SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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) December 22, 1998
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Union Financial Services-1, Inc.
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(Exact name of registrant as specified in its charter)
Nevada 333-28551 86-081775
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) ID Number)
6991 East Camelback Road, Suite B290, Scottsdale, Arizona 85251
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(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number,
including area code: (602) 947-7703
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N/A
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(Former name or former address, if changed since last report)
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Item 5. Other Events
This Current Report on Form 8-K is being filed to file copies of an
Underwriting Agreement between Union Financial Services-1, Inc. and Salomon
Smith Barney Inc. (hereinafter the "Underwriting Agreement") dated as of
December 16, 1998 and the 1998 Supplemental Indenture of Trust by and between
Union Financial Services-1, Inc. and Zions First National Bank (hereinafter the
"Indenture"). The Underwriting Agreement and the Indenture were executed in
connection with the issuance by Union Financial Services-1, Inc. of $745,000,000
of its Taxable Student Loan Asset-Backed Notes Series 1998 on December 22, 1998.
The details of this issuance are contained in the Prospectus Supplement filed on
December 22, 1998 (File No. 333-28551).
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Not applicable.
(b) Not applicable.
(c) Exhibits:
(1)
(4.3)
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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 thereunto duly authorized.
UNION FINANCIAL SERVICES-1, INC.
By: /s/ Ronald W. Page
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Ronald W. Page
Senior Vice President
Dated: January 6, 1999
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EXHIBIT INDEX
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Exhibit Page
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(1) 5
(4.3) 28
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EXHIBIT 1
EXECUTION COPY
UNION FINANCIAL SERVICES-1, INC.
$745,000,000
Taxable Student Loan Asset-Backed Notes
(Series 1998)
UNDERWRITING AGREEMENT
December 16, 1998
Salomon Smith Barney Inc.
as representative of the Underwriters
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
Union Financial Services-1, Inc., a Nevada corporation (the "Company"),
proposes to sell to Salomon Smith Barney Inc. (the "Representative") and the
other underwriters listed on Schedule A hereto (the "Underwriters"), pursuant to
the terms of this Underwriting Agreement, $745,000,000 aggregate principal
amount of its Taxable Student Loan Asset-Backed Notes, Series 1998 (the
"Notes"). Zions First National Bank, a national banking association, will act as
eligible lender (the "Eligible Lender") on behalf of the Company. The Notes will
be issued under a Second Amended and Restated Indenture of Trust dated as of
November 1, 1996 (as previously amended and supplemented, the "Master
Indenture") between the Company and Zions First National Bank, a national
banking association, as successor indenture trustee ("Trustee"), as supplemented
by the Series 1998 Supplemental Indenture of Trust (the "Indenture Supplement"
and collectively with the Master Indenture, the "Indenture"). Upon issuance, the
Notes will be secured by, among other things, Financed Eligible Loans (as
defined in the Sale Agreements referred to below) pledged to the Trustee and
described in the Prospectus (as defined in Section 3 below). The Financed
Eligible Loans are to be serviced by Union Bank and Trust Company (in this
capacity, the "Servicer") pursuant to an Amended and Restated Servicing
Agreement dated as of June 19, 1996, as amended (the "Servicing Agreement"),
between the Servicer and the Company. The Servicer has entered into subservicing
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agreements with (i) UNIPAC Service Corporation ("UNIPAC") dated as of January 1,
1995 (the "UNIPAC Servicing Agreement") as amended by the parties thereto on
March 1, 1996 and June 19, 1996(the "UNIPAC Servicing Amendment" and, along with
the UNIPAC Servicing Agreement, the "UNIPAC Subservicing Agreement") pursuant to
which UNIPAC will act as subservicer or, upon inability of the Servicer to do
so, as servicer with respect to certain of the Financed Eligible Loans and (ii)
InTuition, Inc. ("InTuition"), dated as of December 22, 1998 (the "InTuition
Subservicing Agreement"), pursuant to which InTuition will act as subservicer
with respect to certain of the Financed Eligible Loans. This Agreement, the Loan
Sale and Commitment Agreement, dated as of December 1, 1998, between Union Bank
and Trust Company, in its own right and in its capacity as trustee, and the
Company, the Loan Sale and Commitment Agreement, dated as of December 22, 1998,
between NEBHELP INC. and the Company and the Loan Sale Agreement, dated as of
December 22, 1998, among Union Bank and Trust Company, as trustee, InTuition
Holdings, Inc. ("IHI") and the Company (collective, the "Sale Agreements"), the
Servicing Agreement, the UNIPAC Subservicing Agreement, the InTuition Servicing
Agreement and the Indenture shall collectively hereinafter be referred to as the
"Basic Documents." Capitalized terms used herein without definition shall have
the meanings ascribed to them in the Indenture or the Prospectus.
The Company proposes, upon the terms and conditions set forth herein, to
sell to each of the Underwriters on the Closing Date (as hereinafter defined)
the aggregate principal amount of each Class of Notes set forth next to the name
of each Underwriter on Schedule A hereto.
The Company wishes to confirm as follows this agreement with the
Underwriters in connection with the purchase and resale of the Notes.
1. Agreements to Sell, Purchase and Resell. (a) The Company hereby
agrees, subject to all the terms and conditions set forth herein to sell to each
of the Underwriters and, upon the basis of the representations, warranties and
agreements of the Company herein contained and subject to all the terms and
conditions set forth herein, each of the Underwriters severally agrees to
purchase from the Company, such principal amount of the Classes of the Notes at
such respective purchase prices as are set forth on Schedule A hereto.
(b) It is understood that the Underwriters propose to offer the Notes
for sale to the public (which may include selected dealers) as set forth in the
Prospectus.
2. Delivery of the Notes and Payment Therefor. Delivery to the
Underwriters of and payment for the Notes shall be made at the office of Kutak
Rock, Denver, Colorado, at 11:00 a.m., Denver time, on December 22, 1998 (the
"Closing Date"). The place of such closing and the Closing Date may be varied by
agreement between the Representative and the Company.
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The Notes will be delivered to the Underwriters against payment of the
purchase price therefor to the Company in Federal Funds, by wire, or such other
form of payment as to which the parties may agree. Unless otherwise agreed to by
the Company and the Representative, each Class of Notes will be evidenced by a
single global security in definitive form and/or by additional definitive
securities, and will be registered, in the case of the global Classes of Notes,
in the name of Cede & Co. as nominee of The Depository Trust Company ("DTC"),
and in the other cases, in such names and in such denominations as the
Underwriters shall request prior to 1:00 p.m., New York City time, no later than
the business day preceding the Closing Date. The Notes to be delivered to the
Underwriters shall be made available to the Underwriters in Denver, Colorado,
for inspection and packaging not later than 9:30 a.m., Denver time, on the
business day next preceding the Closing Date.
3. Representations and Warranties of the Company. The Company represents
and warrants to each of the Underwriters that:
(a) A registration statement on Form S-3 (No. 333-28551), including a
prospectus and such amendments thereto as may have been required to the date
hereof, relating to the Notes and the offering thereof from time to time in
accordance with Rule 415 under the Securities Act of 1933, as amended (the
"Act"), has been filed with the Securities and Exchange Commission (the "SEC" or
the "Commission") and such registration statement, as amended, has become
effective; such registration statement, as amended, and the prospectus relating
to the sale of the Notes offered thereby constituting a part thereof, as from
time to time amended or supplemented (including the base prospectus, any
prospectus supplement filed with the Commission pursuant to Rule 424(b) under
the Act, the information deemed to be a part thereof pursuant to Rule 430A(b)
under the Act, and the information incorporated by reference therein) are
respectively referred to herein as the "Registration Statement" and the
"Prospectus"; and the conditions to the use of a registration statement on Form
S-3 under the Act, as set forth in the General Instructions to Form S-3, and the
conditions of Rule 415 under the Act, have been satisfied with respect to the
Registration Statement;
(b) On the effective date of the Registration Statement, the
Registration Statement and the Prospectus conformed in all respects to the
requirements of the Act, the rules and regulations of the SEC (the "Rules and
Regulations") and the Trust Indenture Act of 1939, as amended, and the rules and
regulations thereunder (the "Trust Indenture Act"), and, except with respect to
information omitted pursuant to Rule 430A of the Act, did not include any untrue
statement of a material fact or, in the case of the Registration Statement, omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading and, in the case of the Prospectus, omit
to state any material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading, and on
the date of this Agreement, the Registration Statement and the Prospectus will
conform in all respects to the requirements of the Act, the Rules and
Regulations and the Trust Indenture Act, and neither of such documents included
or will include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that the foregoing does not apply to
statements in or omissions from the Registration Statement or the Prospectus
based upon written information furnished to the Company by the Underwriters,
specifically for use therein.
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(c) The Commission has not issued and, to the best knowledge of the
Company, is not threatening to issue any order preventing or suspending the use
of the Registration Statement.
(d) As of the Closing Date, each consent, approval, authorization or
order of, or filing with, any court or governmental agency or body which is
required to be obtained or made by the Company or its affiliates for the
consummation of the transactions contemplated by this Agreement shall have been
obtained, except as otherwise provided in the Basic Documents.
(e) The Master Indenture and the Indenture Supplement have been duly and
validly authorized by the Company and, upon their execution and delivery by the
Company and assuming due authorization, execution and delivery by the Trustee,
will be valid and binding agreements of the Company, enforceable in accordance
with their terms, except as enforcement thereof may be limited by bankruptcy,
insolvency or other similar laws affecting creditors' rights generally and
conform in all material respects to the description thereof in the Prospectus.
(f) The Notes have been duly authorized by the Company and the Notes to
be issued on the Closing Date, when executed by the Company and authenticated by
the Trustee in accordance with the Indenture, and delivered to the Underwriters
against payment therefor in accordance with the terms hereof, will have been
validly issued and delivered, and will constitute valid and binding obligations
of the Company entitled to the benefits of the Indenture and enforceable in
accordance with their terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, moratorium, fraudulent conveyance or other similar laws
relating to or affecting creditors' rights generally and court decisions with
respect thereto, and the Notes will conform in all material respects to the
description thereof in the Prospectus.
(g) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Nevada with full corporate power
and authority to own, lease and operate its properties and to conduct its
business as conducted on the date hereof, and is duly registered and qualified
to conduct its business and is in good standing in each jurisdiction or place
where the nature of its properties or the conduct of its business requires such
registration or qualification, except where the failure so to register or
qualify does not have a material adverse effect on the condition (financial or
other), business, prospects, properties, net worth or results of operations of
the Company.
(h) Other than as contemplated by this Agreement or as disclosed in the
Prospectus, there is no broker, finder or other party that is entitled to
receive from the Company or any of its affiliates any brokerage or finder's fee
or other fee or commission as a result of any of the transactions contemplated
by this Agreement.
(i) There are no legal or governmental proceedings pending or, to the
knowledge of the Company threatened, against the Company, or to which the
Company or any of its properties is subject, that are not disclosed in the
Prospectus or that will not be disclosed in any subsequent amendment or
supplement to the Prospectus and which, if adversely decided, are reasonably
likely to materially affect the issuance of the Notes or the consummation of the
transactions contemplated hereby or by the Basic Documents.
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(j) Neither the offer, sale or delivery of the Notes by the Company nor
the execution, delivery or performance of this Agreement by the Company, nor the
consummation by the Company of the transactions contemplated hereby or thereby
(i) requires or will require any consent, approval, authorization or other order
of, or registration or filing with, any court, regulatory body, administrative
agency or other governmental body, agency or official (except for compliance
with the securities or Blue Sky laws of various jurisdictions, the qualification
of the Indenture under the Trust Indenture Act and such other consents,
approvals or authorizations as shall have been obtained prior to the Closing
Date) or conflicts or will conflict with or constitutes or will constitute a
breach of, or a default under, the organizational documents or bylaws of the
Company or (ii) conflicts or will conflict with or constitutes or will
constitute a breach of, or a default under, in any material respect, any
material agreement, indenture, lease or other instrument to which the Company is
a party or by which the Company or any of its properties may be bound, or
violates or will violate in any material respect any statute, law, regulation or
filing or judgment, injunction, order or decree applicable to the Company or any
of its properties, or will result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company pursuant to the
terms of any agreement or instrument to which it is a party or by which it may
be bound or to which any of its properties is subject other than as contemplated
by the Basic Documents.
(k) The Company has all requisite power and authority to execute,
deliver and perform its obligations under this Agreement; the execution and
delivery of, and the performance by the Company of its obligations under, this
Agreement have been duly and validly authorized by the Company and this
Agreement has been duly executed and delivered by the Company and constitutes
the valid and legally binding agreement of the Company, enforceable against the
Company in accordance with its terms, except as the enforcement hereof may be
limited by bankruptcy, insolvency, moratorium, fraudulent conveyance or other
similar laws relating to or affecting creditors' rights generally and court
decisions with respect thereto and subject to the applicability of general
principles of equity, and except as rights to indemnity and contribution
hereunder may be limited by Federal or state securities laws or principles of
public policy.
(l) Each Seller's assignment and delivery of Financed Eligible Loans to
the order of the Trustee on behalf of the Company as of the applicable sale date
described in the applicable Sale Agreement will vest in the Trustee on behalf of
the Company all of such Seller's right, title and interest therein, subject to
no prior lien, mortgage, security interest, pledge, adverse claim, charge or
other encumbrance.
