<PAGE> 1
As filed with the Securities and Exchange Commission on JUNE 17, 1996
REGISTRATION NO. 333-4418
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
NELLIE MAE EDUCATION LOAN TRUST
(Issuer of the Asset-Backed Securities)
NELLIE MAE EDUCATION FUNDING, LLC
(Originator of the Trust described herein)
(Exact name of Registrant as specified in ITS CHARTER)
DELAWARE 043318763
(State or OTHER JURISDICTION of (I.R.S. Employer
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
---------------
50 BRAINTREE HILL PARK - SUITE 300
BRAINTREE, MASSACHUSETTS 02184
(617) 849-1325
(Address, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
of Registrant's PRINCIPAL EXECUTIVE OFFICES)
---------------
JOHN F. REMONDI
TREASURER AND CHIEF FINANCIAL OFFICER
50 BRAINTREE HILL PARK - SUITE 300
BRAINTREE, MASSACHUSETTS 02184
(617) 849-1325
(Name, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
---------------
JOHN R. REGIER, ESQ.
MINTZ, LEVIN, COHN, FERRIS,
GLOVSKY AND POPEO, P.C.
ONE FINANCIAL CENTER
BOSTON, MASSACHUSETTS 02111
(617) 542-6000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: from
time to time after the effective date of this Registration Statement, as
determined by market conditions.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under this Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
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<CAPTION>
CALCULATION OF REGISTRATION FEE
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AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO PROPOSED MAXIMUM PROPOSED MAXIMUM AGGREGATE REGISTRATION FEE(2)
SECURITIES TO BE REGISTERED BE REGISTERED OFFERING PRICE (1) OFFERING PRICE (1)
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<S> <C> <C> <C> <C>
A-1 Asset Backed Notes
A-2 Asset Backed NOTES
Asset Backed Certificates $ 67,000,000 100% $ 67,000,000 n/a
$ 48,800,000 100% $ 48,800,000 n/a
$ 7,700,000 100% $ 7,700,000 n/a
TOTAL $123,500,000 100% $123,500,000 $42,586.21
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(1) ESTIMATED SOLELY FOR THE PURPOSE OF CALCULATING THE REGISTRATION FEE.
(2) A PORTION OF THIS AMOUNT, $37,931.03, WAS PAID IN CONNECTION WITH THE
INITIAL FILING OF THE REGISTRATION STATEMENT ON MAY 3, 1996. THE REMAINDER,
$4,655.18, IS PAID IN CONNECTION HEREWITH.
<PAGE> 2
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the COMMISSION, acting pursuant to said Section
8(a), may determine.
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<PAGE> 3
PROSPECTUS SUBJECT TO COMPLETION, DATED JUNE 17, 1996
NELLIE MAE EDUCATION LOAN TRUST
$67,000,000 LIBOR RATE ASSET BACKED CLASS A-1 NOTES
$48,800,000 LIBOR RATE ASSET BACKED CLASS A-2 NOTES
$7,700,000 LIBOR RATE ASSET BACKED CERTIFICATES
NELLIE MAE EDUCATION FUNDING, LLC (SELLER)
The Nellie Mae Education Loan Trust (the "Trust" or "Issuer") will be
formed pursuant to a Trust Agreement, dated as of JUNE 1, 1996 (TOGETHER WITH
ANY SUPPLEMENT OR AMENDMENT THERETO, THE "TRUST AGREEMENT"), between Nellie Mae
Education Funding, LLC ("Seller") and FLEET NATIONAL BANK, AS OWNER trustee
(the "Owner Trustee"), and will issue (i) an aggregate of $67,000,000 LIBOR
Rate Asset Backed Class A-1 Notes (the "A-1 Notes"), which will bear interest at
an interest rate equal to the LIBOR Rate plus ___%, but not to exceed at any
time 18% per annum, and have a MATURITY DATE OF DECEMBER 15, 2004; AN AGGREGATE
OF $48,800,000 LIBOR RATE (cover continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE 12 OF THIS PROSPECTUS FOR A
DISCUSSION OF RISK FACTORS WHICH SHOULD BE CONSIDERED IN CONNECTION WITH AN
INVESTMENT IN THE 1996 SECURITIES.
THE OFFERED 1996 NOTES REPRESENT OBLIGATIONS OF, AND THE 1996 CERTIFICATES
REPRESENT UNDIVIDED BENEFICIAL INTERESTS IN, THE TRUST AND DO NOT
REPRESENT OBLIGATIONS OF OR INTERESTS IN NELLIE MAE, INC., THE
SELLER, THE OWNER TRUSTEE, THE INDENTURE TRUSTEE OR ANY
OF THEIR RESPECTIVE AFFILIATES OR SUBSIDIARIES.
EACH OF NELLIE MAE, INC AND THE SELLER IS A PRIVATE, NONGOVERNMENTAL
ORGANIZATION AND THE FINANCED LOANS ARE NOT FUNDED OR INSURED BY ANY
GOVERNMENTAL ENTITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Price to Underwriting Proceeds to the
PUBLIC DISCOUNT (1) Seller(2)
<S> <C> <C> <C>
A-1 Notes % % %
A-2 Notes % % %
1996 Certificates % % %
Total $ $ $
</TABLE>
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(1) Nellie Mae, Inc. has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(2) Before deducting expenses, estimated at $__________.
The 1996 Securities are offered by the Underwriter subject to prior
sale, when, as and if issued to and accepted by the Underwriter, subject to
approval of certain legal matters by counsel for the Underwriter. The
Underwriter reserves the right to withdraw, cancel or modify such offer and to
reject orders in whole or in part. It is expected that delivery of the 1996
Securities will be made in book-entry form only through the Same Day Funds
Settlement System of The Depository Trust Company on or about __________, 1996.
SMITH BARNEY INC.
DATED: ______, 1996
Information contained herein is subject to completion and amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These Securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these Securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
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(cover continued from previous page)
ASSET BACKED CLASS A-2 NOTES (THE "A-2 NOTES", AND TOGETHER WITH THE A-1
NOTES,THE "1996 NOTES"), WHICH WILL BEAR INTEREST AT AN INTEREST RATE equal to
the LIBOR Rate plus ____%, but not to exceed 18% per annum, AND HAVE A MATURITY
DATE OF DECEMBER 15, 2018; AND (III) AN AGGREGATE OF $7,700,000 LIBOR RATE ASSET
BACKED CERTIFICATES (THE "1996 CERTIFICATES" AND TOGETHER WITH THE 1996 NOTES,
THE "1996 SECURITIES"), WHICH WILL BEAR INTEREST AT AN INTEREST RATE EQUAL TO
THE LIBOR RATE PLUS ___%, BUT NOT TO EXCEED 18% PER ANNUM, AND HAVE A MATURITY
DATE OF DECEMBER 15, 2018. In the event that the interest rate on the 1996 Notes
or 1996 Certificates, as the case may be, for any Interest Period exceeds the
applicable Net Loan Rate (as defined herein) for such Interest Period, the
Noteholders or Certificateholders, as the case may be, will receive interest
payments on the 1996 Notes or 1996 Certificates for such Interest Period at the
applicable Net Loan Rate; the difference between the interest rate and the
applicable Net LOAN Rate for such an Interest Period shall be deferred and
paid to the Noteholders or Certificateholders, as the case may be, on the next
succeeding Distribution Date on which funds are available therefor, except as
described herein. The 1996 Notes will be issued pursuant to a Master Trust
Indenture, dated as of JUNE 1, 1996 (the "Master Indenture," and together with
any supplements or amendments thereto, the "Indenture") between the Issuer and
STATE STREET BANK AND TRUST COMPANY, AS INDENTURE trustee (the "Indenture
Trustee"), and the First Terms Supplement thereto. The 1996 Certificates will be
issued pursuant to the Trust Agreement AND THE FIRST TRUST SUPPLEMENT THERETO.
The assets of the Trust will consist primarily of a pool of student loans
purchased or to be purchased from the Seller as more completely described
herein. The Notes will be secured by the assets of the Trust (other than the
CERTIFICATE Fund) pursuant to the Indenture. Pursuant to the Indenture, the
Issuer, subject to certain conditions contained therein, may issue from time to
time additional notes that will be equally and ratably secured with the 1996
Notes by the assets of the Trust (collectively with the 1996 Notes, the
"Notes"). In addition, the Issuer may issue from time to time, subject to
certain conditions contained in the Trust Agreement, additional certificates
(together with the 1996 Certificates, the "Certificates," and collectively with
the Notes, the "Securities").
There is currently no secondary market for the 1996 Securities. The
Underwriter intends to make a secondary market for the 1996 Securities, but has
no obligation to do so. There can be no assurance that a secondary market for
the 1996 Securities will develop or, if one does develop, that it will continue.
(end of cover page)
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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES
AND THE CERTIFICATES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING
OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND ARE
INTENDED TO BE SUBJECT TO THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. THE FUTURE EVENTS DESCRIBED IN SUCH STATEMENTS
INVOLVE RISKS AND UNCERTAINTIES, INCLUDING THOSE SET FORTH IN "RISK FACTORS" AND
ELSEWHERE IN THIS PROSPECTUS.
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SUMMARY OF PROSPECTUS
The following summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus. Certain capitalized terms
used in this Summary are defined elsewhere in this Prospectus. A GLOSSARY OF
MAJOR DEFINED TERMS IS SET FORTH IMMEDIATELY PRECEDING THE BACK COVER PAGE.
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Issuer.................................. Nellie Mae Education Loan Trust (the "Trust" or the "Issuer") is a
Massachusetts business trust to be formed by the Seller and the Owner
Trustee pursuant to the Trust Agreement, dated as of JUNE 1, 1996.
The activities of the Trust and the Owner Trustee are limited by the
terms of the Trust Agreement to acquiring, owning, selling and
managing the Loans and the other assets of the Trust as described herein,
issuing the Securities, collecting and making payments thereon and other
activities related thereto. SEE "FORMATION OF THE TRUST."
Seller.................................. Nellie Mae Education Funding, LLC (the "Seller") is a DELAWARE
limited liability company. The Seller is a limited purpose entity formed
solely to acquire Loans from NELLIE MAE, INC., to transfer such Loans
to the Issuer and to carry out certain related functions described herein.
NELLIE MAE, INC. owns 99% of the interests in the Seller, and NMI
Education Loan Corporation ("NMELC"), a Massachusetts non-profit
corporation of which NELLIE MAE, INC. is the sole member, owns the
remaining ONE PERCENT (1%) interest in the Seller. SEE "NELLIE
MAE EDUCATION FUNDING, LLC."
Administrator .......................... Nellie Mae, Inc. ("NELLIE MAE, INC."), will act as administrator (in such
capacity, the "Administrator") on behalf of the Trust pursuant to an
Administration Agreement (as amended and supplemented from time to
time, the "Administration Agreement"), among the Administrator, the
Issuer, the Owner Trustee and the Indenture Trustee. NELLIE MAE,
INC. is a non-profit corporation organized and existing under the laws of
The Commonwealth of Massachusetts and is an organization described
in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended.
NELLIE MAE, INC. CARRIES ON A PRIVATE, NONGOVERNMENTAL EDUCATION
LOAN PROGRAM to provide funds to assist families and individuals in
financing the cost of attendance at various educational institutions, by
originating or purchasing loans made for such purposes. NELLIE MAE,
INC.'S LOAN PROGRAM, WHICH IS UNRELATED TO ANY FEDERALLY GUARANTEED
OR INSURED EDUCATION LOAN PROGRAMS, IS DESIGNED TO MEET THE NEEDS OF
PARENTS AND STUDENTS WHOSE EDUCATION LOAN REQUIREMENTS ARE NOT
FULLY MET BY SUCH FEDERAL EDUCATION LOAN PROGRAMS. See "NELLIE
MAE, INC." Neither NELLIE MAE, INC. nor any of its affiliates,
including the Seller, NOR ANY OTHER PRIVATE OR GOVERNMENTAL ENTITY has
guaranteed, insured or is otherwise obligated with respect to the
Securities. See "RISK FACTORS."
Indenture Trustee....................... STATE STREET BANK AND TRUST COMPANY IS THE INDENTURE Trustee
under the Indenture.
Owner Trustee........................... FLEET NATIONAL BANK is the Owner Trustee under the Trust
Agreement.
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1
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Servicer................................ USA Group Loan Services, Inc. (the "Servicer" or "Loan Services") will
service those Financed Loans that are acquired by the Issuer and
delivered to Loan Services. Loan Services is a private, non-profit
corporation organized under the laws of Delaware. SEE "SERVICER."
Purpose of Issue........................ Proceeds of the 1996 Securities will be used by the Issuer to finance the
Issuer's purchase of certain loans (the "Loans") originated under NELLIE
MAE, INC.'S PRIVATE, NONGOVERNMENTAL EDUCATION LOAN PROGRAM to
finance the cost of higher education (the Loans so financed by the 1996
Securities being referred to herein as the "1996 Financed Loans", and
together with any similar loans financed by the issuance of additional
Securities, the "Financed Loans").
ASSETS OF THE TRUST
FINANCED LOANS.......................... THE FINANCED LOANS WILL CONSIST OF LOANS MADE OR PURCHASED BY
NELLIE MAE, INC. PURSUANT TO ITS PRIVATE, NONGOVERNMENTAL GRADUATE
AND UNDERGRADUATE LOAN PROGRAM AND WILL INCLUDE RIGHTS TO RECEIVE
PAYMENTS MADE WITH RESPECT TO SUCH FINANCED LOANS. AS OF APRIL
30, 1996 (THE "INITIAL CUT-OFF DATE"), THE INITIAL LOANS HAD AN
AGGREGATE PRINCIPAL BALANCE OF $68,306,777 AND A REMAINING WEIGHTED
AVERAGE MATURITY OF 142 MONTHS.
LOAN ORIGINATION PROCESS APPLICANTS FOR NELLIE MAE, INC.'S STUDENT LOANS APPLY DIRECTLY TO
NELLIE MAE, INC. UPON REVIEW AND APPROVAL OF THE APPLICANT FOR
CREDIT QUALIFICATION, NELLIE MAE, INC. CONFIRMS WITH THE STUDENT'S
SCHOOL THAT THE REQUESTED LOAN AMOUNT IS WITHIN THE STUDENT'S COSTS
OF EDUCATION THAT HAVE NOT BEEN MET THROUGH OTHER SOURCES OF
FINANCIAL AID. PROCEEDS OF THE LOAN ARE THEN DISBURSED EITHER BY
NELLIE MAE, INC., OR BY A COMMERCIAL BANK ON ITS BEHALF, DIRECTLY TO
THE STUDENT'S SCHOOL ON BEHALF OF THE STUDENT. WHEN THE LOAN IS IN
REPAYMENT, THE BORROWER MAKES MONTHLY PAYMENTS TO THE SERVICER
AS AGENT FOR NELLIE MAE, INC. WHICH IS THE OWNER OF THE LOAN. THE
SERVICER DEPOSITS THESE PAYMENTS INTO THE DESIGNATED NELLIE MAE, INC.
ACCOUNT. SEE "THE TRUST ESTATE-NELLIE MAE, INC.'S LOAN
PROGRAM--LOAN ORIGINATION PROCESS."
SECURITIZATION OF FINANCED LOANS. ON OR PRIOR TO THE DATE OF ISSUANCE OF THE 1996 SECURITIES (THE
"CLOSING DATE"), NELLIE MAE, INC. WILL SELL STUDENT LOANS THAT WILL
CONSTITUTE THE INITIAL LOANS TO THE SELLER PURSUANT TO A MASTER TERMS
PURCHASE AGREEMENT, DATED AS OF JUNE 1, 1996 AND PURCHASE AGREEMENT NUMBER
1 DATED AS OF THE CLOSING DATE (TOGETHER WITH SUBSEQUENT SUPPLEMENTAL
PURCHASE AGREEMENTS ENTERED INTO ON OR BEFORE JANUARY 10, 1997, THE
"PURCHASE AGREEMENT") AND THE SELLER WILL SELL THE INITIAL LOANS TO THE
ISSUER PURSUANT TO A MASTER TERMS SALES AGREEMENT, DATED AS OF JUNE 1, 1996
AND SALES AGREEMENT NUMBER 1 DATED AS OF THE CLOSING DATE (TOGETHER WITH
SUBSEQUENT SUPPLEMENTAL SALES AGREEMENTS ENTERED INTO ON OR BEFORE JANUARY
10, 1997, THE "SALES AGREEMENT"). THE ISSUER WILL PURCHASE THE 1996
FINANCED LOANS WITH THE PROCEEDS OF THE 1996 SECURITIES. THE ISSUER WILL
MAKE PAYMENTS OF PRINCIPAL AND INTEREST DUE TO THE 1996
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SECURITYHOLDERS FROM THE NET CASH RECEIPTS OF PAYMENTS MADE BY THE
BORROWERS OF THE 1996 FINANCED LOANS. SEE "DESCRIPTION OF THE SALES AND
PURCHASE AGREEMENTS."
PRE-FUNDING ACCOUNT..................... FROM TIME TO TIME ON OR PRIOR TO JANUARY 10, 1997, PURSUANT TO THE
PURCHASE AGREEMENT, NELLIE MAE, INC. WILL BE OBLIGATED TO SELL, AND THE
SELLER WILL BE OBLIGATED TO PURCHASE, SUBJECT TO THE SATISFACTION OF
CERTAIN CONDITIONS DESCRIBED THEREIN, SUBSEQUENT LOANS AT A PURCHASE PRICE
EQUAL TO THE PRINCIPAL BALANCE PLUS ACCRUED INTEREST LESS AMOUNTS HELD TO
INSURE AGAINST LOAN LOSSES. PURSUANT TO THE SALES AGREEMENT, AND SUBJECT TO
THE SATISFACTION OF CERTAIN CONDITIONS DESCRIBED HEREIN AND THEREIN, THE
SELLER WILL IN TURN SELL THE SUBSEQUENT LOANS TO THE ISSUER AT A PURCHASE
PRICE EQUAL TO THE AMOUNT PAID BY THE SELLER TO NELLIE MAE, INC. FOR SUCH
SUBSEQUENT LOANS, WHICH PURCHASE PRICE SHALL BE PAID FROM MONEYS ON DEPOSIT
IN THE 1996-A SUBACCOUNT WITHIN THE PRE-FUNDING ACCOUNT. SUBSEQUENT LOANS
WILL BE TRANSFERRED FROM NELLIE MAE, INC. TO THE SELLER AND FROM THE SELLER
TO THE ISSUER ON THE BUSINESS DAY SPECIFIED BY NELLIE MAE, INC. AND THE
SELLER (EACH, A "SUBSEQUENT TRANSFER DATE"). THE 1996-A SUBACCOUNT OF THE
PRE-FUNDING ACCOUNT WILL BE MAINTAINED WITH THE INDENTURE TRUSTEE AND WILL
BE AN ASSET OF THE INDENTURE TRUST ESTATE. THE 1996-A SUBACCOUNT OF THE
PRE-FUNDING ACCOUNT IS DESIGNED SOLELY TO HOLD FUNDS TO BE APPLIED BY THE
ISSUER DURING THE 1996 FUNDING PERIOD (AS DEFINED BELOW) TO PAY TO THE
SELLER THE PURCHASE PRICE FOR SUBSEQUENT LOANS. MONEYS ON DEPOSIT IN THE
1996-A SUBACCOUNT OF THE PRE-FUNDING ACCOUNT WILL NOT BE AVAILABLE TO COVER
LOSSES ON OR IN RESPECT OF THE 1996 FINANCED LOANS.
ON THE CLOSING DATE, THE 1996-A SUBACCOUNT OF THE PRE-FUNDING ACCOUNT WILL
BE CREATED WITH AN INITIAL DEPOSIT, FROM THE PROCEEDS OF THE SECURITIES, OF
$38,000,000 (THE "1996 PRE-FUNDED AMOUNT"). THE "1996 FUNDING PERIOD" WILL
BE THE PERIOD FROM THE CLOSING DATE UNTIL THE EARLIEST TO OCCUR OF (i) THE
DATE ON WHICH THE AMOUNT ON DEPOSIT IN THE 1996-A SUBACCOUNT OF THE
PRE-FUNDING ACCOUNT IS LESS THAN $100,000, (ii) THE DATE ON WHICH AN EVENT
OF DEFAULT OCCURS UNDER THE INDENTURE, (iii) THE DATE ON WHICH AN EVENT OF
TERMINATION OCCURS UNDER THE SALES AGREEMENT, (iv) THE INSOLVENCY OF THE
SELLER OR NELLIE MAE, INC. OR (V) THE CLOSE OF BUSINESS ON JANUARY 10,
1997. DURING THE 1996 FUNDING PERIOD, ON ONE OR MORE SUBSEQUENT TRANSFER
DATES, THE 1996 PRE-FUNDED AMOUNT WILL BE APPLIED TO PURCHASE SUBSEQUENT
LOANS FROM THE SELLER. NELLIE MAE, INC. EXPECTS THAT IT WILL HAVE
COMMITMENTS FOR LOANS EQUAL TO OR IN EXCESS OF THE 1996 PRE-FUNDED AMOUNT
ON OR BEFORE NOVEMBER 15, 1996 (THE "COMMITMENT CUT-OFF DATE") AND THAT THE
1996 PRE-FUNDED AMOUNT WILL BE FULLY APPLIED TO ACQUIRE LOANS BY JANUARY
10, 1997, ALTHOUGH NO ASSURANCE CAN BE GIVEN THAT THIS WILL IN FACT OCCUR.
ANY PORTION OF THE 1996-A SUBACCOUNT OF THE PRE-FUNDING ACCOUNT REMAINING
UNCOMMITTED TO THE ACQUISITION OF LOANS AFTER THE COMMITMENT CUT- OFF DATE
AND ANY PORTION OF THE 1996-A SUBACCOUNT IN THE PRE- FUNDING ACCOUNT
REMAINING UNEXPENDED AT THE END OF THE FUNDING PERIOD, WILL BE APPLIED TO
PAY PRINCIPAL OF THE NOTES ON THE FIRST DISTRIBUTION DATE AFTER (i) THE
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COMMITMENT CUT-OFF DATE; OR (ii) THE END OF THE 1996 FUNDING PERIOD, AS THE
CASE MAY BE. APPLICATION OF AMOUNTS IN THE 1996-A SUBACCOUNT OF THE
PRE-FUNDING ACCOUNT MAY BE APPLIED TO PAY PRINCIPAL OF THE 1996 NOTES ON OR
BEFORE THE COMMITMENT CUT-OFF DATE OR THE END OF THE 1996 FUNDING PERIOD IF
THE ISSUER CERTIFIES TO THE INDENTURE TRUSTEE, BASED UPON A CERTIFICATE
RECEIVED BY THE ISSUER FROM THE SELLER, THAT THE AMOUNT OF LOANS COMMITTED
OR ORIGINATED WILL BE INSUFFICIENT TO UTILIZE BY THE COMMITMENT CUT-OFF
DATE OR THE END OF THE 1996 FUNDING PERIOD, AS THE CASE MAY BE, THE ENTIRE
1996 PRE-FUNDING AMOUNT.
REVENUE FUND............................ THE INDENTURE TRUSTEE IS REQUIRED TO MAINTAIN THE REVENUE FUND INTO
WHICH IS DEPOSITED (I) ALL AMOUNTS RECEIVED IN RESPECT OF THE FINANCED
LOANS, WHETHER AS PRINCIPAL, INTEREST, LATE CHARGES OR IN PAYMENT OR
REPURCHASE OF FINANCED LOANS, (II) AMOUNTS RECEIVED ON CANCELLATION OF
FINANCED LOANS, (III) AMOUNTS RECEIVED AS RECOVERIES FROM A GUARANTOR, IF
ANY, AND (IV) AMOUNTS RECEIVED AS EARNINGS ON OR INCOME FROM INVESTMENT
SECURITIES INCLUDED IN THE BALANCES OF THE FUNDS AND ACCOUNTS. SEE
"DESCRIPTION OF THE INDENTURE- FLOW OF FUNDS--REVENUE FUND."
DEBT SERVICE RESERVE FUND............... THE INDENTURE TRUSTEE IS REQUIRED TO MAINTAIN THE DEBT SERVICE
RESERVE FUND. ON THE CLOSING DATE, THE INDENTURE TRUSTEE IS REQUIRED TO
DEPOSIT TO THE APPLICABLE ACCOUNT WITHIN THE DEBT SERVICE RESERVE FUND THE
AMOUNT SPECIFIED IN THE RELATED TERMS SUPPLEMENT. MONEYS SHALL ALSO BE
DEPOSITED INTO THE APPLICABLE DEBT SERVICE RESERVE ACCOUNT FROM THE
APPLICABLE REVENUE ACCOUNT IF THE AMOUNT THEREIN IS LESS THAN THE
APPLICABLE DEBT SERVICE RESERVE REQUIREMENT. SEE "DESCRIPTION OF THE
INDENTURE-FLOW OF FUNDS--DEBT SERVICE RESERVE FUND."
SALES AND PURCHASE AGREEMENTS........... NELLIE MAE, INC. WILL SELL LOANS TO THE SELLER PURSUANT TO A MASTER
TERMS PURCHASE AGREEMENT AND SUPPLEMENTAL PURCHASE AGREEMENTS AND THE
SELLER WILL SELL LOANS TO THE TRUST PURSUANT TO A MASTER TERMS SALES
AGREEMENT AND SUPPLEMENTAL SALES AGREEMENTS.
NELLIE MAE, INC. AND THE SELLER, UNDER THE PURCHASE AGREEMENT AND THE SALES
AGREEMENT, RESPECTIVELY, WILL BE OBLIGATED TO REPURCHASE ANY FINANCED LOAN
IF THE INTEREST OF THE PURCHASER OF SUCH FINANCED LOAN IS MATERIALLY
ADVERSELY AFFECTED BY A BREACH OF ANY REPRESENTATION OR WARRANTY MADE BY
NELLIE MAE, INC. OR THE SELLER, AS THE CASE MAY BE, WITH RESPECT TO THE
FINANCED LOAN, IF THE BREACH HAS NOT BEEN CURED FOLLOWING THE DISCOVERY BY
OR NOTICE TO NELLIE MAE, INC. OR THE SELLER, AS THE CASE MAY BE. SEE
"DESCRIPTION OF SALES AND PURCHASE AGREEMENTS.
SERVICING AGREEMENT .................... THE ISSUER WILL ENTER INTO A SERVICING AGREEMENT DATED AS OF JUNE 1,
1996 WITH THE SERVICER FOR THE SERVICING OF THE FINANCED LOANS. SEE
"SERVICER."
ADMINISTRATION AGREEMENT................ THE ISSUER, THE INDENTURE TRUSTEE AND THE OWNER TRUSTEE WILL ENTER
INTO AN ADMINISTRATION AGREEMENT DATED AS OF JUNE 1, 1996 WITH THE
ADMINISTRATOR PURSUANT TO WHICH THE ADMINISTRATOR WILL
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PERFORM CERTAIN DUTIES ON BEHALF OF THE ISSUER AND THE OWNER TRUSTEE IN
CONNECTION WITH THE NOTES, THE CERTIFICATES AND THE TRUST ESTATE, INCLUDING
THE FINANCED LOANS. SEE "DESCRIPTION OF ADMINISTRATION AGREEMENT."
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The 1996 Notes
General................................. The 1996 Notes are to be issued in the following classes and initial
principal amounts (each a "Class"):
$67,000,000 A-1 Notes
$48,800,000 A-2 Notes
The Trust will issue the 1996 Notes pursuant to the Master Trust Indenture,
dated as of JUNE 1, 1996 (the "Master Indenture") and the First Terms
Supplement dated as of JUNE 1, 1996, authorizing such 1996 Notes (the
"First Terms Supplement" and, together with the Master Indenture and any
other amendments or supplements thereto, the "Indenture") between the Trust
and the Indenture Trustee. The 1996 Notes will represent obligations of the
Trust, secured by the assets of the Trust (other than the CERTIFICATE
Fund). The 1996 Notes will be issued as fully-registered notes without
coupons and are initially to be issued in the name of Cede & Co., as
nominee of The Depository Trust Company ("DTC"). See "THE 1996 NOTES."
INTEREST PAYMENTS..................... INTEREST ON THE A-1 NOTES FOR THE PERIOD BEGINNING ON THE DATE OF
ISSUANCE TO, BUT NOT INCLUDING, JULY 15, 1996 (the "Initial Period") shall
accrue at an interest rate equal to the LIBOR Rate determined on
__________, 1996 plus ____%, and interest on the A-2 Notes for the Initial
Period shall accrue at an interest rate equal to the LIBOR Rate determined
on __________, 1996 plus ____%. Thereafter, interest on the 1996 Notes will
accrue at an interest rate which shall be equal to the LIBOR Rate plus
____%, in the case of the A-1 Notes, and the LIBOR Rate plus ____%, in the
case of the A-2 Notes. The interest rate on each Class of 1996 Notes will
be adjusted on July 15, 1996, and on the 15th day of each month thereafter
(each a "Rate Adjustment Date"), based on the LIBOR Rate determined on the
second Business Day immediately preceding each such Rate Adjustment Date (a
"Rate Determination Date"). The interest rate on the 1996 Notes shall never
exceed the maximum rate permitted by law. In addition, the interest rate on
the 1996 Notes shall never exceed, for any Interest Period, a rate of 18%
per annum. See "THE NOTES--Interest on the Notes."
Interest on the 1996 Notes (calculated on the basis of a 360-day year for
actual days elapsed) will be payable on the 15th day of each month (each
a "Distribution Date").
In the event that the interest rate on the 1996 Notes for any Interest
Period exceeds the applicable Net Loan Rate (which rate is equal to the
weighted average interest rate on the 1996 Financed Loans minus _________
percent (___%)) for such Interest Period, the Noteholders will receive
interest payments on the 1996 Notes for such Interest Period in an amount
equal to such applicable Net Loan Rate; the difference between the interest
rate and the applicable Net Loan Rate for such an Interest Period shall be
deferred and paid to the Noteholders on the next succeeding Distribution
Date on which funds are available therefor, provided that the principal of
such 1996 Notes is not fully paid prior to such Distribution Date. See "THE
1996 NOTES--Interest on the Notes."
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Principal Payments...................... Each Class of 1996 Notes has the following stated maturity dates:
Class Maturity Date
----- -------------
A-1 DECEMBER 15, 2004
A-2 DECEMBER 15, 2018
The 1996 Notes are subject to mandatory principal distributions, mandatory
prepayments and optional purchase prepayment prior to maturity. See "THE
1996 NOTES--Prepayment."
Mandatory Principal
Distributions........................... The Indenture provides that, except as provided under "THE 1996
NOTES--Prepayment--Mandatory Principal Distributions," principal payments
on or with respect to the 1996 Financed Loans must be deposited to the
1996-A Subaccount of the NOTE Payment Account established under
the Indenture.
The 1996 Notes are subject to mandatory principal distributions on each
Distribution Date as a whole or in part in amounts equal to moneys
representing principal payments on or with respect to the 1996 Financed
Loans deposited to the credit of the 1996-A Subaccount of the NOTE ----
Payment Account. No principal of A-2 Notes may be so prepaid unless no A-1
Notes remain outstanding.
IF THE PRIMARY PARITY TRIGGER (AS DEFINED BELOW) IS LESS THAN 104%,
THE INDENTURE REQUIRES THAT THE INTEREST PAYMENTS ON OR WITH RESPECT
TO THE 1996 FINANCED LOANS AND OTHER MONEYS IN THE 1996-A
ACCOUNTS AND SUBACCOUNTS UNDER THE INDENTURE IN EXCESS OF AMOUNTS
NECESSARY TO PAY INTEREST (EXCLUSIVE OF DEFERRED INTEREST) ON THE 1996
NOTES SHALL BE APPLIED TO MAKE MANDATORY PRINCIPAL DISTRIBUTIONS ON
THE 1996 NOTES. SEE "DESCRIPTION OF INDENTURE--FLOW OF
FUNDS."
In addition, if the PRIMARY Parity Trigger is less than 112.78%, the
Indenture requires that the interest payments on or with respect to the
1996 Financed Loans and other moneys in various 1996-A Accounts and
Subaccounts under the Indenture in excess of amounts NECESSARY to
pay interest on the 1996 Securities (exclusive of Deferred Interest) and
to INCREASE THE AMOUNT IN the 1996-A Account of the Debt Service
Reserve Fund TO THE DEBT SERVICE RESERVE REQUIREMENT shall be
applied to make mandatory principal distributions on the 1996 Notes.
See "DESCRIPTION OF INDENTURE--Flow of Funds."
"PRIMARY PARITY TRIGGER" MEANS, AS OF ANY DATE OF DETERMINATION,
AN AMOUNT (EXPRESSED AS A PERCENTAGE) EQUAL TO THE SUM OF (I) THE
BALANCES THEN ON DEPOSIT IN ALL FUNDS AND ACCOUNTS ALLOCABLE TO THE
1996 SECURITIES (EXCLUDING BALANCES ATTRIBUTABLE TO PRINCIPAL OF OR
ACCRUED INTEREST ON DEFAULTED LOANS) AND (II) AMOUNTS ON DEPOSIT IN
THE LOCKBOX ACCOUNT HELD BY THE SERVICER AND ALLOCABLE to the 1996
Financed Loans , DIVIDED BY AN AMOUNT EQUAL TO THE PRINCIPAL
AMOUNT OF ALL NOTES THEN OUTSTANDING PLUS ALL ACCRUED AND UNPAID
INTEREST THEREON PLUS ANY UNPAID PORTION OF THE ADMINISTRATION
REQUIREMENT. THE PRIMARY PARITY TRIGGER SHALL BE CALCULATED BY THE
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ADMINISTRATOR AS OF THE DATE OF THE INFORMATION CONTAINED IN THE THEN
MOST RECENT REPORT OF THE SERVICER PROVIDED BY THE ISSUER TO THE
INDENTURE TRUSTEE.
"SECONDARY Parity Trigger" SHALL MEAN , as of any date of
determination, an amount (expressed as a percentage) equal to the sum
of (i) the Balances then on deposit in all Funds and Accounts
HEREUNDER (excluding Balances attributable to principal of or accrued
interest on Defaulted Loans) and (ii) amounts on deposit in the lockbox
account held by the Servicer and allocable to THE 1996 Financed Loans,
divided by an amount equal to the principal amount of all Notes AND
CERTIFICATES then Outstanding plus all accrued and unpaid interest
thereon plus any unpaid portion of the Administration Requirement. The
SECONDARY Parity Trigger shall be calculated by the Administrator as of
the date of the information contained in the then most recent report of
the Servicer provided by the Issuer to the Indenture Trustee.
The 1996 Notes are also subject to mandatory principal distribution from
excess moneys in the 1996-A Subaccount of the Pre-Funding Account.
See "DESCRIPTION OF THE INDENTURE--FLOW of Funds."
Optional Purchase
Prepayment.............................. The Seller may repurchase all remaining Financed Loans, and thus
effect the early retirement of the A-2 Notes, on any Distribution Date on
or after which the BALANCE in the 1996-A Account of the Student Loan
Portfolio Fund IS equal to or less than 10% of the Initial Pool Balance, at
a price equal to the outstanding principal balance of the Financed Loans,
plus accrued and unpaid interest. See "THE 1996 NOTES--Prepayment--Optional
Purchase Prepayment."
Principal Factor........................ All prepayments of 1996 Notes of any Class, whether by mandatory
principal distribution or prepayment, shall be made pro rata within that
Class. In connection with each prepayment of 1996 Notes of any Class, the
Indenture Trustee shall compute the Principal Factor for that Class. The
Principal Factor shall be a seven-digit decimal indicating the principal
balance of each 1996 Note of a Class as of a Distribution Date (after
giving effect to any prepayments made on that date) as a fraction of the
original principal amount of the 1996 Note. The principal balance of any
1996 Note can be determined by multiplying the original principal amount of
SUCH 1996 Note by the Principal Factor applicable to that Class of 1996
Notes.
Security for the Notes
Indenture Trust Estate.................. The Indenture Trust Estate consists of (i) all Revenues (as defined
herein); (ii) the amounts in all Subaccounts, Accounts and Funds (whether
derived from proceeds of the sale of the Notes, from Revenues or from any
other source, excluding the CERTIFICATE Fund); (iii) all rights, title,
interest and privileges of the Issuer, as the owner of the Financed Loans,
in and to (a) the Financed Loans, including all promissory notes evidencing
the indebtedness for Financed Loans and all related documentation, and all
rights of the Issuer to receive any and all payments of any nature and from
any source with respect to the
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Financed Loans, (b) each Guaranty AGREEMENT insofar as it relates to the
Financed Loans, (c) the Servicing Agreement, (d) THE Administration
Agreement, and (e) any Sales Agreements with the Seller with respect to the
Financed Loans; (iv) all products and proceeds of any of the foregoing; and
(v) all other property of every kind and nature which is now or from time
to time hereafter pledged, assigned or transferred as and for security
under the Indenture to the Indenture Trustee by the Issuer OR by anyone on
its behalf. See "THE TRUST ESTATE."
Collateralization....................... Upon closing, the value of all assets pledged to the Indenture Trust
Estate will equal 110.65% of the principal amount of all of the Notes AND
IS EXPECTED TO REACH AT LEAST 112.78% UPON EXPENDITURE OF ALL THE FUNDS IN
THE 1996-A SUBACCOUNT IN THE PRE-FUNDING ACCOUNT.
Denominations........................... The 1996 Notes will be offered for purchase in minimum denominations
of $20,000 and integral multiples of $1,000 in excess thereof in book-
entry form only. Definitive 1996 Notes will be issued only under the
limited circumstances described herein. Persons acquiring beneficial
interests in the Notes will hold their interests through DTC. SEE
"INFORMATION REGARDING THE SECURITIES-Book-Entry Registration" and
"-Definitive Securities."
ADDITIONAL Notes........................ The Indenture provides that the Issuer may from time to time issue
additional Notes to acquire additional Loans. Such additional Notes shall
be secured by the Indenture Trust Estate equally and ratably with the 1996
Notes. In order to issue additional Notes, the Indenture requires that the
Issuer satisfy certain conditions, including but not limited to, the
condition that the issuance of SUCH additional Notes will not adversely
affect the ratings on the then outstanding Notes and Certificates.
The 1996 Certificates
General................................. The 1996 Certificates will represent undivided interests in the Trust.
See "THE 1996 CERTIFICATES-General."
The Trust will issue $7,700,000 aggregate principal amount of 1996
Certificates pursuant to the Trust Agreement and the First Trust
Supplement. Payments in respect of the Certificates, including the 1996
Certificates, will be subordinated to payments on the Notes to the extent
described herein. See "THE 1996 CERTIFICATES-General."
Interest Payments....................... Interest on the 1996 Certificates (calculated on the basis of a 360-day
year for actual days elapsed) will be payable on each Distribution Date.
Interest on the 1996 Certificates for the period beginning on the date of
issuance to, but not including, July 15, 1996 (the "Initial Period") shall
accrue at an interest rate equal to the LIBOR Rate determined on
____________, 1996 plus ___%. Thereafter, interest on the 1996
Certificates will accrue at an interest rate which shall be equal to the
LIBOR Rate plus ___%. The interest rate on the 1996 Certificates will
be adjusted on July 15, 1996, and on the 15th day of each month
thereafter (each a "Rate Adjustment Date"), based on the LIBOR Rate
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determined on the second Business Day immediately preceding each such
Rate Adjustment Date (a "Rate Determination Date"). The interest rate
on the 1996 Certificates shall never exceed the maximum rate permitted
by law. In addition, the interest rate on the 1996 Certificates shall never
exceed, for any Interest Period, the rate of 18% per annum. See "THE
1996 CERTIFICATES--Interest on the Certificates."
In the event that the interest rate on the 1996 Certificates for any Interest
Period exceeds the applicable Net Loan Rate for such Interest Period,
the Certificateholders will receive interest payments on the 1996
Certificates for such Interest Period in an amount equal to such
applicable Net Loan Rate; the difference between the interest rate and
the applicable Net Loan Rate for such an Interest Period shall be
deferred and paid to the Certificateholders on the next succeeding
Distribution Date on which funds are available therefor, provided that
the principal of such 1996 Certificates is not fully paid prior to such
Distribution Date. See "THE 1996 CERTIFICATES--Interest on the
CERTIFICATES."
NO INTEREST ON THE 1996 CERTIFICATES SHALL BE DISTRIBUTED IF AFTER
SUCH DISTRIBUTION THE PRIMARY PARITY TRIGGER WOULD BE LESS THAN 104%.
Principal Payments...................... The 1996 Certificates shall have a maturity date of DECEMBER 15,
2018.
Mandatory Principal
Distributions........................... The Indenture provides that, except as provided under "THE 1996
NOTES--Prepayment--Mandatory Principal Distributions," principal payments
on or with respect to the 1996 Financed Loans must be deposited to the 1996
-A Subaccount of the NOTE Payment Account established under the Indenture.
The Indenture provides that if no 1996 Notes are Outstanding, principal
payments on or with respect to the 1996 Financed Loans shall be
transferred to the Owner Trustee and applied to the prepayment of
principal of the 1996 Certificates in accordance with the Trust
Agreement ON EACH DISTRIBUTION DATE.
Optional Purchase
Prepayment.............................. The Seller may repurchase all remaining 1996 Financed Loans, and
thus effect the early retirement of the 1996 Certificates, on any
Distribution Date on or after which the BALANCE in the 1996-A Account of
the Student Loan Portfolio Fund IS equal to or less than 10% of the Initial
POOL Balance, at a price equal to the outstanding principal balance of the
1996 Financed Loans, plus accrued and unpaid interest. SEE "THE 1996
CERTIFICATES--PREPAYMENT-OPTIONAL PURCHASE PREPAYMENT".
Principal Factor........................ All prepayments of 1996 Certificates, whether by mandatory principal
distribution or optional purchase prepayment, shall be made pro rata. In
connection with each prepayment of 1996 Certificates, the Owner Trustee
shall compute the Principal Factor for the 1996 Certificates. The Principal
Factor shall be a seven-digit decimal indicating the principal balance of
each 1996 Certificate as of a Distribution Date (after giving effect to any
prepayments made on that date) as a fraction of the original principal
amount of the 1996 Certificate.
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The principal balance of any 1996 Certificate can be determined by
multiplying the original principal amount of the 1996 Certificate by the
Principal Factor applicable to that 1996 Certificate.
Collateralization....................... Upon closing, the value of all moneys and 1996 Financed Loans
owned by the Issuer will equal 103.75% of the principal amount of all Notes
and Certificates AND IS EXPECTED TO BE AT LEAST 103.75% UPON EXPENDITURE OF
ALL THE FUNDS IN THE 1996-A SUBACCOUNT IN THE PRE- FUNDING ACCOUNT.
Additional Certificates................. The Trust Agreement provides that the Issuer may from time to time
issue additional Certificates to acquire additional Loans. In order to
issue additional Certificates, the Trust Agreement requires that the Issuer
satisfy certain conditions, including but not limited to, the condition
that the issuance of SUCH additional Certificates will not adversely affect
the ratings on the then outstanding Notes and Certificates.
Denominations........................... The 1996 Certificates will be issued in minimum denominations of
$20,000 and integral multiples of $1,000 in excess thereof in book-entry
form only; provided, however, that 1996 Certificates may be issued in
denominations less than $20,000 and other than in integral multiples of
$1,000 to the Seller and NMELC. Persons acquiring beneficial interests in
the 1996 Certificates will hold their interests through DTC. Definitive
certificates will be issued only under the limited circumstances described
herein. See " INFORMATION REGARDING THE 1996 SECURITIES--Book-Entry
Registration" and "--Definitive Securities."
Tax Considerations...................... In the opinion of counsel for the Issuer, (i) the 1996 Notes will be
characterized as debt for Federal income tax purposes, and (ii) the 1996
Certificates will constitute interests in a trust fund that will not be
treated as an association taxable as a corporation.
Each Noteholder, by the acceptance of a Note of a given SERIES, will
agree to treat such Note as indebtedness, and each Certificateholder, by
the acceptance of a Certificate of a given CLASS and assuming that any
such Certificates are sold to persons other than the Seller, will agree to
treat the Issuer as a partnership in which such Certificateholder is a
partner for FEDERAL income tax PURPOSES.
Due to the method of allocation of Issuer income to the
CERTIFICATEHOLDERS, cash basis holders may, in effect, be required to
report income from the Certificates on an accrual basis. In addition,
because tax allocations and tax reporting will be done on a uniform
basis, but Certificateholders may be purchasing Certificates at different
times and at different prices, Certificateholders may be required to
report on their tax returns taxable income that is greater or less than the
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amount reported to them by the Trust. SEE "CERTAIN FEDERAL
INCOME TAX CONSEQUENCES."
ERISA Considerations.................... A fiduciary of any employee benefit plan or other retirement
arrangement subject to the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), or Section 4975 of the Internal Revenue Code of 1986,
as amended (the "Code"), should carefully review with its legal advisors
whether the purchase or holding of any class of Securities could give rise
to a transaction prohibited or not otherwise permissible under ERISA or
Section 4975 of the Code. See "ERISA CONSIDERATIONS."
Subordination of CERTIFICATES........... The rights of the Certificateholders to receive distributions with respect
to the 1996 Financed Loans will be subordinated to the rights of the
Noteholders, to the extent described herein. This subordination is intended
to enhance the likelihood of timely receipt by the Noteholders of the full
amount of interest and principal required to be paid to SUCH HOLDERS, and
to afford such Noteholders limited protection against losses in respect of
the 1996 Financed Loans.
The protection afforded to the Noteholders by the subordination feature
described above will be effected by the preferential right of the
Noteholders to receive, to the extent described herein, current
distributions from collections on or in respect of the Financed Loans
prior to the application of such collections FOR making payments in
respect of the Certificates. There is no other protection against losses
on the Financed Loans afforded TO THE HOLDERS OF the Notes.
Ratings of the SECURITIES............... It is a condition OF the issuance of the NOTES AND OF THE CERTIFICATES
THAT THE NOTES BE RATED IN THE HIGHEST INVESTMENT RATING CATEGORY BY AT
LEAST TWO NATIONALLY RECOGNIZED RATING AGENCIES AND THAT THE Certificates
be rated IN THE "A" RATING CATEGORY BY AT LEAST TWO SUCH RATING AGENCIES. A
RATING IS NOT A RECOMMENDATION TO PURCHASE, HOLD OR SELL SECURITIES,
INASMUCH AS SUCH RATING DOES NOT COMMENT AS TO MARKET PRICE OR SUITABILITY
FOR A PARTICULAR INVESTOR. The ratings of the NOTES AND CERTIFICATES
ADDRESS THE LIKELIHOOD OF THE ULTIMATE PAYMENT OF PRINCIPAL OF AND INTEREST
ON THE NOTES AND CERTIFICATES PURSUANT TO THEIR RESPECTIVE TERMS. HOWEVER,
THE RATING AGENCIES DO NOT EVALUATE, AND THE RATINGS OF THE NOTES AND
CERTIFICATE DO NOT ADDRESS, THE LIKELIHOOD OF PAYMENT OF THE NOTEHOLDERS'
DEFERRED INTEREST OR THE CERTIFICATEHOLDERS' DEFERRED INTEREST. There can
be no assurance that A rating will remain for any given period of time or
that a rating will not be lowered or withdrawn ENTIRELY BY A Rating Agency
if, in its JUDGEMENT, circumstances IN THE FUTURE so warrant. There can be
no assurance AS TO whether any ADDITIONAL rating agency will rate the Notes
or the Certificates, or if one does, what rating would be assigned by such
rating agency.
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RISK FACTORS
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING
OF SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT AND ARE
INTENDED TO BE SUBJECT TO THE "SAFE-HARBOR" PROVISIONS OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. THE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO
MANY RISKS AND UNCERTAINTIES, WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM SUCH STATEMENTS.
Prospective purchasers of the 1996 Securities should consider carefully
the following discussion of risk factors associated with an investment in the
1996 Securities.
LIMITED LIQUIDITY
THERE IS CURRENTLY NO SECONDARY MARKET FOR THE 1996 SECURITIES. SMITH
BARNEY INC. (THE "UNDERWRITER") INTENDS TO MAKE A SECONDARY MARKET IN THE 1996
SECURITIES, BUT HAS NO OBLIGATION TO DO SO. THERE CAN BE NO ASSURANCE THAT A
SECONDARY MARKET WILL DEVELOP FOR THE 1996 SECURITIES OR, IF IT DOES DEVELOP,
THAT IT WILL PROVIDE THE HOLDERS OF THE 1996 SECURITIES WITH LIQUIDITY OF
INVESTMENT OR THAT IT WILL REMAIN FOR THE TERM OF THE 1996 SECURITIES.
BASIS RISK; NET LOAN RATE
The Financed Loans bear interest based on the Prime Rate, which is the
base rate on corporate loans at large U.S. money center commercial banks as
reported in The Wall Street Journal. The 1996 Securities, however, will bear
interest based on the LIBOR Rate as published by the Telerate Service, up to a
maximum of 18%. If the spread between the Prime Rate and the LIBOR Rate were to
narrow permanently, the Holders of the 1996 Securities might receive interest at
a rate equal to the Net Loan Rate. Interest at a rate equal to the difference
between the interest rate on the 1996 Securities and the Net Loan Rate would be
deferred until the next succeeding Distribution Date on which funds are
available therefor. To the extent principal of the 1996 Securities is paid prior
to the payment of any Deferred Interest, the Deferred Interest on SUCH
principal will not be paid.
FACTORS POSSIBLY AFFECTING RECEIPT OF REVENUES FROM OR WITH RESPECT TO THE
FINANCED LOANS
GENERALLY. Actual revenues received from the Financed Loans and,
therefore, the Trust's ability to pay promptly the amount of interest and
principal payable on the 1996 Securities, will depend on various factors
including, among others, the maturities and other terms of the FINANCED Loans
and the timely receipt of payments of principal of and interest on such FINANCED
Loans. To the extent actual revenues received from or with respect to THE
FINANCED Loans vary in timing or amount from the assumptions for THIS
financing, the ability of the Trust to pay principal of and interest on some or
all of the 1996 Securities could be adversely affected.
VARIABILITY OF ACTUAL CASH FLOWS. Amounts received with respect to the
Financed Loans may vary in both timing and amount from the payments actually
due on the Financed Loans for a variety of economic, social and other factors,
including, both individual factors, such as unemployment of the borrower, and
general factors, such as a general economic downturn which could increase the
amount of defaulted Financed Loans. Failure by borrowers to pay timely the
principal of and interest on the Financed Loans will affect the amount of
available funds, which may reduce the amount of principal and interest paid to
Holders of the 1996 Securities. The effect of such factors, including the effect
on the TRUST'S ability to pay principal and interest with respect to the 1996
Securities, is impossible to predict.
LOAN DEFERMENT AND FORBEARANCE. THE TERMS OF THE FINANCED LOANS ALLOW
QUALIFIED BORROWERS OF UNDERGRADUATE LOANS (SEE "THE TRUST ESTATE-UNDERGRADUATE
LOAN PROGRAM") TO DEFER PAYMENTS OF PRINCIPAL AND QUALIFIED BORROWERS OF
GRADUATE LOANS (SEE "THE TRUST ESTATE-GRADUATE LOAN PROGRAM") TO DEFER PAYMENTS
OF BOTH PRINCIPAL AND INTEREST DURING PERIODS WHEN THE STUDENT IS CONTINUOUSLY
ENROLLED IN SCHOOL. IN EITHER THE UNDERGRADUATE OR GRADUATE LOAN PROGRAM, THE
STUDENT MAY EXTEND THE PERIOD OF
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CONTINUOUS ENROLLMENT, THEREBY EXTENDING THE TERM OF THE LOAN AND, IN THE CASE
OF GRADUATE LOANS, MAY FURTHER DELAY THE PAYMENT OF INTEREST. HOWEVER, ONCE A
STUDENT IS NO LONGER ENROLLED, SUCH STUDENT CANNOT RETURN TO A CONTINUOUS
ENROLLMENT STATUS.
BORROWERS ARE ALSO ELIGIBLE FOR PERIODS OF FORBEARANCE AT THE
DISCRETION OF NELLIE MAE, INC., WHEREBY PAYMENTS OF PRINCIPAL AND INTEREST MAY
BE REDUCED OR DEFERRED. NELLIE MAE, INC.'S POLICY IS TO PERMIT UP TO TWO, SIX
MONTH PERIODS OF FORBEARANCE IN CASES OF DEMONSTRATED FINANCIAL HARDSHIP.
LIMITED LIQUIDITY OF FINANCED LOANS. If an Event of Default occurs
under the Indenture, subject to certain conditions, the Indenture Trustee is
authorized, with the consent of the Noteholders, to sell the Financed Loans.
There can be no assurance, however, that the Indenture Trustee will be able to
find a purchaser for the Financed Loans in a timely manner or that the market
value of such Financed Loans would, at any time, be equal to the aggregate
outstanding principal amount of the 1996 Securities and accrued interest
thereon.
DEFAULT RISK ON FINANCED LOANS. THE Financed Loans are NOT MADE
UNDER ANY FEDERAL OR GOVERNMENTAL LOAN PROGRAM AND ARE NOT INSURED OR GUARANTEED
BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY. THE ACTUAL CASH FLOW TO THE
INDENTURE TRUST ESTATE MAY VARY DEPENDING UPON THE ACTUAL DEFAULT EXPERIENCE of
the Financed Loans. IF ACTUAL DEFAULT EXPERIENCE IS HIGHER THAN EXPECTED BY
NELLIE MAE, INC., THERE WILL BE A DELAY OR REDUCTION IN RECEIPT OF REVENUES BY
THE INDENTURE TRUSTEE. IF THE ACTUAL EXPERIENCE IS SUBSTANTIALLY HIGHER THAN
EXPECTED, A DELAY OR REDUCTION IN PAYMENTS TO NOTEHOLDERS AND CERTIFICATEHOLDERS
MAY OCCUR.
SUBORDINATION OF CERTIFICATES
The rights of THE Certificateholders to receive payments of interest
ARE subordinated to THE RIGHTS of the Noteholders TO RECEIVE PAYMENTS OF
INTEREST AND THE RIGHTS OF THE CERTIFICATEHOLDERS TO RECEIVE PAYMENTS OF
PRINCIPAL ARE SUBORDINATED TO THE RIGHTS OF THE NOTEHOLDERS TO RECEIVE PAYMENTS
OF INTEREST AND PRINCIPAL. CONSEQUENTLY, REVENUES ON DEPOSIT IN THE REVENUE FUND
AND THE DEBT SERVICE RESERVE FUND ON (I) ANY DISTRIBUTION DATE, WILL BE APPLIED
TO THE PAYMENT OF INTEREST ON THE NOTES BEFORE PAYMENT OF INTEREST ON THE
CERTIFICATES AND (II) ANY DISTRIBUTION DATE THAT IS ALSO A MATURITY DATE, WILL
BE APPLIED TO THE PAYMENT OF INTEREST ON THE NOTES BEFORE PAYMENT OF INTEREST
AND PRINCIPAL ON THE CERTIFICATES AND WILL BE APPLIED TO THE PAYMENT OF
PRINCIPAL ON THE NOTES BEFORE PAYMENT OF PRINCIPAL ON THE CERTIFICATES. THE
CERTIFICATEHOLDERS WILL NOT BE ENTITLED TO ANY PAYMENTS OF PRINCIPAL UNTIL THE
NOTES ARE PAID IN FULL. IF AMOUNTS OTHERWISE ALLOCABLE TO THE CERTIFICATES ARE
USED TO FUND PAYMENTS OF INTEREST OR PRINCIPAL ON THE NOTES, DISTRIBUTIONS WITH
RESPECT TO THE CERTIFICATES MAY BE DELAYED OR REDUCED AND CERTIFICATEHOLDERS MAY
SUFFER A LOSS. NOTWITHSTANDING THE FOREGOING, DISTRIBUTIONS OF PRINCIPAL TO
CERTIFICATEHOLDERS WILL NOT BE SUBORDINATED TO THE PAYMENT OF DEFERRED INTEREST
TO NOTEHOLDERS, IF ANY. THE CERTIFICATEHOLDERS BEAR DIRECTLY THE CREDIT AND
OTHER RISKS ASSOCIATED WITH AN UNDIVIDED INTEREST IN THE TRUST. SEE "THE 1996
CERTIFICATES-SUBORDINATION."
LIMITED ASSETS OF THE TRUST
THE TRUST does not have, nor is it permitted or expected to have, any
significant assets or sources of funds other than the Financed Loans , THE
REVENUE FUND, THE PRE-FUNDING ACCOUNT AND THE DEBT SERVICE RESERVE FUND. THE
NOTES REPRESENT OBLIGATIONS SOLELY OF THE TRUST, AND THE Certificates represent
interests solely in the Trust and its assets. NEITHER THE NOTES NOR THE
CERTIFICATES WILL BE INSURED OR GUARANTEED BY THE SELLER, THE SERVICER, NELLIE
MAE, INC., THE OWNER TRUSTEE OR ANY GOVERNMENTAL AGENCY. CONSEQUENTLY, HOLDERS
OF THE NOTES AND THE Certificates must rely FOR REPAYMENT UPON PAYMENTS MADE
WITH RESPECT TO the Financed Loans and, TO THE EXTENT AVAILABLE UNDER THE
CIRCUMSTANCES DESCRIBED HEREIN, AMOUNTS ON DEPOSIT IN THE FUNDS AND ACCOUNTS
DESCRIBED ABOVE. THE 1996-A Pre-Funding AccountWILL ONLY BE AVAILABLE DURING THE
FUNDING PERIOD TO COVER OBLIGATIONS OF THE TRUST RELATING TO SUBSEQUENT LOANS OR
THE PREPAYMENT OF NOTES AS REQUIRED HEREIN, AND IS NOT INTENDED TO COVER LOSSES
ON THE FINANCED LOANS. SIMILARLY, AMOUNTS TO BE DEPOSITED IN THE DEBT SERVICE
RESERVE FUND ARE LIMITED IN AMOUNT AND WILL BE REDUCED, SUBJECT TO THE DEBT
SERVICE RESERVE REQUIREMENT. IF THE DEBT SERVICE RESERVE FUND IS EXHAUSTED, THE
TRUST WILL DEPEND SOLELY ON PAYMENTS MADE
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WITH RESPECT TO THE FINANCED LOANS TO MAKE PAYMENTS ON THE NOTES AND THE
CERTIFICATES AND NOTEHOLDERS AND CERTIFICATEHOLDERS COULD SUFFER A LOSS.
NOTEHOLDERS AND CERTIFICATEHOLDERS WILL HAVE NO CLAIM TO ANY AMOUNTS PROPERLY
DISTRIBUTED TO THE SELLER, NMELC, THE ADMINISTRATOR OR THE SERVICER FROM TIME TO
TIME AS DESCRIBED HEREIN AND THE SELLER, NMELC, THE ADMINISTRATOR AND THE
SERVICER SHALL IN NO EVENT BE REQUIRED TO REFUND SUCH DISTRIBUTED AMOUNTS. SEE
"DESCRIPTION OF THE INDENTURE-FLOW OF FUNDS."
PREPAYMENT OF THE 1996 SECURITIES FROM MONEYS IN THE 1996-A PRE-FUNDING
SUBACCOUNT
ON THE Closing Date, the Trust will own the INITIAL Financed Loans
and the Pre-Funded Amount on deposit in the 1996-A Pre-Funding SUBACCOUNT.
If the aggregate principal amount of the 1996 Financed Loans sold by the Seller
to the TRUST during the Funding Period is less than the 1996 Pre-Funded
Amount, the Trust will prepay principal to NOTEHOLDERS. TO THE EXTENT THAT
AMOUNTS ON DEPOSIT IN THE 1996-A PRE-FUNDING ACCOUNT HAVE NOT BEEN FULLY
COMMITTED BY THE COMMITMENT CUT-OFF DATE OR FULLY APPLIED TO PURCHASE SUBSEQUENT
LOANS BY THE TRUST BY THE END OF THE 1996 FUNDING PERIOD, THE HOLDERS OF THE
CLASS OF NOTES WITH THE EARLIEST MATURITY DATE THAT FUNDED THE 1996-A
PRE-FUNDING SUBACCOUNT WILL RECEIVE AS PREPAYMENTS OF PRINCIPAL AN AMOUNT EQUAL
TO THE AMOUNT IN THE 1996-A PRE-FUNDING SUBACCOUNT IN EXCESS OF THAT NEEDED TO
ACQUIRE SUBSEQUENT LOANS. SEE DESCRIPTION OF THE INDENTURE-PRE-FUNDING ACCOUNT."
In addition, any conveyance of Subsequent Loans is subject to the
following conditions, among others: (i) each such Subsequent Loan must satisfy
the eligibility criteria specified in the Sales Agreement and (ii) the Seller
will not select such Subsequent Loans in a manner that it believes is adverse to
the interests of the Noteholders or the Certificateholders.
PREPAYMENT OF THE 1996 SECURITIES FROM MONEYS RECEIVED AS PREPAYMENTS OF THE
FINANCED LOANS
Financed Loans may be prepaid by borrowers at any time. For this
purpose the term "prepayments" includes prepayments in full or in part from any
SOURCE, including with respect to Financed Loans payments from Guarantors,
IF ANY OR IF APPLICABLE, upon default. The rate of prepayments on the Financed
Loans CANNOT BE PREDICTED AND may be influenced by a variety of economic, social
and other factors affecting borrowers, including interest rates, the
availability of alternative financing and the general job market for graduates
of institutions of higher education. In addition, under certain circumstances,
the SellerOR NELLIE MAE, INC. will be obligated to repurchase Financed Loans
from the TRUST as a result of breaches of their respective representations,
warranties or covenants in the Sales Agreementor the Purchase Agreement. THE
PROCEEDS TO THE TRUST OF SUCH REPURCHASE WILL BE DEPOSITED IN THE REVENUE FUND.
See "DESCRIPTION OF THE SALES AND PURCHASE AGREEMENTS."
In addition, because monthly payment schedules on CERTAIN OF the
Financed Loans are fixed for certain periods of time, scheduled payments with
respect to, and maturities of, the Financed Loans will be extended if interest
RATES on the Financed Loans RISE, or shortened if THE interest rates on the
Financed Loans fall. Any reinvestment risks resulting from a faster or slower
incidence of prepayment of Financed Loans will be borne entirely by the
Noteholders and the Certificateholders.
UNSECURED NATURE OF FINANCED STUDENTS LOANS
ALL OF THE FINANCED LOANS ARE UNSECURED OBLIGATIONS OF THE BORROWERS.
THE BORROWERS HAVE NOT PLEDGED ANY COLLATERAL TO THE REPAYMENT OF THE FINANCED
LOANS.
DIFFERENT RISK BETWEEN CLASSES OF NOTES AND THE CERTIFICATES
Because the Classes of Notes within a Series with a later Maturity
Date will receive no payment of principal until the Classes of Notes within that
Series with an earlier Maturity Date have been paid in full, the Classes of
Notes with an earlier Maturity Date bear relatively greater risk than each
Class with a later Maturity Date of an increased rate of principal
PREPAYMENTS with respect to the Financed Loans (whether as a result of
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<PAGE> 20
voluntary prepayments or liquidations due to default or breach). In addition,
the Class of Notes with the earliest Maturity Date will generally bear the risk
of principal prepayments as a result of any remaining Pre-Funded Amount at each
Commitment Cut-OFF Date or the end of each Funding Period. On the other hand,
CERTIFICATEHOLDERS and, to a lesser extent, holders of Notes with a later
Maturity Date would bear a greater risk of loss of principal than do holders of
Notes with an earlier Maturity Date in the event of a shortfall in available
funds and amounts on deposit in the Revenue Fund because the Certificates do not
receive principal distributions until each Class of Notes of the corresponding
Series OF NOTES is paid in full and no Class of Notes within a Series will
receive principal payments until each Class of Notes within that Series with an
earlier Maturity Date is paid in full.
RATINGS OF THE SECURITIES
IT IS CONDITION OF THE ISSUANCE OF THE NOTES AND OF THE CERTIFICATES
THAT THE NOTES BE RATED IN THE HIGHEST INVESTMENT RATING CATEGORY BY AT LEAST
TWO NATIONALLY RECOGNIZED RATING AGENCIES AND THAT THE CERTIFICATES BE RATED IN
THE "A" RATING CATEGORY BY AT LEAST TWO SUCH RATING AGENCIES. A RATING IS NOT A
RECOMMENDATION TO PURCHASE, HOLD OR SELL THE 1996 SECURITIES, INASMUCH AS SUCH
RATING DOES NOT COMMENT AS TO MARKET PRICE OR SUITABILITY FOR A PARTICULAR
INVESTOR. THE RATINGS OF THE 1996 SECURITIES ADDRESS THE LIKELIHOOD OF THE
ULTIMATE PAYMENT OF PRINCIPAL OF AND INTEREST ON THE 1996 SECURITIES PURSUANT TO
THEIR RESPECTIVE TERMS. HOWEVER, THE RATING AGENCIES DO NOT EVALUATE, AND THE
RATINGS OF THE 1996 SECURITIES DO NOT ADDRESS, THE LIKELIHOOD OF PAYMENT OF THE
NOTEHOLDERS' DEFERRED INTEREST OR THE CERTIFICATEHOLDERS' DEFERRED INTEREST.
THERE CAN BE NO ASSURANCE THAT A RATING WILL REMAIN FOR ANY GIVEN PERIOD OF TIME
OR THAT A RATING WILL NOT BE LOWERED OR WITHDRAWN ENTIRELY BY A RATING AGENCY
IF, IN ITS JUDGEMENT, CIRCUMSTANCES IN THE FUTURE SO WARRANT. THERE CAN BE NO
ASSURANCE AS TO WHETHER ANY ADDITIONAL RATING AGENCY WILL RATE THE NOTES OR THE
CERTIFICATES OR, IF ONE DOES, WHAT RATING WOULD BE ASSIGNED BY SUCH RATING
AGENCY.
ISSUANCE OF ADDITIONAL SECURITIES; ACCELERATION OF 1996 SECURITIES
The Issuer may from time to time issue additional Securities to acquire
additional Loans. Additional Notes would be secured by the Indenture Trust
Estate equally and ratably with the 1996 Notes, and additional Certificates
would rank equally with the 1996 Certificates as described herein. While the
Indenture requires that the Issuer satisfy certain conditions, including, but
not limited to, the condition that the issuance of the additional Securities
will not adversely affect the ratings on the then outstanding Securities, if
additional Securities are issued and the Financed Loans acquired with the
proceeds of such additional Securities do not produce sufficient revenue to pay
principal of and interest on those additional Securities, it may result in a
delay in or reduction of DISTRIBUTIONS on the 1996 Securities. MOREOVER, IF
ADDITIONAL NOTES ARE ISSUED AND EVENT OF DEFAULT OCCURS WITH RESPECT TO SUCH
ADDITIONAL NOTES AND SUCH EVENT OF DEFAULT IS NOT CURED OR WAIVED, THEN ALL
NOTES WHICH ARE THEN OUTSTANDING, INCLUDING THE 1996 NOTES, ARE SUBJECT TO
ACCELERATION.
LEGAL ASPECTS
Numerous federal and state consumer protection laws and related
regulations impose substantial requirements upon lenders and servicers involved
in consumer finance. Also, some state laws impose finance charge ceilings and
other restrictions on consumer transactions and require contract disclosures
in addition to those required under federal law. These requirements impose
specific statutory liability that could affect an assignee's ability to enforce
consumer finance contracts such as the Loans. In addition, the remedies
available to the Indenture Trustee or the HOLDERS OF THE 1996 NOTES upon an
Event of Default under the Indenture may not be readily available or may be
limited by applicable state and federal laws. SEE "CONSUMER PROTECTION LAWS" AND
"DESCRIPTION OF SALES AND PURCHASE AGREEMENTS-REPRESENTATIONS, AND WARRANTIES OF
LOAN SELLER."
NELLIE MAE, INC. and the Seller have taken steps in structuring the
transactions contemplated hereby that are intended to ensure that the voluntary
application for relief by NELLIE MAE, INC. under the Bankruptcy Code
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will not result in THE SUBSTANTIVE consolidation OF SOME OR ALL of the assets
and liabilities of the TRUST OR THE Seller with those of NELLIE MAE, INC.
However, there can be no assurance that the activities of NELLIE MAE, INC. OR
the Seller would not result in a court concluding that SOME OR ALL OF the assets
and liabilities of the Seller OR OF THE TRUST should be SUBSTANTIVELY
consolidated with OR RESTORED TO OR MADE A PART OF those of NELLIE MAE, INC. in
a proceeding under THE BANKRUPTCY CODE. If a court were to reach such a
conclusion or a filing were made under THE BANKRUPTCY CODE, or if an attempt
were made to litigate any of the foregoing issues, then delays in distributions
on the 1996 Securities could occur or reductions in the amounts of such
distributions could result.
It is intended by NELLIE MAE, INC. and the Seller that the transfer
of Financed Loans by NELLIE MAE, INC. to the Seller constitute a true sale of
the Financed Loans to the Seller. If the transfer constitutes such a true sale,
the Financed Loans and the proceeds thereof would not be property of NELLIE
MAE, INC. should it become the subject of THE BANKRUPTCY CODE subsequent to
the transfer of the Financed Loans to the Seller. NELLIE MAE, INC. will
warrant to the Seller in the related Purchase Agreement that the sale of the
Financed Loans by NELLIE MAE, INC. to the Seller is a valid sale of the
Financed Loans by NELLIE MAE, INC. to the Seller. Notwithstanding the
foregoing, if NELLIE MAE, INC. were to become subject to THE BANKRUPTCY CODE
and a creditor or trustee-in-bankruptcy of NELLIE MAE, INC. itself were to
take the position that the sale of Financed Loans by NELLIE MAE, INC. to the
Seller should instead be treated as a pledge of such Financed Loans to secure a
borrowing of NELLIE MAE, INC., DELAYS IN DISTRIBUTIONS ON THE 1996 SECURITIES
could occur or (should the court rule in favor of NELLIE MAE, INC. or such
trustee or creditor) reductions in the amounts of such DISTRIBUTIONS could
result. If the transfer of Financed Loans by NELLIE MAE, INC. to the Seller is
treated as a pledge instead of a sale, a tax or government lien on the property
of NELLIE MAE, INC. arising before the transfer of such Financed Loans to the
Seller may have priority over the Trust's interest in such Financed Loans.
FORMATION OF THE TRUST
GENERAL
The Issuer is a business trust formed under the laws of The
Commonwealth of Massachusetts pursuant to the Trust Agreement between the Seller
and Owner Trustee. After its formation, the Trust will not engage in any
activity other than (i) issuing the Notes and the Certificates, (ii) purchasing
the Financed Loans, (iii) assigning all of its assets (OTHER THAN THE
CERTIFICATE FUND) to the Indenture Trustee, and (iv) engaging in other
activities that are necessary, suitable or convenient to accomplish the
foregoing or are incidental thereto or connected therewith.
The Issuer will initially be capitalized with equity equal to $1.00
contributed by the Seller, which will be deposited in the Revenue Fund. The
Seller SHALL RETAIN BENEFICIAL AND RECORD OWNERSHIP OF THE 1996 CERTIFICATES
IN AN AMOUNT SUCH THAT THE AGGREGATE AMOUNT OF THE 1996 CERTIFICATES THEN OWNED
BY THE SELLER REPRESENTS AT LEAST ONE PERCENT (1%) of the outstanding 1996
Certificates. NMI EDUCATION LOAN CORPORATION ("NMELC") SHALL OBTAIN AND RETAIN
BENEFICIAL AND RECORD OWNERSHIP OF THE 1996 CERTIFICATES IN AN AMOUNT SUCH THAT
THE AGGREGATE AMOUNT OF THE 1996 CERTIFICATES THEN OWNED BY NMELC REPRESENTS AT
LEAST ONE NINETY-NINTH (1/99TH) OF THE AGGREGATE AMOUNT OF THE 1996 CERTIFICATES
THEN OWNED BY THE SELLER. The remaining Certificates will be sold to third party
investors that are expected to be unaffiliated with the Seller, NELLIE MAE,
INC. or their affiliates. The INITIAL Trust Estate, together with the proceeds
from the initial sale of the 1996 Securities, will be used by the Trust to
purchase the Initial Financed Loans from the Seller pursuant to the SALES
Agreement and to fund the deposit of the 1996 Pre-Funded Amount in the 1996-A
Subaccount of the Pre-Funding Account.
Upon the consummation of such purchases, the property of the Trust will
consist of (i) a pool of Financed Loans, (ii) all funds collected in respect
thereof, and (iii) all moneys and investments on deposit in the Services Fund,
Debt Service Reserve Fund, Student Loan Acquisition Fund, Student Loan Portfolio
Fund, Note Fund and CERTIFICATE Fund. The 1996 Notes will be collateralized by
the property of the Trust (other than the CERTIFICATE Fund). To facilitate
servicing and to minimize administrative burden and expense, the Servicer will
be appointed custodian of the promissory notes representing the Financed Loans
owned by the Issuer.
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The Issuer will use funds on deposit in the 1996-A Subaccount of the
Pre-Funding Account during the 1996 Funding Period to purchase Subsequent Loans,
which will constitute property of the Trust. The Pool Balance will be increased
during the 1996 Funding Period by the principal amount of Subsequent Loans
PURCHASED BY the Trust. The Seller expects that the amount of Subsequent Loans
will approximate 100% of the 1996 Pre-Funded Amount by the last day of the 1996
Funding Period; however, there can be no assurance that a sufficient amount of
LOANS WILL BE AVAILABLE FOR PURCHASE by such date. If the ENTIRE 1996 Pre-Funded
Amount has not been EXPENDED by the end of the Funding Period, the HOLDERS of
the A-1 Notes will receive any remaining amounts as payments of principal, and,
if such HOLDERS of the A-1 Notes have been paid in full, the HOLDERS of the A-2
Notes will receive THE residual amounts as payments of principal.
The TRUST'S PRINCIPAL OFFICES ARE IN BOSTON, MASSACHUSETTS, IN CARE
OF the Owner Trustee.
THE OWNER TRUSTEE
FLEET NATIONAL BANK is the Owner Trustee under the Trust Agreement.
The Owner Trustee is a NATIONAL BANKING ASSOCIATION ORGANIZED UNDER THE LAWS
OF THE UNITED STATES. The principal offices of the Owner Trustee are located at
ITS CORPORATE TRUST DEPARTMENT, ONE FEDERAL STREET, BOSTON, MASSACHUSETTS
02211 AND its telephone number is (617) 346-5508. THE OWNER TRUSTEE, ON BEHALF
OF THE TRUST, WILL ACQUIRE LEGAL TITLE TO ALL THE FINANCED LOANS FROM TIME TO
TIME PURSUANT TO THE SALES AGREEMENT.
RESIGNATION AND REMOVAL OF OWNER TRUSTEE
The Owner Trustee may at any time resign by giving written notice
thereof to the Administrator. The Administrator may dismiss the Owner Trustee at
any time for failure to act in accordance with the terms of the Trust Agreement;
provided, however, that prior to any such dismissal, the Administrator must give
the Owner Trustee notice identifying such failure and shall have given the Owner
Trustee two BUSINESS DAYS to cure such failure, if such failure relates to the
distribution of funds to Certificateholders, and 30 days to cure all other
failures. Upon receiving such notice of resignation or dismissal of the Owner
Trustee, the Administrator shall promptly appoint a successor Owner Trustee
meeting the applicable eligibility requirements.
The Owner Trustee's liability in connection with the issuance and sale
of the Certificates and the Notes is limited solely to the express obligations
of the Owner Trustee as set forth in the Trust Agreement and the SALES
Agreement.
INSOLVENCY EVENT
If an Insolvency Event occurs with respect to the Seller, the Trust
will dissolve and the Trust Agreement will be terminated 90 days after the date
of such Insolvency Event, unless, before the end of such 90-day period, the
Owner Trustee shall have received written instructions from the
Certificateholders (other than the Seller and NMELC) representing more than
HALF of the Certificate Balance (not including the principal amount of
Certificates held by the Seller and NMELC), to the effect that each such party
disapproves of the liquidation of the Financed Loans and termination of the
Trust, in which event the Trust shall continue. Upon such termination of the
Trust, the Owner Trustee shall direct the Indenture Trustee promptly to sell the
assets of the Trust (other than the Funds and Accounts) in a commercially
reasonable manner and on commercially reasonable terms. The proceeds of such a
sale of the assets of the Trust will be deposited in the Revenue Fund.
In the Trust Agreement, the Owner Trustee agrees not to institute
against the Seller or the Trust, or join, in any ACTION against the Seller or
the Trust , any bankruptcy, reorganization, arrangement, insolvency,
receivership or liquidation proceedings, or other proceedings under any
Federal or state bankruptcy or similar law.
