EXHIBIT C
FORM OF CLASS 1996B-3 SUBORDINATE LIBOR RATE NOTES
EXCEPT AS OTHERWISE PROVIDED IN THE INDENTURE, THIS GLOBAL NOTE MAY BE
TRANSFERRED, IN WHOLE BUT NOT IN PART, ONLY TO ANOTHER NOMINEE OF THE SECURITIES
DEPOSITORY (AS DEFINED HEREIN) OR TO A SUCCESSOR SECURITIES DEPOSITORY OR TO A
NOMINEE OF A SUCCESSOR SECURITIES DEPOSITORY.
UNION FINANCIAL SERVICES-1, INC.
TAXABLE STUDENT LOAN ASSET-BACKED NOTE
SUBORDINATE CLASS 1996B-3
LIBOR RATE NOTE
REGISTERED NO. R-1 REGISTERED $15,600,000
MATURITY DATE: INTEREST RATE: ORIGINAL ISSUE DATE CUSIP NO.
July 1, 2025 Variable November 1, 1996 906619 AJ0
PRINCIPAL SUM: FIFTEEN MILLION SIX HUNDRED THOUSAND DOLLARS
REGISTERED OWNER: CEDE & CO.
UNION FINANCIAL SERVICES-1, INC., a corporation organized under the
corporation laws of the State of Nevada (the "Issuer," which term includes any
successor corporation under the Second Amended and Restated Indenture of Trust,
dated as of November 1, 1996 (as amended, the "Indenture"), between the Issuer
and Norwest Bank Minnesota, National Association, as trustee (the "Trustee,"
which term includes any successor trustee under the Indenture)), for value
received, hereby promises to pay to the Registered Owner (stated above) or
registered assigns, the Principal Sum of (stated above), but solely from the
revenues and receipts hereinafter specified and not otherwise, on the Maturity
Date specified above (subject to the right of prior redemption hereinafter
described), upon presentation and surrender of this note at the Principal Office
of the Trustee, as paying agent, trustee, authenticating agent and registrar for
the Notes, or a duly appointed successor paying agent, and to pay interest in
arrears on said Principal Sum, but solely from the revenues and receipts
hereinafter specified and not otherwise, to the Registered Owner hereof from the
most recent Interest Payment Date to which interest has been paid hereon, until
the payment of said principal sum in full, at the LIBOR-Based Rate on the first
Business Day of each month (each an "Interest Payment Date"), commencing
December 2, 1996. Such interest is payable by check or draft drawn upon the
Trustee and mailed on the Interest Payment Date to the person who is the
Registered Owner
C-1
<PAGE>
hereof on the Record Date at the address of such Registered Owner as it
appears on the registration books (the "Note Register") maintained by the
Trustee.
Any capitalized words and terms used as defined words and terms in this
note and not otherwise defined herein shall have the meanings given them in the
Indenture.
This note shall bear interest at LIBOR-Based Rate, all as determined in
Appendix C of the Indenture.
The principal of and interest on this note are payable in lawful money of
the United States of America. If the specified date for any payment of
principal or interest accrued to such specified date shall be a day other than a
Business Day then such payment may be made on the next succeeding Business Day,
with the same force and effect as if made on the specified date for such payment
without additional interest.
Interest payable on this note shall be computed on the assumption that each
year contains 360 days and actual days elapsed.