(m) The Company's assignment of the Financed Eligible Loans to the
Trustee pursuant to the Indenture will vest in the Trustee, for the benefit of
the Noteholders, a first priority perfected security interest therein, subject
to no prior lien, mortgage, security interest, pledge, adverse claim, charge or
other encumbrance.
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(n) The Company is not, nor as a result of the issuance and sale of the
Notes as contemplated hereunder will it become, subject to registration as an
"investment company" under the Investment Company Act of 1940, as amended (the
"1940 Act").
(o) The representations and warranties made by the Company in any Basic
Document to which the Company is a party and made in any Officer's Certificate
of the Company will be true and correct at the time made and on and as of the
applicable Closing Date.
4. Agreements of the Company. The Company agrees with each of the
Underwriters as follows:
(a) The Company will prepare a supplement to the Prospectus setting
forth the amount of the Notes covered thereby and the terms thereof not
otherwise specified in the Prospectus, the price at which the Notes are to be
purchased by the Underwriters, either the initial public offering price or the
method by which the price at which the Notes are to be sold will be determined,
the selling concessions and reallowances, if any, and such other information as
the Underwriters and the Company deem appropriate in connection with the
offering of the Notes, and the Company will timely file such supplement to the
prospectus with the SEC pursuant to Rule 424(b) under the Act, but the Company
will not file any amendments to the Registration Statement as in effect with
respect to the Notes or any amendments or supplements to the Prospectus, unless
it shall first have delivered copies of such amendments or supplements to the
Underwriters, or if the Underwriters shall have reasonably objected thereto
promptly after receipt thereof; the Company will immediately advise the
Underwriters or the Underwriters' counsel (i) when notice is received from the
SEC that any post-effective amendment to the Registration Statement has become
or will become effective and (ii) of any order or communication suspending or
preventing, or threatening to suspend or prevent, the offer and sale of the
Notes or of any proceedings or examinations that may lead to such an order or
communication, whether by or of the SEC or any authority administering any state
securities or Blue Sky law, as soon as the Company is advised thereof, and will
use its best efforts to prevent the issuance of any such order or communication
and to obtain as soon as possible its lifting, if issued.
(b) If, at any time when the Prospectus relating to the Notes is
required to be delivered under the Act, any event occurs as a result of which
the Prospectus as then amended or supplemented would include an untrue statement
of a material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend or supplement
the Prospectus to comply with the Act or the Rules and Regulations, the Company
promptly will prepare and file with the SEC, an amendment or supplement to such
Prospectus that will correct such statement or omission or an amendment that
will effect such compliance.
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(c) The Company will immediately inform the Underwriters (i) of the
receipt by the Company of any communication from the SEC or any state securities
authority concerning the offering or sale of the Notes and (ii) of the
commencement of any lawsuit or proceeding to which the Company is a party
relating to the offering or sale of the Notes.
(d) The Company will furnish to the Underwriters, without charge, copies
of the Registration Statement (including all documents and exhibits thereto or
incorporated by reference therein), the Prospectus, and all amendments and
supplements to such documents relating to the Notes, in each case in such
quantities as the Underwriters may reasonably request.
(e) No amendment or supplement will be made to the Registration
Statement or Prospectus which the Underwriters shall not previously have been
advised or to which it shall reasonably object after being so advised.
(f) The Company will cooperate with the Underwriters and with its
counsel in connection with the qualification of, or procurement of exemptions
with respect to, the Notes for offering and sale by the Underwriters and by
dealers under the securities or Blue Sky laws of such jurisdictions as the
Underwriters may designate and will file such consents to service of process or
other documents necessary or appropriate in order to effect such qualification
or exemptions; provided that in no event shall the Company be obligated to
qualify to do business in any jurisdiction where it is not now so qualified or
to take any action which would subject it to service of process in suits, other
than those arising out of the offering or sale of the Notes, in any jurisdiction
where it is not now so subject.
(g) The Company consents to the use, in accordance with the securities
or Blue Sky laws of such jurisdictions in which the Notes are offered by the
Underwriters and by dealers, of the Prospectus furnished by the Company.
(h) To the extent, if any, that the rating or ratings provided with
respect to the Notes by the rating agency or agencies that initially rate the
Notes is conditional upon the furnishing of documents or the taking of any other
actions by the Company, the Company shall cause to be furnished such documents
and such other actions to be taken.
(i) So long as any of the Notes are outstanding, the Company will
furnish to the Underwriters (i) as soon as available, a copy of each document
relating to the Notes required to be filed with the SEC pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any order
of the SEC thereunder, and (ii) such other information concerning the Company as
the Underwriters may request from time to time.
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(j) If this Agreement shall terminate or shall be terminated after
execution and delivery pursuant to any provisions hereof (otherwise than by
notice given by the Representative terminating this Agreement pursuant to
Section 8 or Section 9 hereof) or if this Agreement shall be terminated by the
Representative because of any failure or refusal on the part of the Company to
comply with the terms or fulfill any of the conditions of this Agreement, the
Company agrees to reimburse the Underwriters for all out-of-pocket expenses
(including fees and expenses of their counsel) reasonably incurred by it in
connection herewith, but without any further obligation on the part of the
Company for loss of profits or otherwise.
(k) The net proceeds from the sale of the Notes hereunder will be
applied substantially in accordance with the description set forth in the
Prospectus.
(l) Except as stated in this Agreement and in the Prospectus, the
Company has not taken, nor will it take, directly or indirectly, any action
designed to or that might reasonably be expected to cause or result in
stabilization or manipulation of the price of the Notes to facilitate the sale
or resale of the Notes.
(m) For a period from the date of this Agreement until the retirement of
the Notes, the Company will deliver to you the annual statements of compliance
and the annual independent certified public accountants' reports furnished to
the Trustee or the Company pursuant to the Servicing Agreement as soon as such
statements and reports are furnished to the Trustee or the Company.
(n) On or before the Closing Date, the Company shall mark its accounting
and other records, if any, relating to the Initial Financed Eligible Loans and
shall cause the Servicer, UNIPAC and InTuition to mark their respective computer
records relating to the Initial Financed Eligible Loans to show the absolute
ownership by the Trustee, as eligible lender of, and the interest of the Company
in, the Initial Financed Eligible Loans, and from and after each Closing Date
the Company will take, or cause the Servicer, UNIPAC and InTuition to take, as
the case may be, such actions with respect to the respective records of each
with regard to any Additional Acquired Eligible Loans at the time of the
acquisition thereof by the Trustee on behalf of the Company and the Company
shall not take, or shall permit any other person to take, any action
inconsistent with the ownership of, and the interest of the Company in, the
Financed Eligible Loans, other than as permitted by the Basic Documents.
(o) For the period beginning on the date of this Agreement and ending 90
days hereafter, after none of the Company and any entity affiliated, directly or
indirectly, with the Company will, without the prior written notice to the
Underwriters, offer to sell or sell notes (other than the Notes) collateralized
by FFELP Loans; provided, however, that this shall not be construed to prevent
the sale of FFELP Loans by the Company.
(p) If, at the time the Registration Statement became effective, any
information shall have been omitted therefrom in reliance upon Rule 430A under
the 1933 Act, then, immediately following the execution of this Agreement, the
Company will prepare, and file or transmit for filing with the Commission in
accordance with such Rule 430A and Rule 424(b) under the 1933 Act, copies of an
amended Prospectus containing all information so omitted.
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5. Indemnification and Contribution. (a) The Company agrees to indemnify
and hold harmless each of the Underwriters and each person, if any, who controls
an Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, from and against any and all losses, claims, damages, liabilities
and expenses (including reasonable costs of investigation) arising out of or
based upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, the Prospectus, or in any amendment or
supplement thereto, or any preliminary prospectus, or arising out of or based
upon any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or expenses arise
out of or are based upon any untrue statement or omission or alleged untrue
statement or omission which has been made therein or omitted therefrom in
reliance upon and in conformity with the information relating to an Underwriter
furnished in writing to the Company by or on behalf of such Underwriter
expressly for use in connection therewith; provided, however, that the
indemnification contained in this paragraph (a) with respect to any preliminary
prospectus shall not inure to the benefit of an Underwriter (or to the benefit
of any person controlling an Underwriter) on account of any such loss, claim,
damage, liability or expense arising from the sale of the of Notes by an
Underwriter to any person if the untrue statement or alleged untrue statement or
omission or alleged omission of a material fact contained in such preliminary
prospectus was corrected in the final Prospectus and such Underwriter sold Notes
to that person without sending or giving at or prior to the written confirmation
of such sale, a copy of the final Prospectus (as then amended or supplemented)
if the Company has previously furnished sufficient copies thereof to such
Underwriter. The foregoing indemnity agreement shall be in addition to any
liability which the Company may otherwise have.
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(b) If any action, suit or proceeding shall be brought against an
Underwriter or any person controlling an Underwriter in respect of which
indemnity may be sought against the Company, such Underwriter or such
controlling person shall promptly notify the parties against whom
indemnification is being sought (the "indemnifying parties"), but the omission
so to notify the indemnifying party will not relieve it from any liability which
it may have to any indemnified party except to the extent that the indemnifying
party is materially prejudiced by such omission. In case any such action is
brought against any indemnified party and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party (who shall not, except with the consent
of the indemnified party, be counsel to the indemnifying party). The applicable
Underwriter or any such controlling person shall have the right to employ
separate counsel in any such action, suit or proceeding and to participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Underwriter or such controlling person unless (i) the
indemnifying parties have agreed in writing to pay such fees and expenses, (ii)
the indemnifying parties have failed to assume the defense and employ counsel,
or (iii) the named parties to any such action, suit or proceeding (including any
impleaded parties) include both the Underwriter or such controlling person and
the indemnifying parties and the Underwriter or such controlling person shall
have been advised by its counsel that there may be one or more legal defenses
available to it which are different from or additional to or in conflict with
those available to the indemnifying parties and in the reasonable judgment of
such counsel it is advisable for the Underwriter or such controlling person to
employ separate counsel (in which case the indemnifying party shall not have the
right to assume the defense of such action, suit or proceeding on behalf of the
Underwriter or such controlling person). It is understood, however, that the
indemnifying parties shall, in connection with any one such action, suit or
proceeding or separate but substantially similar or related actions, suits or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses of only one
separate firm of attorneys (in addition to any local counsel) at any time for
each Underwriter and controlling persons not having actual or potential
differing interests with such Underwriter or among themselves, which firm shall
be designated in writing by such Underwriter, and that all such fees and
expenses shall be reimbursed on a monthly basis as provided in paragraph (a)
hereof. An indemnifying party will not, without the prior written consent of the
indemnified party, settle or compromise or consent to the entry of any judgment
with respect to any pending or threatened claim, action, suit or proceeding in
respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified parties are actual or potential parties to such
claim or action) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising out
of such claim, action, suit or proceeding.
(c) Each Underwriter, severally and not jointly, agrees to indemnify and
hold harmless the Company and its directors and officers, and any person who
controls the Company within the meaning of Section 15 of the Act or Section 20
of the Exchange Act, to the same extent as the indemnity from the Company to the
Underwriters set forth in paragraph (a) hereof, but only with respect to
information relating to an Underwriter furnished in writing by or on behalf of
such Underwriter expressly for use in the Registration Statement, the
Prospectus, or any amendment or supplement thereto, or any related preliminary
prospectus. If any action, suit or proceeding shall be brought against the
Company, any of its directors or officers, or any such controlling person based
on the Registration Statement, the Prospectus, or any amendment or supplement
thereto, or any related preliminary prospectus and in respect of which indemnity
may be sought against an Underwriter pursuant to this paragraph (c), such
Underwriter shall have the rights and duties given to the Company by paragraph
(b) above (except that if the Company shall have assumed the defense thereof the
Underwriter shall not be required to do so, but may employ separate counsel
therein and participate in the defense thereof, but the fees and expenses of
such counsel shall be at such Underwriter's expense), and the Company, its
directors and officers, and any such controlling person shall have the rights
and duties given to the Underwriters by paragraph (b) above. The foregoing
indemnity agreement shall be in addition to any liability which the Underwriters
may otherwise have.
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(d) If the indemnification provided for in this Section 5 is unavailable
to an indemnified party under paragraphs (a) or (c) hereof in respect of any
losses, claims, damages, liabilities or expenses referred to therein, then an
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or expenses (i) in such proportion
as is appropriate to reflect the relative benefits received by the Company on
the one hand and the applicable Underwriter on the other hand from the offering
of the Notes, or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company on the one hand and the applicable Underwriter on the other
in connection with the statements or omissions that resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and an Underwriter on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Notes (before
deducting expenses) received by the Company bear to the total underwriting
discounts and commissions received by such Underwriter. The relative fault of
the Company on the one hand and the Underwriters on the other hand shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or by an Underwriter on the other hand and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(e) The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 5 were determined by a pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in paragraph (d) above. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities and expenses referred to in paragraph (d) above shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating any claim or defending any such action, suit or proceeding.
Notwithstanding the provisions of this Section 5, no Underwriter shall not be
required to contribute any amount in excess of the amount by which the total
underwriting discounts and commissions received by such Underwriter exceed the
amount of any damages which such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 5 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 5 and the
representations and warranties of the Company and the Underwriters set forth in
this Agreement shall remain operative and in full force and effect, regardless
of (i) any investigation made by or on behalf of the Underwriters, the Company
or any person controlling any of them or their respective directors or officers,
(ii) acceptance of any Notes and payment therefor hereunder, and (iii) any
termination of this Agreement. A successor to the Underwriters, the Company or
any person controlling any of them or their respective directors or officers,
shall be entitled to the benefits of the indemnity, contribution and
reimbursement agreements contained in this Section 5.