PAYMENT OF NOTES
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Upon the payment in full of all outstanding Notes and the satisfaction
and discharge of the Indenture, the Indenture Trustee will transfer to the Owner
Trust for the benefit of the Certificateholders the remaining Indenture Trust
Estate.
SELLER LIABILITY
Under the Trust Agreement, the Seller will agree to be liable directly
to and indemnify an injured party for all losses, claims, damages, liabilities
and expenses of the Trust (other than in respect of amounts payable by the Trust
on the Securities) to the extent that the Seller would be liable if the Trust
were a partnership under the Massachusetts Uniform Limited Partnership Act in
which the Seller were a general partner of the Trust ; PROVIDED HOWEVER, THAT
THE SELLER SHALL NOT BE LIABLE FOR ANY LOSSES INCURRED BY A BENEFICIAL OWNER OF
A NOTE IN ITS CAPACITY AS A NOTEHOLDER OR TO ANY CERTIFICATEHOLDER. IN ADDITION,
ANY THIRD PARTY CREDITORS OF THE TRUST (OTHER THAN IN CONNECTION WITH THE
OBLIGATIONS TO NOTEHOLDERS EXCEPTED ABOVE) SHALL BE DEEMED THIRD PARTY
BENEFICIARIES OF THE INDEMNIFICATION PROVISIONS OF THIS PARAGRAPH.
THE TRUST ESTATE
GENERAL
The 1996 Notes are an obligation of the Issuer and will be secured by
the assets of the Issuer (other than the CERTIFICATE Fund). Each 1996
Certificate represents an undivided interest in the Issuer. The Issuer's assets
will include, among other things, (i) a pool of student loans; (ii) all
MONEYS received under the Financed Loans; (iii) such amounts as from time to
time may be held in one or more accounts established and maintained by the
Servicer pursuant to the Servicing Agreement as described herein; (iv) all
MONEYS on deposit in the Pre-Funding Account and the Debt Service Reserve Fund
(including all investments in such accounts and all income from the funds
therein and all proceeds thereof); (v) the rights of the Issuer under the Sales
Agreement, the Servicing AGREEMENT, ANY GUARANTY Agreement and the
Administration Agreement; and (vi) any and all proceeds of the foregoing.
THE LOAN POOL
The Loan Pool will initially consist of Loans (collectively, the
"Initial Loans") having an aggregate unpaid principal balance as of APRIL 30,
1996 (the "Initial Cut-off Date") of $64,934,152 (the "Initial Pool
Balance").
In addition to the Initial Loans sold by the Seller to the Issuer on
the Closing Date, the Issuer is expected to use the moneys in the 1996-A
Subaccount of the Pre-Funding Account to purchase from the Seller additional
student loans from time to time on or before January 10, 1997 (collectively, the
"Subsequent Loans" and, together with the Initial Loans, the "1996 Financed
Loans"). The Subsequent Loans to be purchased by the Issuer, if available, will
be purchased by the Seller from NELLIE MAE, INC. and sold by the Seller to the
Issuer. In addition, the Issuer may from time to time issue additional NOTES
and Certificates to finance the acquisition of additional Loans for the Loan
Pool (collectively with the 1996 Financed Loans, the "Financed Loans").
Accordingly, the statistical characteristics of the Loan Pool will vary upon the
acquisition of additional Financed Loans.
NELLIE MAE, INC. will sell the Initial Loans to the Seller pursuant to
the Purchase Agreement, and the Seller will sell the Initial Loans to the Issuer
pursuant to the Sales Agreement. NELLIE MAE, INC. will sell any Subsequent Loans
to the Seller pursuant to a Supplemental Purchase Agreement, and the Seller will
sell any Subsequent Loans to the Issuer pursuant to a Supplemental Sales
Agreement.
The obligation of the Issuer to purchase the Subsequent Loans is
subject to the following requirements:
1. Each Loan is not more than sixty (60) days delinquent in the payment
of principal and interest;
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2. Each Loan WILL BE fully disbursed BY JANUARY 10, 1997;
3. Each Loan is accompanied by the loan application and the original
promissory note and any addendum thereto, or a certified copy
thereof.
In addition, pursuant to the Sales Agreement, the Seller is required to
make representations and warranties concerning the Loans. See "DESCRIPTION OF
THE SALES AND PURCHASE AGREEMENTS."
Because the Subsequent Loans will be originated OR PURCHASED after the
Initial Loans, following their conveyance to the Issuer, the characteristics of
the Loans, including the Subsequent Loans, may vary from those of the Initial
Loans. Among other things, in order to acquire Loans with an initial principal
balance of $6,000 or less, the Issuer must obtain a small loan license from the
Massachusetts Commissioner of Banks OR WRITTEN ASSURANCE FROM THE MASSACHUSETTS
COMMISSIONER OF BANKS THAT SUCH A LICENSE IS NOT NECESSARY. The Issuer expects
to OBTAIN EITHER THE LICENSE OR SUCH WRITTEN ASSURANCE before the end of the
1996 Funding Period, but no assurance can be given as to whether or when the
license will be obtained. The Issuer does not expect to have its small loan
license OR WRITTEN ASSURANCE FROM THE MASSACHUSETTS COMMISSIONER OF BANKS TO THE
EFFECT THAT A SMALL LOAN LICENSE IS NOT NECESSARY by the Closing Date, and
therefore, the Initial Loans will not include any Loans with an initial
principal balance of $6,000 or less. If the Issuer obtains the small loan
license OR WRITTEN ASSURANCE FROM THE MASSACHUSETTS COMMISSIONER OF BANKS THAT
SUCH LICENSE IS NOT NECESSARY before the end of the 1996 Funding Period, it
expects to purchase from amounts in the 1996-A Subaccount of the Pre-Funding
Account approximately $17,000,000 of Loans currently held by NELLIE MAE,
INC. with initial principal balance of $6,000 or less. If the Issuer does not
obtain a small loan license before the end of the 1996 Funding Period, it may
not be able to utilize fully the moneys in the 1996-A Subaccount of the
Pre-Funding Account, thereby causing a partial prepayment of the 1996 Notes. See
"THE 1996 NOTES-Prepayment-Mandatory PRINCIPAL DISTRIBUTIONS."
NELLIE MAE, INC.'S LOAN PROGRAM
The LOANS WHICH THE ISSUER PURCHASES FROM THE SELLER WERE ORIGINATED OR
PURCHASED BY NELLIE MAE, INC. PURSUANT TO NELLIE MAE, INC.'S PRIVATE,
NONGOVERNMENTAL EDUCATION LOAN PROGRAM. NELLIE MAE, INC. HAS OFFERED student
loan programs for undergraduate and graduate students since 1986, providing over
$600 million in loans to help students and their families bridge the gap between
the total cost of higher education and other financial aid received. NELLIE MAE,
INC. offers private loans throughout the country .
APPLICANTS FOR NELLIE MAE, INC.'S STUDENT LOANS APPLY DIRECTLY TO
NELLIE MAE, INC. UPON REVIEW AND APPROVAL OF THE APPLICANT FOR CREDIT
QUALIFICATION, NELLIE MAE, INC. CONFIRMS WITH THE STUDENT'S SCHOOL THAT THE
REQUESTED LOAN AMOUNT IS WITHIN THE STUDENT'S COSTS OF EDUCATION THAT HAVE NOT
BEEN MET THROUGH OTHER SOURCES OF FINANCIAL AID. PROCEEDS OF THE LOAN ARE THEN
DISBURSED EITHER BY NELLIE MAE, INC., OR BY A COMMERCIAL BANK ON ITS BEHALF,
DIRECTLY TO THE STUDENT'S SCHOOL ON BEHALF OF THE STUDENT. WHEN THE LOAN IS IN
REPAYMENT, THE BORROWER MAKES MONTHLY PAYMENTS TO THE SERVICER AS AGENT FOR
NELLIE MAE, INC. WHICH IS THE OWNER OF THE LOAN. THE SERVICER DEPOSITS THESE
PAYMENTS INTO THE DESIGNATED NELLIE MAE, INC. ACCOUNT.
Marketing
NELLIE MAE, INC.'S PRIVATE, NONGOVERNMENTAL undergraduate and
graduate EDUCATION loan PROGRAM IS marketed nationally, both through the
financial aid office of EDUCATIONAL institutions as well as directly to
prospective borrowers. Nellie Mae, INC. works closely with schools around the
country and seeks to provide the "full-service" complement of Nellie Mae, INC.
origination, debt planning and advisory services to each college or university
throughout the entire loan process.
In particular, Nellie Mae, INC. has worked closely with the 32-member
Consortium on Financing Higher Education ("COFHE") schools TO MARKET ITS
PRIVATE, NONGOVERNMENTAL LOAN PROGRAM since the inception of the PROGRAM in
1986. Members of COFHE include the following institutions:
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Amherst College Pomona College
Barnard College Princeton University
Brown University Radcliffe College
Bryn Mawr College Rice University
Carleton College Smith College
Columbia University Stanford University
Cornell University Swarthmore College
Dartmouth College Trinity College
Duke University The University of Chicago
Georgetown University University of Pennsylvania
Harvard University The University of Rochester
The Johns Hopkins University Washington University
Massachusetts Institute Wellesley College
of Technology Wesleyan University
Mount Holyoke College Williams College
Northwestern University Yale University
Oberlin College
In addition, Nellie Mae, INC. sponsors and participates in numerous
advisory sessions for high school students AND THEIR PARENTS on college
financial planning and debt counseling issues; advertises in selected
educational publications; and targets major consumer media markets to broaden
awareness of its capabilities as an attractive source for education loans.
In some cases, Nellie MAE, INC.'S collaboration with schools has led
to exclusive lending relationships with Nellie Mae, INC., either for all or a
portion of the institutions' educational financing needs. NELLIE MAE, INC.
offers these colleges and universities A tailored loan PACKAGE to meet their
unique needs.
Nellie Mae, INC. has also developed "affinity" relationships with large
organizations such as the National Education Association ("NEA"), offering its
two million members access to student loan financing. Nellie Mae, INC. has been
named the exclusive student loan provider to NEA members through its sponsored
Member Benefits Programs.
UNDERGRADUATE LOAN PROGRAM
UNDERGRADUATE LOANS are primarily made to parents of students
attending four-year, degree granting institutions. Parents may borrow from
$2,000 up to the cost of education, less other financial aid received, per
academic year. The student's school determines the maximum annual loan need
AMOUNT.
Borrowers may choose from THE FOLLOWING two interest options: a monthly
variable rate which is equal to 0 to 2 percent over the Prime Rate or a one-year
adjustable rate which, when set, approximates the Prime Rate plus 2 to 4
percent. Upon origination, a fee charged on the loans ranges from 5 to 7
percent, depending on the specific TYPE selected. Loan proceeds are disbursed
to the institution ON BEHALF OF THE BORROWER.
Undergraduate Repayment Terms and Options
While the student is continuously enrolled in school, borrowers may
choose from THE FOLLOWING two repayment options: payment of principal and
interest or payment of interest only. Depending on the option selected, the
borrower begins full amortization either within 45 days of disbursement or upon
graduation. The borrower's monthly payment amount is initially fixed based on
the following repayment terms:
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<TABLE>
<CAPTION>
Principal Balance Outstanding Repayment Term
----------------------------- --------------
<S> <C>
Less than $ 3,001 48 months
$3,001 to $4,000 72 months
$4,001 to $10,000 120 months
$10,001 to $50,000 180 months
Over $50,000 240 months
</TABLE>
Thereafter, as the interest rate on the loan changes, the monthly
payment amount remains constant, with the repayment period lengthened or
shortened, and the interest accrual adjusted accordingly. However, if rates rise
such that the loan will not be fully amortized within 20 years of the
commencement of repayment or within a period twice the initial repayment period,
whichever is less, the monthly payment amount is adjusted to allow amortization
within the required time period. The monthly payment for loans which bear
interest at the one year adjustable rate is changed with the annual rate
adjustment.
One educational institution also sponsors Nellie Mae , INC. LOANS
available only to students approved by the school's financial aid office and
guaranteed in full by the university. Loan terms are similar to NELLIE MAE,
INC.'S other undergraduate LOANS, with some minor exceptions. Loan amounts may
be as small as $1,000 and participating borrowers may select repayment on a
deferred principal and interest basis in which no payment is made until six
months after the student graduates. While in school, interest on the loan is
capitalized either on a quarterly or one-time basis at repayment. Loans
capitalizing at repayment incur a one-time fee equal to 2 percent of the
outstanding balance of such loan including unpaid interest. This fee is added to
the then outstanding loan balance. All credit decisions are made by the school.
Undergraduate Credit Standards
All applications received by Nellie Mae, INC. undergo a full credit
analysis to determine the creditworthiness of the applicant(s).
Once the application is REVIEWED for completeness, Nellie MAE, INC.'S
credit analysts perform the following steps:
1. Income listed on the application is verified with a recent pay
voucher, W-2 Form, Federal Income Tax Return or CPA-prepared
financial statements.
2. A national credit bureau report is obtained for each applicant and
reviewed for timely fulfillment of previous and existing debt
obligations.
3. Each applicant's current credit information is compared to the
applicant's credit bureau report for completeness. Applicants must
have a satisfactory two-year credit history.
4. A debt to income ratio measuring the applicant's obligations
(including the new undergraduate loans) to the gross monthly income
is calculated. Generally, an applicant with a clean credit history
cannot exceed a debt to income ratio of 40 percent. An applicant's
extremely high annual income, exceptional credit history and other
mitigating factors such as length of employment and home ownership
may allow the debt to income ratio to exceed 40 percent but in no
case to exceed 50 percent.
5. Applicant information is entered into Nellie MAE, INC.'S custom
credit scoring model. Depending on where the score generated ranks
the applicant, Nellie Mae, INC. may approve, deny or recommend that
the application receive further review.
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<PAGE> 27
NELLIE MAE, INC.'S credit underwritten undergraduate loan portfolio
originated in 1995 has the following general characteristics:
<TABLE>
<CAPTION>
Average Individual Average Combined Median Debt to
Applicant Salary Applicant Salary Income Ratio
---------------- ---------------- ------------
<S> <C> <C>
$41,232 $74,280 31.78%
------- ------
</TABLE>
Historical Default Trends
The following chart, as of March 31, 1996, shows historical cumulative
default trends for NELLIE MAE, INC.'S undergraduate loan portfolio since the
program's inception in 1986. These cumulative default rates represent gross
defaults and do not reflect amounts subsequently recovered through post-default
collection and litigation efforts. Each borrower cohort is shown in the chart,
along with the original disbursed and defaulted amounts by year.
23
<PAGE> 28
NELLIE MAE, INC.
CUMULATIVE DEFAULTS BY PROGRAM YEAR
UNDERGRADUATE LOANS
<TABLE>
<CAPTION>
1986 1987 1988 1989 1990 1991
DISBURSEMENT
YEAR
- ----
<S> <C> <C> <C> <C> <C> <C> <C>
1986 ORIGINAL BALANCE
DEFAULTS $10,424,427 $0 $24,419 $55,474 $8,450 $30,784
% OF BALANCE $0 0.00% 0.23% 0.53% 0.08% 0.30% %
0.00%
1987 ORIGINAL BALANCE
DEFAULTS $17,362,667 $15,539 $138,496 $205,520 $215,088
% OF BALANCE $0 0.09% 0.80% 1.18% 1.24%
0.00%
1988 ORIGINAL BALANCE
DEFAULTS $24,944,806 $35,238 $167,120 $301,818
% OF BALANCE $0 0.14% 0.67% 1.21%
0.00%
1989 ORIGINAL BALANCE
DEFAULTS $34,514,193 $72,292 $341,634
% OF BALANCE $0 0.21% 0.99%
0.00%
1990 ORIGINAL BALANCE
DEFAULTS $52,209,404 $176,941
% OF BALANCE $5,027 0.34%
0.01%
1991 ORIGINAL BALANCE
DEFAULTS $54,756,578
% OF BALANCE $41,869
0.08%
1992 ORIGINAL BALANCE
DEFAULTS
% OF BALANCE
1993 ORIGINAL BALANCE
DEFAULTS
% OF BALANCE
1994 ORIGINAL BALANCE
DEFAULTS
% OF BALANCE
1995 ORIGINAL BALANCE
DEFAULTS
% OF BALANCE
</TABLE>
<TABLE>
<CAPTION>
MARCH TOTALS
-----
1992 1993 1994 1995 1996
DISBURSEMENT
YEAR
- ----
<S> <C> <C> <C> <C> <C> <C> <C>
1986 ORIGINAL BALANCE
DEFAULTS $16,307 $43,070 $2,082 $24,117 $0 $204,703
% OF BALANCE 0.16% 0.41% 0.02% 0.23% 0.00% 1.96
1987 ORIGINAL BALANCE
DEFAULTS $208,526 $146,069 $130,900 $35,403 $0 $1,095,541
% OF BALANCE 1.20% 0.84% 0.75% 0.20% 0.00% 6.31%
1988 ORIGINAL BALANCE
DEFAULTS $349,210 $288,030 $120,331 $229,700 $0 $1,491,447
% OF BALANCE 1.40% 1.15% 0.48% 0.92% 0.00% 5.98%
1989 ORIGINAL BALANCE
DEFAULTS $546,650 $578,304 $261,426 $460,142 $4,454 $2,264,903
% OF BALANCE 1.58% 1.68% 0.76% 1.33% 0.01% 6.56%
1990 ORIGINAL BALANCE
DEFAULTS $501,003 $632,936 $458,176 $598,123 $27,568 $2,399,774
% OF BALANCE 0.96% 1.21% 0.88% 1.15% 0.05% 4.60%
1991 ORIGINAL BALANCE
DEFAULTS $294,827 $287,610 $311,485 $553,048 $20,646 $1,509,485
% OF BALANCE 0.54% 0.53% 0.57% 1.01% 0.04% 2.76%
1992 ORIGINAL BALANCE
DEFAULTS $52,147,101 $149,762 $310,843 $725,093 $74,287 $1,264,321
% OF BALANCE $4,336 0.29% 0.60% 1.39% 0.14% 2.42%
0.01%
1993 ORIGINAL BALANCE
DEFAULTS $46,001,887 $143,093 $364,313 $54,172 $561,578
% OF BALANCE $0 0.31% 0.79% 0.12 1.22%
0.00%
1994 ORIGINAL BALANCE
DEFAULTS $28,367,703 $17,847 $3,574 $33,523
% OF BALANCE $12,102 0.06% 0.01% 0.12%
0.04%
1995 ORIGINAL BALANCE $15,811,144
DEFAULTS $22,255 $0 $22,255
% OF BALANCE 0.14% 0.00% 0.14%
</TABLE>
24
<PAGE> 29
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
1996 ORIGINAL BALANCE
DEFAULTS
% OF BALANCE
TOTALS $0 $0 $39,958 $229,208 $458,409 $1,108,134
-- -- ------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1996 ORIGINAL BALANCE $1,908,370
DEFAULTS $0 $0
% OF BALANCE 0.00% 0.00%
TOTALS $1,920,859 $2,125,783 $1,750,438 $3,030,041 $ 184,701
---------- ---------- ---------- ---------- ----------
$10,847,530
===========
</TABLE>
25
<PAGE> 30
GRADUATE LOAN PROGRAMS
Nellie Mae, INC. offers graduate loans to students pursuing advanced
degrees. Since 1988, NELLIE MAE, INC. has offered supplemental loans to graduate
and professional students in need of funds beyond federal limits to finance the
cost of their education. These loans are made to creditworthy students
themselves or to the students and an eligible co-borrower. Depending on the
program of study, and the particular Nellie Mae, INC. loan , graduate students
may borrow from $1,500 up to $20,000 annually. In addition, a graduate student
may borrow up to the cost of attendance per academic year, less other financial
aid received, provided that a creditworthy co-borrower is also an obligor on the
loan. The student's graduate or professional institution certifies the annual
loan need. The chart below shows the maximum annual loan amount available
without a co-borrower, depending on the particular Nellie Mae, INC. loan
program, by academic discipline:
<TABLE>
<CAPTION>
Maximum Annual Loan
Degree PROGRAM WITHOUT an Eligible Co-Borrower
-------------- -------------------------------
<S> <C>
Medicine $ 7,500-20,000
DENTISTRY $ 7,500-20,000
LAW $12,000-15,000
Business/Management $ 7,500-12,000
Engineering $ 7,500-12,000
Physical Sciences $ 7,500-12,000
All Others $ 7,500-12,000
</TABLE>
In addition, maximum cumulative education debt limits apply to
graduate student borrowing, depending on the academic discipline, the particular
Nellie Mae, INC. loan and whether a creditworthy co-borrower participates. The
chart below shows the maximum debt limits by academic discipline:
<TABLE>
<CAPTION>
Maximum Cumulative
Degree Program Education Debt Limit
-------------- --------------------
<S> <C>
Medicine $110,000-120,000
Dentistry $ 40,000-135,000
Law $ 70,000-105,000
Business/Management $ 45,000- 80,000
Engineering $ 40,000- 65,000
Physical Science $ 30,000- 50,000
All Others $ 25,000- 50,000
</TABLE>
Graduate borrowers may choose from THE FOLLOWING two interest options:
a monthly variable rate which is equal to 0 to 2 percent over the Prime Rate or
a one-year adjustable rate which, when set, approximates the Prime Rate plus 2
to 4 percent. Upon origination, the FEES charged on the loans vary from 5 to 10
percent based on the academic discipline, Nellie Mae , INC. LOAN selected and
whether the loan is borrowed with an eligible co-borrower.
Graduate Repayment Terms and Options
While the student is continuously enrolled in school, he or she may
select one of THE FOLLOWING three repayment options: (I) payment of principal
and interest, (II) payment of interest only and (III) deferment of principal and
interest while in school and for an additional six months. During interest
deferment periods, interest continues to accrue and is capitalized either
quarterly or once at repayment. Those students that select the one-time
capitalization option are charged a fee equal to 2 percent of the outstanding
balance of such loan including unpaid interest. This fee is added to the
outstanding loan balance AT THE TIME OF REPAYMENT. Full amortization begins
after the six month "grace" period. Under the interest only option, the borrower
is required to make monthly
26
<PAGE> 31
payments while in school equal to the interest accrued. Six months after
graduation, the student must begin full amortization.
Regardless of the repayment option, once payments of principal and
interest commence, the borrower's monthly payment amount is fixed based upon the
following repayment schedule:
<TABLE>
<CAPTION>
Outstanding Principal Balance Repayment Term
----------------------------- --------------
<S> <C>
Less than $3,001 48 months
$3,001 to $4,000 72 months
$4,001 to $10,000 120 months
$10,001 to $50,000 180 months
Over $50,000 240 months
</TABLE>
Thereafter, as the interest rate on the loan changes, the monthly
payment amount remains the same, with the repayment period lengthened or
shortened, and the interest accrual adjusted accordingly. However, if rates rise
such that the loan will not be fully amortized within 20 years from the
commencement of repayment or within a period twice the initial repayment period,
whichever is less, the monthly payment amount is adjusted to allow amortization
within the required time period. The monthly payment for loans which bear
interest at the one year adjustable rate is changed with the annual rate
adjustment.
Graduate Credit Standards
Graduate student loans are underwritten based on the following
criteria:
1. A national credit bureau report showing no current delinquencies
or prior defaults for both the graduate student and an eligible
co-borrower.
2. Each applicant's current credit information is compared to the
applicant's credit bureau report for completeness. While graduate
students are not required to meet the income verification
standards of Nellie MAE, INC.'S undergraduate credit approval
process for parents, they must demonstrate good credit history.
3. If applicable, eligible CO-BORROWERS must be verified to have a
minimum two-year continuous employment history and a two-year
credit history with no current delinquencies. In addition, co-
borrowers must demonstrate sufficient current income to meet the
obligations of this and other debt, similar to the requirements
applicable to undergraduate loans.
4. Applicant information is entered into Nellie MAE, INC.'S CUSTOM
credit scoring model that specifically evaluates graduate student
credit. Depending on where the generated score ranks the
applicant, Nellie Mae, INC. may approve, deny or recommend that
the application receive further review.
Historical Default Trends
Cumulative historical default trends for NELLIE MAE, INC.'S graduate
loan portfolio since the program's inception in 1988 are shown in the FOLLOWING
chart , as of March 31, 1996. These cumulative default rates represent gross
defaults and do not reflect subsequent recoveries from collection and litigation
activities. Each borrower cohort is shown in the chart, along with the original
disbursed and actual defaulted amounts by year.
27
<PAGE> 32
NELLIE MAE, INC.
CUMULATIVE DEFAULTS BY PROGRAM YEAR
GRADUATE LOANS
<TABLE>
<CAPTION>
Disbursement
Year 1988 1989 1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1988 ORIGINAL BALANCE $3,900,000
DEFAULTS $ 0 $ 0 $ 22,963 $ 59,418 $ 120,398 $ 118,574 $ 70,266
% OF BALANCE 0.00% 0.00% 0.59% 1.62% 3.09% 3.04% 1.80%
1989 ORIGINAL BALANCE $15,068,527
DEFAULTS $ 0 $ 84,848 $ 244,193 $ 603,987 $ 598,323 $ 462,808
% OF BALANCE 0.00% 0.56% 1.62% 4.01% 3.97% 3.07%
1990 ORIGINAL BALANCE $28,646,835
DEFAULTS $ 15,180 $ 112,937 $ 432,902 $ 861,237 $ 1,172,106
% OF BALANCE 0.05% 0.39% 1.51% 3.01% 4.09
1991 ORIGINAL BALANCE $35,361,678
DEFAULTS $ 15,192 $ 143,922 $ 528,028 $ 985,576
% OF BALANCE 0.04% 0.41% 1.49% 2.79%
1992 ORIGINAL BALANCE $47,493,128
DEFAULTS $ 0 $ 124,320 $ 416,372
% OF BALANCE 0.00% 0.26% 0.88%
1993 ORIGINAL BALANCE $47,092,701
DEFAULTS 2,264 192,847
% OF BALANCE 0.00% 0.41%
1994 ORIGINAL BALANCE $42,156,237
DEFAULTS $ 10,477
% OF BALANCE 0.02%
1995 ORIGINAL BALANCE
DEFAULTS
% OF BALANCE
1996 ORIGINAL BALANCE
DEFAULTS
% OF BALANCE
TOTALS $ 0 $ 0 $ 122,991 $ 431,740 $ 1,301,209 $ 2,232,746 $ 3,310,452
<CAPTION>
Disbursement MARCH
Year 1995 1996 TOTALS
<S> <C> <C> <C> <C>
1988 ORIGINAL BALANCE
DEFAULTS $ 31,045 $ 0 $ 422,664
% OF BALANCE 0.80% 0.00% 10.84%
1989 ORIGINAL BALANCE
DEFAULTS $ 395,432 $ 0 $ 2,389,591
% OF BALANCE 2.62% 0.00% 15.86%
1990 ORIGINAL BALANCE
DEFAULTS $ 677,831 $ 38,644 $ 3,310,837
% OF BALANCE 2.37% 0.13% 11.56%
1991 ORIGINAL BALANCE
DEFAULTS $ 755,421 $ 52,617 $ 2,480,756
% OF BALANCE 2.14% 0.15% 7.02%
1992 ORIGINAL BALANCE
DEFAULTS $ 505,062 $ 42,676 $ 1,088,430
% OF BALANCE 1.06% 0.09% 2.29%
1993 ORIGINAL BALANCE
DEFAULTS 248,063 67,830 511,004
% OF BALANCE 0.53% 0.14% 1.09%
1994 ORIGINAL BALANCE
DEFAULTS $ 77,664 $ 44,751 $ 132,892
% OF BALANCE 0.18% 0.11% 0.32%
1995 ORIGINAL BALANCE $37,356,049
DEFAULTS $ 0 $ 2,134 $ 2,134
% OF BALANCE 0.00% 0.01% 0.01%
1996 ORIGINAL BALANCE $3,476,828
DEFAULTS 0 0
% OF BALANCE 0.00% 0.00%
TOTALS $ 2,690,518 $ 248,652 $10,338,308
</TABLE>
28
<PAGE> 33
NELLIE MAE, INC. DELINQUENCY AND DEFAULT RATES
SINCE 1986, NELLIE MAE, INC. has originated or purchased over $600
million in loans under its PRIVATE, NONGOVERNMENTAL EDUCATION LOAN PROGRAM. As
of March 31, 1996, approximately $21.7 million or 3.6 percent of these loans had
entered default. Shown below is a delinquency summary for all loans OWNED BY
NELLIE MAE, INC. as of APRIL 30, 1996:
<TABLE>
<CAPTION>
Number of Days Delinquent % (of Principal Balance Outstanding)
------------------------- ------------------------------------
<S> <C>
30-60 DAYS 3.96%
61-90 DAYS 1.18
91-120 DAYS 0.88
Over 120 Days* 1.99
</TABLE>
* THE NUMBER OF DAYS DELINQUENT IS MEASURED AS THE NUMBER OF DAYS ELAPSED
SINCE THE FIRST MISSED PAYMENT DATE. LOANS INCLUDED IN THIS CATEGORY
INCLUDE LOANS WHICH HAVE BEEN DECLARED TO BE IN DEFAULT AND ARE IN THE
PRECOLLECTION PERIOD, A PERIOD WHICH GENERALLY CONTINUES UNTIL LOANS
ARE APPROXIMATELY 180 DAYS DELINQUENT. THIS CATEGORY DOES NOT INCLUDE
LOANS SUBMITTED FOR COLLECTION ACTIVITY AND/OR LITIGATION.
RECOVERY DATA
THE FOLLOWING CHART SHOWS THE CUMULATIVE RECOVERIES, AS OF APRIL 30,
1996, FOR NELLIE MAE, INC.'S UNDERGRADUATE LOAN PORTFOLIO BY YEAR OF DEFAULT
SINCE 1993.
<TABLE>
<CAPTION>
YEAR OF DEFAULT CUMULATIVE PERCENT RECOVERED
--------------- -----------------------------
<S> <C>
1993 29.6%
1994 37.7
1995 13.4
1996 4.1
</TABLE>
THE FOLLOWING CHART SHOWS THE CUMULATIVE RECOVERIES, AS OF APRIL 30,
1996, FOR NELLIE MAE, INC.'S GRADUATE LOAN PORTFOLIO BY YEAR OF DEFAULT SINCE
1993.
<TABLE>
<CAPTION>
YEAR OF DEFAULT CUMULATIVE PERCENT RECOVERED
--------------- ----------------------------
<S> <C>
1993 30.3%
1994 27.0
1995 17.6
1996 1.2
</TABLE>
The Initial Loans
The following table provides information on the COMPOSITION OF THE 1996
Financed Loans as of the INITIAL Cut-OFF Date (APRIL 30, 1996):
<TABLE>
<S> <C>
Aggregate Outstanding Principal Balance $64,934,152
Number of BORROWERS 5,787
Average Outstanding Principal Balance Per Borrower $ 11,221
</TABLE>
29
<PAGE> 34
<TABLE>
<S> <C>
Weighted Average Annual Interest Rate (%) 10.39%
WEIGHTED AVERAGE REMAINING TERM IN REPAYMENT (IN MONTHS) 142
</TABLE>
30
<PAGE> 35
The following table shows the distribution of the 1996 Financed Loans
by OUTSTANDING BALANCE as of the INITIAL Cut-off Date (APRIL 30, 1996):
<TABLE>
<CAPTION>
Percent of Loans by
Outstanding Balance Number of Borrowers Outstanding Balance Outstanding Balance
- ------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C>
Less than $1,000 67 $ 14,182 0.0%
$1,000 - $2,000 19 27,083 0.0
$2,000 - $3,000 27 68,346 0.1
$3,000 - $4,000 60 210,376 0.3
$4,000 - $5,000 75 339,994 0.5
$5,000 - $6,000 104 579,274 0.9
$6,000 - $7,000 523 3,401,136 5.2
$7,000 - $8,000 854 6,453,995 9.9
$8,000 - $9,000 898 7,537,540 11.7
$9,000 - $10,000 451 4,261,346 6.6
$10,000 - $11,000 596 6,230,592 9.6
$11,000 - $12,000 307 3,485,948 5.4
$12,000 - $13,000 316 3,950,813 6.1
$13,000 - $14,000 292 3,914,856 6.0
$14,000 - $15,000 144 2,088,812 3.2
$15,000 - $16,000 173 2,693,543 4.1
$16,000 - $17,000 112 1,846,896 2.8
$17,000 - $18,000 97 1,692,219 2.6
$18,000 - $19,000 84 1,557,173 2.4
OVER $19,000 588 14,580,028 22.6
TOTAL 5,787 $64,934,152 100.0%
</TABLE>
THE TERMS OF THE FINANCED LOANS ALLOW QUALIFIED BORROWERS OF
UNDERGRADUATE LOANS (SEE "THE TRUST ESTATE-UNDERGRADUATE LOAN PROGRAM") TO DEFER
PAYMENTS OF PRINCIPAL AND QUALIFIED BORROWERS OF GRADUATE LOANS (SEE "THE TRUST
ESTATE-GRADUATE LOAN PROGRAM") TO DEFER PAYMENTS OF BOTH PRINCIPAL AND INTEREST
DURING PERIODS WHEN THE STUDENT IS CONTINUOUSLY ENROLLED IN SCHOOL. IN EITHER
THE UNDERGRADUATE OR GRADUATE LOAN PROGRAM, THE STUDENT MAY EXTEND THE PERIOD OF
CONTINUOUS ENROLLMENT, THEREBY EXTENDING THE TERM OF THE LOAN AND, IN THE CASE
OF GRADUATE LOANS, MAY FURTHER DELAY THE PAYMENT OF INTEREST. HOWEVER, ONCE A
STUDENT IS NO LONGER ENROLLED, SUCH STUDENT CANNOT RETURN TO A CONTINUOUS
ENROLLMENT STATUS.
BORROWERS ARE ALSO ELIGIBLE FOR PERIODS OF FORBEARANCE AT THE
DISCRETION OF NELLIE MAE, INC., WHEREBY PAYMENTS OF PRINCIPAL AND INTEREST MAY
BE REDUCED OR DEFERRED. NELLIE MAE, INC.'S POLICY IS TO PERMIT UP TO TWO, SIX
MONTH PERIODS OF FORBEARANCE IN CASES OF DEMONSTRATED FINANCIAL HARDSHIP.
THE FOLLOWING TABLE SHOWS THE DISTRIBUTION OF THE 1996 FINANCED LOANS
BY BORROWER payment status as of the INITIAL Cut-off Date (APRIL 30, 1996):
<TABLE>
<CAPTION>
Borrower Percent of Loans by
Payment Schedule Outstanding Balance Outstanding Balance
- ---------------- ------------------- -------------------
<S> <C> <C>
DEFERRED PRINCIPAL AND INTEREST $30,112,078 46.4%
INTEREST ONLY 14,925,787 23.0
REPAYMENT 18,326,938 28.2
Forbearance 1,569,349 2.4
TOTAL $64,934,152 100.0%
</TABLE>
31
<PAGE> 36
The following table shows the geographic distribution OF the 1996
Financed Loans as of the INITIAL Cut-off Date (APRIL 30, 1996):
<TABLE>
<CAPTION>
Percent of Loans
Location Number of Borrowers Outstanding Balance Outstanding Balance
- -------- ------------------- ------------------- -------------------
<S> <C> <C> <C>
New York 1,485 $16,700,961 25.72%
- --------------------------------------------------------------------------------
California 755 8,708,874 13.41
- --------------------------------------------------------------------------------
Massachusetts 611 6,700,299 10.32
- --------------------------------------------------------------------------------
New Jersey 315 3,859,581 5.94
- --------------------------------------------------------------------------------
Pennsylvania 308 3,404,059 5.24
- --------------------------------------------------------------------------------
Illinois 270 2,965,345 4.57
- --------------------------------------------------------------------------------
Connecticut 169 2,052,014 3.16
- --------------------------------------------------------------------------------
Maryland 166 1,802,966 2.78
- --------------------------------------------------------------------------------
Texas 128 1,697,269 2.61
- --------------------------------------------------------------------------------
Virginia 145 1,619,434 2.49
- --------------------------------------------------------------------------------
Florida 125 1,421,152 2.19
- --------------------------------------------------------------------------------
District of Columbia 109 1,169,766 1.80
- --------------------------------------------------------------------------------
Ohio 85 950,495 1.46
- --------------------------------------------------------------------------------
Georgia 79 837,321 1.29
- --------------------------------------------------------------------------------
MICHIGAN 69 740,845 1.14
- --------------------------------------------------------------------------------
All Others 968 10,303,772 15.88
- --------------------------------------------------------------------------------
TOTAL 5,787 $64,934,152 100.00%
- --------------------------------------------------------------------------------
</TABLE>
The following TABLE shows distribution of the 1996 Financed Loans
by YEAR of DISBURSEMENT as of the INITIAL Cut-off Date (APRIL 30, 1996):
<TABLE>
<CAPTION>
Percent of
Disbursement Date Outstanding Balance Outstanding Balance
----------------- ------------------- -------------------
<S> <C> <C>
1987 $ 43,520 0.07%
----------------------------------------------------
1988 165,776 0.26
----------------------------------------------------
1989 463,409 0.71
----------------------------------------------------
1990 950,236 1.46
----------------------------------------------------
1991 1,325,921 2.04
----------------------------------------------------
1992 1,807,982 2.78
----------------------------------------------------
1993 4,761,671 7.33
----------------------------------------------------
1994 9,156,130 14.10
----------------------------------------------------
1995 41,714,669 64.25
----------------------------------------------------
1996 4,544,838 7.00
----------------------------------------------------
TOTAL $64,934,152 100.00%
----------------------------------------------------
</TABLE>
32
<PAGE> 37
The following TABLE shows the distribution of the 1996 Financed Loans
by the interest rate as of the INITIAL Cut-OFF Date (APRIL 30, 1996):
<TABLE>
<CAPTION>
Percent of Loans by
Interest Rate Number of Borrowers Outstanding Balance Outstanding Balance
- ------------- ------------------- ------------------- -------------------
<S> <C> <C> <C>
9.00% - 9.99% 1,317 14,942,103 23.0
- -------------------------------------------------------------------------
10.00% - 10.99% 3,036 34,116,592 52.6
- -------------------------------------------------------------------------
11.00% - 11.99% 1,434 15,875,457 24.4
- -------------------------------------------------------------------------
TOTAL 5,787 $64,934,152 100.0%
- -------------------------------------------------------------------------
</TABLE>
The following TABLE shows the distribution of 1996 Financed Loans as of
the INITIAL Cut-off Date (APRIL 30, 1996) by school for the fifteen schools with
the highest outstanding balances:
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF LOANS
SCHOOL BORROWERS OUTSTANDING BALANCE OUTSTANDING
BALANCE
<S> <C> <C> <C>
NEW YORK UNIVERSITY 1,458 $15,868,284 23.2%
- ----------------------------------------------------------------------------------------------
COLUMBIA UNIVERSITY 292 3,205,660 4.7
- ----------------------------------------------------------------------------------------------
UNIVERSITY OF SOUTHERN CALIFORNIA 202 2,230,245 3.3
- ----------------------------------------------------------------------------------------------
HARVARD UNIVERSITY 163 1,897,620 2.8
- ----------------------------------------------------------------------------------------------
UNIVERSITY OF PENNSYLVANIA 177 1,825,081 2.7
- ----------------------------------------------------------------------------------------------
UNIVERSITY OF CHICAGO 130 1,333,528 2.0
- ----------------------------------------------------------------------------------------------
BOSTON UNIVERSITY 100 1,135,123 1.7
- ----------------------------------------------------------------------------------------------
GEORGETOWN UNIVERSITY 109 1,133,537 1.7
- ----------------------------------------------------------------------------------------------
UNIVERSITY OF HEALTH SCIENCES CHICAGO MEDICAL 96 1,063,473 1.6
- ----------------------------------------------------------------------------------------------
UNIVERSITY OF THE PACIFIC 90 919,091 1.3
- ----------------------------------------------------------------------------------------------
GEORGE WASHINGTON UNIVERSITY 76 781,220 1.1
- ----------------------------------------------------------------------------------------------
DUKE UNIVERSITY 70 664,064 1.0
- ----------------------------------------------------------------------------------------------
CORNELL UNIVERSITY 56 632,014 0.9
- ----------------------------------------------------------------------------------------------
JOHN HOPKINS 60 618,492 0.9
- ----------------------------------------------------------------------------------------------
NEW ENGLAND CULINARY INSTITUTE 48 575,907 0.8
- ----------------------------------------------------------------------------------------------
TOTAL 5,787 $33,883,345 49.6%
- ----------------------------------------------------------------------------------------------
</TABLE>
THE FOLLOWING TABLE SHOWS THE DISTRIBUTION OF 1996 FINANCED LOANS AS OF
THE INITIAL CUT-OFF DATE (APRIL 30, 1996) BY LOAN PROGRAM:
<TABLE>
<CAPTION>
Percent of Loans by
LOAN PROGRAM Outstanding Balance Outstanding Balance
- ------------ ------------------- -------------------
<S> <C> <C>
Graduate $38,731,457 59.6%
- ----------------------------------------------------
Undergraduate 26,202,695 40.4
- ----------------------------------------------------
TOTAL $64,934,152 100.0%
- ----------------------------------------------------
</TABLE>
33
<PAGE> 38
TRADING INFORMATION
The weighted average life of the 1996 Notes and the 1996 Certificates
will generally be influenced by the rate at which the principal balances of the
1996 Financed Loans are paid, which payment may be in the form of scheduled
amortization or prepayments. For this purpose, the term "prepayments" includes
prepayments in full or in part, as a result of refinancing, death, disability or
bankruptcy and subsequent liquidation and as a result of Financed LOANS being
REPURCHASED by the Seller OR NELLIE MAE, INC. as required or as permitted by the
INDENTURE, Sales Agreementor the Purchase Agreement. All of the Financed Loans
are prepayable at any time without penalty to the borrower. The rate of
prepayment of Financed Loans is influenced by a variety of economic, social and
other factors. In general, the rate of prepayments may tend to increase to the
extent that alternative financing becomes available at prevailing interest rates
which fall significantly below the interest rates applicable to the Financed
Loans. Under certain circumstances, the Seller or NELLIE MAE, INC. will be
obligated to REPURCHASE Financed Loans from the Trust pursuant to the INDENTURE,
Sales Agreement or Purchase Agreement as a result of breaches of representations
and warranties.
In light of the above considerations, there can be no assurance as to
the amount of principal payments to be made on the 1996 Notes or 1996
Certificates on each Distribution Date. Any reinvestment risks resulting from a
faster or slower incidence of prepayment of 1996 Financed Loans will be borne
entirely by the 1996 Noteholders and the 1996 Certificateholders.
Principal Factor and Trading Information
In connection with each prepayment of 1996 Notes of any CLASS, the
Indenture Trustee shall compute the Principal Factor for SUCH CLASS. The
Principal Factor shall be a seven-digit decimal indicating the principal balance
of each 1996 Note of a CLASS as of a Distribution Date (after giving effect to
any prepayments made on SUCH date) as a fraction of the original principal
amount of the 1996 Note. The principal balance of any 1996 Note can be
determined by multiplying the original principal amount of the 1996 Notes by the
Principal Factor applicable to the 1996 Notes.
In connection with each prepayment of 1996 Certificates, the Owner
Trustee shall compute the Principal Factor for the 1996 Certificates. The
Principal Factor shall be a seven-digit decimal INDICATING the principal balance
of each 1996 Certificate as of a Distribution Date (after giving effect to any
prepayments made on SUCH date) as a fraction of the original principal amount of
the 1996 Certificate. The principal balance of any 1996 Certificate can be
determined by multiplying the original principal amount of the 1996 Certificate
by the Principal Factor applicable to SUCH 1996 Certificate.
The HOLDERS OF THE NOTES AND CERTIFICATES will receive reports on or
about each Distribution Date concerning the payments received on the Financed
Loans, the Pool Balance, the applicable Principal Factors and various other
items of information. HOLDERS of record during any calendar year will be
furnished information for tax reporting purposes not later than the latest date
permitted by law. See "INFORMATION REGARDING THE SECURITIES--Reports to
Securityholders."
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related
regulations impose substantial requirements upon lenders and servicers involved
in consumer finance. Also, unless preempted by federal law, some state laws
impose finance charge ceilings and other restrictions on consumer transactions
and require contract disclosures in addition to those required under FEDERAL
LAW. SPECIFICALLY, NELLIE MAE, INC., AS ORIGINATOR AND HOLDER OF EDUCATION
LOANS, AND AS ADMINISTRATOR FOR THE FINANCED LOANS, MUST COMPLY WITH THE
REQUIREMENTS OF CONSUMER PROTECTION LAWS INCLUDING, BUT NOT LIMITED TO,
MASSACHUSETTS CONSUMER PROTECTION LAWS AND FEDERAL CONSUMER PROTECTION LAWS SUCH
AS THE CONSUMER CREDIT PROTECTION ACT, WHICH INCLUDES THE EQUAL CREDIT
OPPORTUNITY ACT, THE TRUTH-IN-LENDING ACT, THE FAIR CREDIT REPORTING ACT AND THE
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<PAGE> 39
FAIR DEBT COLLECTIONS ACT, TOGETHER WITH THE REGULATIONS PROMULGATED THEREUNDER.
These requirements impose specific statutory liabilities upon lenders who fail
to comply with their provisions. In certain circumstances, the Seller or the
Trust may be liable for certain violations of consumer protection laws that
apply to the Loans, either as assignee from NELLIE MAE, INC. or the Seller or as
the party directly responsible for obligations arising after the SALE. NELLIE
MAE, INC. and the Seller are obligated pursuant to the Purchase Agreement and
the Sales Agreement, respectively, to repurchase any Financed Loan which was not
made or serviced in accordance with applicable Federal or state law if the
failure has a material adverse affect on the Issuer's interest in the Loan. FOR
A DESCRIPTION OF THE SELLER'S AND THE TRUST'S RIGHTS IF THE FINANCED LOANS WERE
NOT MADE AND SERVICED IN COMPLIANCE IN ALL MATERIAL RESPECTS WITH ALL APPLICABLE
LAWS, SEE "DESCRIPTION OF THE SALES AND PURCHASE AGREEMENTS - REPRESENTATIONS
AND WARRANTIES OF LOAN SELLER."
TREATMENT OF EDUCATION LOANS IN BANKRUPTCY
Under existing law, student loans generally are not subject to
discharge by a borrower in bankruptcy if such loans are made under a program
funded in whole or in PART by a nonprofit institution.
Title 11 of the United States Code at Section 523(a) (8) provides as
follows:
(a) A discharge under Section 727, 1141, 1228(a), 1228(b), or 1328(b)
of this title does not discharge an individual debtor from any
debt --
(8) for an educational . . . loan made, insured, or guaranteed
by a governmental unit or made under any program funded in
whole or in part by a governmental unit or a nonprofit
institution . . . , unless --
(A) such loan . . . first became due before 7 years
(exclusive of any applicable suspension of the
repayment period) before the date of the filing of the
petition; or
(B) excepting such debt from discharge under this paragraph
will impose an undue hardship on the debtor and the
debtor's dependents.
The 1990 Budget Reconciliation Act included language amending the
Bankruptcy Code to clarify the nondischargeability of educational loans under
Chapter 13 bankruptcy filings.
All of the 1996 Financed Loans were funded by NELLIE MAE, INC., a
nonprofit corporation, pursuant to its various education loan programs.
CONCURRENT WITH THE ISSUANCE OF THE NOTES AND CERTIFICATES, THE TRUST WILL
RECEIVE AN OPINION OF MINTZ, LEVIN, COHN, FERRIS, GLOVSKY AND POPEO, P.C. TO THE
EFFECT THAT THE FACT THAT ANY OR ALL OF THE FINANCED LOANS MAY HAVE BEEN
INITIALLY MADE BY A FOR-PROFIT INSTITUTION WILL NOT, IN AND OF ITSELF, PREVENT
THE APPLICABILITY OF 11 U.S.C. SECTION 523(A)(8) TO ANY SUCH FINANCED LOAN.
USE OF PROCEEDS
The Seller will sell the Initial Loans to the Issuer concurrently with
the sale of the 1996 Securities and a portion of the net proceeds from the sale
of the 1996 Securities will be applied by the Indenture Trustee (I) to the
purchase of the Initial Loans, (II) to the payment of certain expenses connected
with issuing the 1996 Securities, (III) to the deposit IN THE AMOUNT of the 1996
Pre-Funded Amount TO the 1996-A Subaccount of the Pre-Funding Account and (IV)
to THE deposit IN THE AMOUNT OF $926,250 TO the 1996-A Debt Service Reserve
ACCOUNT. Such net proceeds less the payment of such expenses, the 1996
Pre-Funded Amount and the initial deposit into the 1996-A Debt Service Reserve
ACCOUNT represent the purchase price paid by the Issuer to the Seller for the
sale of the Initial Loans to the Issuer. Such amount will be determined as a
result of the pricing of the 1996
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<PAGE> 40
Securities, through the offering described in this Prospectus. The PURCHASE
PRICE to be received BY THE SELLER from the sale of the Initial Loans will be
paid to NELLIE MAE, INC. as the purchase price for the Initial LOANS and will be
used to repay debt of NELLIE MAE, INC. and for other corporate purposes.
FUND BALANCES AT CLOSING
Upon delivery of the 1996 Notes, the Fund Balances under the Indenture,
derived from the proceeds of the 1996 Securities will be as follows:
<TABLE>
<S> <C>
1996-A SUBACCOUNT WITHIN THE COST OF ISSUANCE ACCOUNT IN THE SERVICES
FUND $
1996-A SUBACCOUNT WITHIN THE NOTE INTEREST ACCOUNT IN THE NOTE FUND
1996-A SUBACCOUNT WITHIN THE Acquisition Account in the Student
Loan Acquisition Fund
1996-A SUBACCOUNT WITHIN THE Pre-Funding Account in the Student
Loan Acquisition Fund
1996-A Debt Service Reserve ACCOUNT
-----
TOTAL FUND BALANCES $
=====
</TABLE>
NELLIE MAE EDUCATION FUNDING, LLC
Nellie Mae Education Funding, LLC (the "Seller") was organized under
the laws of THE STATE OF DELAWARE ON JUNE 11, 1996. The Seller is a limited
liability company owned 99% by NELLIE MAE, INC. and 1% by NMI Education Loan
Corporation, a Massachusetts non-profit corporation of which NELLIE MAE, INC. is
the sole member. The Seller maintains its principal office at 50 Braintree Hill
Park, Suite 300, Braintree, Massachusetts 02184. Its telephone number is (617)
849-1325.
NELLIE MAE, INC.
NELLIE MAE, INC. is a Massachusetts private, NONGOVERNMENTAL,
non-profit corporation established in 1986 to develop and administer programs of
student financial aid and institutional aid through which students are assisted
in financing their education costs. NELLIE MAE, INC. MAKES PRIVATE,
NONGOVERNMENTAL student loans to students and their families . NELLIE MAE, INC.
qualifies as a tax-exempt organization under the Internal Revenue Code of 1986,
as amended (the "Code"), having received an Internal Revenue Service
determination letter to the effect that it is a tax-exempt organization under
Section 501(c)(3) of the Code and that it is not a private foundation within the
meaning of Section 509(a) of the Code because it is an organization of the type
described in Section 509(a)(1) of the Code.
NELLIE MAE, INC. was organized in 1986 at the request and direction of
the Board of Directors of THE NEW ENGLAND EDUCATION LOAN CORPORATION ("NEELMC").
NELLIE MAE, INC. is permitted to create and administer education loan programs
that are PRIVATE AND unrelated to the federal loan programs. The need for such
unrelated programs arose as student and parent educational loan requirements
were not fully met by the federal loan programs.
Through December 31, 1995, NELLIE MAE, INC. has originated and/or
purchased over $600 million in education loans to over 75,000 students and
families. As of December 31, 1995, NELLIE MAE, INC. had education loan
receivables of over $387 million.
NELLIE MAE, INC. maintains its principal OFFICE at 50 Braintree Hill
Park, Suite 300, Braintree, Massachusetts 02184. Its telephone number is (617)
849-1325.
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<PAGE> 41
SERVICER
GENERAL
USA Group Loan Services, Inc. (the "Servicer" or "Loan Services"),
which will act as Servicer of the Financed Loans, is a private, nonprofit,
nonstock membership corporation which was organized in 1982 under and pursuant
to the provisions of the General Corporation Law of the State of Delaware. The
sole member of Loan Services is USA Group, Inc., a nonprofit corporation. As of
March 31, 1996, Loan Services provided loan servicing FOR in excess of 2,848,196
student and parent loans with outstanding balances of over $9.4 billion for
approximately 160 different lenders and secondary market corporations. Loan
Services' principal office is located in Indianapolis, Indiana where it
currently has over 800 full-time employees.
SERVICING AGREEMENT
The Issuer and Loan Services have entered into an agreement (the
"Servicing Agreement") under which Loan Services will service those Financed
Loans that are acquired by the Issuer and delivered to THE CUSTODY OF Loan
Services.
Loan Services will produce an audit trail for each Financed Loan
serviced by Loan Services to comply with the reporting, servicing and operating
standards set forth in the Servicing Agreement. Loan Services is required to
provide to the Issuer weekly and monthly reports as set forth in the Servicing
Agreement. Loan Services is required to keep information and documents with
respect to the Financed Loans serviced by Loan Services in strictest confidence
and maintain a disaster recovery plan for the storage of data and loan
documentation.
Loan Services is entitled to be compensated on a monthly basis pursuant
to a fee schedule attached to the Servicing Agreement.
The Servicing Agreement, which is dated as of JUNE 1, 1996 , is to
remain effective until all Financed Loans serviced by Loan Services have been
paid in full or otherwise discharged. The Servicing Agreement may be terminated
(a) by either the Issuer or Loan Services, (i) without cause, upon 90 days'
written notice, after the Servicing Agreement is in effect for seventy-two (72)
months, or (ii) upon the occurrence of certain events set forth in the Servicing
Agreement and (b) by the Issuer, upon a material breach by Loan Services or upon
the filing of a bankruptcy petition by or against Loan Services.
THE 1996 NOTES
GENERAL
Each SERIES of Notes will represent obligations of the Issuer secured
by the assets of the Issuer (other than the CERTIFICATE Fund). The Issuer will
issue (i) $67,000,000 aggregate principal amount of LIBOR Rate Asset Backed
Class A-1 Notes, with a Maturity Date of DECEMBER 15, 2004 (the "A-1 Notes") and
(ii) $48,800,000 aggregate principal amount of LIBOR Rate Asset Backed Class A-2
Notes, with a Maturity Date of DECEMBER 15, 2018 (the "A-2 Notes"), each
pursuant to the terms of a Master Trust Indenture to be dated as of JUNE 1, 1996
(the "Master Indenture") and the First Terms Supplement (together with the
Master Indenture and any other amendments or supplements thereto, the
"Indenture") between the Issuer and the Indenture Trustee, a form of which has
been filed as an exhibit to the Registration Statement of which this Prospectus
forms a part. A copy of the Indenture will be available from the Seller, upon
request, to the HOLDERS of the 1996 Notes or 1996 Certificates. The following
summary describes certain terms of the 1996 Notes. The summary does not purport
to be complete and is subject to, and is qualified in its entirety by reference
to, all of the provisions of the 1996 Notes and the Indenture. Where particular
provisions or terms used in the Indenture are referred to, the actual provisions
or terms used in the Indenture (including definitions of terms) are incorporated
by reference as part of such summary.
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<PAGE> 42
The 1996 Notes will be offered for purchase in minimum denominations of
$20,000 and integral multiples of $1,000 in excess thereof in book-entry form
only. Each CLASS of 1996 Notes will initially be represented by a single note
registered in the name of the nominee of The Depository Trust Company ("DTC"
and, together with any successor depository, the "Depository"), except as
provided below. The Issuer has been informed by DTC that DTC's nominee will be
Cede & Co. ("Cede"). No person acquiring an interest in the 1996 Notes through
the facilities of DTC will be entitled to receive a note representing such
person's interest in the Notes, except as set forth below under "INFORMATION
REGARDING THE 1996 SECURITIES-Definitive Securities" and such persons will hold
their interests in the 1996 Notes through DTC. Unless and until definitive 1996
Notes are issued under the limited circumstances described herein, all
references to actions by Noteholders shall refer to actions taken by DTC upon
instructions from its Participants, and all references herein to distributions,
notices, reports and statements to Noteholders shall refer to distributions,
notices, reports and statements to DTC in accordance with DTC procedures. See "
INFORMATION REGARDING THE 1996 SECURITIES-Definitive Securities" below.
INTEREST ON THE NOTES
The A-1 Notes will bear interest from the date of original delivery to,
but not including, July 15, 1996 (such period being the "Initial Period") at an
interest rate equal to the LIBOR Rate determined on _______________ plus _____%,
and the A-2 Notes will bear interest for such Initial Period at an interest rate
equal to the LIBOR Rate determined on ___________ plus ____%. Thereafter, the
1996 Notes will bear interest at interest rates determined as described below.
Interest on the 1996 Notes will be payable on the 15th day of each month,
commencing July 15, 1996 (each a "Distribution Date").
The interest rate on the 1996 Notes after the Initial Period will be
reset on the 15th day of each month thereafter (each a "Rate Adjustment Date").
For each Interest Period (i.e., the period commencing on each Rate Adjustment
Date and ending on the day before the next Rate Adjustment Date), the interest
rate on the 1996 Notes shall be equal to the LIBOR Rate determined by the
Indenture Trustee (in such capacity, the "Calculation Agent") on the second
Business Day preceding each Rate Adjustment Date (a "Rate Determination Date")
plus in the case of the A-1 Notes, ___%, or in the case of the A-2 Notes, ___%.
"LIBOR Rate" means the rate per annum equal to (a) the annual rate of interest
published or reported by the Telerate Service (by reference to the screen page
currently designated as "Page 3750" on that service or such other service as may
be nominated by the British Bankers' Association as the information vendor for
the purpose of displaying British Bankers' Association Interest Settlement Rates
for U.S. dollar deposits) as of 11:00 a.m., London time, on the Rate
Determination Date for a one-month period, or (b) if such a rate does not appear
on Telerate Page 3750, the "LIBOR Rate" for the given day shall be the
arithmetic mean of the offered rates for dollar deposits for a one-month period
commencing on the Rate Determination Date, which rate appears on Reuters LIBO
Page as of 11:00 a.m., London time, on the Rate Determination Date. If the rate
described above does not appear on Telerate Page 3750 and fewer than two rates
appear on Reuters LIBO Page, the "LIBOR Rate" for the applicable Rate
Determination Date shall be determined in good faith by the Calculation AGENT
from such source as it shall determine to be comparable to Telerate Page 3750
and Reuters LIBO Page.
The determination of the interest rate by the Calculation Agent shall
be conclusive and binding on the Noteholders, the Issuer and the Indenture
Trustee absent manifest error. If the Calculation Agent shall fail or refuse to
determine the interest rate on any Rate Determination DATE, the interest rate
shall be determined by the Indenture Trustee in accordance with the provisions
of the Indenture. If the Indenture Trustee shall fail or refuse to determine the
interest rate on any Rate Determination Date, the interest rate most recently
determined for each CLASS of Notes shall remain in effect with respect thereto.
In the event that the interest rate on the 1996 Notes for any Interest
Period exceeds the Net Loan Rate (which rate is equal to the weighted average
interest rate on the Financed Loans minus ________ percent (_____%)) for such
Interest Period, the Holders of such 1996 Notes will receive interest payments
on such 1996 Notes for such Interest Period in an amount equal to the applicable
Net Loan Rate; the difference between the interest rate and the applicable Net
Loan Rate for such an Interest Period shall be deferred and paid to the Holders
of the 1996 Notes on the next succeeding Distribution Date on which funds are
available therefor. THE 1996 Notes that have matured
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<PAGE> 43
or that have been otherwise paid pursuant to the Indenture shall only receive
Deferred Interest, to the extent due on the date of such maturity or payment, to
the extent funds are available for payment thereof. No interest accrues on
unpaid Deferred Interest.
Notwithstanding the foregoing, the rate of interest on any 1996 Note
for any Interest Period shall not be in excess of the maximum rate of interest
which may be charged or collected pursuant to provisions of applicable FEDERAL
or state law. The rate of interest on any 1996 Note shall never exceed 18% per
annum for any Interest Period. Currently, there is no maximum lawful rate of
interest applicable to the 1996 Notes.
STATED MATURITIES
The stated maturity dates of the respective classes of 1996 Notes are
as follows:
<TABLE>
<CAPTION>
Stated
Class Maturity Date
----- -------------
<S> <C>
A-1 DECEMBER 15, 2004
A-2 DECEMBER 15, 2018
</TABLE>
Principal of the 1996 Notes is, however, subject to payment prior to
maturity. Principal of the 1996 Notes is expected to be paid in full prior to
their stated MATURITY DATES. See "THE 1996 NOTES--Prepayment."
PREPAYMENT
Mandatory Principal Distributions. The Indenture provides that, except
as provided below, principal payments on or with respect to the 1996 Financed
Loans be transferred from the 1996-A REVENUE ACCOUNT TO THE 1996-A Subaccount of
the NOTE PAYMENT Account in the Note Fund on a regular basis. See
"DESCRIPTION OF THE INDENTURE--Flow of Funds." Such amounts include principal
payments on the Financed Loans, whether paid by the borrowers or by a Guarantor,
and also include excess amounts transferred from the Debt Service Reserve Fund.
To the extent that payments of principal on the 1996 Financed Loans are
characterized as CAPITALIZED INTEREST, however, any such amount shall remain
in the 1996-A Revenue ACCOUNT and be applied in accordance with the terms of
the Indenture. The 1996 Notes shall be subject to mandatory principal
distribution on each Distribution Date from amounts deposited to the credit of
the 1996 -A Subaccount of the NOTE Payment Account; provided, however, that
no principal of A-2 Notes may be distributed unless, after such distribution, no
A-1 Notes remain outstanding. It is anticipated that mandatory distributions of
principal of 1996 Notes will occur on a regular basis on each Distribution Date.
Accelerated receipt of principal from the sources described above or deposit of
interest payments into the 1996 -A Subaccount of the NOTE Payment Account
could cause the distribution of principal of the 1996 Notes earlier than might
otherwise be expected. See "TRADING INFORMATION."
In addition, all payments of interest and late charges on or with
respect to the 1996 Financed Loans and all investment earnings on FUNDS held
under the Indenture, are required to be deposited in the 1996-A REVENUE ACCOUNT
OF THE Revenue Fund created under the Indenture. Moneys therein are to be
distributed to the Funds, Accounts and Subaccounts or transferred to the OWNER
TRUSTEE as described under "DESCRIPTION OF THE INDENTURE--Flow of Funds," on the
Business Day preceding each Distribution Date, but, subject to the following
paragraphs, any money remaining therein after distributions to the APPLICABLE
SUBACCOUNT WITHIN THE Administration Account, to pay interest on the 1996
Securities, to replenish the Debt Service Reserve Fund, to pay Deferred Interest
on the 1996 Securities, to make distributions to the Seller AND NMELC, and to
pay principal of the 1996 Certificates, may be deposited in the 1996-A
Subaccount of the NOTE Payment Account.
If the PRIMARY Parity Trigger is less than 104% ON ANY DISTRIBUTION
DATE AFTER THE PAYMENT OF THE ADMINISTRATION REQUIREMENT AND INTEREST ON THE
NOTES, THEN ANY REMAINING interest payments on the 1996 Financed Loans are to be
deposited in the 1996-A Subaccount of the Note Payment Account and shall be used
to
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<PAGE> 44
pay principal of the 1996 Notes in lieu of being used to replenish the Debt
Service Reserve Fund, to pay interest on the1996 Certificates, to pay Deferred
Interest on the 1996 Securities, to make distributions to the Seller and NMELC,
and to pay principal of the 1996 Certificates.
LIKEWISE, IF the PRIMARY Parity Trigger is less than 112.78% ON ANY
DISTRIBUTION DATE AFTER THE PAYMENT OF THE ADMINISTRATION REQUIREMENT, INTEREST
ON THE 1996 NOTES, INTEREST ON THE 1996 CERTIFICATES AND REPLENISHMENT OF THE
1996-A DEBT SERVICE RESERVE ACCOUNT, THEN ANY REMAINING interest payments on the
1996 Financed Loans are to be deposited in the 1996-A Subaccount of the Note
Payment Account and shall be used to pay principal of 1996 Notes in lieu of
being used to pay Deferred Interest on the 1996 Securities, to make
distributions to the Seller and NMELC and to pay principal of the 1996
Certificates.
"PRIMARY Parity Trigger" means, as of any date of determination, an
amount (expressed as a percentage) equal to the sum of (i) the Balances then on
deposit in all 1996-A Subaccounts AND 1996-A ACCOUNTS under the Indenture (other
than Balances attributable to 1996 Defaulted Loans), and (ii) amounts on deposit
in the lockbox account and allocable to 1996 Financed Loans, divided by an
amount equal to the principal amount of the 1996 Notes then Outstanding plus all
accrued and unpaid interest thereon (excluding Deferred Interest) plus any
unpaid portion of the Administration Requirement. See "DESCRIPTION OF THE
INDENTURE--Flow of Funds."
Mandatory distributions of principal of 1996 Notes shall occur as
described above on Distribution Dates, but only at such times as there shall be
amounts in excess of $5,000 in the 1996 -A Subaccount of the NOTE Payment
Account on the third Business Day preceding the Distribution Date on which such
distribution will occur as described above.
Amounts in the 1996-A Subaccount of the Pre-Funding Account in the
Student Loan Acquisition Fund that are uncommitted (as evidenced by a
certificate of the ISSUER) to the purchase of Loans on November 15, 1996 (the
"Commitment Cut-OFF Date"), or unspent for the purchase of Loans on January
10, 1997 are required to be transferred to the 1996-A Subaccount of the NOTE
Payment Account. Amounts in the 1996-A Subaccount of the Pre- Funding Account
may be transferred earlier than on November 15, 1996 or January 10, 1997, if the
ISSUER certifies to the Indenture Trustee the amount in such 1996-A
SUBACCOUNT that will not be committed prior to November 15, 1996 or the amount
that will not be used to acquire Loans on or before January 10, 1997. See
"DESCRIPTION OF THE INDENTURE--Flow of Funds."
Optional Purchase Prepayment. The Seller may repurchase all remaining
1996 Financed Loans, and thus effect the prepayment of the A-2 Notes and the
1996 Certificates, on any Distribution Date on or after which the BALANCE in
the 1996-A Account of the Student Loan Portfolio Fund IS equal to or less than
10% of the Initial Pool Balance with respect to the 1996 Financed Loans, at a
price equal to the outstanding principal balance of the 1996 Financed Loans,
plus accrued and unpaid interest. Such purchase price shall be deposited in the
1996-A Subaccount of the NOTE Payment Account of the NOTE Fund and used on
that Distribution Date to make mandatory principal distributions on the A-2
Notes as described in "THE 1996 NOTES-Prepayment-Mandatory Principal
Distributions," or to the extent no A-2 Notes remain Outstanding, to make
mandatory principal distributions on the 1996 Certificates as described in "THE
1996 CERTIFICATES-Prepayment-Mandatory Principal Distributions."
Principal Factor. All prepayments and mandatory distributions of
principal of 1996 Notes of either CLASS shall be made pro rata within that
CLASS. In connection with each optional prepayment or principal distribution of
1996 Notes of either CLASS, the Indenture Trustee shall compute a factor (the
"Principal Factor") for that CLASS. The Principal Factor shall be a
seven-digit decimal indicating the principal balance of each 1996 Note of a
CLASS as of a Distribution Date (after giving effect to any optional prepayment
or principal distribution made or to be made on that date) as a fraction of the
original principal amount of the 1996 Note. The Principal Factor for each
CLASS of 1996 Notes shall be initially 1.0000000 and will thereafter decline to
reflect the reduction in the principal balance of the 1996 Notes of that CLASS
after any optional prepayment or principal distribution. The principal balance
of any 1996 Note can be determined by multiplying the original principal amount
of the 1996 Note by the applicable Principal Factor for that CLASS of 1996
Notes.
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<PAGE> 45
Notice of Optional Purchase Prepayment; Effect. Notice of optional
purchase prepayment of Notes shall be given by the Indenture Trustee in the name
and for and on behalf of the Issuer not less than thirty (30) days prior to the
date of prepayment. Notice shall be given by first-class mail, postage prepaid
to the Holder of each affected Note at the address of such Holder as it appears
on the books of registry or by transmitting such notice by telex or telecopier
to any Holder of any affected Note who shall have submitted a written request to
the Indenture Trustee for notice of prepayments by such means, to the telex or
telecopier number set forth in such request. A copy of any notice so transmitted
shall also be mailed to such Holder at the address of such Holder set forth on
the books of registry; provided, however, that neither failure by the Indenture
Trustee to so mail a copy of such notice nor any defect in such copy shall
affect the validity of such notice so transmitted in accordance with the
Indenture; and, provided further, that neither failure by the Indenture Trustee
to so transmit a copy of such notice by telex or telecopier nor any defect
therein shall affect the validity of such notice so mailed in accordance with
the Indenture.
Each such notice shall state (i) the CLASS of the affected Notes, the
prepayment or PRINCIPAL distribution date and the applicable Principal Factor
(after giving effect to such prepayment or distribution); (ii) that the interest
on the principal OF THE NOTES to be prepaid or distributed shall cease to accrue
from and after such OPTIONAL PURCHASE prepayment or Distribution Date; and (iii)
that on the prepayment or PRINCIPAL distribution date there will become due and
payable on each said Note the principal amount thereof to be prepaid or
distributed and the interest accrued, including Deferred Interest BUT ONLY to
the extent funds are available therefor.
THE 1996 CERTIFICATES
The Certificates offered hereby will be issued pursuant to the Trust
Agreement, a form of which has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part. The following summary describes
certain terms of the 1996 Certificates. The summary does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all of the provisions of the Certificates and the Trust Agreement and the First
Trust Supplement. Where particular provisions or terms used in the Trust
Agreement are referred to, the actual provisions or terms used in the Trust
Agreement (including definitions of terms) are incorporated by reference as
part of such summary. A copy of the Trust Agreement will be available from the
Seller, upon request, to HOLDERS of the 1996 Notes or 1996 Certificates.
GENERAL
The 1996 Certificates will represent undivided interests in the Issuer.
The Issuer will issue $7,700,000 aggregate principal amount of 1996
Certificates pursuant to the Trust Agreement AND THE FIRST TRUST SUPPLEMENT.
Payments in respect to the 1996 Certificates will be subordinated to payments on
the 1996 Notes to the limited extent described herein.
The 1996 Certificates (excluding the 1996 Certificates issued to the
SELLER and NMELC) will be offered for purchase in minimum denominations of
$20,000 and integral multiples of $1,000 in excess thereof in book-entry form
only. The 1996 Certificates will initially be represented by a single 1996
Certificate registered in the name of Cede, the nominee of DTC. No person
acquiring an interest in the 1996 Certificates through the facilities of DTC
will be entitled to receive a CERTIFICATE representing such person's interest
in the 1996 Certificates, except as set forth below under "INFORMATION
REGARDING THE 1996 SECURITIES-Definitive Securities." Unless and until
DEFINITIVE 1996 Certificates are issued under the limited circumstances
described herein, all references to actions by Certificateholders shall refer to
actions taken by DTC upon instructions from its Participants, and all references
herein to distributions, notices, reports and statements to Certificateholders
shall refer to distributions, notices, reports and statements to DTC in
accordance with DTC procedures. See " INFORMATION REGARDING THE 1996
SECURITIES-Definitive Securities" below.
Payments of interest and principal on the 1996 Certificates with
respect to each Interest Period will be made on each Distribution Date,
commencing July 15, 1996. Payments on the 1996 Certificates on each Distribution
Date will be made to the holders of record of the related 1996 Certificates on
the related Record Date.
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<PAGE> 46
INTEREST ON THE 1996 CERTIFICATES
The 1996 Certificates in the initial principal amount of $7,700,000
will bear interest from the date of original delivery to, but not including,
July 15, 1996 (such period being the "Initial Period") at an interest rate equal
to the LIBOR Rate determined on _____________ plus _____%. Thereafter, the 1996
Certificates will bear interest at interest rates determined as described below.
Interest on the 1996 Certificates will be payable on the 15th day of each month,
commencing July 15, 1996 (EACH A "DISTRIBUTION DATE").
The interest rate on the 1996 Certificates after the Initial Period
will be reset on the 15th day of each month thereafter (each a "Rate Adjustment
Date"). For each Interest Period (i.e., the period commencing on each Rate
Adjustment Date and ending on the day before the next Rate Adjustment Date), the
interest rate on the 1996 Certificates shall be equal to the LIBOR Rate
determined by the OWNER Trustee (in such capacity, the "Calculation Agent") on
the second Business Day preceding each Rate Adjustment Date (a "Rate
Determination Date") plus _____%. "LIBOR Rate" means the rate per annum equal to
(a) the annual rate of interest published or reported by the Telerate Service
(by reference to the screen page currently designated as "Page 3750" on that
service or such other service as may be nominated by the British Bankers'
Association as the information vendor for the purpose of displaying British
Bankers' Association Interest Settlement Rates for U.S. dollar deposits) as of
11:00 a.m., London time, on the Rate Determination Date for a one-month period,
or (b) if such a rate does not appear on Telerate Page 3750, the "LIBOR Rate"
for the given day shall be the arithmetic mean of the offered rates for dollar
deposits for a one-month period commencing on the Rate Determination Date, which
rate appears on Reuters LIBO Page as of 11:00 a.m., London time, on the Rate
Determination Date. If the rate described above does not appear on Telerate Page
3750 and fewer than two rates appear on Reuters LIBO Page, the "LIBOR Rate" for
the applicable Rate Determination Date shall be determined in good faith by the
Calculation Agent from such source as it shall determine to be comparable to
Telerate Page 3750 and Reuters LIBO Page.
The determination of the interest rate by the Calculation Agent shall
be conclusive and binding on the Holders of the 1996 Certificates, the Issuer
and the Owner Trustee absent manifest error. If the Calculation Agent shall fail
or refuse to determine the interest rate on any Rate Determination Date, the
interest rate shall be determined by the Owner Trustee in accordance with the
provisions of the Trust Agreement. If the Owner Trustee shall fail or refuse to
determine the interest rate on any Rate Determination Date, the interest rate
most recently determined for the 1996 Certificates shall remain in effect with
respect thereto.
In the event that the interest rate on the 1996 Certificates for any
Interest Period exceeds the Net Loan Rate (which rate is equal to the weighted
average interest rate on the 1996 Financed Loans minus __________________
percent (_____%)) for such Interest Period, the Holders of such 1996
Certificates will receive interest payments on such 1996 Certificates for such
Interest Period in an amount equal to the applicable Net Loan Rate; the
difference between the interest rate and the applicable Net Loan Rate for such
an Interest Period shall be deferred and paid to the Holders of the 1996
Certificates on the next succeeding Distribution Date on which funds are
available therefor. THE 1996 Certificates which have matured or which have been
otherwise paid pursuant to the Trust Agreement shall only receive Deferred
Interest, to the extent due on the date of such maturity or payment, to the
extent funds are available for payment thereof. No interest accrues on unpaid
Deferred Interest.
Notwithstanding the foregoing, the rate of interest on any 1996
Certificate for any Interest Period shall not be in excess of the maximum rate
of interest which may be charged or collected pursuant to provisions of
applicable FEDERAL or state law. The rate of interest on any 1996 Certificate
shall never exceed 18% per annum for any Interest Period. Currently, there is no
maximum lawful rate of interest applicable to the 1996 Certificates which is
lower than the maximum rate of interest payable on the 1996 Certificates.
STATED MATURITIES
The 1996 Certificates have a stated maturity date of DECEMBER 15,
2018. Principal of the 1996 Certificates is however, subject to payment prior to
maturity. Principal of the 1996 Certificates is expected to be paid in full
prior to their stated maturity date. SEE "THE 1996 CERTIFICATES-PREPAYMENT."
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PREPAYMENT
Mandatory Principal Distributions. The Indenture provides that, except
as provided below, principal payments on or with respect to the Financed Loans
be transferred from the 1996 -A REVENUE ACCOUNT TO THE 1996-A SUBACCOUNT OF THE
NOTE PAYMENT ACCOUNT WITHIN THE NOTE Fund established under the Indenture, or if
no 1996 Notes are outstanding, to the OWNER TRUSTEE for deposit in the 1996-A
Subaccount of the CERTIFICATE Payment Account in the CERTIFICATE Fund. Such
amounts include principal payments on the 1996 Financed Loans, whether paid by
the borrowers or by a Guarantor, and also include excess amounts transferred
from the Debt Service Reserve Fund. To the extent that payments of principal
of the 1996 Financed Loans are characterized as Capitalized Interest, HOWEVER,
any such amount shall REMAIN IN THE 1996-A REVENUE ACCOUNT AND BE applied in
accordance with the terms of the Indenture.