This note is one of a series of notes of the Issuer designated Taxable
Student Loan Asset-Backed Notes, Subordinate Class 1996B-3 LIBOR Rate, dated the
Original Issue Date, in the aggregate original principal amount of $15,600,000
(the "Class 1996B-3 Notes") which, together with the Issuer's Taxable Student
Loan Asset-Backed Notes, Senior Class 1996A issued in the aggregate principal
amount of $300,500,000 (the "Class 1996A Notes") have been authorized by the
Issuer under a certain resolution, and issued by the Issuer pursuant to the
Indenture. The Issuer has previously issued $48,300,000 of its Taxable Student
Loan Asset-Backed Notes, Senior Class 1996A-1 Auction Rate Securities (ARS-SM-)
(the "Class 1996A-1 Notes"), $48,300,000 of its Taxable Student Loan
Asset-Backed Notes, Senior Class 1996A-2 Auction Rate Securities (ARS-SM-) (the
"Class 1996A-2 Notes"), $11,100,000 of its Taxable Student Loan Asset-Backed
Notes, Subordinate Class 1996B LIBOR Rate (the "Class 1996B Notes"), $73,700,000
of its Taxable Student Loan Asset-Backed Notes, Senior Class 1996A-3 Auction
Rate Securities (ARS-SM-) (the "Class 1996A-3 Notes"),$54,300,000 of its Taxable
Student Loan Asset-Backed Notes, Senior Class 1996A-4 Auction Rate Securities
(ARS-SM-) (the "Class 1996A-4 Notes") and $14,200,000 of its Taxable Student
Loan Asset-Backed Notes, Subordinate Class 1996B-2 LIBOR Rate (the
"Class 1996B-2 Notes"). The Class 1996A-1 Notes, the Class 1996A-2 Notes, the
Class 1996A-3 Notes, the Class 1996A-4 Notes and the Class 1996A Notes are
collectively referred to herein as the "Class A Notes." The Class 1996B Notes,
the Class 1996B-2 Notes and the Class 1996B-3 Notes are collectively referred to
herein as the "Class B Notes." The proceeds of such notes will be used by the
Issuer, together with other moneys of the Issuer, for the purpose of providing
funds to finance the acquisition of student loans, fund a reserve fund and to
pay certain costs and expenses in connection with the issuance of such notes.
The Indenture provides for the issuance of additional notes (the "Additional
Notes") which may be secured on a parity with or subordinate to the Class A
Notes or the Class B Notes as determined by the Issuer. The Class A Notes, the
Class B Notes and any Additional Notes are collectively referred to herein as
the "Notes."
C-2
<PAGE>
MANDATORY REDEMPTION. This note is subject to redemption by the Issuer, in
whole or in part, on any Interest Payment Date subsequent to May 1, 1999, from
certain moneys in the Subordinate Note Redemption Account of the Note Redemption
Fund created pursuant to the Indenture at a redemption price equal to the
principal amount thereof plus accrued interest to the redemption date.
EXTRAORDINARY OPTIONAL REDEMPTION. This note is subject to extraordinary
optional redemption, at the option of the Issuer, at a redemption price equal to
the principal amount of this note being redeemed, plus accrued interest to the
date of redemption, without premium in whole or in part on any Interest Payment
Date, if the Issuer reasonably determines that it is unable to acquire Financed
Eligible Loans, that the rate of return on Financed Eligible Loans has
materially decreased, or that the costs of administering the Trust have placed
unreasonable burdens upon the ability of the Issuer to perform its obligations
under the Indenture.
OPTIONAL REDEMPTION. This note is subject to redemption at the option of
the Issuer, in whole or in part, on any Interest Payment Date subsequent to
May 1, 1999 at a redemption price equal to the principal amount of this note
being redeemed, plus accrued interest on the date of redemption.
OPTIONAL PURCHASE. The Issuer may purchase or cause to be purchased all of
the Notes on any Interest Payment Date on which the aggregate current principal
balance of the Notes shall be less than or equal to 10% of the initial aggregate
principal balance of the Notes on the Date of Issuance, at a purchase price
equal to the aggregate current principal balance of such Notes, plus accrued
interest on the Notes through the day preceding the Interest Payment Date on
which the purchase occurs.
NOTICE OF REDEMPTION OR PURCHASE. Notice of the call for redemption or
purchase shall be given by the Trustee by mailing a copy of the notice at least
15 days prior to the redemption or purchase date to the Registered Owners of
Notes to be redeemed or purchased in whole or in part at the address of such
Registered Owner last showing on the registration books. Failure to give such
notice or any defect therein shall not affect the validity of any proceedings
for the redemption or purchase of such Notes for which no such failure or defect
occurs. All Notes called for redemption or purchase will cease to bear interest
after the specified redemption or purchase date, provided funds for their
payment are on deposit at the place of payment at the time. If less than all
Notes are to be redeemed or purchased, Notes shall be selected for redemption or
purchase as provided in the Indenture.