6. Conditions of the Underwriters' Obligations. The obligations of the
Underwriters to purchase the Notes hereunder are subject to the following
conditions:
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(a) All actions required to be taken and all filings required to be made
by the Company under the Act prior to the sale of the Notes shall have been duly
taken or made. At and prior to the Closing Date, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or, to the knowledge of
the Company or the Underwriters, shall be contemplated by the Commission.
(b) Subsequent to the effective date of this Agreement, there shall not
have occurred (i) any change, or any development involving a prospective change,
in or affecting the condition (financial or other), business, properties, net
worth, or results of operations of the Company, a Seller, the Servicer, UNIPAC
or InTuition not contemplated by the Registration Statement, which in the
opinion of the Representative, would materially adversely affect the market for
the Notes, (ii) any downgrading in the rating of any debt securities of the
Company, a Seller, the Servicer, UNIPAC or InTuition by any nationally
recognized statistical rating organization or any public announcement that any
such organization has under surveillance or review its rating of any debt
securities of the Company, a Seller, the Servicer, UNIPAC or InTuition (other
than an announcement with positive implications of a possible upgrading, and no
implication of a possible downgrading, of such rating), or (iii) any event or
development which makes any statement made in the Registration Statement or
Prospectus untrue or which, in the opinion of the Company and its counsel or the
Underwriters and their counsel, requires the filing of any amendment to or
change in the Registration Statement or Prospectus in order to state a material
fact required by any law to be stated therein or necessary in order to make the
statements therein not misleading, if amending or supplementing the Registration
Statement or Prospectus to reflect such event or development would, in the
opinion of the Representative, materially adversely affect the market for the
Notes.
(c) You shall have received an opinion addressed to you of Kutak Rock,
in its capacity as counsel to the Company, dated the Closing Date, in form and
substance satisfactory to you and your counsel with respect to the status of the
Company, to each of the Sale Agreements, Servicing Agreement, Indenture,
Custodian Agreements, Auction Agency Agreement, Broker-Dealer Agreement and this
Agreement and to the validity of the Notes and such related matters as you shall
reasonably request. In addition, you shall have received an opinion addressed to
you of Kutak Rock, in its capacity as counsel for the Company, in form and
substance satisfactory to you and your counsel, concerning "true sale," "non-
consolidation" and "first perfected security interest" and certain other issues
with respect to the transfer of the Financed Eligible Loans from the Sellers to
the Company and from the Company to the Trustee.
(d) You shall have received an opinion addressed to you of Kutak Rock,
in its capacity as counsel for the Company, dated the Closing Date, in form and
substance satisfactory to you and your counsel to the effect that the statements
in the Prospectus under the headings "CERTAIN FEDERAL INCOME TAX CONSEQUENCES"
and "ERISA CONSIDERATIONS", to the extent that they constitute statements of
matters of law or legal conclusions with respect thereto, have been prepared or
reviewed by such counsel and are correct in all material respects.
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(e) You shall have received an opinion addressed to you of Kutak Rock,
in its capacity as counsel for the Company, dated the Closing Date, in form and
substance satisfactory to you and your counsel with respect to the character of
the Notes for federal tax purposes.
(f) You shall have received an opinion addressed to you of Stroock &
Stroock & Lavan, in its capacity as Underwriters' Counsel, dated the Closing
Date, in form and substance satisfactory to you.
(g) You shall have received an opinion addressed to you of Ballard Spahr
Andrews & Ingersoll LLP, in its capacity as counsel for the Company, dated the
Closing Date in form and substance satisfactory to you and your counsel with
respect to the Prospectus and the Registration Statement and certain matters
arising under the Trust Indenture Act of 1939, as amended, and the Investment
Company Act of 1940, as amended.
(h) You shall have received opinions addressed to you of Perry, Guthery,
Haase & Gessford, P.C. in their capacity as counsel to Union Bank and Trust
Company, NEBHELP, INC. and NHELP-1, Inc., each dated the Closing Date and
satisfactory in form and substance to you and your counsel, to the effect that:
(i) Union Bank and Trust Company has been duly organized and is
validly existing as a Nebraska bank and trust company in good standing
under the laws of the State of Nebraska; NHELP-1, Inc. is a corporation
in good standing under the laws of the State of Nevada; NEBHELP, INC. is
a corporation in good standing under the laws of the State of Nebraska;
and IHI is a corporation in good standing under the laws of the State of
Florida, each having the full power and authority (corporate and other)
to own its properties and conduct its business, as presently conducted
by it, and to enter into and perform its obligations under each of the
Servicing Agreement, the Sale Agreements and the Subservicing Agreements
to which it is a party.
(ii) The Sale Agreements have been duly authorized, executed and
delivered by the respective Sellers which are parties thereto and the
Servicing Agreement, the UNIPAC Subservicing Agreement and the InTuition
Subservicing Agreement have been duly authorized, executed and delivered
by Union Bank and Trust Company, and each such agreement is the legal,
valid and binding obligations of the Sellers and Union Bank and Trust
Company, as the case may be, enforceable against the Sellers and Union
Bank and Trust Company, as the case may be, in accordance with their
respective terms, except (x) the enforceability thereof may be subject
to bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights and (y)
remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be
brought.
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(iii) Neither the execution and delivery by Union Bank and Trust
Company of the Servicing Agreement, the Sale Agreement to which it is a
party, the UNIPAC Subservicing Agreement or the InTuition Subservicing
Agreement, nor the consummation by Union Bank and Trust Company or the
Sellers of the transactions contemplated therein nor the fulfillment of
the terms thereof by Union Bank and Trust Company or the Sellers will
conflict with, result in a breach, violation or acceleration of, or
constitute a default under, any term or provision of the by-laws of
Union Bank and Trust Company or the Sellers or of any indenture or other
agreement or instrument to which Union Bank and Trust Company or the
Sellers is a party or by which Union Bank and Trust Company or the
Sellers is bound, or result in a violation of or contravene the terms of
any statute, order or regulation applicable to Union Bank and Trust
Company or the Sellers of any court, regulatory body, administrative
agency or governmental body having jurisdiction over Union Bank and
Trust Company or the Sellers.
(iv) There are no actions, proceedings or investigations pending
or, to the best of such counsel's knowledge after due inquiry and
reasonable investigation, threatened against Union Bank and Trust
Company or the Sellers before or by any governmental authority that
might materially and adversely affect the performance by Union Bank and
Trust Company or the Sellers of its obligations under, or the validity
or enforceability of, the Servicing Agreement, the UNIPAC Subservicing
Agreement, the InTuition Subservicing Agreement or the Sale Agreement to
which it is a party.
(v) Nothing has come to such counsel's attention that would lead
such counsel to believe that the representations and warranties of Union
Bank and Trust Company contained in the Servicing Agreement, the Sale
Agreement to which it is a party, the UNIPAC Subservicing Agreement or
the InTuition Subservicing Agreement or the representations and
warranties of the Sellers contained in the Sale Agreement to which each
is a party are other than as stated therein.
(vi) No authorization, approval, or other action by, and no
notice to or filing with, any governmental authority or regulatory body
is required (a) for the due execution, delivery and performance by Union
Bank and Trust Company of the Servicing Agreement, the UNIPAC
Subservicing Agreement the InTuition Subservicing Agreement, the Sale
Agreement to which it is a party, (b) for the due execution, delivery
and performance by the Sellers of the Sale Agreement to which each is a
party or (c) for the perfection of the Company's and the Trustee's
interest in the Student Loans sold pursuant to the Sale Agreements or
the exercise by the Company (or it permitted assigns) and the Trustee of
their rights and remedies under the Sale Agreements, including
specifically the filings of any Uniform Commercial Code financing
statements, except for the execution and delivery of the Guarantee
Agreements.
(vii) The Sale Agreements together with the related bill of sale
and blanket endorsement effects a valid sale to the Trustee of the
Student Loans to be sold under the Sale Agreements enforceable against
creditors of, and purchasers from, the Sellers.
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(viii) As of the date specified in a schedule to such opinion,
there were no (a) UCC financing statements naming the Sellers as debtor
or seller and covering any Student Loans to be sold under the Sale
Agreements or interest therein or (b) notices of the filing of any
federal tax lien (filed pursuant to Section 6323 of the Internal Revenue
Code) or lien of the Pension Benefit Guaranty Corporation (filed
pursuant to Section 4068 of ERISA) covering any Student Loan to be sold
under the Sale Agreements or interest therein, listed in the available
records in the respective offices set forth in such schedule opposite
each such date (which are all of the offices that are prescribed under
either the internal law of the conflict of law rules of the Nebraska UCC
as the offices in which filings should be made to perfect security
interests in Student Loans), except as set forth in such schedule.
(ix) Union Bank and Trust Company is an "eligible lender" as that
term is defined in the Higher Education Act of 1965, as amended (the
"Act"), at 20 U.S.C. ss.1085(d)(1).
(x) As of the date of such opinion, by executing the Guarantee
Agreements and upon execution and delivery of the instruments of
transfer described in the Sale Agreements and notification of the
Guarantors and borrowers of the transfer contemplated thereby, and
assuming that the Trustee is an eligible lender as that term is defined
in 20 U.S.C. ss.1085(d)(1) of the Higher Education Act of 1965, as
amended, the Trustee on behalf of the Company will be entitled to the
benefit of the applicable Guarantor and/or Department of Education
payments under the Act related to the Student Loans sold from time to
time under the Sale Agreements, subject to the terms and conditions of
the Guarantee Agreements and the Act.
(i) You shall have received an opinion addressed to you of counsel to
the Trustee, dated the Closing Date and in form and substance satisfactory to
you and your counsel, to the effect that:
(i) The Trustee is a national banking association duly organized
and validly existing under the laws of the United States of America.
(ii) The Trustee has the full corporate trust power to accept the
office of indenture trustee under the Indenture and to enter into and
perform its obligations under the Indenture, the Custodian Agreements,
the Auction Agency Agreement, the Market Agent Agreement and each
Guarantee Agreement.
(iii) The execution and delivery of each of the Indenture, the
Custodian Agreements, the Auction Agency Agreement, the Market Agent
Agreement and each Guarantee Agreement, and the performance by the
Trustee of its obligations under the Indenture, the Custodian
Agreements, the Auction Agency Agreement, the Market Agent Agreement and
each Guarantee Agreement, have been duly authorized by all necessary
action of the Trustee and each has been duly executed and delivered by
the Trustee.
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(iv) The Indenture, the Custodian Agreements, the Auction Agency
Agreement, the Market Agent Agreement and each Guarantee Agreement
constitute valid and binding obligations of the Trustee enforceable
against the Trustee.
(v) The execution and delivery by the Trustee of the Indenture,
the Custodian Agreements, the Auction Agency Agreement, the Market Agent
Agreement and each Guarantee Agreement do not require any consent,
approval or authorization of, or any registration or filing with, any
state or United States Federal governmental authority.
(vi) Each of the Notes has been duly authenticated by the
Trustee.
(vii) Neither the consummation by the Trustee of the transactions
contemplated in the Indenture, the Custodian Agreements, the Auction
Agency Agreement and each Guarantee Agreement nor the fulfillment of the
terms thereof by the Trustee will conflict with, result in a breach or
violation of, or constitute a default under any law or the charter,
by-laws or other organizational documents of the Trustee or the terms of
any indenture or other agreement or instrument known to such counsel and
to which the Trustee or any of its subsidiaries is a party or is bound
or any judgment, order or decree known to such counsel to be applicable
to the Trustee or any of its subsidiaries of any court, regulatory body,
administrative agency, governmental body or arbitrator having
jurisdiction over the Trustee or any of its subsidiaries.
(viii) There are no actions, suits or proceedings pending or, to
the best of such counsel's knowledge after due inquiry, threatened
against the Trustee (as indenture trustee under the Indenture or in its
individual capacity) before or by any governmental authority that might
materially and adversely affect the performance by the Trustee of its
obligations under, or the validity or enforceability of, the Indenture,
the Custodian Agreements, the Auction Agency Agreement, the Market Agent
Agreement or any Guarantee Agreement.
(ix) The execution, delivery and performance by the Trustee of
the Indenture the Custodian Agreements, the Auction Agency Agreement,
the Market Agent Agreement or any Guarantee Agreement will not subject
any of the property or assets of the Company or any portion thereof, to
any lien created by or arising under the Indenture that is unrelated to
the transactions contemplated in such agreements.
(x) The Trustee is an "eligible lender" for purposes of the FFELP
Program in its capacity as trustee with respect to Financed Eligible
Loans held under the Indenture.
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(j) You shall have received certificates addressed to you dated the
Closing Date of any two of the Chairman of the Board, the President, any
Executive Vice President, Senior Vice President or Vice President, the
Treasurer, any Assistant Treasurer, the principal financial officer or the
principal accounting officer of each of the Sellers and the Servicer in which
such officers shall state that, to the best of their knowledge after reasonable
investigation, (i) the representations and warranties of the Sellers or the
Servicer, as the case may be, contained in the Sale Agreement, the Servicing
Agreement, the UNIPAC Subservicing Agreement and the InTuition Subservicing
Agreement, as applicable, are true and correct in all material respects, that
each of the Sellers and the Servicer has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied under such
agreements at or prior to the Closing Date, (ii) that they have reviewed the
Prospectus and that the information therein regarding the Sellers or the
Servicer, as applicable, is fair and accurate in all material respects, and
(iii) since the date set forth in such certificate, except as may be disclosed
in the Prospectus, no material adverse change or any development involving a
prospective material adverse change, in or affecting particularly the business
or properties of the Sellers or the Servicer, as applicable, has occurred.