In addition, all payments of interest and late charges on or with
respect to the 1996 Financed Loans and all investment earnings on FUNDS held
under the Indenture are required to be deposited in the 1996 -A Account in the
Revenue Fund created under the Indenture. Moneys therein are to be distributed
to the Funds, Accounts and Subaccounts or transferred to the OWNER TRUSTEE as
described under "DESCRIPTION OF THE INDENTURE-Flow of Funds" on the Business Day
preceding each Distribution Date, but subject to the exceptions described under
"THE 1996 NOTES-Prepayment-Mandatory Principal Distributions," any money
remaining therein after distributions to the Administration Account, to pay
interest on the 1996 Securities, to replenish the Debt Service Reserve Fund, to
pay Deferred Interest on the 1996 Securities, and to make distributions to the
Seller and NMELC, may be transferred to the Owner Trustee for deposit in the
1996-A Subaccount of the Certificates Payment Account in the Certificate Fund.
It is not expected that any such moneys will be so deposited in the 1996-A
Subaccount of the CERTIFICATE Payment Fund.
Mandatory distributions of principal of 1996 Certificates shall occur
on Distribution Dates after all 1996 Notes have been paid, but only at such
times as there shall be amounts in excess of $5,000 on deposit in the 1996-A
Subaccount of the CERTIFICATE Payment Account on the third Business Day
preceding the Distribution Date on which such distribution will occur as
described above.
Optional Purchase Prepayment. The Seller may repurchase all remaining
1996 Financed Loans, and thus effect the prepayment of the A-2 Notes and the
1996 Certificates, on any Distribution Date on or after which the BALANCE in
the 1996-A Account of the Student Loan Portfolio Fund IS equal to or less than
10% of the Initial Pool Balance with respect to the 1996 Financed Loans, at a
price equal to the outstanding principal balance of the 1996 Financed Loans,
plus accrued and unpaid interest. Such purchase price shall be deposited in the
1996-A Subaccount of the NOTE Payment Account of the NOTE FUND and used on
that Distribution Date to make mandatory principal distributions on the A-2
Notes as described in "THE 1996 NOTES-Prepayment-Mandatory Principal
Distributions," or to the extent no A-2 Notes remain Outstanding, to make
mandatory principal distributions on the 1996 Certificates as described in "THE
1996 CERTIFICATES-Prepayment-Mandatory Principal Distributions."
Principal Factor. All optional prepayments and mandatory distributions
of principal of the 1996 Certificates shall be made pro rata among such 1996
Certificates. In connection with each optional prepayment or principal
distribution of 1996 Certificates, the Owner Trustee shall compute a factor (the
"Principal Factor"). The Principal Factor shall be a seven-digit decimal
indicating the principal balance of each 1996 Certificate as of a Distribution
Date (after giving effect to any optional prepayment or principal distribution
made or to be made on that date) as a fraction of the original principal amount
of the 1996 Certificate. The Principal Factor for 1996 Certificates shall be
initially 1.0000000 and will thereafter decline to reflect the reduction in the
principal balance of the 1996 Certificates after any optional prepayment or
principal distribution. The principal balance of any 1996 Certificate can be
determined by multiplying the original principal amount of the 1996 Certificate
by the applicable Principal Factor for the 1996 Certificates.
Notice of Optional Purchase Prepayment; Effect. Notice of optional
purchase prepayment of Certificates shall be given by the Owner Trustee in the
name and for and on behalf of the Issuer not less than thirty (30) days
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prior to the date of prepayment. Notice shall be given by first-class mail,
postage prepaid to the Holder of each affected Certificate at the address of
such Holder as it appears on the books of registry or by transmitting such
notice by telex or telecopier to any Holder of any affected Certificate who
shall have submitted a written request to the Owner Trustee for notice of
prepayments by such means, to the telex or telecopier number set forth in such
request. A copy of any notice so transmitted shall also be mailed to such Holder
at the address of such Holder set forth on the books of registry; provided,
however, that neither failure by the Owner Trustee to so mail a copy of such
notice nor any defect in such copy shall affect the validity of such notice so
transmitted in accordance with the Trust Agreement; and, provided further, that
neither failure by the Owner Trustee to so transmit a copy of such notice by
telex or telecopier nor any defect therein shall affect the validity of such
notice so mailed in accordance with the Trust Agreement.
Each such notice shall state (i) the prepayment or PRINCIPAL
distribution date and the applicable Principal Factor (after giving effect to
such prepayment or distribution); (ii) that the interest on the principal OF THE
CERTIFICATES to be prepaid or distributed shall cease to accrue from and after
such prepayment or PRINCIPAL distribution date; and (iii) that on the prepayment
or PRINCIPAL distribution date there will become due and payable on each said
Certificate the principal amount thereof to be prepaid or distributed and the
interest accrued, including Deferred Interest but only to the extent funds are
available therefor.
SUBORDINATION
Payment of the principal of and interest on the 1996 Certificates is
subordinate to payment of the principal of and interest on the 1996 Notes as and
to the extent provided in the Indenture. Such subordination provisions include
the following:
(1) No payment of interest on any Certificates shall be made
on any Distribution Date unless interest on all Notes due to and
including such date shall have been paid.
(2) No payment of interest on the 1996 CERTIFICATES shall be
made if the PRIMARY Parity Trigger is less than ONE HUNDRED FOUR
percent (104%).
(3) No payment of principal on the 1996 Certificates shall be
made if any of the 1996 Notes remain Outstanding.
(4) Non-payment of interest on the Certificates shall not
constitute an Event of Default under the Indenture.
(5) Upon an Event of Default under the Indenture, if the Notes
are accelerated, the Indenture Trust Estate will be applied first to
the Notes and then to the Certificates. Absent such acceleration, the
Indenture Trust Estate will be applied to interest then principal due
on the Notes, then to interest then principal on the Certificates, then
to Deferred Interest on the Notes and then to Deferred Interest on the
Certificates. The Holders of two-thirds in aggregate principal amount
of the Notes Outstanding or the Indenture Trustee may direct an
acceleration.
INFORMATION REGARDING THE 1996 SECURITIES
BOOK ENTRY REGISTRATION
The Depository Trust Company ("DTC") is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York UCC
and a "clearing agency" registered pursuant to Section 17A of the Exchange Act.
DTC was created to hold securities for its Participants and to facilitate the
clearance and settlement of securities transactions between Participants through
electronic book-entries, thereby eliminating the need for physical movement of
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certificates. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations. Indirect access to the DTC system also is
available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly ("Indirect Participants").
Securityholders that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or other interests
in, securities may do so only through Participants and Indirect Participants. In
addition, Securityholders will receive all distributions of principal and
interest from the Indenture Trustee or the Owner Trustee, as applicable (the
"Applicable Trustee"), through Participants and Indirect Participants. DTC will
forward such payments to its Participants, which thereafter will forward them to
Indirect Participants or Securityholders. It is anticipated that the only
"Securityholder," "Certificateholder" and "Noteholder" will be Cede, as nominee
for DTC. Securityholders will not be recognized by the Indenture Trustee or the
OWNER Trustee as SECURITYHOLDERS as such terms are used in the Indenture and
the Trust Agreement, respectively, and Securityholders will be permitted to
exercise the rights of Securityholders only indirectly through DTC and its
Participants.
Under the rules, regulations and procedures creating and affecting DTC
and its operations (the "Rules"), DTC is required to make book-entry transfers
of Securities among Participants on whose behalf its acts with respect to the
Securities and to receive and transmit distributions of principal of, and
interest on, the Securities. Participants and Indirect Participants with which
Securityholders have accounts with respect to the Securities similarly are
required to make book-entry transfers and receive and transmit such payments on
behalf of their respective Securityholders. Accordingly, although
Securityholders will not possess Securities, the Rules provide a mechanism by
which Participants will receive payments and will be able to transfer their
interests.
Because DTC can only act on behalf of its Participants, who in turn act
on behalf of Indirect Participants and certain banks, the ability of a
Securityholder to pledge Securities to persons or entities that do not
participate in the DTC system, or to otherwise act with respect to such
Securities, may be limited due to lack of a physical certificate for such
Securities.
DTC has advised the Administrator that it will take any action
permitted to be taken by a Securityholder under the Indenture or the Trust
Agreement, as the case may be, only at the direction of one or more Participants
to whose accounts with DTC the Securities are credited. DTC may take conflicting
actions with respect to other undivided interests to the extent that such
actions are taken on behalf of Participants whose holdings include such
undivided interests.
Except as required by law, neither the Administrator, THE OWNER TRUSTEE
nor the INDENTURE Trustee will have any liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of the Securities held by Cede, as nominee for DTC, or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
DEFINITIVE SECURITIES
The Notes and the Certificates will be issued in fully registered,
certificated form ("Definitive Notes" and Definitive Certificates,"
respectively, and collectively referred to herein as "Definitive Securities") to
Noteholders or Certificateholders or their respective nominees, rather than to
DTC or its nominee, only if (i) the Administrator advises the APPLICABLE
Trustee in writing that DTC is no longer willing or able to discharge properly
its responsibilities as depository with respect to the Securities and the
Administrator is unable to locate a qualified successor, (ii) the Administrator,
at its option, elects to terminate the book-entry system through DTC or (iii)
after the occurrence of an Event of Default, a Servicer Default or an
Administrator Default, Securityholders representing at least a majority of the
outstanding principal amount of the Notes or the Certificates, as the case may
be, advises the Applicable Trustee through DTC in writing that the continuation
of a book-entry system through DTC (or a successor thereto) with respect to such
Notes or Certificates is no longer in the best interest of the holders of such
Securities.
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Upon the occurrence of any event described in the immediately preceding
paragraph, the Applicable Trustee will be required to notify all applicable
Securityholders through Participants of the availability of Definitive
Securities. Upon surrender by DTC of the definitive security representing the
corresponding Securities and receipt of instructions for re-registration, the
Applicable Trustee will reissue such Securities as Definitive Securities to such
Securityholders.
Distributions of principal of, and interest on, such Definitive
Securities will thereafter be made by the Applicable Trustee in accordance with
the procedures set forth in the Indenture or the Trust Agreement, as the case
may be, directly to holders of Definitive Securities in whose names the
Definitive Securities were registered at the close of business on the Record
Date. Such distributions will be made by check mailed to the address of such
holder as it appears on the register maintained by the Applicable Trustee. The
final payment on any such Definitive Security, however, will be made only upon
presentation and surrender of such Definitive Security at the office or agency
specified in the notice of final distribution to Securityholders.
Definitive Securities will be transferable and exchangeable at the
offices of the Applicable Trustee or of a registrar named in a notice delivered
to the holders of Definitive Securities. No service charge will be imposed for
any registration of transfer or exchange, but the Applicable Trustee may require
payment of a sum sufficient to cover any tax or other governmental charge
imposed in connection with therewith.
LIST OF SECURITYHOLDERS
If Definitive Certificates have been issued, the Owner Trustee will,
upon written request by three or more Certificateholders or by holders of
Certificates evidencing not less than 25% of the CERTIFICATE Balance, within
five (5) Business Days afford such Certificateholders access during business
hours to the current list of Certificateholders for purposes of communicating
with other Certificateholders with respect to their rights under the Purchase
Agreements and the BASIC Documents (provided such Certificateholders (i) state
that they wish to communicate with other Certificateholders with respect to
their rights under the Purchase AGREEMENT, the BASIC Documents or under the
Certificates and (ii) provide the OWNER Trustee, THE ADMINISTRATOR and the
Servicer with a copy of the proposed communication). The Purchase AGREEMENT
and BASIC Documents will not provide for the holding of any annual or other
meeting of Certificateholders.
If Definitive Notes have been issued, the Indenture Trustee will, upon
written request by three or more Noteholders or by holders of Notes evidencing
not less than 25% of the aggregate principal OUTSTANDING balance of the Notes,
within five (5) Business Days afford such Noteholders access during business
hours to the current list of Noteholders for purposes of communicating with
other Noteholders with respect to their rights under the Indenture (PROVIDED
such Noteholders (i) state that they wish to communicate with other Noteholders
with respect to their rights under the Indenture and (ii) provide the INDENTURE
Trustee, THE ADMINISTRATOR and the Servicer with a copy of the proposed
communication). The Indenture will not provide for the holding of any annual or
other meetings of Noteholders.
REPORTS TO SECURITYHOLDERS
On each Distribution Date, the Indenture Trustee will provide to the
applicable Noteholders of record as of the related Record Date, and the Owner
Trustee will provide to the Certificateholders of the related Record Date, a
statement setting forth substantially the same information as is required to be
provided on the report provided to the INDENTURE Trustee and the Issuer
described under "DESCRIPTION OF ADMINISTRATION AGREEMENT."
WITHIN the prescribed period of time for tax reporting purposes after
the end of each calendar year during the term of the Indenture or the Trust
Agreement, as the case may be, the Applicable Trustee will mail to each person
who at any time during such calendar year was a Securityholder and received any
payment thereon, a statement containing information for the purposes of such
Securityholder's preparation of federal income tax returns. See "FEDERAL INCOME
TAX CONSEQUENCES."
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DESCRIPTION OF THE INDENTURE
In order to secure the payment of the principal of and interest on the
1996 Notes, and in order to secure the performance and observance of all the
covenants and conditions contained in the Indenture and in the Notes, the Issuer
pledged, and granted a first lien on and a security interest in, the INDENTURE
Trust Estate to the Indenture Trustee, as security for the performance of all of
the obligations of the Issuer under the Indenture, and for the equal and ratable
benefit and security of the Holders of the Notes, without preference priority or
distinction as to lien or otherwise, except as otherwise provided in the
Indenture. Forms of the Master Indenture and First Terms Supplement have been
filed as exhibits to the Registration Statement of which this Prospectus is a
part. The following summary describes provisions of the Indenture (consisting of
the Master Indenture and the First Terms Supplement). The summary does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all of the provisions of the Indenture. Where particular
provisions or terms used in the Indenture are referred to, the actual provisions
or terms used in the Indenture(including definitions of terms) are incorporated
by reference as part of such summary. A copy of the Master Indenture and First
Terms Supplement will be available from the ISSUER, upon request, to HOLDERS of
the 1996 Notes or 1996 Certificates.
INDENTURE TRUST ESTATE
The Indenture Trust Estate is comprised of substantially all the assets
of the Issuer (other than the CERTIFICATE Fund), including the following:
Revenues. The Revenues include all revenues, receipts and moneys
payable into or to the credit of the Revenue Fund pursuant to the Indenture and
any interest earnings on Investment Securities credited to any other Fund,
Account or Subaccount. See "-Flow of Funds" below.
Financed Loans. The Financed Loans include all Loans purchased by the
Issuer from the Seller and designated on the certificate delivered to the
Indenture Trustee pursuant to the Indenture and financed by the Issuer with
proceeds of the Notes and Certificates, but excluding such Financed Loans as are
released from the lien of the Indenture in exchange for payment therefor. See
"-Flow of Funds--Student Loan Portfolio Fund" below. Payments on or with respect
to the Financed Loans are included within the Revenues and are credited to the
Revenue Fund. See "THE TRUST ESTATE."
Servicing Agreement. Under the Indenture, the Issuer has pledged all of
its rights, title and interest in the Servicing Agreement to the Indenture
Trustee. See "SERVICER."
Administration Agreement. Under the Indenture, the Issuer has pledged
all of its rights, title and interest in the Administration Agreement to the
Indenture Trustee. See "DESCRIPTION OF THE ADMINISTRATION AGREEMENT."
Purchase and Sales Agreements. Under the Indenture, the Issuer has
pledged all of rights, title and interest in the Purchase Agreement and the
Sales Agreement to the Indenture Trustee. See "DESCRIPTION OF THE PURCHASE AND
SALES AGREEMENTS."
Funds and Accounts. The Indenture establishes the following Funds and
Accounts:
(a) Services Fund, containing a Cost of Issuance Account
and Administration Account therein;
(b) Debt Service Reserve Fund;
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(c) Student Loan Acquisition Fund, containing a Pre-
Funding Account and an Acquisition Account;
(d) Student Loan Portfolio Fund;
(e) Revenue Fund; and
(f) Note Fund, containing a Note Interest Account and
a Note Payment Account.
Within each Fund and Account, there shall be established an Account or
a Subaccount for each SERIES of Notes, including a 1996-A Account or 1996-A
Subaccount for the 1996 Notes. All moneys in the Funds and Accounts are pledged
to payment of the Notes, subject, however, to particular application of amounts
therein as provided in the Indenture. See "DESCRIPTION OF THE INDENTURE-Flow of
Funds" below. Moneys in the Funds and Accounts are to be invested only in
Investment Securities.
FLOW OF FUNDS
Student Loan Acquisition Fund.
(a) Acquisition Account. The Indenture Trustee shall deposit to
the credit of the applicable SUBACCOUNT of the Acquisition Account in the
Student Loan Acquisition Fund a portion of the proceeds of the applicable SERIES
of Notes and CLASS of Certificates as described in the applicable Terms
Supplement. Such deposits to the 1996-A Subaccount from the 1996 Securities
shall be as described under "FUND BALANCES AT CLOSING." Such amount shall be
paid to or upon the order of the ISSUER on the Closing Date to finance THE
Initial Loans.
(b) Pre-Funding Account. The Indenture Trustee shall deposit to
the credit of the applicable SUBACCOUNT of the Pre- Funding Account in the
Student Loan Acquisition Fund a portion of the proceeds of the applicable SERIES
of Notes and CLASS of Certificates. The Indenture Trustee shall deposit to the
credit of the 1996-A Subaccount of the Pre-Funding Account in the Student Loan
Acquisition Fund a portion of the proceeds of the 1996 Notes and Certificates as
described under "FUND BALANCES AT CLOSING." Such amount shall be applied from
time to time, but in any event before January 10, 1997, to the acquisition of
Subsequent Loans from the Seller. AT ANYTIME PRIOR TO JANUARY 10, 1997, TO the
extent amounts in the 1996-A Subaccount of the Pre-Funding Account will not be
committed to the acquisition of Subsequent Loans, UPON CERTIFICATION BY THE
TRUST, SUCH AMOUNTS shall be transferred to the 1996-A Subaccount WITHIN the
Note Payment Account of the Note Fund.
Student Loan Portfolio Fund. All Financed Loans shall be included in
the Balances of the Student Loan Portfolio Fund. All principal of, interest on
and other Revenues in respect of Financed Loans shall be deposited upon receipt
to the credit of the Revenue Fund as described below. Financed Loans included in
the Balances of the Student Loan Portfolio Fund may be removed therefrom by the
Indenture Trustee only upon an Event of Default or as described in the next
paragraph. Nothing in the Indenture shall be deemed to preclude the Servicer or
other custodian, including the Administrator, from maintaining possession of the
notes evidencing, and other documentation relating to, Financed Loans on behalf
of the INDENTURE Trustee in accordance with the Custody Agreement provided the
same is consistent with the creation and maintenance of the first lien and
security interest IN THE FINANCED LOANS created by the Indenture and does not
impair the perfection of such security interest.
The Indenture provides that Defaulted Loans may be removed from the
Student Loan Portfolio Fund in return for payment in full by a Guarantor,
Servicer, the Seller or the Administrator. Financed Loans which are so
transferred from the Student Loan Portfolio Fund shall no longer constitute a
part of the INDENTURE Trust Estate and shall be free and clear of the lien of
the Indenture. The Indenture Trustee shall deposit the proceeds of any such
disposition of Financed Loans which are allocable to principal to the credit of
the appropriate SUBACCOUNT WITHIN THE NOTE PAYMENT ACCOUNT and the remainder of
such proceeds to the credit of the appropriate REVENUE ACCOUNT.
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Revenue Fund. There shall be deposited in the Revenue Fund (a) all
amounts received in respect of all Financed Loans, whether as principal,
interest, late charges or in payment or repurchase of PRINCIPAL OF Financed
Loans, amounts received on cancellation of Financed Loans and ANY amounts
received as recoveries from a Guarantor; AND (b) amounts received as earnings on
or income from Investment Securities included in the Balances of the Funds and
Accounts to the extent provided in the Indenture.
The Indenture Trustee shall maintain within the REVENUE Fund a separate
Account for each Series. The Issuer shall, and shall cause the Servicer to,
transfer all Revenues received by it or by the Servicer on its behalf to the
Indenture Trustee, promptly or otherwise in accordance with the Servicing
Agreement, and the Indenture Trustee shall upon receipt of any Revenues
immediately deposit and credit such Revenues to the applicable Revenue Account;
provided, however, that the Issuer shall remit directly to a Guarantor OR
COLLECTOR any amount received in respect of a Financed Loan which is owed to the
Guarantor OR COLLECTOR as a collection fee pursuant to a Guaranty Agreement. On
any Business Day, as directed by the Issuer, and, in any case, on the Business
Day prior to each Distribution Date, the Indenture Trustee shall transfer to the
applicable subaccount of the Note Payment Account, to be applied to the
prepayment or mandatory distribution of principal of Notes or transferred to the
Owner Trustee pursuant to the Indenture, all amounts then on deposit in the
applicable Revenue Account which can then be identified, based upon information
furnished to the Indenture Trustee by the Issuer, as allocable to payments of
principal of corresponding Financed Loans and amounts transferred on account of
principal pursuant to the Indenture, less the amount of any increase in
Capitalized Interest during the prior INTEREST PERIOD.
By 12:00 noon on the last Business Day prior to any Distribution Date,
the Indenture Trustee shall, EXCEPT AS OTHERWISE PROVIDED BY THE RELATED TERMS
SUPPLEMENT, transfer or apply all amounts then on deposit in each Revenue
Account, after the TRANSFERS described above, in the following order OF
priority, the requirement of each clause at the time of transfer to be satisfied
before any transfer is made to any purpose subsequent in priority:
First, to the applicable subaccount in the Administration
Account in the Services Fund to the extent required to increase the
Balance on deposit in SUCH subaccount to the Administration
Requirement, calculated as of the date of such transfer.
Second, to the applicable subaccount in the Note Interest
Account to the extent required to increase the amount in such
subaccount to the amount of interest (excluding Deferred Interest)
which will have accrued and be unpaid on the applicable Notes to but
not including such Distribution Date.
Third, to the Owner Trustee, the amount, as certified in
writing by the Owner Trustee, of any interest then accrued and unpaid
on the Class of Certificates identified with the applicable Series of
Notes (excluding Deferred Interest) to but not including such
Distribution Date.
Fourth, any remainder to the applicable Debt Service Reserve
Account in order to INCREASE the amount therein to the applicable Debt
Service Reserve Requirement.
Fifth, any remainder to the applicable subaccount within the
Note Interest Account to the extent required to pay any amounts due to
Holders of Notes in respect of Deferred Interest on Notes calculated in
accordance with the related Terms Supplement.
Sixth, any remainder to the Owner Trustee to the extent
required, as certified by the Owner Trustee, to pay any amounts due to
the Holders of Certificates in respect of Deferred Interest applicable
to the Class of Certificates identified with the applicable Series of
Notes calculated in accordance with the related Trust Supplement.
Seventh, any remainder, ratably with available moneys in all
other Revenue Accounts, to the Debt Service Reserve Fund to increase
the amount in any other Debt Service Reserve Account to its applicable
Debt Service Reserve Requirement.
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Eighth, any remainder to the Owner Trustee for distribution to
the DEPOSITOR and NMELC to the extent specified in the RELATED Terms
Supplement.
Ninth, any remainder to the APPLICABLE SUBACCOUNT OF THE NOTE
PAYMENT ACCOUNT FOR THE PAYMENT OR PREPAYMENT OF THE NOTES.
TENTH, ANY REMAINDER TO THE Owner Trustee for the payment of
principal of Certificates or prepayment of Certificates identified with
the applicable Series of Notes.
Eleventh, any remainder to the Owner Trustee.
PURSUANT TO THE FIRST TERMS SUPPLEMENT THE ABOVE TRANSFERS ARE SUBJECT
TO THE FOLLOWING LIMITATIONS:
(a) AFTER THE TRANSFERS REQUIRED BY CLAUSES FIRST THROUGH SEVENTH
HAVE BEEN SATISFIED, AN AMOUNT EQUAL TO ONE-TWELFTH OF 0.80% OF THE PRINCIPAL OF
THE FINANCED LOANS OUTSTANDING AS OF THE END OF THE PRIOR MONTH shall be
transferred to the OWNER TRUSTEE FOR DISTRIBUTION TO THE DEPOSITOR AND NMELC,
PROVIDED, HOWEVER, THAT NO SUCH TRANSFER SHALL OCCUR IF, AFTER THE TRANSFERS
REQUIRED BY CLAUSES FIRST THROUGH SEVENTH HAVE BEEN SATISFIED, THE PRIMARY
Parity Trigger is less than 114.78% OR THE SECONDARY PARITY TRIGGER IS LESS THAN
105.74% AND PROVIDED, FURTHER, THAT IF, AFTER THE TRANSFERS REQUIRED BY CLAUSES
FIRST THROUGH SEVENTH HAVE BEEN SATISFIED, THE PRIMARY PARITY TRIGGER IS EQUAL
TO OR GREATER THAN 125%, THEN ANY FUNDS REMAINING IN THE 1996-A REVENUE ACCOUNT,
AFTER THE TRANSFERS REQUIRED BY CLAUSES FIRST THROUGH SEVENTH HAVE BEEN
SATISFIED, shall be transferred to the OWNER TRUSTEE FOR DISTRIBUTION TO THE
DEPOSITOR AND NMELC.
(b) IF THE PRIMARY PARITY TRIGGER IS LESS THAN 104% AFTER THE
TRANSFER DESCRIBED IN CLAUSE SECOND HAS BEEN COMPLETED, THEN ALL REMAINING
AMOUNTS SHALL BE TRANSFERRED TO THE 1996-A SUBACCOUNT WITHIN the Note Payment
Account in lieu of the transfers described in CLAUSES Third through Eleventh.
(c) IF THE PRIMARY PARITY TRIGGER IS LESS THAN 112.78% AFTER THE
TRANSFER DESCRIBED IN CLAUSE FOURTH HAS BEEN COMPLETED, THEN ALL REMAINING
AMOUNTS SHALL BE TRANSFERRED TO THE 1996-A SUBACCOUNT WITHIN THE NOTE PAYMENT
ACCOUNT IN LIEU OF THE TRANSFERS DESCRIBED IN CLAUSES FIFTH THROUGH ELEVENTH.
Debt Service Reserve Fund. On the CLOSING DATE for any SERIES of Notes,
the INDENTURE TRUSTEE shall deposit to the credit of the APPLICABLE ACCOUNT in
the Debt Service Reserve Fund an amount specified in the applicable Terms
Supplement, which amount may be equal to or less than the Debt Service Reserve
Requirement for that SERIES. The initial deposit to the 1996-A Debt Service
Reserve ACCOUNT is as described under "FUND BALANCES AT CLOSING." The Debt
Service Reserve Requirement for each SERIES shall be established in the
applicable Terms Supplement. The Debt Service Reserve Requirement for the 1996
Notes shall be an amount equal to two percent (2%) of the aggregate principal
amount of 1996 Notes and 1996 Certificates Outstanding on any date of
determination. If on any Distribution Date the Balances of any ACCOUNT in the
Debt Service Reserve Fund are in excess of the Debt Service RESERVE Requirement,
the amount of such excess shall be transferred to the corresponding Account of
the Revenue Fund.
Other than the transfer of excess Balances pursuant to the preceding
paragraph, or in the case of an Event of Default, the amounts in any ACCOUNT of
the Debt Service RESERVE FUND shall be used solely for the following purposes in
the following order of priority: first, to make up any deficiency in the
corresponding SUBACCOUNT of the Administration Account; second, to increase the
amount in the corresponding SUBACCOUNT of the NOTE Interest Account to the
amount of interest then accrued and unpaid on the Notes (excluding Deferred
Interest) on any Distribution Date or on any other date on which interest is due
upon prepayment or payment of any Notes of the corresponding SERIES, by transfer
and deposit by the Indenture Trustee to the credit of the corresponding
SUBACCOUNT of the NOTE Interest Account on any such date; third, on a Maturity
Date, to provide for payment of the principal of the Notes of the corresponding
SERIES, by transfer and deposit by the Indenture
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Trustee to the credit of the corresponding SUBACCOUNT of the Note Payment
Account on the Maturity Date; fourth, to the Owner Trustee to the extent
necessary to pay the amount of interest then accrued and unpaid on the
corresponding CLASS of Certificates (excluding Deferred Interest) on any
Distribution Date or on any other date on which interest is due upon prepayment
or payment of any corresponding CLASS of Certificates; AND FIFTH, AT SUCH TIME
AS THERE ARE NO LONGER any Notes of the corresponding SERIES Outstanding to
provide for payment of the principal of the corresponding CLASS of Certificates
at the Maturity Date thereof by transfer to the OWNER TRUSTEE.
Note Fund. The NOTE FUND SHALL CONSIST OF TWO ACCOUNTS DESIGNATED THE
"NOTE INTEREST ACCOUNT" AND THE "NOTE PAYMENT ACCOUNT." THE Note Fund shall be
used only for the payment of the principal of and interest on the Notes.
(a) Note Interest Account. Moneys shall be deposited in each
SUBACCOUNT in the NOTE Interest Account from the corresponding Revenue Account,
from the corresponding SUBACCOUNT in the Administration Account, from the
corresponding SUBACCOUNT in the Note Payment Account and from the Debt Service
Reserve FUND in accordance with the terms of the Indenture. Moneys on deposit in
each SUBACCOUNT in the NOTE Interest Account shall be applied by the Indenture
Trustee to the payment of the interest on the Notes of the corresponding SERIES
when due (whether on A DISTRIBUTION Date or upon the prepayment or payment of
such Notes in accordance with the terms of the Indenture).
(b) Note Payment Account. Moneys shall be deposited in each
SUBACCOUNT in the Note Payment Account from the corresponding Revenue Account,
from the Debt Service Reserve FUND and from any other source received by the
Indenture Trustee for deposit therein. Moneys on deposit in the corresponding
SUBACCOUNT in the Note Payment Account shall be applied by the Indenture Trustee
to payment of principal of the Notes of the corresponding SERIES in accordance
with the terms of the Indenture.
Services Fund. The Services Fund consists of two Accounts designated
the "Cost of Issuance Account" and the "Administration Account." The Services
Fund shall be used for and applied only to the payment of Administrative
Expenses and Costs of Issuance.
The Trustee shall deposit to the credit of the APPLICABLE SUBACCOUNT OF
THE COST OF ISSUANCE ACCOUNT THE AMOUNT, IF ANY, SPECIFIED IN THE RELATED TERMS
SUPPLEMENT. THE TRUSTEE SHALL DEPOSIT TO THE CREDIT OF THE APPLICABLE SUBACCOUNT
WITHIN THE Administration Account amounts from the Revenue Fund as described
above.
EXECUTION AND DELIVERY OF NOTES
Prior to the execution and delivery of any Series of Notes, the Issuer
shall deliver to the Indenture Trustee:
(a) Opinions of Counsel addressed to the Indenture Trustee
to the effect that:
(i) all instruments furnished to the Indenture
Trustee in connection with such Notes conform to the
requirements of the Indenture and constitute all the documents
required to be delivered hereunder for the Indenture Trustee
to authenticate and deliver SUCH Notes;
(ii) all conditions precedent provided for in the
Indenture relating to the authentication and delivery of SUCH
Notes have been complied with;
(iii) the Trust Agreement authorizes the Issuer to
execute and deliver the Terms Supplement relating to such
Notes, and to issue such Notes, and the Issuer has duly taken
all necessary action under the Trust Agreement for those
purposes;
(iv) the Issuer is a Massachusetts business trust
and the issuance of the Notes is in conformity with the terms
of and duly authorized by the Trust Agreement;
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(v) assuming due execution and delivery thereof
by the Indenture Trustee, the Indenture and the related Terms
Supplement, as executed and delivered by the Issuer, are the
valid, legal and binding obligations of the Issuer,
enforceable in accordance with their terms, subject to the
effect of bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other similar laws relating to or
affecting creditors' rights generally and court decisions with
respect thereto, and such counsel need express no opinion with
respect to the availability of equitable remedies, and the
execution of such Terms Supplement is authorized or permitted
by the Indenture;
(vi) the Notes, when issued, delivered,
authenticated and paid for, will be the valid, legal and
binding obligations of the Issuer, entitled to the benefits of
the Indenture and the related Terms Supplement, equally and
ratably with all other Notes of such Series, if any,
theretofore issued, authenticated, delivered and paid for and
then Outstanding, and enforceable in accordance with their
terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other
similar laws relating to or affecting creditors' rights
generally and court decisions with respect thereto, and such
counsel need express no opinion with respect to the
availability of equitable remedies;
(vii) the Issuer has granted to the Indenture
Trustee a lien and first perfected security interest in all of
its right, title and interest in each Financed Loan;
(viii) the Trust Agreement authorizes the Issuer to
grant the Indenture Trust Estate to the Indenture Trustee as
security for the Notes of such Series and all previously
issued and Outstanding Series and the Issuer has taken all
necessary action under the Trust Agreement to grant the
Indenture Trust Estate to the Indenture Trustee;
(ix) the Terms Supplement delivered to the
Indenture Trustee with such Opinion of Counsel subjects the
Financed Loans securing such Series and all previously issued
and Outstanding Series and all proceeds therefrom and the
Trust Accounts or Funds for such Series and all previously
issued and Outstanding Series to the lien and security
interest of the Indenture;
(x) such action has been taken with respect to
delivery of possession of the Indenture Trust Estate and with
respect to the recording and filing of the Indenture, the
Terms Supplement for such Series, any other indentures
supplemental hereto and any other requisite documents and with
respect to the execution and filing of any financing
statements as is necessary to perfect a security interest in
the Indenture Trust Estate for such Series and all previously
issued and Outstanding Series, with either the details of such
action being recited therein, or the absence of any such
action being necessary to make such lien and security interest
effective being stated therein; and, with any recording,
filing, re-recording and re-filing of the Indenture, the Terms
Supplement for such Series, any other indentures supplemental
hereto and any other requisite documents and any execution and
filing of any financing statements and continuation statements
that will, in the opinion of such counsel, be required to
maintain the lien and security interest created by the
Indenture and the related Terms Supplements in the Indenture
Trust Estate for such Series and all previously issued and
Outstanding Series;
(xi) the Indenture and the Terms Supplements for
such Series have been duly qualified under the TIA, or that no
qualification of such Terms Supplement under the TIA is
necessary; the execution of the Terms Supplement for such
Series requires the requalification of the Indenture under the
TIA, or that no requalification of the Indenture under the TIA
is necessary by virtue of the execution of such Terms
Supplement; and
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(xii) no authorization, approval or consent of any
governmental body having jurisdiction over the Issuer which
has not been obtained by the Issuer is required for the valid
issuance and delivery of the Notes.
(b) an Officer's Certificate of the Issuer stating that:
(i) the Issuer is not in default under the
Indenture and the issuance of SUCH Notes will not result in
THE BREACH OF any of the terms, conditions or provisions of,
or constitute a default under, the Trust Agreement, any
indenture, mortgage, deed of trust or other agreement or
instrument to which the Issuer is a party or by which it is
bound, or any order of any court or administrative agency
entered in any proceeding to which the Issuer is a party or by
which it may be bound or to which it may be subject, and that
all conditions precedent provided in the Indenture relating to
the authentication and delivery of SUCH Notes have been
complied with;
(ii) the Issuer is the owner of each Financed
Loan securing such Series and any previously issued Series,
has not assigned any interest or participation in any such
Financed Loans (or, if any such interest or participation has
been assigned, it has been released) and has the right to
pledge such Financed LOANS to the Indenture Trustee;
(iii) the Issuer has granted to the Indenture
Trustee a lien and first perfected security interest in all of
its right, title and interest in each such Financed Loan; and
(iv) attached thereto are true and correct copies
of letters signed by each Rating Agency confirming that the
Notes of such new Series have been rated in the highest
ratings category by such Rating Agency and that the issuance
of such Notes will not adversely affect the rating on any
Outstanding Notes or Certificates.
COVENANTS TO SECURE NOTES
Performance of Covenants; the Issuer. The Issuer has covenanted that it
will faithfully perform at all times any and all covenants, undertakings,
stipulations and provisions contained in the Indenture, in any and every Note
executed, authenticated and delivered under the Indenture and in all of its
proceedings pertaining thereto. The Issuer has covenanted and agreed that,
except as provided in the Indenture, it will not sell, convey, assign, pledge,
encumber or otherwise dispose of any part of the Indenture Trust Estate.
Compliance with and Enforcement of Financed Loans, Custody Agreement,
Servicing Agreement, the Sales Agreement and Administration Agreement. The
Issuer has agreed that it (i) shall cause to be diligently taken all reasonable
steps, actions and proceedings necessary for the compliance with and the
enforcement of all terms, covenants and conditions of all Financed Loans, the
Custody Agreement, the Servicing Agreement, the Sales Agreement, and the
Administration Agreement, (ii) shall at all times, to the extent permitted by
law, defend, enforce, preserve and protect the rights and privileges of the
Issuer, the Indenture Trustee and the Holders of the Notes under or with respect
to each Financed Loan, the Custody Agreement, the Sales Agreement, the Servicing
Agreement and the Administration Agreement and (iii) shall not consent, or agree
to or permit any amendment or modification of any Financed Loan, the Custody
Agreement, the Servicing Agreement, the Sales Agreement or the Administration
Agreement which will in any manner materially adversely affect the rights or
security of the Holders of the NOTES under the Indenture. Nothing in the
Indenture prevents the Issuer or the Indenture Trustee from permitting a
borrower to settle a default or cure a delinquency or any Financed Loan on such
terms as THE ISSUER OR THE INDENTURE TRUSTEE, AS APPLICABLE, shall deem
reasonable or AS shall be required by law.
Servicing of Financed Loans. The Issuer has agreed to service all
Financed Loans and enforce the payment and collection of all payments of
principal OF and interest ON SUCH FINANCED LOANS or to cause such servicing to
be done by one or more SERVICERS, each evidencing, in the judgment of the
Issuer, the capability and experience necessary to adequately service such
Financed Loans.
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THE INDENTURE TRUSTEE
Duties of Indenture Trustee; Qualification; Resignation; Removal;
Successor.
If an Event of Default has occurred and is continuing, the Indenture
Trustee shall exercise the rights and powers vested in it by the Indenture and
use the same degree of care and skill in ITS exercise as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.
Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform
such duties and only such duties as are specifically set forth
in the Indenture and no implied covenants or obligations shall
be read into the Indenture against the Indenture Trustee; and
(ii) in the absence of bad faith on its part, the
Indenture Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the
Indenture Trustee and conforming to the requirements of this
Indenture; provided, however, that the Indenture Trustee shall
examine the certificates and opinions to determine whether or
not they conform to the requirements of the Indenture.
The Indenture Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) the Indenture Trustee shall not be liable
for any error of judgment made in good faith BY a responsible
officer unless it is proved that the Indenture Trustee was
negligent in ascertaining the pertinent facts; and
(ii) the Indenture Trustee shall not be liable
with respect to any action it takes or omits to take in good
faith in accordance with a direction received by it.
No provision of the Indenture shall require the Indenture Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties thereunder or in the exercise of any of its
right of powers, if it shall have reasonable grounds to believe that repayments
of such funds or adequate indemnity satisfactory to IT against any loss,
liability or expense is not reasonably assured to it; provided, however, that
the Indenture Trustee shall not refuse or fail to perform any of its duties
hereunder solely as a result of nonpayment of its normal fees and expenses and
further provided that nothing in this paragraph shall be construed to limit the
exercise by the Indenture Trustee of any right or remedy permitted under the
Indenture or otherwise in the event of the Issuer's failure to pay the Indenture
Trustee's fees and expenses.
Except as expressly provided, the Indenture Trustee shall have no
obligation to administer, service or collect the Financed Loans or to maintain,
monitor or otherwise supervise the administration, servicing or collection of
the Financed Loans.
Rights of Indenture Trustee. The Indenture Trustee may rely on any
document believed by it to be genuine and to have been signed or presented by
the proper person. The Indenture Trustee need not investigate any fact or matter
stated in such document. Before the Indenture Trustee acts or refrains from
acting, it may require an Officer's Certificate of the Issuer or an Opinion of
Counsel. The Indenture Trustee shall not be liable for any action it takes or
omits to take in good faith in reliance on such Officer's Certificate or Opinion
of Counsel. The Indenture Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian or nominee, and the Indenture Trustee shall
not be responsible for any misconduct or negligence on the part of, or for the
supervision of, any such agent, attorney, custodian or nominee appointed with
due care by it hereunder.
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Notice of Defaults. If AN EVENT OF Default occurs and is continuing and
if it is either actually known or written notice of the existence thereof has
been delivered to the Indenture Trustee, the Indenture Trustee shall mail notice
of the EVENT OF Default to each Noteholder within 90 days after it occurs.
Except in the case of AN EVENT OF Default in payment of principal of or interest
on any Note, the Indenture Trustee may withhold the notice to the Noteholders if
and so long as a committee of its RESPONSIBLE OFFICERS in good faith determines
that withholding the notice is in the interests of Noteholders of such Series.
If the Indenture Trustee receives notice FROM the Owner Trustee of the
occurrence of an Insolvency Event with respect to the Seller pursuant to the
Trust Agreement, the Indenture Trustee shall give prompt written notice to the
Noteholders of the occurrence of such event and of the effect of such event
under the Trust Agreement. Upon termination of the Trust pursuant to the Trust
Agreement, the Indenture Trustee shall, if so directed by the Owner Trustee,
sell the Indenture Trust Estate (other than the Trust Funds and Accounts) in a
commercially reasonable manner and on commercially reasonable terms. The
proceeds of any such sale shall be treated as Revenues under the Indenture.
Compensation and Indemnity. The Issuer shall pay to the Indenture
Trustee for its services, a fee equal to the amount agreed to in writing between
the Indenture Trustee and the Administrator (the "Indenture Trustee Fee") at the
times set forth in the Administration Agreement and shall or shall cause the
Administrator from its own funds to reimburse the Indenture Trustee for all
reasonable out-of-pocket expenses incurred or made by it in accordance with any
provision of this Indenture. The Indenture Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The Issuer
shall or shall cause the Administrator from its own funds to indemnify the
Indenture Trustee against any and all loss, liability or expense (including
attorneys' fees) incurred by it in connection with the administration of this
trust and the performance of its duties under the Indenture and the other Basic
Documents. The Indenture Trustee shall notify the Issuer and the Administrator
promptly of any claim for which it may seek indemnity. Failure by the Indenture
Trustee to so notify the Issuer and the Administrator shall not relieve the
Issuer or the Administrator of its obligations under the Indenture and under the
other Basic Documents. The Issuer shall or shall cause the Administrator to
defend the claim and the Administrator shall not be liable for the legal fees
and expenses of the Indenture Trustee after it has assumed such defense;
provided, however, that, in the event that there may be a conflict between the
positions of the Indenture Trustee and the Administrator in conducting the
defense of such claim, the Indenture Trustee shall be entitled to separate
counsel the fees and expenses of which shall be paid by the Administrator from
its own funds on behalf of the Issuer. Neither the Issuer nor the Administrator
need reimburse any expense or indemnify against any loss, liability or expense
incurred by the Indenture Trustee through the Indenture Trustee's own willful
misconduct, negligence or bad faith.
Replacement of Indenture Trustee. No resignation or removal of the
Indenture Trustee and no appointment of a successor Indenture Trustee shall
become effective until the acceptance of appointment by the successor Indenture
Trustee. The Indenture Trustee may resign at any time by so notifying the
Issuer. The Noteholders of a majority in Outstanding Amount of the Notes may
remove the Indenture Trustee by so notifying the Indenture Trustee and may
appoint a successor Indenture Trustee. The Issuer shall remove the Indenture
Trustee if:
(i) the Indenture Trustee fails to comply with
the eligibility requirements of the
Indenture;
(ii) an Insolvency Event occurs with respect to
the Indenture Trustee;
(iii) a receiver or other public officer takes
charge of the Indenture Trustee or its
Property;
(iv) the Indenture Trustee otherwise becomes
incapable of acting.
If the Indenture Trustee resigns or is removed or if a vacancy exists
in the office of Indenture Trustee for any reason, the Issuer shall promptly
appoint a successor Indenture Trustee.
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A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee and to the Issuer. Thereupon the
resignation or removal of the retiring Indenture Trustee shall become effective,
and the successor Indenture Trustee shall have all the rights, powers and duties
of the Indenture Trustee. The successor Indenture Trustee shall mail a notice of
its succession to Noteholders. The retiring Indenture Trustee shall promptly
transfer all property held by it as Indenture Trustee to the successor Indenture
Trustee.
If a successor Indenture Trustee does not take office within 60 days
after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Issuer or the Noteholders of a majority in Outstanding
Amount of the Notes may petition any court of competent jurisdiction for the
appointment of a successor Indenture Trustee.
If the Indenture Trustee fails to comply with the eligibility
requirements of the Indenture, any Noteholder may petition any court of
competent jurisdiction for the removal of the Indenture Trustee and the
appointment of a successor Indenture Trustee.
Successor Indenture Trustee by Merger. If the Indenture Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Indenture Trustee; provided that such
corporation or banking association shall be otherwise qualified and eligible
under the Indenture.
Appointment of Co-Trustee or Separate Owner Trustee. Notwithstanding
any other provisions of the Indenture, at any time, for the purpose of meeting
any legal requirement of any jurisdiction in which any part of the Indenture
Trust Estate may at the time be located, the Indenture Trustee shall have the
power and may execute and deliver all instruments to appoint one or more PERSONS
to act as co-trustee or co-trustees, or separate trustee or separate trustees,
of all or any part of the Indenture Trust Estate, and to vest in such PERSON or
PERSONS, in such capacity and for the benefit of the Noteholders.
Eligibility; Disqualification. The Indenture Trustee shall at all times
satisfy the requirements of the Trust Indenture Act of 1939, as amended (the
"TIA").
DEFAULTS AND REMEDIES
Events of Default. The following shall constitute "Events of Default":
(a) Failure in the due and punctual payment of the principal of or
interest on any of the Notes, when the same shall become due and payable, either
at maturity or otherwise;
(b) A material failure by the Issuer in the observance and
performance of any other of the covenants, conditions and agreements of the
Issuer contained in the Indenture and the continuation of such failure for a
period of thirty (30) days after written notice thereof from the Indenture
Trustee or from the Holders of not less than two-thirds in aggregate principal
amount of the Notes then Outstanding; OR
(c) An Insolvency Event with respect to the Issuer or the Seller.
Upon the occurrence of an Event of Default, so long as such Event of
Default shall not have been remedied, unless the principal of all of the Notes
shall have already become due and payable, the Indenture Trustee may, and upon
written request of the Holders of not less than two-thirds in aggregate
principal amount of the Notes then Outstanding, the Indenture Trustee shall, by
written notice to the Issuer, declare the principal of all the Notes then
Outstanding and the interest accrued thereon, excluding Deferred Interest, to be
due and payable immediately; and upon any such declaration the same shall become
and be due and payable on such date, anything contained in the Indenture or in
any of the Notes to the contrary notwithstanding. The right of the Indenture
Trustee to make any such declaration as aforesaid, however, is subject to the
condition that if, at any time after such declaration,
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but before any judgment or decree for the payment of moneys due shall have been
obtained or entered unless the same has been discharged, all overdue
installments of interest upon the Notes, together with the reasonable and proper
charges, expenses and liabilities of the Indenture Trustee and the Holders of
the Notes and their respective agents and attorneys and all other sums then
payable by the Issuer under the Indenture (except the principal of and interest
accrued since the next preceding Distribution Date on the Notes and due and
payable solely by virtue of such declaration) shall either be paid by or for the
account of the Issuer or provision satisfactory to the Indenture Trustee shall
be made for such payment, and all defaults under the Notes or under the
Indenture (other than the payment of principal and interest due and payable
solely by reason of such declaration) shall be cured to the satisfaction of the
Indenture Trustee or provision deemed by the Indenture Trustee to be adequate
shall be made therefor, or, to the extent any of such defaults cannot be cured,
such defaults shall have been waived by the Holders of not less than two-thirds
in aggregate principal mount of the Notes then Outstanding, then and in every
such case the Holders of two-thirds in principal amount of the Notes then
Outstanding, by written notice to the Issuer and to the Indenture Trustee, may
rescind such declaration with respect to the Notes and annul such Event of
Default with respect to the Notes, or, if the Indenture Trustee shall have acted
with respect to the Notes without a written request from the Holders of Notes as
provided for in this paragraph, and if there shall not have been theretofore
delivered to the Indenture Trustee written notice to the contrary by the Holders
of Notes as provided in this paragraph, then the Indenture Trustee may, by
written notice to the Issuer, annul such declaration and any such default with
respect to the Notes and its consequences shall be annulled; provided that no
such recision and annulment shall EXTEND to or affect any subsequent Event of
Default or impair or exhaust any right or power consequent thereon.
Upon any declaration of acceleration of the Notes under the Indenture,
the Indenture Trustee shall give notice of such declaration and its consequences
to Noteholders. Notice of such acceleration having been given as aforesaid,
anything contained in the Indenture or in the Notes to the contrary
notwithstanding, interest shall cease to accrue on the Notes from and after the
date set forth in such notice (which shall be not more than five (5) days from
the date of such declaration).
Application of Moneys. In the event that an Event of Default shall have
occurred and be continuing and at any time the moneys held by the Indenture
Trustee shall be insufficient for the payment of the principal of and interest
then due on the Notes, such moneys and all Revenues received or collected from
the INDENTURE Trust Estate or otherwise for the benefit or for the account of
Holders OF THE NOTES by the Indenture Trustee shall be applied first to the
payment of the reasonable and proper fees and expenses of the Indenture Trustee
and of such other expenses as are necessary in the judgment of the Indenture
Trustee to prevent loss of Revenues and to protect the interests of the Holders
of the Notes, and thereafter as follows:
(a) Unless the principal of all of the Notes shall have
become or have been declared due and payable,
First, to the payment to the persons entitled thereto of all
installments of interest then due on the Notes (including any interest
on overdue principal at the rate borne by the respective obligations
but excluding Deferred Interest) in the order that such installments of
interest shall have become due, and, if the amounts available shall not
be sufficient to pay in full all installments of interest coming due on
the same date then to the payment thereof ratably, according to the
amount due thereon, to the persons entitled thereto, without any
discrimination or preference, and
Second, to the payment to the persons entitled thereto of the
unpaid principal due and unpaid on the Notes at the time of such
payment according to the amounts due for principal, to the persons
entitled thereto without any discrimination or preference, and
Third, to the payment to the persons entitled thereto of all
Deferred Interest on the Notes.
(b) If the principal of all of the Notes shall have become or have
been declared due and payable, to the payment of the principal OF and interest
then due and unpaid on the Notes without preference or priority of principal
over interest or of interest over principal or of any installment of interest
over any other installment of
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interest, or of any Note over any other Note, ratably, according to the amounts
due respectively for principal and interest, to the persons entitled thereto
without any discrimination or preference, AND THEN TO THE OWNER TRUSTEE.
Whenever moneys are to be applied pursuant to the foregoing paragraphs
such moneys shall be applied at such times, and from time to time, as the
Indenture Trustee in its sole discretion shall determine, having due regard to
the amount of such moneys available for application and the likelihood of
additional moneys becoming available for such application in the future.
Whenever the Indenture Trustee shall exercise such discretion, it shall fix the
date upon which application is to be made, and upon such date interest on the
amounts of principal to be paid on such date shall cease to accrue on the
affected Notes. The Indenture Trustee shall give such notice as it may deem
appropriate of the fixing of any such date and shall not be required to make
payment to the Holder of any unpaid affected Note unless such Note is presented
for appropriate endorsement.
Upon the occurrence of an Event of Default, the Indenture Trustee may
not cause any or all of the Indenture Trust Estate to be sold or otherwise
liquidated unless (A) the Noteholders of 100% of the Outstanding Amount of the
Notes of any affected Series consent thereto, (B) the proceeds of such sale or
liquidation distributable to the Noteholders are sufficient to discharge in full
all amounts then due and unpaid upon the Outstanding Notes for principal and
interest or (C) the Indenture Trustee determines that the Indenture Trust Estate
will not continue to provide sufficient funds for the payment of principal of
and interest on the Notes as they would have become due if the Outstanding Notes
had not been declared due and payable, and the Indenture Trustee obtains the
consent of Noteholders of two-third (2/3) of the Outstanding Amount of the
Outstanding Notes. In determining such sufficiency or insufficiency with respect
to Clause (B) and (C), the Indenture Trustee may, but need not, obtain and rely
upon an opinion of an independent banking or accounting firm of national
reputation as to the feasibility of such proposed action and as to the
sufficiency of the Indenture Trust Estate for such purpose.
So long as Notes are outstanding under the Indenture, if and whenever
all overdue installments of interest on all Notes, together with the reasonable
and proper charges, expenses and liabilities of the Indenture Trustee and the
Holders thereof, their respective agents and attorneys, and all other sums
payable by the Issuer under the Indenture, including the principal of and
accrued and unpaid interest on all Notes which shall then be payable by
declaration or otherwise, shall either be paid in full by or for the account of
the Issuer or provision satisfactory to the Indenture Trustee shall be made for
such payment, and all Events of Default under the Indenture or the Notes shall
be made good or secured to the satisfaction of the Indenture Trustee or
provision deemed by the Indenture Trustee to be adequate shall be made therefor,
thereupon the Issuer and the Indenture Trustee shall be restored, respectively,
to their former positions and rights under the Indenture, and all Revenues shall
thereafter be applied as provided in the Indenture. No such resumption of the
application of Revenues as provided in the Indenture shall extend to or affect
any subsequent Event of Default under the Indenture or impair any right
consequent thereon.
Suits at Law or in Equity; Direction of Action by Holders. If an Event
of Default shall happen and shall not have been REMEDIED, then and in every such
case, the Indenture Trustee shall be entitled and empowered to proceed forthwith
such suits, actions and proceedings at law or in equity for the collection of
all sums due in connection with the Notes and to protect and enforce its rights
and the rights of the Holders of the Notes under the Indenture for the specific
performance of any covenant contained in the Indenture, or in aid of the
execution of any power granted in the Indenture, or for an accounting as trustee
of any express trust or in the enforcement of any legal or equitable rights as
the Indenture Trustee, being advised by counsel, shall deem most effectual to
enforce any of its rights, or to perform any of its duties under the Indenture.
The Indenture Trustee shall be entitled and empowered either in its own name or
as a trustee of an express trust, or an attorney-in-fact for the Holders of the
Notes or in any one or more of such capacities, to file such proof of debt,
claim, petition or other document as may be necessary or advisable in order to
have the claims of the Indenture Trustee and of the Holders of the Notes allowed
in any equity, receivership, insolvency, bankruptcy, liquidations, readjustment,
reorganization or other similar proceedings. For this purpose, the Indenture
Trustee has been irrevocably appointed the true and lawful attorney-in-fact of
the respective Holders (and the successive Holders of the Notes by taking and
holding the same shall be conclusively deemed to have so appointed the Indenture
Trustee) with authority to make and file in the respective names of the Holders
of the Notes any such proof of debt, amendment of proof of debt, claim, petition
or other document in any such proceedings and to receive payment of any sums
becoming distributable on account
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thereof, and to execute any such other papers and documents and to do and
perform any and all acts and things for and on behalf of the Holders of the
Notes necessary or advisable in the opinion of the Indenture Trustee in order to
have the respective claims of the Indenture Trustee and of the Holders of the
Notes allowed in any such proceedings and to receive payment of any sums
becoming distributable on account thereof, and to execute any such other papers
and documents and to do and perform any and all acts and things for and on
behalf of the Holders of the Notes necessary or advisable in the opinion of the
Indenture Trustee in order to have the respective claims of the Indenture
Trustee and of the Holders of the Notes allowed in any such proceedings and to
receive payment of and on account of such claims.
The Indenture Trustee, at the request of the Holders of the Notes of
not less than two-thirds in aggregate principal amount of the Notes then
Outstanding, and upon being furnished with reasonable security and indemnity,
shall take such steps and institute such suits, actions or proceedings for the
protection and enforcement of the rights of the Holders of Notes, to collect any
amount due and owing from the Issuer or by injunction or other appropriate
proceeding in law or in equity to obtain other appropriate relief.
Suits by Individual Holders. Except as otherwise specifically provided
below, no Holder of the Notes shall have any right to institute any suit, action
or proceeding in equity or at law for the enforcement of any provision of, or
the execution of any trust or for any remedy under the Indenture unless (i) such
Holder is a Holder of one or more Notes then Outstanding, and such Holder
previously shall have given to the Indenture Trustee notice of the Event of
Default on account of which such suit, action or proceeding is to be instituted,
(ii) the Holders of not less than two-thirds in aggregate principal amount of
the Notes then Outstanding, shall have filed a written request with the
Indenture Trustee after the right to exercise such powers or right of action, as
the case may be, shall have accrued that such suit, action or proceeding be
instituted, (iii) there shall have been offered to the Indenture Trustee
reasonable security and indemnity against the costs, expenses and liability to
be incurred therein or thereby, (iv) the Indenture Trustee for a period of
thirty (30) days after a receipt by it of such action, suit or proceeding, or
the Indenture Trustee shall at any time after such receipt have stated in
writing that it shall not so proceed, and (v) no direction described in the
heading "Suits at Law or in Equity; Direction of Action" above IS inconsistent
with such written request shall have been given to the Indenture Trustee. Except
as otherwise above provided, no one or more Holders of the Notes shall have any
right in any manner whatsoever by its or their action to affect, disturb or
prejudice the pledge created by the Indenture, or to enforce any right under the
Indenture except in the manner provided in the Indenture.
NOTICE of Default. The Indenture Trustee shall, within thirty (30) days
after the time the Indenture Trustee becomes aware of the occurrence of an Event
of Default, give notice to all Noteholders by registered mail of all Events of
Default known to the Indenture Trustee, unless such Event of Default shall have
been cured before the giving of such notice.
AMENDING AND SUPPLEMENTING OF INDENTURE
Amending and Supplementing of Indenture Without Consent of Noteholders.
The Issuer and the Indenture Trustee, from time to time and at any time and
without the consent or concurrence of any Noteholder, may execute a Supplemental
Indenture, for any one or more of the following purposes:
(i) to correct or amplify the description of any
property at any time subject to the lien of each Terms
Supplement, or better to assure, convey and confirm unto the
Indenture Trustee any property subject or required to be
subjected to the lien of each Terms Supplement, or to subject
to the lien of each Terms Supplement additional property;
(ii) to evidence the succession, in compliance
with the applicable provisions of the Indenture, of another
PERSON to the Issuer, and the assumption by any such successor
of the covenants of the Issuer in the Indenture and in the
Notes contained;
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(iii) to add to the covenants of the Issuer, for
the benefit of the Noteholders of all Notes or of the Notes of
any Series, or to surrender any right or power in the
Indenture conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or
pledge any property to or with the Indenture Trustee;
(v) to cure any ambiguity, to correct or
supplement any provision in the Indenture which may be
inconsistent with any other provision in the Indenture or to
make any other provisions with respect to matters or questions
arising under the Indenture; provided that such action shall
not materially adversely affect the interests of the
Noteholders of any Series;
(vi) to evidence and provide for the acceptance
of the appointment under the Indenture by a successor
INDENTURE TRUSTEE with respect to the Notes and to add to or
change any of the provisions of the Indenture as shall be
necessary to facilitate the administration of the trusts under
the Indenture by more than one trustee;
(vii) to add to the conditions, limitations and
restrictions on the authorized amount, terms and purposes of
the issuance, authentication and delivery of any Series of
Notes, additional conditions, limitations and restrictions
thereafter to be observed;
(viii) to set forth the terms of, and security for,
any Series that has not theretofore been authorized by a Terms
Supplement;
(ix) to modify or eliminate any of the terms of
the Indenture; provided, however, that:
(A) such supplemental indenture shall
expressly provide that any such modifications or
eliminations shall not be effective with respect to
any Outstanding Note of any Series created prior to
the execution of such supplemental indenture; AND
(B) the Indenture Trustee may, in its
discretion, decline to enter into any such
supplemental indenture which, in its opinion, would
adversely affect its own rights, duties or
immunities;
(x) to provide for the issuance of Notes of any
Series (including Notes of a Series theretofore authorized and
then Outstanding) or any Class within such Series in bearer
form with coupons ("Bearer Notes") and for the exchangeability
of Bearer Notes and Notes of the same Series and Class issued
in registered form ("Registered Notes"); and such supplemental
indenture may provide for payments on Bearer Notes only
outside the United States and for appointment of a foreign
Paying Agent that is acceptable to the Rating Agencies that
rated the initial Series of the Notes and may also contain any
provisions as may in the Issuer's judgment be necessary,
appropriate or convenient (a) to permit the Notes to be issued
and sold to or held in bearer form by non-United States
Persons, (b) to establish entitlement to an exemption from
United States withholding tax or reporting requirements with
respect to payment on the Notes, (c) to comply, or facilitate
compliance, with other applicable laws or regulations, (d) to
provide for usual and customary provisions for communication
(by notice, publication, maintenance of lists of holders of
Bearer Notes who have provided names and addresses for such
purpose, or otherwise) with holders of Bearer Notes, or (e) to
otherwise effectuate provisions of the issuance of Bearer
Notes and their exchangeability with Registered Notes; or
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(xi) to modify, eliminate or add to the
provisions of the Indenture to such extent as shall be
necessary to effect the qualification of the Indenture under
the TIA or under any similar Federal statute hereafter enacted
and to add to the Indenture such other provisions as may be
expressly required by TIA.
The Issuer and the Indenture Trustee may, also without the consent of
any of the Noteholders but with prior notice to the Rating Agencies, enter into
an indenture or indentures supplemental to the Indenture for the purpose of
adding any provisions to, or changing in any manner or eliminating any of the
provisions of the Indenture or of modifying in any manner the rights of the
Noteholders under the Indenture; provided, however, that such actions shall not
adversely affect the ratings then assigned to any Notes or Certificates, as
evidenced by an Officer's Certificate to such effect delivered to the Indenture
Trustee (upon which the Indenture Trustee may conclusively rely), accompanied by
A LETTER from each Rating Agency (or other evidence satisfactory to the
Indenture Trustee) confirming that the adoption of such indenture or indentures
will not adversely affect the ratings then assigned by such Rating Agency to any
Notes or Certificates Outstanding.
Amendment of Indenture with Consent of Holders. The Issuer and the
Indenture Trustee also may, with prior notice to the Rating Agencies, and with
prior notice to and consent of the Noteholders of not less than a majority of
the Outstanding Amount of all the Notes in SUCH case Outstanding Notes of all
Series are to be affected or with the consent of the Noteholders of not less
than a majority of the Outstanding Amount of the Notes to be affected in case
one or more, but less than all, of the Series of Outstanding Notes are to be
affected, by act of such Noteholders delivered to the Issuer and the Indenture
Trustee, enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to, or changing in any manner or eliminating
any of the provisions of the Indenture relating to such Series or of modifying
in any manner the rights of the Noteholders of such Series under the Indenture;
provided, however, that no such supplemental indenture shall, without the
consent of the Noteholders of each Outstanding Note affected thereby;
(i) change the date of payment of any
installment of principal of or interest on any Note, or reduce
the principal amount thereof or the interest rate thereon,
change the provisions of the Indenture relating to the
application of collections on, or the proceeds of the sale of,
the Indenture Trust Estate to payment of principal of or
interest on the Notes, or change any place of payment where,
or the coin or currency in which any Note or the interest
thereon is payable, or impair the right to institute suit for
the enforcement of the provisions of the Indenture requiring
the application of funds available therefor to the payment of
any such amount due on the Notes on or after the respective
due dates thereof;
(ii) reduce the percentage of the Outstanding
Amount of the Notes of any Series, the consent of the
Noteholders of which is required for any supplemental
indenture, or the consent of the Noteholders of which is
required for any waiver of compliance with certain provisions
of the Indenture or certain defaults hereunder and their
consequences provided for in the Indenture;
(iii) modify or alter the provisions of the
proviso to the definition of the term "Outstanding";
(iv) reduce the percentage of the Outstanding
Amount of the Notes of any Series required to direct the
Indenture Trustee to direct the Issuer to sell or liquidate
the Indenture Trust Estate;
(v) modify any provision relating to the power
to amend the Indenture with Noteholders' consent except to
increase any percentage specified herein or to provide that
certain additional provisions of the Indenture or the other
Basic Documents cannot be modified or waived without the
consent of the Noteholder of each Outstanding Note affected
thereby;
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(vi) modify any of the provisions of the
Indenture in such manner as to affect the calculation of the
amount of any payment of interest or principal due on any Note
on any Distribution Date; or
(vii) permit the creation of any lien ranking
prior to or on a parity with the lien of the Indenture with
respect to any part of the Indenture Trust Estate or, except
as otherwise permitted or contemplated herein, terminate the
lien of the Indenture on any property at any time subject
hereto or deprive any Noteholder of any Note of the security
provided by the lien of the Indenture.
The Indenture Trustee may in its discretion determine whether or not
any Notes of any particular Series would be affected by any supplemental
indenture and any such determination shall be conclusive upon the Noteholders of
all Notes, whether theretofore or thereafter authenticated and delivered
hereunder.
DISCHARGE OF INDENTURE; MONEYS HELD FOR PAYMENT OF NOTES
Discharge of Indenture. The Indenture shall cease to be of further
effect with respect to a Series of Notes except as to (i) rights of registration
of transfer and exchange, (ii) substitution of mutilated, destroyed, lost or
stolen Notes of such Series, (iii) rights of Noteholders to receive payments of
principal thereof and interest thereon, (iv) the rights, obligations and
immunities of the Indenture Trustee hereunder and (v) the rights of Noteholders
as beneficiaries of the Indenture with respect to the property so deposited with
the Indenture Trustee payable to all or any of them, and the Indenture Trustee,
on demand of and at the expense of the Issuer, shall execute proper instruments
acknowledging satisfaction and discharge of the Indenture with respect to the
Notes; when:
(A) either
(1) all Notes of such Series theretofore
authenticated and delivered (other than (i) Notes that have
been destroyed, lost or stolen and that have been replaced and
(ii) Notes for whose payment money has been deposited in
trust) have been delivered to the Indenture Trustee for
cancellation; or
(2) all Notes of such Series not theretofore
delivered to the Indenture Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable within
one year,
and the Issuer, in the case of (i) or (ii) above, has
irrevocably deposited or caused to be irrevocably deposited
with the Indenture Trustee cash or direct obligations of or
obligations guaranteed by the United States of America (which
will mature prior to the date such amounts are payable), in
trust for such purpose, in an amount sufficient to pay and
discharge the entire indebtedness on such Series of Notes not
theretofore delivered to the Indenture Trustee for
cancellation when due to the applicable Maturity Date;
(B) the Issuer has paid or caused to be paid all other
sums payable under the Indenture by the Issuer with respect to such Series; and
(C) the Issuer has delivered to the Indenture Trustee an
Officer's Certificate of the Issuer AND an Opinion of Counsel(AND if required by
the TIA or the Indenture Trustee an Independent Certificate from a firm of
certified public accountants), each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge or the Indenture with
respect to such Series have been complied with.
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Notes Not Presented for Payment When Due; Moneys Held for the Notes
after due Date Thereof. If any Note shall not be presented for payment when the
principal thereof shall become due, whether at maturity or at the date fixed for
the prepayment thereof, or otherwise, and if moneys and/or Investment Securities
shall at such due date be held by the Indenture Trustee, in trust for that
purpose sufficient and available to pay the principal of such Note, together
with all interest due on such principal to the due date thereof, or to the date
fixed for prepayment thereof, as the case may be, all liability of the Issuer
for such payment shall forthwith cease, terminate and be completely discharged
and thereupon it shall be the duty of the Indenture Trustee, to hold said moneys
and/or Investment Securities without liability to the Holder of such Note for
interest thereof, in trust for the benefit of the Holder of such Note, who
thereafter shall be restricted exclusively to said moneys and/or Investment
Securities for any claim of whatever nature on its part on or with respect to
said Note, including for any claim for the payment thereof; provided however,
that any such moneys and/or Investment Securities held by the Indenture Trustee
remaining unclaimed by the Holders of such Notes for three (3) years after the
principal of the respective Notes with respect to which such moneys and or
Investment Securities have been so set aside has become due and payable (whether
at maturity or otherwise) shall be paid to the Issuer free from the trusts
created by the Indenture, and all liabilities of the Trustee with respect to
such moneys and or Investment Securities shall cease.
MISCELLANEOUS
Investments. Moneys held by the Indenture Trustee for the credit of any
Fund or Account shall be invested by the Trustee to the fullest extent
practicable and reasonable, in accordance with the provisions of the Indenture,
in Investment Securities, as directed in writing by the Issuer, and in the
absence of any such directions, in Investment Securities selected by the
Indenture Trustee. Moneys shall be invested in Investment Securities with
respect to which payments of principal and interest are scheduled or otherwise
payable not later than the date on which it is estimated that such moneys will
be required by the Trustee for the purposes intended, and, in any event, with
respect to the Revenue Fund, the Debt Service Reserve Fund and the Note Fund not
later than the next succeeding Date. Investment Securities acquired as an
investment of moneys in any Fund or Account shall be credited to such Fund or
Account. Unless otherwise provided in the Indenture, any earnings on or income
from such Investment Securities shall be credited to the Revenue Fund, except
that an amount of interest received with respect to any Investment Security on
the first payment of interest after purchase equal to the amount of accrued
interest, if any, paid as part of the purchase price of such Investment Security
shall be credited to the Fund or Account from which such accrued interest was
paid. The Debt Service Reserve Fund shall be valued by the Indenture Trustee
monthly, in accordance with the definition of "Value of Investment Securities"
in the Indenture.
The Indenture Trustee may sell or present for redemption, any
Investment Security so purchased whenever it shall be necessary to provide
moneys to meet any required payment, transfer, withdrawal or disbursement from
the Fund or Account to which such Investment Security is credited. The Indenture
Trustee shall not be liable or responsible for any loss resulting from the
acquisition or disposition of any Investment Security in accordance with the
Indenture.
Ownership of Notes. The Issuer, the Indenture Trustee and the
Authenticating Agent may treat the registered owner of any Note as the absolute
owner of such Note for the purpose of receiving payment of the principal of and
interest on such Note and for all other purposes whatsoever and the Issuer, the
Indenture Trustee and the Authenticating Agent shall not be affected by any
notice to the contrary.
Any request or consent of the Holder of any Note shall bind every
future Holder of the same Note and the holder of any Note issued in exchange
therefor or in lieu thereof, in respect of anything done or suffered to be done
by the Indenture Trustee or the Issuer in pursuance of such request or consent.
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DESCRIPTION OF THE SALES AND PURCHASE AGREEMENTS
NELLIE MAE, INC. will sell Loans to the Seller as described herein
pursuant to a Master Terms Purchase Agreements and Supplemental Purchase
Agreements (the "Purchase Agreement") and the Seller will sell Loans to the
Issuer as described herein pursuant to a Master Terms Sales Agreement and
Supplemental Sales Agreements (the "Sales Agreement"). The Purchase Agreement
and the Sales Agreement are for the most part identical, and the provisions
thereof are summarized below. For purposes of the following summary, the entity
selling Loans (i.e., NELLIE MAE, INC. in the Purchase Agreement and the Seller
in the Sales Agreement) is identified as the "Loan Seller," and the entity
purchasing the Loans (i.e., the Seller in the Purchase Agreement and the Issuer
in the Sales Agreement) is identified as the "Loan Purchaser." Forms of the
Purchase Agreement and the Sales Agreement have been filed as Exhibits to the
Registration Statement of which this Prospectus is a part. The following summary
describes MATERIAL provisions of these agreements. The summary does not purport
to be complete and is subject to, and is qualified in its entirety by reference
to, all of the provisions of the Purchase Agreement and the Sales Agreement.
Where particular provisions or terms used in the Purchase Agreement and the
Sales Agreement are referred to, the actual provisions or terms used in the
Purchase Agreement and the Sales Agreement are referred to and the actual
provisions (including definitions of terms) are incorporated by reference as
part of such summary. A copy of the Purchase Agreement and the Sales Agreement
will be available from the Seller, upon request, to holders of the 1996 Notes or
1996 Certificates.
Consummation of Sale and Purchase. The sale and purchase of Loans shall
be consummated upon the Loan Purchaser's receipt from the Loan Seller of the
bill of sale and the payment by the Loan Purchaser to Loan Seller of the
purchase price, and when consummated such sale and purchase shall be effective
as of the date of the bill of sale. The Loan Purchaser on the date of the bill
of sale shall pay the Loan Seller the purchase price by wire transfer of
immediately available funds.
Conditions Precedent to Purchase. The Loan Seller shall provide any
assistance requested by the Loan Purchaser in determining that all required
documentation on the Loans is present and correct. The Loan Seller shall
service, or cause to be serviced, all Loans until the date of the bill of sale.
Endorsement. The Loan Seller shall provide a blanket endorsement
transferring the entire interest of Seller in the Student Loans to the Owner
Trustee on behalf of the Loan Purchaser with the form of endorsement provided
for in the Purchase Agreement or Sales Agreement.
At the direction of and in such form as the Loan Purchaser may
designate, the Loan Seller also agrees to individually endorse any Qualified
Loan as the Loan Purchaser may request from time to time.
Representations and Warranties of Loan Seller. The Loan Seller
represents and warrants, among other things, to the Loan Purchaser that with
respect to a portfolio of Loans:
(i) The Loan Seller is duly organized and existing under
the laws of the applicable jurisdiction;
(ii) The Loan Seller has all requisite power and authority
to enter into and to perform the terms of the Sales Agreement;
(iii) The Loan Seller has good title to, and is the sole
owner of, the Loans, free and clear of all security interests, liens,
charges, claims or encumbrances of any nature and no right of
rescission, offsets, defenses, or counterclaims have been asserted or
threatened with respect to the Loans;
(iv) The description of the Loans provided to the Loan
Purchaser is true and correct;
(v) The Loan Seller is authorized to sell, assign,
transfer and repurchase the Loans, and the sale, assignment and
transfer of such Loans is or, in the case of a Loan repurchase by the
Loan Seller, will
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be made pursuant to and consistent with the laws and regulations under
which the Loan Seller operates, and will not violate any decree,
judgment or order of any court or agency, or conflict with or result in
a beach of any of the terms, conditions or provisions of any agreement
or instrument to which the Loan Seller is a party or by which the Loan
Seller or its property is bound, or constitute a default (or an event
which could constitute a default with the passage of time or notice or
both);
(vi) The Loans are each in full force and effect in
accordance with their terms and are legal, valid and binding
obligations of the respective borrowers thereunder subject to no
defenses;
(vii) Due diligence and reasonable care have been exercise
in the making, administering, servicing and collecting the Loans and,
with respect to any Loan for which repayment terms have been
established, all disclosures of information required to be made have
been made;
(viii) Each Loan has been duly made and serviced in
accordance with the provisions of all applicable federal and state
laws;
(ix) No Loan is more than 60 days delinquent and no
default, breach, violation or event permitting acceleration under the
terms of any Loan exists; and neither the Loan Seller nor any
predecessor holder of any Loan has waived any of the foregoing other
than as permitted by the Basic Documents;
(x) The Loan Seller warrants that the transfer and
assignment of the Loans constitute a valid sale of the Loans from the
Loan Seller to the Loan Purchaser and that the beneficial interest in
and title to such Loans not be part of the Loan Seller's estate in the
event of the bankruptcy of the Loan Seller or the appointment of a
receiver with respect to the Loan Seller;
(xi) There is only one original executed copy of the
promissory note evidencing each Loan;
(xii) No borrower of any Loan is known by the Loan Seller
to be currently involved in a bankruptcy proceeding.
Repurchase of Trust Student Loans; Reimbursement. Each party to the
agreement shall give notice to the other party, in writing, upon the discovery
of any breach of the Loan Seller's representations and warranties which has a
materially adverse effect on the interest of the Loan Purchaser in any Financed
Loan. In the event of such a material breach which is not curable, the Loan
Seller shall repurchase any affected Financed Loan not later than 120 days
following the date of discovery of such material breach. In the event of such a
material breach which is curable, unless the material breach shall have been
cured within 360 days following the date of discovery of such material breach,
the Loan Seller shall repurchase such Financed Loan not later than the sixtieth
day following the end of such 360-day period.
DESCRIPTION OF ADMINISTRATION AGREEMENT
Pursuant to the Administration Agreement, the Administrator agrees to
perform duties of the Issuer and the Owner Trustee. A form of the Administration
Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part. The following summary describes MATERIAL provisions
of the Administration Agreement. The summary does not purport to be complete and
is subject to, and is qualified in its entirety by reference to, all of the
provisions of the Administration Agreement. Where particular provisions or terms
used in the Administration Agreement are referred to, the actual provisions or
terms used in the Administration Agreement are referred to and the actual
provisions (including definitions of terms) are incorporated by reference as
part of such summary. A copy of the Administration Agreement will be available
from the Seller, upon request, to holders of the 1996 Securities.