SWAP AGREEMENTS. The Indenture provides that the Issuer may enter into an
interest rate swap or basis agreement between the Issuer and a swap provider (a
"Swap Counterparty"), as originally executed and as amended or supplemented, or
other interest rate hedge agreement between the Issuer and a Swap Counterparty,
as originally executed and as amended or supplemented, in each case approved in
writing by each of the Rating Agency, for the purpose of converting in whole or
in part the Issuer's variable interest rate liability on all or a portion of the
Notes bearing interest at a variable rate issued on a parity therewith to a
fixed rate
C-3
<PAGE>
liability or for the purpose of converting in whole or in part the Issuer's
fixed interest rate liability on all or a portion of any Additional Notes
bearing interest at a fixed rate issued on a parity therewith or subordinate
to a variable rate liability. Payments due to a Swap Counterparty from the
Issuer pursuant to the applicable Swap Agreement (including, but not limited
to, payments in respect of an Early Termination Date, as defined in the
applicable Swap Agreement) are referred to herein as "Issuer Swap Payments."
The principal of and interest on the Class A Notes and any Additional Notes
issued on a parity with the Class A Notes and any Issuer Swap Payments secured
on a parity with the Class A Notes are payable on a superior basis to such
payments on the Class B Notes and any Additional Notes issued on a parity with
or subordinate to the Class B Notes; provided, however, that current principal
and interest may be paid on the Class B Notes and any Additional Notes issued on
a parity with or subordinate to the Class B Notes only if all principal and
interest payments due and owing at such time on the Class A Notes and any
Additional Notes issued on a parity with the Class A Notes and any Issuer Swap
Payments secured on a parity with the Class A Notes have been previously made or
provided for as provided in the Indenture.
Reference is hereby made to the Indenture, copies of which are on file in
the Principal Office of the Trustee, and to all of the provisions of which any
Registered Owner of this note by his acceptance hereof hereby assents, for
definitions of terms; the description of and the nature and extent of the
security for the Notes; the Issuer's student loan origination and acquisition
program; the revenues and other money pledged to the payment of the principal of
and interest on the Notes; the nature and extent and manner of enforcement of
the pledge; the conditions upon which the Indenture may be amended or
supplemented with or without the consent of the Registered Owners of the Notes
and any Swap Counterparty; the rights and remedies of the Registered Owner
hereof with respect hereto and thereto, including the limitations upon the right
of a Registered Owner hereof to institute any suit, action, or proceeding in
equity or at law with respect hereto and thereto; the rights, duties, and
obligations of the Issuer and the Trustee thereunder; the terms and provisions
upon which the liens, pledges, charges, trusts, and covenants made therein may
be discharged at or prior to the stated maturity or earlier redemption of this
note, and this note thereafter shall no longer be secured by the Indenture or be
deemed to be Outstanding, as defined in the Indenture, thereunder; and for the
other terms and provisions thereof.
THE NOTES ARE LIMITED OBLIGATIONS OF THE ISSUER, PAYABLE SOLELY FROM, AND
FURTHER SECURED BY, THE TRUST ESTATE, AS DEFINED IN THE INDENTURE.
No recourse, either directly or indirectly, shall be had for the payment of
the principal of and interest on this note or any claim based hereon or in
respect hereof or of the Indenture, against the Trustee, or any incorporator,
director, officer, employee, or agent of the Issuer, but the obligation to pay
all amounts required by the Indenture securing this note and the obligation
C-4
<PAGE>
to do and perform the covenants and acts required of the Issuer therein and
herein shall be and remain the responsibility and obligation of said Issuer,
limited as herein set forth.
Subject to the restrictions specified in the Indenture, this note is
transferable on the Note Register kept for that purpose by the Trustee, as
regist rar, upon surrender of this note for transfer at the principal office
of the Trustee, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Trustee duly executed by, the Registered
Owner hereof or his attorney duly authorized in writing, and thereupon one or
more new Notes of the same series, Stated Maturity, of authorized
denominations, bearing interest at the same rate, and for the same aggregate
principal amount will be issued to the designated transferee or transferees.
At the option of the Registered Owner, any Note may be exchanged for other
Notes in authorized denominations upon surrender of the Note to be exchanged
at the principal office of the Trustee. Upon any such presentation for
exchange, one or more new Notes of the same series, Stated Maturity, in
authorized denominations, bearing interest at the same rate, and for the same
aggregate principal amount as the Note or Notes so surrendered will be issued
to the Registered Owner of the Note or Notes so surrendered; and the Note or
Notes so surrendered shall thereupon be cancelled by the Trustee.