(k) You shall have received certificates addressed to you dated the
Closing Date of any two of the Chairman of the Board, the President, any
Executive Vice President, Senior Vice President or Vice President, the
Treasurer, any Assistant Treasurer, the principal financial officer or the
principal accounting officer of UNIPAC and InTuition in which such officers
shall state that, to the best of their knowledge after reasonable investigation,
(i) the representations and warranties of UNIPAC and InTuition contained in the
UNIPAC Subservicing Agreement and the InTuition Subservicing Agreement,
respectively, are true and correct in all material respects, that each of UNIPAC
and InTuition has complied with all agreements and satisfied all conditions on
its part to be performed or satisfied under such agreements at or prior to the
Closing Date, (ii) that they have reviewed the Prospectus and that the
information therein regarding UNIPAC and InTuition is fair and accurate in all
material respects, and (iii) since the date set forth in such certificate,
except as may be disclosed in the Prospectus, no material adverse change or any
development involving a prospective material adverse change in, or affecting
particularly the business or properties of UNIPAC and InTuition has occurred.
(l) You shall have received evidence satisfactory to you that, on or
before the Closing Date, UCC-1 financing statements have been or are being filed
in the office of the Secretary of State of the States of Nevada and Arizona
reflecting the grant of the security interest by the Company in the Financed
Eligible Loans and the proceeds thereof to the Trustee.
(m) You shall have received a certificate addressed to you dated the
Closing Date from a responsible officer acceptable to you of the Trustee in form
and substance satisfactory to you and your counsel and to which shall be
attached each Guarantee Agreement.
(n) The Underwriters shall have received on the Closing Date from KPMG
Peat Marwick a letter dated the Closing Date, and in form and substance
satisfactory to the Representative, to the effect that they have carried out
certain specified procedures, not constituting an audit, with respect to certain
information regarding the Financed Eligible Loans and setting forth the results
of such specified procedures.
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(o) All the representations and warranties of the Company contained in
this Agreement and the Basic Documents shall be true and correct in all material
respects on and as of the date hereof and on and as of the Closing Date as if
made on and as of the Closing Date and the Underwriters shall have received a
certificate, dated the Closing Date and signed by an executive officer of the
Company to the effect set forth in this Section 6(p) and in Section 6(q) hereof.
(p) The Company shall not have failed at or prior to the Closing Date to
have performed or complied with any of its agreements herein contained and
required to be performed or complied with by it hereunder at or prior to the
Closing Date.
(q) The Underwriters shall have received by instrument dated the Closing
Date (at the option of the Representative), in lieu of or in addition to the
legal opinions referred to in this Section 6, the right to rely on opinions
provided by such counsel and all other counsel under the terms of the Basic
Documents.
(r) Each of the Class A Notes shall be rated at least "AAA" and "AAA",
respectively, by Fitch IBCA, Inc. ("Fitch") and Standard & Poor's Ratings
Service, a division of The McGraw-Hill Companies ("S&P"), and that the Class B
Notes shall be rated at least "A" and "A" by Fitch and S&P, respectively, and
that neither Fitch nor S&P have placed either of the Class A Notes or the Class
B Notes under surveillance or review with possible negative implications.
(s) The issuance of the Notes shall not have resulted in a reduction or
withdrawal by Fitch or S&P of the current rating of any outstanding securities
issued or originated by the Company or any of its affiliates.
(t) You shall have received evidence satisfactory to you of the
completion of all actions necessary to effect the transfer of the Financed
Eligible Loans as described in the Prospectus and the recordation thereof on the
Sellers', UNIPAC's and InTuition's computer systems.
(u) You shall have received certificates addressed to you dated the
Closing Date from officers of the Company addressing such additional matters as
you may reasonably request in form and substance satisfactory to you and your
counsel.
(v) You shall have received a signed Indemnity Agreement from Union Bank
and Trust Company and Union Financial Services, Inc. in form and substance
satisfactory to you and your counsel.
(w) You shall have received such other opinions, certificates and
documents as are required under the Indenture as a condition to the issuance of
the Notes.
The Company will provide or cause to be provided to you such conformed
copies of such of the foregoing opinions, notes, letters and documents as you
reasonably request.
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7. Expenses. The Company agrees to pay or to otherwise cause the payment
of the following costs and expenses and all other costs and expenses incident to
the performance by it of its obligations hereunder: (i) the preparation,
printing or reproduction of the Registration Statement, the Prospectus and each
amendment or supplement to any of them, this Agreement, and each other Basic
Document; (ii) the printing (or reproduction) and delivery (including postage,
air freight charges and charges for counting and packaging) of such copies of
the Registration Statement, the Prospectus and all amendments or supplements to
any of them as may be reasonably requested for use in connection with the
offering and sale of the Notes; (iii) the preparation, printing, authentication,
issuance and delivery of definitive certificates for the Notes; (iv) the
printing (or reproduction) and delivery of this Agreement, the preliminary and
supplemental Blue Sky Memoranda and all other agreements or documents printed
(or reproduced) and delivered in connection with the offering of the Notes; (v)
qualification of the Indenture under the Trust Indenture Act; (vi) the
qualification of the Notes for offer and sale under the securities or Blue Sky
laws of the several states as provided in Section 3(h) hereof (including the
reasonable fees, expenses and disbursements of counsel relating to the
preparation, printing or reproduction, and delivery of the preliminary and
supplemental Blue Sky Memoranda and such qualification); (vii) the fees and
disbursements of (A) the Company's counsel, (B) the Underwriters' counsel, (C)
the Trustee and its counsel, (D) the Depository Trust Company in connection with
the book-entry registration of the Notes and (G) KPMG Peat Marwick, accountants
for the Company and issuer of the Comfort Letter; and (viii) the fees charged by
S&P and Fitch for rating the Notes.
8. Effective Date of Agreement. This Agreement shall be deemed effective
as of the date first above written upon the execution and delivery hereof by all
the parties hereto. Until such time as this Agreement shall have become
effective, it may be terminated by the Company, by notifying the Representative,
or by the Representative, by notifying the Company.
Any notice under this Section 8 may be given by telecopy or telephone
but shall be subsequently confirmed by letter.
9. Termination of Agreement. This Agreement shall be subject to
termination in the absolute discretion of the Representative, without liability
on the part of the Underwriters to the Company, by notice to the Company, if
prior to the Closing Date (i) trading in securities generally on the New York
Stock Exchange, American Stock Exchange or the Nasdaq National Market shall have
been suspended or materially limited, (ii) a general moratorium on commercial
banking activities in New York shall have been declared by either Federal or
state authorities, or (iii) there shall have occurred any outbreak or escalation
of hostilities or other international or domestic calamity, crisis or change in
political, financial or economic conditions, the effect of which on the
financial markets of the United States is such as to make it, in the judgment of
the Representative, impracticable or inadvisable to commence or continue the
offering of the Notes on the terms set forth in the Prospectus, as applicable,
or to enforce contracts for the resale of the Notes by the Underwriters. Notice
of such termination may be given to the Company by telecopy or telephone and
shall be subsequently confirmed by letter.
10. Information Furnished by the Underwriters. The statements set forth
under the heading "Plan of Distribution" in the Prospectus Supplement constitute
the only information furnished by or on behalf of the Underwriters as such
information is referred to in Sections 3(b) and 5 hereof.
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11. Default by One of the Underwriters. If any of the Underwriters shall
fail on the Closing Date to purchase the Notes which it is obligated to purchase
hereunder (the "Defaulted Notes"), the remaining Underwriters (the
"Non-Defaulting Underwriters") shall have the right, but not the obligation,
within one (1) Business Day thereafter, to make arrangements to purchase all,
but not less than all, of the Defaulted Notes upon the terms herein set forth;
if, however, the Non-Defaulting Underwriters shall have not completed such
arrangements within such one (1) Business Day period, then this Agreement shall
terminate without liability on the part of the Non-Defaulting Underwriters.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination
of this Agreement, either the Non-Defaulting Underwriters or the Company shall
have the right to postpone the Closing Date for a period not exceeding seven
days in order to effect any required changes in the Registration Statement or
Prospectus or in any other documents or arrangements.
12. Computational Materials. (a) It is understood that the Underwriters
may prepare and provide to prospective investors certain Computational Materials
(as defined below) in connection with the Company's offering of the Notes,
subject to the following conditions:
(i) The Underwriters shall comply with all applicable laws and
regulations in connection with the use of Computational Materials including the
No-Action Letter of May 20, 1994 issued by the Commission to Kidder, Peabody
Acceptance Corporation I, Kidder, Peabody & Co. Incorporated and Kidder
Structured Asset Corporation, as made applicable to other issuers and
underwriters by the Commission in response to the request of the Public
Securities Association dated May 24, 1994, and the No-Action Letter of February
17, 1995 issued by the Commission to the Public Securities Association
(collectively, the "Kidder/PSA Letters").
(ii) As used herein, "Computational Materials" and the term "ABS
Term Sheets" shall have the meanings given such terms in the Kidder/PSA Letters,
but shall include only those Computational Materials that have been prepared or
delivered to prospective investors by or at the direction of an Underwriter.
(iii) Each Underwriter shall provide the Company with
representative forms of all Computational Materials prior to their first use, to
the extent such forms have not previously been approved by the Company for use
by such Underwriter. Each Underwriter shall provide to the Company, for filing
on Form 8-K as provided in Section 11(b), copies of all Computational Materials
that are to be filed with the Commission pursuant to the Kidder/PSA Letters.
Each Underwriter may provide copies of the foregoing in a consolidated or
aggregated form. All Computational Materials described in this subsection
(a)(iii) must be provided to the Company not later than 10:00 A.M., Colorado
time, one business day before filing thereof is required pursuant to the terms
of this Agreement.
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(iv) If an Underwriter does not provide the Computational
Materials to the Company pursuant to subsection (a)(iii) above, such Underwriter
shall be deemed to have represented, as of the applicable Closing Date, that it
did not provide any prospective investors with any information in written or
electronic form in connection with the offering of the Notes that is required to
be filed with the Commission in accordance with the Kidder/PSA Letters.
(v) In the event of any delay in the delivery by an Underwriter
to the Company of all Computational Materials required to be delivered in
accordance with subsection (a)(iii) above, the Company shall have the right to
delay the release of the Prospectus to investors or to such Underwriter, to
delay the Closing Date and to take other appropriate actions in each case as
necessary in order to allow the Company to comply with its agreement set forth
in Section 11(b) to file the Computational Materials by the time specified
therein.
(b) The Company shall file the Computational Materials (if any) provided
to it by the Underwriter under Section 11(a)(iii) with the Commission pursuant
to a Current Report on Form 8-K no later than 5:30 P.M., New York time, on the
date required pursuant to the Kidder/PSA Letters.
13. Survival of Representations and Warranties. The respective
indemnities, agreements, representations, warranties and other statements of the
Company or its officers and of the Underwriters set forth in or made pursuant to
this Agreement or contained in notes of officers of the Company submitted
pursuant hereto shall remain operative and in full force and effect, regardless
of any investigation or statement as to the results thereof, made by or on
behalf of the Underwriters, the Company or any of their respective
representatives, officers or directors or any controlling person, and will
survive delivery of and payment for the Notes.
14. Miscellaneous. Except as otherwise provided in Sections 5, 8 and 9
hereof, notice given pursuant to any provision of this Agreement shall be in
writing and shall be delivered (i) if to the Company, at 6991 East Camelback
Road, Suite B290, Scottsdale, Arizona 85251, Attention: Stephen F. Butterfield,
and (ii) if to the Underwriters, to Salomon Smith Barney Inc., 388 Greenwich
Street, 4th Floor, New York, New York 10013, Attention: John A. Hupalo.
This Agreement has been and is made solely for the benefit of the
Underwriters, the Company, their respective directors, officers, trustees and
controlling persons referred to in Section 5 hereof and their respective
successors and assigns, to the extent provided herein, and no other person shall
acquire or have any right under or by virtue of this Agreement. Neither the term
"successor" nor the term "successors and assigns" as used in this Agreement
shall include a purchaser from an Underwriter of any of the Notes in his status
as such purchaser.
15. Applicable Law; Counterparts. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed within the State of New York without giving
effect to the choice of laws or conflict of laws principles thereof.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof or
thereof shall have been executed and delivered on behalf of each party hereto.
21
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the Underwriters.
Very truly yours,
UNION FINANCIAL SERVICES-1, INC.
By:/s/ Stephen F. Butterfield
------------------------------
Stephen F. Butterfield
President
Confirmed as of the date first above mentioned.