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Duties with Respect to the Indenture. The Administrator shall exercise
the duties of the Issuer under the Indenture and the Trust Agreement. The
Administrator shall monitor the performance of the Issuer and shall advise the
Owner Trustee when action by the Issuer or the Owner Trustee is necessary to
comply with the Issuer's or the Owner Trustee's duties under the Indenture, the
Trust Agreement and any of the other Basic Documents. The Administrator shall
prepare for execution, if required, by the Issuer or shall cause the preparation
by other appropriate PERSONS of all such documents, reports, filing,
instruments, certificates and opinions as it shall be the duty of the Issuer to
prepare, file or deliver pursuant to the Indenture, the Trust Agreement or any
of the other Basic Documents. In furtherance of the foregoing, the Administrator
shall take all appropriate action that is the duty of the Issuer to take
pursuant to the Trust Agreement and the Indenture.
Duties with Respect to the Issuer. In addition to the duties of the
Administrator set forth above and in the other Basic Documents, the
Administrator shall perform such calculations and shall prepare for execution by
the Issuer or the Owner Trustee or shall cause the preparation by other
appropriate PERSONS of all such documents, reports, filings, instruments,
certificates and opinions as it shall be the duty of the Issuer (except to the
extent that the Owner Trustee has expressly agreed to perform such duties in the
Trust Agreement), to prepare, file or deliver pursuant to the Basic Documents,
and at the request of the Owner Trustee shall take all appropriate action that
it is the duty of the Issuer to take pursuant to the Basic Documents.
In carrying out the foregoing duties or any of its other obligations
under the Administration Agreement, the Administrator may enter into
transactions with or otherwise deal with any of its affiliates; provided,
however, that the terms of any such transactions or dealings shall be, in the
Administrator's opinion, no less favorable to the Issuer than would be available
from unaffiliated parties.
Statements to Certificateholders and Noteholders. On each Distribution
Date the Administrator will provide instructions as to the payments which will
take place on that day including:
a. The amount of principal to be prepaid on the Notes;
b. The amount of principal to be prepaid on the Certificates;
c. The amount of interest to be paid on the Notes;
d. The amount of interest to be paid on the Certificates;
e. The amount of the Administration Fees, if any, to be paid; and
f. The amount of Servicing Fee billed by the Servicer for the
preceding month to be transferred to the APPLICABLE SUBACCOUNT
WITHIN THE Administration Account.
Additionally, on the 20th of each month, OR THE NEXT BUSINESS DAY IF
THE 20TH IS NOT A BUSINESS DAY, the Administrator will provide to the Owner
Trustee, the Indenture Trustee and the Rating Agencies the following
information, all as of the preceding month end:
g. The aggregate Outstanding principal balance of Notes;
h. The aggregate Outstanding PRINCIPAL BALANCE OF CERTIFICATES;
i. The balance of EACH ACCOUNT IN the Debt Service Reserve Fund;
j. The total Financed Loans outstanding;
k. Summary of delinquent Financed Loans;
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l. The PRIMARY AND SECONDARY PARITY TRIGGERS;
m. The weighted average interest rate on the Financed Loans;
n. The aggregate amount of Financed Loans repurchased by the
Seller or purchased by the Servicer during the preceding
month; AND
o. THE ADMINISTRATOR SHALL ALSO PROVIDE INSTRUCTIONS FOR PAYMENT
OF FEES TO THE RATING AGENCIES, THE INDENTURE TRUSTEE AND THE
OWNER TRUSTEE.
A copy of the statements referred to above may be obtained by any
Certificate Owner or Noteholder by a written request to the Owner Trustee or
Noteholder by a written request to the Owner Trustee or the Indenture Trustee,
respectively, addressed to the respective Corporate Trust Office.
Non-Ministerial Matters. With respect to matters that in the reasonable
judgment of the Administrator are non-ministerial, the Administrator shall not
take any action unless within a reasonable time before the taking of such
action, the Administrator shall have notified the Owner Trustee AND THE RATING
AGENCIES of the proposed action and the Owner Trustee shall not have withheld
consent or provided an alternative direction.
Liability of Administrator; Indemnities. The Administrator shall be
liable in accordance herewith only to the extent of the obligations specifically
undertaken by the Administrator under this Agreement.
The Administrator shall indemnify, defend and hold harmless the Issuer,
the Certificateholders and the Noteholders and any of the officers, directors,
employees and agents of the Issuer from and against any and all costs, expenses,
losses, claims, damages and liabilities to the extent that such cost, expense,
loss, claim, damage or liability arose out of, or was imposed upon any such
PERSON through the GROSS negligence, willful misfeasance or bad faith of the
Administrator in the performance of its duties under the Administration
Agreement or by reason of reckless disregard of its obligations and duties
hereunder or thereunder.
The Administrator shall indemnify the Indenture Trustee in its
individual capacity and any of its officers, directors, employees and agents
against any and all loss, liability or expense (including attorneys' fees)
incurred by it in connection with the performance of its duties under the
Indenture and the other Basic Documents.
The Administrator shall indemnify the Owner Trustee in its individual
capacity and any of its officers, directors, employees and agents against any
and all loss, liability, claims, damages, costs, penalties, taxes (excluding
taxes payable by it on any compensation received by it for its services as
trustee) or expense (including attorneys' fees) incurred by it in connection
with the performance of its duties under the Trust Agreement and the other Basic
Documents.
RESIGNATION OF Nellie Mae, Inc. as Administrator. Nellie Mae, Inc. MAY
resign from the obligations and duties imposed on it as Administrator under the
Administration Agreement ONLY IN ACCORDANCE WITH THE PROVISIONS OF the
Administration Agreement. NELLIE MAE, INC. SHALL PROVIDE WRITTEN NOTICE OF ITS
INTENTION TO RESIGN to the Owner Trustee and the Indenture Trust at LEAST 120
DAYS PRIOR TO THE EFFECTIVE TIME OF THE RESIGNATION AND SUCH WRITTEN NOTICE
shall be confirmed in writing at the earliest practicable time, PROVIDED HOWEVER
THAT NO such resignation shall become effective until the Indenture Trustee or a
successor Administrator shall have assumed the responsibilities and obligations
of Nellie Mae, Inc.
Administrator Default. If any one of the following events (an
"Administrator Default") shall occur and be continuing:
A. any failure by the Administrator to direct the Indenture
Trustee to make any required distributions from any of the Trust Funds and
Accounts which failure continues unremedied for five Business Days after written
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notice of such failure is received by the Administrator from the Indenture
Trustee or the Owner Trustee or after discovery of such failure by an officer of
the Administrator; or
B. any failure by the Administrator duly to observe or to perform
in any material respect any other covenant or agreement of the Administrator set
forth in the Administration Agreement or any other Basic Document, which failure
shall (i) materially and adversely AFFECT the rights of Noteholders or
Certificateholders and (ii) continue unremedied for a period of 60 days after
the date on which written notice of such failure, requiring the sale to be
remedied, shall have been given (A) to the Administrator by the Indenture
Trustee or the Owner Trustee or (B) to the Administrator, the Indenture Trustee
and the Owner Trustee by the Noteholders or Certificateholders, as applicable,
representing not less than 25% of the Outstanding Amount of the Notes or 25% of
the Outstanding Certificate Balance (including any Certificates owned by the
Seller) or
C. an Insolvency Event occurs with respect to the Administrator;
then, in each and every case, so long as the Administrator Default shall not
have been remedied, either the Indenture TRUSTEE, THE OWNER Trustee or the
Noteholders evidencing not less than 25% of the Outstanding Amount of the Notes
SHALL GIVE WRITTEN NOTICE to the Administrator OF SUCH ADMINISTRATOR DEFAULT AND
the Indenture Trustee and to the Owner Trustee may terminate all the rights and
obligations of the Administrator under this Agreement.
Upon receipt by the Administrator of notice of termination or the
resignation by the Administrator in accordance with the terms of the
Administration Agreement, the predecessor Administrator shall continue to
perform its functions as Administrator under this Agreement in the case of
termination, only until the date specified in such termination notice or, if no
such date is specified in a notice of termination, until receipt of such notice
and, in the case of resignation, until the date 120 days from the delivery to
the Owner Trustee and the Indenture Trustee of written notice of such
resignation (or written confirmation of such notice) in accordance with the
terms of the Administration Agreement. In the event of the termination OR
RESIGNATION of the Administrator, the Issuer shall appoint a successor
Administrator acceptable to the Indenture Trustee AND THE OWNER TRUSTEE, and the
successor Administrator shall accept its appointment by a written assumption in
form acceptable to the Indenture Trustee. In the event that a successor
Administrator has not been appointed at the time when the predecessor
Administrator has ceased to act as Administrator, the Indenture Trustee without
further action shall automatically be appointed the successor Administrator and
the Indenture Trustee shall be entitled to the Administration Fee.
Notwithstanding the above, the Indenture Trustee shall, if it shall be unwilling
or legally unable so to act, appoint or petition a court of competent
jurisdiction to appoint any established institution whose regular business shall
include the servicing of student loans, as the successor to the Administrator
under the Administration Agreement.
Waiver of Past Default. The Noteholders of Notes evidencing a majority
of the Outstanding Amount of the Notes (or the Certificateholders of
Certificates evidencing a majority of the Outstanding Certificate Balance, in
the case of any default which does not adversely affect the Indenture Trustee or
the Noteholders) may, on behalf of all Noteholders and Certificateholders, waive
in writing any default by the Administrator in the performance of its
obligations and any consequences thereof, except a default in making any
required deposits to or payments from any of the Trust Funds and Accounts (or
giving instructions regarding the same) in accordance with the Administration
Agreement. Upon any such waiver of a past default, such default shall cease to
exist, and any Administration Agreement default arising therefrom shall be
deemed to have been remedied for every purpose. No such waiver shall extend to
any subsequent or other default or impair any right consequent thereto.
Insolvency of the Seller. Upon any sale of the assets of the Trust due
to the insolvency of the Seller, the Administrator shall instruct the Indenture
Trustee in writing to deposit the net proceeds from such sale after all payments
and reserves therefrom (including the expenses of such sale) have been made (the
"Insolvency Proceeds") in the Revenue Fund. On the first Distribution Date
following the date on which the Insolvency Proceeds are deposited in the Revenue
Fund, the Administrator shall INSTRUCT the Indenture Trustee AND THE OWNER
TRUSTEE TO MAKE THE DISTRIBUTIONS IN ACCORDANCE WITH THE INDENTURE AND THE TRUST
AGREEMENT.
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TRANSFER OF STUDENT LOANS
NELLIE MAE, INC. intends that the transfer of the Financed Loans by it
to the Seller, and the Seller intends that the transfer of the Financed Loans by
it to the Issuer, will constitute a valid sale and assignment of such Financed
Loans.
If the transfer of the Financed Loans is deemed to be an assignment as
security for the benefit of the Seller or the Issuer, there are limited
circumstances in which prior or subsequent transferees of Financed Loans could
have an interest in such Financed Loans with priority over the INDENTURE
Trustee's interest. A tax or other government lien on property of NELLIE MAE,
INC. or the Seller arising prior to the time a Loan comes into existence may
also have priority over the interest of the Seller or the Issuer in such Loan.
Under the related Purchase AGREEMENT and Sales AGREEMENT, however, NELLIE MAE,
INC. or the Seller, as applicable, will warrant that it has transferred the
Financed Loans to the Seller or the Issuer, as applicable, free and clear of the
lien of any third party. In addition, each of NELLIE MAE, INC. and the Seller
will covenant that it will not sell, pledge, assign, transfer or grant any lien
on any Loan (or any interest therein) other than to the Seller or on behalf of
THE Issuer, respectively, except as provided below.
Pursuant to the Servicing Agreement, the Servicer as custodian on
behalf of the Issuer will have custody of the promissory notes evidencing the
Financed Loans following the sale of the Financed Loans to Seller and THEN TO
the Issuer. Although the records of the Seller and Servicer will be marked to
indicate the sale and although NELLIE MAE, INC. and the Seller will cause UCC
financing statements to be filed with the appropriate authorities, the Financed
Loans will not be physically segregated, stamped or otherwise marked to indicate
that such Financed Loans have been sold to the Seller and to the Issuer. If,
through inadvertence or otherwise, any of such Financed Loans were sold to
another party that (i) purchased such Financed Loans in the ordinary course of
its business, (ii) took possession of such Financed Loans, and (iii) PURCHASED
the Financed Loans for new value and without actual knowledge of the Issuer's
interest THEREIN, then such purchaser would acquire an interest in the Financed
Loans superior to the interest of the Seller and the Issuer.
With respect to the Issuer, in the event of a Servicer Default
resulting solely from certain events of insolvency or bankruptcy that may occur
with respect to the Servicer, a court, conservator, receiver or liquidator may
have the power to prevent either the Indenture Trustee or Noteholders from
appointing a successor Servicer.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Set forth below is a DESCRIPTION of Federal income tax consequences of
the purchase, ownership and disposition of the 1996 Securities. MINTZ, LEVIN,
COHN, FERRIS, GLOVSKY AND POPEO, P.C., Federal tax counsel for the Issuer
("Federal Tax Counsel") is of the opinion that the discussion hereunder fully
and fairly discloses all material Federal tax CONSEQUENCES associated with the
purchase, ownership and disposition of the 1996 Securities.
THIS DESCRIPTION does not deal with all aspects of Federal income
taxation applicable to all categories of holders of the Securities, some of
which may be subject to special rules or special treatment under the Federal
income tax laws. For example, it does not discuss the specific tax treatment of
Securityholders that are insurance companies, banks and other financial
institutions, regulated investment companies, individual retirement accounts),
life insurance companies, tax-exempt organizations or dealers in securities.
This summary is based upon present provisions of the Internal Revenue Code of
1986, as amended (the "Code"), the regulations promulgated thereunder, and
judicial or ruling authority, all of which are subject to change, which change
may be retroactive. Moreover, there are no cases or Internal Revenue Service
(the "IRS") rulings on similar transactions involving a trust that issues debt
and equity interests with terms similar to those of the 1996 Notes and the 1996
Certificates. As a result, the IRS may disagree with all or part of the
discussions below.
Prospective investors are advised to consult their own tax advisors
with regard to the Federal income tax consequences of the purchase, ownership
and disposition of the 1996 Securities, as well as the tax consequences
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arising under the laws of any state, foreign country or other jurisdiction. The
Issuer has been provided with an opinion of Federal Tax Counsel regarding the
Federal income tax matters discussed below. An opinion of counsel, however, is
not binding on the IRS, and no ruling on any of the issues discussed below will
be sought from the IRS.
FEDERAL TAX CONSEQUENCES WITH RESPECT TO THE NOTES
Tax Characterization of the Notes and the Issuer. Federal Tax Counsel
has advised the Issuer that based on the terms of the Notes and the transactions
relating to the Loans as set forth herein, the Notes will be treated as debt for
Federal income tax purposes. There is, however, no specific authority with
respect to the characterization for Federal income tax purposes of securities
having the same terms as the Notes.
Federal Tax Counsel is also of the opinion that based on the applicable
provisions of the Trust Agreement and related documents, the Issuer will not be
classified as an association or publicly traded partnership taxable as a
corporation for Federal income tax purposes. However, there are no authorities
directly dealing with similar transactions. If the I.R.S. were to successfully
characterize the Issuer as a corporation for Federal income tax purposes, the
income from the Loans (reduced by deductions, possibly including interest on the
Notes) would be subject to Federal income tax at corporate rates, which would
reduce the amounts available to make payments on the Notes.
If, contrary to the opinion of Federal Tax Counsel, the IRS
successfully asserted that the Notes were not debt for Federal income tax
purposes, the Notes might be treated as equity interests in the Issuer. If so,
the Issuer might be taxable as a corporation with the adverse consequences
described above (and the taxable corporation would not be able to deduct
interest on the Notes). The remainder of this discussion assumes that the Notes
will be treated as debt and that the Issuer will not be taxable as a
corporation.
Interest Income on the Notes. The stated interest on the Notes will be
taxable to a Noteholder as ordinary income when received or accrued in
accordance with such Noteholder's method of tax accounting. It is not
anticipated that the Notes will be issued with "original issue discount" within
the meaning of Section 1273 of the Code ("OID"). A holder who purchases a Note
at a discount that exceeds a statutory defined de minimis amount will be subject
to the "market discount" rules of the Code, and a holder who purchased a Note at
a premium will be subject to the premium amortization rules of the Code.
Sale or Other Disposition. If a Noteholder sells a Note, the holder
will recognize gain or loss in an amount equal to the difference between the
amount realized on the sale and the holder's adjusted tax basis in the Note. The
adjusted tax basis of a Note to a particular Noteholder will equal the holder's
cost for the Note, increased by any OID (if any), market discount and gain
previously included by such Noteholder in income with respect to the Note and
decreased by the amount of bond premium (if any) previously amortized and by the
amount of principal payments previously received by such Noteholder with respect
to such Note. Subject to the rules of the Code concerning market discount on the
Notes, any such gain or loss will be capital gain or loss if the note was held
as a capital asset. Capital losses generally may be deducted only to the extent
the Noteholder has capital gains for the taxable year, although under certain
circumstances non-corporate Noteholders can deduct losses in excess of available
capital gains.
Foreign Holders. If interest paid (or accrued) to a Noteholder who is
nonresident alien, foreign corporation or other non-United States person (a
"foreign person") is not effectively connected with the conduct of a trade or
business within the United States by the foreign person, the interest generally
will be considered "portfolio interest," and generally will not be subject to
United States Federal income tax and withholding tax, if the foreign person (i)
is not actually or constructively a "10 percent shareholder" of the
Issuer(including a holder of 10% of the outstanding Certificates) or a
"controlled foreign corporation" with respect to which the Issuer is a "related
person" within the meaning of the Code and (ii) PROVIDES the person otherwise
required to withhold U.S. tax with an appropriate statement, signed under
penalties of perjury, certifying that the beneficial owner of the Note is a
foreign person and providing the foreign person's name and address. If the
information provided in the statement
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changes, the foreign person must so inform the person otherwise required to
withhold U.S. tax within 30 days of such charge. The statement generally must be
provided in the year a payment occurs or in either of the two preceding years.
If a Note is held through a securities clearing organization or certain other
financial institutions, the organization or institution may provide a signed
statement to the withholding agent. However, in that case, the signed statement
must be accompanied by a Form W-8 or substitute form provided by the foreign
person that owns the Note. If such interest is not portfolio interest, then it
will be subject to United States Federal income and withholding tax at a rate of
30%, unless reduced or eliminated pursuant to an applicable tax treaty.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Note by a foreign person will be exempt from United
States Federal income and withholding tax, provided that (i) the gain is not
effectively connected with the conduct of a trade or business in the United
States by the foreign person and (ii) in the case of an individual foreign
person, the foreign individual is not present in the United States for 183 days
or more in the taxable year or does not have a tax home in the United States.
If the interest, gain or income on a Note held by a foreign person is
effectively connected with the conduct of a trade or business in the United
States by the foreign person (although exempt form the withholding tax
previously discussed if the holder provides an appropriate statement), the
holder generally will be subject to United States Federal income tax on the
interest, gain or income at regular Federal income tax rates. In addition, if
the foreign person is a foreign corporation, it may be subject to a branch
profits tax equal to 30% of its "effectively connected earnings and profits"
within the meaning of the Code for the taxable year, as adjusted for certain
items, unless it qualifies for a lower rate under an applicable tax treaty (as
modified by the branch profits tax rules).
Information Reporting and Backup Withholding. The Issuer will be
required to report annually to the IRS and each Noteholder of record, the amount
of interest paid on THE Notes (and the amount of interest withheld for Federal
income taxes, if any) for each calendar year except as to exempt holders
(generally, holders that are corporations, tax-exempt organizations, qualified
pension and profit-sharing trusts, individual retirement accounts, or
nonresident aliens who provide certification as to their status as
nonresidents). Accordingly, each holder (other than exempt holders who are not
subject to the reporting requirements) will be required to provide, under
penalties of perjury, a certificate containing the holder's name, address,
correct Federal taxpayer identification number and a statement that the holder
is not subject to backup withholding. Should a nonexempt Noteholder fail to
provide the required certification, the Issuer will be required to withhold 31%
of the amount otherwise payable to the holder, and remit the withheld amount to
the IRS as a credit against the holder's Federal income tax liability.
FEDERAL TAX CONSEQUENCES WITH RESPECT TO THE CERTIFICATES
Tax Characterization of the Issuer. The Seller, as general partner, and
the Servicer have agreed, and the Certificateholders will agree by their
purchase of Certificates, to treat the Issuer as a partnership for federal
income tax for purposes with the assets of the partnership being the assets held
by the Issuer, the partners of the partnership being the Certificateholders and
the Notes being debt of the partnership. However, the proper characterization of
the arrangement involving the Issuer, the Certificates, the Notes, the Seller,
and the Servicer is not clear because there is no authority on transactions
closely comparable to that contemplated herein.
If the Issuer were held to be an "association" taxable as a corporation
for Federal income tax purposes, rather than a partnership, the Issuer would be
subject to a corporate level income tax. Any such corporate income tax could
materially reduce or eliminate cash that would otherwise be distributable with
respect to the Certificates (and Certificateholders could be liable for any such
tax that is unpaid by the Issuer). See also the discussion above under"-FEDERAL
Tax Consequences with Respect to the Notes-Tax Characterization of the Notes and
the Issuer." However, in the opinion of Federal Tax Counsel, the Issuer will not
be classified as an association taxable as a corporation because of the nature
of its income and because it will not have certain "corporate" characteristics
necessary for a business trust to be an association taxable as a corporation.
Nonetheless, because of the lack of cases or rulings on similar
transactions, a variety of alternative characterizations are possible in
addition to the position to be taken by Certificateholders that the Certificates
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represent equity interests in a partnership. For example, because the
Certificates have certain features characteristic of debt, the Certificates
(other than those representing the initial interest of the Seller and NMELC)
might be considered debt of the Issuer or of the Seller. IN SUCH CASE, THE
DISCUSSION ABOVE UNDER "--CERTAIN FEDERAL INCOME TAX CONSEQUENCES WITH RESPECT
TO THE NOTE" RELATING TO NOTEHOLDERS WOULD ALSO BE GENERALLY APPLICABLE TO
CERTIFICATEHOLDERS TREATED AS HOLDERS OF DEBT INSTRUMENTS. The remainder of this
summary assumes that the Certificates represent equity interests in a
partnership that owns the Loans.
Partnership Taxation. As a partnership, the Issuer will not be subject
to Federal income tax, but each Certificateholder will be required to separately
take into account such holder's allocated share of income, gains, losses,
deductions and credits of the Issuer. In certain instances, however, the Issuer
could have an obligation to make payments of withholding tax on behalf of a
Certificateholder. See "Backup Withholding" and "Tax Consequences to Foreign
Certificateholders" below. The Issuer's income will consists primarily of
interest accrued on the Loans, including appropriate adjustments for market
discount (as discussed below), and any original issue discount and bond premium,
investment income from investments in the Issuer Accounts and Certificate
Distribution Account and any gain upon collection or disposition of the Loans.
The Issuer's deductions will consist primarily of interest accruing with respect
to the Notes, servicing and other fees and losses or deductions upon collection
or disposition of the Loans.
The tax items of a partnership are allocable to the partners in
accordance with the Code, Treasury regulations and the partnership agreement
(here, the Trust Agreement and Related Documents). The Trust Agreement will
provide that the Certificateholders will be allocated taxable income of the
Issuer on a monthly basis as follows: first, items of gross income will be
allocated among Certificateholders until the Certificateholders have been
allocated income equal to the interest paid on their respective Certificates
plus interest accrued by the Issuer and reasonably expected to be paid during
the next month; remaining gross income items and all items of deduction and loss
are then allocated to the Depositor and NMELC. It is believed that this
allocation will be valid under applicable Treasury regulations, although no
assurance can be given that the IRS would not require a greater amount of income
to be allocated to Certificateholders. Moreover, under the foregoing method of
allocation, holders may be allocated income greater than the amount of interest
accruing on the Certificates based on the Certificate Rate or may be allocated
income greater than the amount of cash distributed to them.
It is possible that the IRS would require Certificateholders to report
net income consisting of a greater share of items of income offset by items of
deduction rather than simply reporting items of gross income in the "net"
amount. In such case, each Certificateholder would account on its own tax return
for the items of deduction as well as the items of income. An individual
taxpayer may generally deduct miscellaneous itemized deductions (which do not
include interest expenses) only to the extent they exceed two percent of the
individual's adjusted gross income. Those limitations would apply to an
individual Certificateholder's share of expenses of the Issuer (including fees
paid to the Servicer) and might result in such holder having net taxable income
that exceeds the amount of cash actually distributed to such holder over the
life of the Issuer. In addition, Section 68 of the Code provides that the amount
of certain itemized deductions otherwise allowable for the taxable year of an
individual whose adjusted gross income exceeds an inflation-adjusted threshold
amount specified in the Code ($114,700 for taxable years beginning in 1995, in
the case of a joint return) will be reduced by the lesser of (i) 3% of the
excess of adjusted gross income over the specified threshold amount or (ii) 80%
of the amount of itemized deduction otherwise allowable for such taxable year.
Market Discounts. To the extent that the Loans are purchased by the
Issuer for a price that is less than the aggregate stated redemption price at
maturity of the Loans, the Issuer must account for "market discount" on the
Loans pursuant to Section 1276 of the Code. Any market discount will be
accounted for each of the Loans on an individual basis, and the Issuer will make
an election to calculate such market discount as it economically accrues. Any
income resulting from the accrual of market discount will be allocated to the
Certificateholders as described above.
Original Issue Discount and Bond Premium. It is believed that the Loans
were not and will not be issued with OID or at a premium, and, therefore, the
Issuer should not have OID income or amortizable bond premium.
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Section 708 Termination. Under Section 708 of the Code, a partnership
will be deemed to terminate for Federal income tax purposes if 50% or more of
the capital and profits interests in the partnership are sold or exchanged
within a 12-month period. If such a termination occurs, A NEW partnership will
be TREATED AS REPLACING THE FORMER partnership. The Issuer may not comply with
technical requirements that might apply when such a constructive termination
occurs. As a result, the Issuer may be subject to tax penalties and may incur
additional expenses if it is required to comply with those requirements.
Furthermore, the Issuer might not be able to comply due to lack of data.
Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale of a Certificate in an amount equal to the difference
between the amount realized and the seller's tax basis in the Certificate sold.
A Certificateholder's tax basis in a Certificate will generally equal his cost
increased by his share of Issuer income that is includable in his gross income
and decreased by any distributions received with respect to such Certificate. In
addition, both the tax basis in the Certificate and the amount realized on a
sale of a Certificate would include the holder's share of the Notes and other
liabilities of the Issuer. A holder acquiring Certificates at different prices
may be required to maintain a single aggregate adjusted tax basis in such
Certificates, and, upon sale or other disposition of some of the Certificates,
allocate a pro rata portion of such aggregate tax basis to the Certificates sold
(rather than maintaining a separate tax basis in each Certificate for purposes
of computing gain or loss on a sale of that Certificate).
Any gain on the sale of a Certificate attributable to the holder's
share of unrecognized accrued market discount on the Loans would generally be
treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The Issuer does not expect to have any other assets that
would give rise to such special reporting requirements. Thus, to avoid these
special reporting requirements, the Issuer will elect to include any such market
discount in income as it accrues.
If a Certificateholder is required to recognize an aggregate amount of
income (not including attributable to disallowed miscellaneous itemized
deductions described above) over the life of the Certificates that exceeds the
aggregate cash distributions with respect thereto, such excess will generally
give rise to a capital loss upon the retirement of the Certificates.
Allocations Between Transferor and Transferee. In general, the Issuer's
taxable income and losses will be determined monthly and the tax items for a
particular calendar month will be apportioned among the Certificateholders in
proportion to the principal amount of Certificates owned by them as of the last
day of such month. As a result, a holder purchasing Certificates may be
allocated tax items (which will affect the tax liability and tax basis of the
holder) attributable to periods before the actual purchase takes place.
The use of such a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or is allowed only for
transfers of less than all of the partner's interest), taxable income and losses
of the Issuer might be reallocated among the Certificateholders. The Affiliated
Purchaser is authorized to revise the Issuer's method of allocation between
transferors and transferees to conform to a method permitted by any future
authority.
Section 754 Election. In the event that a Certificateholder sells a
Certificate at a profit (or loss), the purchasing Certificateholder will have a
higher (or lower) basis in the Certificate than the selling Certificateholder
had. The tax basis of the Issuer's assets will not be adjusted to reflect that
higher (or lower) basis unless the Issuer files an election under Section 754 of
the Code. In order to avoid the administrative complexities that would be
involved in keeping accurate accounting records, as well as potentially onerous
information reporting requirements, the Issuer will not make such an election.
As a result, Certificateholders might be allocated a greater or lesser amount of
Issuer income than would be appropriate based on their own purchase price for
Certificates.
Administrative Matters. The Servicer, on behalf of the Issuer, is
required to keep or cause to be kept complete and accurate books of the Issuer.
Such books will be maintained for financial reporting and tax purposes on an
accrual basis and the taxable year of the Issuer will be the calendar year. A
partnership information return
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(IRS Form 1065) WILL BE FILED with the IRS for each taxable year of the Issuer
WHICH will report to holders (and to the IRS) each Certificateholder's allocable
share of items of Issuer income and expense on Schedule K-1. The Issuer will
provide the Schedule K-1 information to nominees that fail to provide the Issuer
with the information statement described below and such nominees will be
required to force such information to the beneficial owners of the Certificates.
Generally, holders must file tax returns that are consistent with the
information returns filed by the Issuer or be subject to penalties unless the
holder notifies the IRS of all such inconsistencies.
Under Section 6031 of the Code, any person that holds Certificates as a
nominee on behalf of another person at any time during a calendar year is
required to furnish the Issuer with a statement containing certain information
on the nominee, the beneficial owners and the Certificates so held. Such
information includes (i) the name, address and taxpayer identification number of
the nominee and (ii) as to each beneficial owner (x) the name, address and
taxpayer identification number of such person, (y) whether such person is a
United States person, a tax-exempt entity or a foreign government, an
international organization, or any wholly owned agency or instrumentality of
either of the foregoing and (z) certain information concerning Certificates that
were held, acquired or transferred on behalf of such person throughout the year.
In addition, brokers and financial institutions that hold Certificates through a
nominee are required to furnish directly to the Issuer information as to
themselves and their ownership of Certificates. A clearing agency registered
under Section 17A of the Exchange Act that holds Certificates as a nominee is
not required to furnish any such information statement to the Issuer. The
information referred to above for any calendar year must be furnished to the
Issuer on or before the following January 31. Nominees, brokers and financial
institutions that fail to provide the Issuer with the information described
above may be subject to penalties. The Issuer will provide the Schedule K-1
information to nominees that fail to provide the Issuer with the information
described above and such nominees will be required to forward such information
to the beneficial owners of the Certificates.
The Seller, as the "tax matters partner," will be responsible for
representing the Certificateholders in any dispute with the IRS with respect to
partnership items. The Code provides for administrative examination of a
partnership as if the partnership were a separate and distinct taxpayer.
Generally, the statute of limitations for partnership items does not expire
before three years after the date on which the partnership information return is
filed. Any adverse determination following an audit of the return of the Issuer
by the appropriate taxing authorities could result in an adjustment of the
returns of the Certificateholders, and, under certain circumstances, a
Certificateholder may be precluded from separately litigating a proposed
adjustment to the items of the Issuer. An adjustment could also result in an
audit of a Certificateholder's returns and adjustments of items not related to
the income and losses of the Issuer.
Backup Withholding. Distributions made on the Certificates and proceeds
from the sale of the Certificates may be subject to a "backup" withholding tax
of 31% if, in general, the Certificateholder fails to comply with certain
identification procedures, unless the holder is an exempt recipient under
applicable provisions of the Code.
Tax Consequences to Foreign Certificateowners. As discussed below, an
investment in a Certificate is not suitable for any non-U.S. person which is not
eligible for a complete exemption from U.S. withholding tax on interest under a
tax treaty with the United States. Accordingly, no interest in a Certificate
should be acquired by or on behalf of any such non-U.S. person.
No regulations, published rulings or judicial decisions exist that
would discuss the characterization for Federal withholding tax purposes with
respect to non-U.S. persons of a partnership with activities substantially the
same as the Issuer. However, it is not expected that the trust would be
considered to be engaged in a trade or business in the United States for
purposes of Federal withholding taxes with respect to non-U.S. persons. If the
Issuer were considered to be engaged in a trade or business in the United States
for such purposes, the income of the Issuer, distributable to a non-U.S. person
would be subject to Federal withholding tax at a rate of 35% for persons taxable
as a corporation and 39.6% for all other non-U.S. persons. Also, in such cases,
a non-U.S. Certificateowner that is a corporation may be subject to the branch
profits tax. If the Issuer is notified that a Certificateowner is a foreign
person, the Issuer may withhold as if it were engaged in a trade or business in
the United States in order to protect the Issuer from possible adverse
consequences of a failure to withhold. Subsequent
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adoption of Treasury regulations or the issuance of other administrative
pronouncements may require the Issuer to change its withholding procedures.
Each foreign Certificateowner might be required to file a U.S.
individual or corporate income tax return (including in the case of a
corporation, the branch profit tax) on its share of the Issuer's income. Each
foreign holder must obtain a taxpayer identification number from the IRS and
submit that number to the withholding agent on Form W-8 in order to assure
appropriate crediting of any taxes withheld. A foreign holder generally would be
entitled to file with the IRS a claim for a refund with respect to withheld
taxes, taking the position that no taxes were due because the Issuer was not
engaged in a U.S. trade or business. However, interest payments made to (or
accrued by) a Certificateholder who is a foreign person may be considered
guaranteed payments to the extent such payments are determined without regard to
the income of the Issuer and for that reason or because of the nature of the
Contracts, the interest will likely not be considered "portfolio interest." As a
result, even if the Issuer is not considered to be engaged in a U.S. trade or
business, Certificateholders will likely be subject to United States Federal
income tax which must be withheld at a rate of 30 percent on their share of the
Issuer's income (without reduction for interest expense), unless reduced or
eliminated pursuant to an applicable income tax treaty. If the Issuer is
notified that a Certificateholder or Certificateowner is a foreign person, the
Issuer may be required to withhold and pay over such tax, which can exceed the
amounts otherwise available for distribution to such Certificateholder. A
foreign holder would generally be entitled to file with the IRS a refund claim
for such withheld taxes, taking the position that the interest was portfolio
interest and therefore not subject to U.S. tax. However, the IRS may disagree
and no assurance can be given as to the appropriate amount of tax liability. As
a result, each potential foreign Certificateowner should consult its tax advisor
as to whether the tax consequences of holding an interest in a Certificate make
it an unsuitable investment.
OTHER TAX CONSEQUENCES
No advice has been received as to local income, franchise, personal
property, or other taxation in any state or locality, or as to the tax effect of
ownership of the Securities in any state or locality. Securityholders are
advised to consult their own tax advisors with respect to any state or local
income, franchise, personal property, or other tax consequences arising out of
their ownership of the Securities.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and Section 4975 of the Internal Revenue Code of 1986, as amended
(the "Code"), impose restrictions on (a) employee benefit plans (as defined in
Section 3(3) of ERISA), (b) plans described in section 4975(e)(1) of the Code,
including individual retirement accounts or Keogh plans, (c) any entities whose
underlying assets include plan assets by reason of a plan's investment in such
entities (each a "Plan") and (d) persons who have specified relationships to
such Plans ("Parties in Interest" under ERISA and "Disqualified Persons" under
the Code). Moreover, based on the reasoning of the United States Supreme Court
in John Hancock Life Co. v. Harris TRUST and SAVINGS Bank, 114 S. Ct. 517
(1993), an insurance company's general account may be deemed to include assets
of the Plans investing in the general account (e.g., through the purchase of an
annuity contract ACCOUNTED FOR IN THE INSURANCE COMPANY'S GENERAL ACCOUNT), and
the insurance company might be treated as a Party in Interest AND A DISQUALIFIED
PERSON with respect to a Plan by virtue of such investment. ERISA also imposes
duties on persons who are fiduciaries of Plans subject to ERISA and prohibits
transactions between a Plan and Parties in Interest or Disqualified Persons with
respect to such Plans.
Generally, the 1996 Certificates and any beneficial interest in such
Certificates may not be acquired by a Plan.
Certain employee benefit plans, such as governmental plans (as defined
in Section 3(32) of ERISA) and certain church plans (as defined in Section 3(33)
of ERISA) are not subject to the prohibited transaction provisions of ERISA and
Section 4975 of the Code. Accordingly, assets of such plans may, subject to the
provisions of any
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other applicable federal and state law, be invested in the Securities of any
series without regard to the ERISA considerations described herein. It should be
noted, however, that any such plan that is qualified and exempt from taxation
under Sections 401(a) and 501(a) of the Code is subject to the prohibited
transaction rules set forth in Section 503 of the Code.
By accepting and holding a Certificate or an interest therein, the
Certificateholder thereof shall be deemed to have represented and warranted that
it is not subject to the prohibited transaction provisions of ERISA.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement relating to the Notes and the Certificates (the "Underwriting
Agreement"), the Seller has agreed to cause the Issuer to sell to Smith Barney
Inc. (the "Underwriter"), and the Underwriter has agreed to purchase,
$67,000,000 in principal amount of A-1 Notes, $48,800,000 in principal amount of
A-2 Notes and $7,700,000 in principal amount of Certificates.
In the Underwriting Agreement, the Underwriter has agreed, subject to
the terms and conditions set forth therein, to purchase (i) all such 1996 Notes
if any of the 1996 Notes are purchased and (ii) all such 1996 Certificates if
any of the 1996 Certificates are purchased. The Seller has been advised by the
Underwriter that the Underwriter proposes initially to offer the 1996 Securities
to the public at the respective public offering prices set forth on the COVER
page of this Prospectus, and to certain dealers at such prices less a concession
not in excess of ____% per 1996 Note and ____% per 1996 Certificate. The
Underwriter may allow and such dealers may reallow to other dealers a discount
not in excess of ____% per 1996 Note and ____% per 1996 Certificate. After the
initial public offering, such public offering prices, concessions and
reallowances may be changed.
The Underwriting Agreement provides that NELLIE MAE, INC. will
indemnify the Underwriter against certain liabilities, including liabilities
under applicable securities laws, or contribute to payments the Underwriter may
be required to make in respect thereof.
The closing of the sale of the 1996 Certificates is conditioned on the
closing of the sale of the 1996 Notes, and the closing of the sale of the 1996
Notes is conditioned on the closing of the sale of the 1996 Certificates.
FINANCIAL INFORMATION
The Seller and NELLIE MAE, INC. have determined that their financial
statements are not material to the offering made hereby. The Issuer will engage
in no activities other than as described herein. Accordingly, no financial
statements with respect to the Issuer are included in this Prospectus.
LEGAL MATTERS
LEGAL matters relating to the Issuer, the Seller, NMELC and NELLIE MAE,
INC. will be passed upon by Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.,
Boston, Massachusetts and for the Underwriter by Palmer & Dodge LLP, Boston,
Massachusetts. Palmer & Dodge LLP has performed legal services for NELLIE MAE,
INC. and it is expected that it will continue to perform legal services for the
NELLIE MAE, INC. in the future. FEDERAL and state income tax and other matters
for the Issuer will be passed on by Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C.
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REPORTS TO SECURITYHOLDERS
Periodic and annual reports concerning the 1996 Securities and the
Issuer will be provided to the Securityholders. See" INFORMATION REGARDING THE
1996 SECURITIES-Reports to Securityholders." Each CLASS of 1996 Notes and the
1996 Certificates will be issued in book-entry form and registered in the name
of Cede & Co., the nominee of The Depository Trust Company. All reports will be
provided to Cede & CO., which in turn will provide such reports to its
Participants and Indirect Participants. Such Participants and Indirect
Participants will then forward such reports to the beneficial owners of 1996
Securities.
AVAILABLE INFORMATION
THE SELLER HAS FILED, ON BEHALF OF THE ISSUER, A REGISTRATION STATEMENT
ON FORM S-3 (TOGETHER WITH ALL AMENDMENTS AND EXHIBITS THERETO, THE
"REGISTRATION STATEMENT"), OF WHICH THIS PROSPECTUS IS A PART, UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), WITH THE SECURITIES
AND EXCHANGE COMMISSION (THE "COMMISSION") WITH RESPECT TO THE 1996 SECURITIES.
THIS PROSPECTUS DOES NOT CONTAIN ALL OF THE INFORMATION SET FORTH IN THE
REGISTRATION STATEMENT, CERTAIN PARTS OF WHICH HAVE BEEN OMITTED IN ACCORDANCE
WITH THE RULES AND REGULATIONS OF THE COMMISSION. STATEMENTS MADE IN THIS
PROSPECTUS AS TO THE CONTENTS OF ANY CONTRACT, AGREEMENT OR OTHER DOCUMENT FILED
AS AN EXHIBIT TO THE REGISTRATION STATEMENT OR INCORPORATED BY REFERENCE
THEREIN, DO NOT NECESSARILY DESCRIBE ALL TERMS OR PROVISIONS OF SUCH CONTRACT,
AGREEMENT OR OTHER DOCUMENT. WITH RESPECT TO EACH SUCH CONTRACT, AGREEMENT, OR
OTHER DOCUMENT FILED OR INCORPORATED BY AS AN EXHIBIT TO THE REGISTRATION
STATEMENT, REFERENCE IS MADE TO SUCH EXHIBIT FOR A MORE COMPLETE DESCRIPTION OF
THE MATTER INVOLVED, AND EACH STATEMENT IS QUALIFIED IN ITS ENTIRETY BY SUCH
REFERENCE.
THE REGISTRATION STATEMENT AND AMENDMENTS THEREOF AND EXHIBITS THERETO,
ARE AVAILABLE FOR INSPECTION WITHOUT CHARGE AT THE PUBLIC REFERENCE FACILITIES
MAINTAINED BY THE COMMISSION AT 450 FIFTH STREET, N.W., WASHINGTON, D.C. 20549;
SEVEN WORLD TRADE CENTER, 13TH FLOOR, NEW YORK, NEW YORK 10048; AND NORTHWESTERN
ATRIUM CENTER, 500 WEST MADISON STREET, SUITE 1400, CHICAGO, ILLINOIS
60661-2511. COPIES OF THE REGISTRATION STATEMENT AND AMENDMENTS THEREOF AND
EXHIBITS THERETO MAY BE OBTAINED FROM THE PUBLIC REFERENCE SECTION OF THE
COMMISSION, 450 FIFTH STREET, N.W., WASHINGTON, D.C. 20549, AT PRESCRIBED RATES.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Any documents filed by or on behalf of the Issuer with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), subsequent to the date of this Prospectus
and prior to the termination of the offering of the 1996 Securities shall be
deemed to be incorporated by reference in this Prospectus and to be a part of
this Prospectus from the date of the filing of such documents. Any statement
contained herein or in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute part of this Prospectus. The Seller will provide without charge to
each person to whom a copy of the Prospectus is delivered, on the written or
oral request of any such person, a copy of any or all of the documents
incorporated herein by reference, except the exhibits to such documents (unless
such exhibits are specifically incorporated by reference in such documents).
Requests for such copies should be directed to Nellie Mae Education Funding,
LLC, 50 Braintree Hill Park, Suite 300, Braintree, Massachusetts 02184,
Attention: John F. Remondi, Telephone: (617) 849-1325.
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GLOSSARY OF MAJOR DEFINED TERMS
"ACCOUNT" SHALL MEAN ANY OF THE ACCOUNTS ESTABLISHED BY THE INDENTURE.
"ACQUISITION ACCOUNT" SHALL MEAN THE ACCOUNT SO DESIGNATED AND
ESTABLISHED IN THE STUDENT LOAN ACQUISITION FUND BY THE INDENTURE.
"ADMINISTRATION ACCOUNT" SHALL MEAN THE ACCOUNT SO DESIGNATED AND
ESTABLISHED IN THE SERVICES FUND BY THE INDENTURE.
"ADMINISTRATION AGREEMENT" SHALL MEAN THE ADMINISTRATION AGREEMENT
DATED AS OF JUNE 1, 1996, AMONG THE ISSUER, THE OWNER TRUSTEE, THE INDENTURE
TRUSTEE AND THE ADMINISTRATOR, AS AMENDED FROM TIME TO TIME.
"ADMINISTRATION FEE" SHALL MEAN, AS OF ANY DATE OF CALCULATION, THE SUM
OWED TO THE ADMINISTRATOR PURSUANT TO THE TERMS OF THE ADMINISTRATION AGREEMENT.
"ADMINISTRATION REQUIREMENT" SHALL MEAN, AS OF ANY DATE OF CALCULATION
AND WITH RESPECT TO A PARTICULAR SERIES, THE ADMINISTRATIVE EXPENSES DUE AS OF
SUCH DATE WITH RESPECT TO SUCH SERIES.
"ADMINISTRATIVE EXPENSES" SHALL MEAN THE FEES AND EXPENSES OF THE
INDENTURE TRUSTEE, THE OWNER TRUSTEE, THE AUTHENTICATING AGENT, THE
ADMINISTRATOR AND THE SERVICER, PROVIDED, HOWEVER, THAT THE FEES AND EXPENSES
DESCRIBED SHALL NOT EXCEED ANY AMOUNT SPECIFIED IN THE RELATED TERMS SUPPLEMENT.
"ADMINISTRATOR" SHALL MEAN NELLIE MAE, INC., A MASSACHUSETTS NON-PROFIT
CORPORATION, OR ANY SUCCESSORS OR ASSIGNS.
"AFFILIATE" SHALL MEAN, WITH RESPECT TO ANY SPECIFIED PERSON, ANY OTHER
PERSON CONTROLLING OR CONTROLLED BY OR UNDER COMMON CONTROL WITH SUCH SPECIFIED
PERSON. FOR THE PURPOSES OF THIS DEFINITION, "CONTROL," WHEN USED WITH RESPECT
TO ANY SPECIFIED PERSON, SHALL MEAN THE POWER TO DIRECT THE MANAGEMENT AND
POLICIES OF SUCH PERSON, DIRECTLY OR INDIRECTLY, WHETHER THROUGH THE OWNERSHIP
OF VOTING SECURITIES, BY CONTRACT OR OTHERWISE, AND THE TERMS "CONTROLLING" AND
"CONTROLLED" SHALL HAVE MEANINGS CORRELATIVE TO THE FOREGOING.
"AUTHORIZED DENOMINATIONS" SHALL MEAN, WITH RESPECT TO THE INITIAL
OFFERING OF THE SECURITIES, $20,000 OR ANY INTEGRAL MULTIPLE THEREOF, AND IN ALL
OTHER RESPECTS SHALL MEAN $1,000 OR ANY INTEGRAL MULTIPLE THEREOF; PROVIDED,
HOWEVER, THAT CERTIFICATES ISSUED TO THE DEPOSITOR AND NMI EDUCATION LOAN
CORPORATION MAY BE ISSUED IN SUCH DENOMINATIONS AS TO INCLUDE ANY RESIDUAL
AMOUNT OF CERTIFICATES TO BE ISSUED.
"AUTHORIZED OFFICER," WHEN USED WITH REFERENCE TO THE ISSUER, SHALL
MEAN ANY OFFICER OF THE OWNER TRUSTEE OR THE ADMINISTRATOR, AS APPLICABLE, IN
MATTERS RELATING TO THE ISSUER AND WHO IS IDENTIFIED ON THE LIST OF AUTHORIZED
OFFICERS DELIVERED BY THE OWNER TRUSTEE TO THE INDENTURE TRUSTEE ON THE CLOSING
DATE RELATING TO THE INITIAL ISSUANCE OF A SERIES OF NOTES.
"BALANCES" WHEN USED WITH REFERENCE TO ANY ACCOUNT OR FUND SHALL MEAN
THE SUM OF THE FOLLOWING ASSETS IN OR DEPOSITED TO THE CREDIT OF SUCH ACCOUNT OR
FUND: (i) INVESTMENT SECURITIES COMPUTED AT THE VALUE OF INVESTMENT SECURITIES;
(ii) FINANCED LOANS COMPUTED AT THE OUTSTANDING BALANCE OF THEIR PRINCIPAL
AMOUNTS PLUS ACCRUED BUT UNPAID INTEREST; AND (iii) LAWFUL MONEY OF THE UNITED
STATES.
"BASIC DOCUMENTS" SHALL MEAN THE TRUST AGREEMENT, THE INDENTURE, EACH
TERMS SUPPLEMENT, EACH TRUST SUPPLEMENT, THE SALES AGREEMENT, THE PURCHASE
AGREEMENT, THE ADMINISTRATION AGREEMENT, THE SERVICING AGREEMENT AND OTHER
DOCUMENTS AND CERTIFICATES TO BE DELIVERED IN CONNECTION THEREWITH AND ALL
AMENDMENTS AND SUPPLEMENTS THERETO.
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"BENEFIT PLAN" SHALL MEAN ANY (i) EMPLOYEE BENEFIT PLAN (AS DEFINED IN
SECTION 3(3) OF ERISA) WHICH IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA,
(ii) PLANS DESCRIBED IN SECTION 4975 (e)(1) OF THE CODE, INCLUDING INDIVIDUAL
RETIREMENT ACCOUNTS DESCRIBED IN SECTION 408(a) OF THE CODE OR KEOGH PLANS OR
(iii) OR ANY ENTITY (INCLUDING AN INSURANCE COMPANY GENERAL ACCOUNT) WHOSE
UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF A PLAN'S INVESTMENT IN SUCH
ENTITY.
"BOOK-ENTRY CERTIFICATE" SHALL MEAN A BENEFICIAL INTEREST IN THE
CERTIFICATES, OWNERSHIP AND TRANSFER OF WHICH SHALL BE MADE THROUGH BOOK ENTRIES
BY A SECURITIES DEPOSITORY.
"BUSINESS DAY" SHALL MEAN ANY DAY OTHER THAN A SATURDAY, SUNDAY OR
OTHER DAY ON WHICH BANKS IN THE CITY OF BOSTON, MASSACHUSETTS, OR NEW YORK, NEW
YORK ARE REQUIRED OR AUTHORIZED BY LAW OR EXECUTIVE ORDER TO CLOSE.
"CAPITALIZED INTEREST" SHALL MEAN ALL INTEREST WHICH HAS BEEN ACCRUED
BUT NOT PAID ON FINANCED LOANS FOR WHICH THE BORROWER IS ENTITLED TO ELECT, AND
HAS ELECTED, TO DEFER PAYMENTS OF PRINCIPAL OF AND INTEREST ON SUCH LOAN.
"CERTIFICATE" SHALL MEAN A CERTIFICATE EVIDENCING THE BENEFICIAL
INTEREST OF A CERTIFICATEHOLDER IN THE TRUST.
"CERTIFICATE BALANCE" SHALL EQUAL, INITIALLY, THE INITIAL CERTIFICATE
BALANCE AND, THEREAFTER, SHALL EQUAL THE INITIAL CERTIFICATE BALANCE INCREASED
BY THE PRINCIPAL BALANCE OF EACH SUBSEQUENT CLASS OF CERTIFICATES ISSUED
PURSUANT TO A TRUST SUPPLEMENT AND REDUCED BY ALL AMOUNTS ALLOCABLE TO PRINCIPAL
PREVIOUSLY DISTRIBUTED TO CERTIFICATEHOLDERS. NOTWITHSTANDING THE FOREGOING,
WHERE ANY PROVISION OF THE TRUST AGREEMENT OR A TRUST SUPPLEMENT PERMITS OR
AUTHORIZES CERTIFICATEHOLDERS HOLDING A SPECIFIED PERCENTAGE OR AMOUNT OF THE
CERTIFICATE BALANCE TO TAKE ANY ACTION OR GRANT ANY APPROVAL, THE HOLDERS OF THE
CERTIFICATES SHALL BE DEEMED TO HAVE A CERTIFICATE BALANCE EQUAL TO 99%.
"CERTIFICATE FUND" SHALL MEAN THE FUND SO DESIGNATED AND ESTABLISHED BY
THE TRUST AGREEMENT.
"CERTIFICATE INTEREST ACCOUNT" SHALL MEAN THE ACCOUNT SO DESIGNATED AND
ESTABLISHED IN THE CERTIFICATE FUND BY THE TRUST AGREEMENT.
"CERTIFICATE OWNER" SHALL MEAN, WITH RESPECT TO A BOOK-ENTRY
CERTIFICATE, THE PERSON WHO IS THE BENEFICIAL OWNER OF SUCH BOOK-ENTRY
CERTIFICATE, AS REFLECTED ON THE BOOKS OF THE SECURITIES DEPOSITORY, OR ON THE
BOOKS OF A PERSON MAINTAINING AN ACCOUNT WITH SUCH SECURITIES DEPOSITORY
(DIRECTLY AS A SECURITIES DEPOSITORY PARTICIPANT OR AS AN INDIRECT PARTICIPANT,
IN EACH CASE IN ACCORDANCE WITH THE RULES OF SUCH SECURITIES DEPOSITORY).
"CERTIFICATE INTEREST RATE" SHALL MEAN, WITH RESPECT TO ANY CLASS OF
CERTIFICATES, THE PER ANNUM RATE DETERMINED AS SET FORTH IN THE RELATED TRUST
SUPPLEMENT.
"CERTIFICATE PAYMENT ACCOUNT" SHALL MEAN THE ACCOUNT SO DESIGNATED AND
ESTABLISHED IN THE CERTIFICATE FUND BY THE TRUST AGREEMENT.
"CERTIFICATEHOLDER" SHALL MEAN A PERSON IN WHOSE NAME A CERTIFICATE IS
REGISTERED IN THE CERTIFICATE REGISTER.
"CLASS" SHALL MEAN, (i) WITH RESPECT TO ANY SERIES OF NOTES, ALL NOTES
OF SUCH SERIES WHOSE FINAL INSTALLMENT OF PRINCIPAL HAS THE SAME MATURITY DATE
AND (ii) WITH RESPECT TO THE CERTIFICATES, ALL CERTIFICATES WHOSE FINAL
INSTALLMENT OF PRINCIPAL HAS THE SAME MATURITY DATE.
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"CLOSING DATE" SHALL MEAN, WITH RESPECT TO CERTIFICATES, THE DATE
IDENTIFIED AS SUCH IN THE RELATED TRUST SUPPLEMENT AND, WITH RESPECT TO NOTES,
THE DATE IDENTIFIED AS SUCH IN THE RELATED TERMS SUPPLEMENT.
"CODE" SHALL MEAN THE INTERNAL REVENUE CODE OF 1986, AS AMENDED FROM
TIME TO TIME, AND TREASURY REGULATIONS PROMULGATED THEREUNDER.
"COLLECTOR" SHALL MEAN THE ADMINISTRATOR OR COLLECTION AGENCY RETAINED
BY THE ADMINISTRATOR TO COLLECT AMOUNTS OUTSTANDING ON FINANCED LOANS UPON
ACCELERATION AFTER DEFAULT.
"COMMONWEALTH" SHALL MEAN THE COMMONWEALTH OF MASSACHUSETTS.
"COST OF ISSUANCE ACCOUNT" SHALL MEAN THE ACCOUNT SO DESIGNATED AND
ESTABLISHED IN THE SERVICES FUND BY THE INDENTURE.
"COSTS OF ISSUANCE" FOR EACH SERIES OF NOTES OR CERTIFICATES SHALL MEAN
ALL ITEMS OF EXPENSE ALLOCABLE TO THE AUTHORIZATION, ISSUANCE, SALE AND DELIVERY
OF SUCH SERIES OF NOTES OR CERTIFICATES, INCLUDING WITHOUT LIMITATION COSTS OF
PLANNING AND FEASIBILITY STUDIES, COSTS OF FINANCIAL ADVISORY, LEGAL, ACCOUNTING
AND MANAGEMENT SERVICES AND SERVICES OF OTHER CONSULTANTS AND PROFESSIONALS AND
RELATED CHARGES, FEES AND DISBURSEMENTS, COSTS OF PREPARATION AND REPRODUCTION
OF DOCUMENTS, COSTS OF PREPARATION AND PRINTING OF ANY OFFERING DOCUMENT
RELATING TO THE NOTES OR CERTIFICATES, ADVERTISING AND PRINTING COSTS, FILING
AND RECORDING FEES, ANY INITIAL FEES AND CHARGES OF THE INDENTURE TRUSTEE,
AUTHENTICATING AGENT OR OWNER TRUSTEE, RATING AGENCY FEES, COSTS OF PREPARATION,
EXECUTION, TRANSPORTATION AND SAFEKEEPING OF NOTES OR CERTIFICATES, AND ANY
OTHER COSTS, CHARGES OR FEES INCURRED IN CONNECTION WITH THE ISSUANCE OF THE
NOTES OR CERTIFICATES.
"CUSTODIAN," SHALL MEAN USA LOAN SERVICES, INC., A DELAWARE
CORPORATION, ITS CORPORATE SUCCESSORS AND ASSIGNS, AND ANY OTHER ORGANIZATION
WITH WHICH THE INDENTURE TRUSTEE AND THE ISSUER HAVE ENTERED INTO OR WILL ENTER
INTO IN THE FUTURE A CUSTODY AGREEMENT.
"CUSTODY AGREEMENT" SHALL MEAN THE AGREEMENT TO BE ENTERED INTO AMONG
THE INDENTURE TRUSTEE, THE CUSTODIAN AND THE ISSUER REGARDING THE CUSTODY OF THE
PROMISSORY NOTES SIGNED BY THE OBLIGORS OF THE FINANCED LOANS.
"DEBT SERVICE RESERVE FUND" SHALL MEAN THE FUND SO DESIGNATED AND
ESTABLISHED BY THE INDENTURE.
"DEBT SERVICE RESERVE REQUIREMENT" SHALL MEAN AN AMOUNT EQUAL TO THE
GREATER OF (i) TWO PERCENT (2%) OF THE AGGREGATE PRINCIPAL AMOUNT OUTSTANDING OF
THE SERIES 1996-A NOTES AND THE CLASS 1996-A CERTIFICATES OR (ii) $500,000.
"DEFAULTED LOAN" SHALL MEAN A FINANCED LOAN WHICH IS MORE THAN 180 DAYS
DELINQUENT IN PAYMENT OF PRINCIPAL OR INTEREST.
"DEFERRED INTEREST" WITH RESPECT TO EACH SERIES AND CLASS OF NOTES
SHALL HAVE THE MEANING SET FORTH IN THE RELATED TERMS SUPPLEMENT AND WITH
RESPECT TO EACH CLASS OF CERTIFICATES SHALL HAVE THE MEANING SET FORTH IN THE
RELATED TRUST SUPPLEMENT.
"DEPOSITOR" SHALL MEAN THE SELLER IN ITS CAPACITY AS DEPOSITOR UNDER
THE TRUST AGREEMENT.
"DISTRIBUTION DATE" SHALL MEAN AS TO EACH SERIES AND CLASS OF NOTES AND
TO EACH CLASS OF CERTIFICATES, THE FIFTEENTH (15TH) DAY OF EACH MONTH.
"DOLLAR" AND "$" SHALL MEAN THE LAWFUL CURRENCY OF THE UNITED STATES OF
AMERICA.
"ERISA" SHALL MEAN THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974,
AS AMENDED.
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"EXCHANGE ACT" SHALL MEAN THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
"FINANCED LOAN" SHALL MEAN ANY LOAN WHICH, FROM TIME TO TIME, IS
ASSIGNED BY THE ISSUER TO THE INDENTURE TRUSTEE TO SERVE AS SECURITY FOR THE
PAYMENT OF ALL AMOUNTS DUE TO NOTEHOLDERS UNDER THE NOTES AND INCLUDED IN THE
STUDENT LOAN PORTFOLIO FUND. THE INITIAL FINANCED LOANS SUBJECT TO THE LIEN OF
THE INDENTURE SHALL BE LISTED ON THE SCHEDULE OF FINANCED LOANS SET FORTH IN
SCHEDULE A TO THE SALES AGREEMENT. THE FINANCED LOANS TO BE PLEDGED BY THE
ISSUER TO THE INDENTURE TRUSTEE IN CONNECTION WITH THE ISSUANCE OF EACH
ADDITIONAL SERIES OF NOTES SHALL BE LISTED ON THE SCHEDULE OF FINANCED LOANS
APPEARING ON SCHEDULE A TO THE RELATED SUPPLEMENTAL SALES AGREEMENT. A MASTER
SCHEDULE OF FINANCED LOANS LISTING ALL FINANCED LOANS SHALL BE MAINTAINED BY THE
ISSUER. EACH SCHEDULE OF FINANCED LOANS SHALL BE AMENDED FROM TIME TO TIME BY
THE ISSUER TO REFLECT ACCURATELY THE FINANCED LOANS THEN SUBJECT TO THE LIEN OF
THE INDENTURE.
"FITCH" SHALL MEAN FITCH INVESTORS SERVICE, INC. (WHOSE ADDRESS IS ONE
STATE STREET PLAZA, NEW YORK, NEW YORK 10004) AND ITS CORPORATE SUCCESSORS.
"FUND" SHALL MEAN ANY OF THE FUNDS SO DESIGNATED AND ESTABLISHED BY THE
INDENTURE OR THE TRUST AGREEMENT.
"GUARANTOR" SHALL MEAN TERI OR PENN, AS APPLICABLE OR ANY OTHER
GUARANTOR AS SPECIFIED IN THE RELATED TERMS SUPPLEMENT.
"GUARANTY AGREEMENT" SHALL MEAN THE TERI GUARANTY AGREEMENT OR THE PENN
GUARANTY AGREEMENT, AS APPLICABLE, INCLUDING, IN EITHER CASE, ANY SUPPLEMENT OR
AMENDMENT THERETO ENTERED INTO IN ACCORDANCE WITH THE PROVISIONS THEREOF, OR ANY
OTHER GUARANTY AGREEMENT AS SPECIFIED IN THE RELATED TERMS SUPPLEMENT.
"HOLDER" OR "HOLDERS" SHALL MEAN A REGISTERED OWNER OF THE NOTES OR THE
CERTIFICATES, AS THE CONTEXT REQUIRES.
"INDENTURE" SHALL MEAN THE MASTER INDENTURE AND ANY TERMS SUPPLEMENT,
EACH AS FROM TIME TO TIME AMENDED OR SUPPLEMENTED WITH RESPECT TO WHICH THE
NOTES ISSUED THEREUNDER ARE STILL OUTSTANDING.
"INDENTURE TRUST ESTATE" SHALL MEAN (i) ALL REVENUES; (ii) THE BALANCES
ON DEPOSIT IN ALL SUBACCOUNTS, ACCOUNTS AND FUNDS (WHETHER DERIVED FROM PROCEEDS
OF SALE OF THE NOTES, FROM REVENUES OR FROM ANY OTHER SOURCE, EXCLUDING THE
CERTIFICATE FUND); (iii) ALL RIGHTS, TITLE, INTEREST AND PRIVILEGES OF THE
ISSUER AS OWNER OF THE FINANCED LOANS IN AND TO (a) THE FINANCED LOANS,
INCLUDING ALL PROMISSORY NOTES EVIDENCING THE INDEBTEDNESS FOR FINANCED LOANS
AND ALL RELATED DOCUMENTATION, AND ALL RIGHTS OF THE ISSUER TO RECEIVE ANY AND
ALL PAYMENTS OF ANY NATURE AND FROM ANY SOURCE WITH RESPECT TO THE FINANCED
LOANS, (b) EACH GUARANTY AGREEMENT INSOFAR AS IT RELATES TO FINANCED LOANS, (c)
THE ADMINISTRATION AGREEMENT, (d) THE SERVICING AGREEMENT AND (e) ANY SALES
AGREEMENTS WITH THE SELLER WITH RESPECT TO THE FINANCED LOANS; (iv) ALL PRODUCTS
AND PROCEEDS OF ANY OF THE FOREGOING; AND (v) ALL OTHER PROPERTY OF EVERY KIND
AND NATURE WHICH IS NOW OR FROM TIME TO TIME HEREAFTER PLEDGED, ASSIGNED OR
TRANSFERRED AS AND FOR SECURITY HEREUNDER TO THE INDENTURE TRUSTEE BY THE ISSUER
OR BY ANYONE ON ITS BEHALF.
"INDENTURE TRUSTEE" SHALL MEAN STATE STREET BANK AND TRUST COMPANY, A
MASSACHUSETTS TRUST COMPANY, NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS
INDENTURE TRUSTEE UNDER THE INDENTURE.
"INITIAL PERIOD" SHALL MEAN, AS TO ANY CLASS OF NOTES AND CLASS OF
CERTIFICATES, THE PERIOD COMMENCING ON THE CLOSING DATE AND CONTINUING WITH
RESPECT TO EACH CLASS OF NOTES, THROUGH THE DAY IMMEDIATELY PRECEDING THE
INITIAL RATE ADJUSTMENT DATE FOR SUCH CLASS OF NOTES, AND WITH RESPECT TO EACH
CLASS OF CERTIFICATES, THROUGH THE DAY IMMEDIATELY PRECEDING THE INITIAL RATE
ADJUSTMENT DATE FOR SUCH CLASS OF CERTIFICATES.
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<PAGE> 86
"INITIAL POOL BALANCE" SHALL MEAN, WITH RESPECT TO ANY SERIES, THE SUM
OF THE RELATED POOL BALANCE AS OF THE CLOSING DATE, PLUS THE PRINCIPAL BALANCE
OF EACH ADDITIONAL FINANCED LOAN PURCHASED BY THE ISSUER ON EACH TRANSFER DATE
DURING THE RELATED FUNDING PERIOD.
"INSOLVENCY EVENT" MEANS, WITH RESPECT TO A SPECIFIED PERSON, (a) THE
FILING OR ENTRY OF A DECREE OR ORDER FOR RELIEF BY A COURT HAVING JURISDICTION
IN THE PREMISES IN RESPECT OF SUCH PERSON OR ANY SUBSTANTIAL PART OF ITS
PROPERTY IN AN INVOLUNTARY CASE UNDER ANY APPLICABLE FEDERAL OR STATE
BANKRUPTCY, INSOLVENCY OR OTHER SIMILAR LAW NOW OR HEREAFTER IN EFFECT, OR
APPOINTING A RECEIVER, LIQUIDATOR, ASSIGNEE, CUSTODIAN, TRUSTEE, SEQUESTRATOR OR
SIMILAR OFFICIAL FOR SUCH PERSON OR ANY SUBSTANTIAL PART OF ITS PROPERTY, OR
ORDERING THE WINDING-UP OR LIQUIDATION OF SUCH PERSON'S AFFAIRS, AND SUCH DECREE
OR ORDER SHALL REMAIN UNSTAYED AND IN EFFECT FOR A PERIOD OF 60 CONSECUTIVE
DAYS; OR (b) THE COMMENCEMENT BY SUCH PERSON OF A VOLUNTARY CASE UNDER ANY
APPLICABLE FEDERAL OR STATE BANKRUPTCY, INSOLVENCY OR OTHER SIMILAR LAW NOW OR
HEREAFTER IN EFFECT, OR THE CONSENT BY SUCH PERSON TO THE ENTRY OF AN ORDER FOR
RELIEF IN AN INVOLUNTARY CASE UNDER SUCH LAW, OR THE CONSENT BY SUCH PERSON TO
THE APPOINTMENT OF OR TAKING POSSESSION BY A RECEIVER, LIQUIDATOR, ASSIGNEE,
CUSTODIAN, TRUSTEE, SEQUESTRATOR OR SIMILAR OFFICIAL FOR SUCH PERSON OR ANY
SUBSTANTIAL PART OF ITS PROPERTY, OR THE MAKING BY SUCH PERSON ANY GENERAL
ASSIGNMENT FOR THE BENEFIT OF CREDITORS, OR THE FAILURE BY SUCH PERSON GENERALLY
TO PAY ITS DEBTS AS SUCH DEBTS BECOME DUE, OR THE TAKING OF ACTION BY SUCH
PERSON IN FURTHERANCE OF ANY OF THE FOREGOING.
"INTEREST PERIOD" SHALL MEAN, AS TO EACH SERIES AND CLASS OF NOTES AND
EACH CLASS OF CERTIFICATES, THE INITIAL PERIOD AND THEREAFTER EACH PERIOD
COMMENCING ON A RATE ADJUSTMENT DATE AND ENDING ON THE DAY BEFORE THE NEXT RATE
ADJUSTMENT DATE.
"INTEREST RATE" SHALL MEAN, WITH RESPECT TO EACH CLASS OF NOTES, THE
RATE OF INTEREST PER ANNUM BORNE BY SUCH CLASS OF NOTES AS SET FORTH IN THE
RELATED TERMS SUPPLEMENT, AND WITH RESPECT TO EACH CLASS OF CERTIFICATES, THE
RATE OF INTEREST PER ANNUM BORNE BY SUCH CLASS OF CERTIFICATES AS SET FORTH IN
THE RELATED TRUST SUPPLEMENT.
"ISSUER" SHALL MEAN THE NELLIE MAE EDUCATION LOAN TRUST ESTABLISHED
UNDER THE TRUST AGREEMENT UNTIL A SUCCESSOR REPLACES IT AND, THEREAFTER, SHALL
MEAN THE SUCCESSOR AND, FOR PURPOSES OF ANY PROVISION CONTAINED IN THE INDENTURE
AND REQUIRED BY THE TIA, EACH OTHER OBLIGOR OF THE NOTES.
"LIBOR RATE" SHALL MEAN, WITH RESPECT TO ANY CLASS OF NOTES OR CLASS OF
CERTIFICATES, THE RATE PER ANNUM EQUAL TO (a) THE ANNUAL RATE OF INTEREST
PUBLISHED OR REPORTED BY THE TELERATE SERVICE (BY REFERENCE TO THE SCREEN PAGE
CURRENTLY DESIGNATED AS "PAGE 3750" ON THAT SERVICE OR SUCH OTHER SERVICE AS MAY
BE NOMINATED BY THE BRITISH BANKERS' ASSOCIATION AS THE INFORMATION VENDOR FOR
THE PURPOSE OF DISPLAYING BRITISH BANKERS' ASSOCIATION INTEREST SETTLEMENT RATES
FOR U.S. DOLLAR DEPOSITS) AS OF 11:00 A.M., LONDON TIME, ON THE RATE
DETERMINATION DATE FOR A ONE MONTH PERIOD, OR (b) IF SUCH A RATE DOES NOT APPEAR
ON TELERATE PAGE 3750, THE "LIBOR RATE" FOR THE GIVEN DAY SHALL BE THE
ARITHMETIC MEAN OF THE OFFERED RATES FOR DOLLAR DEPOSITS FOR A ONE MONTH PERIOD
COMMENCING ON THE RATE DETERMINATION DATE, WHICH RATE APPEARS ON REUTERS LIBO
PAGE AS OF 11:00 A.M., LONDON TIME, ON THE RATE DETERMINATION DATE. IF THE RATE
DESCRIBED ABOVE DOES NOT APPEAR ON TELERATE PAGE 3750 AND FEWER THAN TWO RATES
APPEAR ON REUTERS LIBO PAGE, THE "LIBOR RATE" FOR THE APPLICABLE RATE
DETERMINATION DATE SHALL BE DETERMINED IN GOOD FAITH BY THE INDENTURE TRUSTEE
FROM SUCH SOURCE AS IT SHALL DETERMINE TO BE COMPARABLE TO TELERATE PAGE 3750
AND REUTERS LIBO PAGE.
"LIEN" SHALL MEAN A SECURITY INTEREST, LIEN, CHARGE, PLEDGE, EQUITY OR
ENCUMBRANCE OF ANY KIND, OTHER THAN TAX LIENS AND OTHER LIENS, IF ANY, WHICH
ATTACH TO THE RESPECTIVE FINANCED LOAN BY OPERATION OF LAW AS A RESULT OF ANY
ACT OR OMISSION.
"LOAN" OR "LOANS" SHALL MEAN ANY LOAN ACQUIRED BY THE ISSUER FROM THE
SELLER.
"MASTER INDENTURE" SHALL MEAN THE MASTER TRUST INDENTURE DATED AS OF
JUNE 1, 1996 BETWEEN THE ISSUER AND THE INDENTURE TRUSTEE, AS AMENDED OR
SUPPLEMENTED FROM TIME TO TIME.
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<PAGE> 87
"MINIMUM AUTHORIZED DENOMINATION" SHALL MEAN, WITH RESPECT TO THE
INITIAL OFFERING OF THE SECURITIES, $20,000, AND IN ALL OTHER RESPECTS SHALL
MEAN $1,000.
"MOODY'S" SHALL MEAN MOODY'S INVESTORS SERVICE, INC. (WHOSE ADDRESS IS
99 CHURCH STREET, NEW YORK, NEW YORK 10007-2796, ATTENTION: ABS MONITORING
DEPARTMENT, AND ITS CORPORATE SUCCESSORS.
"NOTEHOLDER" SHALL MEAN ANY PERSON WHO SHALL BE THE REGISTERED OWNER OF
ANY NOTE OR THE DULY AUTHORIZED ATTORNEY-IN-FACT OR REPRESENTATIVE OF SUCH
PERSON.
"NOTES" SHALL MEAN THE ASSET-BACKED NOTES ISSUED PURSUANT TO THE MASTER
INDENTURE AND A RELATED TERMS SUPPLEMENT.
"NOTE FUND" SHALL MEAN THE FUND SO DESIGNATED AND ESTABLISHED BY THE
INDENTURE.
"NOTE INTEREST ACCOUNT" SHALL MEAN THE ACCOUNT SO DESIGNATED AND
ESTABLISHED IN THE NOTE FUND BY THE INDENTURE.
"NOTE PAYMENT ACCOUNT" SHALL MEAN THE ACCOUNT SO DESIGNATED AND
ESTABLISHED IN THE NOTE FUND BY THE INDENTURE.
"OUTSTANDING," (A) WHEN USED WITH RESPECT TO NOTES, SHALL REFER TO ANY
NOTES EXECUTED, AUTHENTICATED, ISSUED AND DELIVERED UNDER THIS INDENTURE OTHER
THAN NOTES (i) FOR THE TRANSFER OR EXCHANGE OF OR IN LIEU OF WHICH OTHER NOTES
SHALL HAVE BEEN AUTHENTICATED AND DELIVERED BY THE INDENTURE TRUSTEE PURSUANT TO
THE INDENTURE OR (ii) WHICH HAVE BEEN CANCELED, (B) WHEN USED WITH RESPECT TO
CERTIFICATES, SHALL REFER TO ANY CERTIFICATES EXECUTED, AUTHENTICATED, ISSUED
AND DELIVERED UNDER THE TRUST AGREEMENT OTHER THAN CERTIFICATES (i) FOR THE
TRANSFER OR EXCHANGE OF OR IN LIEU OF WHICH OTHER CERTIFICATES SHALL HAVE BEEN
AUTHENTICATED AND DELIVERED BY THE OWNER TRUSTEE PURSUANT TO THE TRUST AGREEMENT
OR (ii) WHICH HAVE BEEN CANCELED, AND (C) WHEN USED WITH RESPECT TO FINANCED
LOANS, SHALL MEAN THE PRINCIPAL BALANCE UNPAID AS OF THE APPLICABLE DATE.
"OUTSTANDING AMOUNT" SHALL MEAN THE AGGREGATE PRINCIPAL AMOUNT OF ALL
NOTES, OR SERIES OR CLASS OF NOTES, OR ALL CERTIFICATES, OR CLASS OF
CERTIFICATES, AS APPLICABLE, OUTSTANDING AS OF THE DATE OF DETERMINATION.
"OWNER TRUSTEE" SHALL MEAN FLEET NATIONAL BANK, A NATIONAL BANKING
ASSOCIATION, NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS OWNER TRUSTEE UNDER
THE TRUST AGREEMENT.
"POOL BALANCE" SHALL MEAN, AT ANY TIME, THE AGGREGATE PRINCIPAL BALANCE
OF THE FINANCED LOANS AT THE END OF THE PRECEDING INTEREST PERIOD (INCLUDING
ACCRUED INTEREST THEREON FOR SUCH INTEREST PERIOD TO THE EXTENT SUCH INTEREST
WILL BE CAPITALIZED), AFTER GIVING EFFECT TO THE FOLLOWING, WITHOUT DUPLICATION:
(i) ALL PAYMENTS IN RESPECT OF PRINCIPAL RECEIVED BY THE TRUST DURING SUCH
INTEREST PERIOD FROM OR ON BEHALF OF BORROWERS AND GUARANTORS, (ii) THE
PRINCIPAL PORTION OF THE PURCHASE PRICE OF ALL FINANCED LOANS PURCHASED FROM THE
TRUST FOR SUCH INTEREST PERIOD FROM THE SELLER, THE ADMINISTRATION OR THE
SERVICER, AND (iii) THE PRINCIPAL PORTION OF ALL ADDITIONAL FINANCED LOANS MADE
FROM THE PRE-FUNDING ACCOUNT WITH RESPECT TO SUCH INTEREST PERIOD.