Notwithstanding the foregoing, so long as the ownership of the Notes is
maintained in book-entry form by The Depository Trust Company (the "Securities
Depository") or a nominee thereof, this note may be transferred in whole but not
in part only to the Securities Depository or a nominee thereof or to a successor
Securities Depository or its nominee.
The Issuer, the Trustee, and any agent of either of them shall treat the
Person in whose name this note is registered as the Registered Owner hereof
(i) on the record date for purposes of receiving timely payment of interest
hereon, and (ii) on the date of surrender of this note for purposes of receiving
payment of principal hereof at its stated maturity and (iii) for all other
purposes, whether or not this note is overdue, and neither the Issuer, the
Trustee, nor any such agent shall be affected by notice to the contrary.
To the extent permitted by the Indenture, modifications or alterations of
the Indenture and any supplemental indenture may be made with the consent of
less than all of the Registered Owners of the Notes then outstanding or without
the consent of any of such Registered Owners (by reason of a change in the Act
or Regulation or to cure ambiguities or conflicts), but such modification or
alteration is not permitted to affect the maturity date, Stated Maturity,
amount, Interest Payment Date, or rate of interest on any outstanding Notes or
affect the rights of the Registered Owners of less than all of the Notes
outstanding.
The Registered Owner hereof shall not have the right to demand payment of
this note or any interest hereon out of funds raised or to be raised by
taxation.
Any capitalized term used herein and not otherwise defined herein shall
have the same meaning ascribed to such term in the herein defined Indenture
unless the context shall clearly indicate otherwise.
C-5
<PAGE>
It is hereby certified and recited that all acts and things required by the
laws of the State of Nevada to happen, exist, and be performed precedent to and
in the issuance of this note, and the passage of said resolution and the
execution of said Indenture, have happened, exist and have been performed as so
required.
C-6
<PAGE>
IN TESTIMONY WHEREOF, the Board of Directors of UNION FINANCIAL SERVICES-1,
INC. has caused the seal of the Issuer to be impressed or a facsimile thereof to
be printed hereon, and this note to be executed by the President and Secretary
of the Issuer all as of the Original Issue Date.
[SEAL] UNION FINANCIAL SERVICES-1, INC.
By
--------------------------------
President
By
--------------------------------
Secretary
C-7
<PAGE>
CERTIFICATE OF AUTHENTICATION
This note is one of the Class 1996B-3 Notes designated therein and
described in the within-mentioned Indenture.
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee
By
--------------------------------
Authorized Signatory
AUTHENTICATION DATE:
- -------------------------
C-8
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
unto __________ (Social Security or other identifying number __________) the
within note and all rights thereunder and hereby irrevocably appoints __________
attorney to transfer the within note on the books kept for registration thereof,
with full power of substitution in the premises.
DATED: SIGNED:
---------------- ----------------------------------------
NOTICE: The signature on this Assignment must
correspond with the name of the Registered Owner
as it appears on the face of the within note in
every particular.
Signature Guaranteed by:
- --------------------------------
A Member of The New York Stock
Exchange or a State or National
Bank
C-9
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EXHIBIT D
SERIES 1996C CLOSING CASH FLOW PROJECTIONS
D-1
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EXHIBIT E
SERIES 1996C CLOSING CASH FLOW PROJECTIONS
E-1
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EXHIBIT F
NOTICE OF PAYMENT DEFAULT
UNION FINANCIAL SERVICES-1, INC.
TAXABLE STUDENT LOAN ASSET-BACKED NOTES
CLASS 1996A-6
AUCTION RATE NOTES
NOTICE IS HEREBY GIVEN that a Payment Default has occurred and is
continuing with respect to the Auction Rate Notes identified above. The next
Auction for the Auction Rate Notes will not be held. The Auction Rate for
the Auction Rate Notes for the next succeeding Interest Period shall be the
Non-Payment Rate.
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as
Trustee
Dated: By
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F-1
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EXHIBIT G
NOTICE OF CURE OF PAYMENT DEFAULT
UNION FINANCIAL SERVICES-1, INC.
TAXABLE STUDENT LOAN ASSET-BACKED NOTES
CLASS 1996A-6
AUCTION RATE NOTES
NOTICE IS HEREBY GIVEN that a Payment Default with respect to the Auction
Rate Notes identified above has been waived or cured. The next Interest Payment
Date is __________________________ and the Auction Date is ____________________.