SALOMON SMITH BARNEY INC., as acting on
behalf of itself and as Representative of the Underwriters
By: /s/ John Hupalo
- ----------------------
John Hupalo, Director
22
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Principal Amount of Notes
Underwriter Class A-7 Class A-8 Class A-9 Class A-10 Class A-11 Class A-12 Class B-5
- ----------- --------- --------- --------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Salomon Smith Barney Inc. $112,500,000 $112,500,000 $112,500,000 $100,000,000 $100,000,000 $100,000,000 $70,000,000
Dain Rauscher Incorporated 12,500,000 12,500,000 12,500,000 -- -- -- --
------------ ----------- ----------- ----------- ----------- ---------- ----------
Total $125,000,000 $125,000,000 $125,000,000 $100,000,000 $100,000,000 $100,000,000 $70,000,000
=========== =========== =========== =========== =========== =========== ==========
</TABLE>
Terms of the Notes
<TABLE>
<CAPTION>
Interest Rate Final Maturity Date Price to Public Underwriting Discount Proceeds to Issuer
------------- ------------------- --------------- --------------------- ------------------
Class
- ----
<S> <C> <C> <C> <C> <C>
A-7 5.48% August 1, 2005 (1) (1) (1)
A-8 5.50% September 1, 2005 (1) (1) (1)
A-9 5.73% December 1, 2005 (1) (1) (1)
A-10 Auction Rate October 1, 2032 100% 0.325% $99,675,000
A-11 Auction Rate November 1, 2032 100% 0.325% $99,675,000
A-12 Auction Rate December 1, 2032 100% 0.325% $99,675,000
B-5 Auction Rate December 1, 2032 100% 0.375% $69,737,500
</TABLE>
(1)These Classes of Series 1998 Notes will be purchased by the Underwriters for
an aggregate purchase price of $371,871,376, plus accrued interest from December
15, 1998. These Classes of Series 1998 Notes will be offered by the Underwriters
from time to time in negotiated transactions or otherwise at varying prices to
be determined at the time of sale.
1
EXHIBIT 4.3
SERIES 1998 SUPPLEMENTAL INDENTURE OF TRUST
by and between
UNION FINANCIAL SERVICES-1, INC.
and
ZIONS FIRST NATIONAL BANK,
as Trustee
Authorizing the Issuance of
$745,000,000
Union Financial Services-1, Inc.
Taxable Student Loan Asset-Backed Notes
Series 1998
Dated as of December 15, 1998
<PAGE>
SERIES 1998 SUPPLEMENTAL INDENTURE OF TRUST
THIS SERIES 1998 SUPPLEMENTAL INDENTURE OF TRUST (this "Supplemental
Indenture") dated as of December 15, 1998, 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 ZIONS FIRST NATIONAL BANK, a national
banking association duly organized and operating under the laws of the United
States of America (together with its successors, the "Trustee"), as successor
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 an Indenture of Trust
dated as of March 1, 1996 (as amended by an Amended and Restated Indenture of
Trust dated as of June 15, 1996 and by a Second Amended and Restated Indenture
of Trust dated as of November 1, 1996, a First Supplement to Second Amended and
Restated Indenture of Trust dated as of March 1, 1997, a Second Supplement to
Second Amended and Restated Indenture of Trust dated as of September 1, 1998 and
a Third Supplement to Second Amended and Restated Indenture of Trust dated as
December 1, 1998, the "Original Indenture," and together with this Supplemental
Indenture, 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 $745,000,000 of its Taxable Student Loan Asset-Backed Notes, Series
1998 consisting of two Classes, designated as Senior Class 1998A (the "Class
1998A Notes") and Subordinate Class 1998B (the "Class 1998B Notes," and together
with the Class 1998A Notes, the "Series 1998 Notes"), and it has by proper
corporate action authorized the execution and delivery of this Supplemental
Indenture;
WHEREAS, the Series 1998 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, with respect to the Class 1998A-10
Notes, the Class 1998A-11 Notes, the Class 1998A-12 Notes and the Class 1998B
Notes, $100,000 and any integral multiple thereof, and with respect to the Class
1998A-7 Notes, the Class 1998A-8 Notes and the Class 1998A-9 Notes, $50,000 and
integral multiples of $1,000 in excess thereof.
"Class 1998A Notes" means, collectively, the Class 1998A-7 Notes, the
Class 1998A-8 Notes, the Class 1998A-9 Notes, the Class 1998A-10 Notes, the
Class 1998A-11 Notes and the Class 1998A-12 Notes.
"Class 1998A-7 Notes" means the $125,000,000 Union Financial Services-1,
Inc., Taxable Student Loan Asset-Backed Notes, Senior Class 1998A-7 Fixed Rate.
"Class 1998A-8 Notes" means the $125,000,000 Union Financial Services-1,
Inc., Taxable Student Loan Asset-Backed Notes, Senior Class 1998A-8 Fixed Rate.
"Class 1998A-9 Notes" means the $125,000,000 Union Financial Services-1,
Inc., Taxable Student Loan Asset-Backed Notes, Senior Class 1998A-9 Fixed Rate.
"Class 1998A-10 Notes" means the $100,000,000 Union Financial
Services-1, Inc., Taxable Student Loan Asset-Backed Notes, Senior Class 1998A-10
Auction Rate Securities (ARSSM).
"Class 1998A-11 Notes" means the $100,000,000 Union Financial
Services-1, Inc., Taxable Student Loan Asset-Backed Notes, Senior Class 1998A-11
Auction Rate Securities (ARSSM).
"Class 1998A-12 Notes" means the $100,000,000 Union Financial
Services-1, Inc., Taxable Student Loan Asset-Backed Notes, Senior Class 1998A-12
Auction Rate Securities (ARSSM).
"Class 1998B Notes" means, collectively, the $70,000,000 Union Financial
Services-1, Inc., Taxable Student Loan Asset-Backed Notes, Subordinate Class
1998B-5 Auction Rate Securities (ARSSM) issued pursuant to this Supplemental
Indenture and up to $125,000,000 of Union Financial Services-1, Inc. Taxable
Student Loan Asset-Backed Notes, Subordinate Class 1998B-5 Auction Rate
Securities (ARSSM) to be issued as Additional Notes under a Supplemental
Indenture.
2
<PAGE>
"Date of Issuance" means, with respect to the Series 1998 Notes,
December 22, 1998.
"Rating Agency" means, collectively, Fitch IBCA, Inc. and Standard &
Poor's Ratings Services.
"Series 1998 Notes" means the Union Financial Services-1, Inc., Taxable
Student Loan Asset-Backed Notes, Series 1998 issued pursuant to the Indenture
and this Supplemental Indenture in the aggregate principal amount of
$745,000,000, consisting of the Class 1998A Notes and the Class 1998B Notes.
"Series 1998 Reserve Fund Requirement" means an amount equal to 2% of
the aggregate principal amount of the Series 1998 Notes then Outstanding;
provided, however, that so long as any Notes remain Outstanding there shall be
at least $1,500,000 on deposit in the Reserve Fund.
"Servicer" means Union Bank and Trust Company.
"Servicing Agreement" means, collectively, (i) the Second Amended and
Restated Servicing Agreement dated as of December 22, 1998, as supplemented and
amended, between the Issuer and the Servicer, (ii) the Servicing Agreement dated
as of January 1, 1995, as supplemented and amended, between the Servicer and
UNIPAC Service Corporation, as subservicer, and (iii) the Servicing Agreement
dated as of December 22, 1998, as supplemented and amended, between the Servicer
and InTuition, Inc., as subservicer.
"Subservicer" means, collectively, UNIPAC Service Corporation and
InTuition, Inc.
"Underwriter" means, with respect to the Class 1998A-10 Notes, Class
1998A-11 Notes, Class 1998A-12 Notes and Class 1998B Notes, Salomon Smith Barney
Inc., and with respect to the Class 1998A-7 Notes, the Class 1998A-8 Notes and
the Class 1998A-9 Notes, Salomon Smith Barney Inc. and Dain Rauscher
Incorporated.
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 1998 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.
3
<PAGE>
ARTICLE II
SERIES 1998 NOTE DETAILS,
FORM OF SERIES 1998 NOTES,
REDEMPTION OF SERIES 1998 NOTES
AND USE OF PROCEEDS OF SERIES 1998 NOTES
Section 2.01. Series 1998 Note Details.
(a) The aggregate principal amount of the Series 1998 Notes which may be
initially authenticated and delivered under this Supplemental Indenture is
limited to $745,000,000, consisting of $675,000,000 of Class 1998A Notes and
$70,000,000 of Class 1998B Notes, except for Class 1998A Notes and Class 1998B
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. Additional
Class 1998B Notes may be issued in an amount not to exceed $125,000,000 as
Additional Notes under the terms of a Supplemental Indenture. Such Additional
Class 1998B Notes, if any, shall mature on December 1, 2032, and be issued with
the same terms as the Class 1998B Notes issued under this Supplemental
Indenture. In addition, the Class 1998A Notes shall be issued in six (6)
separate subclasses (each a "subclass" of the Class 1998A Notes) consisting of
$125,000,000 of Class 1998A-7 Notes, $125,000,000 of Class 1998A-8 Notes,
$125,000,000 of Class 1998A-9 Notes, $100,000,000 of Class 1998A-10 Notes,
$100,000,000 of Class 1998A-11 Notes and $100,000,000 of Class 1998A-12 Notes."
The Class 1998A-7 Notes shall be known and designated as "Union Financial
Services-1, Inc., Taxable Student Loan Asset-Backed Notes, Senior Class 1998A-7
Fixed Rate." The Class 1998A-8 Notes shall be known and designated as "Union
Financial Services-1, Inc., Taxable Student Loan Asset-Backed Notes, Senior
Class 1998A-8 Fixed Rate." The Class 1998A-9 Notes shall be known and designated
as "Union Financial Services-1, Inc., Taxable Student Loan Asset-Backed Notes,
Senior Class 1998A-9 Fixed Rate." The Class 1998A-10 Notes shall be known and
designated as "Union Financial Services-1, Inc., Taxable Student Loan
Asset-Backed Notes, Senior Class 1998A-10 Auction Rate SecuritiesSM (ARSSM)."
The Class 1998A-11 Notes shall be known and designated as "Union Financial
Services-1, Inc., Taxable Student Loan Asset-Backed Notes, Senior Class 1998A-11
Auction Rate SecuritiesSM (ARSSM)." The Class 1998A-12 Notes shall be known and
designated as "Union Financial Services-1, Inc., Taxable Student Loan
Asset-Backed Notes, Senior Class 1998A-12 Auction Rate SecuritiesSM (ARSSM)."
The Class 1998B Notes shall be known and designated as "Union Financial
Services-1, Inc., Taxable Student Loan Asset-Backed Notes, Subordinate Class
1998B-5 Auction Rate SecuritiesSM (ARSSM)." The Series 1998 Notes shall be
issuable only as fully registered notes in the Authorized Denominations. The
Class 1998A Notes and Class 1998B Notes of each class and subclass shall each be
lettered "R" and shall be numbered separately from 1 upwards, respectively.
The Class 1998A-7 Notes, Class 1998A-8 Notes and Class 1998A-9 Notes
shall be dated December 22, 1998 and shall bear interest from December 15, 1998,
payable on the first Business Day of each month (an "Interest Payment Date"),
commencing February 1, 1999, except that Class 1998A-7 Notes, Class 1998A-8
Notes and Class 1998A-9 Notes which are issued upon transfer, exchange or other
4
<PAGE>
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 December 15,
1998. The Class 1998A-7 Notes shall bear interest at 5.48% per annum and mature
on August 1, 2005; the Class 1998A-8 Notes shall bear interest at 5.50% per
annum and mature on September 1, 2005 and the Class 1998A-9 Notes shall bear
interest at 5.73% per annum and mature on December 1, 2005. Interest on the
Class 1998A-7 Notes, the Class 1998A-8 Notes and the Class 1998A-9 Notes shall
be computed on the basis of a 360-day year of twelve 30-day months.
The Class 1998A-10 Notes, Class 1998A-11 Notes, Class 1998A-12 Notes and
Class 1998B Notes (collectively, the "Auction Rate Notes") shall be dated their
Date of Issuance and shall bear interest from their Date of Issuance, payable on
each Interest Payment Date (as defined in Appendix A to this Supplemental
Indenture), except that Auction 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 Auction Rate Notes. The Class 1998A-10 Notes shall mature
on October 1, 2032, the Class 1998A-11 Notes shall mature on November 1, 2032,
the Class 1998A-12 Notes shall mature on December 1, 2032 and the Class 1998B
Notes shall mature on December 1, 2032. Interest on the Auction Rate 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 A to this Supplemental Indenture.
The principal of the Series 1998 Notes due at its Stated Maturity or
redemption in whole shall be payable at the Principal Office of the Trustee, or
such other location as directed by the Trustee, or at the Principal Office of
its successor in trust upon presentation and surrender of the Series 1998 Notes.
Payment of interest and principal paid subject to a redemption on any Series
1998 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 1998 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 1998 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 1998 Notes shall be made in
lawful money of the United States of America.
5
<PAGE>
(b) Except as otherwise provided in this Section, the Series 1998 Notes
in the form of one global note for each Stated Maturity date 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 1998 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 1998
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 1998 Notes, (ii) the delivery to any
Agent Member, beneficial owner of the Series 1998 Notes or other Person, other
than the Securities Depository, of any notice with respect to the Series 1998
Notes or (iii) the payment to any Agent Member, beneficial owner of the Series
1998 Notes or other Person, other than the Securities Depository, of any amount
with respect to the principal of or interest on the Series 1998 Notes. So long
as the certificates for the Series 1998 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 1998 Notes for all purposes
whatsoever, including, without limitation, (A) the payment of principal of and
interest on such Series 1998 Notes, (B) giving notices of redemption and other
matters with respect to such Series 1998 Notes and (C) registering transfers
with respect to such Series 1998 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 1998
Notes, give the Securities Depository notice of such record date not less than
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 1998 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 1998 Notes as provided below. In addition,
6
<PAGE>
the Issuer may determine at any time that the Series 1998 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 1998 Notes. In such
event, the Issuer shall execute and the Trustee shall authenticate and deliver
certificates representing the Series 1998 Notes as provided below. Certificates
for the Series 1998 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 1998 Notes to the Persons in whose names such Notes are so
registered.