"PRE-FUNDING ACCOUNT" MEANS THE ACCOUNT DESIGNATED AS SUCH, ESTABLISHED
AND MAINTAINED PURSUANT TO THE INDENTURE.
"PRIMARY PARITY TRIGGER" SHALL MEAN, AS OF ANY DATE OF DETERMINATION,
AN AMOUNT (EXPRESSED AS A PERCENTAGE) EQUAL TO THE SUM OF (i) THE BALANCES THEN
ON DEPOSIT IN ALL FUNDS AND ACCOUNTS UNDER THE INDENTURE (EXCLUDING BALANCES
ATTRIBUTABLE TO PRINCIPAL OF OR ACCRUED INTEREST ON DEFAULTED LOANS) AND (ii)
AMOUNTS ON DEPOSIT IN THE LOCKBOX ACCOUNT HELD BY THE SERVICER AND ALLOCABLE TO
THE 1996 FINANCED LOANS, DIVIDED BY AN AMOUNT EQUAL TO THE PRINCIPAL AMOUNT OF
ALL NOTES THEN OUTSTANDING PLUS ALL ACCRUED AND UNPAID INTEREST THEREON PLUS ANY
UNPAID PORTION OF THE ADMINISTRATION REQUIREMENT. THE PRIMARY PARITY
G-6
<PAGE> 88
TRIGGER SHALL BE CALCULATED BY THE ADMINISTRATOR AS OF THE DATE OF THE
INFORMATION CONTAINED IN THE THEN MOST RECENT REPORT OF THE SERVICER PROVIDED BY
THE ISSUER TO THE INDENTURE TRUSTEE.
"PRINCIPAL CORPORATE TRUST OPERATIONS OFFICE" SHALL MEAN THE PRINCIPAL
CORPORATE TRUST OPERATIONS OFFICE OF THE INDENTURE TRUSTEE IN BOSTON,
MASSACHUSETTS, OR SUCH OTHER OFFICE AS MAY BE DESIGNATED BY WRITTEN NOTICE OF
THE INDENTURE TRUSTEE TO THE ISSUER AND EACH NOTEHOLDER AT THE ADDRESS OF SUCH
NOTEHOLDER AS IT APPEARS ON THE BOOKS OF REGISTRY MAINTAINED IN ACCORDANCE WITH
THE INDENTURE.
"PRINCIPAL FACTOR" SHALL HAVE THE MEANING SET FORTH IN THE INDENTURE.
"PURCHASE AGREEMENT" SHALL MEAN THE MASTER TERMS PURCHASE AGREEMENT
DATED JUNE 1, 1996 BETWEEN NELLIE MAE, INC. AND NELLIE MAE FUNDING, LLC, AS
AMENDED FROM TIME TO TIME.
"RATE ADJUSTMENT DATE" SHALL MEAN, WITH RESPECT TO EACH CLASS OF NOTES
AND EACH CLASS OF CERTIFICATES, THE DATE ON WHICH THE APPLICABLE INTEREST RATE
FOR SUCH CLASS OF NOTES OR CERTIFICATES, AS APPROPRIATE, IS EFFECTIVE AND SHALL
MEAN, WITH RESPECT TO EACH SUCH CLASS OF NOTES AND CERTIFICATES, THE DATE OF
COMMENCEMENT OF EACH RELATED INTEREST PERIOD.
"RATE DETERMINATION DATE" SHALL MEAN THE SECOND BUSINESS DAY
IMMEDIATELY PRECEDING THE RATE ADJUSTMENT DATE FOR SUCH INTEREST PERIOD.
"RATING AGENCY" SHALL MEAN (i) MOODY'S AND (ii) FITCH, IF THE NOTES ARE
THEN RATED BY FITCH, OR, IF EITHER OF THEM NO LONGER EXISTS AND HAS NO
SUCCESSORS, THEN ANY OTHER RATING AGENCY, IF ANY, OF NATIONALLY RECOGNIZED
STATUS THEN RATING THE NOTES.
"RECORD DATE" SHALL MEAN THE LAST DAY OF THE MONTH.
"RESPONSIBLE OFFICER" SHALL MEAN, WITH RESPECT TO THE INDENTURE
TRUSTEE, ANY OFFICER WITHIN THE CORPORATE TRUST OFFICE OF THE INDENTURE TRUSTEE
WITH DIRECT RESPONSIBILITY FOR THE ADMINISTRATION OF THE INDENTURE AND THE OTHER
BASIC DOCUMENTS ON BEHALF OF THE INDENTURE TRUSTEE, INCLUDING ANY VICE
PRESIDENT, ASSISTANT VICE PRESIDENT, ASSISTANT TREASURER, ASSISTANT SECRETARY,
OR ANY OTHER OFFICER OF THE INDENTURE TRUSTEE CUSTOMARILY PERFORMING FUNCTIONS
SIMILAR TO THOSE PERFORMED BY ANY OF THE ABOVE DESIGNATED OFFICERS.
"REUTERS LIBO PAGE" SHALL MEAN THE DISPLAY DESIGNATED AS PAGE "LIBO" ON
THE REUTER MONITOR MONEY RATES SERVICE (OR SUCH OTHER PAGE AS MAY REPLACE THE
REUTERS LIBO PAGE ON THAT SERVICE FOR THE PURPOSE OF DISPLAYING LONDON INTERBANK
OFFERED RATES OF MAJOR BANKS FOR DOLLAR DEPOSITS).
"REVENUE FUND" SHALL MEAN THE FUND ESTABLISHED BY THE INDENTURE.
"REVENUES" SHALL MEAN ALL REVENUES, RECEIPTS AND MONEYS PAYABLE INTO OR
TO THE CREDIT OF THE REVENUE FUND PURSUANT TO THE INDENTURE AND ANY INTEREST
EARNINGS ON INVESTMENT SECURITIES CREDITED TO ANY OTHER FUND OR ACCOUNT AS
PROVIDED IN THE INDENTURE.
"SALES AGREEMENT" SHALL MEAN THE MASTER TERMS SALES AGREEMENT DATED
JUNE 1, 1996, AMONG THE ISSUER, THE SELLER AND THE OWNER TRUSTEE, AS AMENDED
FROM TIME TO TIME.
"SECONDARY PARITY TRIGGER" SHALL MEAN, AS OF ANY DATE OF DETERMINATION,
AN AMOUNT (EXPRESSED AS A PERCENTAGE) EQUAL TO THE SUM OF (i) THE BALANCES THEN
ON DEPOSIT IN ALL FUNDS AND ACCOUNTS UNDER THE INDENTURE (EXCLUDING BALANCES
ATTRIBUTABLE TO PRINCIPAL OF OR ACCRUED INTEREST ON DEFAULTED LOANS) AND (ii)
AMOUNTS ON DEPOSIT IN THE LOCKBOX ACCOUNT HELD BY THE SERVICER AND ALLOCABLE TO
THE 1996 FINANCED LOANS, DIVIDED BY AN AMOUNT EQUAL TO THE PRINCIPAL AMOUNT OF
ALL NOTES AND CERTIFICATES THEN OUTSTANDING PLUS ALL ACCRUED AND UNPAID INTEREST
THEREON PLUS ANY UNPAID PORTION OF THE ADMINISTRATION REQUIREMENT. THE
G-7
<PAGE> 89
SECONDARY PARITY TRIGGER SHALL BE CALCULATED BY THE ADMINISTRATOR AS OF THE DATE
OF THE INFORMATION CONTAINED IN THE THEN MOST RECENT REPORT OF THE SERVICER
PROVIDED BY THE ISSUER TO THE INDENTURE TRUSTEE.
"SECURITIES" SHALL MEAN THE NOTES AND THE CERTIFICATES TOGETHER.
"SECURITIES ACT" SHALL MEAN THE SECURITIES ACT OF 1933, AS AMENDED.
"SECURITIES DEPOSITORY" SHALL MEAN AN ORGANIZATION REGISTERED AS A
"CLEARING AGENCY" PURSUANT TO SECTION 17A OF THE EXCHANGE ACT AND SHALL
INITIALLY BE THE DEPOSITORY TRUST COMPANY.
"SECURITIES DEPOSITORY PARTICIPANT" SHALL MEAN A BROKER, DEALER, BANK,
OTHER FINANCIAL INSTITUTION OR OTHER PERSON FOR WHOM FROM TIME TO TIME A
SECURITIES DEPOSITORY EFFECTS BOOK-ENTRY TRANSFERS AND PLEDGES OF SECURITIES
DEPOSITED WITH THE SECURITIES DEPOSITORY.
"SELLER" SHALL MEAN THE NELLIE MAE EDUCATION FUNDING, LLC, A DELAWARE
LIMITED LIABILITY COMPANY.
"SERIES" SHALL MEAN A SEPARATE SERIES OF NOTES ISSUED PURSUANT TO THE
MASTER INDENTURE, WHICH SERIES MAY, AS PROVIDED IN THE RELATED TERMS SUPPLEMENT,
BE DIVIDED INTO TWO OR MORE CLASSES.
"SERVICER DEFAULT" SHALL MEAN AN "EVENT OF DEFAULT" AS DEFINED IN THE
SERVICING AGREEMENT.
"SERVICER" SHALL MEAN USA GROUP LOAN SERVICES, INC., A DELAWARE
CORPORATION, ITS CORPORATE SUCCESSORS AND ASSIGNS, AND ANY OTHER ORGANIZATION
WITH WHICH THE ISSUER HAS ENTERED INTO OR SHALL IN THE FUTURE ENTER INTO A
SERVICING AGREEMENT PROVIDING FOR THE ADMINISTRATION, SERVICING AND COLLECTION
OF, AMONG OTHERS, THE FINANCED LOANS.
"SERVICES FUND" SHALL MEAN THE FUND ESTABLISHED BY THE INDENTURE.
"SERVICING AGREEMENT" SHALL MEAN THE SERVICING AGREEMENT BETWEEN THE
ISSUER AND USA GROUP LOAN SERVICES, INC. DATED AS OF JUNE 1, 1996, AND ANY OTHER
SIMILAR SERVICING AGREEMENT ENTERED INTO BETWEEN THE ISSUER AND A SERVICER
PROVIDING FOR THE ADMINISTRATION, SERVICING AND COLLECTION OF FINANCED LOANS, IN
EACH CASE AS ORIGINALLY EXECUTED AND AS AMENDED OR SUPPLEMENTED FROM TIME TO
TIME IN ACCORDANCE WITH THE TERMS THEREOF AND WITH THE INDENTURE.
"SERVICING FEES" SHALL MEAN, AS OF ANY DATE OF CALCULATION, THE SUM
OWED TO THE SERVICER PURSUANT TO THE TERMS OF THE SERVICING AGREEMENT.
"STUDENT LOAN ACQUISITION FUND" SHALL MEAN THE FUND SO DESIGNATED AND
ESTABLISHED BY THE INDENTURE.
"STUDENT LOAN PORTFOLIO FUND" SHALL MEAN THE FUND SO DESIGNATED AND
ESTABLISHED BY THE INDENTURE.
"SUBACCOUNT" SHALL MEAN ANY OF THE SUBACCOUNTS ESTABLISHED BY THE
INDENTURE AND THE RELATED TERMS SUPPLEMENT.
"SUPPLEMENTAL INDENTURE" SHALL MEAN ANY SUPPLEMENT TO OR AMENDMENT OF
THE INDENTURE ENTERED INTO BY THE ISSUER AND THE INDENTURE TRUSTEE PURSUANT TO
AND IN ACCORDANCE WITH THE PROVISIONS OF THE INDENTURE.
"SUPPLEMENTAL PURCHASE AGREEMENT" SHALL MEAN ANY SUPPLEMENTAL PURCHASE
AGREEMENT BETWEEN NELLIE MAE AND THE SELLER.
"SUPPLEMENTAL SALES AGREEMENT" SHALL MEAN ANY SUPPLEMENTAL SALES
AGREEMENT AMONG THE SELLER, THE TRUST AND THE OWNER TRUSTEE.
G-8
<PAGE> 90
"TERMS SUPPLEMENT" SHALL MEAN EACH SUPPLEMENTAL INDENTURE WHICH
AUTHORIZES A PARTICULAR SERIES OF NOTES.
"TRANSFER AGREEMENT" SHALL MEAN A DULY WRITTEN ASSIGNMENT AND BILL OF
SALE DELIVERED BY THE SELLER TO THE OWNER TRUSTEE AND THE INDENTURE TRUSTEE
EVIDENCING THE SALE OF ADDITIONAL FINANCED LOANS TO THE ISSUER.
"TRANSFER DATE" SHALL MEAN EACH DATE ON WHICH THE ISSUER PURCHASES
ADDITIONAL FINANCED LOANS PURSUANT TO A SUPPLEMENTAL SALES AGREEMENT DURING A
RELATED FUNDING PERIOD.
"TREASURY REGULATIONS" SHALL MEAN REGULATIONS, INCLUDING PROPOSED OR
TEMPORARY REGULATIONS, PROMULGATED UNDER THE CODE. REFERENCES IN ANY DOCUMENT OR
INSTRUMENT TO SPECIFIC PROVISIONS OF PROPOSED OR TEMPORARY REGULATIONS SHALL
INCLUDE ANALOGOUS PROVISIONS OF FINAL TREASURY REGULATIONS OR OTHER SUCCESSOR
TREASURY REGULATIONS.
"TRUST AGREEMENT" SHALL MEAN THE TRUST AGREEMENT DATED AS OF JUNE 1,
1996 BETWEEN THE DEPOSITOR AND THE OWNER TRUSTEE, AS AMENDED AND SUPPLEMENTED
FROM TIME TO TIME.
"TRUST ESTATE" SHALL MEAN ALL PROPERTY OF THE ISSUER FROM TIME TO TIME,
INCLUDING ALL FUNDS HELD BY THE OWNER TRUSTEE UNDER THE TRUST AGREEMENT AND ALL
RIGHTS OF THE OWNER TRUSTEE AND THE TRUST PURSUANT TO THE SERVICING AGREEMENT,
THE ADMINISTRATION AGREEMENT, THE SALES AGREEMENT AND ANY SUPPLEMENTAL SALES
AGREEMENT.
"TRUST INDENTURE ACT" OR "TIA" SHALL MEAN THE TRUST INDENTURE ACT OF
1939 AS IN FORCE ON THE DATE HEREOF, UNLESS OTHERWISE SPECIFICALLY PROVIDED.
"TRUST SUPPLEMENT" SHALL MEAN EACH SUPPLEMENT TO THE TRUST AGREEMENT
THAT AUTHORIZES AN ISSUANCE OF A CLASS OF CERTIFICATES.
G-9
<PAGE> 91
NO DEALER, SALESMAN, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, IN CONNECTION WITH THE OFFER HEREIN CONTAINED AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES OFFERED
BY THIS PROSPECTUS OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SINCE THE
DATE HEREOF.
-------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary of Terms ......................................................... 1
Risk Factors ............................................................. 12
Formation of the Trust ................................................... 16
The Trust Estate ......................................................... 18
Trading Information ...................................................... 31
Consumer Protection Laws ................................................. 31
Treatment of Education Loans in Bankruptcy ............................... 32
Use of Proceeds .......................................................... 32
Fund Balances at Closing ................................................. 33
Nellie Mae Education Funding, LLC ........................................ 33
Nellie Mae, Inc. ......................................................... 33
Servicer ................................................................. 34
The 1996 Notes ........................................................... 34
The 1996 Certificates .................................................... 38
Information Regarding the 1996 Securities ................................ 41
Description of the Indenture ............................................. 44
Description of the Sales and Purchase Agreem1nts ......................... 61
Description of ADMINISTRATION AGREEMENT .................................. 62
Transfer of Student Loans ................................................ 66
Federal Income Tax Consequences .......................................... 66
ERISA Considerations ..................................................... 72
Underwriting ............................................................. 73
Financial Information .................................................... 73
Legal Matters ............................................................ 73
Reports to Securityholders ............................................... 74
Available Information .................................................... 74
Incorporation of Certain Documents by Reference .......................... 74
Glossary of Major Defined Terms........................................... G-1
</TABLE>
------------------
UNTIL 90 DAYS AFTER THE DATE HEREOF, ALL DEALERS EFFECTING TRANSACTIONS
IN THE SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPRIONS.
NELLIE MAE EDUCATION LOAN TRUST
$67,000,000 LIBOR Rate Asset Backed
Class A-1 Notes
$48,000,000 LIBOR Rate Asset Backed
Class A-2 Notes
$ 7,700,000 LIBOR Rate Asset Backed
Certificates
------------------
PROSPECTUS
------------------
SMITH BARNEY INC.
<PAGE> 92
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses payable by the Registrant
in connection with the issuance and distribution of the securities being
registered. All the amounts shown are estimates, except the registration fee.
<TABLE>
<S> <C>
SEC Registration Fee ......................................... $ 42,586.21
Fees and expenses of accountants ............................. $ *
Fees and expenses of counsel ................................. $ *
Fees and expenses of INDENTURE Trustee and COUNSEL ........... $ *
Fees and expenses OF OWNER TRUSTEE AND COUNSEL ............... $ *
PRINTING AND ENGRAVING ....................................... $ *
Rating Agency FEES ........................................... $ *
Miscellaneous ................................................ $ *
-----------
Total ........................................................ $ *
===========
</TABLE>
- ---------------------------
* TO BE PROVIDED BY AMENDMENT.
ITEM 15 INDEMNIFICATION OF DIRECTORS AND OFFICERS
THE OPERATING AGREEMENT OF THE REGISTRANT PROVIDES THAT, TO THE MAXIMUM
EXTENT PERMITTED UNDER DELAWARE LAW, THE REGISTRANT SHALL INDEMNIFY ITS MANAGERS
FOR ALL COSTS, LOSSES, LIABILITIES AND DAMAGES PAID OR ACCRUED BY SUCH MANAGERS
IN CONNECTION WITH THE BUSINESS OF THE REGISTRANT, AND THAT THE REGISTRANT WILL
INDEMNIFY ITS OFFICERS, EMPLOYEES AND OTHER AGENTS WHO ARE NOT MANAGERS TO THE
FULLEST EXTENT PERMITTED BY LAW, PROVIDED THAT THE INDEMNIFICATION IN ANY GIVEN
SITUATION IS APPROVED BY THE BOARD OF MANAGERS.
ITEM 16 EXHIBITS
(1.1)* - Form of Underwriting Agreement FOR THE NOTES.
(1.2)* - FORM OF UNDERWRITING AGREEMENT FOR THE CERTIFICATES.
(3.1)* - CERTIFICATE OF ORGANIZATION OF NELLIE MAE EDUCATION
FUNDING, LLC.
(3.2)* - OPERATING AGREEMENT OF NELLIE MAE EDUCATION FUNDING, LLC.
(3.3)* - FORM OF DECLARATION OF TRUST FOR THE Nellie Mae Education
Loan Trust(INCLUDED IN EXHIBIT 4.3).
(4.1)* - FORM OF MASTER TRUST INDENTURE, DATED AS OF JUNE 1, 1996,
BETWEEN NELLIE MAE EDUCATION LOAN TRUST AND STATE STREET
BANK AND TRUST COMPANY, as Indenture Trustee.
(4.2)* - Form of First Terms Supplement to the Master Trust
Indenture.
II-1
<PAGE> 93
(4.3)* - Form of Trust Agreement, dated as of JUNE 1, 1996,
between Nellie Mae Education Funding, LLC and FLEET
NATIONAL BANK, AS OWNER TRUSTEE.
(4.4)* - FORM OF First Trust Supplement to the Trust Agreement.
(4.5)* - FORM OF NOTE (INCLUDED AS AN EXHIBIT TO EXHIBIT 4.1).
(4.6)* - FORM OF CERTIFICATE (INCLUDED AS AN EXHIBIT TO EXHIBIT
4.3).
(5.1)* - Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C. WITH RESPECT TO LEGALITY OF THE NOTES AND
CERTIFICATES.
(8.1)* - Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C. as to tax matters.
(23.2)* - Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C. (included in Exhibit 5.1).
(24.1)* - Powers of Attorney (included as part of signature page).
(25.1)* - Statement of Eligibility and Qualification under the
TRUST Indenture Act of 1939 on Form T-1 of State Street
Bank and Trust Company.
(99.1)* - Form of Master Terms Sales Agreement, dated as of JUNE 1,
1996, among Nellie Mae Education Funding, LLC, Nellie Mae
Education Loan Trust and FLEET NATIONAL BANK, AS OWNER
TRUSTEE.
(99.2)* - Form of Master Terms Purchase Agreement, dated as of JUNE
1, 1996, between Nellie Mae, Inc. and Nellie Mae
Education Funding, LLC.
(99.3)* - Form of Administration Agreement, dated as of JUNE 1,
1996, among Nellie Mae, Inc., Nellie Mae Education Loan
Trust, STATE STREET BANK AND TRUST COMPANY, AS INDENTURE
TRUSTEE AND FLEET NATIONAL BANK, AS OWNER TRUSTEE.
- ---------------------------
*Filed herewith.
ITEM 17. UNDERTAKINGS
A. UNDERTAKINGS PURSUANT TO RULE 415.
The REGISTRANT hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
REGISTRATION STATEMENT;
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of
1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of
the registration statement (or the most
recent post-effective amendment thereof)
which, individually or in the aggregate,
represent a fundamental change in the
information set forth in the REGISTRATION
STATEMENT. Notwithstanding the foregoing,
any increase or decrease in volume of
securities offered (if the total dollar
value of
II-2
<PAGE> 94
securities offered would not exceed that
which was registered) and any deviation from
the low or high and of the estimated maximum
offering range may be reflected in the form
of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price
represent no more than 20 percent change in
the maximum aggregate offering price set
forth in the "Calculation of Registration
Fee" table in the effective registration
statement.
(iii) To include any material information with
respect to the plan of distribution not
previously disclosed in the registration
statement or any material change to such
information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
REGISTRATION STATEMENT is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
REGISTRANT pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the REGISTRATION STATEMENT.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being
registered which remain unsold at the termination of the
offering.
B. FILING INCORPORATING SUBSEQUENT EXCHANGE ACT DOCUMENTS BY
REFERENCE.
THE REGISTRANT hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933,
each filing of the REGISTRANT'S annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be
a new registration statement relating to the securities
offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering
thereof.
C. UNDERTAKING IN RESPECT OF INDEMNIFICATION.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
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<PAGE> 95
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized, in the City of Boston, and Commonwealth of Massachusetts, on the
17TH day of JUNE, 1996.
NELLIE MAE EDUCATION FUNDING, LLC
BY/S/John F. Remondi
-------------------------------
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed below by the following persons in
the capacities indicated and on JUNE 17, 1996; and each of the undersigned
officers and Directors, hereby severally constitute and appoint John F. Remondi
and Lawrence W. O'Toole, and each of them, so sign for him, and in his name in
the capacity indicated below, all amendments, including post-effective
amendments, to such registration statement and any related Rule 462(b)
registration statement or amendment thereto, hereby ratifying and confirming
such signatures as they may be signed by such attorneys to such registration
statements and any and all amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on JUNE 17, 1996.
Principal executive officer: CLASS A Managers
NELLIE MAE, INC.
/S/LAWRENCE W. O'Toole /S/LAWRENCE W. O'Toole
--------------------------- ------------------------------
Lawrence W. O'Toole BY: Lawrence W. O'Toole
NMI EDUCATION LOAN CORPORATION
Principal financial officer: /S/JOHN F. Remondi
------------------------------
BY: John F. Remondi
/S/JOHN F. Remondi
---------------------------
John F. Remondi
Principal accounting officer:
/S/JOHN F. Remondi
---------------------------
John F. Remondi
II-4
<PAGE> 96
Exhibit Index
Exhibit Number and Description
(1.1)* - Form of Underwriting Agreement FOR THE NOTES.
(1.2)* - FORM OF UNDERWRITING AGREEMENT FOR THE CERTIFICATES.
(3.1)* - CERTIFICATE OF ORGANIZATION OF NELLIE MAE EDUCATION
FUNDING, LLC.
(3.2)* - OPERATING AGREEMENT OF NELLIE MAE EDUCATION FUNDING, LLC.
(3.3)* - FORM OF DECLARATION OF TRUST FOR THE Nellie Mae Education
Loan Trust(INCLUDED IN EXHIBIT 4.3).
(4.1)* - FORM OF MASTER TRUST INDENTURE, DATED AS OF JUNE 1, 1996,
BETWEEN NELLIE MAE EDUCATION LOAN TRUST AND STATE STREET
BANK AND TRUST COMPANY, as Indenture Trustee.
(4.2)* - Form of First Terms Supplement to the Master Trust
Indenture.
(4.3)* - Form of Trust Agreement, dated as of JUNE 1, 1996,
between Nellie Mae Education Funding, LLC and FLEET
NATIONAL BANK, AS OWNER TRUSTEE.
(4.4)* - First Trust Supplement to the Trust Agreement.
(4.5)* - FORM OF NOTE (INCLUDED AS AN EXHIBIT TO EXHIBIT 4.1).
(4.6)* - FORM OF CERTIFICATE (INCLUDED AS AN EXHIBIT TO EXHIBIT
4.3).
(5.1)* - Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C. WITH RESPECT TO LEGALITY.
(8.1)* - Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C. as to tax matters.
(23.1)* - Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C. (included in Exhibit 5.1).
(24.1)* - Powers of Attorney (included as part of signature page).
(25.1)* - Statement of Eligibility and Qualification under the
TRUST Indenture Act of 1939 on Form T-1 of State Street
Bank and Trust Company.
(99.1)* - Form of Master Terms Sales Agreement, dated as of JUNE 1,
1996, among Nellie Mae Education Funding, LLC, Nellie Mae
Education Loan Trust and FLEET NATIONAL BANK, AS OWNER
TRUSTEE.
(99.2)* - Form of Master Terms Purchase Agreement, dated as of JUNE
1, 1996, between Nellie Mae, Inc. and Nellie Mae
Education Funding, LLC.
(99.3)* - Form of Administration Agreement, dated as of JUNE 1,
1996, among Nellie Mae, Inc., Nellie Mae Education Loan
Trust, STATE STREET BANK AND TRUST COMPANY, AS INDENTURE
TRUSTEE AND FLEET NATIONAL BANK, AS OWNER TRUSTEE.
- ---------------------------
*Filed herewith
II-5
<PAGE> 1
EXHIBIT 1.1
NELLIE MAE EDUCATION LOAN TRUST
$___________ Libor Rate Asset Backed Class A-1 Notes
$___________ Libor Rate Asset Backed Class A-2 Notes
Underwriting Agreement
SMITH BARNEY INC.
390 Greenwich Street
New York, NY 10013
Dear Sirs:
Nellie Mae Education Funding, LLC, a limited liability company
organized under the laws of The Commonwealth of Massachusetts (the "Company")
which is 99% owned by Nellie Mae, Inc., a non-profit corporation organized and
existing under the laws of The Commonwealth of Massachusetts ("Nellie Mae"), has
formed a business trust known as the Nellie Mae Education Loan Trust (the
"Trust") under the laws of The Commonwealth of Massachusetts. The Trust proposes
to sell to Smith Barney Inc. (the "Underwriter"), pursuant to the terms of this
Underwriting Agreement (this "Agreement"), an aggregate of $__________ Libor
Rate Asset Backed Class A-1 Notes (the "A-1 Notes") and an aggregate of
$_____________ Libor Rate Asset Backed Class A-2 Notes (the "A-2 Notes" and
together with the A-1 Notes, the "Notes"). Fleet National Bank, a national
banking association, will act as the Owner Trustee of the Trust. The Notes will
be issued under a Master Trust Indenture as supplemented by a First Terms
Supplement (the "Indenture") between the Trust and State Street Bank and Trust
Company, as indenture trustee (the "Indenture Trustee"). Upon issuance, the
Notes will be secured by, among other things, Financed Loans pledged to the
Indenture Trustee and described in the Prospectus (as defined in Section 3
below).
Capitalized terms used but not defined herein have the respective
meanings ascribed to such terms in Exhibit A to the Indenture.
1. Agreement to Sell, Purchase and Resell
(a) The Trust hereby agrees, subject to all of the terms and
conditions set forth herein, to sell to the Underwriter and, upon the basis of
the representations, warranties and agreements of the Company and Nellie Mae
herein contained and subject to all of the terms and conditions set forth
herein, the Underwriter agrees to purchase from the Trust, the Notes at a
purchase price equal to the principal amount of the Notes less an underwriting
discount equal to [_____%] of the principal amount of the Notes.
(b) It is understood that the Underwriter proposes 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
Underwriter of, and payment for, the Notes to be sold pursuant to this Agreement
shall be made at the offices of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C., One Financial Center, Boston, Massachusetts 02111 at 10:00 a.m., Boston
time, on ___________________, 1996 (the "Closing Date"). The place of such
closing and the Closing Date may be varied by agreement among the Underwriter,
the Trust and the Company.
<PAGE> 2
The Notes will be delivered to the Underwriter against payment of
the purchase price therefor to the Trust in Federal Funds, by wire or such other
form of payment as to which the parties may agree. The A-1 Notes and A-2 Notes
each will be evidenced by a single global security in definitive form and/or by
additional definitive securities and will be registered in the name of Cede &
Co., as nominee of The Depository Trust Company. The Notes to be delivered to
the Underwriter shall be made available to the Underwriter in New York City for
inspection and packaging not later than 9:30 a.m., New York City time, on the
business day next preceding the Closing Date.
3. Representations and Warranties of the Company and Nellie Mae. The
Company and Nellie Mae represent and warrant to, and agree with, the Underwriter
that:
(a) A registration statement on Form S-3 (File No. 333-4418)
relating to the Notes, including a form of prospectus, has been filed with the
Securities and Exchange Commission (the "Commission"); such registration
statement and any post-effective amendment thereto, each in the form previously
delivered to the Underwriter, excluding exhibits to such registration statement,
have been declared effective under the Securities Act of 1933, as amended (the
Securities Act"); no other document with respect to such registration statement
has heretofore been filed with the Commission. The term "Registration
Statement," as used in this Agreement, means such registration statement, as
amended, at the time each part thereof became effective and shall be deemed to
include all information omitted therefrom in reliance upon Rule 430A and
contained in the Prospectus referred to below. The term "Registration Statement"
as used in this Agreement shall include any registration statement relating to
the Notes that is filed and declared effective pursuant to Rule 462(b) under the
Securities Act. The term "Prospectus" as used in this Agreement means the final
prospectus, as first filed with the Commission pursuant to Rule 424(b) under the
Securities Act. The term "Preliminary Prospectus" as used in this Agreement
means the prospectus subject to completion in the form included in the
Registration Statement at the time of the initial filing of the Registration
Statement with the Commission, and as such prospectus shall have been amended
from time to time prior to the date of the Prospectus. For purposes of the
following representations and warranties, to the extent reference is made to the
Prospectus and at the relevant time the Prospectus is not yet in existence, such
reference shall be deemed to be to the most recent Preliminary Prospectus.
(b) No order preventing or suspending the use of any Preliminary
Prospectus or prospectus has been issued by the Commission or any state
regulatory authority.
(c) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of the
Securities Act and the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act") and the rules and regulations of the Commission thereunder and
do not and will not, as of the applicable effective date as to any part of the
Registration Statement and any amendment thereto and as of the applicable filing
date as to the Prospectus and any amendment or supplement thereto, contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading;
provided, however, that this representation and warranty shall not apply to any
statements made in reliance upon and in conformity with information furnished in
writing to the Company by the Underwriter expressly for use therein;
(d) 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.
(e) 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,
2
<PAGE> 3
Nellie Mae, the Trust or any of their affiliates for the consummation of the
transactions contemplated by this Agreement shall have been obtained, except as
otherwise provided in the Basic Documents.
(f) The Trust has the requisite power and authority to execute,
deliver and perform its obligations under the Master Indenture and the First
Terms Supplement. The Master Indenture and the First Terms Supplement have been
duly and validly authorized by the Trust and, upon their execution and delivery
by the Trust, assuming due authorization, execution and delivery by the
Indenture Trustee, will be duly executed and delivered by the Trust and will
constitute valid and legally binding agreements of the Trust, enforceable in
accordance with their terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other
similar laws of general applicability affecting creditors' rights or general
equitable principles. The Master Indenture and First Terms Supplement conform in
all material respects to the descriptions thereof in the Prospectus.
(g) The Trust has the requisite power and authority to issue the
Notes. The Notes have been duly authorized by the Trust and, when executed by
the Trust, authenticated by the Indenture Trustee in accordance with the
Indenture and delivered to the Underwriter against payment therefor in
accordance with the terms hereof, will have been validly issued and delivered,
and will constitute valid and legally binding obligations of the Trust 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 of general applicability
relating to or affecting creditors' rights or general equitable principles. The
Notes conform in all material respects to the description thereof in the
Prospectus.
(h) The Company has the requisite power and authority to execute,
deliver and perform its obligations under the Trust Agreement and the First
Trust Supplement Agreement. The Trust Agreement and the First Trust Supplement
have been duly and validly authorized, executed and delivered by the Company
and, assuming due authorization and execution by the Owner Trustee, constitute
valid and legally binding agreements of the Company, enforceable in accordance
with their terms, except as enforcement thereof may be limited by bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium or other similar
laws of general applicability relating to or affecting creditors' rights or
general equitable principles. The Trust Agreement and the First Trust conform in
all material respects to the descriptions thereof in the Prospectus.
(i) The Company and the Trust each have the requisite power and
authority to execute, deliver and perform its obligations under the Master Terms
Sales Agreement and the First Supplemental Sales Agreement. The Master Terms
Sales Agreement and the First Supplemental Sales Agreement have been duly and
validly authorized by each of the Company and the Trust and, upon execution and
delivery, will be duly executed and delivered by each of the Company and the
Trust and will constitute valid and legally binding agreements of the Company
and the Trust, enforceable in accordance with their terms, except as enforcement
thereof may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or other similar laws of general applicability
relating to or affecting creditors' rights or general equitable principles. The
Master Terms Sales Agreement and the First Supplemental Sales Agreement conform
in all material respects to the descriptions thereof in the Prospectus.
(j) The Company and Nellie Mae each have the requisite power and
authority to execute, deliver and perform its obligations under the Master Terms
Purchase Agreement and the First Supplemental Purchase Agreement. The Master
Terms Purchase Agreement and the First Supplemental Purchase Agreement have been
duly and validly authorized by each of the Company, and Nellie Mae and, upon
execution and delivery, will be duly executed and delivered by each of the
Company and Nellie Mae and will constitute valid and legally binding agreements
of the Company and Nellie Mae, enforceable in
3
<PAGE> 4
accordance with their terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other
similar laws of general applicability relating to or affecting creditors' rights
or general equitable principles. The Master Terms Purchase Agreement and the
First Supplemental Purchase Agreement conform in all material respects to the
descriptions thereof in the Prospectus.
(k) Nellie Mae and the Trust each have the requisite power and
authority to execute, deliver and perform its obligations under the
Administration Agreement. The Administration Agreement has been duly and validly
authorized by each of Nellie Mae and the Trust and, upon execution and delivery,
assuming due authorization, execution and delivery, by the Owner Trustee and the
Indenture Trustee, will be duly executed and delivered by each of Nellie Mae and
the Trust and will constitute a valid and legally binding agreement of each of
Nellie Mae and the Trust, enforceable in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium or other similar laws of general
applicability relating to or affecting creditors' rights or general equitable
principles. The Administration Agreement conforms in all material respects to
the description thereof in the Prospectus.
(l) The Trust has the requisite power and authority to execute,
deliver and perform its obligations under the Custody Agreement and the
Servicing Agreement. The Custody Agreement and the Servicing Agreement have been
duly and validly authorized by the Trust and, upon execution and delivery,
assuming due authorization, execution and delivery by the Indenture Trustee (in
the case of the Custody Agreement) and the Servicer (in the case of the
Servicing Agreement), will be duly executed and delivered by the Trust and will
constitute valid and legally binding agreements of the Trust, enforceable in
accordance with their terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other
similar laws of general applicability relating to or affecting creditors rights
or general equitable principles. The Custody Agreement and the Servicing
Agreement conform in all material respects to the descriptions thereof in the
Prospectus.
(m) The Company is a limited liability company and Nellie Mae is a
non-profit corporation, and each is duly organized, validly existing and in good
standing under the laws of The Commonwealth of Massachusetts, with the requisite
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 could not have a material adverse effect on its condition (financial or
other), business, prospectus, properties, net worth or results of operations.
(n) The Trust is a business trust duly formed and validly existing
under the laws of The Commonwealth of Massachusetts with full power and
authority to own and pledge its assets and to issue the Notes as described in
the Prospectus.
(o) There are no legal or governmental proceedings pending or, to
the knowledge of the Company or Nellie Mae, threatened, against the Company,
Nellie Mae or the Trust, or to which the Company, Nellie Mae, the Trust or any
of their respective properties is subject, that are not disclosed in 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.
(p) Neither the offer, sale or delivery of the Notes by the Trust
nor the execution, delivery or performance of this Agreement or any of the Basic
Documents by the Company, Nellie Mae or
4
<PAGE> 5
the Trust nor the consummation by the Company, Nellie Mae or the Trust 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 federal securities laws
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 (ii)
conflicts or will conflict with or constitutes or will constitute a breach of,
or a default under, the organizational documents of the Company, Nellie Mae or
the Trust or (iii) 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,
Nellie Mae or the Trust is a party or by which the Company, Nellie Mae or the
Trust or any of their respective properties may be bound, or (iv) violates or
will violate in any material respect any statute, law, regulation or filing or
judgment, injunction, order or decree applicable to the Company, Nellie Mae or
the Trust or any of their respective properties, or (v) results or will result
in the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company, Nellie Mae or the Trust pursuant to the terms
of any agreement or instrument to which any is a party or by which any may be
bound or to which any of their respective properties is subject other than as
contemplated by the Basic Documents.
(q) The Company, Nellie Mae and the Trust each have all requisite
power and authority to execute, deliver and perform its obligations under this
Agreement; the execution and delivery of, and the performance by each of the
Company, Nellie Mae and the Trust of its respective obligations under this
Agreement have been duly and validly authorized by the Company, Nellie Mae and
the Trust, respectively, and this Agreement has been duly executed and delivered
by each of them and constitutes the valid and legally binding agreement of each
of them, enforceable against each of them in accordance with its terms, except
as the enforcement may be limited by bankruptcy, insolvency, moratorium,
fraudulent conveyance or other similar laws relating to or affecting creditors'
rights generally or general equitable principles, and except as rights to
indemnity and contribution hereunder may be limited by federal or state
securities laws or principles of public policy.
(r) The Company and the Trust each has, and has no reason to believe
that any facts exist which would result in the revocation or termination of, all
necessary power, authority, licenses and approvals to purchase and own the
Financed Loans; and the Company, Nellie Mae and the Trust each to its knowledge,
after reasonable inquiry, believes the Financed Loans were originated in
compliance with all applicable consumer lending, interest rate disclosure and
usury laws.
(s) Neither the Trust nor the Company is subject to registration as
an "investment company" under the Investment Company Act of 1940, as amended
(the "1940 Act").
(t) Neither the Company, the Trust nor any of their affiliates does
business with the government of Cuba or with any person or affiliate located in
Cuba within the meaning of Section 517.075, Florida Statute and the Company
agrees to comply with such Section if prior to the completion of the
distribution of the Notes it commences doing such business.
(u) The representations and warranties made by (i) the Trust in the
Indenture and made in any officer's certificate of the Owner Trustee delivered
pursuant to the Indenture and (ii) the Company and Nellie Mae in the
Administration Agreement and made in any officer's certificate of the Company or
Nellie Mae will be true and correct at the time made and on and as of the
Closing Date.
5
<PAGE> 6
(v) The Indenture (together with the Custody Agreement as to the
Financed Loans) will create a first lien upon the Financed Loans and a valid
pledge of and perfected security interest in the entire Indenture Trust Estate,
subject only to the provisions of the Indenture and the Custody Agreement
permitting the application thereof for the purposes and on the terms and
conditions set forth therein. On the Closing Date, the Owner Trustee will have
legal title to the Indenture Trust Estate for the benefit of the Trust,
including without limitation the Financed Loans, and no lien other than the lien
of the Indenture will exist with respect to any asset which constitutes a part
of the Indenture Trust Estate securing the Notes.
4. Agreements of the Company and Nellie Mae. The Company and Nellie Mae
agree with the Underwriter as follows:
(a) The Company will prepare the Prospectus in a form approved by
the Underwriter and file such Prospectus pursuant to Rule 424(b)(1) under the
Securities Act not later than the Commission's close of business on the second
business day following the execution and delivery of this Agreement, or, if
applicable, such earlier time as may be required by Rule 430A(a)(3) or Rule
424(b) under the Securities Act; the Company will (i) make no further amendment
or any supplement to the Registration Statement or Prospectus which shall be
disapproved by the Underwriter promptly after reasonable notice thereof; (ii)
advise the Underwriter, promptly after it receives notice thereof, of the time
when any amendment to the Registration Statement has been filed or becomes
effective or any amended Prospectus has been filed and furnish the Underwriter
with copies thereof; (iii) advise the Underwriter, promptly after it receives
notice thereof, of the issuance by the Commission of any stop order or of any
order preventing or suspending the use of any Preliminary Prospectus or
prospectus, of the suspension of the qualification of the Notes for offering or
sale in any jurisdiction, of the initiation or threatening of any proceeding
relating to the offering or sale of the Notes, or of any request by the
Commission for the amending or supplementing of the Registration Statement or
Prospectus or for additional information; and (iv) in the event of the issuance
of any stop order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus or suspending any such qualification,
promptly use its best efforts to obtain the withdrawal of such order.
(b) The Company will furnish to the Underwriter, without charge,
copies of the Registration Statement (at least one copy of which will be signed
and include 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 Underwriter may
reasonably request. If the delivery of a prospectus is required at any time
after an event has occurred which results in the Prospectus, as then amended or
supplemented, including an untrue statement of a material fact or omitting to
state any material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, or, if
for any other reason it shall be necessary to amend or supplement the Prospectus
in order to comply with the Securities Act or the Trust Indenture Act, the
Company will notify the Underwriter and, upon the Underwriter's request, prepare
and furnish without charge to the Underwriter and to any dealer in securities as
many copies as the Underwriter may from time to time reasonably request an
amended Prospectus which corrects such statement or omission or effects such
compliance.
(c) The Company will cooperate with the Underwriter 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 Underwriter and by
dealers, and with the determination of their eligibility for investment, under
the laws of such jurisdictions as the Underwriter may designate and will file or
cause the Trust to 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 either the Company or the Trust 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
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<PAGE> 7
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.
(d) The Company and the Trust consent to the use, in accordance with
the securities or Blue Sky laws of such jurisdictions in which the Notes are
offered by the Underwriter and by dealers, of the Prospectus.
(e) To the extent, if any, that the ratings provided with respect to
the Notes by the Rating Agencies are conditional upon the furnishing of
documents or the taking of any other actions by Nellie Mae, the Company or the
Trust, Nellie Mae shall cause to be furnished such documents and such other
actions to be taken.
(f) So long as any of the Notes are outstanding, the Company or the
Trust will furnish to the Underwriter (i) as soon as available, a copy of each
document relating to the Trust or the Notes required to be filed with the
Commission pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or any order of the Commission thereunder, and (ii) such other
information concerning the Company, Nellie Mae or the Trust as the Underwriter
may request from time to time.
(g) To make generally available to the Noteholders as soon as
practicable, but in any event not later than eighteen months after the effective
date of the Registration Statement (as defined in Rule 158(c) under the
Securities Act), an earnings statement of the Company and it subsidiaries (which
need not be audited) complying with Section 11(a) of the Act and the rules and
regulations of the Commission thereunder (including, at the option of the
Company, Rule 158).
(h) If this Agreement shall terminate or shall be terminated after
execution and delivery pursuant to any provisions hereof or if this Agreement
shall be terminated by the Underwriter because of any failure or refusal on the
part of the Company, Nellie Mae or the Trust to comply with the terms or fulfill
any of the conditions of this Agreement, the Company and Nellie Mae agree
jointly and severally to reimburse the Underwriter for all out-of-pocket
expenses (including fees and expenses of its counsel) reasonably incurred by it
in connection herewith, but without any further obligation on the part of the
Company or Nellie Mae for loss of profits or otherwise.
(i) The net proceeds from the sale of the Notes hereunder will be
applied substantially in the manner specified under the caption "Use of
Proceeds."
(j) Except as stated in this Agreement and in the Prospectus,
neither the Company, the Trust nor Nellie Mae has taken, nor will any of them
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.
(k) Deposits required by the Indenture into the Acquisition Account,
the Pre-Funding Account and the Debt Service Reserve Fund shall be made on the
Closing Date.
5. Indemnification and Contribution. (a) The Company and Nellie Mae
jointly and severally agree to indemnify and hold harmless the Underwriter and
each person, if any, who controls the Underwriter within the meaning of Section
15 of the Securities 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 any Registration
Statement, the Prospectus, or in any amendment or supplement thereto, or any
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<PAGE> 8
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 the Underwriter furnished in writing to the
Company by or on behalf of the 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 the Underwriter (or to the benefit of any person controlling the
Underwriter) on account of any such loss, claim, damage, liability or expense
arising from the sale of the Series of Notes covered thereby by the 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 relating to such Series of Notes and the
Underwriter sold Notes of such Series 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 the Underwriter. The foregoing indemnity
agreement shall be in addition to any liability which the Company or Nellie Mae
may otherwise have.
(b) If any action, suit or proceeding shall be brought against the
Underwriter or any person controlling the Underwriter in respect of which
indemnity may be sought against the Company or Nellie Mae, the Underwriter or
such controlling person, as the case may be, shall promptly notify the parties
against whom indemnification is being sought (the "indemnifying parties"), and
such indemnifying parties shall assume the defense thereof, including the
employment of counsel and payment of all fees and expenses. The Underwriter or
any such controlling person, as the case may be, 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 the 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 representation of such indemnified party
and any indemnifying party by the same counsel would be inappropriate under
applicable standards of professional conduct (whether or not such representation
by the same counsel has been proposed) due to actual or potential differing
interests between them (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
the Underwriter and controlling persons not having actual or potential differing
interests with the Underwriter or among themselves, which firm shall be
designated in writing by Smith Barney Inc., and that all such fees and expense
shall be reimbursed on a monthly basis. The indemnifying parties shall not be
liable for any settlement of any such action, suit or proceeding effected
without their written consent, but if settled with such written consent, or if
there be a final judgment for the plaintiff in any such action, suit or
proceeding, the indemnifying parties agree to indemnify and hold harmless the
Underwriter, to the extent provided in paragraph (a), and any such controlling
person from and against any loss, claim, damage, liability or expense by reason
of such settlement or judgment.
(c) The Underwriter agrees to indemnify and hold harmless the Company,
Nellie Mae and their respective directors and officers, and any person who
controls the Company of Nellie Mae within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
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<PAGE> 9
indemnity from the Company and Nellie Mae to the Underwriter set forth in
paragraph (a) hereof, but only with respect to information relating to the
Underwriter furnished in writing by or on behalf of the 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 or Nellie Mae, any of their
respective 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 the Underwriter pursuant to this paragraph (c), the Underwriter
shall have the rights and duties given to the Company and Nellie Mae by
paragraph (b) above (except that if the Company or Nellie Mae 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 the Underwriter's expense), and
the Company and Nellie Mae, their respective directors and officers, and any
such controlling person shall have the rights and duties given to the
Underwriter by paragraph (b) above. The foregoing indemnity agreement shall be
in addition to any liability which the Underwriter may otherwise have.
(d) If the indemnification provided for is 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 and Nellie Mae on the one hand and the 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 and Nellie Mae on the one hand and the
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 and Nellie Mae on the one hand and the 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 the underwriter.
The relative fault of the Company and Nellie Mae on the one hand and the
Underwriter 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 or Nellie Mae on the one hand or by the 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 Underwriter 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, the Underwriter shall not be
required to contribute any amount in excess of the amount received by the
Underwriter over the price paid by the Underwriter for the Notes purchased by it
and distributed to the public less the amount of any damages which the
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
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
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<PAGE> 10
(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, Nellie Mae and the Underwriter
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 Underwriter, the
Company or Nellie Mae 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
Underwriter, the Company or Nellie Mae 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 Underwriter's Obligations. The obligations of the
Underwriter to purchase the Notes hereunder are subject to the following
conditions:
(a) All actions required to be taken and all filings required to be
made by the Company or the Trust under the Securities Act and the Trust
Indenture 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
Underwriter, 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) or net worth of the
Company or the Trust not contemplated by the Registration Statement, which in
the opinion of the Underwriter, would materially adversely affect the market for
the Notes, or (ii) 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 Underwriter and its 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 Underwriter, materially adversely
affect the market for the Notes.
(c) The Notes, each of the Basic Documents and this Agreement shall
have been duly authorized, executed and delivered in the form heretofore
approved by the Underwriter.
(d) The Underwriter shall have received on the Closing Date an
opinion of Mintz, Levin, Cohen, Ferris, Glovsky and Popeo, P.C., counsel for the
Company, dated the Closing Date and addressed to the Underwriter in form and
scope satisfactory to the Underwriter and its counsel.
(e) The Underwriter shall have received on the Closing Date an
opinion of _________________, counsel for the Servicer, dated the Closing Date
and addressed to the Underwriter in form and scope satisfactory to the
Underwriter and its counsel.
(f) The Underwriter shall have received on the Closing Date an
opinion of Day, Berry & Howard, counsel for the Owner Trustee, dated the Closing
Date and addressed to the Underwriter in form and scope satisfactory to the
Underwriter and its counsel.
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<PAGE> 11
(g) The Underwriter shall have received on the Closing Date an
opinion of Shipman & Goodwin, counsel for the Indenture Trustee, dated the
Closing Date and addressed to the Underwriter in form and scope satisfactory to
the Underwriter and its counsel.
(h) The Underwriter shall have received on the Closing Date an
opinion or opinions of Palmer & Dodge LLP, counsel for the Underwriter, dated
the Closing Date, and addressed to the Underwriter, in form and scope
satisfactory to the Underwriter.
(i) The Underwriter shall have received on the Closing Date from
Coopers & Lybrand, LLP a letter dated the Closing Date, and in form and
substance satisfactory to the Underwriter, to the effect that they have carried
out certain specified procedures, not constituting an audit, with respect to
certain information regarding the Financed Loans and setting forth the results
of such specified procedures.
(j) All the representations and warranties of the Trust, the Company
and Nellie Mae 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.
(k) The Company, the Trust and Nellie Mae shall 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.
(l) The Underwriter shall have received by instrument dated the
Closing Date (at the option of the Underwriter), in addition to the opinions
referred to in clauses (c) through (g) of this Section 6, the right to rely on
opinions provided by such counsel and all other counsel under the terms of the
Basic Documents or to Moody's and Fitch.
(m) The Underwriter shall have received evidence satisfactory to it
that Moody's and Fitch have rated each Class of Notes "Aaa" and "AAA",
respectively, and there has not been any announcement by Moody's or Fitch that
(i) it is downgrading any of its ratings assigned to the Notes or (ii) it is
reviewing its ratings assigned to the Notes with a view to possible downgrading,
or with negative implications, or direction not determined.
(n) The Underwriter shall have received a certificate of the
Servicer in form and substance satisfactory to the Underwriter, signed by an
officer of the Servicer, dated the Closing Date, to the effect that (A) the
information describing the Servicer in the Prospectus is true and correct and
does not contain any untrue statement of a material fact and does not omit to
state a material fact that should be stated therein or is necessary to make the
statements in such Prospectus relating to such Servicer, in light of the
circumstances under which they were made, not misleading; (B) the Servicing
Agreement and the Custody Agreement have been duly authorized, executed and
delivered by the Servicer, are in full force and effect, and constitute the
legal, valid and binding obligations of the Servicer, enforceable in accordance
with their respective terms; and (C) to the best of its knowledge, no litigation
or proceedings are pending or threatened seeking to restrain, enjoin or in any
way limit the performance by the Servicer of the Servicing Agreement or the
Custody Agreement or which would in any manner challenge or adversely affect the
corporate existence or power of the Servicer to enter into and carry out the
transactions described in or contemplated by, or the execution, delivery,
validity or performance by the Servicer of the terms and provisions of, the
Servicing Agreement or the Custody Agreement, or involving any of the property
or assets under the control of the Servicer, which involves the possibility of
any judgment which may adversely affect the ability of the Servicer to performs
its obligations under the Servicing Agreement and the Custody Agreement.
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<PAGE> 12
(o) The Underwriter shall have received a certificate of the Chief
Financial Officer of the Company, Nellie Mae and/or the Trust, as applicable,
affirming the matters specified in Sections 6(k), (l) and (m) and such other
matters as the Underwriter may reasonably request.
(p) The Underwriter shall have received (i) a certificate or
certificates from the Secretary, Clerk or comparable officer of each of the
Company, NMI Education Loan Corporation and Nellie Mae certifying and attaching
copies of (A) organizational documents, (B) resolutions authorizing this
Agreement and the Basic Documents and the transactions contemplated hereby and
thereby, (C) all written communications, and any memoranda relating to
conversations between such entity, its officers and employees or, to its
knowledge, its counsel, accountants or other representatives, on the one hand,
and the Commission or its staff, on the other hand, relating to the Registration
Statement and certifying the incumbency and signature of the officers executing
this Agreement and the Basic Documents; and (ii) certificates of legal existence
and good standing with respect to Nellie Mae, NMI Education Loan Corporation and
the Company from the Secretary of The Commonwealth of Massachusetts, dated as of
the Closing Date or such earlier date within two weeks of the Closing Date.
(q) The Underwriter shall have received a certificate of the
Indenture Trustee, signed by an officer of the Indenture Trustee, dated the
Closing Date, to the effect that the Indenture Trustee received each of the
items enumerated in Section 2.11 of the Indenture.
(r) The Underwriter shall have received such further certificates
and documents as the Underwriter shall have requested.
All opinions, certificates, letters and other documents referred in
this Section 6 will be in compliance with the provisions hereof only if they are
reasonably satisfactory in form and substance to the Underwriter and counsel for
the Underwriter.
Any certificate or document signed by any officer of the Company or
Nellie Mae and delivered to the Underwriter, or to counsel for the Underwriter,
shall be deemed a representation and warranty by the Company or Nellie Mae,
respectively, to the Underwriter as to the statements made therein.
7. Expenses. The Company and Nellie Mae, jointly and severally, agree
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 them and the Trust
of their respective obligations hereunder: (i) the preparation, printing or
reproduction of any Registration Statement and each amendment or supplement
thereto and each other Basic Document; (ii) the preparation, printing,
authentication, issuance and delivery of definitive certificates for the Notes;
(iii) the qualification of the Indenture under the Trust Indenture Act; (iv) the
fees and disbursements of (A) the Company's counsel, (B) the Indenture Trustee
and its counsel, (C) the Owner Trustee and its counsel, (D) the Depository Trust
Company in connection with the book-entry registration of the Notes and (E)
Coopers & Lybrand LLP, accountants for the Company and issuer of the specified
procedures letter referenced in Section 6(i); (v) the fees charged by Moody's
and Fitch for rating the Notes; and (vi) the cost of any advertising expenses
requested or undertaken by the Company, or Nellie Mae and incurred in connection
with the public offering of the Notes. The Underwriter shall be under no
obligation to pay any expense incident to the performance of the obligations of
the Company or Nellie Mae hereunder.
The Underwriter shall pay the cost of preparation, reproduction and
distribution of the Preliminary Prospectus and the final Prospectus distributed
to investors (excluding any amendments or supplements thereto) and this
Agreement and all other expenses incurred by it in connection with its public
offering and
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<PAGE> 13
distribution of the Notes, including the cost of preparing, printing and
delivering the Preliminary Blue Sky Memorandum and all other underwriting
documents and the fees and disbursements of its counsel.
8. Effective Date of Agreement. This Agreement shall become effective
upon the execution and delivery hereof by all the parties hereto.
9. Termination of Agreement. This Agreement shall be subject to
termination in the absolute discretion of the Underwriter, without liability on
the part of the Underwriter to the Company, Nellie Mae or the Trust, by notice
to the Company, Nellie Mae and the Trust, 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
or Massachusetts shall have been declared by either federal or state
authorities, (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 Underwriter, impracticable or inadvisable to commence or continue the
offering of the Notes on the terms set forth in the Prospectus or to enforce
contracts for the resale of the Notes by the Underwriter, (iv) legislation shall
be enacted by the Congress of the United States or a decision by a court of the
United States or the Tax Court of the United States shall be rendered, or an
officially published ruling, regulation, proposed regulation or official
statement by or on behalf of the Treasury Department of the United States, the
Internal Revenue Service or any other governmental agency shall be made, with
respect to federal taxation upon revenues or other income of the general
character expected to be pledged under the Indenture or upon interest received
on securities of the general character of the Notes, or which would have the
effect of changing, directly or indirectly, the federal income tax consequences
of interest on securities of the general character of the Notes in the hands of
the holders thereof, which in the opinion of the Underwriter materially affects
the market price of the Notes, (v) legislation shall be enacted by The
Commonwealth of Massachusetts, or a decision by a court of competent
jurisdiction of The Commonwealth of Massachusetts or any administrative tribunal
of The Commonwealth of Massachusetts or other governmental agency or department
thereof shall be rendered with respect to taxation by The Commonwealth of
Massachusetts or any of its political subdivisions upon revenues or other income
of the general character expected to be pledged under the Indenture or upon
interest received on securities of the general character of the Notes, or which
would have the effect of changing, directly or indirectly, the tax consequences
under The Commonwealth of Massachusetts tax law of interest on securities of the
general character of the Notes in the hands of the holders thereof, which in the
opinion of the Underwriter materially affects the market price of the Notes or
(vi) additional material restrictions not in force as of the date hereof shall
have been imposed upon trading in securities of the general character of the
Notes by any governmental authority or by any national securities exchange.
Notice of such termination may be given to the Company, Nellie Mae and the
Trust, by telegram, telecopy or telephone and shall be subsequently confirmed by
letter.
10. Information Furnished by the Underwriter. The statements set forth
under the heading "Underwriting" in the Prospectus constitute the only
information furnished by or on behalf of the Underwriter as such information is
referred to in Sections 3(c) and 5 hereof.
11. Miscellaneous. Except as otherwise provided in Section 4 hereof,
notice given pursuant to any provision of this Agreement shall be in writing and
shall be delivered (i) if to the Company or Nellie Mae, at 50 Braintree Hill
Park, Suite 300, Braintree, Massachusetts 02184, Attention Chief Financial
Officer, (ii) if to the Trust, at the office of the Owner Trustee, One Federal
Street, Boston, Massachusetts 02110, Attention: Corporate Trust Services and
(iii) if to the Underwriter, to Smith Barney Inc., 1345 Avenue of the Americas,
46th Floor, New York, NY 10105, Attention: Manager, Securitization Group.
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<PAGE> 14
This Agreement has been and is made solely for the benefit of the
Underwriter, the Company, Nellie Mae, the Trust, 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 the Underwriter of any of
the Notes in his status as such purchaser.
12. 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.
Fleet National Bank acts solely as Owner Trustee and not in its
individual capacity and no trustee, shareholder, officer, employee or agent of
Fleet National Bank shall be held personally liable in connection with the
affairs of the Trust.
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.
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<PAGE> 15
Please confirm that the foregoing correctly sets forth the agreement
among the Company, the Trust, Nellie Mae and the Underwriter.
Very truly yours,
NELLIE MAE EDUCATION LOAN TRUST
By Fleet National Bank
as Owner Trustee
By_________________________________
Name:
Title:
NELLIE MAE EDUCATION FUNDING, LLC
By_________________________________
Name:
Title: Manager
NELLIE MAE, INC.
By_________________________________
Name:
Title:
Confirmed as of the date first
above mentioned.
SMITH BARNEY INC.
By:___________________________
Name:
Title:
15
<PAGE> 1
EXHIBIT 1.2
NELLIE MAE EDUCATION LOAN TRUST
$___________ Libor Rate Asset Backed Certificates
Underwriting Agreement
SMITH BARNEY INC.
390 Greenwich Street
New York, NY 10013
Dear Sirs:
Nellie Mae Education Funding, LLC, a limited liability company
organized under the laws of The Commonwealth of Massachusetts (the "Company")
which is 99% owned by Nellie Mae, Inc., a non-profit corporation organized and
existing under the laws of The Commonwealth of Massachusetts ("Nellie Mae"), has
formed a business trust known as the Nellie Mae Education Loan Trust (the
"Trust") under the laws of The Commonwealth of Massachusetts. The Company
proposes to sell to Smith Barney Inc. (the "Underwriter"), pursuant to the terms
of this Underwriting Agreement (this "Agreement"), an aggregate of $__________
Libor Rate Asset Backed Certificates issued pursuant to a Trust Agreement and
the First Trust Supplement. Fleet National Bank, a national banking association,
will act as the Owner Trustee of the Trust.
Capitalized terms used but not defined herein have the respective
meanings ascribed to such terms in Exhibit A to the Indenture.
1. Agreement to Sell, Purchase and Resell
(a) The Company hereby agrees, subject to all of the terms and
conditions set forth herein, to sell to the Underwriter and, upon the basis of
the representations, warranties and agreements of the Company and Nellie Mae
herein contained and subject to all of the terms and conditions set forth
herein, the Underwriter agrees to purchase from the Company, the Certificates at
a purchase price equal to the principal amount of the Certificates less an
underwriting discount equal to [_____%] of the principal amount of the
Certificates.
(b) It is understood that the Underwriter proposes to offer the
Certificates for sale to the public (which may include selected dealers) as set
forth in the Prospectus.
2. Delivery of the Certificates and Payment Therefor. Delivery to the
Underwriter of, and payment for, the Certificates to be sold pursuant to this
Agreement shall be made at the offices of Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C., One Financial Center, Boston, Massachusetts 02111 at 10:00
a.m., Boston time, on ___________________, 1996 (the "Closing Date"). The place
of such closing and the Closing Date may be varied by agreement among the
Underwriter and the Company.
The Certificates will be delivered to the Underwriter against
payment of the purchase price therefor in Federal Funds, by wire or such other
form of payment as to which the parties may agree. The Certificates will be
evidenced by a single global security in definitive form and/or by additional
definitive
<PAGE> 2
securities and will be registered in the name of Cede & Co., as nominee of The
Depository Trust Company. The Certificates to be delivered to the Underwriter
shall be made available to the Underwriter in New York City for inspection and
packaging not later than 9:30 a.m., New York City time, on the business day next
preceding the Closing Date.
3. Representations and Warranties of the Company and Nellie Mae. The
Company and Nellie Mae represent and warrant to, and agree with, the Underwriter
that:
(a) A registration statement on Form S-3 (File No. 333-4418)
relating to the Certificates, including a form of prospectus, has been filed
with the Securities and Exchange Commission (the "Commission"); such
registration statement and any post-effective amendment thereto, each in the
form previously delivered to the Underwriter, excluding exhibits to such
registration statement, have been declared effective under the Securities Act of
1933, as amended (the Securities Act"); no other document with respect to such
registration statement has heretofore been filed with the Commission. The term
"Registration Statement," as used in this Agreement, means such registration
statement, as amended, at the time each part thereof became effective and shall
be deemed to include all information omitted therefrom in reliance upon Rule
430A and contained in the Prospectus referred to below. The term "Registration
Statement" as used in this Agreement shall include any registration statement
relating to the Notes that is filed and declared effective pursuant to Rule
462(b) under the Securities Act. The term "Prospectus" as used in this Agreement
means the final prospectus, as first filed with the Commissioner pursuant to
Rule 424(b) under the Securities Act. The term "Preliminary Prospectus" as used
in this Agreement means the prospectus subject to completion in the form
included in the Registration Statement at the time of the initial filing of the
Registration Statement with the Commission, and as such prospectus shall have
been amended from time to time prior to the date of the Prospectus. For purposes
of the following representations and warranties, to the extent reference is made
to the Prospectus and at the relevant time the Prospectus is not yet in
existence, such reference shall be deemed to be to the most recent Preliminary
Prospectus.
(b) No order preventing or suspending the use of any Preliminary
Prospectus or prospectus has been issued by the Commission or any state
regulatory authority.
(c) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of the
Securities Act and the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act") and the rules and regulations of the Commission thereunder and
do not and will not, as of the applicable effective date as to any part of the
Registration Statement and any amendment thereto and as of the applicable filing
date as to the Prospectus and any amendment or supplement thereto, contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading;
provided, however, that this representation and warranty shall not apply to any
statements made in reliance upon and in conformity with information furnished in
writing to the Company by the Underwriter expressly for use therein;
(d) 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.
(e) 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, Nellie Mae, the Trust or any of
their affiliates for the consummation of the transactions contemplated by this
Agreement shall have been obtained, except as otherwise provided in the Basic
Documents.
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<PAGE> 3
(f) The Trust has the requisite power and authority to execute,
deliver and perform its obligations under the Master Indenture and the First
Terms Supplement. The Master Indenture and the First Terms Supplement have been
duly and validly authorized by the Trust and, upon their execution and delivery
by the Trust, assuming due authorization, execution and delivery by the
Indenture Trustee, will be duly executed and delivered by the Trust and will
constitute valid and legally binding agreements of the Trust, enforceable in
accordance with their terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other
similar laws of general applicability affecting creditors' rights or general
equitable principles. The Master Indenture and First Terms Supplement conform in
all material respects to the descriptions thereof in the Prospectus.
(g) The Trust has the requisite power and authority to issue the
Notes. The Notes have been duly authorized by the Trust and, when executed by
the Trust, authenticated by the Indenture Trustee in accordance with the
Indenture and delivered to the Underwriter against payment therefor in
accordance with the terms hereof, will have been validly issued and delivered,
and will constitute valid and legally binding obligations of the Trust 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 of general applicability
relating to or affecting creditors' rights or general equitable principles. The
Notes conform in all material respects to the description thereof in the
Prospectus.
(h) The Company has the requisite power and authority to execute,
deliver and perform its obligations under the Trust Agreement and the First
Trust Supplement. The Trust Agreement and the First Trust Supplement have been
duly and validly authorized, executed and delivered by the Company and, assuming
due authorization and execution by the Owner Trustee, constitute valid and
legally binding agreements of the Company, enforceable in accordance with their
terms, except as enforcement thereof may be limited by bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium or other similar laws of general
applicability relating to or affecting creditors' rights or general equitable
principles. The Trust Agreement and the First Trust Supplement to the Trust
Agreement conform in all material respects to the descriptions thereof in the
Prospectus.
(i) The Trust has the requisite power and authority to issue the
Certificates, which represent undivided interests in the Trust. The Certificates
have been duly authorized by the Trust and, when delivered to the Underwriter
against payment therefor in accordance with the terms thereof, will have been
validly issued and delivered, and will constitute valid and legally binding
obligations of the Trust, enforceable in accordance with their terms. The
Certificates conform in all material respects to the description thereof in the
Prospectus.
(j) The Company and the Trust each have the requisite power and
authority to execute, deliver and perform its obligations under the Master Terms
Sales Agreement and the First Supplemental Sales Agreement. The Master Terms
Sales Agreement and the First Supplemental Sales Agreement have been duly and
validly authorized by each of the Company and the Trust and, upon execution and
delivery, will be duly executed and delivered by each of the Company and the
Trust and will constitute valid and legally binding agreements of the Company
and the Trust, enforceable in accordance with their terms, except as enforcement
thereof may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or other similar laws of general applicability
relating to or affecting creditors' rights or general equitable principles. The
Master Terms Sales Agreement and the First Supplemental Sales Agreement conform
in all material respects to the descriptions thereof in the Prospectus.
(k) The Company and Nellie Mae each have the requisite power and
authority to execute, deliver and perform its obligations under the Master Terms
Purchase Agreement and the First
3
<PAGE> 4
Supplemental Purchase Agreement. The Master Terms Purchase Agreement and the
First Supplemental Purchase Agreement have been duly and validly authorized by
each of the Company, and Nellie Mae and, upon execution and delivery, will be
duly executed and delivered by each of the Company and Nellie Mae and will
constitute valid and legally binding agreements of the Company and Nellie Mae,
enforceable in accordance with their terms, except as enforcement thereof may be
limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium or other similar laws of general applicability relating to or
affecting creditors' rights or general equitable principles. The Master Terms
Purchase Agreement and the First Supplemental Purchase Agreement conform in all
material respects to the descriptions thereof in the Prospectus.
(l) Nellie Mae and the Trust each have the requisite power and
authority to execute, deliver and perform its obligations under the
Administration Agreement. The Administration Agreement has been duly and validly
authorized by each of Nellie Mae and the Trust and, upon execution and delivery,
assuming due authorization, execution and delivery, by the Owner Trustee and the
Indenture Trustee, will be duly executed and delivered by each of Nellie Mae and
the Trust and will constitute a valid and legally binding agreement of each of
Nellie Mae and the Trust, enforceable in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium or other similar laws of general
applicability relating to or affecting creditors' rights or general equitable
principles. The Administration Agreement conforms in all material respects to
the description thereof in the Prospectus.
(m) The Trust has the requisite power and authority to execute,
deliver and perform its obligations under the Custody Agreement and the
Servicing Agreement. The Custody Agreement and the Servicing Agreement have been
duly and validly authorized by the Trust and, upon execution and delivery,
assuming due authorization, execution and delivery by the Indenture Trustee (in
the case of the Custody Agreement) and the Servicer (in the case of the
Servicing Agreement), will be duly executed and delivered by the Trust and will
constitute valid and legally binding agreements of the Trust, enforceable in
accordance with their terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other
similar laws of general applicability relating to or affecting creditors rights
or general equitable principles. The Custody Agreement and the Servicing
Agreement conform in all material respects to the descriptions thereof in the
Prospectus.
(n) The Company is a limited liability company and Nellie Mae is a
non-profit corporation, and each is duly organized, validly existing and in good
standing under the laws of The Commonwealth of Massachusetts, with the requisite
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 could not have a material adverse effect on its condition (financial or
other), business, prospectus, properties, net worth or results of operations.
(o) The Trust is a business trust duly formed and validly existing
under the laws of The Commonwealth of Massachusetts with full power and
authority to issue the Certificates.
(p) There are no legal or governmental proceedings pending or, to
the knowledge of the Company or Nellie Mae, threatened, against the Company,
Nellie Mae or the Trust, or to which the Company, Nellie Mae, the Trust or any
of their respective properties is subject, that are not disclosed in the
Prospectus and which, if adversely decided, are reasonably likely to materially
affect the issuance of the Certificates or the consummation of the transactions
contemplated hereby or by the Basic Documents.
4
<PAGE> 5
(q) Neither the offer, sale or delivery of the Certificates by the
Company nor the execution, delivery or performance of this Agreement or any of
the Basic Documents by the Company, Nellie Mae or the Trust nor the consummation
by the Company, Nellie Mae or the Trust 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 federal securities laws 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 (ii) conflicts or will conflict with or
constitutes or will constitute a breach of, or a default under, the
organizational documents of the Company, Nellie Mae or the Trust or (iii)
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, Nellie Mae or the Trust is a
party or by which the Company, Nellie Mae or the Trust or any of their
respective properties may be bound, or (iv) violates or will violate in any
material respect any statute, law, regulation or filing or judgment, injunction,
order or decree applicable to the Company, Nellie Mae or the Trust or any of
their respective properties, or (v) results or will result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Company, Nellie Mae or the Trust pursuant to the terms of any agreement or
instrument to which any is a party or by which any may be bound or to which any
of their respective properties is subject other than as contemplated by the
Basic Documents.
(r) The Company, Nellie Mae and the Trust each have all requisite
power and authority to execute, deliver and perform its obligations under this
Agreement; the execution and delivery of, and the performance by each of the
Company, Nellie Mae and the Trust of its respective obligations under this
Agreement have been duly and validly authorized by the Company, Nellie Mae and
the Trust, respectively, and this Agreement has been duly executed and delivered
by each of them and constitutes the valid and legally binding agreement of each
of them, enforceable against each of them in accordance with its terms, except
as the enforcement may be limited by bankruptcy, insolvency, moratorium,
fraudulent conveyance or other similar laws relating to or affecting creditors'
rights generally or general equitable principles, and except as rights to
indemnity and contribution hereunder may be limited by federal or state
securities laws or principles of public policy.
(s) The Company and the Trust each has, and has no reason to believe
that any facts exist which would result in the revocation or termination of, all
necessary power, authority, licenses and approvals to purchase and own the
Financed Loans; and the Company, Nellie Mae and the Trust each to its knowledge,
after reasonable inquiry, believes the Financed Loans were originated in
compliance with all applicable consumer lending, interest rate disclosure and
usury laws.
(t) Neither the Trust nor the Company is subject to registration as
an "investment company" under the Investment Company Act of 1940, as amended
(the "1940 Act").
(u) Neither the Company, the Trust nor any of their affiliates does
business with the government of Cuba or with any person or affiliate located in
Cuba within the meaning of Section 517.075, Florida Statute and the Company
agrees to comply with such Section if prior to the completion of the
distribution of the Notes it commences doing such business.
(v) The representations and warranties made by (i) the Trust in the
Indenture and made in any officer's certificate of the Owner Trustee delivered
pursuant to the Indenture and (ii) the Company and Nellie Mae in the
Administration Agreement and made in any officer's certificate of the Company or
Nellie Mae will be true and correct at the time made and on and as of the
Closing Date.
5
<PAGE> 6
(w) On the Closing Date, the Trust will have title to the Trust
Estate, including without limitation the Financed Loans, and no lien other than
the lien of the Indenture will exist with respect to any asset which constitutes
a part of the Trust Estate securing the Certificates.
(x) The Indenture (together with the Custody Agreement as to the
Financed Loans) will create a first lien upon the Financed Loans and a valid
pledge of and perfected security interest in the entire Indenture Trust Estate,
subject only to the provisions of the Indenture and the Custody Agreement
permitting the application thereof for the purposes and on the terms and
conditions set forth therein. On the Closing Date, the Owner Trustee will have
legal title to the Indenture Trust Estate for the benefit of the Trust,
including without limitation the Financed Loans, and no lien other than the lien
of the Indenture will exist with respect to any asset which constitutes a part
of the Indenture Trust Estate securing the Notes.
4. Agreements of the Company and Nellie Mae. The Company and Nellie Mae
agree with the Underwriter as follows:
(a) The Company will prepare the Prospectus in a form approved by
the Underwriter and file such Prospectus pursuant to Rule 424(b)(1) under the
Securities Act not later than the Commission's close of business on the second
business day following the execution and delivery of this Agreement, or, if
applicable, such earlier time as may be required by Rule 430A(a)(3) or Rule
424(b) under the Securities Act; the Company will (i) make no further amendment
or any supplement to the Registration Statement or Prospectus which shall be
disapproved by the Underwriter promptly after reasonable notice thereof; (ii)
advise the Underwriter, promptly after it receives notice thereof, of the time
when any amendment to the Registration Statement has been filed or becomes
effective or any amended Prospectus has been filed and furnish the Underwriter
with copies thereof; (iii) advise the Underwriter, promptly after it receives
notice thereof, of the issuance by the Commission of any stop order or of any
order preventing or suspending the use of any Preliminary Prospectus or
prospectus, of the suspension of the qualification of the Notes for offering or
sale in any jurisdiction, of the initiation or threatening of any proceeding
relating to the offering or sale of the Notes, or of any request by the
Commission for the amending or supplementing of the Registration Statement or
Prospectus or for additional information; and (iv) in the event of the issuance
of any stop order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus or suspending any such qualification,
promptly use its best efforts to obtain the withdrawal of such order.
(b) The Company will furnish to the Underwriter, without charge,
copies of the Registration Statement (at least one copy of which will be signed
and include 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 Underwriter may
reasonably request. If the delivery of a prospectus is required at any time
after an event has occurred which results in the Prospectus, as then amended or
supplemented, including an untrue statement of a material fact or omitting to
state any material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, or, if
for any other reason it shall be necessary to amend or supplement the Prospectus
in order to comply with the Securities Act or the Trust Indenture Act, the
Company will notify the Underwriter and, upon the Underwriter's request, prepare
and furnish without charge to the Underwriter and to any dealer in securities as
many copies as the Underwriter may from time to time reasonably request an
amended Prospectus which corrects such statement or omission or effects such
compliance.