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as
Trustee
Dated: By
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G-1
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EXHIBIT H
NOTICE OF PROPOSED CHANGE IN LENGTH
OF ONE OR MORE AUCTION PERIODS
UNION FINANCIAL SERVICES-1, INC.
TAXABLE STUDENT LOAN ASSET-BACKED NOTES
CLASS 1996A-6
AUCTION RATE NOTES
Notice is hereby given that the Issuer proposes to change the length of one
or more Auction Periods pursuant to the Second Amended and Restated Indenture of
Trust, as amended (the "Indenture") as follows:
1. The change shall take effect on _______________, the Interest Rate
Adjustment Date for the next Auction Period (the "Effective Date").
2. The Auction Period Adjustment in Paragraph 1 shall take place only if
(a) the Trustee and the Auction Agent receive, by 11:00 a.m., eastern time, on
the Business Day before the Auction Date for the Auction Period commencing on
the Effective Date, a certificate from the Issuer, as required by the Indenture
authorizing the change in length of one or more Auction Periods and (b)
Sufficient Bids exist on the Auction Date for the Auction Period commencing on
the Effective Date.
3. If the condition referred to in (a) above is not met, the Auction Rate
for the Auction Period commencing on the Effective Date will be determined
pursuant to the Auction Procedures and the Auction Period shall be the Auction
Period determined without reference to the proposed change. If the condition
referred to in (a) is met but the condition referred to in (b) above is not met,
the Auction Rate for the Auction Period commencing on the Effective Date shall
be the Maximum Rate and the Auction Period shall be the Auction Period
determined without reference to the proposed change.
4. It is hereby represented, upon advice of the Auction Agent for the
Class 1996A-6 Notes described herein, that there were Sufficient Bids for such
Class 1996A-6 Notes at the Auction immediately preceding the date of this
Notice.
H-1
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5. Terms not defined in this Notice shall have the meanings set forth in
the Indenture entered into in connection with the Class 1996A-6 Notes.
UNION FINANCIAL SERVICES-1, INC.
Dated: By
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H-2
<PAGE>
EXHIBIT I
NOTICE ESTABLISHING CHANGE IN LENGTH
OF ONE OR MORE AUCTION PERIODS
UNION FINANCIAL SERVICES-1, INC.
TAXABLE STUDENT LOAN ASSET-BACKED NOTES
CLASS 1996A-6
AUCTION RATE NOTES
Notice is hereby given that the Issuer hereby establishes new lengths for
one or more Auction Periods pursuant to the Second Amended and Restated
Indenture of Trust, as amended:
1. The change shall take effect on _______________, the Interest Rate
Adjustment Date for the next Auction Period (the "Effective Date").
2. For the Auction Period commencing on the Effective Date, the Interest
Rate Adjustment Date shall be _______________, or the next succeeding Business
Day if such date is not a Business Day.
3. For Auction Periods occurring after the Auction Period commencing on
the Effective Date, the Interest Rate Adjustment Date shall be
[_______________(date) and every ______________(number) ______________(day of
week) thereafter] [every ______________(number) ______________(day of week)
after the date set forth in paragraph 2 above], or the next Business Day if any
such day is not a Business Day; provided, however, that the length of subsequent
Auction Periods shall be subject to further change hereafter as provided in the
Indenture of Trust.
4. The changes described in paragraphs 2 and 3 above shall take place
only upon delivery of this Notice and the satisfaction of other conditions set
forth in the Indenture of Trust and our prior notice dated _______________
regarding the proposed change.
5. Terms not defined in this Notice shall have the meanings set forth
in the Indenture of Trust relating to the Class 1996A-6 Notes.
UNION FINANCIAL SERVICES-1, INC.
Dated: By
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I-1
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EXHIBIT J
NOTICE OF CHANGE IN AUCTION DATE
UNION FINANCIAL SERVICES-1, INC.
TAXABLE STUDENT LOAN ASSET-BACKED NOTES
CLASS 1996A-6
AUCTION RATE NOTES
Notice is hereby given by [ ], as Market Agent for the
Auction Rate Notes, that with respect to the Auction Rate Notes, the Auction
Date is hereby changed as follows:
1. With respect to Class 1996A-6 Notes, the definition of "Auction Date"
shall be deemed amended by substituting "_______________(number) Business Day"
in the second line thereof and by substituting "_______________(number) Business
Days" for "two Business Days" in subsection (d) thereof.