Section 2.02. Redemption of the Series 1998 Notes. Notwithstanding
anything to the contrary set forth in this Section 2.02 or any other provision
of the Indenture to the contrary, redemption of the Class 1998A-7, Class 1998A-8
and Class 1998A-9 Notes shall be subject to the Irrevocable Issuer Order dated
December 22, 1998.
(a) Mandatory Redemption.
(i) Subject to the provisions of Section 2.02(d) hereof, the
Class 1998A Notes are subject to mandatory redemption at the direction
of 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 the Indenture.
(ii) Subject to the provisions of Section 2.02(d) hereof, the
Class 1998B Notes shall be subject to mandatory redemption at the
direction of the Issuer on or after April 1, 1999, in whole or in part,
on any Interest Payment Date, 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 the Indenture.
(b) Optional Redemptions and Optional Purchase.
(i) Optional Redemption of Class 1998 Notes. Subject to the
provisions of Section 2.02(d) hereof, the Class 1998A-10 Notes, Class
1998A-11 Notes, Class 1998A-12 Notes and Class 1998B 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.
7
<PAGE>
(ii) Extraordinary Optional Redemption of Series 1998 Notes.
Subject to the provisions of Section 2.02(d) hereof, the Class 1998A-10
Notes, the Class 1998A-11 Notes, the Class 1998A-12 Notes and Class
1998B 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 Class 1998A-10 Notes, the Class 1998A-11 Notes, the Class
1998A-12 Notes and Class 1998B 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. The Class 1998A-7 Notes, the Class 1998A-8 Notes and Class
1998A-9 Notes are not subject to extraordinary optional redemption at
the option of the Issuer.
(iii) Optional Purchase of Series 1998 Notes. Subject to the
provisions of Section 2.02(d) hereof, the Issuer may purchase or cause
to be purchased all of the Series 1998 Notes on any Interest Payment
Date on which the aggregate current principal balance of the Series 1998
Notes shall be less than or equal to 10% of the initial aggregate
principal balance of the Series 1998 Notes on their Date of Issuance, at
a purchase price equal to the aggregate current principal balance of
such Series 1998 Notes, plus accrued interest on the Series 1998 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 1998 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 by
first-class mail to the Registered Owner of any Series 1998 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 1998 Notes for which no such
failure or defect occurs.
(d) Partial Redemption.
(i) If less than all of the Series 1998 Notes are to be redeemed
pursuant to Section 2.02(a) or 2.02(b) hereof, the class or subclass of
Series 1998 Notes to be redeemed shall be redeemed as directed by an
Issuer Order. If less than all of the Series 1998 Notes of any Stated
Maturity of any class or subclass of the Series 1998 Notes are to be
8
<PAGE>
redeemed, (A) the Series 1998A-10 Notes, the Series 1998A-11 Notes, the
Series 1998A-12 Notes and the Series 1998B-5 Notes of the same Stated
Maturity to be redeemed shall be selected by lot in such manner as the
Trustee shall determine, and (B) the Series 1998A-7 Notes, the Series
1998A-8 Notes and the Series 1998A-9 Notes of the same Stated Maturity
to be redeemed shall be selected pro rata by the Trustee.
Notwithstanding the foregoing, the Series 1998 Notes may only be
redeemed pursuant to the provisions of Section 5.06 of the Indenture.
(ii) In case a Series 1998 Note is of a denomination larger than
an Authorized Denomination, a portion of such Note (in an Authorized
Denomination) may be redeemed. Upon surrender of any Series 1998 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 1998 Note or Series
1998 Notes of the same series, maturity and of authorized denominations,
in an aggregate principal amount equal to the unredeemed portion of the
Series 1998 Note surrendered.
Section 2.03. Delivery of Series 1998 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 1998 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 1998 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 1998 Notes.
(b) Duly executed copies of this Supplemental Indenture and a
copy of the Indenture.
(c) The written order of the Issuer as to the delivery of the
Series 1998 Notes, signed by an Authorized Officer.
(d) A Cash Flow Certificate pursuant to Section 2.12(b)(ii) of
the Original Indenture.
(e) Rating letters from each Rating Agency pursuant to Section
2.12(b)(iii) of the Original Indenture.
(f) An opinion of Note Counsel pursuant to Sections 2.12(b)(iv)
and (vi) of the Original Indenture.
9
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Section 2.04. Trustee's Authentication Certificate. The Trustee's
authentication certificate upon the Series 1998 Notes shall be substantially in
the form provided in Exhibit A hereof. No Series 1998 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 1998 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 1998 Notes issued hereunder.
Section 2.05. Deposit of Series 1998 Note Proceeds. Upon the issuance
and delivery of the Series 1998 Notes, the Trustee shall deposit the net
proceeds thereof (i.e., net of Underwriter's discount of $3,807,362 original
issue discount of $558,762, plus accrued interest of $406,145.83):
(a) an amount equal to $1,077,206 shall be deposited to the
Cost of Issuance Fund;
(b) an amount equal to $14,900,000 shall be deposited to the
Reserve Fund;
(c) an amount equal to $724,656,670 shall be deposited to the
Series 1998 Loan Account of the Student Loan Fund; and
(d) an amount equal to $406,145.83 shall be deposited to the
Revenue Fund.
Section 2.06. Forms of Series 1998 Notes. The Class 1998A-7 Notes, Class
1998A-8 Notes and Class 1998A-9 Notes shall be in substantially the form set
forth in Exhibit A-1 hereto, each with such variations, omissions and insertions
as may be necessary. The Class 1998A-10 Notes, Class 1998A-11 Notes and Class
1998A-12 Notes shall be in substantially the form set forth in Exhibit A-2
hereto, each with such variations, omissions and insertions as may be necessary.
The Class 1998B Notes shall be in substantially the form set forth in Exhibit
A-3 hereto, each with such variations, omissions and insertions as may be
necessary.
ARTICLE III
AMENDMENTS TO ORIGINAL INDENTURE
Section 3.01. Section 2.12(c) of the Original Indenture is hereby
amended as provided in Section 8.01(m) thereof, as follows:
(c) Any Additional Notes shall have the Stated Maturities
described in a Supplemental Indenture.
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Section 3.02. The Original Indenture is hereby amended, restated and
supplemented as provided in Sections 2.12 and 8.01(l) and 8.01(m) thereof, as
follows:
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 December 15,
1998.
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
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 1996C Loan Account, a Series 1998 Loan Account,
a Series 1996 Note Account, a Series 1996C Note Account, a Series
1998 Note Account, a Series 1996 Recycling Account, a Series 1998
Recycling Account and any other Accounts added pursuant to a
Supplemental Indenture therein,
(ii) Revenue Fund,
(iii) Reserve Fund,
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(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:
(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, the Series 1996B Notes and the Series 1996C Notes, there
was transferred to the Series 1996 Loan Account of the Student Loan Fund the
amounts set forth in this Indenture. On the Date of Issuance of any Additional
Notes, there will be transferred to the respective Loan Account of the Student
Loan Fund the amounts set forth in any Supplemental Indenture. 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
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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 may use
proceeds in any Recycling Account of the Student Loan Fund to purchase Eligible
Loans which have a stated maturity shorter than the longest Stated Maturity of
any Series of Notes then Outstanding. 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: (a) the Aggregate Market Value of the Trust Estate is greater than the
aggregate principal amount of Notes Outstanding, or (b) 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 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: (i) the Special Allowance
Payments, (ii) the loan interest yield formula, (iii) the guaranty obligation of
the Guarantee Agency, (iv) the federal interest subsidies, or (v) 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 anything herein to the contrary, 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 and the
Student Loan Holding Fund, such transfers shall be made by the Trustee, upon
Issuer Order, in an amount equal to any such deficiency (including replenishment
of the Reserve Fund), directly from the Loan Accounts of the Student Loan Fund,
then from the Recycling Accounts of the Student Loan Fund, and, but only after
the required transfers from the Reserve Fund, then from the proceeds from the
sale of Financed Eligible Loans in the Note Accounts of the Student Loan Fund.
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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, 2002, or such later date as approved in writing by the
Rating Agencies, all moneys and investments remaining in the Recycling Accounts
of the Student Loan Fund shall be transferred to the Note Redemption Fund. In
addition, subsequent to January 15, 1999, the Issuer shall determine on a
monthly basis and include in its servicer report if the aggregate principal
amount of Financed Eligible Loans that bear interest at a fixed interest rate is
less than the aggregate principal amount of Notes that bear interest at a fixed
interest rate, the Issuer shall (i) purchase additional Eligible Loans that bear
interest at a fixed rate, with proceeds in any Recycling Account of the Student
Loan Fund, in an aggregate principal amount necessary to have Financed Eligible
Loans that bear interest at a fixed interest rate greater than the aggregate
principal amount of Notes that bear interest at a fixed rate, or (ii) prepare a
Cash Flow Certificate to be approved by each Rating Agency. Notwithstanding
anything herein to the contrary, upon Issuer Order, amounts held in the
Recycling Accounts of the Student Loan Fund may 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 this Indenture or any
Supplemental Indenture 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 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 to pay 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 April 1, 2002, unless otherwise approved by each Rating Agency and on and
after April 1, 2002, 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.
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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 (a), (b) and (c) below and (ii) the Operating Fund on the
first Business Day of each month as specified in (d) 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):
(a) 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;
(b) 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;
(c) 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
(d) 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.
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 or prior to the
next succeeding Transfer Date (if such principal payment 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;
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(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 or
prior to the next succeeding Transfer Date (if such principal payment 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 or prior to the next succeeding Transfer Date (if such principal
payment 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;
(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 Recycling Accounts of the Student Loan Fund prior to
April 1, 2002, or such later date as approved in writing by the Rating
Agencies, and (ii) to the Note Redemption Fund on and after April 1,
2002;
(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) hereof;
(k) at the option of the Issuer and upon Issuer Order, to the
Note Redemption Fund or, prior to April 1, 2002, or such later date as
approved in writing by the Rating Agencies, to the Recycling Accounts of
the Student Loan Fund; and
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(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 is
equal to the Maximum Auction Rate for six consecutive Auction Periods, the
Estimated Amount transferred to the Operating Fund shall be reduced to .05%
until such time as each Rating Agency approves a Cash Flow Certificate prepared
by the Issuer.
Section 5.04. Reserve Fund.
(a) The Trustee shall deposit to the Reserve Fund the amount
specified in this Indenture and any Supplemental Indenture. 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 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
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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 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 $1,500,000,
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
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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 any other Account
of the Interest Fund, from 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,
from the Student Loan Holding Fund, from the Loan Account of the Student Loan
Fund, from the Recycling Accounts of the Student Loan Fund, from the Reserve
Fund and from the proceeds from the sale of Financed Eligible Loans in the Note
Accounts of the Student Loan Fund, 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.
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
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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 from the Revenue Fund
as provided above, then the amount of any such deficiency shall be provided
(after first making any required transfers to the Senior Interest Account), from
the Junior-Subordinate Note Redemption Account of the Note Redemption Fund, the
Subordinate Note Redemption Account of the Note Redemption Fund, from the
Student Loan Holding Fund, from the Loan Account of the Student Loan Fund, from
the Recycling Accounts of the Student Loan Fund, from the Reserve Fund and from
the proceeds from the sale of Financed Eligible Loans in the Note Accounts of
the Student Loan Fund, 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 form moneys transferred
from the Revenue Fund as provided above, then the amount of any such deficiency
shall be provided (after first making any required transfers to the Senior
Interest Account and the Subordinate Interest Account) from the
Junior-Subordinate Note Redemption Account of the Note Redemption Fund, from the
Student Loan Holding Fund, from the Loan Account of the Student Loan Fund, from
the Recycling Accounts of the Student Loan Fund, from the Reserve Fund and from
the proceeds from the sale of Financed Eligible Loans in the Note Accounts of
the Student Loan Fund, 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.
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.
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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 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
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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 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
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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 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 (a) that portion of such payment representing interest
payments (including Special Allowance Payments and Interest Subsidy Payments) on
Eligible Loans to the Revenue Fund, (b) shall so transfer the portion of such
payment representing principal payments (including unamortized premiums) on
Financed Eligible Loans held in the Note Accounts of the Student Loan Fund to
the Recycling Account of the Student Loan Fund prior to April 1, 2002, or such
later date as approved in writing by the Rating Agencies, and (c) 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
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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 this
Indenture and any Supplemental Indenture. 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 Section 2.10(b)(ii) hereof, such
amounts shall be paid by the Trustee without further direction to the Issuer.
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.
The Trustee shall deposit in the Cost of Issuance Fund on the Date of
Issuance the amounts set forth in Section 2.05(b) of the Series 1997A
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 Class 1997B-4
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 June 1, 1997, such amounts shall be paid by the Trustee without further
direction to the Issuer.
The Trustee shall deposit in the Cost of Issuance Fund on the Date of
Issuance the amounts set forth in Section 2.05(b) of the Series 1998
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 1998
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, 1999, 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
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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 twenty-fifth 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 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.
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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.
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
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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.
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ARTICLE VI
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
ZIONS FIRST NATIONAL BANK, as Trustee
By /s/ David Bata
---------------------
Vice President
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APPENDIX A
CERTAIN TERMS AND PROVISIONS OF
THE AUCTION RATE NOTES
ARTICLE I
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, January 21, 1999 with respect to the
Class 1998A-10 Notes, January 28, 1999 with respect to the Class 1998A-11 Notes,
February 4, 1999 with respect to the Class 1998A-12 Notes and January 21, 1999
with respect to the Class 1998B Notes, and thereafter, the Business Day
immediately preceding the first day of each Auction Period for each respective
Class or Subclass, other than:
<PAGE>
(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;
(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 A.