(c) The Company will cooperate with the Underwriter and with its
counsel in connection with the qualification of, or procurement of exemptions
with respect to, the Certificates for offering and sale by the Underwriter and
by dealers, and with the determination of their eligibility for investment,
under the
6
<PAGE> 7
laws of such jurisdictions as the Underwriter may designate and will file or
cause the Trust to 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 either the Company or the Trust 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.
(d) The Company and the Trust consent to the use, in accordance with
the securities or Blue Sky laws of such jurisdictions in which the Certificates
are offered by the Underwriter and by dealers, of the Prospectus.
(e) To the extent, if any, that the ratings provided with respect to
the Certificates by the Rating Agencies are conditional upon the furnishing of
documents or the taking of any other actions by Nellie Mae, the Company or the
Trust, Nellie Mae shall cause to be furnished such documents and such other
actions to be taken.
(f) So long as any of the Certificates are outstanding, the Company
or the Trust will furnish to the Underwriter (i) as soon as available, a copy of
each document relating to the Trust or the Certificates required to be filed
with the Commission pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or any order of the Commission thereunder, and (ii) such
other information concerning the Company, Nellie Mae or the Trust as the
Underwriter may request from time to time.
(g) To make generally available to the Certificateholders as soon as
practicable, but in any event not later than eighteen months after the effective
date of the Registration Statement (as defined in Rule 158(c) under the
Securities Act), an earnings statement of the Company and it subsidiaries (which
need not be audited) complying with Section 11(a) of the Act and the rules and
regulations of the Commission thereunder (including, at the option of the
company, Rule 158).
(h) If this Agreement shall terminate or shall be terminated after
execution and delivery pursuant to any provisions hereof or if this Agreement
shall be terminated by the Underwriter because of any failure or refusal on the
part of the Company, Nellie Mae or the Trust to comply with the terms or fulfill
any of the conditions of this Agreement, the Company and Nellie Mae agree
jointly and severally to reimburse the Underwriter for all out-of-pocket
expenses (including fees and expenses of its counsel) reasonably incurred by it
in connection herewith, but without any further obligation on the part of the
Company or Nellie Mae for loss of profits or otherwise.
(i) The net proceeds from the sale of the Certificates hereunder
will be applied substantially in the manner specified under the caption "Use of
Proceeds."
(j) Except as stated in this Agreement and in the Prospectus,
neither the Company, the Trust nor Nellie Mae has taken, nor will any of them
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
Certificates to facilitate the sale or resale of the Certificates.
5. Indemnification and Contribution. (a) The Company and Nellie Mae
jointly and severally agree to indemnify and hold harmless the Underwriter and
each person, if any, who controls the Underwriter within the meaning of Section
15 of the Securities 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
7
<PAGE> 8
in any 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 the Underwriter
furnished in writing to the Company by or on behalf of the 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 the Underwriter (or to the benefit of any person
controlling the Underwriter) on account of any such loss, claim, damage,
liability or expense arising from the sale of the Class of Certificates covered
thereby by the 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 relating to
such Class of Certificates and the Underwriter sold Certificates of such Class
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 the
Underwriter. The foregoing indemnity agreement shall be in addition to any
liability which the Company or Nellie Mae may otherwise have.
(b) If any action, suit or proceeding shall be brought against the
Underwriter or any person controlling the Underwriter in respect of which
indemnity may be sought against the Company or Nellie Mae, the Underwriter or
such controlling person, as the case may be, shall promptly notify the parties
against whom indemnification is being sought (the "indemnifying parties"), and
such indemnifying parties shall assume the defense thereof, including the
employment of counsel and payment of all fees and expenses. The Underwriter or
any such controlling person, as the case may be, 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 the 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 representation of such indemnified party
and any indemnifying party by the same counsel would be inappropriate under
applicable standards of professional conduct (whether or not such representation
by the same counsel has been proposed) due to actual or potential differing
interests between them (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
the Underwriter and controlling persons not having actual or potential differing
interests with the Underwriter or among themselves, which firm shall be
designated in writing by Smith Barney Inc., and that all such fees and expense
shall be reimbursed on a monthly basis. The indemnifying parties shall not be
liable for any settlement of any such action, suit or proceeding effected
without their written consent, but if settled with such written consent, or if
there be a final judgment for the plaintiff in any such action, suit or
proceeding, the indemnifying parties agree to indemnify and hold harmless the
Underwriter, to the extent provided in paragraph (a), and any such controlling
person from and against any loss, claim, damage, liability or expense by reason
of such settlement or judgment.
(c) The Underwriter agrees to indemnify and hold harmless the Company,
Nellie Mae and their respective directors and officers, and any person who
controls the Company of Nellie Mae within
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<PAGE> 9
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act to the same extent as the indemnity from the Company and Nellie Mae to the
Underwriter set forth in paragraph (a) hereof, but only with respect to
information relating to the Underwriter furnished in writing by or on behalf of
the 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 or Nellie
Mae, any of their respective 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 the Underwriter pursuant to this paragraph
(c), the Underwriter shall have the rights and duties given to the Company and
Nellie Mae by paragraph (b) above (except that if the Company or Nellie Mae
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 the Underwriter's
expense), and the Company and Nellie Mae, their respective directors and
officers, and any such controlling person shall have the rights and duties given
to the Underwriter by paragraph (b) above. The foregoing indemnity agreement
shall be in addition to any liability which the Underwriter may otherwise have.
(d) If the indemnification provided for is 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 and Nellie Mae on the one hand and the 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 and Nellie Mae on the one hand and the
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 and Nellie Mae on the one hand and the 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 the underwriter.
The relative fault of the Company and Nellie Mae on the one hand and the
Underwriter 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 or Nellie Mae on the one hand or by the 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 Underwriter 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, the Underwriter shall not be
required to contribute any amount in excess of the amount received by the
Underwriter over the price paid by the Underwriter for the Certificates
purchased by it and distributed to the public less the amount of any damages
which the Underwriter has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
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<PAGE> 10
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities 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, Nellie Mae and the Underwriter
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 Underwriter, the
Company or Nellie Mae or any person controlling any of them or their respective
directors or officers, (ii) acceptance of any Certificates and payment therefor
hereunder, and (iii) any termination of this Agreement. A successor to the
Underwriter, the Company or Nellie Mae 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 Underwriter's Obligations. The obligations of the
Underwriter to purchase the Certificates hereunder are subject to the following
conditions:
(a) All actions required to be taken and all filings required to be
made by the Company or the Trust under the Securities Act and the Trust
Indenture Act prior to the sale of the Certificates 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 Underwriter, 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) or net worth of the
Company or the Trust not contemplated by the Registration Statement, which in
the opinion of the Underwriter, would materially adversely affect the market for
the Certificates, or (ii) 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 Underwriter and its 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 Underwriter, materially adversely
affect the market for the Certificates.
(c) The Certificates, the Notes, each of the Basic Documents and
this Agreement shall have been duly authorized, executed and delivered in the
form heretofore approved by the Underwriter.
(d) The Underwriter shall have received on the Closing Date an
opinion of Mintz, Levin, Cohen, Ferris, Glovsky and Popeo, P.C., counsel for the
Company, dated the Closing Date and addressed to the Underwriter in form and
scope satisfactory to the Underwriter and its counsel.
(e) The Underwriter shall have received on the Closing Date an
opinion of Day, Berry & Howard, counsel for the Owner Trustee, dated the Closing
Date and addressed to the Underwriter in form and scope satisfactory to the
Underwriter and its counsel.
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<PAGE> 11
(f) The Underwriter shall have received on the Closing Date an
opinion or opinions of Palmer & Dodge LLP, counsel for the Underwriter, dated
the Closing Date, and addressed to the Underwriter, in form and scope
satisfactory to the Underwriter.
(g) The Underwriter shall have received on the Closing Date from
Coopers & Lybrand, LLP a letter dated the Closing Date, and in form and
substance satisfactory to the Underwriter, to the effect that they have carried
out certain specified procedures, not constituting an audit, with respect to
certain information regarding the Financed Loans and setting forth the results
of such specified procedures.
(h) All the representations and warranties of the Trust, the Company
and Nellie Mae 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.
(i) The Company, the Trust and Nellie Mae shall 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.
(j) The Underwriter shall have received by instrument dated the
Closing Date (at the option of the Underwriter), in addition to the opinions
referred to in clauses (c) through (g) of this Section 6, the right to rely on
opinions provided by such counsel and all other counsel under the terms of the
Basic Documents or to Moody's and Fitch.
(k) The Underwriter shall have received evidence satisfactory to it
that Moody's and Fitch have rated the Certificates "A2" and "A", respectively,
and there has not been any announcement by Moody's or Fitch that (i) it is
downgrading its ratings assigned to the Certificates or (ii) it is reviewing its
rating assigned to the Certificates with a view to possible downgrading, or with
negative implications, or direction not determined.
(l) The Underwriter shall have received a certificate of the Chief
Financial Officer of the Company, the Trust and/or Nellie Mae, as applicable
affirming the matters specified in Sections 6(i), (j) and (k) and such other
matters as the Underwriter may reasonably request.
(m) The Underwriter shall have received (i) a certificate or
certificates from the Secretary, Clerk or comparable officer of each of the
Company, NMI Education Loan Corporation and Nellie Mae certifying and attaching
copies of (A) organizational documents, (B) resolutions authorizing this
Agreement and the Basic Documents and the transactions contemplated hereby and
thereby, (C) all written communications, and any memoranda relating to
conversations between such entity, its officers and employees or, to its
knowledge, its counsel, accountants or other representatives, on the one hand,
and the Commission or its staff, on the other hand, relating to the Registration
Statement and certifying the incumbency and signature of the officers executing
this Agreement and the Basic Documents; and (ii) certificates of legal existence
and good standing with respect to Nellie Mae, NMI Education Loan Corporation and
the Company from the Secretary of The Commonwealth of Massachusetts, dated as of
the Closing Date or such earlier date within two weeks of the Closing Date.
(n) The Underwriter shall have received a duly executed and
delivered copy of the Underwriting Agreement regarding the 1996 Notes and Nellie
Mae and the Company shall be in compliance with the terms thereof.
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<PAGE> 12
(o) The Underwriter shall have received such further certificates
and documents as the Underwriter shall have requested.
All opinions, certificates, letters and other documents referred in
this Section 6 will be in compliance with the provisions hereof only if they are
reasonably satisfactory in form and substance to the Underwriter and counsel for
the Underwriter.
Any certificate or document signed by any officer of the Company or
Nellie Mae and delivered to the Underwriter, or to counsel for the Underwriter,
shall be deemed a representation and warranty by the Company or Nellie Mae,
respectively, to the Underwriter as to the statements made therein.
7. Expenses. The Company and Nellie Mae, jointly and severally, agree
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 them and the Trust
of their respective obligations hereunder: (i) the preparation, printing or
reproduction of any Registration Statement and each amendment or supplement
thereto and each other Basic Document; (ii) the preparation, printing,
authentication, issuance and delivery of definitive certificates for the
Certificates; (iii) the fees and disbursements of (A) the Company's counsel, (B)
the Indenture Trustee and its counsel; (C) the Owner Trustee and its counsel,
(D) the Depository Trust Company in connection with the book-entry registration
of the Certificates and (E) Coopers & Lybrand LLP; accountants for the Company
and issuer of the specified procedures letter referenced in Section 6(g); (iv)
the fees charged by Moody's and Fitch for rating the Certificates; and (v) the
cost of any advertising expenses requested or undertaken by the Company, or
Nellie Mae and incurred in connection with the public offering of the
Certificates. The Underwriter shall be under no obligation to pay any expenses
incident to the performance of the obligations of the Company or Nellie Mae
hereunder.
The Underwriter shall pay the cost of preparation, reproduction and
distribution of the Preliminary Prospectus and the final Prospectus distributed
to investors (excluding any amendments or supplements thereto) and this
Agreement and all other expenses incurred by it in connection with its public
offering and distribution of the Certificates, including the cost of preparing,
printing and delivering the Preliminary Blue Sky Memorandum and all other
underwriting documents and the fees and disbursements of its counsel.
8. Effective Date of Agreement. This Agreement shall become effective
upon the execution and delivery hereof by all the parties hereto.
9. Termination of Agreement. This Agreement shall be subject to
termination in the absolute discretion of the Underwriter, without liability on
the part of the Underwriter to the Company, Nellie Mae or the Trust, by notice
to the Company, Nellie Mae and the Trust, 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
or Massachusetts shall have been declared by either federal or state
authorities, (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 Underwriter, impracticable or inadvisable to commence or continue the
offering of the Certificates on the terms set forth in the Prospectus or to
enforce contracts for the resale of the Certificates by the Underwriter, (iv)
legislation shall be enacted by the Congress of the United States or a decision
by a court of the United States or the Tax Court of the United States shall be
rendered, or an officially published ruling, regulation, proposed regulation or
official statement by or on behalf of the Treasury Department of the United
States, the Internal Revenue Service or any other governmental agency shall be
made, with respect to federal taxation upon revenues or other
12
<PAGE> 13
income of the general character expected to be pledged under the Indenture or
upon payments received on securities of the general character of the
Certificates, or which would have the effect of changing, directly or
indirectly, the federal income tax consequences of interest on securities of the
general character of the Certificates in the hands of the holders thereof, which
in the opinion of the Underwriter materially affects the market price of the
Certificates, (v) legislation shall be enacted by The Commonwealth of
Massachusetts, or a decision by a court of competent jurisdiction of The
Commonwealth of Massachusetts or any administrative tribunal of The Commonwealth
of Massachusetts or other governmental agency or department thereof shall be
rendered with respect to taxation by The Commonwealth of Massachusetts or any of
its political subdivisions upon revenues or other income of the general
character expected to be pledged under the Indenture or upon payments received
on securities of the general character of the Certificates, or which would have
the effect of changing, directly or indirectly, the tax consequences under The
Commonwealth of Massachusetts tax law of interest on securities of the general
character of the Certificates in the hands of the holders thereof, which in the
opinion of the Underwriter materially affects the market price of the
Certificates or (vi) additional material restrictions not in force as of the
date hereof shall have been imposed upon trading in securities of the general
character of the Certificates by any governmental authority or by any national
securities exchange. Notice of such termination may be given to the Company,
Nellie Mae and the Trust, by telegram, telecopy or telephone and shall be
subsequently confirmed by letter.
10. Information Furnished by the Underwriter. The statements set forth
under the heading "Underwriting" in the Prospectus constitute the only
information furnished by or on behalf of the Underwriter as such information is
referred to in Sections 3(c) and 5 hereof.
11. Miscellaneous. Except as otherwise provided in Section 4 hereof,
notice given pursuant to any provision of this Agreement shall be in writing and
shall be delivered (i) if to the Company or Nellie Mae, at 50 Braintree Hill
Park, Suite 300, Braintree, Massachusetts 02184, Attention Chief Financial
Officer, (ii) if to the Trust, at the office of the Owner Trustee, One Federal
Street, Boston, Massachusetts 02110, Attention: Corporate Trust Services and
(iii) if to the Underwriter, to Smith Barney Inc., 1345 Avenue of the Americas,
46th Floor, New York, NY 10105, Attention: Manager, Securitization Group.
This Agreement has been and is made solely for the benefit of the
Underwriter, the Company, Nellie Mae, the Trust, 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 the Underwriter of any of
the Certificates in his status as such purchaser.
12. 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.
Fleet National Bank acts solely as Owner Trustee and not in its
individual capacity and no trustee, shareholder, officer, employee or agent of
Fleet National Bank shall be held personally liable in connection with the
affairs of the Trust.
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.
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<PAGE> 14
Please confirm that the foregoing correctly sets forth the agreement
among the Company, the Trust, Nellie Mae and the Underwriter.
Very truly yours,
NELLIE MAE EDUCATION LOAN TRUST
By: Fleet National Bank
as Owner Trustee
By________________________________
Name:
Title:
NELLIE MAE EDUCATION FUNDING, LLC
By________________________________
Name:
Title: Manager
NELLIE MAE, INC.
By________________________________
Name:
Title:
Confirmed as of the date first
above mentioned.
SMITH BARNEY INC.
By:___________________________
Name:
Title:
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<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF FORMATION
OF
NELLIE MAE EDUCATION FUNDING, LLC
The undersigned, an authorized natural person, for the purpose of
forming a limited liability company, under the provisions and subject to the
requirements of the State of Delaware (particularly Chapter 18, Title 6 of the
Delaware Code and the acts amendatory thereof and supplemental thereto, and
known, identified, and referred to as the "Delaware Limited Liability Company
Act"), hereby certifies that:
FIRST: The name of the limited liability company (hereinafter called
the "limited liability company") is Nellie Mae Education Funding, LLC.
SECOND: The address of the registered office and the name and the
address of the registered agent of the limited liability company required to be
maintained by Section 18-104 of the Delaware Limited Liability Company Act are
The Prentice-Hall Corporation System, Inc., 1013 Center Road, Wilmington,
Delaware 19805.
THIRD: The limited liability company's duration of existence is
perpetual.
Executed on June 11, 1996.
/s/ Catherine Topouzoglou
-------------------------
Catherine Topouzoglou
Authorized Person
<PAGE> 1
NELLIE MAE EDUCATION FUNDING, LLC
OPERATING AGREEMENT
THIS OPERATING AGREEMENT of Nellie Mae Education Funding, LLC (the
"Company"), a limited liability company organized pursuant to the Act is entered
into and shall be effective as of the Effective Date, by and among the Company
and the persons executing this Agreement as Members.
PRELIMINARY STATEMENT
The purpose of this Agreement is to form Nellie Mae Education Funding,
LLC (the "Company") in accordance with the Act and to set out fully the rights,
obligations and duties of the Members, the Managers and the officers of the
Company.
ARTICLE I
Definitions
1.01 Definitions. The defined terms used in this Agreement shall have
the meanings specified below:
"Accountants" means such firm of independent certified public
accountants as may be engaged by the Managers.
"Act" means the Delaware Limited Liability Company Act.
"Affiliate" means, with respect to a specified Person, (i) any Person
that directly or indirectly controls or is controlled by or is under common
control with the specified Person, and (ii) any Person that is an officer of,
general partner in or trustee of, or serves in a similar capacity with respect
to, the specified Person or of which the specified Person is an officer, general
partner or trustee, or with respect to which the specified Person serves in a
similar capacity.
"Agreement" means this Operating Agreement, including all Exhibits and
Schedules attached hereto, as it may be amended from time to time.
"Capital Account" has the meaning set forth in Section 4.02.
"Capital Contribution" means the amount of cash or the fair market
value of property contributed to the Company by each Member as the consideration
for each Member's interest in the Company pursuant to Article IV. Any reference
in this Agreement to the Capital Contribution of a then Member shall include a
Capital Contribution previously made by any prior Member with respect to the
interest of such then Member in the Company.
"Certificate of Formation" means the Certificate of Formation as filed
with the Secretary of State of the State, as the same may be amended from time
to time.
<PAGE> 2
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means Nellie Mae Education Funding, LLC.
"Consent of the Members" means the vote at a meeting or the written
consent of Members holding a majority of the aggregate Percentage Interests in
the Company.
"Effective Date" means the date of filing of the Certificate of
Formation with the Secretary of State of the State.
"Independent Manager" means an individual who:
(i) is not employed by the Company or any of its subsidiaries or
affiliates as a director, officer or employee;
(ii) is not affiliated with a significant customer or supplier of the
Company or any of its subsidiaries or affiliate;
(iii) is not affiliated with a company of which the Company or any of
its subsidiaries and affiliates is a significant customer or supplier;
(iv) does not have significant personal services contract(s) with the
Company or any of its subsidiaries or affiliates;
(v) is not affiliated with a tax-exempt entity that receives
significant contributions from the Company or any of its subsidiaries or
affiliates;
(vi) is not the beneficial owner of such number of membership units of
the Company or equity interests in any of its subsidiaries or affiliates the
value of which constitutes more than 5% of such individual's net worth;
(vii) is not a spouse, parent, sibling or child of any person described
in (i) through (vi) and
(viii) is not a major creditor of the Company or any of its
subsidiaries or affiliates;
provided that an individual who meets the requirements of set forth in
subsections (ii) through (viii) above and who serves as and "Independent
Director" (as defined in the corporation's Articles of Organization), of a
corporation under common control with the Company, shall qualify as an
"Independent Manager" for the purposes of this Operating Agreement.
"Members" means the parties to this Agreement, any Person to whom the
parties to this Agreement may convey an interest in the Company pursuant to
Article IX, and any Person subsequently admitted to the Company as an additional
Member in accordance with the terms of this Agreement, and "Member" means any of
the Members. To the extent a Manager or officer has purchased a unit in the
Company, he will have all the rights of a Member with respect to such
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<PAGE> 3
Unit, and the term "Member" as used in this Agreement shall include a Manager or
officer to the extent he or she has purchased such Unit in the Company.
"Net Profits" and "Net Losses" shall mean, respectively, the annual net
profit or net loss of the Company determined by the Accountants by the method
used for federal income tax purposes.
"Percentage Interest" means, for each Member, the percentage obtained
by dividing the number of Units owned by such Member by the total number of
Units outstanding. The Percentage Interest of each Member is as indicated on
Schedule A, as it may be amended from time to time.
"Person" means any individual, general partnership, limited
partnership, limited liability company, corporation, joint venture, trust,
business trust, cooperative or association, and the heirs, executors,
administrators, legal representatives, successors and assigns of the "Person"
when the context so permits.
"Securities Act" means the Securities Act of 1933, as amended.
"State" means the State of Delaware.
"Unit" means an interest in the Company held by a Member. The number of
Units held by each Member is as indicated on Schedule A, as it may be amended
from time to time.
"Written Consent" means the written consent or approval of the affected
Member. The Managers shall deliver, or cause to be delivered, to each affected
Member reasonable prior written notice of any proposed action the taking of
which would require the Written Consent of such Member pursuant to this
Agreement. Each affected Member shall deliver to the Managers written notice of
its approval or disapproval of any such proposed action on or before the tenth
(10th) business day after delivery of the notice from the Managers referred to
in the preceding sentence. If any affected Member fails to deliver such notice
within such 10 business day period, such proposed action shall be deemed to have
been approved by such Member. All deliveries of writings shall be governed by
Section 12.01.
ARTICLE II
General Provisions
2.01 Formation of the Company. The parties hereto hereby form a limited
liability company pursuant to the provisions of the Act. Except as expressly
provided herein, the rights and obligations of the Members and the
administration and termination of the Company shall be governed by the Act. The
Managers shall take all actions necessary to assure the prompt filing of the
Certificate of Formation with the Secretary of State of the State as required by
law in connection with the formation of the Company or otherwise necessary or
appropriate to effectuate the provisions of this Agreement and the conduct of
the operations of the Company as contemplated hereby.
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<PAGE> 4
2.02 Name of the Company. The name of the Company shall be "Nellie Mae
Education Funding, LLC" or such other name as the Managers may from time to time
determine. The Managers shall cause to be filed on behalf of the Company such
corporate, assumed or fictitious name or foreign qualification certificate or
certificates as may from time to time be required by law.
2.03 Purposes of Company.
(a) The purposes of the Company are:
(i) to acquire from time to time, own, hold, sell, assign and
pledge education loans made to students, parents and others for the purpose of
financing the costs of higher education ("Student Loans");
(ii) to enter into any agreement relating to the acquisition,
sale, servicing, administration and guaranteeing of Student Loans (and any
proceeds or further rights associated therewith) with any lender, holder,
servicer, administrator or guaranty agency and to sell Student Loans to trusts
(the "Trusts") pursuant to one or more sale agreements, pooling agreements,
trust agreements or other agreements (collectively, the "Agreements");
(iii) to sell and deliver any class of certificates or other
securities (collectively, the "Certificates") issued by the Trusts under the
related Agreements;
(iv) to sell and deliver one or more series and classes of bonds,
notes or other evidences of indebtedness secured or collateralized by one or
more pools of Student Loans or by Certificates of any class issued by one or
more Trusts (collectively, the "Notes");
(v) to hold and enjoy all of the rights and privileges of any
Certificates issued by the Trusts to the Corporation under the related
Agreements;
(vi) to perform its obligations under the Agreements;
(vii) to engage in all such other activities and to exercise all
such other powers permitted to corporations under the laws of the State of
Delaware that are incidental to or connected with the foregoing business or
purposes or necessary or desirable to accomplish the foregoing.
(b) The Company shall be a limited liability company solely for the
purposes set forth in this Section 2.03. Except as provided in this Agreement,
the Company shall not engage in any other activity or business.
2.04 Place of Business of the Company; Registered Agent. The principal
place of business of the Company shall be located at 50 Braintree Hill Park,
Braintree, Massachusetts 02184. The Managers may, at any time and from time to
time, change the location of the Company's principal place of business upon
written notice of such change to the Members. The
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<PAGE> 5
registered agent for service of process for the Company in the State shall be
The Prentice-Hall Corporation System, Inc. with a business address at 1013
Center Road, Wilmington, DE 19805.
2.05 Duration of the Company. The Company shall continue in existence
until terminated in accordance with Article IX hereof.
2.06 Scope of Members' Authority. Except as expressly provided for in
this Agreement, no Member shall have any authority to act for, hold himself or
itself out as the agent of, or assume any obligation or responsibility on behalf
of, any other Member of the Company.
2.07 Title to Company Property. All property owned by the Company,
whether real or personal, tangible or intangible, shall be deemed to be owned by
the Company as an entity, and no Member, individually, shall have any ownership
of such property. The Company may hold any of its assets in its own name or in
the name of its nominee, which nominee may be one or more individuals,
partnerships, trusts or other entities.
2.08 Members Names and Addresses. The names and addresses of the
Members are as set forth on Schedule A.
ARTICLE III
Distributions
3.01 Distributions. The Board of Managers shall, in its sole
discretion, determine the amount and timing of all distributions to the Members
of the Company. All distributions shall be distributed to and among the Members
in accordance with their respective Percentage Interests.
ARTICLE IV
Capital Contributions, Profits and Losses
4.01 Capital Contributions.
(a) At the time of admission, each Member has made a Capital
Contribution to the Company in the amount set forth in Schedule A hereto.
(b) No interest shall accrue on any contributions to the capital of the
Company, and no Member shall have the right to withdraw or to be repaid any
capital contributed by him or it or to receive any other payment in respect of
his or its interest in the Company (including, without limitation, upon
withdrawal from the Company), except as specifically provided in this Agreement.
4.02 Capital Accounts. A Capital Account shall be established for each
Member. The Capital Account of each Member shall be initially credited with the
Member's Capital Contribution and (i) shall be increased by the amount of any
additional capital contributions and allocations to the Member of profits, (ii)
shall be decreased by any distributions to the Member
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<PAGE> 6
and allocations to the Member of losses, and (iii) shall otherwise be
appropriately adjusted to reflect the transactions of the Company and the Member
in accordance with the Company's method of accounting and as required for
allocations of profits and losses to have substantial economic effect for income
tax purposes.
4.03 Allocation of Profits and Losses. Net Profits and Net Losses for
the year shall be allocated among the Members in accordance with their
Percentage Interests.
4.04 Allocations Upon Transfer or Admittance. In the event that a
Member acquires an interest in the Company either by transfer from another
Member or by acquisition from the Company, an equal portion of the profits or
losses from operations of the Company for the year in which such acquisition
occurs shall be allocated to each day of such year, and the profits and losses
so allocated to the portion of the year prior to the date of the acquisition of
the interest in the company by the Member shall be allocated among the Members
without giving effect to such acquisition, and the profits and losses so
allocated to the portion of the year from and after the date of the acquisition
of such interest shall be allocated among the Members by giving effect to such
acquisition. Profits and losses realized from the sale or other disposition of
the assets of the Company shall be allocated among the Members based upon the
actual ownership of interests in the Company on the date of the event giving
rise to such profits or losses.
ARTICLE V
Management
5.01 Board of Managers. The overall management and control of the
business and affairs of the Company will be vested solely in the Board of
Managers, which will consist of two classes, the Class A Managers and the Class
B Managers. The Board of Managers shall direct, manage, and control the business
of the Company to the best of its ability. Subject to the provisions of this
Agreement, the Board of Managers, acting by majority vote, shall have the full
and complete authority, power, and discretion to manage and control the
business, affairs, and properties of the Company, to make all decisions
regarding those matters and to perform any and all other acts or activities
customary or incident to the management of the Company's business. The Class A
Managers will be responsible for the daily management and control of all the
Company's business and the Class B Managers will be responsible for management
and oversight solely with respect to the matters described in Section 5.04
below.
5.02 Tenure and Qualifications of Managers. The Class A Managers shall
not be elected, but rather the Class A Managers shall consist of the Members.
Each Class A Manager may appoint an individual officer to act as its
representative for the purpose of carrying out its management duties with
respect to management. The number of Class B Managers of the Company shall be
fixed from time to time by the affirmative vote of Members having a majority of
the aggregate Percentage Interests. The Board of Managers shall consist
initially of the following persons: Class A Managers -- Nellie Mae, Inc. and NMI
Education Loan Corporation, Class B Manager -- Joachim Froehlich. Each Class B
Manager shall hold office until the next annual meeting of Members or until a
successor shall have been elected and qualified. Managers need not be residents
of the State.
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<PAGE> 7
5.03 Independent Manager. At all times as any Certificates or Notes are
outstanding, Class B Managers shall include at least one Independent Manager.
When voting on matters subject to the vote of the full Board of Managers,
including those matters specified in Section 5.04 below, notwithstanding that
the Company is not then insolvent, each Independent Manager shall take into
account the interests of the creditors of the Company as well as the interests
of the Company. No Independent Manager shall owe a fiduciary or other obligation
to the Members of the Company and every member shall consent to the foregoing by
virtue of such Member's purchase of Units of the Company, no further act or deed
of any holder being required to evidence such consent.
5.04 Votes by Independent Manager. Notwithstanding any other provisions
of this Agreement and any provision of law that otherwise so empowers the
Company, the Company shall not, without the affirmative vote of 100% of the
Board of Managers, including the affirmative vote of each Independent Manager,
do any of the following:
(a) engage in any business or activity other than in accordance with
Section 2.03 above;
(b) incur any indebtedness, or assume or guarantee any indebtedness of
any other entity, other than (i) indebtedness incurred in connection with the
execution of any Agreement or the acquisition of Certificates, (ii) indebtedness
to Nellie Mae, Inc. or any affiliate thereof incurred in connection with the
acquisition of Student Loans which indebtedness from time to time may be
represented by notes issued by the Company to Nellie Mae, Inc. that will be
subordinate to the Certificates and Notes and will only be payable to the extent
the Company has available cash to pay such indebtedness, (iii) salaries, fees
and expenses to its professional advisors and counsel, directors, officers and
employees, (iv) indebtedness where the person to whom the indebtedness is owing
has delivered to the Company an undertaking that it will not institute against,
or join any other person in instituting against, the Company any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceeding, or other
proceeding under any federal or state bankruptcy or similar law, for one year
and one day after all Certificates and Notes are paid in full, or look to
property or assets of the Company in respect of such obligations and that such
obligations shall not constitute a claim against the Company in the event that
the Company's assets are insufficient to pay in full such obligations and (v)
other indebtedness not exceeding $75,000 at any one time outstanding, on account
of incidentals or services supplied or furnished to the Company;
(c) dissolve or liquidate, in whole or in part;
(d) consolidate with or merge into any other entity or convey or
transfer its properties and assets substantially as an entirety to any entity;
or
(e) institute proceedings to be adjudicated bankrupt or insolvent; or
consent to the institution of bankruptcy or insolvency proceedings against it;
or file a petition seeking, or consent to, reorganization or relief under any
applicable federal or state law relating to bankruptcy; or consent to the
appointment or a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Corporation or a substantial property; or make any
assignment for the benefit of creditors; or admit in writing its ability to pay
its debts generally as they become due; or take any corporate action in
furtherance of any such action.
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5.05 Resignation of Managers. Any Manager of the company may resign at
any time by giving written notice to the Members of the Company, provided that a
Class A Manager may resign only at such time as it is no longer a Member. The
resignation of any Manager shall take effect upon receipt of that notice or at
such later time as shall be specified in the notice; and, unless otherwise
specified in the notice, the acceptance of the resignation shall not be
necessary to make it effective.
5.06 Removal of Managers. At a meeting called expressly for that
purpose, all or any lesser number of Managers may be removed at any time, with
or without cause, with the Consent of the Members, provided that a Class A
Manager may be removed only at such time as it is no longer a Member.
5.07 Vacancies on Board of Managers. Any vacancy occurring for any
reason in the number of Mangers of the Company may be filled by vote of the
remaining Managers then in office, provided that if there are no remaining
Managers, the vacancy(ies) shall be filled by the affirmative vote of Members
holding a majority of the aggregate Percentage Interests. A Manager elected to
fill a vacancy shall be elected for the unexpired term of the Manager's
predecessor in office and shall hold office until the expiration of that term
and until the Manager's successor shall be elected and shall qualify or until
the Manager's earlier death, resignation, or removal.
5.08 Certain Powers of Managers. In furtherance of the purposes set
forth in Section 2.03 above and without limiting the generality of Section 5.01
above, the Board of Managers shall have power and authority, on behalf of the
Company:
(a) to acquire from any Person by purchase, lease or otherwise, any
real or personal property which may be necessary, convenient or incidental to
the accomplishment of the purposes of the Company. The fact that a Manager or a
Member is an Affiliate of any such Person shall not prohibit the Board of
Managers from dealing with that Person, provided that the terms for dealing with
such Person are no less favorable to the Company than would be available in
dealing with an independent third party;
(b) to borrow money for the Company from banks, other lending
institutions, the Managers, Members, or affiliates of the Managers or Members on
such terms as the Board of Managers deems appropriate, and in connection
therewith, to hypothecate, encumber, and grant security interests in the assets
of the Company to secure repayment of the borrowed sums. No debt for borrowed
money shall be contracted or incurred by or on behalf of the Company except by
the Board of Managers, or to the extent permitted under the Act, by agents or
employees of the Company expressly authorized to contract such debt or incur
such liability by the Managers.
(c) to enter into, perform and carry out contracts of any kind
necessary to, in connection with or incidental to, the accomplishment of the
purposes of the Company, which contracts may extend beyond the term of the
Company.
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(d) to prepay in whole or in part, refinance, recast, increase, modify
or extend any deed of trust, mortgage or other indebtedness of the Company, and,
in connection therewith, to execute any extensions, renewals or modifications of
such deeds of trust or mortgages;
(e) to employ or engage persons, firms or companies (including any
Manager or Member or an Affiliate of any Manager or Member) for the operation,
maintenance, marketing and financing of the Company and to pay reasonable
compensation for such services;
(f) to cause to be paid any and all taxes, charges and assessments that
may be levied, assessed or imposed upon any assets of the Company, unless the
same are contested by the Board of Managers;
(g) to purchase liability and other insurance to protect the Company's
property and business;
(h) to hold and own any Company real and/or personal properties in the
name of the Company;
(i) to invest any Company funds temporarily (by way of example but not
limitation) in time deposits, short-term governmental obligations, commercial
paper, or other investments;
(j) with the Consent of the Members, to sell or otherwise dispose of
all or substantially all of the assets of the Company as part of a single
transaction or plan or to merge or consolidate the Company with or into another
Person;
(k) to employ accountants, legal counsel, managing agents, or other
experts to perform services for the Company and to compensate them from Company
funds;
(l) subject to the provisions of (j) above, to execute on behalf of the
Company all instruments and documents, including, without limitation: checks;
drafts; notes and other negotiable instruments; mortgages, or deeds of trust;
security agreements; financing statements; documents providing for the
acquisitions, mortgage or disposition of the Company's property; assignments;
bills of sale; leases; partnership agreements; operating agreements of other
limited liability companies; and any other instruments or documents necessary,
in the opinion of the Board of Managers, to the business of the Company; and
(m) to engage in such other activities and incur such other expenses as
may be reasonably necessary, advisable or appropriate for the furtherance of the
Company's purposes so long as such activities may be lawfully carried on or
performed by a limited liability company under the Act, and to execute,
acknowledge and deliver any and all instruments necessary to implement the
foregoing.
5.09 Meetings of Managers.
(a) Place of Meetings. Meetings of the Managers need not be held in the
State.
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(b) Regular Meetings. Regular meetings of the Board of Managers may be
held without call or notice at such places and at such times as the Managers may
from time to time determine, provided that any Manager who is absent when such
determination is made shall be given notice of the determination. A regular
meeting of the Board of Managers may be held without a call or notice at the
same place as the annual meeting of Members, or the special meeting held in lieu
thereof, following such meeting of Members.
(c) Special Meetings. Special meetings of the Board of Managers may be
called by the President, the Secretary, the Treasurer or any Manager. Notice of
the time and place of all special meetings shall be given by the Secretary or
the officer or Manager(s) calling the meetings. Notice must be given orally, by
telephone, by telegraph, or in writing, and such notice shall be sufficient if
given in time to enable the Manager to attend, or in any case if sent by mail or
telegraph, at least two days before the meeting, addressed to a Manager's usual
or last known place of business or residence. No notice of any meeting of the
Board of Managers need be given to any Manager if such Manager, by a writing
(including, without limitation, by telegraph, telex, telecopy or cable) filed
with the records of the meeting (and whether executed before or after such
meeting), waives such notice, or if such Manager attends the meeting without
protesting prior thereto or at its commencement the lack of notice to him.
(d) Quorum of Managers. At any meeting of the Board of Managers a
majority of the number of Managers then constituting a full Board shall
constitute a quorum, but a lesser number may adjourn any meeting from time to
time without further notice. Unless otherwise provided by law or by this
Agreement, business may be transacted by vote of a majority of the Managers then
present at any meeting at which there is a quorum.
(e) Action Without a Meeting. Unless otherwise provided by law or by
this Agreement, any action required or permitted to be taken at any meeting of
the Managers may be taken without a meeting if all the Managers of a class
entitled to vote with respect to such action consent to the action in writing
and the written consents are filed with the records of the meetings of Managers.
Such consents shall be treated for all purposes as a vote at a meeting.
(f) Telephone Conference Meetings. The Board of Managers may
participate in any meeting of the Board by means of a conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other at the same time and participation by such means
shall constitute presence in person at a meeting.
5.10 Authority of Others to Act. Unless authorized to do so by this
Agreement or by the Board of Managers, no attorney-in-fact, employee, or other
agent of the Company shall have any power or authority to bind the Company in
any way, to pledge its credit or to render it liable pecuniary for any purpose.
No Member shall have any power or authority to bind the Company unless the
Member has been authorized by the Board of Managers to act as an agent of the
Company in accordance with the previous sentence.
5.11 Officers.
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(a) Tenure and Qualifications. The Company shall have as its officers a
President, a Treasurer and a Secretary. The officers of the Company shall be
elected annually by the Board of Managers at their first meeting following the
annual meeting of Members. The Board of Managers may, from time to time, elect
or appoint such other officers as it may determine. No officer need be a Member
and two or more offices may be held by any Person. All officers shall hold
office until the first meeting of the Board of Managers following the next
annual meeting of the Members and until his successor is elected or appointed or
qualified, or until he dies, resigns, is removed or become disqualified. The
officers shall be, initially, as set forth below:
President Lawrence W. O'Toole
Treasurer John F. Remondi
Secretary John F. Remondi
(b) Resignation, Removal and Vacancies. Any officer may resign by
giving written notice of his resignation to the Board of Managers at a meeting
of the Board and such resignation shall become effective at the time specified
therein. Any officer may be removed with or without cause by the affirmative
vote of the Board of Managers. Any vacancy in the position of any officer may be
filled by the Board of Managers.
(c) Duties of Officers.
(i) President. The President shall be the chief executive officer of
the Company. He shall, subject to the control and direction of the Board of
Managers, have general supervision and control over the business of the Company
and shall have the power and authority, without the need to obtain approval from
the Board of Directors, except as specifically provided therein, to take the
actions set forth in Sections 5.08(a), (c), (e), (f), (g), (i), and (l) of this
Agreement; and he shall have and perform such other powers and duties as may be
prescribed by this Agreement or from time to time be determined by the Board of
Managers.
(ii) Treasurer. The Treasurer shall, subject to the control and
direction of the Board of Managers, have and perform such powers and duties as
may be prescribed in this Agreement, specifically Article VIII hereto, or from
time to time be determined by the Board of Mangers. He shall have custody of all
moneys, obligations, contracts and other valuable documents of the Company
except his own bond and the record books, and shall collect all moneys from time
to time due and owing to the Company and disburse the same pursuant to the
contracts and obligations of the Company or the order of the Board of Managers
or Members. He shall have custody of the transfer books of the Company and shall
keep accurate books of account of all the transactions of the Company. All
property of the Company in his custody shall be subject at all times to the
inspection and control of the Board of Managers.
(iii) Secretary. The Secretary shall have and perform the powers and
duties prescribed in this Agreement, and such other powers and duties as may
from time to time be determined by the Board of Managers. He shall attend all
meetings of the Members and the Board of Managers and shall record upon the
record book of the Company all votes of the Company and minutes of the
proceedings at such meetings. He shall have custody of the record books of the
Company.
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5.12 Liability for Certain Acts. The Board of Managers and officers of
the Company shall perform their managerial duties in good faith, in a manner
they reasonably believe to be in the best interests of the Company, and with
such care as an ordinarily prudent person in a like position would use under
similar circumstances. A Manager or officer of the Company who so performs the
duties of Manager or officer shall not have any liability by reason of being or
having been a Manager or officer of the Company. The Board of Managers and
officers of the Company do not, in any way, guarantee the return of the Members'
Capital Contributions or a profit for the Members from the operations of the
Company. No Manager or officer shall be liable to the Company or to any Member
for any loss or damage sustained by the Company or any Member, unless the loss
or damage shall have been the result of fraud, deceit, gross negligence, willful
misconduct, or a wrongful taking by the Manager or officer.
5.13 Managers Have No Exclusive Duty to Company. The Managers shall not
be required to manage the Company as their sole and exclusive function and they
may have other business interests and may engage in other activities in addition
to those relating to the Company. Neither the Company nor any Member shall have
any right, by virtue of this Agreement, to share or participate in such other
investments or activities of the Managers or to the income or proceeds derived
therefrom. The Managers shall incur no liability to the Company or to any of the
Members as a result of engaging in any other business or venture.
5.14 Indemnity of Managers, Officers, Employees and Other Agents. To
the maximum extent permitted under Delaware law, the company shall indemnify the
Managers for all costs, losses, liabilities and damages paid or accrued by such
Managers in connection with the business of the Company. The Company shall
indemnify its officers, employees and other agents who are not Managers to the
fullest extent permitted by law, provided that the indemnification in any given
situation is approved by the Board of Managers.
5.15 Certain Expenses. All reasonable and necessary expenses incurred
by the Board of Managers and officers in connection with the Company's business
shall be paid by the Company or reimbursed to the Board of Managers and officers
by the Company.
ARTICLE VI
Rights and Obligations of Members
6.01 Limitation of Liability. Each Member's liability shall be limited
as set forth in this Agreement, the Act, and other applicable law.
6.02 Company Debt Liability. Except as required pursuant to the Act, a
Member will not be personally liable for any debts or losses of the Company
beyond the Member's Capital Contribution.
6.03 List of Members. Upon written request of any Member, the Managers
shall provide a list showing the names, addresses, and Percentage Interests of
all Members.
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6.04 Company Books. In accordance with section 8.02 below, the
Treasurer shall maintain and preserve, during the term of the Company, and for
five (5) years thereafter, all accounts, books, and other relevant Company
documents. Upon reasonable request, each Member shall have the right, during
ordinary business hours, to inspect and copy those Company documents at the
requesting Member's expense.
6.05 Priority and Return of Capital. Except as may be expressly
provided in Articles III and IV, no Member shall have priority over any other
Member, either for the return of Capital Contributions or for Net Profits, Net
Losses, or distributions.
ARTICLE VII
Meetings of Members
7.01 Annual Meeting. The annual meeting of the Members shall be held on
the second Wednesday in March or at such other time as shall be determined by
resolution of the Members commencing with the year 1997, for the purpose of the
transaction of such business as may come before the meeting.
7.02 Special Meetings. Special meetings of the Members, for any purpose
or purposes, unless otherwise prescribed by statute, may be called by the Board
of Managers or by any Member or Members having aggregate Percentage Interests of
at least 25 percent.
7.03 Place of Meetings. The Members may designate any place, either
within or outside the State, as the place of meeting for any meeting of the
Members. If no designation is made, or if a special meeting be otherwise called,
the place of meeting shall be the principal executive office of the Company in
the States.
7.04 Notice of Meetings. Except as provided in section 7.05 below,
written notice stating the place, day, and hour of the meeting and the purpose
or purposes for which the meeting is called shall be delivered no fewer than 5
nor more than 30 days before the date of the meeting, either personally or by
mail, by or at the direction of the Executive Manager or person calling the
meeting, to each Member entitled to vote at the meeting. If mailed, the notice
shall be deemed to be delivered two calendar days after being deposited in the
United States mail, addressed to the Member at the Member's address as it
appears on the books of the Company, with postage thereon prepaid.
7.05 Meeting of All Members. If all of the Members shall meet at any
time and place, either within or outside of the State, and consent to the
holding of a meeting at that time and place, the meeting shall be valid without
call or notice, and at the meeting lawful action may be taken.
7.06 Record Date. For the purpose of determining Members entitled to
notice or to vote at any meeting of members or any adjournment of the meeting,
or Members entitled to receive payment of any distribution, or to make a
determination of Members for any other purpose, the date on which notice of the
meeting is mailed or the date on which the resolution declaring the
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distribution is adopted, as the case may be, shall be the record date for the
determination of Members. When a determination of Members entitled to vote at
any meeting of members has been made as provided in this section, the
determination shall apply to any adjournment of the meeting.
7.07 Quorum. Members having at least a majority of the aggregate
Percentage Interests, represented in person or by proxy, shall constitute a
quorum at any meeting of Members. In the absence of a quorum at any meeting of
Members, a majority of the aggregate Percentage Interests so represented may
adjourn the meeting from time to time for a period not to exceed 60 days without
further notice. However, if the adjournment is for more than 60 days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each Member of record entitled
to vote at the meeting. At an adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have been
transacted at the meeting as originally noticed. The Members present at a duly
organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal during the meeting of Members having aggregate
Percentage Interests whose absence would cause less than a quorum.
7.08 Manner of Acting. If a quorum is present, the Consent of the
Members shall be the act of the Members, unless the vote of a greater or lesser
proportion or number is otherwise required by the Act or by this Agreement.
7.09 Proxies. At all meetings of Members, a Member may vote in person
or by proxy executed in writing by the Member or by a duly authorized
attorney-in-fact. The proxy shall be filed with the Managers of the company
before or at the time of the meeting. No proxy shall be valid after 11 months
from the date of its execution, unless otherwise provided in the proxy.
7.10 Action by Members Without a Meeting. Action required or permitted
to be taken at a meeting of Members may be taken without a meeting if the action
is evidenced by one or more written consents describing the action taken, signed
by Members entitled to vote having the aggregate Percentage Interests required
to take such action at a duly called Meeting and delivered to the Secretary of
the Company for inclusion in the minutes or for filing with the Company records.
7.11 Waiver of Notice. When any notice is required to be given to any
Member, a waiver of the notice in writing signed by the person entitled to the
notice, whether before, at, or after the time stated therein, shall be
equivalent to the giving of the notice.
ARTICLE VIII
Books, Records And Bank Accounts
8.01 Tax and Financial Matters. The Treasurer shall be responsible for
preparing all tax and accounting records for the Company. The Treasurer shall
appoint the Accountants to be
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engaged by the Company. Nellie Mae, Inc. shall be the tax matters partner of the
Company. The cost of preparing the Company's tax return shall be paid by the
Company as a Company expense.
8.02 Books and Records. The Treasurer shall keep just and true books of
account with respect to the operations of the Company. Such books shall be
maintained at the principal place of business of the Company, or at such other
place as the Treasurer shall determine, and all Members, and their duly
authorized representatives, shall at all reasonable times have access to such
books.
8.03 Accounting Basis and Fiscal Year. The books of account of the
Company shall be kept on the tax basis of accounting, or on such other method of
accounting as the Board of Managers may from time to time determine. The fiscal
year of the Company shall be the calendar year or such other year as the Board
of Managers may from time to time determine.
8.04 Reports.
(a) Annual Reports. Within 90 days after the end of each year, the
Treasurer shall cause to be prepared and shall deliver to the Members, a
financial report of Company, including a balance sheet (noting the terms of any
outstanding loans pursuant to Section 6.06), a profit and loss statement and, if
such profit and loss statement is to prepared on a cash basis, a cash flow or
source and application of funds statement, which shall be accompanied by a
certificate of the Treasurer stating that such financial report presents fairly
the financial condition of the Company as of the date of such financial report
and the results of the Company's operations for such year. If Members
representing at least a majority of the aggregate Percentage Interests provide
the Treasurer a written request for an audit prior to December 1 in any year,
the Treasurer shall cause the Accountants to audit the company's financial
statements for such year.
(b) Tax Information. Within 300 days after the end of each fiscal year,
the Company shall furnish to each Member such information as may be needed to
enable such Member to file his or its Federal income tax return, any required
state income tax return, and any other reporting or filing requirements imposed
by any governmental agency or authority.
(c) Expenses; Separate Audit. All Company accounting costs and the cost
of all reporting required under this Section 8.04 shall be paid by the Company
as a Company expense.
8.05 Bank Accounts. The Treasurer shall be responsible for causing one
or more accounts to be maintained in a bank (or banks) which is a member of the
F.D.I.C., which accounts shall be used for the payment of the expenditures
incurred by the Board of Managers and officers in connection with the business
of the Company, and in which shall be deposited any and all cash receipts. All
such amounts shall be and remain the property of the Company, and shall be
received, held and disbursed by the Treasurer for the purposes specified in this
Agreement. There shall not be deposited in any of said accounts any funds other
than funds belonging to the Company, and no other funds shall in any way be
commingled with such funds.
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ARTICLE IX
Transferability Of Units; Resignation; Withdrawal.
9.01 General. No Member may voluntarily retire, resign or withdraw from
the Company prior to the dissolution and winding up of the company, or sell,
transfer, assign, pledge, encumber or otherwise dispose of all or any part of
its interest in the Company (whether voluntarily, involuntarily or by operation
of law).
9.02 Continuation of Membership upon Certain Events. No Member shall
cease to be a Member by virtue of the occurrence of any of the following events
with respect to such Member:
(a) When such Member:
(i) Makes an assignment for the benefit of creditors;
(ii) Files a voluntary petition in bankruptcy;
(iii) Is adjudged a bankrupt or insolvent, or has entered against him
an order for relief, in any bankruptcy or insolvency proceeding;
(iv) Files a petition or answer seeking for himself any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any statute, law or regulation;
(v) Files an answer or other pleading admitting or failing to contest
the material allegations of a petition filed against him in any proceeding of
this nature;
(vi) Seeks, consents to or acquiesces in the appointment of a trustee,
receiver or liquidator of the member or of all or any substantial part of his
properties; or
(b) the commencement of any proceeding against the member seeking
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any statute, law or regulation.
ARTICLE X
Certificates; Issuance of Additional Units
10.01 Certificates; Legends. The Company may issue certificates or
other instruments representing or evidencing the ownership of Units by Members,
which certificates or other instruments shall have the following legends placed
on them:
The Units represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Act"), or any state
securities law and they may not be sold or otherwise transferred by any
person, including a pledgee, unless (1) either (a) a registration
statement with respect to such Units shall be effective under the Act
or (b) the
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company shall have received an opinion of counsel satisfactory to the
company than an exemption from registration under such Act is then
available and (2) there shall have been compliance with all applicable
securities laws.
The Units represented by this certificate are subject to further
restriction as to their sale, transferability, or assignment as set
forth in the Operating Agreement of the company and agreed to by each
Member. Said restrictions provide, among other things, that no
transferee or assignee of Units held by a Member shall be come a
Substitute Member unless consented to by the Board of Managers of the
company, which consent may be given or withheld in the Board's
discretion.
10.02 Issuance of Additional Units. The issuance by the Company of
additional Units shall require the Consent of the Members. Subject to the
foregoing, the Board of Managers shall have the authority to issue additional
Units, and to determine the timing of the issuance, the number of additional
Units, whether such Units shall be a new class of Units, the consideration to be
paid for such Units, the relative priority of such Units in relation to other
Units, and all other rights of such Units.
ARTICLE XI
Dissolution and Termination
11.01 Perpetuity of Existence; No Dissolution upon Loss of Member.
Except as otherwise provided in this Agreement or as required by the
Act, the Company shall exist in perpetuity. The Company shall continue and shall
not dissolve in the event of the death, retirement, resignation, expulsion,
bankruptcy or dissolution of a Member or the occurrence of any event which
terminates the continued membership of a member.
11.02 Event of Dissolution.
(a) Except as provided in 11.01 above, the Company shall dissolve in
accordance with the Act.
(b) Dissolution of the Company shall be effective on the day on which
the event occurs giving rise to the dissolution, but the Company shall not
terminate until the Certificate of Formation shall have been canceled and the
assets of the company shall have been distributed as provided herein.
Notwithstanding the dissolution of the Company, prior to the termination of the
Company, as aforesaid, the business of the Company and the affairs of the Board
of Managers, officers and the Members, as such, shall continue to be governed by
this Agreement. Upon dissolution, the President or, if there is none, a
liquidator appointed by the Board of Managers, shall liquidate the assets of the
Company and apply and distribute the proceeds thereof as contemplated by this
Agreement and cause the cancellation of the Certificate of Formation.
11.03 Distributions Upon Liquidation.
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(a) After payment of liabilities owning to creditors, the President or,
if there be none, a liquidator appointed by the President shall set up such
reserves as they or it deem reasonably necessary for any such contingent or
unforeseen liabilities or obligations and, at the expiration of such period as
the President or such liquidator may deem advisable, such reserves shall be
distributed to the Members or their assigns in the manner set forth in Section
11.03(b) below.
(b) After paying such liabilities and providing for such reserves, the
President or such liquidator shall cause the remaining net assets of the Company
to be distributed to and among the Members in accordance with their respective
Capital Account balances, as determined after taking into account all Net
Profits and Net Losses of the Company. In the event that any part of such net
assets consists of notes or accounts receivable or other non-cash assets, the
President or such liquidator may take whatever steps they or it deem appropriate
to convert such assets into any other form which would facilitate the
distribution thereof. If any assets of the Company are to be distributed in
kind, such assets shall be distributed on the basis of their fair market value.
ARTICLE XII
Miscellaneous
12.01 Notices. Any and all notices, elections, consents or demands
permitted or required to be made or given under this Agreement shall be in
writing, signed by the Member, Manager or officer giving such notice, election,
consent or demand and shall be delivered personally, made by telex, telecopy, or
facsimile transmission, sent by overnight courier or sent by registered or
certified mail, return receipt requested, to the each other Member, at his or
its address set forth on Schedule A, and/or to the Board of Managers and
officers at the Company's principal executive office. Any and all notices,
elections, consents or demands permitted or required to be made or given under
this Agreement shall be deemed to have been given if by hand, at the time of the
delivery thereof to the receiving party, if made by telex, telecopy or facsimile
transmission, at the time that receipt thereof has been acknowledged by
electronic confirmation or otherwise, if sent by overnight courier, on the next
business day following the day such notice is delivered to the courier service,
or if sent by registered or certified mail, on the third business day following
the day such mailing is made.
12.02 Successors and Assigns. Subject to the restrictions on transfer
set forth herein, the Agreement, and each and every provision hereof, shall be
binding upon and shall inure to the benefit of the Members, their respective
successors, successors-in-title, heirs and assigns, and each and every
successor-in-interest to any Member, whether such successor acquires such
interest by way of gift, purchase, foreclosure, or by any other method, shall
hold such interest subject to all of the terms and provisions of this Agreement.
12.03 Amendments. This Agreement may be amended from time to time by
the Board of Managers; provided, however, that: (i) all Members must give their
consent in writing to any amendment which would amend this Section 12.03; (ii)
each Member to be affected must give its Written Consent to any amendment which
would (a) increase the amount of the Capital Contribution payable by such
Member; (b) increase the liability of such Member or (c) cause such Member's
share of the Company's assets to be modified, unless such modification is in
connection
-18-
<PAGE> 19
with the admission of a new Member or Members and all interested of persons or
entities who are Members of the same class immediately prior to such admission
are similarly modified; and (iii) the Board of Managers is authorized, without
the consent of any Member, to made amendments to this Agreement: (a) to add to
the duties or obligations of the Board of Managers or surrender any right or
power granted to the Board of Managers herein, or to add any other provisions
with respect to matters or questions arising under this Agreement which will not
be inconsistent with respect to matters or questions arising under this
Agreement which will not be inconsistent with the provisions of this Agreement;
(c) to preserve the status of the Company as a "partnership" for federal income
tax purposes; (d) to amend the provisions of this Agreement related to
allocations of profits and losses for tax purposes so that such provisions
comply with applicable regulations adopted under the Code; and (e) to amend
Schedule A hereto to reflect the admission or withdrawal of Members as
authorized by this Agreement. Notwithstanding the foregoing, the Company shall
not, without the prior written consent of each of its Independent Managers,
amend, alter, change or repeal Sections 2.03, 5.01, 5.03, 5.04 and this Section
12.03.
12.04 Partition. The Members hereby agree that no Member nor any
successor-in-interest to any Member, shall have the right while this Agreement
remains in effect to have any property of the Company partitioned, or to file a
complaint or institute any proceeding at law or in equity to have any property
of the Company partitioned, and each Member, on behalf of himself or itself, his
or its successors, representatives, heirs, and assigns, hereby waives any such
right. It is the intention of the Members that during the term of this
Agreement, this rights of the Members and their successors-in-interest, as among
themselves, shall be governed by the terms of this Agreement, and that the right
of any Member or successor-in-interest to assign, transfer, sell or otherwise
dispose of his interest in the Company's properties shall be subject to the
limitations and restrictions of this Agreement.
12.05 No Waiver. The failure of any Member to insist upon strict
performance of a covenant hereunder or of any obligation hereunder, irrespective
of the length of time for which such failure continues, shall not be a waiver of
such Member's right to demand strict compliance in the future. No consent or
waiver, express or implied, to or of any breach or default in the performance of
any obligation hereunder, shall constitute a consent or waiver to or of any
other breach or default in the performance of the same or any other obligation
hereunder.
12.06 Representations and Warranties of the Members. Each Member hereby
represents, warrants and covenants to the other Members that the following are
true and correct as of the date hereof:
(a) such Member has full power and authority to execute, deliver, and
perform this Agreement in accordance with its terms, and this Agreement
constitutes the valid and binding obligation of such Member, enforceable against
such Member in accordance with its terms.
(b) no Event of Bankruptcy has occurred with respect to such Member.
12.07 Exhibits. All Exhibits and Schedules attached hereto are an
internal part of this Agreement and are incorporated herein by this reference.
-19-
<PAGE> 20
12.08 Entire Agreement. This Agreement constitutes the full and
complete agreement of the parties hereto with respect to the subject matter
hereof.
12.09 Captions. Titles or captions of Articles or Sections contained in
this Agreement are inserted only as a matter of convenience and for reference,
and in no way define, limit, extend or describe the scope of this Agreement or
the intent of any provision hereof.
12.10 Counterparts. This Agreement may be executed in a number of
counterparts, all of which together shall for all purposes constitute one
Agreement, binding on all the Members notwithstanding that all Members have not
signed the same counterpart.
12.11 Applicable Law. This Agreement and the rights and obligations of
the parties hereunder shall be governed by and interpreted, construed and
enforced in accordance with the laws of the State.
12.12 Gender, Etc. In the case of all terms used in this Agreement, the
singular shall include the plural and the masculine gender shall include the
feminine and neuter, and vice versa, as the context requires.
12.13 Equitable Remedies. Each Member shall, in addition to rights
provided herein or as may be provided under applicable law, be entitled to all
equitable remedies, including those of specific performance and injunction, to
enforce its rights hereunder.
12.14 Creditors. None of the provisions of this Agreement shall be for
the benefit of or enforceable by any creditor of any Member or of the Company.
WITNESS the execution hereof under seal as of the day first above
written.
MEMBERS:
NELLIE MAE, INC.
By:______________________________
Lawrence W. O'Toole, President
NMI EDUCATION LOAN CORPORATION
By:______________________________
Lawrence W. O'Toole, President
SCHEDULE A
<TABLE>
<CAPTION>
NAME AND ADDRESS OF MEMBERS CONTRIBUTION NUMBER OF UNITS PERCENTAGE
====================================================================================================================
<S> <C> <C> <C>
</TABLE>
-20-
<PAGE> 21
<TABLE>
<CAPTION>
INTEREST
===================================================================================================================
<S> <C>
Nellie Mae, Inc. 99%
50 Braintree Hill Park
Braintree, Massachusetts 021840
NMI Education Loan Corporation 1%
50 Braintree Hill Park
Braintree, Massachusetts 02184
TOTAL 100%
</TABLE>
-21-
<PAGE> 1
EXHIBIT 4.1
MASTER TRUST INDENTURE
between
NELLIE MAE EDUCATION LOAN TRUST,
as Issuer
and
STATE STREET BANK AND TRUST COMPANY,
as Indenture Trustee
Dated as of June 1, 1996
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- -------
<S> <C> <C>
310 (a)(1).................................................................................. 6.11
(a)(2).................................................................................. 6.11
(a)(3).................................................................................. 6.10
(a)(4).................................................................................. Not Applicable
(a)(5).................................................................................. 6.11
(b)..................................................................................... 6.8; 6.11
(c)..................................................................................... Not Applicable
311 (a)..................................................................................... 6.12
(b)..................................................................................... 6.12
(c)..................................................................................... Not Applicable
312 (a)..................................................................................... 8.1; 8.2(a)
(b)..................................................................................... 8.2(b)
(c)..................................................................................... 8.2(c)
313 (a)..................................................................................... 6.6
(b)..................................................................................... 6.6
(c)..................................................................................... 11.5
(d)..................................................................................... 6.6
314 (a)..................................................................................... 5.12; 8.3
(b)..................................................................................... 5.10
(c)..................................................................................... 2.13; 10.1;
11.10
(d)..................................................................................... 2.13; 11.10
(e)..................................................................................... 11.10
(f)..................................................................................... Not Applicable
315 (a)..................................................................................... 6.1; 6.2
(b)..................................................................................... 6.5
(c)..................................................................................... 6.1
(d)..................................................................................... 6.1
(e)..................................................................................... 7.9
316 (a)(1)(A)............................................................................... 7.8
(a)(1)(B)............................................................................... 7.6
(a)(2).................................................................................. Not Applicable
(b)..................................................................................... 7.10
(c)..................................................................................... 1.1
317 (a)..................................................................................... 7.3
(b)..................................................................................... 5.9
318 (a)..................................................................................... 11.12
(c)..................................................................................... 11.12
</TABLE>
- -------------
This table shall not be deemed to be a part of this Indenture.
<PAGE> 3
ARTICLE 1
DEFINITIONS
<TABLE>
<S> <C> <C>
SECTION 1.1. Definitions and Usage.......................................................... 1
SECTION 1.2. Incorporation by Reference of Trust Indenture Act.............................. 1
ARTICLE 2
THE NOTES
SECTION 2.1. Authorization.................................................................. 2
SECTION 2.2. Form........................................................................... 2
SECTION 2.3. Execution and Authentication of Notes.......................................... 2
SECTION 2.4. Notes Issuable in Series and Classes; General Provisions with
Respect to Principal and Interest Payments..................................... 3
SECTION 2.5. Denominations.................................................................. 3
SECTION 2.6. Books of Registry.............................................................. 3
SECTION 2.7. Transfer of Notes; Exchange of Notes........................................... 3
SECTION 2.8. Mutilated, Lost, Stolen or Destroyed Notes..................................... 4
SECTION 2.9. Disposition and Destruction of Notes........................................... 5
SECTION 2.10. Temporary Notes................................................................ 5
SECTION 2.11. Execution and Delivery of Notes................................................ 6
SECTION 2.12. Book-Entry System for Notes.................................................... 8
SECTION 2.13. Payment of Principal and Interest.............................................. 10
SECTION 2.14. Release of Collateral.......................................................... 11
SECTION 2.15. No Listing on Securities Market................................................ 11
ARTICLE 3
PAYMENT OF THE NOTES PRIOR TO MATURITY
SECTION 3.1. Payment of the Notes Prior to Maturity......................................... 11
ARTICLE 4
DISPOSITION OF PROCEEDS; ESTABLISHMENT OF FUNDS AND ACCOUNTS;
APPLICATION OF REVENUES
SECTION 4.1. Disposition of Proceeds........................................................ 12
SECTION 4.2. Debt Service Reserve Fund...................................................... 13
SECTION 4.3. Student Loan Acquisition Fund.................................................. 13
SECTION 4.4. Student Loan Portfolio Fund.................................................... 14
SECTION 4.5. Revenue Fund................................................................... 15
SECTION 4.6. Note Fund...................................................................... 16
SECTION 4.7. Services Fund.................................................................. 17
SECTION 4.8. Pledge......................................................................... 18
SECTION 4.9. Investments.................................................................... 18
SECTION 4.10. Termination.................................................................... 19
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
ARTICLE 5
COVENANTS TO SECURE NOTE
<S> <C> <C>
SECTION 5.1. Performance of Covenants; the Issuer............................................. 19
SECTION 5.2. Instruments of Further Assurance................................................. 19
SECTION 5.3. Recording and Filing............................................................. 20
SECTION 5.4. Compliance with and Enforcement of Financed Loans, Servicing
Agreement, Custody Agreement, Sales Agreement and Administration
Agreement........................................................................ 20
SECTION 5.5. Repurchase of Financed Loans..................................................... 20
SECTION 5.6. Issuer Status.................................................................... 20
SECTION 5.7. Statements by Issuer Regarding Financed Loans and Other Matters.................. 20
SECTION 5.8. Maintenance of Office or Agency.................................................. 20
SECTION 5.9. Money for Payments To Be Held in Trust........................................... 21
SECTION 5.10. Opinions as to Indenture Trust Estate............................................ 21
SECTION 5.11. Restricted Payments.............................................................. 22
SECTION 5.12. Annual Statement as to Compliance................................................ 22
SECTION 5.13. No Other Business................................................................ 22
SECTION 5.14. No Borrowing..................................................................... 22
SECTION 5.15. Capital Expenditures............................................................. 22
SECTION 5.16. Guarantees, Loans, Advances and Other Liabilities................................ 22
SECTION 5.17. Servicing of Financed Loans...................................................... 23
ARTICLE 6
CONCERNING THE INDENTURE TRUSTEE
SECTION 6.1. Duties of Indenture Trustee...................................................... 23
SECTION 6.2. Rights of Indenture Trustee...................................................... 24
SECTION 6.3. Individual Rights of Indenture Trustee........................................... 24
SECTION 6.4. Indenture Trustee's Disclaimer................................................... 24
SECTION 6.5. Notice of Defaults............................................................... 24
SECTION 6.6. Reports by Indenture Trustee to Noteholders...................................... 25
SECTION 6.7. Compensation and Indemnity....................................................... 25
SECTION 6.8. Replacement of Indenture Trustee................................................. 26
SECTION 6.9. Successor Indenture Trustee by Merger............................................ 26
SECTION 6.10. Appointment of Co-Trustee or Separate Owner Trustee.............................. 27
SECTION 6.11. Eligibility; Disqualification.................................................... 28
SECTION 6.12. Preferential Collection of Claims Against Issuer................................. 28
SECTION 6.13. Statements by Indenture Trustee of Funds and Accounts and
Other Matters.................................................................... 28
</TABLE>
ii
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
ARTICLE 7
DEFAULTS AND REMEDIES
<S> <C> <C>
SECTION 7.1. Events of Default................................................................ 28
SECTION 7.2. Application of Moneys............................................................ 29
SECTION 7.3. Suits at Law or in Equity; Direction of Action by Holders........................ 31
SECTION 7.4. Suits by Individual Holders...................................................... 32
SECTION 7.5. Remedies Not Exclusive........................................................... 32
SECTION 7.6. Waivers of Default............................................................... 32
SECTION 7.7. Notice of Events of Default...................................................... 33
SECTION 7.8. Control by Noteholders........................................................... 33
SECTION 7.9. Undertaking for Costs............................................................ 33
SECTION 7.10. Unconditional Rights of Noteholders To Receive Principal and
Interest......................................................................... 33
ARTICLE 8
NOTEHOLDERS' LISTS AND REPORTS
SECTION 8.1. Issuer to Furnish Indenture Trustee Names and Addresses
of Noteholders................................................................... 34
SECTION 8.2. Preservation of Information; Communications to Noteholders....................... 34
SECTION 8.3. Reports by Issuer................................................................ 34
ARTICLE 9
AMENDING AND SUPPLEMENTING OF INDENTURE
SECTION 9.1. Amending and Supplementing of Indenture Without Consent
of Noteholders................................................................... 35
SECTION 9.2. Amendment of Indenture with Consent of Holders................................... 37
SECTION 9.3. Execution of Supplemental Indentures............................................. 38
SECTION 9.4. Effect of Supplemental Indenture................................................. 38
SECTION 9.5. Conformity with Trust Indenture Act.............................................. 38
SECTION 9.6. Reference in Notes to Supplemental Indentures.................................... 38
ARTICLE 10
SATISFACTION AND DISCHARGE OF INDENTURE;
SUBSTITUTION AND RELEASE OF INDENTURE ESTATE
SECTION 10.1. Satisfaction and Discharge of Indenture.......................................... 39
SECTION 10.2. Application of Trust Money....................................................... 39
SECTION 10.3. Repayment of Moneys Held by Paying Agent......................................... 40
SECTION 10.4. Substitution and Release of Indenture Trust Estate............................... 40
</TABLE>
iii
<PAGE> 6
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 10.5. Opinion of Counsel............................................................... 40
SECTION 10.6. Notes Not Presented for Payment When Due; Moneys Held for
the Notes after Due Date Thereof................................................. 41
ARTICLE 11
MISCELLANEOUS
SECTION 11.1. Benefits of Indenture............................................................ 41
SECTION 11.2. Indenture Binding Upon Successors or Assigns of the Issuer....................... 41
SECTION 11.3. Effect of Legal Holidays......................................................... 41
SECTION 11.4. Partial Invalidity............................................................... 41
SECTION 11.5. Notices; Notice to Shareholders; Waiver.......................................... 42
SECTION 11.6. Governing Law.................................................................... 42
SECTION 11.7. Effect of Article and Section Headings and Table of Contents..................... 42
SECTION 11.8. Suspension of Mail............................................................... 43
SECTION 11.9. Execution Counterparts........................................................... 43
SECTION 11.10. Compliance Certificates and Opinions, etc........................................ 43
SECTION 11.11. Form of Documents Delivered to Indenture Trustee................................. 44
SECTION 11.12. Conflict with Trust Indenture Act................................................ 45
SECTION 11.13. Recording of Indenture........................................................... 45
SECTION 11.14. Trust Obligations................................................................ 45
SECTION 11.15. No Petition...................................................................... 45
SECTION 11.16. Usury............................................................................ 45
</TABLE>
EXHIBITS
A - Definitions
B - Form of Note
C - Certificate of Financed Loans
D - Form of Monthly Statements
iv
<PAGE> 7
MASTER TRUST INDENTURE
THIS MASTER TRUST INDENTURE has been made and entered into as of June
1, 1996 by and between the NELLIE MAE EDUCATION LOAN TRUST, a Massachusetts
business trust (the "Issuer" or the "Trust"), and STATE STREET BANK AND TRUST
COMPANY, a Massachusetts trust company, as trustee and not in its individual
capacity (the "Indenture Trustee").
The Issuer has duly authorized the execution and delivery of this
Indenture to provide for one or more series (each, a "Series") of its Notes (the
"Notes"), issuable as provided in this Indenture. Each Series of such Notes will
be issued only under a separate supplement (a "Terms Supplement") to this
Indenture duly executed and delivered by the Issuer and the Indenture Trustee
and limited to the amount therein described. All covenants and agreements made
by the Issuer herein are for the benefit and security of the Holders of the
Notes. The Issuer is entering into this Indenture and the Indenture Trustee is
accepting the trusts created hereby for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged.
All conditions precedent to make this Indenture a valid agreement of
the Issuer in accordance with its terms have been done.
ARTICLE 1
DEFINITIONS AND USAGE
SECTION 1.1. DEFINITIONS AND USAGE. Unless the context shall clearly
indicate some other meaning or may otherwise require, capitalized terms used but
not defined herein are defined in Exhibit A hereto (as supplemented to the
extent indicated therein, by the provisions of the Terms Supplement for a
particular Series), which also contains rules as to construction and usage that
are applicable herein.
SECTION 1.2. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means, if requested in writing by
the Administrator, this Indenture.
"indenture trustee" or "institutional trustee" means the
Indenture Trustee.
"obligor" on the indenture securities means the Issuer and any
other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by
Commission rule have the meaning assigned to them by such definitions.
<PAGE> 8
ARTICLE 2
THE NOTES
SECTION 2.1. AUTHORIZATION. There is hereby authorized the borrowing of
funds, and to evidence such borrowings there is hereby authorized to be issued
from time to time, without limitation, one or more Series, each of which Series
may consist of one or more Classes, of Notes which shall be designated generally
as the "Asset-Backed Notes" of the Issuer, with such further particular
designations added or incorporated in such title for the Notes of any particular
Series or Class as the Issuer may determine.
SECTION 2.2. FORM. The Notes and the Indenture Trustee's certificate of
authentication shall be issued in fully registered form in substantially the
form set forth in Exhibit B, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture or any Terms Supplement and may have such letters, numbers or other
marks of identification and such legends or endorsements placed thereon as may,
consistently herewith, be determined by the officers executing such Notes, as
evidenced by their execution of the Notes. Any portion of the text of any Note
may be set forth on the reverse thereof, with an appropriate reference thereto
on the face of the Note.
The definitive Notes shall be typewritten, printed, lithographed or
engraved or produced by any combination of these methods (with or without steel
engraved borders), all as determined by the officers executing such Notes, as
evidenced by their execution.
Each Note shall be dated the date of its authentication. The terms of
the Notes set forth in Exhibit B are part of the terms of this Indenture.
SECTION 2.3. EXECUTION AND AUTHENTICATION OF NOTES. After their
authorization by a Terms Supplement, the Notes shall be executed on behalf of
the Issuer by any of its Authorized Officers. The signature of any such
Authorized Officer on the Notes may be by manual or facsimile. The Notes shall
be authenticated by the manual signature of an authorized officer of the
Authenticating Agent.
Only such of the Notes as shall bear thereon a certificate of
authentication and registration substantially in the form set forth in Exhibit B
hereto, manually executed by an authorized officer of the Authenticating Agent,
shall be valid or obligatory for any purpose or entitled to the benefits of this
Indenture, and such certificate of authentication shall be conclusive evidence
that the Notes so authenticated have been duly executed, authenticated,
delivered and issued hereunder and are entitled to the benefits of this
Indenture.
At any time and from time to time after the execution and delivery of
this Indenture and after authorization by a Term Supplement, the Issuer may
deliver Notes executed by the Issuer to the Indenture Trustee for
authentication, and the Indenture Trustee shall authenticate and deliver such
Notes as provided in this Indenture and not otherwise.
In case any person who shall have executed, authenticated or registered
any of the Notes, whether manually or by facsimile, shall die or cease to be the
person authorized to execute, authenticate or register the Notes before the
Notes so executed, authenticated or registered by such person shall have been
actually issued and delivered, such Notes shall be valid nevertheless, and may
be issued with the same effect as though the person who had so executed,
authenticated or registered such Notes had not died or ceased to be such
authorized person.
2
<PAGE> 9
SECTION 2.4. NOTES ISSUABLE IN SERIES AND CLASSES; GENERAL PROVISIONS
WITH RESPECT TO PRINCIPAL AND INTEREST PAYMENTS. The Notes may be issued in one
or more Series, each of which Series may consist of only one Class of Notes or
may be divided into two or more Classes, and shall be designated generally as
the "Asset-Backed Notes" of the Issuer, with such further particular
designations added or incorporated in such title for the Notes of any particular
Series or Class as the Issuer may determine.
If a Series of Notes includes more than one Class, the Classes of Notes
of such Series shall mature sequentially unless otherwise provided in the
related Terms Supplement. The principal of each Note within a Class shall be due
on such Maturity Date applicable to such Class as shall be specified in the
related Terms Supplement. The principal of each Note shall be payable on the
related Maturity Date unless the unpaid principal of such Note becomes due and
payable at an earlier date by declaration of acceleration or otherwise.
Unless otherwise provided in the related Terms Supplement, no payments
of principal of any Class of Notes of a Series shall be made until payment of
the entire principal amount of all Outstanding Notes of such Series, if any,
with an earlier Maturity Date has been made. Payments of principal of a Class of
Notes of a Series shall be made pro rata among all Outstanding Notes of such
Class, without preference or priority of any kind.