2. This change shall take effect on _______________ which shall be the
Auction Date for the Auction Period commencing on _______________.
3. The Auction Date for the Class 1996A-6 Notes shall be subject to
further change hereafter as provided in the Indenture of Trust.
4. Terms not defined in this Notice shall have the meaning set forth in
the Second Amended and Restated Indenture of Trust, as amended relating to the
Class 1996A-6 Notes.
Smith Barney Inc., as Market Agent
Dated: By
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J-1
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EXHIBIT K
NOTICE OF PROPOSED ADJUSTMENT TO PERCENTAGE
USED IN DETERMINING [MAXIMUM AUCTION RATE]
[ALL HOLD RATE] [NON-PAYMENT RATE]
UNION FINANCIAL SERVICES-1, INC.
TAXABLE STUDENT LOAN ASSET-BACKED NOTES
CLASS 1996A-6
AUCTION RATE NOTES
Notice is hereby given that the Market Agent hereby proposes to change the
[percentage] [Applicable Percentage] used in determining the [Maximum Auction
Rate] [All Hold Rate] [Non-Payment Rate] with respect to the captioned Auction
Rate Notes pursuant to the Second Amended and Restated Indenture of Trust, as
amended (the "Indenture") relating to such Auction Rate Notes:
1. The change shall take effect on the date of commencement of the next
Auction Period (the "Effective Date").
2. For the Auction Period commencing on the Effective Date, and each
Auction Period thereafter, it is proposed that the percentage used in
determining the [Maximum Auction Rate] [All Hold Rate] [Non-Payment Rate] shall
be ____________________.
3. The adjustment to the percentage used in determining the [Maximum
Auction Rate] [All Hold Rate] [Non-Payment Rate] in paragraph 2 above shall take
place only if (A) the Trustee, the Auction Agent and the Market Agent receive,
by 11:00 a.m., eastern time, on the Business Day immediately preceding the
Effective Date, an Issuer Certificate authorizing the adjustment of such
percentage as specified in such Certificate, together with a copy of the Issuer
consent thereto and the opinion of Note Counsel as required by the Indenture;
and (B) the Trustee and the Issuer have received written confirmation from each
of the Rating Agencies then rating the Auction Rate Notes that such proposed
adjustment will not adversely affect its ratings then applicable to any of the
Auction Rate Notes.
4. If any of the conditions referred to in paragraph 3(A) and (B) above
are not met, the existing percentage used to determine the [Maximum Auction
Rate] [All Hold Rate] [Non-Payment Rate] shall remain in effect, and the rate of
interest on the captioned Auction Rate Notes for the next succeeding Interest
Period shall be determined in accordance with the Auction Procedures.
Terms used herein have the meanings set forth in the Indenture.
Smith Barney Inc., as Market Agent
Dated: By
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K-1
<PAGE>
EXHIBIT L
NOTICE ESTABLISHING NEW PERCENTAGE USED IN DETERMINING
[MAXIMUM AUCTION RATE] [ALL HOLD RATE] [NON-PAYMENT RATE]
UNION FINANCIAL SERVICES-1, INC.
TAXABLE STUDENT LOAN ASSET-BACKED NOTES
CLASS 1996A-6
AUCTION RATE NOTES
Notice is hereby given that the Issuer hereby establishes a new
[percentage] [Applicable Percentage] to be used in determining the [Maximum
Auction Rate] [All Hold Rate] [Non-Payment Rate] with respect to the captioned
Auction Rate Notes pursuant to the Second Amended and Restated Indenture of
Trust, as amended (the "Indenture") relating to such Auction Rate Notes:
1. The change shall take effect on ______________________, the
commencement of the next Auction Period (the "Effective Date").
2. For the Auction Period commencing on the Effective Date, and each
Auction Period thereafter, the percentage used in determining the [Maximum
Auction Rate] [All Hold Rate] [Non-Payment Rate] shall be ____________________.
3. The change described in paragraph 2 above shall take place only upon
delivery of this Notice and the satisfaction of other conditions set forth in
the Indenture and the Market Agent's prior notice dated ___________________
regarding the proposed change.
Terms used herein have the meanings set forth in the Indenture.
UNION FINANCIAL SERVICES-1, INC.
Dated: By
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L-1