"Auction Rate Notes" means the Class 1998A-10 Notes, the Class 1998A-11
Notes, the Class 1998A-12 Notes and the Class 1998B 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 or
Subclass) initially shall consist generally of 28 days for the Class 1998A-10
Notes, 28 days for the Class 1998A-11 Notes, 28 days for the Class 1998A-12
Notes and 28 days for the Class 1998B 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.
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"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 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, Salomon 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 Salomon 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 December 15, 1998, among the Issuer, Bankers Trust Company, as
Auction Agent, and Salomon 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.
A-3
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"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 A and the Auction Rate 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 Auction Rate Notes
(December 22, 1998).
"Commercial Paper Dealer" means Salomon Smith Barney Inc., its
successors and assigns, and any other commercial paper dealer appointed pursuant
to Section 2.02(c) of this Appendix A.
"Effective Interest Rate" means, with respect to any Financed Eligible
Loan, the interest rate per annum payable by the borrower as of the last day of
the calendar quarter borne by such Financed Eligible Loan after giving effect to
any reduction in such interest rate pursuant to borrower incentives, (a) less
all accrued rebate fees on such Financed Eligible Loan constituting
Consolidation Loans paid during such calendar quarter expressed as a percentage
per annum and (b) plus all accrued Interest Benefit Payments and Special
Allowance Payments applicable to such Financed Eligible Loan during such
calendar quarter expressed as a percentage per annum.
"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.
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"Initial Auction Agent Agreement" means, collectively, the Auction Agent
Agreement dated as of December 15, 1998, 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 5.80% for the Class 1998A-10 Notes, 5.75% for the
Class 1998A-11 Notes, 5.75% for the Class 1998A-12 Notes and 6.15% for the Class
1998B Notes.
"Initial Rate Adjustment Date" means, with respect to the Class 1998A-10
Notes, January 22, 1999; with respect to the Class 1998A-11 Notes, January 29,
1999; with respect to the Class 1998A-12 Notes, February 5, 1999; and with
respect to the Class 1998B Notes, January 22, 1999.
"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 or Subclass, 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 or Subclass and ending on the day before (a) the next Interest
Rate Adjustment Date for such Class or Subclass or (b) the Stated Maturity of
such Class or Subclass, 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
or Subclass, the Business Day immediately preceding the date of commencement of
an Auction Period.
"Maintenance and Operating Expense Percentage" means, the percentage
that all Maintenance and Operating Expenses estimated for the next 12 months
represent of the principal amount of the Notes, which as of December 15, 1998 is
1.05%, and which the Issuer shall calculate at least annually. Any adjustment in
the Maintenance and Operating Expense Percentage shall be effective beginning on
the first Interest Rate Determination Date following each such calculation.
"Market Agent" means Salomon Smith Barney Inc., New York, New York, in
such capacity hereunder, or any successor to it in such capacity hereunder.
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"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, respect to any Interest Period applicable to the
Auction Rate Notes, the greater of (a) 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% or (b) the rate of interest per
annum (rounded to the next highest one-hundredth of one percent) equal to (i)
the weighted average Effective Interest Rate of the Financed Eligible Loans for
the calendar quarter immediately preceding such Interest Period, as determined
by the Issuer on the last day of such calendar quarter, less (ii) the
Maintenance and Operating Expense Percentage, as calculated by the Issuer. In
making the determination of the Net Loan Rate, the Issuer shall take into
account as an increase to such Net Loan Rate the receipt of any Swap
Counterparty Payments and as a decrease to any Issuer Swap Payment.
"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 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.
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"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.
"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 or Subclass of Auction Rate Notes during
the Initial Period for such Class or Subclass, 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. During the Initial Period, the Auction
Rate Notes shall bear interest at the Initial Rate for such Class or Subclass.
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
28-day Auction Period for the Auction Rate Notes, as determined pursuant to this
Section 2.01 and Section 2.02 hereof.
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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 (i) fourth Business Day of the following fourth week in the case of
the Class 1998A-10 Notes, (ii) fourth Business Day of the following fourth week
in the case of the Class 1998A-11 Notes, (iii) fourth Business Day of the
following fourth week in the case of the Class 1998A-12 Notes, and (iv) fourth
Business Day of the following fourth week in the case of the Class 1998B 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.
Notwithstanding the foregoing:
(a) 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
(b) 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.
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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 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 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 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.
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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 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 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. 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.
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(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.
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.
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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."
(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 by such Existing Owner and not subject
to an Order submitted to the Auction Agent.
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(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 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
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(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 "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-16
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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 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.
A-17
<PAGE>
(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.
(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:
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(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 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
A-19
<PAGE>
(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:
(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.
A-20
<PAGE>
(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 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.
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<PAGE>
(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 C attached hereto to
the Auction 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 D 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.
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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 Salomon 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, Salomon 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. Salomon
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 or Subclass 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 or Subclass 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 continuing and the ownership of the Auction
Rate Notes is maintained in Book-entry Form by the Securities
Depository.
A-23
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(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 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.
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(f) Broker-Dealers.
(i) The Auction Agent will enter into a Broker-Dealer
Agreement with Salomon 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 Salomon Smith Barney
Inc. is serving as a Broker-Dealer, Salomon 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 E 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-25
<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 F 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 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 G 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 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.
A-26
<PAGE>
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 Issuer hereby directs
the Trustee to appoint Salomon Smith Barney Inc. as the 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.
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.
A-27
<PAGE>
EXHIBIT A-1
FORM OF CLASS 1998A-7, CLASS 1998A-8
AND CLASS 1998A-9 SENIOR FIXED 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 1998A-[7] [8] [9]
FIXED RATE
REGISTERED NO. R-__ REGISTERED $125,000,000
Maturity Date Interest Rate Original Issue Date CUSIP No.
_________, 2005 _______% December 22, 1998 906619
PRINCIPAL SUM: ONE HUNDRED TWENTY-FIVE MILLION AND 00/100 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 "Original Indenture") and the
Series 1998 Supplemental Indenture of Trust dated as of December 15, 1998 (as
amended, the "Series 1998 Supplemental Indenture," and together with the
Original Indenture, the "Indenture"), each between the Issuer and Zions First
National Bank, as successor 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.
<PAGE>
This note shall bear interest at rate shown above, computed on the basis
of a 360-day year of twelve 30-day months. Interest on this note shall be
payable on the first Business Day of each month.
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 1998A-[7][8][9] Fixed Rate, dated
December 15, 1998, in the aggregate original principal amount of $125,000,000
(the "Class 1998A-[7][8][9] Notes") which have been authorized by the Issuer
under a certain resolution, and issued by the Issuer pursuant to the Indenture.
The following notes of the Issuer are being issued simultaneously with the Class
1998A-[7][8][9] Notes or currently remain Outstanding under the Indenture:
$48,300,000 of its Taxable Student Loan Asset-Backed Notes, Senior Class 1996A-1
Auction Rate Securities (ARSSM) (the "Class 1996A-1 Notes"), $48,300,000 of its
Taxable Student Loan Asset-Backed Notes, Senior Class 1996A-2 Auction Rate
Securities (ARSSM) (the "Class 1996A-2 Notes"), $73,700,000 of its Taxable
Student Loan Asset-Backed Notes, Senior Class 1996A-3 Auction Rate Securities
(ARSSM) (the "Class 1996A-3 Notes"), $54,300,000 of its Taxable Student Loan
Asset-Backed Notes, Senior Class 1996A-4 Auction Rate Securities (ARSSM) (the
"Class 1996A-4 Notes"), $225,000,000 of its Taxable Student Loan Asset-Backed
Notes, Senior Class 1996A-5 Treasury Rate (the "Class 1996A-5 Notes"),
$75,500,000 of its Taxable Student Loan Asset-Backed Notes, Senior Class 1996A-6
Auction Rate Securities (ARSSM) (the "Class 1996A-6 Notes"), $125,000,000 of its
Taxable Student Loan Asset-Backed Notes, Senior Class 1998A-[7][8][9] Fixed Rate
(the "Class 1998A-[7][8][9] Notes"), $125,000,000 of its Taxable Student Loan
Asset-Backed Notes, Senior Class 1998A-[7][8][9] Fixed Rate (the "Class
1998A-[7][8][9] Notes"), $100,000,000 of its Taxable Student Loan Asset-Backed
Notes, Senior Class 1998A-10 Auction Rate Securities (ARSSM) (the "Class
1998A-10 Notes"), $100,000,000 of its Taxable Student Loan Asset-Backed Notes,
Senior Class 1998A-11 Auction Rate Securities (ARSSM) (the "Class 1998A-11
Notes"), $100,000,000 of its Taxable Student Loan Asset-Backed Notes, Senior
Class 1998A-12 Auction Rate Securities (ARSSM) (the "Class 1998A-12 Notes"),
$15,600,000 of its Taxable Student Loan Asset-Backed Notes, Subordinate Class
1996B-3 LIBOR Rate (the "Class 1996B-3 Notes"), $30,800,000 of its Taxable
Student Loan Asset-Backed Notes, Subordinate Class 1997B-4 LIBOR Rate (the
"Class 1997B-4 Notes") and $70,000,000 of its Taxable Student Loan Asset-Backed
Notes, Subordinate Class 1998B-5 Auction Rate Securities (ARSSM) (the "Class
1998B-5 Notes"). The Class 1996A-1 Notes, the Class 1996A-2 Notes, the Class
1996A-3 Notes, the Class 1996A-4 Notes, the Class 1996A-5 Notes, the Class
1996A-6 Notes, the Class 1998A-7 Notes, the Class 1998A-8 Notes, the Class
1998A-9 Notes, the Class 1998A-10 Notes, the Class 1998A-11 Notes and the Class
1998A-12 Notes are collectively referred to herein as the "Class A Notes." The
Class 1996B-3 Notes, the Class 1997B-4 Notes and the Class 1998B-5 Notes are
collectively referred to herein as the "Class B Notes." The proceeds of such
notes have been 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."
A-1-2
<PAGE>
Mandatory Redemption and Optional Redemption. This note is subject to
mandatory redemption and optional redemption, all as described in 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."
A-1-3
<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 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.
A-1-4
<PAGE>
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 (a)
on the record date for purposes of receiving timely payment of interest hereon,
and (b) on the date of surrender of this note for purposes of receiving payment
of principal hereof at its stated maturity and (c) 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-1-5
<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-1-6
<PAGE>
CERTIFICATE OF AUTHENTICATION
This note is one of the Class 1998A-__ Notes designated therein and
described in the within-mentioned Indenture.
ZIONS FIRST NATIONAL BANK, as Trustee
By _____________________________
Authorized Signatory
Authentication Date:
A-1-7
<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-1-8
<PAGE>
EXHIBIT A-2
FORM OF CLASS 1998A-10, CLASS 1998A-11
AND CLASS 1998A-12 SENIOR (ARSSM) 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 1998A-[10] [11] [12]
AUCTION RATE SECURITIES SM
REGISTERED NO. R-__ REGISTERED $100,000,000
Maturity Date Interest Rate Original Issue Date CUSIP No.
_________ 1, 2032 Variable December 22, 1998 906619
PRINCIPAL SUM: ONE HUNDRED MILLION AND 00/100 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 "Original Indenture") and the
Series 1998 Supplemental Indenture of Trust dated as of December 15, 1998 (as
amended, the "Series 1998 Supplemental Indenture," and together with the
Original Indenture, the "Indenture"), each between the Issuer and Zions First
National Bank, as successor 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.