Unless otherwise provided in the Terms Supplement, all payments made
with respect to any Note shall be applied first to the interest then due and
payable on such Note and then to the principal thereof. Unless otherwise
provided in the related Terms Supplement, all computations of interest accrued
on any Note shall be made on the basis of the actual number of days elapsed in
each applicable Interest Period divided by 360.
Payments of principal of and interest on each Note shall be made by the
Indenture Trustee from its Principal Corporate Trust Operations Office in lawful
money of the United States, and payment of interest of each Note shall, if the
Holder thereof holds $1,000,000 or more in aggregate principal amount of Notes,
be made by the deposit or wire transfer of immediately available funds to the
credit of an account located within the United States specified by such Holder
in duly executed instructions, with signature guaranteed in a manner
satisfactory to the Indenture Trustee, delivered to the Indenture Trustee no
less than ten (10) Business Days prior to the first Distribution Date for which
such deposit or wire transfer of payment of interest is to be effective. If such
instructions are not delivered to the Indenture Trustee by the Holder of
$1,000,000 or more in aggregate principal amount of Notes in accordance with
this paragraph, and for all other Holders, payment of interest shall be made by
check mailed on the applicable Distribution Date to the Holder's address as it
appears on the books of registry maintained by the Indenture Trustee pursuant to
Section 2.6 hereof. Notwithstanding the foregoing and except for the Notes held
in book-entry only form pursuant to Section 2.12 hereof, no payment of principal
shall be made on any Note unless and until such Note is delivered to the
Indenture Trustee for cancellation; and no payment of interest due on any
Distribution Date shall be made on any Note except to the person whose name
appears on the books of registry maintained by the Indenture Trustee as the
Holder thereof as of the close of business on the Record Date. Wire transfers to
a Holder made pursuant to this Section 2.4 shall be made without expense to such
Holder.
SECTION 2.5. DENOMINATIONS. The Notes shall be issuable only as
registered Notes in the Authorized Denominations prescribed by the terms of the
Terms Supplement creating the particular Series.
SECTION 2.6. BOOKS OF REGISTRY. At all times while any Note remains
Outstanding, the Issuer shall cause to be kept books of registry (the "Note
Register") for the registration and transfer of
3
<PAGE> 10
Notes. The Indenture Trustee shall be "Note Registrar" for the purpose of the
registration of Notes and the registration of transfers of Notes. Upon
presentation of any Notes to the Indenture Trustee or at the Office of the
Authenticating Agent, the Indenture Trustee shall transfer, or the
Authenticating Agent shall cause the Indenture Trustee to transfer, as the case
may be, under such reasonable regulations as the Indenture Trustee may
prescribe, such Notes on such Note Register. Such Note Register shall at all
reasonable times be open for inspection by the Issuer or its duly authorized
agents or representatives. Upon the resignation of any Note Registrar, the
Issuer shall promptly appoint a successor or, if it elects not to make such an
appointment, assume the duties of maintaining the Note Register.
The Issuer, the Indenture Trustee and the Authenticating Agent may
treat the registered owner of any Note as the absolute owner of such Note for
the purpose of receiving payment of the principal of and interest on such Note
and for all other purposes whatsoever and the Issuer, the Indenture Trustee and
the Authenticating Agent shall not be affected by any notice to the contrary.
SECTION 2.7. TRANSFER OF NOTES; EXCHANGE OF NOTES. Any Note may be
transferred upon the Note Register maintained pursuant to Section 2.6 hereof, by
the person in whose name it is registered, in person or by its duly authorized
attorney, upon surrender of such Note to the Indenture Trustee for cancellation,
accompanied by a written instrument of transfer in the form set forth in Exhibit
B hereto duly executed by the registered owner in person or by its duly
authorized attorney, with signatures guaranteed, in a manner satisfactory to the
Indenture Trustee.
Whenever any Note shall be surrendered for transfer, the Issuer shall
execute and the Authenticating Agent shall authenticate and deliver, at the
Principal Corporate Trust Operations Office of the Indenture Trustee or at the
Office of the Authenticating Agent (or send by first class mail to the new
Noteholder or Noteholders at the new Noteholder's request, risk and expense),
registered in the name or names of the transferee or transferees, a new duly
executed Note or (to the extent of Authorized Denominations) two or more new
duly executed Notes of the same date, Series, Class and aggregate principal
amount, and bearing interest at the same rate, as the Note being surrendered.
To the extent of Authorized Denominations, any Note or Notes may be
surrendered and exchanged at the Principal Corporate Trust Operations Office of
the Indenture Trustee or at the Office of the Authenticating Agent for a Note or
Notes of the same date, Class and Series, bearing interest at the same rate and
of like aggregate principal amount. The Issuer shall execute and the
Authenticating Agent shall authenticate and deliver the Notes issued upon such
exchange and shall deliver the same at the Principal Corporate Trust Operations
Office of the Indenture Trustee or at the Office of the Authenticating Agent (or
send the same by first class mail to the Noteholder at the new Noteholder's
request, risk and expense).
All exchanges and transfers of Notes pursuant to this Section 2.7 shall
be made without expense to the Noteholder, except that the Indenture Trustee or
the Authenticating Agent shall require the payment by the Noteholder requesting
such transfer or exchange of any tax, fee or other governmental charge required
to be paid with respect to such transfer or exchange.
All Notes surrendered pursuant to this Section 2.7 shall be cancelled.
SECTION 2.8. MUTILATED, LOST, STOLEN OR DESTROYED NOTES. In case any
Note shall at any time become mutilated in whole or in part, or is destroyed,
lost or stolen, the Issuer shall cause to be executed and delivered at the
Principal Corporate Trust Operations Office of the Indenture Trustee or at the
Office of the Authenticating Agent (or send by first class mail to the
Noteholder thereof at the Noteholder's request, risk and expense), a new Note of
the same date, Class, Series and bearing interest at the same rate and of like
principal amount as the Note so mutilated, destroyed, lost or stolen, in
exchange and substitution
4
<PAGE> 11
for and upon the surrender for cancellation of such mutilated Note, or in lieu
of or in substitution for such destroyed, lost or stolen Note. In any such event
the applicant for the issuance of a substitute Note shall file with the
Indenture Trustee or the Authenticating Agent evidence or proof satisfactory to
the Indenture Trustee or the Authenticating Agent, as the case may be, of the
mutilation, destruction, loss or theft of the original Note, and proof of
ownership thereof, shall furnish the Issuer, the Indenture Trustee and the
Authenticating Agent with security and indemnity satisfactory to the Issuer, the
Indenture Trustee and the Authenticating Agent, and shall comply with such other
reasonable rules as the Issuer, the Indenture Trustee or the Authenticating
Agent may prescribe. Any duplicate Note issued under the provisions of this
Section 2.8 in exchange and substitution for any mutilated Note or in
substitution for any allegedly destroyed, lost or stolen Note, shall be entitled
to the identical benefits under this Indenture as was the original Note in lieu
of which such duplicate Note is issued. Neither the Issuer nor the Indenture
Trustee shall be required to treat both the original Note and any duplicate Note
as being Outstanding for the purpose of determining the principal amount of
Notes Outstanding hereunder, but both the original and duplicate Note shall be
treated as one and the same.
Notwithstanding the foregoing provisions of this Section 2.8 as to the
issuance of duplicate or replacement Notes, if any such mutilated, destroyed,
lost or stolen Note has matured, at the option of the Issuer or the Indenture
Trustee, payment of the amount due thereon may be made without the issuance of
any duplicate or replacement Note upon receipt of like evidence, indemnity,
security and expenses and the surrender for cancellation of any such mutilated,
destroyed, lost or stolen Note and upon such other conditions as the Issuer or
the Indenture Trustee may prescribe.
All mutilated Notes surrendered to the Indenture Trustee or the
Authenticating Agent for substitution for new Notes pursuant to this Section 2.8
shall be cancelled by the Indenture Trustee or the Authenticating Agent. The
Authenticating Agent shall deliver any such cancelled Notes to the Indenture
Trustee.
All expenses incurred by the Issuer, the Indenture Trustee or the
Authenticating Agent for providing any duplicate or replacement Note shall be
paid by the Noteholder.
SECTION 2.9. DISPOSITION AND DESTRUCTION OF NOTES. All Notes
surrendered to the Indenture Trustee for payment, or surrendered to the
Indenture Trustee for transfer or exchange in accordance with Section 2.7
hereof, or surrendered to the Indenture Trustee or the Authenticating Agent for
substitution in accordance with Section 2.8 hereof, shall be cancelled by the
Indenture Trustee or the Authenticating Agent upon such payment, transfer,
exchange or substitution, as the case may be.
Whenever in this Indenture provision is made for the cancellation of
any Notes, the cancelled Notes shall be delivered by the Indenture Trustee to
the Issuer or as the Issuer may direct. Upon the written request of the Issuer,
the Indenture Trustee may, however, in lieu of such cancellation and delivery,
destroy such Notes to the extent permitted by law. If the Indenture Trustee
shall destroy any Notes, it shall deliver a certificate of such destruction to
the Issuer at least annually.
SECTION 2.10. TEMPORARY NOTES. Until definitive Notes are prepared, the
Issuer may execute and deliver, in lieu of definitive Notes, but subject to the
same provisions, limitations and conditions as the definitive Notes, except as
to the exchangeability, one or more temporary Notes, substantially of the tenor
of the definitive Notes in lieu of which such temporary Notes are issued, in
Authorized Denominations, and with such omissions, insertions and variations as
may be appropriate to temporary Notes. Until so exchanged, the temporary Notes
shall in all respects be entitled to the same benefits and security as
definitive Notes issued pursuant to this Indenture. All temporary Notes
surrendered in exchange for definitive Notes shall be forthwith cancelled by the
Indenture Trustee.
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SECTION 2.11. EXECUTION AND DELIVERY OF NOTES. Upon execution and
delivery of the related Terms Supplement, the Issuer shall execute and deliver
to the Indenture Trustee for authentication, and thereupon the same shall be
authenticated and delivered by the Indenture Trustee upon receipt by the
Indenture Trustee of the following:
(a) an Issuer Order authorizing the execution, authentication
and delivery of such Notes by the Issuer and specifying the Series, the
Classes within such Series, the Maturity Date of each Class, the
principal amount and the Interest Rate applicable to each Class and the
method of determining such Interest Rate of each Class of such Notes to
be authenticated and delivered;
(b) in case the Notes to be authenticated and delivered are of
any Series not theretofore created, an appropriate Terms Supplement,
accompanied by an Issuer Order authorizing such Terms Supplement (and,
in the case of the first Series to be authenticated and delivered
hereunder, authorizing this Indenture), designating the new Series to
be created and prescribing, consistent with the applicable provisions
of this Indenture, the terms and provisions relating to the Notes of
such Series;
(c) Opinions of Counsel addressed to the Indenture Trustee
complying with the requirements of Section 11.10 and to the effect
that:
(i) all instruments furnished to the Indenture
Trustee in connection with such Notes conform to the
requirements of this Indenture and constitute all the
documents required to be delivered hereunder for the Indenture
Trustee to authenticate and deliver such Notes;
(ii) all conditions precedent provided for
in this Indenture relating to the authentication and delivery
of such Notes have been complied with;
(iii) the Trust Agreement authorizes the Issuer
to execute and deliver the Terms Supplement relating to such
Notes (and, in the case of the first Series to be
authenticated and delivered hereunder, this Indenture), and to
issue such Notes, and the Issuer has duly taken all necessary
action under the Trust Agreement for those purposes;
(iv) the Issuer is a Massachusetts business
trust and the issuance of such Notes is in conformity with the
terms of and duly authorized by the Trust Agreement;
(v) assuming due execution and delivery
thereof by the Indenture Trustee, this Indenture and the
related Terms Supplement, as executed and delivered by the
Issuer, are the valid, legal and binding obligations of the
Issuer, enforceable in accordance with their terms, subject to
the effect of bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other similar laws
relating to or affecting creditors' rights generally and court
decisions with respect thereto, and such counsel need express
no opinion with respect to the availability of equitable
remedies, and the execution of such Terms Supplement is
authorized or permitted by Section 9.1 of this Indenture;
(vi) such Notes, when issued, delivered,
authenticated and paid for, will be the valid, legal and
binding obligations of the Issuer, entitled to the benefits of
this Indenture and the related Terms Supplement, equally and
ratably with all other Notes of such Series, if any,
theretofore issued, authenticated, delivered and paid for and
then Outstanding hereunder, and enforceable in accordance with
their terms, subject to the effect
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of bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other similar laws relating to or
affecting creditors' rights generally and court decisions with
respect thereto, and such counsel need express no opinion with
respect to the availability of equitable remedies;
(vii) the Issuer has granted to the Indenture
Trustee a lien and first perfected security interest in all of
its right, title and interest in each such Financed Loan;
(viii) the Trust Agreement authorizes the Issuer
to grant the Indenture Trust Estate to the Indenture Trustee
as security for the Notes of such Series and all previously
issued and Outstanding Series and the Issuer has taken all
necessary action under the Trust Agreement to grant the
Indenture Trust Estate to the Indenture Trustee;
(ix) the Terms Supplement delivered to the
Indenture Trustee with such Opinion of Counsel subjects the
Financed Loans securing such Series and all previously issued
and Outstanding Series and all proceeds therefrom and the
Trust Accounts or Funds for such Series and all previously
issued and Outstanding Series to the lien and security
interest of this Indenture;
(x) such action has been taken with respect to
delivery of possession of the Indenture Trust Estate and with
respect to the recording and filing of this Indenture, the
Terms Supplement for such Series, any other indentures
supplemental hereto and any other requisite documents and with
respect to the execution and filing of any financing
statements as is necessary to perfect a security interest in
the Indenture Trust Estate for such Series and all previously
issued and Outstanding Series, with either the details of such
action being recited therein, or the absence of any such
action being necessary to make such lien and security interest
effective being stated therein; and, with any recording,
filing, rerecording and re-filing of this Indenture, the Terms
Supplement for such Series, any other indentures supplemental
hereto and any other requisite documents and any execution and
filing of any financing statements and continuation statements
that will, in the opinion of such counsel, be required to
maintain the lien and security interest created by this
Indenture and the related Terms Supplements in the Indenture
Trust Estate for such Series and all previously issued and
Outstanding Series until March 15 of the year in which the
first Opinion of Counsel with respect to such Series is
required to be delivered under Section 5.10 being described
therein;
(xi) this Indenture and the Terms Supplement
for such Series have been duly qualified under the TIA, or
that no qualification of such Terms Supplement under the TIA
is necessary; the execution of the Terms Supplement for such
Series requires the requalification of this Indenture under
the TIA, or that no requalification of the Indenture under the
TIA is necessary by virtue of the execution of such Terms
Supplement; and
(xii) no authorization, approval or consent of
any governmental body having jurisdiction over the Issuer
which has not been obtained by the Issuer is required for the
valid issuance and delivery of the Notes.
(d) an Officer's Certificate of the Issuer complying with the
requirements of Section 11.10 and stating that:
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(i) the Issuer is not in default under this
Indenture and the issuance of such Notes will not result in
any breach of any of the terms, conditions or provisions of,
or constitute a default under, the Trust Agreement, any
indenture, mortgage, deed of trust or other agreement or
instrument to which the Issuer is a party or by which it is
bound, or any order of any court or administrative agency
entered in any proceeding to which the Issuer is a party or by
which it may be bound or to which it may be subject, and that
all conditions precedent provided in this Indenture relating
to the authentication and delivery of such Notes have been
complied with;
(ii) the Issuer is the owner of each Financed
Loan securing such Series and any previously issued Series,
has not assigned any interest or participation in any such
Financed Loan (or, if any such interest or participation has
been assigned, it has been released) and has the right to
pledge each such Financed Loan to the Indenture Trustee;
(iii) the Issuer has granted to the Indenture
Trustee a lien and first perfected security interest in all of
its right, title, and interest in each such Financed Loan; and
(iv) attached thereto are true and correct
copies of letters signed by each Rating Agency confirming that
the Notes of such new Series have been rated in the highest
rating categories by such Rating Agency and that the issuance
of such new Series shall not adversely affect the ratings on
any Outstanding Notes or Certificates.
(e) Except to the extent otherwise provided in the related
Terms Supplement, an Officer's Certificate of the Issuer stating that
all of the Financed Loans and any other assets securing such Series and
all previously issued and Outstanding Series:
(i) satisfy each of the requirements
established for such Financed Loans in the related Terms Supplement;
and
(ii) have been endorsed as provided in the
Sales Agreement;
(f) Cash in the amount, if any, required by the terms of the
related Terms Supplement to be deposited in the applicable Revenue
Account and held by the Indenture Trustee and applied in accordance
with the terms hereof or as otherwise provided in the related Terms
Supplement;
(g) Cash, or any other assets specified in or permitted by the
related Terms Supplement in the respective amounts, if any, required by
the terms of the related Terms Supplement to be maintained in the
applicable Debt Service Reserve Account and held by the Indenture
Trustee;
(h) An executed counterpart of the Terms Supplement; and
(i) Such other documents, certificates, instruments or
opinions as may be required by the terms of the Terms Supplement
creating such Series of Notes.
SECTION 2.12. BOOK-ENTRY SYSTEM FOR NOTES. Unless otherwise provided in
the related Terms Supplement, the Notes shall be registered under a book-entry
system with a Securities Depository in accordance with the provisions of this
Section 2.12. The Depository Trust Company, New York, New York ("DTC"), shall
serve as the initial Securities Depository. The Notes shall be registered in the
form of one registered Note for the aggregate principal amount of each Series
and Class in the name of Cede & Co., as
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nominee of DTC, provided that if DTC shall request that the Notes be registered
in the name of a different nominee, the Indenture Trustee shall exchange all or
any portion of the Notes for an equal aggregate principal amount of Notes
registered in the name of such nominee or nominees of DTC. During any such
period, no person other than DTC or its nominee shall be entitled to receive
from the Issuer or the Indenture Trustee either a Note or any other evidence of
ownership of the Notes, or any right to receive any payment in respect thereof
unless DTC or its nominee shall transfer record ownership of all or any portion
of the Notes on the registration books maintained by the Indenture Trustee in
connection with discontinuing the book-entry system as provided in this Section
2.12 or otherwise.
So long as the Notes or any portion thereof are registered in the name
of DTC or any nominee thereof, all payments of the principal of and interest on
such Notes shall be made to DTC or its nominee in New York Clearing House or
equivalent same-day funds no later than the dates provided for such payments to
be made to Noteholders. Each such payment to DTC or its nominee shall be valid
and effective to fully discharge all liability of the Issuer and the Indenture
Trustee with respect to the principal of and interest on the Notes to the extent
of the sum or sums so paid. In the event of the payment or prepayment of less
than all of the Notes Outstanding, the Indenture Trustee shall not require
surrender by DTC or its nominee of the Notes so paid or prepaid, but DTC (or its
nominee) may retain such Notes and make an appropriate notation on the Note
certificates as to the amount of such partial payment or prepayment, provided
that DTC shall deliver to the Indenture Trustee, upon request, a written
confirmation of such partial payment or prepayment and thereafter the records
maintained by the Indenture Trustee shall be conclusive as to the amount of the
Notes of such maturity which have been paid or prepaid.
So long as the Notes or any portion thereof are registered in the name
of DTC or any nominee thereof, the Issuer and the Indenture Trustee may treat
DTC (or its nominee) as the sole and exclusive owner of the Notes registered in
its name for the purposes of payment of the principal of or interest on the
Notes, selecting the Notes or portions thereof to be paid or prepaid, giving any
notice permitted or required to be given to Noteholders under this Indenture,
registering the transfer of Notes, obtaining any consent or other action to be
taken by Noteholders and for all other purposes whatsoever, and neither the
Issuer nor the Indenture Trustee shall be affected by any notice to the
contrary. Neither the Issuer nor the Indenture Trustee shall have any
responsibility or obligation to any participant in DTC, any person claiming a
beneficial ownership in the Notes under or through DTC or any such participant,
or any other person not shown on the registration books of the Indenture Trustee
as being a Noteholder, with respect to the Notes, the accuracy of any records
maintained by DTC or any such participant, the payment by DTC or any such
participant of any amount in respect of the principal of or interest on the
Notes, any notice which is permitted or required to be given to Noteholders
under this Indenture, the selection by DTC or any such participant of any person
to receive payment in the event of a partial payment or prepayment of the Notes
or any consent given or other action taken by DTC as Noteholder.
So long as the Notes or any portion thereof are registered in the name
of DTC or any nominee thereof, all notices required or permitted to be given to
the Noteholders under this Indenture shall be given to DTC as provided in a
Representation Letter (the "DTC Representation Letter"). Any successor Indenture
Trustee shall in its written acceptance of its duties under this Indenture agree
to take any actions necessary from time to time to comply with the requirements
of the DTC Representation Letter.
In connection with any notice or other communication to be provided to
Noteholders pursuant to this Indenture by the Issuer or the Indenture Trustee
with respect to any consent or other action to be taken by Noteholders, DTC
shall consider the date of receipt of notice requesting such consent or other
action as the record date for such consent or other action, provided that the
Issuer or the Indenture Trustee may establish a special record date for such
consent or other action, consistent with the terms of this Indenture. The Issuer
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or the Indenture Trustee shall give DTC notice of such special record date not
less than fifteen (15) calendar days in advance of such special record date to
the extent possible.
The book-entry system for registration of the ownership of the Notes
may be discontinued at any time if DTC determines to resign as securities
depository for the Notes or the Indenture Trustee determines that continuation
of the system of book-entry transfers through DTC (or through a successor
securities depository) is not in the best interests of the Noteholders (provided
that the Indenture Trustee shall have no obligation or duty to make such
determination prior to a continuing Event of Default, and any such duty during a
continuing Event of Default shall be subject to Article 7 hereof). In either of
such events (unless in the case of a determination by the Indenture Trustee, the
Indenture Trustee, at the direction of the Issuer, appoints a successor
securities depository), the Notes shall be delivered in registered certificate
form to such persons, and in such principal amounts (and in authorized
denominations), as may be designated by DTC, but without any liability on the
part of the Issuer or the Indenture Trustee for the accuracy of such
designation. Whenever DTC requests the Issuer and the Indenture Trustee to do
so, the Issuer and the Indenture Trustee shall cooperate with DTC in taking
appropriate action after reasonable notice to arrange for another securities
depository to maintain custody of certificates evidencing the Notes.
SECTION 2.13. Payment of Principal and Interest. (a) Any
installment of interest or principal payable on any Notes of any Series which is
punctually paid or duly provided for by the Issuer on the applicable
Distribution Date shall be paid to the person in whose name such Note is
registered at the close of business on the Record Date for such Distribution
Date (i) by check mailed to such person's address as it appears in the Note
Register on such Record Date, or (ii) except that, unless definitive Notes have
been issued pursuant to Section 2.12, with respect to Notes registered on the
Note Record Date in the name of Cede & Co., payment will be made by wire
transfer in immediately available funds to the account designated by such
nominee; provided, however, the final installment of principal payable with
respect to such Note shall be payable as provided in subsection (c) of this
Section 2.13.
(b) All reductions in the principal amount of a Note effected
by payments of installments of principal made on any Distribution Date shall be
binding upon all Holders of such Note and of any Note issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof.
Following any prepayment or principal distribution in part, the principal
balance of each affected Note shall be deemed to be an amount equal to the
original principal amount of such Note multiplied by the Principal Factor (as
defined in Section 3.1(a) hereof).
(c) The principal of each Class of Notes shall be payable in
installments on each Distribution Date as provided in the applicable Terms
Supplement. Notwithstanding the foregoing, the entire unpaid principal amount of
each Class of Notes shall be due and payable, if not previously paid, on the
date on which an Event of Default shall have occurred and be continuing, if
either the Indenture Trustee or the Noteholders of the Notes representing not
less than a majority of the Outstanding Amount of the Notes have declared the
Notes to be immediately due and payable in the manner provided in Section 7.1.
All principal payments on each Class of Notes shall be made pro rata to the
Noteholders of such Class entitled thereto as provided in the applicable Terms
Supplement. The Indenture Trustee shall notify the person in whose name a Note
is registered at the close of business on the Record Date preceding the
Distribution Date on which the Issuer expects that the final installment of
principal of and interest on such Note will be paid. Such notice shall be mailed
or transmitted by facsimile prior to such final Distribution Date and shall
specify that such final installment will be payable only upon presentation and
surrender of such Note and shall specify the place where such Note may be
presented and surrendered for payment of such installment.
(d) If the Issuer defaults in a payment of interest on any
Class of Notes, the Issuer shall pay defaulted interest (plus interest on such
defaulted interest to the extent lawful) at the applicable Class
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Note Rate in any lawful manner. The Issuer may pay such defaulted interest to
the persons who are Noteholders of such Class on a subsequent special record
date, which date shall be at least five Business Days prior to the payment date.
The Issuer shall fix or cause to be fixed any such special record date and
payment date, and, at least 15 days before any such special record date, the
Issuer shall mail to each Noteholder of such Class a notice that states the
special record date and the amount of defaulted interest to be paid.
(e) Subject to the foregoing provisions of this Section, each
Note delivered under this Indenture, upon registration of transfer of or in
exchange for or in lieu of any other Note, shall carry the rights to unpaid
principal and interest that were carried by such other Note. Any checks mailed
pursuant to this Section 2.13 and returned undelivered shall be held in
accordance with Section 5.9.
SECTION 2.14. RELEASE OF COLLATERAL. Subject to Section 11.10 and
except as otherwise provided herein, including in Sections 4.4, 5.2, 5.4, 5.5
and 10.4, the Indenture Trustee shall release property from the lien of this
Indenture only upon receipt of a written request by the Issuer accompanied by a
certificate of an Authorized Officer of the Issuer, an Opinion of Counsel and
Independent Certificates in accordance with TIA Sections 314(c) and 314(d)(1) or
an Opinion of Counsel in lieu of such Independent Certificates to the effect
that the TIA does not require any such Independent Certificates. In the case of
a release of collateral in an amount in excess of five percent (5%) of the
Outstanding balance of the Notes and Certificates; the Issuer shall deliver a
copy of its written request to the Rating Agencies.
SECTION 2.15. NO LISTING ON SECURITIES MARKET. The Notes shall not be
listed on any established securities market. For this purpose, an established
securities market includes any national securities exchange registered under the
Securities Exchange Act or exempted from registration because of the limited
volume of transactions, any local exchange, and any over the counter market
characterized by an interdealer quotation system which regularly disseminates
quotations of obligations by identified brokers or dealer, by electronic means
or otherwise.
ARTICLE 3
PAYMENT OF THE NOTES PRIOR TO MATURITY
SECTION 3.1. PAYMENT OF THE NOTES PRIOR TO MATURITY.
(a) General. The Notes shall be subject to optional purchase prepayment
or mandatory principal distribution prior to the applicable Maturity Date upon
the terms and conditions and on such dates as may be set forth in the related
Terms Supplement.
In the event of the optional purchase prepayment or mandatory
distribution of principal at any time of only part of any Class of Notes, moneys
available for such prepayment or distribution shall be applied to the payment of
a portion of the principal of each Note of such Class in accordance with the
ratio which the outstanding principal amount of such Note bears to the aggregate
principal amount of all the Outstanding Notes of such Class. Such ratio will be
expressed as a seven-digit decimal, which will initially be 1.0000000 and will
thereafter decline to reflect the reduction in the Outstanding principal balance
of a Note after such prepayment or distribution (the "Principal Factor").
Following any prepayment or principal distribution in part, the principal
balance of each affected Note shall be deemed to be an amount equal to the
original principal amount of such Note multiplied by the Principal Factor.
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(b) Optional Purchase Prepayment. As provided in the related Terms
Supplement, on any Distribution Date on or after which the Balance in the
applicable Account of the Student Loan Portfolio Fund is equal to or less than a
certain percentage (as specified in the related Terms Supplement) of the Initial
Pool Balance with respect to the Financed Loans in such Account, the Seller may
repurchase all remaining such Financed Loans at a purchase price equal to the
outstanding principal balance of such Financed Loans, plus accrued and unpaid
interest. The proceeds of the sale of such Financed Loans shall be credited to
the applicable subaccount in the Note Payment Account within the Note Fund and
used on that Distribution Date for mandatory distributions of principal.
(c) Mandatory Principal Distributions. All Notes shall be subject to
mandatory principal distributions on each Distribution Date as a whole or in
part on the terms hereinafter set forth prior to their respective Maturity
Dates, from moneys on deposit in the applicable subaccount in the Note Payment
Account with respect to the payment of principal and in the applicable
subaccount in the Note Interest Account with respect to the payment of interest.
Accrued interest on the amount of principal so distributed shall be payable on
such principal distribution date, provided that Deferred Interest shall be
payable only to the extent that funds are available therefor. Mandatory
distributions of principal shall occur as aforesaid at such times, but only at
such times, as there shall be in excess of $5,000 in the Note Payment Account of
the Note Fund on the third Business Day immediately preceding a Distribution
Date.
(d) Notice of Optional Purchase Prepayment. Except as otherwise
provided in the related Terms Supplement, notice of optional purchase prepayment
of principal of Notes shall be given at the Issuer's request by the Indenture
Trustee in the name and for and on behalf of the Issuer not less than thirty
(30) days prior to the date of prepayment. Notice of optional purchase
prepayment of any Note shall be given within the time period specified in the
related Terms Supplement by first class mail, postage prepaid, to the Holder of
such Note at the address of such Holder as it appears in the Note Register or by
transmitting such notice by telex or telecopier to any Holder of any affected
Note who shall have submitted a written request to the Trustee for notice of
optional purchase prepayment by such means, to the telex or telecopier number
set forth in such request. A copy of any notice so transmitted shall also be
mailed to such Holder at the address of such Holder set forth in the Note
Register, provided, however, that neither failure by the Trustee to so mail a
copy of such notice nor any defect in such copy shall affect the validity of
such notice so transmitted in accordance herewith and provided, further, that
neither failure by the Trustee to so transmit a copy of such notice by telex or
telecopier or any defect therein shall affect the validity of such notice so
mailed in accordance herewith.
Each notice of optional purchase prepayment shall state (i) the amount
of principal of the Class and Series of the Notes to be prepaid or principal
distributed, the prepayment date and the applicable Principal Factor (after
giving effect to such prepayment); (ii) that the interest on the Notes, or on
the principal amount thereof to be prepaid or distributed shall cease to accrue
from and after such optional purchase prepayment date; and (iii) that on the
optional purchase prepayment date there will become due and payable on each said
Note the principal amount thereof to be prepaid or distributed and the interest
accrued on such principal amount to such date.
If notice of optional purchase prepayment of a Note shall have been
duly given as hereinbefore provided and if moneys for the payment of such Note
(or of the principal amount thereof subject to such prepayment), and the
interest to accrue to the optional purchase prepayment date with respect to such
Note (or portion thereof) shall be held for the purpose of such payment by the
Trustee, then such Note or portion thereof shall, on the optional purchase
prepayment date designated in such notice, become due and payable, and interest
on said Note or portion thereof shall cease to accrue.
All Notes surrendered pursuant to the provisions of this Section 3.1
shall be cancelled.
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ARTICLE 4
DISPOSITION OF PROCEEDS; ESTABLISHMENT OF FUNDS AND ACCOUNTS;
APPLICATION OF REVENUES; PLEDGE
SECTION 4.1. DISPOSITION OF PROCEEDS. All proceeds of issuance and sale
of a Series of Notes hereunder shall be deposited with the Indenture Trustee on
the Closing Date, and the Indenture Trustee shall deposit such proceeds to the
credit of one or more Funds or Accounts hereunder as specified in the related
Terms Supplement.
SECTION 4.2. DEBT SERVICE RESERVE FUND. There is hereby established a
Fund, to be held by the Indenture Trustee and designated the "Nellie Mae
Education Loan Trust Debt Service Reserve Fund" (referred to herein as the "Debt
Service Reserve Fund"). The Indenture Trustee shall maintain, within the Debt
Service Reserve Fund, a separate Debt Service Reserve Account for each Series.
The moneys in the Debt Service Reserve Fund shall be invested in Investment
Securities as provided in Section 4.9 hereof.
On each Closing Date, the Indenture Trustee shall deposit to the credit
of the applicable Debt Service Reserve Account the amount specified in the
related Terms Supplement. Moneys shall be deposited in each Debt Service Reserve
Account from the applicable Revenue Account in the Revenue Fund as provided in
Section 4.5(b) hereof. Except as may be otherwise provided in the related Terms
Supplement, if on any Distribution Date the Balance on deposit in a Debt Service
Reserve Account is in excess of the applicable Debt Service Reserve Requirement,
the amount of such excess shall be transferred to the applicable subaccount in
the Note Payment Account within the Note Fund.
Other than the transfer of excess Balances pursuant to the preceding
paragraph and except as may be otherwise provided in a Terms Supplement, the
Debt Service Reserve Fund shall be used solely for the following purposes in the
following order of priority: first, to make up any deficiency in a subaccount in
the Administration Account in the Services Fund immediately following the
transfer of moneys into such subaccount pursuant to Sections 4.5(b) and 4.7
hereof, with moneys drawn from the applicable Debt Service Reserve Account to
the extent of available moneys therein and, to the extent necessary, by moneys
drawn pro rata from each Debt Service Reserve Account; second, to increase the
amount in the Note Interest Account in the Note Fund to the amount of interest
then accrued and unpaid on the Notes (after giving effect to any transfer to be
made thereto pursuant to Sections 4.5(b), 4.6(b) and 4.7 hereof) on any
Distribution Date or on any other date on which interest is due upon any Notes,
by transfer and deposit by the Indenture Trustee to the credit of the Note
Interest Account on any such date, with transfers to particular subaccounts
within the Note Interest Account funded by moneys drawn from the applicable Debt
Service Reserve Accounts to the extent of available moneys therein and, to the
extent necessary, by moneys drawn pro rata from all Debt Service Reserve
Accounts; third, on a Maturity Date, to provide for payment of the principal of
the Notes, by transfer and deposit by the Indenture Trustee to the credit of the
Note Payment Account in the Note Fund on the Maturity Date of any Notes, with
transfers to particular subaccounts within the Note Payment Account funded by
moneys drawn from the applicable Debt Service Reserve Accounts to the extent of
available moneys therein and, to the extent necessary, by moneys drawn pro rata
from all Debt Service Reserve Accounts; fourth, by transfer from the Indenture
Trustee to the Owner Trustee, the amount, as certified in writing by the Owner
Trustee, for deposit in the Certificate Interest Account in the Certificate Fund
to increase the amount in the Certificate Interest Account in the Certificate
Fund to the amount of interest then accrued and unpaid on the Certificates
(after giving effect to any transfer to be made thereto pursuant to Section
4.5(b) and Section 4.6(b) hereof) on any Distribution Date or on any other date
on which interest is due upon prepayment or payment of any Certificates, with
transfers to particular subaccounts
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within the Certificate Interest Account funded by moneys drawn from the
applicable Debt Service Reserve Accounts to the extent of available moneys
therein and, to the extent necessary, by moneys drawn pro rata from all Debt
Service Reserve Accounts; and fifth, at such time as there are no longer any
Notes Outstanding hereunder, or if there are no longer any Notes of a particular
Series Outstanding identified with a particular Class of Certificates, by
transfer by the Indenture Trustee to the Owner Trustee, to provide for payment
of the principal of all Certificates or such particular Class of Certificates,
as the case may be, at the Maturity Date thereof.
SECTION 4.3. STUDENT LOAN ACQUISITION FUND. There is hereby established
a Fund, to be held by the Indenture Trustee and designated the "Nellie Mae
Education Loan Trust Student Loan Acquisition Fund" (referred to herein as the
"Student Loan Acquisition Fund"). The Student Loan Acquisition Fund shall
consist of two Accounts, which are hereby established, to be held by the
Indenture Trustee and designated as the "Acquisition Account" and the
"Pre-Funding Account." The Indenture Trustee shall maintain, within the
Acquisition Account and the Pre-Funding Account, a separate subaccount for each
Series. On each Closing Date, the Indenture Trustee shall deposit to the credit
of the applicable subaccount in each the Acquisition Account and the Pre-Funding
Account, or to the applicable subaccount in either such Account, the amount
specified by the related Terms Supplement. Amounts credited to the Acquisition
Account shall be paid to or upon the order of the Issuer on the Closing Date to
finance Loans, upon receipt by the Indenture Trustee of a certificate from the
Issuer in the form set forth in Exhibit C hereto. Any amount remaining in the
Acquisition Account at the close of business on any Closing Date shall be
deposited in the Pre-Funding Account. Amounts credited to the Pre-Funding
Account shall be paid to or upon the order of the Issuer to finance Loans, upon
receipt by the Indenture Trustee of a certificate from the Issuer in the form
set forth in Exhibit C hereto. Any amount remaining in the Pre-Funding Account
at the close of business on the date identified in the Terms Supplement relating
to a particular Series shall be deposited in the appropriate subaccount within
the Note Payment Account in the Note Fund.
SECTION 4.4. STUDENT LOAN PORTFOLIO FUND. There is hereby established a
Fund to be held by the Indenture Trustee and designated the "Nellie Mae
Education Loan Trust Student Loan Portfolio Fund" (referred to herein as the
"Student Loan Portfolio Fund"). The Indenture Trustee shall maintain within the
Student Loan Portfolio Fund a separate account for each Series. All Financed
Loans, including Additional Financed Loans, shall be included in the Balances of
the Student Loan Portfolio Fund. All principal of, interest on and other
Revenues in respect of Financed Loans shall be deposited upon receipt to the
credit of the appropriate Revenue Account as provided in Section 4.5 hereof.
Financed Loans included in the Balances of the Student Loan Portfolio Fund may
be removed therefrom by the Indenture Trustee only in accordance with the terms
of this Indenture. Nothing in this Indenture shall be deemed to preclude the
Servicer, the Administrator or any other custodian from maintaining possession
of the notes evidencing, and other documentation relating to, Financed Loans on
behalf of the Indenture Trustee in accordance with the Servicing Agreement or
the Administration Agreement, provided the same is consistent with the creation
and maintenance of the first lien and security interest created by Section 4.8
hereof and does not impair the perfection of such security interest.
When necessary for the Issuer to enforce its rights under a Guaranty
Agreement or the Servicing Agreement after reasonable negotiations with the
borrower, upon the direction of the Issuer, the Indenture Trustee shall remove
such Financed Loans from the Student Loan Portfolio Fund and cause such Financed
Loans to be tendered to the applicable Guarantor or Servicer, as the case may
be, together with an assignment thereof and all other documentation, records and
certificates relating thereto which are in the possession of the Indenture
Trustee, against payment to the Indenture Trustee of moneys at least equal to
the principal amount thereof and accrued interest thereon. When necessary in
accordance with the provisions of Section 5.5 hereof, the Indenture Trustee
shall remove Financed Loans from the Student Loan Portfolio Fund and cause such
loans to be tendered to the Issuer, together with an assignment thereof and all
other
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documentation, records and certificates relating thereto which are in the
possession of the Indenture Trustee. The Issuer and the Indenture Trustee shall
execute such assignments or other certificates or instruments as may be required
to effectuate the transfer of Financed Loans in accordance with the provisions
of this paragraph. Financed Loans which are transferred from the Student Loan
Portfolio Fund in accordance with the provisions of this paragraph shall no
longer constitute a part of the Indenture Trust Estate and shall be free and
clear of the lien of this Indenture.
The Indenture Trustee shall deposit the proceeds of any disposition of
Financed Loans pursuant to this Section 4.4 which are allocable to principal to
the credit of the applicable subaccount within the Note Payment Account and the
remainder of such proceeds to the credit of the applicable Revenue Account.
SECTION 4.5. REVENUE FUND. There is hereby established a Fund, to be
held by the Indenture Trustee and designated as the "Nellie Mae Education Loan
Trust Revenue Fund" (referred to herein as the "Revenue Fund") to which shall be
deposited (i) all amounts received in respect of all Financed Loans, whether as
principal, interest, late charges or in payment or repurchase of Financed Loans,
amounts received on cancellation of Financed Loans and amounts received as
recoveries from a Guarantor; and (ii) amounts received as earnings on or income
from Investment Securities included in the Balances of the Funds and Accounts to
the extent provided in Section 4.9 hereof. The Indenture Trustee shall maintain
within the Revenue Fund a separate Revenue Account for each Series.
(a) The Issuer shall, and shall cause the Servicer to, transfer all
Revenues received by it, or by the Servicer on its behalf to the Indenture
Trustee, promptly or otherwise in accordance with the Servicing Agreement, and
the Indenture Trustee shall upon receipt of any Revenues immediately deposit and
credit such Revenues to the applicable Revenue Account, provided, however, that
the Issuer shall remit directly to a Guarantor or a Collector any amount
received in respect of a Financed Loan which is owed to such Guarantor or
Collector as a collection fee. On any Business Day, as directed by the Issuer,
and, in any case, on the Business Day prior to each Distribution Date, the
Indenture Trustee shall transfer to the appropriate subaccount within the Note
Payment Account, to be applied to the prepayment or mandatory distribution of
principal of Notes or transfer to the Owner Trustee pursuant to Section 4.6(b)
hereof, all amounts then on deposit in each Revenue Account which can then be
identified, based upon information furnished to the Indenture Trustee by the
Issuer, as allocable to payments of principal of Financed Loans and amounts
transferred on account of principal pursuant to Section 4.3, less the amount of
any increase in Capitalized Interest during the prior Interest Period.
(b) By 12:00 noon on the last Business Day prior to any Distribution
Date, the Indenture Trustee shall, except as otherwise provided by the related
Terms Supplement, transfer or apply all amounts then on deposit in each Revenue
Account, after the transfer described in Section 4.5(a) hereof, in the following
order of priority, the requirement of each clause at the time of transfer to be
satisfied before any transfer is made to any purpose subsequent in priority:
First, to the applicable subaccount in the Administration
Account in the Services Fund to the extent required to increase the
Balance on deposit in such subaccount to the Administration
Requirement, calculated as of the date of such transfer.
Second, to the applicable subaccount in the Note Interest
Account to the extent required to increase the amount in such
subaccount to the amount of interest (excluding Deferred Interest)
which will have accrued and be unpaid on the applicable Notes to but
not including such Distribution Date.
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Third, to the Owner Trustee, the amount, as certified in
writing by the Owner Trustee, of any interest then accrued and unpaid
on the Class of Certificates identified with the applicable Series of
Notes (excluding Deferred Interest) to but not including such
Distribution Date.
Fourth, any remainder to the applicable Debt Service Reserve
Account in order to increase the amount therein to the applicable Debt
Service Reserve Requirement.
Fifth, any remainder to the applicable subaccount within the
Note Interest Account to the extent required to pay any amounts due to
Holders of Notes in respect of Deferred Interest on Notes calculated in
accordance with the related Terms Supplement.
Sixth, any remainder to the Owner Trustee to the extent
required, as certified by the Owner Trustee, to pay any amounts due to
the Holders of Certificates in respect of Deferred Interest applicable
to the Class of Certificates identified with the applicable Series of
Notes calculated in accordance with the related Trust Supplement.
Seventh, any remainder, ratably with available moneys in all
other Revenue Accounts, to the Debt Service Reserve Fund to increase
the amount in any other Debt Service Reserve Account to its applicable
Debt Service Reserve Requirement.
Eighth, any remainder to the Owner Trustee for distribution to
the Depositor and NMI Education Loan Corporation to the extent
specified in the related Terms Supplement.
Ninth, any remainder to the applicable subaccount of the Note
Payment Account for the payment or prepayment of the Notes pursuant to
Section 4.6(b) hereof.
Tenth, any remainder to the Owner Trustee for the payment of
principal of Certificates or prepayment of Certificates identified with
the applicable Series of Notes.
Eleventh, any remainder to the Owner Trustee.
(c) Investment of Revenue Fund. Pending transfers of moneys from the
Revenue Fund as provided in this Section 4.5, such moneys shall be invested in
Investment Securities as provided in Section 4.9 hereof.
SECTION 4.6. NOTE FUND. There is hereby established a Fund to be held
by the Indenture Trustee and designated the "Nellie Mae Education Loan Trust
Note Fund" (referred to herein as the "Note Fund"). The Note Fund shall be used
only for the payment of the principal of and interest on the Notes. The Note
Fund shall consist of two Accounts, which are hereby established, to be held by
the Indenture Trustee and designated the "Note Interest Account" and the "Note
Payment Account." The Indenture Trustee shall maintain, within the Note Interest
Account and the Note Payment Account, a separate subaccount for each Series.
Moneys on deposit in the Note Fund shall be invested in Investment Securities as
provided in Section 4.9 hereof.
(a) Note Interest Account. Moneys shall be deposited in the applicable
subaccount within the Note Interest Account from the applicable Revenue Account
as provided in Section 4.5(b) hereof, from the applicable subaccount within the
Cost of Issuance Account as provided in Section 4.7 hereof, from the Debt
Service Reserve Fund as provided in Section 4.2 hereof and from the applicable
subaccount within the Note Payment Account as provided in Section 4.6(b) hereof.
Moneys on deposit in the Note Interest Account shall be applied by the Indenture
Trustee to the payment of the interest on the Notes when due (whether on
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a Distribution Date or upon the prepayment or payment of any of the Notes in
accordance with the terms of this Indenture and the related Terms Supplement)
without further authorization or direction.
(b) Note Payment Account. Moneys shall be deposited in the applicable
subaccount within the Note Payment Account from the Debt Service Reserve Fund as
provided in Section 4.2 hereof, from the applicable Revenue Account as provided
in Sections 4.5(a) and 4.5(b) hereof and from any other source received by the
Indenture Trustee for deposit therein. Moneys on deposit in the Note Payment
Account shall be applied by the Indenture Trustee to payment of principal of the
Notes at the applicable Maturity Dates or upon acceleration and to the payment
or prepayment of Notes pursuant to Section 3.1 hereof and the related Terms
Supplement without further authorization or direction. Prior to application
thereof in accordance with the preceding sentence, money on deposit in the
applicable subaccount within the Note Payment Account shall be used to increase
the amount in the applicable subaccount within the Note Interest Account (after
giving effect to any transfer to be made thereto pursuant to Section 4.5(b)
hereof) to the amount of interest then accrued and unpaid on the Notes on any
Business Day prior to any Distribution Date or on any other date on which
interest is due upon distribution of principal or prepayment or payment of any
Notes; provided, however, after a notice of distribution of principal or
prepayment of any Notes has been given by the Indenture Trustee in accordance
with Section 3.1 hereof, no amount shall be transferred from the Note Payment
Account pursuant to this sentence other than that in excess of the amount
required for such prepayment or distribution of principal on the date specified
in such notice. Interest on any Notes paid or prepaid shall be payable from the
Note Interest Account. After all the Notes of a particular Series have been paid
in full, any amounts remaining in the applicable subaccount in the Note Payment
Account shall be transferred to the Owner Trustee.
SECTION 4.7. SERVICES FUND. There is hereby established a Fund, to be
held by the Indenture Trustee and designated the "Nellie Mae Education Loan
Trust Services Fund" (referred to herein as the "Services Fund"), which shall
consist of two Accounts, which are hereby established and designated as the
"Cost of Issuance Account" and the "Administration Account." The Services Fund
shall be used for and applied only to the payment of Administrative Expenses and
Costs of Issuance, except as otherwise provided in this Section 4.7.
Administrative Expenses and Costs of Issuance shall be paid by the Indenture
Trustee from moneys in the appropriate Account of the Services Fund upon receipt
of written orders signed by an Authorized Officer of the Issuer, which shall
direct the payment to designated payees in designated amounts for stated
services and certify that such payment is a proper charge against the applicable
Account therein and is then due and owing for services rendered or expenses
incurred.
The Indenture Trustee shall maintain within the Cost of Issuance
Account a separate subaccount for each Series. The Indenture Trustee shall
deposit to the credit of the applicable subaccount within the Cost of Issuance
Account the amount, if any, specified by the related Terms Supplement. Amounts
in the Cost of Issuance Account shall be withdrawn and used by the Indenture
Trustee in accordance with the first paragraph of this Section 4.7 for the
purpose of paying Costs of Issuance. Any amounts remaining in a subaccount
within the Cost of Issuance Account upon payment of all related Costs of
Issuance shall be transferred to the applicable Revenue Account upon receipt by
the Indenture Trustee of a certificate of an Authorized Officer of the Issuer
stating that such moneys are no longer needed for the payment of Costs of
Issuance.
The Indenture Trustee shall maintain within the Administration Account
a separate subaccount for each Series. The Indenture Trustee shall deposit to
the credit of the applicable subaccount within the Administration Account
amounts from the Revenue Fund pursuant to Section 4.5(b) hereof. Amounts in the
applicable subaccount within the Administration Account shall be withdrawn and
used by the Indenture Trustee in accordance with the first paragraph of this
Section 4.7 for the purpose of paying Administrative Expenses.
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The moneys in the Services Fund shall be invested in Investment
Securities as provided in Section 4.9 hereof.
SECTION 4.8. PLEDGE. In order to secure the full and final payment of
the principal of and interest on all of the Notes issued pursuant to this
Indenture, and in order to secure the performance and observation of all the
covenants and conditions contained herein, in the related Terms Supplement and
in the Notes, and for and in consideration of the purchase and acceptance of the
Notes by the Noteholders and the acceptance by the Indenture Trustee of the
trusts hereby created, the Issuer does hereby pledge and grant a first lien on
and a security interest in, the Indenture Trust Estate to the Indenture Trustee,
and its successors in trust as security for the performance of all of the
obligations of the Issuer hereunder and for the benefit and security of the
Noteholders.
The covenants and agreements herein set forth to be performed by or on
behalf of the Issuer shall be for the equal and proportionate benefit, security
and protection of all Noteholders, without preference, priority or distinction
as to payment or security except as specifically provided herein, in the related
Terms Supplement or in the Notes. All Notes shall rank pari passu and shall be
secured equally and ratably without discrimination or preference, except as
specifically provided herein, in the related Terms Supplement or in the Notes.
The pledge of, lien on and security interest in and assignment of the
Indenture Trust Estate to the Indenture Trustee made hereby includes any and all
contracts and other evidence of indebtedness or other rights of the Issuer to
receive any of the same, whether now existing or hereafter coming into
existence, and whether now or hereafter acquired, and the proceeds thereof, with
respect to any of the Indenture Trust Estate.
No Holder of a Note shall be required to ensure that the moneys derived
from such Note are applied to the purpose or purposes for which the Note was
issued. The validity of any Note shall neither be dependent upon nor affected by
the validity or regularity of any proceedings or contracts relating to the
Program nor the use and application of the proceeds of the Note.
Nothing contained in this Section 4.8 or in this Indenture shall
prevent or be construed to prevent any Terms Supplement or other Supplemental
Indenture from pledging or otherwise providing, or the Issuer from providing, in
addition to the security given or intended to be given by this Indenture
additional security for the benefit of the Notes.
SECTION 4.9. INVESTMENTS. Moneys held by the Indenture Trustee for the
credit of any Fund or Account shall be invested by the Indenture Trustee to the
fullest extent practicable and reasonable, in accordance with the provisions
hereof, in Investment Securities, as directed in writing by the Issuer. All
Investment Securities shall be acquired subject to the limitations on maturities
hereinafter set forth in this Section 4.9 and to any additional limitations or
requirements, consistent with the foregoing provisions of this paragraph, as may
be established by written request of the Issuer. Moneys shall be invested in
Investment Securities with respect to which payments of principal and interest
are scheduled or otherwise payable not later than the date on which it is
estimated that such moneys will be required by the Indenture Trustee for the
purposes intended, and in any event, with respect to the Revenue Fund, the Debt
Service Reserve Fund and the Note Fund, not later than the next succeeding
Distribution Date. Investment Securities purchased under a repurchase agreement
may be deemed to mature on the date or dates on which the Indenture Trustee may
deliver such Investment Securities for repurchase under such agreement.
Investment Securities which may be tendered at the option of the holder thereof
for payment of the full principal amount thereof plus accrued interest thereon
prior to the maturity thereof may be deemed to mature on the date or dates on
which they may be so tendered. Investment Securities acquired as an investment
of moneys in any Fund or
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Account shall be credited to such Fund or Account. Unless otherwise provided
herein, any earnings on or income from such Investment Securities shall be
credited to the Student Loan Interest Account in the Revenue Fund, as provided
in Section 4.5 hereof, except that an amount of interest received with respect
to any Investment Security on the first payment of interest after purchase equal
to the amount of accrued interest, if any, paid as part of the purchase price of
such Investment Security shall be credited to the Fund or Account from which
such accrued interest was paid.
All Funds and Accounts shall be held by the Indenture Trustee in one or
more segregated trust accounts. Investments in any and all Funds and Accounts
may be commingled in a separate fund or funds established by the Indenture
Trustee for purposes of making, holding and disposing of investments,
notwithstanding provisions herein for transfer to or holding in or to the credit
of particular Funds and Accounts amounts received or held by the Indenture
Trustee hereunder, provided that the Indenture Trustee shall at all times
account for such investments strictly in accordance with the Funds and Accounts
to which they are credited and otherwise as provided in this Indenture. The
Indenture Trustee may act as principal or agent in the acquisition or disposing
of any Investment Security. The Indenture Trustee may sell or present for
redemption, any Investment Security so purchased whenever it shall be necessary
to provide moneys to meet any required payment, transfer, withdrawal or
disbursement from the Fund or Account to which such Investment Security is
credited. The Indenture Trustee shall not be liable or responsible for any loss
resulting from the acquisition or disposition of any Investment Security in
accordance with this Indenture.
SECTION 4.10. TERMINATION. When no Notes remain Outstanding and all
amounts due or to become due hereunder have been paid in full or provided for to
the satisfaction of the Indenture Trustee, the Indenture Trustee shall transfer
the Balances on deposit in all Funds and Accounts established hereby to the
Owner Trustee for the benefit of the Certificateholders.
ARTICLE 5
COVENANTS TO SECURE NOTE
The Issuer hereby covenants and agrees with the purchasers and Holders
of the Notes as follows:
SECTION 5.1. PERFORMANCE OF COVENANTS; THE ISSUER. The Issuer covenants
that it will faithfully perform at all times any and all covenants,
undertakings, stipulations and provisions contained in this Indenture, in any
and every Note executed, authenticated and delivered hereunder and in all of its
proceedings pertaining hereto. The Issuer covenants that it is duly authorized
under the laws of Massachusetts to issue the Notes authorized hereby and to
execute and deliver this Indenture and to pledge and create a security interest
in the Indenture Trust Estate in the manner and to the extent herein set forth,
and that all action on its part for the issuance of the Notes and the execution
and delivery of this Indenture has been duly taken, and that the Notes in the
hands of the Holders thereof are and will be valid and enforceable obligations
of the Issuer according to the terms thereof and hereof.
SECTION 5.2. INSTRUMENTS OF FURTHER ASSURANCE. The Issuer agrees that
the Indenture Trustee may defend its rights to the Indenture Trust Estate for
the benefit of the Holders of the Notes against the claims and demands of all
persons whomsoever. The Issuer covenants that, if requested in writing by the
Indenture Trustee, it will do, execute, acknowledge and deliver, or cause to be
done, executed, acknowledged and delivered, such indentures supplemental hereto
and such further acts, instruments and transfers as the Indenture Trustee may
reasonably require for the better assuring, transferring, pledging, assigning
and confirming unto the Indenture Trustee all and singular the rights assigned
hereby and the
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amounts and other property pledged hereby to the payment of the Notes. The
Issuer covenants and agrees that, except as provided herein, it will not sell,
convey, assign, pledge, encumber or otherwise dispose of any part of the
Indenture Trust Estate.
SECTION 5.3. RECORDING AND FILING. The Issuer shall keep and renew the
filing or cause to be kept and renewed all financing statements related to this
Indenture and all supplements hereto and such other documents as may be
necessary to be kept and filed, renewed in such manner and in such places as may
be required by law, in order to preserve and protect fully the security of the
Holders of the Notes and the rights of the Indenture Trustee hereunder. In
carrying out its duties under this Section 5.3, the Issuer shall be entitled to
rely on an opinion of its counsel specifying what actions are required to comply
with this Section 5.3.
SECTION 5.4. COMPLIANCE WITH AND ENFORCEMENT OF FINANCED LOANS,
SERVICING AGREEMENT, CUSTODY AGREEMENT, SALES AGREEMENT AND ADMINISTRATION
AGREEMENT. The Issuer (i) shall cause to be diligently taken all reasonable
steps, actions and proceedings necessary for the compliance with and the
enforcement of all terms, covenants and conditions of all Financed Loans, the
Servicing Agreement, Custody Agreement, Sales Agreement and Administration
Agreement, (ii) shall at all times, to the extent permitted by law, defend,
enforce, preserve and protect the rights and privileges of the Issuer, the
Indenture Trustee and the Holders under or with respect to each Financed Loan,
the Servicing Agreement, Custody Agreement, Sales Agreement and Administration
Agreement, and (iii) without prior notice to the Rating Agencies, shall not
consent, or agree to or permit any amendment or modification of any Financed
Loan, the Servicing Agreement, Custody Agreement, Sales Agreement and
Administration Agreement, which will in any manner materially adversely affect
the rights or security of the Holders under this Indenture. Nothing in this
Indenture shall be construed to prevent the Issuer or the Indenture Trustee from
permitting a borrower to settle a default or cure a delinquency on any Financed
Loan on such terms as the Issuer or the Indenture Trustee, as applicable, shall
deem reasonable or as shall be required by law.
SECTION 5.5. REPURCHASE OF FINANCED LOANS. The Issuer agrees to require
the Seller to repurchase, at a price equal to the amount of outstanding
principal and accrued but unpaid interest, any Financed Loan rejected by the
Issuer based upon the Issuer's reasonable determination that such Financed Loan
does not comply with the loan origination requirements of the Sales Agreement.
SECTION 5.6. ISSUER STATUS. The Issuer will keep in full effect its
existence and rights as a trust under the laws of the Commonwealth (unless it
becomes, or any successor Issuer hereunder is or becomes, organized under the
laws of any other State or of the United States of America, in which case the
Issuer will keep in full effect its existence and rights under the laws of such
other jurisdiction) and will obtain and preserve its qualification to do
business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Indenture, the
Notes and each other instrument or agreement included in the Indenture Trust
Estate.
SECTION 5.7. STATEMENTS BY ISSUER REGARDING FINANCED LOANS AND OTHER
MATTERS. Within twenty-five (25) days following the end of each calendar month,
the Issuer shall furnish to the Indenture Trustee and each Rating Agency a
statement setting forth, as of the end of such calendar month, the information
set forth in Exhibit D hereto.
SECTION 5.8. MAINTENANCE OF OFFICE OR AGENCY. The Issuer will maintain
in the City of Boston, Massachusetts, an office or agency where Notes may be
surrendered for registration of transfer or exchange, and where notices and
demands to or upon the Issuer in respect of the Notes and this Indenture may be
served. The Issuer hereby initially appoints the Indenture Trustee to serve as
its agent for the foregoing purposes. The Issuer will give prompt written notice
to the Indenture Trustee of the location, and
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of any change in the location, of any such office or agency. If at any time the
Issuer shall fail to maintain any such office or agency or shall fail to furnish
the Indenture Trustee with the address thereof, such surrenders, notices and
demands may be made or served at the Corporate Trust Office, and the Issuer
hereby appoints the Indenture Trustee as its agent to receive all such
surrenders, notices and demands.
SECTION 5.9. MONEY FOR PAYMENTS TO BE HELD IN TRUST. All payments of
amounts due and payable with respect to any Notes that are to be made from
amounts distributed from any Fund or Account shall be made on behalf of the
Issuer by the Indenture Trustee or by another Paying Agent, and no amounts so
distributed from such Funds and Accounts for payments of Notes shall be paid
over to the Issuer except as provided herein.
The Issuer will cause each Paying Agent other than the Indenture
Trustee to execute and deliver to the Indenture Trustee an instrument in which
such Paying Agent shall agree with the Indenture Trustee (and if the Indenture
Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions of
this Section, that such Paying Agent will:
(i) hold all sums held by it for the payment
of amounts due with respect to the Notes in trust for the
benefit of the persons entitled thereto until such sums shall
be paid to such persons or otherwise disposed of as herein
provided and pay such sums to such persons as herein provided;
(ii) give the Indenture Trustee notice of any
default by the Issuer of which it has actual knowledge (or any
other obligor upon the Notes) in the making of any payment
required to be made with respect to the Notes;
(iii) at any time during the continuance of any
such default, upon the written request of the Indenture
Trustee, forthwith pay to the Indenture Trustee all sums so
held in trust by such Paying Agent;
(iv) immediately resign as a Paying Agent and
forthwith pay to the Indenture Trustee all sums held by it in
trust for the payment of Notes if at any time its ceases to
meet the standards required to be met by a Paying Agent at the
time of its appointment; and
(vi) comply with all requirements of the Code
with respect to the withholding from any payments made by it
on any Notes of any applicable withholding taxes imposed
thereon and with respect to any applicable reporting
requirements in connection therewith.
The Issuer may at any time for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by Issuer
Order direct any Paying Agent to pay to the Indenture Trustee all sums held in
trust by such Paying Agent, such sums to be held by the Indenture Trustee upon
the same trusts as those upon which the sums were held by such Paying Agent; and
upon such payment by any Paying Agent to the Indenture Trustee, such Paying
Agent shall be released from all further liability with respect to such money.
SECTION 5.10. OPINIONS AS TO INDENTURE TRUST ESTATE. On or before June
30 in each calendar year, beginning with the 1997 calendar year, the Issuer
shall furnish to the Indenture Trustee an Opinion of Counsel either stating
that, in the opinion of such counsel, such action has been taken with respect to
the recording, filing, re-recording and refiling of this Indenture, any
indentures supplemental
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hereto and any other requisite documents and with respect to the execution and
filing of any financing statements and continuation statements as is necessary
to maintain the lien and security interest created by this Indenture and
reciting the details of such action or stating that in the opinion of such
counsel no such action is necessary to maintain such lien and security interest.
Such Opinion of Counsel shall also describe the recording, filing, re-recording
and refiling of this Indenture, any indentures supplemental hereto and any other
requisite documents and the execution and filing of any financing statements and
continuation statements that will, in the opinion of such counsel, be required
to maintain the lien and security interest of this Indenture until June 30 in
the following calendar year.
SECTION 5.11. RESTRICTED PAYMENTS. The Issuer shall not, directly or
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Indenture Trustee or any owner of a beneficial interest in the
Issuer or otherwise with respect to any ownership or equity interest or security
in or of the Issuer or to the Servicer or the Administrator, (ii) redeem,
purchase, retire or otherwise acquire for value any such ownership or equity
interest or security or (iii) set aside or otherwise segregate any amounts for
any such purpose; other than that the Issuer may make, or cause to be made,
distributions to the Servicer, the Indenture Trustee, the Owner Trustee, the
Certificateholders, the Noteholders, the Administrator and the Seller as
contemplated by, and to the extent funds are available for such purpose under,
any of the Basic Documents.
SECTION 5.12. ANNUAL STATEMENT AS TO COMPLIANCE. The Issuer will
deliver to the Indenture Trustee and the Rating Agencies, within 120 days after
the first fiscal year of the Issuer that ends more than three months after the
Closing Date for a Series, and each fiscal year thereafter, an Officer's
Certificate of the Issuer stating that:
(i) a review of the activities of the Issuer
during such year and of performance under this Indenture has
been made under such Authorized Officer's supervision; and
(ii) to the best of such Authorized
Officers' knowledge, based on such review, the Issuer has
complied with all conditions and covenants under this
Indenture throughout such year, or if there has been a default
in compliance with any such condition or covenant, specifying
each default known to such Authorized Officers and the nature
and status thereof.
SECTION 5.13. NO OTHER BUSINESS. The Issuer shall not engage in any
business other than financing, purchasing, owning, selling, servicing and
managing Financed Loans and activities incidental thereto.
SECTION 5.14. NO BORROWING. The Issuer shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
indebtedness, except for the Notes and such other obligations as are authorized
under the Basic Documents.
SECTION 5.15. CAPITAL EXPENDITURES. The Issuer shall not make any
expenditure (by long- term or operating lease or otherwise) for capital assets
(either realty or personalty).
SECTION 5.16. GUARANTIES, LOANS, ADVANCES AND OTHER LIABILITIES. Except
as contemplated by this Indenture and other Basic Documents, the Issuer shall
not make any loan or advance or credit to, or guarantee (directly or indirectly
or by an instrument having the effect of assuring another's payment or
performance on any obligation or capability of so doing or otherwise), endorse
or otherwise
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become contingently liable, directly or indirectly, in connection with the
obligations, stocks or dividends of, or own, purchase, repurchase or acquire (or
agree contingently to do so) any stock, obligations, assets or securities of, or
any other interest in or make any capital contributions to, any other person.
SECTION 5.17. SERVICING OF FINANCED LOANS. The Issuer shall service all
Financed Loans and enforce the payment and collection of payments of principal
of and interest on such Financed Loans or cause such servicing to be done by one
or more servicers, each evidencing, in the judgment of the Issuer, the
capability and experience necessary to adequately service such Financed Loans.
The Issuer shall not replace the Servicer without prior notice to the Rating
Agencies.
ARTICLE 6
CONCERNING THE INDENTURE TRUSTEE
SECTION 6.1. DUTIES OF INDENTURE TRUSTEE. (a) If an Event of Default
has occurred and is continuing, the Indenture Trustee shall exercise the rights
and powers vested in it by this Indenture and use the same degree of care and
skill in its exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such
duties and only such duties as are specifically set forth in this
Indenture and any Terms Supplement and no implied covenants or
obligations shall be read into this Indenture or any Terms Supplement
against the Indenture Trustee; and
(ii) in the absence of bad faith on its part, the
Indenture Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Indenture Trustee and
conforming to the requirements of this Indenture; provided, however,
that the Indenture Trustee shall examine the certificates and opinions
to determine whether or not they conform to the requirements of this
Indenture.
(c) The Indenture Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of
paragraph (b) of this Section;
(ii) the Indenture Trustee shall not be liable for any
error of judgment made in good faith by a responsible officer unless it
is proved that the Indenture Trustee was negligent in ascertaining the
pertinent facts; and
(iii) the Indenture Trustee shall not be liable with
respect to any action it takes or omits to take in good faith in
accordance with a direction received by it.
(d) The Indenture Trustee shall not be liable for interest on any money
received by it except as the Indenture Trustee may agree in writing with the
Issuer.
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(e) Money held in trust by the Indenture Trustee need not be segregated
from other funds except to the extent required by law or the terms of this
Indenture or the other Basic Documents.
(f) No provision of this Indenture shall require the Indenture Trustee
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights of powers, if it shall have reasonable grounds to believe that repayments
of such funds or adequate indemnity satisfactory to it against any loss,
liability or expense is not reasonably assured to it.
(g) Except as expressly provided, the Indenture Trustee shall have no
obligation to administer, service or collect the Financed Loans or to maintain,
monitor or otherwise supervise the administration, servicing or collection of
the Financed Loans.
(h) In the event that the Indenture Trustee is the Paying Agent or Note
Registrar, the rights and protections afforded to the Indenture Trustee pursuant
to this Indenture shall also be afforded to the Indenture Trustee in its
capacity as Paying Agent or Note Registrar.
(i) Every provision of this indenture relating to the conduct or
affecting the liability of or affording protection to the Indenture Trustee
shall be subject to the provision of this Section and to the provisions of the
TIA.
SECTION 6.2. RIGHTS OF INDENTURE TRUSTEE. (a) The Indenture Trustee may
rely on any document believed by it to be genuine and to have been signed or
presented by the proper person. The Indenture Trustee need not investigate any
fact or matter stated in such document.
(b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officer's Certificate of the Issuer or an Opinion of Counsel. The
Indenture Trustee shall not be liable for any action it takes or omits to take
in good faith in reliance on such Officer's Certificate or Opinion of Counsel.
(c) The Indenture Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian or nominee, and the Indenture Trustee shall
not be responsible for any misconduct or negligence on the part of, or for the
supervision of, any such agent, attorney, custodian or nominee appointed with
due care by it hereunder.
SECTION 6.3. INDIVIDUAL RIGHTS OF INDENTURE TRUSTEE. The Indenture
Trustee in its individual or any other capacity may become the owner or pledgee
of Notes and may otherwise deal with the Issuer or its Affiliates with the same
rights it would have if it were not Indenture Trustee. Any Paying Agent, Note
Registrar, co-registrar or co-paying agent may do the same with like rights.
However, the Indenture Trustee must comply with Sections 6.11 and 6.12.
SECTION 6.4. INDENTURE TRUSTEE'S DISCLAIMER. The Indenture Trustee
shall not be responsible for and makes no representation as to the validity or
adequacy of this Indenture or the Notes, shall not be accountable for the
Issuer's use of the proceeds from the sale of the Notes, and shall not be
responsible for any statement of the Issuer in the Indenture or in any document
issued in connection with the sale of the Notes or in the Notes other than the
Indenture Trustee's certificate of authentication.
SECTION 6.5. NOTICE OF DEFAULTS. (a) If a Default occurs and is
continuing and if it is either actually known or written notice of the existence
thereof has been delivered to a Responsible Officer of the Indenture Trustee,
the Indenture Trustee shall mail notice of the Default to each Noteholder within
90 days after it occurs. Except in the case of a Default in payment of principal
of or interest on any Note,
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the Indenture Trustee may withhold the notice to the Noteholders if and so long
as a committee of its Responsible Officers in good faith determines that
withholding the notice is in the interests of Noteholders of such Series.
(b) If the Indenture Trustee receives notice from the Owner Trustee of
the occurrence of an Insolvency Event with respect to the Depositor pursuant to
Section 9.2 of the Trust Agreement, the Indenture Trustee shall give prompt
written notice to the Noteholders of the occurrence of such event and of the
effect of such event under such Section 9.2. Upon termination of the Trust
pursuant to such Section 9.2, the Indenture Trustee shall, if so directed by the
Owner Trustee, sell the Indenture Trust Estate (other than the Trust Funds and
Accounts) in a commercially reasonable manner and on commercially reasonable
terms. The proceeds of any such sale shall be treated as Revenues under this
Indenture.
SECTION 6.6. REPORTS BY INDENTURE TRUSTEE TO NOTEHOLDERS. The Indenture
Trustee shall deliver to each Noteholder (and to each person who was a
Noteholder at any time during the applicable calendar year) Form 1099's as may
be required to enable such Holder to prepare its Federal and state income tax
returns. Within 60 days after each May 15 beginning with the May 15 following
the first issuance of a Series of Notes, the Indenture Trustee shall mail to
each Noteholder a brief report as of such May 15 that complies with TIA Section
313(a) if required by said section. The Indenture Trustee shall also comply with
TIA Section 313(b). If the issuance of any Series of Notes has been registered
under the Securities Act of 1933, as amended, a copy of each such report
required pursuant to TIA Sections 313(a) or (b) shall, at the time of such
transmission to Noteholders, be filed by the Indenture Trustee with the
Commission and with each securities exchange, if any, upon which the Notes of
such Series are listed, provided that the Issuer has previously notified the
Indenture Trustee of such listing.
SECTION 6.7. COMPENSATION AND INDEMNITY. The Issuer shall pay to the
Indenture Trustee for its services, a fee equal to the amount agreed to in
writing between the Indenture Trustee and the Administrator (the "Indenture
Trustee Fee") at the times set forth in the Administration Agreement and shall
or shall cause the Administrator from its own funds to reimburse the Indenture
Trustee for all reasonable out-of-pocket expenses incurred or made by it in
accordance with any provision of this Indenture, including attorney's fees. The
Indenture Trustee's compensation shall not be limited by any law on compensation
of a trustee of an express trust. The Issuer shall or shall cause the
Administrator from its own funds to indemnify the Indenture Trustee against any
and all loss, liability or expense (including attorneys' fees) incurred by it in
connection with the administration of this trust and the performance of its
duties hereunder and the other Basic Documents. The Indenture Trustee shall
notify the Issuer and the Administrator promptly of any claim for which it may
seek indemnity. Failure by the Indenture Trustee to so notify the Issuer and the
Administrator shall not relieve the Issuer or the Administrator of its
obligations hereunder and under the other Basic Documents. The Issuer shall or
shall cause the Administrator to defend the claim and the Administrator shall
not be liable for the legal fees and expenses of the Indenture Trustee after it
has assumed such defense; provided, however, that, in the event that there may
be a conflict between the positions of the Indenture Trustee and the
Administrator or the Issuer in conducting the defense of such claim, the
Indenture Trustee shall be entitled to separate counsel the fees and expenses of
which shall be paid by the Administrator from its own funds on behalf of the
Issuer. Neither the Issuer nor the Administrator need reimburse any expense or
indemnify against any loss, liability or expense incurred by the Indenture
Trustee through the Indenture Trustee's own willful misconduct, negligence or
bad faith.
The Issuer's payment obligations to the Indenture Trustee pursuant to
this Section shall survive the discharge of this Indenture. When the Indenture
Trustee incurs expenses after the occurrence of a Default with respect to the
Issuer, the expenses are intended to constitute expenses of administration under
Title 11 of the United States Code or any other applicable Federal or state
bankruptcy, insolvency or similar law.
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SECTION 6.8. REPLACEMENT OF INDENTURE TRUSTEE. No resignation or
removal of the Indenture Trustee and no appointment of a successor Indenture
Trustee shall become effective until the acceptance of appointment by the
successor Indenture Trustee pursuant to this Section 6.8. The Indenture Trustee
may resign at any time by so notifying the Issuer. The Noteholders of a majority
in Outstanding Amount of the Notes may remove the Indenture Trustee by so
notifying the Indenture Trustee and may appoint a successor Indenture Trustee.
The Issuer shall remove the Indenture Trustee if:
(i) the Indenture Trustee fails to comply with
Section 6.11;
(ii) an Insolvency Event occurs with respect to
the Indenture Trustee;
(iii) a receiver or other public officer takes
charge of the Indenture Trustee or its
property; or
(iv) the Indenture Trustee otherwise becomes
incapable of acting.
If the Indenture Trustee resigns or is removed or if a vacancy exists
in the office of Indenture Trustee for any reason (the Indenture Trustee in such
event being referred to herein as the retiring Indenture Trustee), the Issuer
shall promptly appoint a successor Indenture Trustee.
A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee and to the Issuer. Thereupon the
resignation or removal of the retiring Indenture Trustee shall become effective,
and the successor Indenture Trustee shall have all the rights, powers and duties
of the Indenture Trustee under this Indenture. The successor Indenture Trustee
shall mail a notice of its succession to Noteholders. The retiring Indenture
Trustee shall promptly transfer all property held by it as Indenture Trustee to
the successor Indenture Trustee.
If a successor Indenture Trustee does not take office within 60 days
after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Issuer or the Noteholders of a majority in Outstanding
Amount of the Notes may petition any court of competent jurisdiction for the
appointment of a successor Indenture Trustee.
If the Indenture Trustee fails to comply with Section 6.11, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Indenture Trustee and the appointment of a successor Indenture Trustee.
Notwithstanding the replacement of the Indenture Trustee pursuant to
this Section, the Issuer's and the Administrator's obligations under Section 6.7
shall continue for the benefit of the retiring Indenture Trustee.
SECTION 6.9. SUCCESSOR INDENTURE TRUSTEE BY MERGER. If the Indenture
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another corporation
or banking association, the resulting, surviving or transferee corporation
without any further act shall be the successor Indenture Trustee; provided that
such corporation or banking association shall be otherwise qualified and
eligible under Section 6.11. The Indenture Trustee shall use its best efforts to
provide the Rating Agencies prior written notice of any such transaction.
In case at the time such successor or successors by merger, conversion
or consolidation to the Indenture Trustee shall succeed to the trusts created by
this Indenture any of the Notes shall have been authenticated but not delivered,
any such successor to the Indenture Trustee may adopt the certificate of
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authentication of any predecessor trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.
SECTION 6.10. APPOINTMENT OF CO-TRUSTEE OR SEPARATE OWNER TRUSTEE. (a)
Notwithstanding any other provisions of this Indenture, at any time, for the
purpose of meeting any legal requirement of any jurisdiction in which any part
of the Indenture Trust Estate may at the time be located, the Indenture Trustee
shall have the power and may execute and deliver all instruments to appoint one
or more persons to act as co-trustee or co-trustees, or separate trustee or
separate trustees, of all or any part of the Indenture Trust Estate, and to vest
in such person or persons, in such capacity and for the benefit of the
Noteholders, such title to the Indenture Trust Estate, or any part hereof, and,
subject to the other provisions of this Section, such powers, duties,
obligations, rights and trusts as the Indenture Trustee may consider necessary
or desirable. No co-trustee or separate trustee hereunder shall be required to
meet the terms of eligibility as a successor trustee under Section 6.11 and no
notice to Noteholders of the appointment of any co-trustee or separate trustee
shall be required under Section 6.8 hereof.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations
conferred or imposed upon the Indenture Trustee shall be conferred or
imposed upon and exercised or performed by the Indenture Trustee and
such separate trustee or co-trustee jointly (it being understood than
such separate trustee or co-trustee is not authorized to act separately
without the Indenture Trustee joining in such act), except to the
extent that under any law of any jurisdiction in which any particular
act or acts are to be performed the Indenture Trustee shall be
incompetent or unqualified to perform such act or acts, in which event
such rights, powers, duties and obligations (including the holding of
title to the Indenture Trust Estate or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such separate
trustee or co-trustee, but solely at the direction of the Indenture
Trustee;
(ii) no trustee hereunder shall be personally liable by
reason of any act or omission of any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the
resignation of or, remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Indenture and
the conditions of this Article VI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Indenture Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every provision of this
Indenture relating to the conduct of, affecting the liability of, or affording
protection to, the Indenture Trustee. Every such instrument shall be filed with
the Indenture Trustee.