<PAGE>
This note shall bear interest at an Auction Rate, all as determined in
Appendix A of the Series 1998 Supplemental 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, Senior Class 1998A-[10][11][12] Auction Rate
Securities (ARSSM ), dated the Original Issue Date, in the aggregate original
principal amount of $100,000,000 (the "Class 1998A-[10][11][12] Notes") which
have been authorized by the Issuer under a certain resolution, and issued by the
Issuer pursuant to the Indenture. The following notes of the Issuer are being
issued simultaneously with the Class 1998A-[10][11][12] Notes or currently
remain Outstanding under the Indenture: $48,300,000 of its Taxable Student Loan
Asset-Backed Notes, Senior Class 1996A-1 Auction Rate Securities (ARSSM) (the
"Class 1996A-1 Notes"), $48,300,000 of its Taxable Student Loan Asset-Backed
Notes, Senior Class 1996A-2 Auction Rate Securities (ARSSM) (the "Class 1996A-2
Notes"), $73,700,000 of its Taxable Student Loan Asset-Backed Notes, Senior
Class 1996A-3 Auction Rate Securities (ARSSM) (the "Class 1996A-3 Notes"),
$54,300,000 of its Taxable Student Loan Asset-Backed Notes, Senior Class 1996A-4
Auction Rate Securities (ARSSM) (the "Class 1996A-4 Notes"), $225,000,000 of its
Taxable Student Loan Asset-Backed Notes, Senior Class 1996A-5 Treasury Rate (the
"Class 1996A-5 Notes"), $75,500,000 of its Taxable Student Loan Asset-Backed
Notes, Senior Class 1996A-6 Auction Rate Securities (ARSSM) (the "Class 1996A-6
Notes"), $125,000,000 of its Taxable Student Loan Asset-Backed Notes, Senior
Class 1998A-7 Fixed Rate (the "Class 1998A-7 Notes"), $125,000,000 of its
Taxable Student Loan Asset-Backed Notes, Senior Class 1998A-8 Fixed Rate (the
"Class 1998A-8 Notes"), $125,000,000 of its Taxable Student Loan Asset-Backed
Notes, Senior Class 1998A-9 Fixed Rate (the "Class 1998A-9 Notes"), $100,000,000
of its Taxable Student Loan Asset-Backed Notes, Senior Class 1998A-[10][11][12]
Auction Rate Securities (ARSSM) (the "Class 1998A-[10][11][12] Notes"),
$100,000,000 of its Taxable Student Loan Asset-Backed Notes, Senior Class
1998A-[10][11][12] Auction Rate Securities (ARSSM) (the "Class
1998A-[10][11][12] Notes"), $15,600,000 of its Taxable Student Loan Asset-Backed
Notes, Subordinate Class 1996B-3 LIBOR Rate (the "Class 1996B-3 Notes"),
$30,800,000 of its Taxable Student Loan Asset-Backed Notes, Subordinate Class
1997B-4 LIBOR Rate (the "Class 1997B-4 Notes") and $70,000,000 of its Taxable
Student Loan Asset-Backed Notes, Subordinate Class 1998B-5 Auction Rate
Securities (ARSSM) (the "Class 1998B-5 Notes"). The Class 1996A-1 Notes, the
Class 1996A-2 Notes, the Class 1996A-3 Notes, the Class 1996A-4 Notes, the Class
1996A-5 Notes, the Class 1996A-6 Notes, the Class 1998A-7 Notes, the Class
1998A-8 Notes, the Class 1998A-9 Notes, the Class 1998A-10 Notes, the Class
1998A-11 Notes and the Class 1998A-12 Notes are collectively referred to herein
as the "Class A Notes." The Class 1996B-3 Notes, the Class 1997B-4 Notes and the
Class 1998B-5 Notes are collectively referred to herein as the "Class B Notes."
The proceeds of such notes have been 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."
A-2-2
<PAGE>
Mandatory Redemption, Optional Redemption and Extraordinary Redemption.
This note is subject to mandatory redemption, optional redemption and
extraordinary redemption, all as described in 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."
A-2-3
<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.
A-2-4
<PAGE>
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 (a)
on the record date for purposes of receiving timely payment of interest hereon,
and (b) on the date of surrender of this note for purposes of receiving payment
of principal hereof at its stated maturity and (c) 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-2-5
<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-2-6
<PAGE>
CERTIFICATE OF AUTHENTICATION
This note is one of the Class 1998A-__ Notes designated therein and
described in the within-mentioned Indenture.
ZIONS FIRST NATIONAL BANK, as Trustee
By_____________________________
Authorized Signatory
Authentication Date:
A-2-7
<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-2-8
<PAGE>
EXHIBIT A-3
FORM OF CLASS 1998B SUBORDINATE (ARSSM) 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 1998B-5
AUCTION RATE SECURITIES SM
REGISTERED NO. R-1 REGISTERED $70,000,000
Maturity Date: Interest Rate: Original Issue CUSIP No.:
December 1, 2032 Variable December 22, 1998 906619 AS 0
PRINCIPAL SUM: SEVENTY MILLION AND 00/100 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 "Original Indenture") and the
Series 1998 Supplemental Indenture of Trust dated as of December 15, 1998 (as
amended, the "Series 1998 Supplemental Indenture," and together with the
Original Indenture, the "Indenture"), each between the Issuer and Zions First
National Bank, as successor 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.
<PAGE>
This note shall bear interest at an Auction Rate, all as determined in
Appendix A of the Series 1998 Supplemental 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 1998B-5 Auction Rate
Securities, dated the Original Issue Date, in the aggregate original principal
amount of $70,000,000 (the "Class 1998B-5 Notes") which have been authorized by
the Issuer under a certain resolution, and issued by the Issuer pursuant to the
Indenture. The following notes of the Issuer are being issued simultaneously
with the Class 1998B-5 Notes or currently remain Outstanding under the
Indenture: $48,300,000 of its Taxable Student Loan Asset-Backed Notes, Senior
Class 1996A-1 Auction Rate Securities (ARSSM) (the "Class 1996A-1 Notes"),
$48,300,000 of its Taxable Student Loan Asset-Backed Notes, Senior Class 1996A-2
Auction Rate Securities (ARSSM) (the "Class 1996A-2 Notes"), $73,700,000 of its
Taxable Student Loan Asset-Backed Notes, Senior Class 1996A-3 Auction Rate
Securities (ARSSM) (the "Class 1996A-3 Notes"), $54,300,000 of its Taxable
Student Loan Asset-Backed Notes, Senior Class 1996A-4 Auction Rate Securities
(ARSSM) (the "Class 1996A-4 Notes"), $225,000,000 of its Taxable Student Loan
Asset-Backed Notes, Senior Class 1996A-5 Treasury Rate (the "Class 1996A-5
Notes"), $75,500,000 of its Taxable Student Loan Asset-Backed Notes, Senior
Class 1996A-6 Auction Rate Securities (ARSSM) (the "Class 1996A-6 Notes"),
$125,000,000 of its Taxable Student Loan Asset-Backed Notes, Senior Class
1998A-7 Fixed Rate (the "Class 1998A-7 Notes"), $125,000,000 of its Taxable
Student Loan Asset-Backed Notes, Senior Class 1998A-8 Fixed Rate (the "Class
1998A-8 Notes"), $125,000,000 of its Taxable Student Loan Asset-Backed Notes,
Senior Class 1998A-9 Fixed Rate (the "Class 1998A-9 Notes"), $100,000,000 of its
Taxable Student Loan Asset-Backed Notes, Senior Class 1998A-10 Auction Rate
Securities (ARSSM) (the "Class 1998A-10 Notes"), $100,000,000 of its Taxable
Student Loan Asset-Backed Notes, Senior Class 1998A-11 Auction Rate Securities
(ARSSM) (the "Class 1998A-11 Notes"), $100,000,000 of its Taxable Student Loan
Asset-Backed Notes, Senior Class 1998A-12 Auction Rate Securities (ARSSM) (the
"Class 1998A-12 Notes"), $15,600,000 of its Taxable Student Loan Asset-Backed
Notes, Subordinate Class 1996B-3 LIBOR Rate (the "Class 1996B-3 Notes") and
$30,800,000 of its Taxable Student Loan Asset-Backed Notes, Subordinate Class
1997B-4 LIBOR Rate (the "Class 1997B-4 Notes"). The Class 1996A-1 Notes, the
Class 1996A-2 Notes, the Class 1996A-3 Notes, the Class 1996A-4 Notes, the Class
1996A-5 Notes, the Class 1996A-6 Notes, the Class 1998A-7 Notes, the Class
1998A-8 Notes, the Class 1998A-9 Notes, the Class 1998A-10 Notes, the Class
1998A-11 Notes and the Class 1998A-12 Notes are collectively referred to herein
as the "Class A Notes." The Class 1996B-3 Notes, the Class 1997B-4 Notes and the
Class 1998B-5 Notes are collectively referred to herein as the "Class B Notes."
The proceeds of such notes have been 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."
A-3-2
<PAGE>
Mandatory Redemption, Optional Redemption and Extraordinary Redemption.
This note is subject to mandatory redemption, optional redemption and
extraordinary redemption, all as described in 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 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 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." Notwithstanding the foregoing, the Issuer has agreed not
to enter into a Swap Agreement so long as this bond is outstanding.
A-3-3
<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
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 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.
A-3-4
<PAGE>
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 (a)
on the record date for purposes of receiving timely payment of interest hereon,
and (b) on the date of surrender of this note for purposes of receiving payment
of principal hereof at its stated maturity and (c) 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-3-5
<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-3-6
<PAGE>
CERTIFICATE OF AUTHENTICATION
This note is one of the Class 1998B-5 Notes designated therein and
described in the within-mentioned Indenture.
ZIONS FIRST NATIONAL BANK, as Trustee
By_____________________________
Authorized Signatory
AUTHENTICATION DATE:
A-3-7
<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-3-8
<PAGE>
EXHIBIT B
SERIES 1998 CLOSING CASH FLOW PROJECTIONS
Exhibit B-1
<PAGE>
EXHIBIT C
NOTICE OF PAYMENT DEFAULT
UNION FINANCIAL SERVICES-1, INC.
TAXABLE STUDENT LOAN ASSET-BACKED NOTES
CLASS 1998__
AUCTION RATE SECURITIES SM
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.
ZIONS FIRST NATIONAL BANK, as Trustee
Dated: _______________________ By _____________________________
Exhibit C-1
<PAGE>
EXHIBIT D
NOTICE OF CURE OF PAYMENT DEFAULT
UNION FINANCIAL SERVICES-1, INC.
TAXABLE STUDENT LOAN ASSET-BACKED NOTES
CLASS 1998__
AUCTION RATE SECURITIES SM
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
__________________________.
ZIONS FIRST NATIONAL BANK, as Trustee
Dated: _______________________ By_____________________________
Exhibit D-1
<PAGE>
EXHIBIT E
NOTICE OF PROPOSED CHANGE IN LENGTH
OF ONE OR MORE AUCTION PERIODS
UNION FINANCIAL SERVICES-1, INC.
TAXABLE STUDENT LOAN ASSET-BACKED NOTES
CLASS 1998__
AUCTION RATE SECURITIES 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 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 1998__ Notes described herein, that there were Sufficient Bids for such
Class 1998__ 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 1998__ Notes.
UNION FINANCIAL SERVICES-1, INC.
Dated: By _____________________________
Exhibit E-1
<PAGE>
EXHIBIT F
NOTICE ESTABLISHING CHANGE IN LENGTH
OF ONE OR MORE AUCTION PERIODS
UNION FINANCIAL SERVICES-1, INC.
TAXABLE STUDENT LOAN ASSET-BACKED NOTES
CLASS 1998__
AUCTION RATE SECURITIES 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, 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 1998__ Notes.
UNION FINANCIAL SERVICES-1, INC.
Dated: By _____________________________
Exhibit F-1
<PAGE>
EXHIBIT G
NOTICE OF CHANGE IN AUCTION DATE
UNION FINANCIAL SERVICES-1, INC.
TAXABLE STUDENT LOAN ASSET-BACKED NOTES
CLASS 1998__
AUCTION RATE SECURITIES SM
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 1998__ 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 1998__ 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 1998__ Notes.
SALOMON SMITH BARNEY INC., as Market Agent
Dated: By _____________________________
Exhibit G-1
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS AND USE OF PHRASES..................................2
ARTICLE II SERIES 1998 NOTE DETAILS, FORM OF SERIES 1998 NOTES,
REDEMPTION OF SERIES 1998 NOTES AND USE OF PROCEEDS OF SERIES
1998 NOTES......................................................4
Section 2.01. Series 1998 Note Details.................................4
Section 2.02. Redemption of the Series 1998 Notes......................7
Section 2.03. Delivery of Series 1998 Notes............................9
Section 2.04. Trustee's Authentication Certificate....................10
Section 2.05. Deposit of Series 1998 Note Proceeds....................10
Section 2.06. Forms of Series 1998 Notes..............................10
ARTICLE III AMENDMENTS TO ORIGINAL INDENTURE........................10
ARTICLE IV GENERAL PROVISIONS......................................11
Section 4.01. Date of Execution.......................................11
Section 4.02. Laws Governing..........................................11
Section 4.03. Severability............................................11
Section 4.04. Exhibits................................................11
ARTICLE V FUNDS..........................................................11
Section 5.01. Creation of Funds and Accounts.........................11
Section 5.02. Student Loan Fund......................................12
Section 5.03. Revenue Fund...........................................14
Section 5.04. Reserve Fund...........................................17
Section 5.05. Interest Fund..........................................18
Section 5.06. Note Redemption Fund...................................21
Section 5.07. Student Loan Holding Fund..............................23
Section 5.08. Cost of Issuance Fund..................................24
Section 5.09. Operating Fund.........................................24
Section 5.10. General Fund...........................................25
Section 5.11. Investment of Funds Held by Trustee....................26
Section 5.12. Release................................................26
ARTICLE VI APPLICABILITY OF INDENTURE.....................................28
Exhibit G-2
<PAGE>
APPENDIX A.. CERTAIN TERMS AND PROVISIONS OF THE AUCTION RATE NOTES
EXHIBIT A-1 FORM OF CLASS 1998A-7, CLASS 1998A-8 AND CLASS 1998A-9 SENIOR FIXED
RATE NOTES
EXHIBIT A-2 FORM OF CLASS 1998A-10, CLASS 1998-11 AND CLASS 1998A-12 SENIOR
(ARSSM) NOTES
EXHIBIT A-3 FORM OF CLASS 1998B SUBORDINATE (ARSSM) NOTES
EXHIBIT B SERIES 1998 CLOSING CASH FLOW PROJECTIONS
EXHIBIT C NOTICE OF PAYMENT DEFAULT
EXHIBIT D NOTICE OF CURE OF PAYMENT DEFAULT
EXHIBIT E NOTICE OF PROPOSED CHANGE IN LENGTH OF ONE OR MORE AUCTION PERIODS
EXHIBIT F NOTICE ESTABLISHING CHANGE IN LENGTH OF ONE OR MORE AUCTION PERIODS
EXHIBIT G NOTICE OF CHANGE IN AUCTION DATE
Exhibit G-3
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