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(d) Any separate trustee or co-trustee may at any time constitute the
Indenture Trustee, its agent or attorney-in-fact with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect of
this Indenture on it's behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all its
estates, properties, rights, remedies and trusts shall vest in and be exercised
by the Indenture Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
SECTION 6.11. ELIGIBILITY; DISQUALIFICATION. The Indenture Trustee
shall at all times satisfy the requirements of TIA Section 310(a). The Indenture
Trustee shall comply with TIA Section 310(b), including the optional provision
permitted by the second sentence of TIA Section 310(b) (9); provided, however,
that there shall be excluded from the operation of TIA Section 310(b) (1) any
indenture or indentures under which other securities of the Issuer are
outstanding if the requirements for such exclusion set forth in TIA Section
310(b) (1) are met.
In addition to the conflicting interests specified in TIA Section
310(b), the Indenture Trustee shall be deemed to have a conflicting interest
prohibited by said Section310(b) and therefore prohibited by this Section 6.11,
if by reason of supplements or amendments to this Indenture as originally
executed, there shall be created covenants, restrictions, conditions or
additional events of default which are applicable to less than all Series of
Notes and the existence of which is sufficiently likely to involve a material
conflict of interest between Series of Notes that is advisable in the public
interest or for the protection of the Noteholders of any Series that the
Indenture Trustee disqualify itself from acting as such with respect to one or
more applicable Series of Notes.
SECTION 6.12. PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER. The
Indenture Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). An Indenture Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated.
SECTION 6.13. STATEMENTS BY INDENTURE TRUSTEE OF FUNDS AND ACCOUNTS AND
OTHER MATTERS. Within ten (10) days following the end of each calendar month,
the Indenture Trustee shall furnish to the Issuer a statement setting forth (to
the extent applicable) with respect to such calendar month, (a) the balances
held by the Indenture Trustee at the end of such month to the credit of each
Fund and Account, (b) the principal amount of Notes Outstanding at the end of
such calendar month and the principal amount thereof prepaid or paid by the
Indenture Trustee during such calendar month and (c) any other information which
the Issuer may request.
ARTICLE 7
DEFAULTS AND REMEDIES
SECTION 7.1. EVENTS OF DEFAULT. The following shall constitute "Events
of Default" with respect to all Outstanding Notes issued hereunder:
(a) Failure in the due and punctual payment of the principal
of or interest on any Note of any Series when the same shall become due
and payable, either at maturity or otherwise;
(b) A material failure by the Issuer in the observance and
performance of any other of the covenants, conditions and agreements of
the Issuer contained in this Indenture and the continuation of such
failure for a period of thirty (30) days after written notice thereof
from the Indenture Trustee or from the Holders of not less than
two-thirds (2/3) in aggregate principal amount of the Notes then
Outstanding; or
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(c) The occurrence of an Insolvency Event with respect to the
Issuer.
Upon the occurrence of an Event of Default, so long as such Event of Default
shall not have been remedied, unless the principal of all of the Notes
Outstanding shall have already become due and payable, the Indenture Trustee
may, and upon written request of the Holders of not less than two-thirds (2/3)
in aggregate principal amount of the Notes then Outstanding, the Indenture
Trustee shall, by written notice to the Issuer, declare the principal of all the
Notes then Outstanding and the interest accrued thereon (excluding Deferred
Interest), to be due and payable immediately; and upon any such declaration the
same shall become and be due and payable on such date, anything contained in
this Indenture or in any of the Notes to the contrary notwithstanding. The right
of the Indenture Trustee to make any such declaration as aforesaid, however, is
subject to the condition that if, at any time after such declaration, but before
any judgment or decree for the payment of moneys due shall have been obtained or
entered unless the same has been discharged, all overdue installments of
interest upon the Notes, together with the reasonable and proper charges,
expenses and liabilities of the Indenture Trustee and the Holders and their
respective agents and attorneys and all other sums then payable by the Issuer
under this Indenture (except the principal of and interest accrued since the
next preceding Distribution Date on the Notes due and payable solely by virtue
of such declaration) shall either be paid by or for the account of the Issuer or
provision satisfactory to the Indenture Trustee shall be made for such payment,
and all defaults under the Notes or under this Indenture (other than the payment
of principal and interest due and payable solely by reason of such declaration)
shall be cured to the satisfaction of the Indenture Trustee or provision deemed
by the Indenture Trustee to be adequate shall be made therefor, or, to the
extent any of such defaults cannot be cured, such defaults shall have been
waived by the Holders of not less than two-thirds (2/3) in aggregate principal
amount of the Notes then Outstanding, by written notice to the Issuer and to the
Indenture Trustee, may rescind such declaration with respect to the Notes and
annul such Event of Default with respect to the Notes, or, if the Indenture
Trustee shall have acted with respect to the Notes without a written request
from the Holders of Notes as provided for herein, and if there shall not have
been theretofore delivered to the Indenture Trustee written notice to the
contrary by the Holders of Notes as provided herein, then the Indenture Trustee
may, by written notice to the Issuer, annul such declaration and any such
default with respect to the Notes and its consequences shall be annulled,
provided that no such rescission and annulment shall extend to or affect any
subsequent Event of Default or impair or exhaust any right or power consequent
thereon.
Upon any declaration of acceleration of the Notes hereunder, the
Indenture Trustee shall give notice of such declaration and its consequences to
Noteholders in the manner set forth in Section 3.1 hereof with respect to notice
of optional purchase prepayment of Notes, to the extent the provisions of such
Section may reasonably be made applicable. Notice of such acceleration having
been given as aforesaid, anything contained in this Indenture or in the Notes to
the contrary notwithstanding, interest shall cease to accrue on the Notes from
and after the date set forth in such notice (which shall be not more than five
(5) days from the date of such declaration).
SECTION 7.2. APPLICATION OF MONEYS. In the event that an Event of
Default shall have occurred and be continuing in respect of the Outstanding
Notes and at any time the moneys held by the Indenture Trustee shall be
insufficient for the payment of the principal of and interest then due on the
Notes, such moneys and all Revenues received or collected from the Indenture
Trust Estate or otherwise for the benefit or account of Holders by the Indenture
Trustee shall be applied first to the payment of the reasonable and proper fees
and expenses of the Indenture Trustee and of such other expenses as are
necessary in the judgment of the Indenture Trustee to prevent loss of Revenues
and to protect the interests of the Holders, including without limitation
servicing expenses, and thereafter as follows:
1. Unless the principal of all of the Notes shall have become or have
been declared due and payable,
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First, to the payment to the persons entitled thereto of all
installments of interest then due on each Series of Notes (including
any interest on overdue principal at the rate borne by the respective
obligations but excluding Deferred Interest) in the order that such
installments of interest shall have become due, and, if the amounts
available shall not be sufficient to pay in full all installments of
interest coming due on the same date, then to the payment thereof
ratably, according to the amount due thereon, to the persons entitled
thereto, without any discrimination or preference,
Second, to the payment to the persons entitled thereto of the
unpaid principal due and unpaid on each Series of Notes at the time of
such payment according to the amounts due for principal, to the persons
entitled thereto without any discrimination or preference and
Third, to the payment to the persons entitled thereto of all
Deferred Interest on Notes.
2. If the principal of all of the Notes shall have become or have been
declared due and payable, to the payment of the principal and interest then due
and unpaid on the Notes without preference or priority of principal over
interest or of interest over principal or of any installment of interest over
any other installment of interest, or of any Note over any other Note, ratably,
according to the amounts due respectively for principal and interest, to the
persons entitled thereto without any discrimination or preference, and then to
the Owner Trustee.
Whenever moneys are to be applied pursuant to the foregoing paragraphs,
such moneys shall be applied at such times, and from time to time, as the
Indenture Trustee in its sole discretion shall determine, having due regard to
the amount of such moneys available for application and the likelihood of
additional moneys becoming available for such application in the future.
Whenever the Indenture Trustee shall exercise such discretion, it shall fix the
date upon which application is to be made, and upon such date interest on the
amounts of principal to be paid on such date shall cease to accrue on the
affected Notes. The Indenture Trustee shall give such notice as it may deem
appropriate of the fixing of any such date and shall not be required to make
payment to the Holder of any unpaid affected Note unless such Note is presented
for appropriate endorsement.
Except as provided in Section 6.5(b) or 10.4(d) hereof, the Indenture
Trustee may not cause any or all of the Indenture Trust Estate to be sold or
otherwise liquidated unless (A) the Noteholders of 100% of the Outstanding
Amount of the Notes consent thereto, (B) the proceeds of such sale or
liquidation distributable to the Noteholders are sufficient to discharge in full
all amounts then due and unpaid upon the Outstanding Notes for principal and
interest or (C) the Indenture Trustee determines that the Indenture Trust Estate
will not continue to provide sufficient funds for the payment of principal of
and interest on the Notes as they would have become due if the Outstanding Notes
had not been declared due and payable, and the Indenture Trustee obtains the
consent of Noteholders of two-thirds (2/3) of the Outstanding Amount of all the
Outstanding Notes. In determining such sufficiency or insufficiency with respect
to clause (B) and (C), the Indenture Trustee may, but need not, obtain and rely
upon an opinion of an Independent investment banking or accounting firm of
national reputation as to the feasibility of such proposed action and as to the
sufficiency of the Indenture Trust Estate for such purpose.
The Indenture Trustee may so sell the Indenture Trust Estate and all
right, title, interest, claim and demand thereto and the right of redemption
thereof, in one or more parts, at any such place or places, and at such time or
times and upon such notice and terms as the Indenture Trustee may deem
appropriate and as may be required by law and apply the proceeds thereof in
accordance with the provisions of this Section 7.2. Upon such sale the Indenture
Trustee may make and deliver to the purchaser or purchasers a good and
sufficient assignment or conveyance for the same, which sale shall be a
perpetual bar both at law and in equity against the Issuer and all persons
claiming such properties. No purchaser at any sale shall be bound
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to see to the application of the purchase money or to inquire as to the
authorization, necessity, expediency or regularity of any such sale.
Nevertheless, the Issuer, if so requested by the Indenture Trustee, shall ratify
and confirm any sale or sales by executing and delivering to the Indenture
Trustee or to such purchaser or purchasers all such instruments as may be
necessary or in the judgment of the Indenture Trustee proper for the purpose
which may be designated in such request.
So long as Notes are Outstanding under this Indenture, if and whenever
all overdue installments of interest on each Series of Notes, together with the
reasonable and proper charges, expenses and liabilities of the Indenture Trustee
and the Holders thereof, their respective agents and attorneys, and all other
sums payable by the Issuer under this Indenture including the principal of and
accrued and unpaid interest on each Series of Notes which shall then be payable
by declaration or otherwise, shall either be paid in full by or for the account
of the Issuer or provision satisfactory to the Indenture Trustee shall be made
for such payment, and all Events of Default under this Indenture or the Notes
shall be made good or secured to the satisfaction of the Indenture Trustee or
provision deemed by the Indenture Trustee to be adequate shall be made therefor,
thereupon the Issuer and the Indenture Trustee shall be restored, respectively,
to their former positions and rights under this Indenture, and all Revenues
shall thereafter be applied as provided in Article 4 hereof and the related
Terms Supplement.
SECTION 7.3. SUITS AT LAW OR IN EQUITY; DIRECTION OF ACTION BY HOLDERS.
If an Event of Default shall occur and shall not have been remedied, then and in
every such case, the Indenture Trustee, either in its own name or as trustee of
an express trust, or as attorney-in-fact for the Holders or in any one or more
of such capacities by its agents and attorneys, shall be entitled and empowered
to proceed forthwith to institute such suits, actions and proceedings at law or
in equity for the collection of all sums due in connection with the Notes and to
protect and enforce its rights and the rights of the Holders under this
Indenture for the specific performance of any covenant herein contained, or in
aid of the execution of any power herein granted, or for an accounting as
trustee of an express trust, or in the enforcement of any legal or equitable
right as the Indenture Trustee, being advised by counsel, shall deem most
effectual to enforce any of its rights, or to perform any of its duties under
this Indenture. The Indenture Trustee shall be entitled and empowered either in
its own name or as a trustee of an express trust, or as attorney-in-fact for the
Holders or in any one or more of such capacities, to file such proof of debt,
claim, petition or other document as may be necessary or advisable in order to
have the claims of the Indenture Trustee and of the Holders allowed in any
equity, receivership, insolvency, bankruptcy, liquidation, readjustment,
reorganization or other similar proceedings. For this purpose the Indenture
Trustee is hereby irrevocably appointed the true and lawful attorney-in-fact of
the respective Holders (and the successive Holders by taking and holding the
same shall be conclusively deemed to have so appointed the Indenture Trustee)
with authority to make and file in the respective names of the Holders any such
proof of debt, amendment of proof of debt, claim, petition or other document in
any such proceedings, and to receive payment of any sums becoming distributable
on account thereof, and to execute any such other papers and documents and to do
and perform any and all acts and things for and on behalf of the Holders as may
be necessary or advisable in the opinion of the Indenture Trustee in order to
have the respective claims of the Indenture Trustee and of the Holders allowed
in any such proceedings and to receive payment of and on account of such claims.
All rights of action under this Indenture may be enforced by the
Indenture Trustee without the possession of any of the Notes or the production
thereof in any suit, action or other proceeding.
The Indenture Trustee, at the request of the Holders of not less than
two-thirds (2/3) in aggregate principal amount of the Notes then Outstanding,
and upon being furnished with reasonable security and indemnity, shall take such
steps and institute such suits, actions or proceedings for the protection and
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enforcement of the rights of the Holders of Notes to collect any amount due and
owing from the Issuer or by injunction or other appropriate proceeding in law or
in equity to obtain other appropriate relief.
SECTION 7.4. SUITS BY INDIVIDUAL HOLDERS. Except as otherwise
specifically provided in this Section 7.4, no Holder shall have any right to
institute any suit, action or proceeding in equity or at law for the enforcement
of any provision of, or the execution of any trust or for any remedy under, this
Indenture unless (i) such Holder is a Holder of one or more Notes then
Outstanding, and such Holder previously shall have given to the Indenture
Trustee notice of the Event of Default on account of which such suit, action or
proceeding is to be instituted, (ii) the Holders of not less than two-thirds
(2/3) in aggregate principal amount of the Notes then Outstanding shall have
filed a written request with the Indenture Trustee after the right to exercise
such powers or right of action, as the case may be, shall have accrued that such
suit, action or proceeding be instituted, (iii) there shall have been offered to
the Indenture Trustee reasonable security and indemnity against the costs,
expenses and liability to be incurred therein or thereby, (iv) the Indenture
Trustee for a period of thirty (30) days after the receipt by it of such notice,
request and offer of indemnity shall have failed to proceed to exercise such
powers or to institute any such action, suit or proceeding, or the Indenture
Trustee shall at any time after such receipt have stated in writing that it
shall not so proceed, and (v) no direction inconsistent with such written
request shall have been given to the Indenture Trustee pursuant to Section 7.3
hereof; it being understood and intended that, except as otherwise above
provided, no one or more Holders shall have any right in any manner whatsoever
by its or their action to affect, disturb or prejudice the pledge created by
this Indenture, or to enforce any right under this Indenture except in the
manner herein provided and that all proceedings at law or in equity shall be
instituted, had and maintained in the manner herein provided for the benefit of
Holders.
Notwithstanding any other provision of this Indenture, the right of any
Holder of any Note to receive payment of the principal of and interest on such
Note, on or after the respective due dates expressed in such Note, or to
institute suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of such
Holder.
SECTION 7.5. REMEDIES NOT EXCLUSIVE. No remedy by the terms of this
Indenture conferred upon or reserved to the Indenture Trustee or the Holders is
intended to be exclusive of any other remedy, but each and every such remedy
shall be cumulative and shall be in addition to every other remedy given under
this Indenture or existing at law or in equity or by statute on or after the
date of adoption of this Indenture.
SECTION 7.6. WAIVERS OF DEFAULT. No delay or omission of the Indenture
Trustee or of any Holder to exercise any right or power arising upon the
happening of an Event of Default shall impair any right or power or shall be
construed to be a waiver of any such Event of Default or to be an acquiescence
therein and every power and remedy given by this Article 7 to the Indenture
Trustee or to the Holders may be exercised from time to time and as often as may
be deemed necessary by the Indenture Trustee or by such Holders.
Prior to a declaration accelerating the maturity of the Notes as
provided in Section 7.1 hereof, the Holders of not less than two-thirds (2/3) in
principal amount of the Notes then Outstanding or their attorneys-in-fact duly
authorized, may waive any past Default hereunder and its consequences except a
Default (a) in payment when due of principal of or interest on any Outstanding
Notes or (b) in respect of a covenant or provision hereof which cannot be
modified or amended without the consent of each Noteholder. In the case of any
such waiver, the Issuer, the Indenture Trustee and the Noteholders shall be
restored to their former positions and rights hereunder respectively, but no
such waiver shall extend to any subsequent failure under this Indenture and its
consequences with respect to the Notes. Upon any such waiver, such Default shall
cease to exist and be deemed to have been cured and not to have occurred for
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every purpose of this Indenture. No such waiver shall extend to any subsequent
or other failure or impair any right consequent thereon.
SECTION 7.7. NOTICE OF EVENTS OF DEFAULT. The Indenture Trustee shall,
within thirty (30) days after the time the Indenture Trustee becomes aware of
the occurrence of an Event of Default, give notice to all Noteholders by
registered mail or by overnight courier service of all Events of Default known
to the Indenture Trustee, unless such Event of Default shall have been cured
before the giving of such notice.
SECTION 7.8. CONTROL BY NOTEHOLDERS. The Noteholders of a majority of
the Outstanding Notes shall have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Indenture Trustee
with respect to the Notes or exercising any trust or power conferred on the
Indenture Trustee; provided that
(i) such direction shall not be in conflict with any
rule of law or with this Indenture;
(ii) subject to the terms hereof, any direction to the
Indenture Trustee to sell or liquidate the Indenture Trust Estate shall
be by the Noteholders of not less than 100% of the Outstanding Notes;
(iii) if the conditions set forth herein have been
satisfied and the Indenture Trustee elects to retain the Indenture
Trust Estate pursuant to such Section, then any direction to the
Indenture Trustee by Noteholders of less than 100% of the Outstanding
Amount of the Notes to sell or liquidate the Indenture Trust Estate
shall be of no force and effect; and
(iv) the Indenture Trustee may take any other action
deemed proper by the Indenture Trustee that is not inconsistent with
such direction;
provided, however, that, the Indenture Trustee need not take any action that it
determines might involve it in liability or might materially adversely affect
the rights of any Noteholders not consenting to such action.
Upon any such waiver, such Default shall cease but to exist and be
deemed to have been cured and not to have occurred for every purpose of this
indenture; but no such waiver shall extend to any subsequent or other Default or
impair any right consequent thereto.
SECTION 7.9. UNDERTAKING FOR COSTS. All parties to this Indenture
agree, and each Noteholder by such Noteholder's acceptance of any Note shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture, or in any suit
against the Indenture Trustee for any action taken, suffered or omitted by it as
Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to (a) any suit instituted by the
Indenture Trustee, (b) any suit instituted by any Noteholder, or group of
Noteholders, in each case holding in the aggregate more than 10% of the
Outstanding Amount of the Outstanding Notes or (c) any suit instituted by any
Noteholder for the enforcement of the payment of principal of or interest on any
Note on or after the respective due dates expressed in such Note.
SECTION 7.10. UNCONDITIONAL RIGHTS OF NOTEHOLDERS TO RECEIVE PRINCIPAL
AND INTEREST. Notwithstanding any other provisions in this Indenture, any
Noteholder shall have the right, which is
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absolute and unconditional, to receive payment of the principal and interest, if
any, on such Note on or after the respective due dates thereof expressed in such
Note or in this Indentures and to institute suit for the enforcement of any such
payment, and such rights shall not be impaired without the consent of such
Noteholder.
ARTICLE 8
NOTEHOLDERS' LISTS AND REPORTS
SECTION 8.1. ISSUER TO FURNISH INDENTURE TRUSTEE NAMES AND ADDRESSES OF
NOTEHOLDERS. The Issuer will furnish or cause to be furnished to the Indenture
Trustee (a) not more than five days after the earlier of (i) each Record Date
for a Series and (ii) three months after the last Record Date for such Series, a
list, in such form as the Indenture Trustee may reasonably require, of the names
and addresses of the Noteholders of such Series as of such Record Date and (b)
at such other times as the Indenture Trustee may request in writing, within 30
days after receipt by the Issuer of any such request, a list of similar form and
content as of a date not more than 10 days prior to the time such list is
furnished; provided, however, that so long as the Indenture Trustee is the Note
Registrar, no such list shall be required to be furnished.
SECTION 8.2. PRESERVATION OF INFORMATION; COMMUNICATIONS TO
NOTEHOLDERS. (a) The Indenture Trustee shall preserve, in as current a form as
is reasonably practicable, the names and addresses of the Noteholders contained
in the most recent list furnished to the Indenture Trustee as provided in
Section 8.1 and the name and addresses of Noteholders received by the Indenture
Trustee in its capacity as Note Registrar. The Indenture Trustee may destroy any
list furnished to it as provided in such Section 8.1 upon receipt of a new list
so furnished.
(b) Noteholders may communicate pursuant to TIA Section 312(b) with
other Noteholders with respect to their rights under this Indenture or under the
Notes. Upon receipt by the Indenture Trustee of any request by three or more
Noteholders or by one or more Noteholders owning not less than 25% of the
Outstanding Amount of the Notes to receive a copy of the current list of
Noteholders (whether or not made pursuant to TIA Section 312(b)), the Indenture
Trustee shall promptly notify the Issuer and the Administrator thereof by
providing to the Issuer and the Administrator a copy of such request and a copy
of the list of Noteholders produced in response thereto.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall have
the protection of TIA Section 312(c).
(d) On each Distribution Date, the Indenture Trustee shall provide to
each Noteholder of record as of the related Record Date the information provided
by the Administrator or the Owner Trustee to the Indenture Trustee on the
related Determination Date pursuant to the Administration Agreement.
(e) The Indenture Trustee shall furnish to the Noteholders promptly
upon receipt of a written request therefor, duplicates or copies of all reports,
notices, requests, demands, certificates, financial statements and any other
instruments furnished to the Indenture Trustee under the Basic Documents.
SECTION 8.3. REPORTS BY ISSUER. (a) If the issuance of any Series of
Notes has been registered under the Securities Act of 1933, as amended, the
Issuer shall:
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(i) file with the Indenture Trustee, within 15 days
after the Issuer is required to file the same with the Commission,
copies of the annual reports and of the information, documents and
other reports (or copies of such portions of any of the foregoing as
the Commission may from time to time by rules and regulations
prescribe) which the Issuer may be required to file with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act;
(ii) file with the Indenture Trustee and the Commission
in accordance with rules and regulations prescribed from time to time
by the Commission such additional information, documents and reports
with respect to compliance by the Issuer with the conditions and
covenants of this Indenture as may be required from time to time by
such rules and regulations; and
(iii) supply to the Indenture Trustee (and the Indenture
Trustee shall transmit by mail to all Noteholders of the related Series
described in TIA Section 313(c)) such summaries of any information,
documents and reports required to be filed by the Issuer pursuant to
clauses (i) and (ii) of this Section 8.3(a) as may be required by rules
and regulations prescribed from time to time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the
Issuer shall end on December 31 of each year.
ARTICLE 9
AMENDING AND SUPPLEMENTING OF INDENTURE
SECTION 9.1. AMENDING AND SUPPLEMENTING OF INDENTURE WITHOUT CONSENT OF
NOTEHOLDERS. (a) Without the consent of any Noteholders but with prior notice to
the Rating Agencies, the Issuer and the Indenture Trustee, when authorized by an
Issuer Order, at any time and from time to time, may enter into one or more
indentures supplemental hereto (which shall conform to the provisions of the
Trust Indenture Act as in force at the date of the execution thereof), in form
satisfactory to the Indenture Trustee, for any of the following purposes:
(i) to correct or amplify the description of any
property at any time subject to the lien of each Terms Supplement, or
better to assure, convey and confirm unto the Indenture Trustee any
property subject or required to be subjected to the lien of each Terms
Supplement, or to subject to the lien of each Terms Supplement
additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein
and in the Notes contained;
(iii) to add to the covenants of the Issuer, for the
benefit of the Noteholders of all Notes or of the Notes of any Series,
or to surrender any right or power herein conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any
property to or with the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement any
provision herein or in any supplemental indenture which may be
inconsistent with any other provision herein or in any
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supplemental indenture or to make any other provisions with respect to
matters or questions arising under this Indenture or in any
supplemental indenture; provided that such action shall not materially
adversely affect the interests of the Noteholders of any Series;
(vi) to evidence and provide for the acceptance of the
appointment hereunder by a successor indenture trustee with respect to
the Notes and to add to or change any of the provisions of this
Indenture as shall be necessary to facilitate the administration of the
trusts hereunder by more than one trustee, pursuant to the requirements
of Article VI;
(vii) to add to the conditions, limitations and
restrictions on the authorized amount, terms and purposes of the
issuance, authentication and delivery of any Series of Notes, as herein
set forth, additional conditions, limitations and restrictions
thereafter to be observed;
(viii) to set forth the terms of, and security for, any
Series that has not theretofore been authorized by a Terms Supplement;
(ix) to modify or eliminate any of the terms of this
Indenture; provided, however, that
(A) such supplemental indenture shall expressly
provide that any such modifications or eliminations shall not
be effective with respect to any Outstanding Note of any
Series created prior to the execution of such supplemental
indenture; and
(B) the Indenture Trustee may, in its discretion,
decline to enter into any such supplemental indenture which,
in its opinion, would adversely affect its own rights, duties
or immunities;
(x) to provide for the issuance of Notes of any Series
(including Notes of a Series theretofore authorized and then
Outstanding) or any Class within such Series in bearer form with
coupons ("Bearer Notes") and for the exchangeability of Bearer Notes
and Notes of the same Series and Class issued in registered form
("Registered Notes"); any such supplemental indenture may provide for
payments on Bearer Notes only outside the United States and for
appointment of a foreign Paying Agent that is acceptable to the Rating
Agencies that rated the initial Series of the Notes and may also
contain any provisions as may in the Issuer's judgment be necessary,
appropriate or convenient (a) to permit the Notes to be issued and sold
to or held in bearer form by non-United States persons, (b) to
establish entitlement to an exemption from United States withholding
tax or reporting requirements with respect to payments on the Notes,
(c) to comply, or facilitate compliance, with other applicable laws or
regulations, (d) to provide for usual and customary provisions for
communication (by notice, publication, maintenance of lists of holders
of Bearer Notes who have provided names and addresses for such purpose,
or otherwise) with holders of Bearer Notes, or (e) to otherwise
effectuate provisions of the issuance of Bearer Notes and their
exchangeability with Registered Notes; or
(xi) to modify, eliminate or add to the provisions of
this Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the TIA or under any similar
Federal statute hereafter enacted and to add to this Indenture such
other provisions as may be expressly required by the TIA.
The Indenture Trustee is hereby authorized to join in the execution of
any such supplemental indenture and to make any further appropriate agreements
and stipulations that may be therein contained.
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(b) The Issuer and the Indenture Trustee, when authorized by an Issuer
Order, may also, without the consent of any of the Noteholders but with prior
notice to the Rating Agencies, enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, this Indenture or of
modifying in any manner the rights of the Noteholders under this Indenture;
provided, however, that such action shall not adversely affect the ratings then
assigned to any Notes or Certificates, as evidenced by an Officer's Certificate
to such effect delivered to the Indenture Trustee (upon which the Indenture
Trustee may conclusively rely), accompanied by letters from each Rating Agency
(or other evidence satisfactory to the Indenture Trustee) confirming that the
adoption of such indenture or indentures will not adversely affect the ratings
then assigned by such Rating Agency to any Notes or Certificates Outstanding.
SECTION 9.2. AMENDMENT OF INDENTURE WITH CONSENT OF HOLDERS. The Issuer
and the Indenture Trustee, when authorized by an Issuer Order, also may, with
prior notice to the Rating Agencies, and with prior notice to and the consent of
the Noteholders of not less than a majority of the Outstanding Amount of all the
Notes in case Outstanding Notes of all Series are to be affected or with the
consent of the Noteholders of not less than a majority of the Outstanding Amount
of the Notes to be affected in case one or more, but less than all, of the
Series of Outstanding Notes are to be affected, by act of such Noteholders
delivered to the Issuer and the Indenture Trustee, enter into an indenture or
indentures supplemental hereto for the purpose of adding any provisions to, or
changing in any manner or eliminating any of the provisions of, this Indenture
relating to such Series or of modifying in any manner the rights of the
Noteholders of such Series under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Noteholders of each
Outstanding Note affected thereby:
(i) change the date of payment of any installment of
principal of or interest on any Note, or reduce the principal amount
thereof or the interest rate thereon, change the provisions of this
Indenture relating to the application of collections on, or the
proceeds of the sale of, the Indenture Trust Estate to payment of
principal of or interest on the Notes, or change any place of payment
where, or the coin or currency in which any Note or the interest
thereon is payable, or impair the right to institute suit for the
enforcement of the provisions of this Indenture requiring the
application of funds available therefor, as provided in Article IV, to
the payment of any such amount due on the Notes on or after the
respective due dates thereof;
(ii) reduce the percentage of the Outstanding Amount of
the Notes of any Series, the consent of the Noteholders of which is
required for any such supplemental indenture, or the consent of the
Noteholders of which is required for any waiver of compliance with
certain provisions of this Indenture or certain defaults hereunder and
their consequences provided for in this indenture;
(iii) modify or alter the provisions of the proviso to
the definition of the term "Outstanding";
(iv) reduce the percentage of the Outstanding Amount of
the Notes of any Series required to direct the Indenture Trustee to
direct the Issuer to sell or liquidate the Indenture Trust Estate
pursuant to Section 7.1;
(v) modify any provision of this Section except to
increase any percentage specified herein or to provide that certain
additional provisions of this Indenture or the other Basic Documents
cannot be modified or waived without the consent of the Noteholder of
each Outstanding Note affected thereby;
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(vi) modify any of the provisions of this Indenture in
such manner as to affect the calculation of the amount of any payment
of interest or principal due on any Note on any Distribution Date; or
(vii) permit the creation of any lien ranking prior to or
on a parity with the lien of this Indenture with respect to any part of
the Indenture Trust Estate or, except as otherwise permitted or
contemplated herein, terminate the lien of this Indenture on any
property at any time subject hereto or deprive any Noteholder of any
Note of the security provided by the lien of this Indenture.
It shall not be necessary for any act of Noteholders under this Section
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Indenture Trustee of
any supplemental indenture pursuant to this Section, the Indenture Trustee shall
mail to the Noteholders of the Notes of each Series to which such amendment or
supplemental indenture relates a notice setting forth in general terms the
substance of such supplemental indenture. Any failure of the Indenture Trustee
to mail such notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such supplemental indenture.
SECTION 9.3. EXECUTION OF SUPPLEMENTAL INDENTURES. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modifications thereby of the trusts created
by this Indenture, the Indenture Trustee shall be entitled to receive, and
subject to Sections 6.1 and 6.2, shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution or such supplemental indenture is
authorized or permitted by this indenture. The Indenture Trustee may, but shall
not be obligated to, enter into any such supplemental indenture that affects the
Indenture Trustee's own rights, duties, liabilities or immunities under this
indenture or otherwise.
SECTION 9.4. EFFECT OF SUPPLEMENTAL INDENTURE. Upon the execution of
any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and be deemed to be modified and amended in accordance therewith with
respect to the Notes of each Series affected thereby, and the respective rights,
limitations of rights, obligations, duties, liabilities and immunities under
this indenture of the Indenture Trustee, the Issuer and the Noteholders shall
thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments, and all the terms and conditions
of any such supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.
SECTION 9.5. CONFORMITY WITH TRUST INDENTURE ACT. Every amendment of
this Indenture and every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the Trust Indenture Act as then
in effect so long as this Indenture shall then be qualified under the Trust
Indenture Act.
SECTION 9.6. REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX which relates to the Series of which such Notes are
a part may, and if required by the Indenture Trustee shall, bear a notation in
form approved by the Indenture Trustee as to any matter provided for in such
supplemental indenture. If the Issuer or the Indenture Trustee shall so
determine, new Notes so modified as to conform, in the opinion of the Indenture
Trustee and the Issuer, to any such supplemental indenture which relates to the
Series of which such Notes are a part may be prepared and executed by the issuer
and authenticated and delivered by the Indenture Trustee in exchange for
Outstanding Notes of such Series.
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ARTICLE 10
SATISFACTION AND DISCHARGE OF INDENTURE;
SUBSTITUTION AND RELEASE OF INDENTURE ESTATE
SECTION 10.1. SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture
shall cease to be of further effect with respect to a Series of Notes except as
to (i) rights of registration of transfer and exchange, (ii) substitution of
mutilated, destroyed, lost or stolen Notes of such Series, (iii) rights of
Noteholders to receive payments of principal thereof and interest thereon, (iv)
the rights, obligations and immunities of the Indenture Trustee hereunder and
(v) the rights of Noteholders as beneficiaries hereof with respect to the
property so deposited with the Indenture Trustee payable to all or any of them,
and the Indenture Trustee, on demand of and at the expense of the Issuer, shall
execute proper instruments acknowledging satisfaction and discharge of this
Indenture with respect to the Notes, when:
(A) either
(1) all Notes of such Series theretofore
authenticated and delivered (other than (i) Notes that have
been destroyed, lost or stolen and that have been replaced as
provided in Section 2.8 and (ii) Notes for whose payment money
has been deposited in trust as provided in Section 5.9) have
been delivered to the Indenture Trustee for cancellation; or
(2) all Notes of such Series not theretofore
delivered to the Indenture Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable within
one year,
and the Issuer, in the case of (i) or (ii) above, has
irrevocably deposited or caused to be irrevocably deposited
with the Indenture Trustee cash or direct obligations of or
obligations guaranteed by the United States of America (which
will mature prior to the date such amounts are payable), in
trust for such purpose, in an amount sufficient to pay and
discharge the entire indebtedness on such Series of Notes not
theretofore delivered to the Indenture Trustee for
cancellation when due to the applicable Maturity Date;
(B) the Issuer has paid or caused to be paid all
other sums payable hereunder by the Issuer with respect to
such Series; and
(C) the Issuer has delivered to the Indenture Trustee
an Officer's Certificate of the Issuer an Opinion of Counsel
and an Independent Certificate from a firm of certified public
accountants, each meeting the applicable requirements of
Section 11.10(a) and, subject to Section 11.11 each stating
that all conditions precedent herein provided for relating to
the satisfaction and discharge of this Indenture with respect
to such Series have been complied with.
SECTION 10.2. APPLICATION OF TRUST MONEY. All moneys deposited with the
Indenture Trustee pursuant to Section 10.1(A) hereof shall be held in trust and
applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent, as the
Trustee may determine, to the Noteholders of the particular Notes for the
payment of which such moneys
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have been deposited with the Trustee, of all sums due and to become due thereon
for principle and interest; but such moneys need not be segregated from other
funds except to the extent required herein or required by law.
SECTION 10.3. REPAYMENT OF MONEYS HELD BY PAYING AGENT. In connection
with the satisfaction and discharge of this Indenture with respect to a Series
of Notes, all moneys then held by any Paying Agent other than the Indenture
Trustee under the provisions of this Indenture with respect to such Series of
Notes shall, upon demand of the Issuer, be paid to the Indenture Trustee to be
held and applied according to Section 5.9 and thereupon such Paying Agent shall
be released from all further liability with respect to such moneys.
SECTION 10.4. RELEASE OF INDENTURE TRUST ESTATE. (a) In connection with
any release of Financed Loans to which the Issuer is entitled pursuant to this
Section 10.4 and the related Terms Supplement, the Indenture Trustee shall
execute appropriate instruments to release such Financed Loans from the lien of
any Terms Supplement, or convey the Indenture Trustee's interest in the same. No
party relying upon an instrument so executed by the Indenture Trustee shall be
bound to ascertain the Indenture Trustee's authority, inquire into the
satisfaction of any conditions precedent or see to the application of any
moneys.
(b) The Indenture Trustee shall, at such time as there are no Notes
Outstanding and all sums due the Indenture Trustee pursuant to Section 6.7 have
been paid, release any remaining portion of the Indenture Trust Estate that
secured the Notes from the lien of any Terms Supplement and release to the Owner
Trustee for the benefit of the Certificateholders any funds then on deposit in
the Funds and Accounts.
(c) The Indenture Trustee shall release property from the lien of each
Terms Supplement pursuant to this Section 10.4 only upon receipt of an Issuer
Request accompanied by an Officer's Certificate of the Issuer and an Opinion of
Counsel (and if required by the TIA, Independent Certificates) in accordance
with TIA Sections 314(c) and 314(d) (1) meeting the applicable
requirements of Section 11.10.
(d) On any Distribution Date on or after which the Balance in the
applicable Account of the Student Loan Portfolio Fund is equal to or less than a
certain percentage (as specified in the related Terms Supplement) of the Initial
Pool Balance with respect to the Financed Loans in such Account, the Seller may
repurchase such Financed Loans at a purchase price equal to the outstanding
principal balance of such Financed Loans, plus accrued and unpaid interest. The
proceeds of the sale of such Financed Loans shall be credited to the applicable
subaccount in the Note Payment Account within the Note Fund and used on that
Distribution Date for mandatory distributions of principal.
(e) Each Noteholder, by acceptance of a Note, acknowledges that from
time to time the Indenture Trustee shall release the lien of this Indenture as
set forth in this Section 10.4 and Sections 2.14, 4.4, 5.2, 5.4 and 5.5 hereof,
and each Noteholder, by acceptance of a Note, consents to any such release.
SECTION 10.5. OPINION OF COUNSEL. The Indenture Trustee shall receive
at least five days' notice when requested by the Issuer to take any action
pursuant to Section 10.4, accompanied by copies of any instruments involved, and
the Indenture Trustee shall also require, as a condition to such action, an
Opinion of Counsel, in form and substance satisfactory to the Indenture Trustee,
stating the legal effect of any such action, outlining the steps required to
complete the same, and concluding that all conditions precedent to the taking of
such action have been complied with and such action will not materially and
adversely impair the security for the Notes or the rights of the Noteholders in
contravention of the provisions of this Indenture; provided, however, that such
Opinion of Counsel shall not be required to express an opinion as to the fair
value of the Indenture Trust Estate. Counsel rendering any such opinion may
rely,
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without independent investigation, on the accuracy and validity of any
certificate or other instrument delivered to the Indenture Trustee in connection
with any such action.
SECTION 10.6. NOTES NOT PRESENTED FOR PAYMENT WHEN DUE; MONEYS HELD FOR
THE NOTES AFTER DUE DATE THEREOF. Subject to the provisions of the next sentence
of this Section 10.6, if any Note shall not be presented for payment when the
principal thereof shall become due, whether at maturity or at the date fixed for
the redemption thereof, or otherwise, and if moneys and/or Investment Securities
shall at such due date be held by the Indenture Trustee, in trust for that
purpose sufficient and available to pay the principal of such Note, together
with all interest due on such principal to the due date thereof, or to the date
fixed for redemption thereof, as the case may be, all liability of the Issuer
for such payment shall forthwith cease, terminate and be completely discharged,
and thereupon it shall be the duty of the Indenture Trustee, to hold said moneys
and/or Investment Securities without liability to the Holder of such Note for
interest thereon, in trust for the benefit of the Holder of such Note, who
thereafter shall be restricted exclusively to said moneys and/or Investment
Securities for any claim of whatever nature on its part on or with respect to
said Note, including for any claim for the payment thereof; provided, however,
that any such moneys and/or Investment Securities held by the Indenture Trustee
remaining unclaimed by the Holders of such Notes for three (3) years after the
principal of the respective Notes with respect to which such moneys and/or
Investment Securities have been so set aside has become due and payable (whether
at maturity or upon redemption or otherwise) shall be paid to the Issuer free
from the trusts created by this Indenture, and all liabilities of the Indenture
Trustee with respect to such moneys and/or Investment Securities shall cease.
ARTICLE 11
MISCELLANEOUS
SECTION 11.1. BENEFITS OF INDENTURE. With the exception of rights or
benefits herein expressly conferred, nothing expressed or mentioned in or to be
implied from this Indenture or the Notes is intended or shall be construed to
confer upon or give to any person other than the Issuer, the Indenture Trustee,
the Owner Trustee, the Noteholders and the Certificateholders, any legal or
equitable right, remedy or claim under or by reason of or in respect to this
Indenture or any covenant, condition, stipulation, promise, agreement or
provision herein contained in this Indenture, and all of the covenants,
stipulations, promises, agreements and provisions hereof are intended to be and
shall be for and inure to the sole and exclusive benefit of the Issuer, the
Indenture Trustee, the Owner Trustee, the Noteholders and the Certificateholders
from time to time as herein and therein provided.
SECTION 11.2. INDENTURE BINDING UPON SUCCESSORS OR ASSIGNS OF THE
ISSUER. All the terms, provisions, conditions covenants, warranties and
agreements contained in this Indenture shall be binding upon the Issuer and the
successors and assigns of the Issuer, and shall inure to the benefit of the
Indenture Trustee, its successors or substitutes in trust and assigns, and the
Noteholders.
SECTION 11.3. EFFECT OF LEGAL HOLIDAYS. Whenever this Indenture
requires any action to be taken on a day which is not a Business Day, such
action shall be taken on the next succeeding Business Day (except as otherwise
expressly provided herein) with the same force and effect as if taken on such
day.
SECTION 11.4. PARTIAL INVALIDITY. If any one or more of the covenants
or agreements or portions thereof provided in this Indenture on the part of the
Issuer or the Indenture Trustee to be performed should be determined by a court
of competent jurisdiction to be contrary to law, then such covenant or
covenants, or such agreement or agreements, or such portions thereof, shall be
deemed severable from the remaining covenants and agreements provided in this
Indenture and the invalidity thereof shall in no way
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affect the validity of the other provisions of this Indenture or of the Notes,
and the Noteholders shall retain all the rights and benefits accorded to them
hereunder and under any applicable provisions of law.
SECTION 11.5. NOTICES; NOTICE TO NOTEHOLDERS; WAIVER. Except as
otherwise expressly provided herein, any notice to or demand upon the Indenture
Trustee may be served or presented, and such demand may be made, at the
principal corporate trust office of the Indenture Trustee, which at the date of
adoption of this Indenture is located at Two International Place, Boston,
Massachusetts 02211, Attention: Corporate Trust Department, or at such other
address as may have been designated by the Indenture Trustee in accordance with
this Indenture. Except as otherwise expressly provided herein, any notice to or
demand upon the Issuer may be served or presented, and such demand may be made,
to Nellie Mae Education Loan Trust in care of Fleet National Bank, Corporate
Trust Department at One Federal Street, Boston, Massachusetts 02110 with a copy
to the Administrator, Nellie Mae, Inc., 50 Braintree Hill Park, Suite 300,
Braintree, Massachusetts 02184, Attention: John F. Remondi, Treasurer, or to the
Issuer at such other address or numbers as may have been filed in writing by the
Issuer with the Indenture Trustee. Any notice required to be in writing shall be
deemed to be in writing if given by telex, telecopier or other method which
produces a legible written record.
Notices required to be given to the Rating Agencies shall be in
writing, personally delivered or mailed by certified mail, return receipt
requested, to (i) in the case of Moody's, at the following address: Moody's
Investors Service, Inc., ABS Monitoring Department, 99 Church Street, New York,
New York 10007 and (ii) in the case of Fitch, at the following address: Fitch
Investors Service, Inc., Municipal Structured Finance Group, One State Street
Plaza, New York, New York 10004; or as to each of the foregoing, at such other
address as shall be designated by written notice to the other parties.
Where this Indenture provides for notice to Noteholders of any event,
such notice shall be sufficiently given (unless otherwise herein expressly
provided) if in writing and mailed, first-class, postage prepaid to each
Noteholder affected by such event, at his address as it appears on the Note
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. In any case where notice to
Noteholders is given by mail, neither the failure to mail such notice nor any
defect in any notice so mailed to any particular Noteholder shall affect the
sufficiency of such notice with respect to other Noteholders, and any notice
that is mailed in the manner herein provided shall conclusively be presumed to
have been duly given.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by any person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Indenture
Trustee but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such a waiver.
Where this Indenture provides for notice to the Rating Agencies,
failure to give such notice shall not affect any other rights or obligations
created hereunder, and shall not under any circumstance constitute an Event of
Default.
SECTION 11.6. GOVERNING LAW. This Indenture shall be construed and
interpreted in accordance with the laws of the Commonwealth without regard to
the conflicts of law principles of such state.
SECTION 11.7. EFFECT OF ARTICLE AND SECTION HEADINGS AND TABLE OF
CONTENTS. The heading or titles of the several Articles and Sections hereof, and
any table of contents appended hereto, shall
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be solely for convenience of reference and shall not affect the meaning or
construction, interpretation or effect of this Indenture.
SECTION 11.8. SUSPENSION OF MAIL. If because of the suspension of
delivery of first class mail or, for any other reason, the Indenture Trustee
shall be unable to mail by the required class of mail any notice, request,
complaint, demand or other instrument or document required to be mailed hereby,
the Indenture Trustee shall give it in any other manner which shall approximate
most effectively the mailing thereof in accordance herewith in the judgment of
the Indenture Trustee. The giving of that notice, request, complaint, demand or
other instrument or document in that manner shall be deemed for all purposes of
this Indenture to be in compliance with the requirement for the mailing thereof.
Except as provided otherwise herein, the mailing of any notice, request,
complaint, demand or other instrument or document shall be deemed to be complete
upon deposit thereof in the mail, and the giving thereof by any other means of
delivery shall be deemed to be complete upon receipt thereof by the delivery
service.
SECTION 11.9. EXECUTION COUNTERPARTS. This Indenture may be executed in
several counterparts, each of which shall be regarded as an original and all of
which shall constitute one and the same document. It shall not be necessary in
proving this Indenture to produce or account for more than one of those
counterparts.
SECTION 11.10. COMPLIANCE CERTIFICATES AND OPINIONS, ETC. (a) Upon any
application or request by the Issuer to the Indenture Trustee to take any action
under any provision of this Indenture, the Issuer shall furnish to the Indenture
Trustee (i) an Officer's Certificate of the Issuer stating that all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with and (ii) an Opinion of Counsel stating that in
the opinion of such counsel all such conditions precedent, if any, have been
complied with (and an Independent Certificate from a firm of certified public
accountants) meeting the applicable requirements of this Section, except that,
in the case of any such application or request as to which the furnishing of
such documents is specifically required by any provision of this Indenture, no
additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(i) a statement that such signatory of such certificate
or opinion has read or has caused to be read such covenant or condition
and the definitions herein relating thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(iii) a statement that, in the opinion of each such
signatory, such signatory has made such examination or investigation as
is necessary to enable such signatory to express an informed opinion as
to whether or not such covenant or condition has been complied with;
and
(iv) a statement as to whether, in the opinion of each
such signatory, such condition or covenant has been complied with.
(b) (i) Other than any property released as contemplated by
clause (iii) below, whenever any property or securities are to be
released from the lien of this Indenture and the related Terms
Supplements, the Issuer shall also furnish to the Indenture Trustee an
Officer's Certificate of the Issuer certifying or stating the opinion
of each person signing such certificate as to the fair value
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(within 90 days of such release) of the property or securities proposed
to be released and stating that in the opinion of such person the
proposed release will not impair the security under this Indenture in
contravention of the provisions hereof.
(ii) Whenever the Issuer is required to furnish to the
Indenture Trustee an Officer's Certificate of the Issuer certifying or
stating the opinion of any signer thereof as to the matters described
in clause (b)(i) above, the Issuer shall also furnish to the Indenture
Trustee an Independent Certificate as to the same matters if the fair
value of the property or securities and of all other property, other
than property as contemplated by clause (iii) below, or securities
released from the lien of this Indenture and the related Terms
Supplements since the commencement of the then-current calendar year,
as set forth in the certificates required by clause (i) above and this
clause (ii) equals 10% or more of the Outstanding Amount of the Notes,
but such certificate need not be furnished in the case of any release
of property or securities if the fair value thereof as set forth in the
related Officer's Certificate is less than $25,000 or less than one
percent of the then Outstanding Amount of the Notes Outstanding.
(iii) Notwithstanding Section 2.14 or any other
provisions of this Section, the Issuer may, without compliance with the
requirements of the other provisions of this Section, (A) collect,
liquidate, sell, service, convey, administer, manage or otherwise
dispose of Financed Loans as and to the extent permitted or required by
the Basic Documents, (B) make cash payments out of the Trust Funds and
Accounts as and to the extent permitted or required by the Basic
Documents, so long as the Issuer shall deliver to the Indenture Trustee
every six months, commencing six months after the first issuance of a
Series of Notes, an Officer's Certificate of the Issuer stating that
all the dispositions of any portion of the Indenture Trust Estate
described in clauses (A) or (B) above that occurred during the
immediately preceding six calendar months were applied in accordance
with the Basic Documents.
SECTION 11.11. FORM OF DOCUMENTS DELIVERED TO INDENTURE TRUSTEE. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such person, or that they
be so certified or covered by only one document, but one such person may certify
or give an opinion with respect to some matters and one or more other such
persons as to other matters, and any such person may certify or give an opinion
as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate of an Authorized Officer or
Opinion of Counsel may be based, insofar as it relates to factual matters, upon
a certificate or opinion of, or representations by, an officer or officers of
the Servicer, the Seller, the Issuer or the Administrator, stating that the
information with respect to such factual matters is in the possession of the
Servicer, the Seller, the Issuer or the Administrator, unless such counsel
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to such matters are erroneous.
Where any person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
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Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Article VI.
SECTION 11.12. CONFLICT WITH TRUST INDENTURE ACT. If any provision
hereof limits, qualifies or conflicts with another provision hereof that is
required to be included in this Indenture by any of the provisions of the TIA,
such required provision shall control.
The provisions of TIA Sections 310 through 317 that impose duties
on any person (including the provisions automatically deemed included herein
unless expressly excluded by this Indenture) are a part of and govern this
Indenture, whether or not physically contained herein.
SECTION 11.13. RECORDING OF INDENTURE. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expenses accompanied by an Opinion of Counsel
(which may be counsel to the Issuer or any other counsel reasonably acceptable
to the Indenture Trustee) to the effect that such recording is necessary either
for the protection of the Noteholders or any other person secured hereunder or
for the enforcement of any right or remedy granted to the Indenture Trustee
under this Indenture.
SECTION 11.14. TRUST OBLIGATIONS. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer, the Owner Trustee or
the Indenture Trustee on the Notes or under this Indenture or any certificate or
other writing delivered in connection herewith or therewith, against (i) the
Indenture Trustee or the Owner Trustee in its individual capacity or (ii) any
partner, owner, beneficiary, custodian, officer, director, employee or agent of
the Indenture Trustee or the Owner Trustee in its individual capacity, any
holder or owner of a beneficial interest in the Issuer, the Owner Trustee or the
Indenture Trustee or of any successor or assign of the Indenture Trustee or the
Owner Trustee in its individual capacity, except as any such person may have
expressly agreed (it being understood that the Indenture Trustee and the Owner
Trustee have no such obligations in their individual capacity) and except that
any such partner, owner or beneficiary shall be fully liable, to the extent
provided by applicable law, for any unpaid consideration for stock, unpaid
capital contribution or failure to pay any installment or call owing to such
entity.
SECTION 11.15. NO PETITION. The Indenture Trustee, by entering into
this Indenture, and each Noteholder, by accepting a Note, hereby covenant and
agree that they will not at any time institute against the Seller or the Issuer,
or join in any institution against the Seller or the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency, receivership or liquidation
proceedings, or other proceedings under any United States Federal or state
bankruptcy or similar law in connection with any obligations relating to the
Notes, this Indenture or any of the other Basic Documents.
SECTION 11.16. USURY. The amount of interest payable or paid on any
Note under the terms of this Indenture shall be limited to an amount which shall
not exceed the maximum non usurious rate of interest allowed by the applicable
laws of the United States or the Commonwealth (whichever shall permit the higher
rate), which could lawfully be contracted for charged or received (the "Highest
Lawful Rate"). If any payment of interest on any Note exceeds the Highest Lawful
Rate, the Issuer stipulates that such
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excess amount will be deemed to have been paid as a result of an error on the
part of both the Indenture Trustee, acting on behalf of the Noteholder of such
Note, and the Issuer, and the Noteholder receiving such excess payment shall
promptly, upon discovery of such error or upon notice thereof from the Issuer or
the Indenture Trustee, refund the amount of such excess and, at the option of
the Indenture Trustee, apply the excess to the payment of principal of such
Note, if any, remaining unpaid.
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IN WITNESS WHEREOF, the Issuer has caused this Indenture to be signed
in its name and on its behalf, and State Street Bank and Trust Company, to
evidence its acceptance of the trusts hereby created, has caused this Indenture
to be signed in its name and on its behalf by one of its officers thereunto duly
authorized, all as of the date first above written.
NELLIE MAE EDUCATION LOAN TRUST
by Fleet National Bank, as Owner Trustee
By:__________________________________
STATE STREET BANK AND TRUST COMPANY,
as Indenture Trustee
By:__________________________________
Responsible Officer
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EXHIBIT A
DEFINITIONS AND USAGE
Definitions
"Account" shall mean any of the accounts established by the Indenture.
"Acquisition Account" shall mean the Account so designated and
established in the Student Loan Acquisition Fund by Section 4.3 of the
Indenture.
"Additional Financed Loans" shall mean the Financed Loans to be
transferred to the Owner Trustee during a Funding Period pursuant to the related
Sales Agreement, each of which will be listed on Schedule A to the related
Transfer Agreement.
"Administration Account" shall mean the Account so designated and
established in the Services Fund by Section 4.7 of the Indenture.
"Administration Agreement" shall mean the Administration Agreement
dated as of June 1, 1996, among the Issuer, the Owner Trustee, the Indenture
Trustee and the Administrator, as amended from time to time.
"Administrator Default" shall have the meaning specified in the
Administration Agreement.
"Administration Fee" shall mean, as of any date of calculation, the sum
owed to the Administrator pursuant to the terms of the Administration Agreement.
"Administration Requirement" shall mean, as of any date of calculation
and with respect to a particular Series, the Administrative Expenses due as of
such date with respect to such Series.
"Administrative Expenses" shall mean the fees and expenses of the
Indenture Trustee, the Owner Trustee, the Authenticating Agent, the
Administrator and the Servicer, provided, however, that the fees and expenses
described shall not exceed any amount specified in the related Terms Supplement.
"Administrator" shall mean Nellie Mae, Inc., a Massachusetts non-profit
corporation, or any successors or assigns.
"Affiliate" shall mean, with respect to any specified person, any other
person controlling or controlled by or under common control with such specified
person. For the purposes of this definition, "control," when used with respect
to any specified person, shall mean the power to direct the management and
policies of such person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise, and the terms "controlling" and
"controlled" shall have meanings correlative to the foregoing.
"Authenticating Agent" shall mean the Indenture Trustee and any bank,
trust company or other financial institution designated by the Indenture Trustee
as authenticating agent for the Indenture Trustee hereunder, or any successor or
successors thereto appointed pursuant to Section 6.8 of the Indenture.
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"Authorized Denominations" shall mean, with respect to the initial
offering of the Securities, $20,000 or any integral multiple thereof, and in all
other respects shall mean $1,000 or any integral multiple thereof.
"Authorized Officer," when used with reference to the Issuer, shall
mean any officer of the Owner Trustee or the Administrator, as applicable, in
matters relating to the Issuer and who is identified on the list of Authorized
Officers delivered by the Owner Trustee to the Indenture Trustee on the Closing
Date relating to the initial issuance of a Series of Notes.
"Balances" when used with reference to any Account or Fund shall mean
the sum of the following assets in or deposited to the credit of such Account or
Fund: (i) Investment Securities computed at the Value of Investment Securities;
(ii) Financed Loans computed at the Outstanding balance of their principal
amounts plus accrued but unpaid interest; and (iii) lawful money of the United
States.
"Basic Documents" shall mean the Trust Agreement, the Indenture, each
Terms Supplement, each Trust Supplement, the Sales Agreement, the Purchase
Agreement, the Administration Agreement, the Servicing Agreement and other
documents and certificates to be delivered in connection therewith and all
amendments and supplements thereto.
"Benefit Plan" shall mean any (i) employee benefit plan (as defined in
Section 3(3) of ERISA) which is subject to the provisions of Title I of ERISA,
(ii) plans described in Section 4975 (e)(1) of the Code, including individual
retirement accounts described in Section 408(a) of the Code or Keogh plans or
(iii) or any entity (including an insurance company general account) whose
underlying assets include plan assets by reason of a plan's investment in such
entity.
"Book-Entry Certificate" shall mean a beneficial interest in the
Certificates, ownership and transfer of which shall be made through book entries
by a Securities Depository as described in Section 3.11 of the Trust Agreement.
"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which banks in the City of Boston, Massachusetts, or New York, New
York are required or authorized by law or executive order to close.
"Capitalized Interest" shall mean all interest which has been accrued
but not paid on Financed Loans for which the borrower is entitled to elect, and
has elected, to defer payments of principal of and interest on such Loan.
"Certificate" shall mean a certificate evidencing the beneficial
interest of a Certificateholder in the Trust, substantially in the form of
Exhibit B to the Trust Agreement.
"Certificate Balance" shall equal, initially, the Initial Certificate
Balance and, thereafter, shall equal the Initial Certificate Balance increased
by the principal balance of each subsequent Class of Certificates issued
pursuant to a Trust Supplement and reduced by all amounts allocable to principal
previously distributed to Certificateholders. Notwithstanding the foregoing,
where any provision of the Trust Agreement or a Trust Supplement permits or
authorizes Certificateholders holding a specified percentage or amount of the
Certificate Balance to take any action or grant any approval, the holders of the
Certificates shall be deemed to have a Certificate Balance equal to 99%.
"Certificate Fund" shall mean the fund so designated and established by
Section 5.1 of the Trust Agreement.
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"Certificate Interest Account" shall mean the Account so designated and
established in the Certificate Fund by Section 5.1 of the Trust Agreement.
"Certificate Owner" shall mean, with respect to a Book-Entry
Certificate, the person who is the beneficial owner of such Book- Entry
Certificate, as reflected on the books of the Securities Depository, or on the
books of a person maintaining an account with such Securities Depository
(directly as a Securities Depository Participant or as an indirect participant,
in each case in accordance with the rules of such Securities Depository).
"Certificate Paying Agent" shall mean any paying agent or co-paying
agent appointed pursuant to Section 3.9 of the Trust Agreement, which shall
initially be the Owner Trustee.
"Certificate Payment Account" shall mean the Account so designated and
established in the Certificate Fund by Section 5.1 of the Trust Agreement.
"Certificate Interest Rate" shall mean, with respect to any Class of
Certificates, the per annum rate determined as set forth in the related Trust
Supplement.
"Certificate Register" and "Certificate Registrar" shall mean the
register and the registrar appointed pursuant to the Trust Agreement.
"Certificateholder" shall mean a person in whose name a Certificate is
registered in the Certificate Register.
"Certification," "Instruction," "Order," "Request" or "Requisition" of
the Issuer, as the case may be, shall mean, respectively, a certification,
direction, instruction, order, request or requisition which shall, unless
otherwise specifically provided herein, be in writing and signed in the name of
the Issuer by an Authorized Officer.
"Class" shall mean, (i) with respect to any Series of Notes, all Notes
of such Series whose final installment of principal has the same Maturity Date
and (ii) with respect to the Certificates, all Certificates whose final
installment of principal has the same Maturity Date.
"Closing Date" shall mean, with respect to Certificates, the date
identified as such in the related Trust Supplement and, with respect to Notes,
the date identified as such in the related Terms Supplement.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and Treasury Regulations promulgated thereunder.
"Collector" shall mean the Administrator or collection agency retained
by the Administrator to collect amounts outstanding on Financed Loans upon
acceleration after default.
"Commonwealth" shall mean The Commonwealth of Massachusetts.
"Cost of Issuance Account" shall mean the Account so designated and
established in the Services Fund by Section 4.7 of the Indenture.
"Costs of Issuance" for each Series of Notes or Certificates shall mean
all items of expense allocable to the authorization, issuance, sale and delivery
of such Series of Notes or Certificates, including without limitation costs of
planning and feasibility studies, costs of financial advisory, legal, accounting
and
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management services and services of other consultants and professionals and
related charges, fees and disbursements, costs of preparation and reproduction
of documents, costs of preparation and printing of any offering document
relating to the Notes or Certificates, advertising and printing costs, filing
and recording fees, any initial fees and charges of the Indenture Trustee,
Authenticating Agent or Owner Trustee, rating agency fees, costs of preparation,
execution, transportation and safekeeping of Notes or Certificates, and any
other costs, charges or fees incurred in connection with the issuance of the
Notes or Certificates.
"Cumulative Default Rate," with respect to any Series, shall have the
meaning set forth in the related Terms Supplement.
"Custodian," shall mean USA Loan Services, Inc., a Delaware
corporation, its corporate successor or assigns and any other organization with
which the Indenture Trustee and the Issuer have entered into or will enter into
in a custody agreement.
"Custody Agreement" shall mean the agreement to be entered into among
the Indenture Trustee, the Custodian and the Issuer regarding the custody of the
promissory notes signed by the obligors of the Financed Loans.
"Debt Service Reserve Fund" shall mean the fund so designated and
established by Section 4.2 of the Indenture.
"Defaulted Loan" shall mean a Financed Loan which is more than 180 days
delinquent in payment of principal or interest.
"Deferred Interest" with respect to each Series and Class of Notes
shall have the meaning set forth in the related Terms Supplement and with
respect to each Class of Certificates shall have the meaning set forth in the
related Trust Supplement.
"Definitive Certificates" shall have the meaning specified in Section
3.13 of the Trust Agreement.
"Depositor" shall mean the Seller in its capacity as depositor under
the Trust Agreement.
"Distribution Date" shall mean as to each Series and Class of Notes and
to each Class of Certificates, the fifteenth (15th) day of each month.
"Dollar" and "$" shall mean the lawful currency of the United States of
America.
"DTC Representation Letter" shall have the meaning set forth in Section
2.12 of the Indenture.
"Event of Default" shall have the meaning specified in Section 7.1 of
the Indenture.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Financed Loan" shall mean any Loan which, from time to time, is
assigned by the Issuer to the Indenture Trustee to serve as security for the
payment of all amounts due to Noteholders under the Notes and included in the
Student Loan Portfolio Fund. The initial Financed Loans subject to the lien of
the Indenture shall be listed on the Schedule of Financed Loans set forth in
Schedule A to the Sales Agreement. The Financed Loans to be pledged by the
Issuer to the Indenture Trustee in connection with the issuance of
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each additional Series of Notes shall be listed on the Schedule of Financed
Loans appearing on Schedule A to the related Supplemental Sales Agreement. A
master Schedule of Financed Loans listing all Financed Loans shall be maintained
by the Issuer. Each Schedule of Financed Loans shall be amended from time to
time by the Issuer to reflect accurately the Financed Loans then subject to the
lien of the Indenture.
"Fitch" shall mean Fitch Investors Service, Inc. (whose address is One
State Street Plaza, New York, New York 10004) and its corporate successors.
"Fund" shall mean any of the Funds established by the Indenture or the
Trust Agreement.
"Funding Period," with respect to each Series, shall have the meaning
set forth in the related Terms Supplement.
"Guarantor" shall mean TERI or Penn, as applicable or any other
guarantor as specified in the related Terms Supplement; provided that the Trust
shall notify the Rating Agencies prior to entering into any other guaranty
agreement.
"Guaranty Agreement" shall mean the TERI Guaranty Agreement or the Penn
Guaranty Agreement, as applicable, including, in either case, any supplement or
amendment thereto entered into in accordance with the provisions thereof, or any
other guaranty agreement as specified in the related Terms Supplement.
"Holder" or "Holders" shall mean a registered owner of the Notes or the
Certificates, as the context requires.
"Indenture" shall mean the Master Indenture and any Terms Supplement,
each as from time to time amended or supplemented with respect to which the
Notes issued thereunder are still Outstanding.
"Indenture Trust Estate" shall mean (i) all Revenues; (ii) the Balances
on deposit in all subaccounts, Accounts and Funds (whether derived from proceeds
of sale of the Notes, from Revenues or from any other source, excluding the
Certificate Fund); (iii) all rights, title, interest and privileges of the
Issuer as owner of the Financed Loans in and to (a) the Financed Loans,
including all promissory notes evidencing the indebtedness for Financed Loans
and all related documentation, and all rights of the Issuer to receive any and
all payments of any nature and from any source with respect to the Financed
Loans, (b) each Guaranty Agreement insofar as it relates to Financed Loans, (c)
the Administration Agreement, (d) the Servicing Agreement and (e) any Sales
Agreements with the Seller with respect to the Financed Loans; (iv) all products
and proceeds of any of the foregoing; and (v) all other property of every kind
and nature which is now or from time to time hereafter pledged, assigned or
transferred as and for security hereunder to the Indenture Trustee by the Issuer
or by anyone on its behalf.
"Indenture Trustee" shall mean State Street Bank and Trust Company, a
Massachusetts trust company, not in its individual capacity but solely as
Indenture Trustee under the Indenture.
"Independent" shall mean, when used with respect to any specified
person, that the person (a) is in fact independent of the Issuer, any other
obligor upon the Notes, the Seller and any Affiliate of any of the foregoing
persons, (b) does not have any direct financial interest or any material
indirect financial interest in the Issuer, any such other obligor, the Seller or
any Affiliate of any of the foregoing persons and (c) is not connected with the
Issuer, any such other obligor, the Seller or any Affiliate of any of the
foregoing persons as an officer, employee, promoter, underwriter, trustee,
partner, director or person performing similar functions.
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"Independent Certificate" shall mean a certificate or opinion to be
delivered to the Indenture Trustee under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 11.10 of the
Indenture, made by an Independent appraiser or other expert appointed by an
Issuer Order and approved by the Indenture Trustee in the exercise of reasonable
care, and such opinion or certificate shall state that the signer has read the
definition of "Independent" and that the signer is Independent within the
meaning thereof.
"Initial Certificate Balance" shall mean, with respect to any Class of
Certificates, the amount identified as such in the related Trust Supplement.
"Initial Certificate Interest Rate" shall mean, with respect to each
Class of Certificates, the rate identified as such in the related Trust
Supplement.
"Initial Note Interest Rate" shall mean, with respect to each Class of
Notes, the rate identified as such in the related Terms Supplement.
"Initial Period" shall mean, as to any Class of Notes and Class of
Certificates, the period commencing on the Closing Date and continuing with
respect to each Class of Notes, through the day immediately preceding the
Initial Rate Adjustment Date for such Class of Notes, and with respect to each
Class of Certificates, through the day immediately preceding the Initial Rate
Adjustment Date for such Class of Certificates.
"Initial Pool Balance" shall mean, with respect to any Series, the sum
of the related Pool Balance as of the Closing Date, plus the principal balance
of each Additional Financed Loan purchased by the Issuer on each Transfer Date
during the related Funding Period.
"Initial Rate Adjustment Date" shall mean, as to any Class of Notes,
the date specified in the related Terms Supplement, and with respect to any
Class of Certificates, the date specified in the related Trust Supplement.
"Insolvency Event" means, with respect to a specified person, (a) the
filing or entry of a decree or order for relief by a court having jurisdiction
in the premises in respect of such person or any substantial part of its
property in an involuntary case under any applicable Federal or state
bankruptcy, insolvency or other similar law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official for such person or any substantial part of its property, or
ordering the winding-up or liquidation of such person's affairs, and such decree
or order shall remain unstayed and in effect for a period of 60 consecutive
days; or (b) the commencement by such person of a voluntary case under any
applicable Federal or state bankruptcy, insolvency or other similar law now or
hereafter in effect, or the consent by such person to the entry of an order for
relief in an involuntary case under such law, or the consent by such person to
the appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for such person or any
substantial part of its property, or the making by such person any general
assignment for the benefit of creditors, or the failure by such person generally
to pay its debts as such debts become due, or the taking of action by such
person in furtherance of any of the foregoing.
"Interest Period" shall mean, as to each Series and Class of Notes and
each Class of Certificates, the Initial Period and thereafter each period
commencing on a Rate Adjustment Date and ending on the day before the next Rate
Adjustment Date.
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"Interest Rate" shall mean, with respect to each Class of Notes, the
rate of interest per annum borne by such Class of Notes as set forth in the
related Terms Supplement, and with respect to each Class of Certificates, the
rate of interest per annum borne by such Class of Certificates as set forth in
the related Trust Supplement.
"Investment Securities" shall mean any of the following:
(a) direct obligations of, or obligations on which the
timely payment of the principal of and interest on which are
unconditionally and fully guaranteed by, the United States of America;
(b) interest-bearing time or demand deposits,
certificates of deposit or other similar banking arrangements with any
bank, trust company, national banking association or other depository
institution (including the Indenture Trustee or any of its affiliates),
provided that, at the time of deposit or purchase, (i) if such deposit,
certificate or other arrangement shall be payable in more than one
year, the depository institution shall have senior long-term debt rated
by each Rating Agency in its highest rating category and (ii) if such
deposit, certificate or other arrangement shall be payable in one year
or less, the depository institution shall have short-term debt which is
rated P1 by Moody's (if Moody's is rating such short-term debt) and
F-1+ by Fitch (if Fitch is rating such short-term debt);
(c) bonds, debentures, notes or other evidences of
indebtedness issued or guaranteed by any of the following agencies:
Federal Farm Credit Banks; Federal Home Loan Mortgage Corporation; the
Export-Import Bank of the United States; the Federal National Mortgage
Association; the Tennessee Valley Authority; the Government National
Mortgage Association; the Federal Financing Bank; the Farmers Home
Administration;
(d) with the prior review of the Rating Agencies as to
form, repurchase agreements and reverse repurchase agreements with
banks (which may include the Indenture Trustee or any of its
affiliates) which are members of the Federal Deposit Insurance
Corporation, the outstanding, unsecured long-term debt securities of
which are rated Aaa by Moody's and AAA by Fitch (if Fitch is rating
such securities);
(e) overnight repurchase agreements and reverse
repurchase agreements (i) with counterparties the outstanding,
unsecured debt securities of which are rated P1 by Moody's and F1+ by
Fitch and (ii) which are at least 102% collateralized by securities
described in subparagraph (a) of this definition which are held by a
third-party collateral agent in a segregated trust account;
(f) investment agreements or guaranteed investment
contracts, secured by collateral securities or unsecured as the Issuer
may determine, which may be entered into by and among the Issuer, the
Indenture Trustee and any bank, bank holding company, corporation or
any other financial institution whose outstanding, unsecured long term
debt securities are rated AAA by Fitch (if Fitch is rating such
securities) and Aaa by Moody's, or by an insurance company whose
claims-paying ability is so rated, provided further that any such
agreement must:
(i) clearly state the exact entity
guarantor, the value of invested funds guaranteed, the rate of
guaranteed interest, and the termination date;
(ii) contain an unconditional,
irrevocable pledge by the guarantor and be written in favor of
the Indenture Trustee;
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(iii) not be cancelable for failure to pay
any fees or premiums and its enforceability must be warranted;
(iv) provide that demands for funds be
honored on terms and conditions determined by the Issuer and
the issuer of such agreement and be credited to the Indenture
Trustee in immediately available funds;
(v) clearly establish the basis for
compounding or computation of interest, and provide that all
guaranteed interest accrue to the payment date;
(vi) provide that failure to meet
collateral or other provisions shall result in acceleration of
the agreement at the option of the Issuer or of the Indenture
Trustee acting on behalf of the Issuer and provide that merger
or acquisition of the issuer of the agreement, or assumption
of the obligations of the agreement, with or by another entity
if combined with a credit or claims paying ability rating
downgrade below the standards set forth in this subsection (f)
shall result in acceleration of the agreement at the option of
the Issuer or of the Indenture Trustee acting on behalf of the
Issuer (after confirmation by Moody's and Fitch that such
acceleration will not affect the ratings assigned to the
Notes); and may provide that other designated events relating
to the issuer of the agreement or its parent or any related
entity, if combined with a credit or claims paying ability
rating downgrade below the standards set forth in this
subsection (f) shall result in acceleration of the agreement
at the option of the Issuer (or Indenture Trustee acting on
behalf of the Issuer); and
(vii) be accompanied by an Opinion of
Counsel, on which the Indenture Trustee may conclusively rely,
stating that such agreement satisfies the requirements of
clauses (i) through (vi) above;
(g) any debt instrument rated Aaa by Moody's and AAA by
Fitch (if Fitch is rating such debt instrument);
(h) commercial paper rated P1 by Moody's and F1+ by Fitch
(if Fitch is rating such commercial paper);
(i) shares of a money market or mutual fund, provided
that the fund is rated AAAm or AAAm-G by Moody's and Fitch, (if Fitch
is rating such securities); and
(j) any other investment agreement or guaranteed
investment contract approved in writing by each Rating Agency.
Notwithstanding the foregoing, investments described in
subparagraphs (g) and (h) shall not include any "margin security" as such term
is defined in Regulation T of the Board of Governors of the Federal Reserve
System or any "margin stock" as such term is defined in Regulation G, U or X of
the Board of Governors of the Federal Reserve System.
"Issuer" shall mean the Nellie Mae Education Loan Trust established
under the Trust Agreement until a successor replaces it and, thereafter, shall
mean the successor and, for purposes of any provision contained in the Indenture
and required by the TIA, each other obligor of the Notes.
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"Issuer Order" and "Issuer Request" shall mean a written order or
request signed in the name of the Issuer by any one of its Authorized Officers
and delivered to the Indenture Trustee.
"LIBOR Rate" shall mean, with respect to any Class of Notes or Class of
Certificates, the rate per annum equal to (a) the annual rate of interest
published or reported by the Telerate Service (by reference to the screen page
currently designated as "Page 3750" on that service or such other service as may
be nominated by the British Bankers' Association as the information vendor for
the purpose of displaying British Bankers' Association Interest Settlement Rates
for U.S. dollar deposits) as of 11:00 a.m., London time, on the Rate
Determination Date for a one month period, or (b) if such a rate does not appear
on Telerate Page 3750, the "LIBOR Rate" for the given day shall be the
arithmetic mean of the offered rates for dollar deposits for a one month period
commencing on the Rate Determination Date, which rate appears on Reuters LIBO
Page as of 11:00 a.m., London time, on the Rate Determination Date. If the rate
described above does not appear on Telerate Page 3750 and fewer than two rates
appear on Reuters LIBO Page, the "LIBOR Rate" for the applicable Rate
Determination Date shall be determined in good faith by the Indenture Trustee
from such source as it shall determine to be comparable to Telerate Page 3750
and Reuters LIBO Page.
"LIBOR Rate Certificates" shall mean a Class of Certificates for which
the related Interest Rate is based upon LIBOR.
"LIBOR Rate Notes" shall mean a Class of Notes for which the related
Interest Rate is based upon LIBOR.
"Lien" shall mean a security interest, lien, charge, pledge, equity or
encumbrance of any kind, other than tax liens and other liens, if any, which
attach to the respective Financed Loan by operation of law as a result of any
act or omission.
"Loan" or "Loans" shall mean any loan acquired by the Issuer from the
Seller.
"Master Indenture" shall mean the Master Trust Indenture dated as of
June 1, 1996 between the Issuer and the Indenture Trustee, as amended or
supplemented from time to time.
"Maturity Date" shall mean, as to each Series and Class of Notes, the
stated maturity date identified as such in the related Terms Supplement and, as
to each Class of Certificates, the stated maturity date identified as such in
the related Trust Supplement.
"Minimum Authorized Denomination" shall mean, with respect to the
initial offering of the Securities, $20,000, and in all other respects shall
mean $1,000.
"Moody's" shall mean Moody's Investors Service, Inc. (whose address is
99 Church Street, New York, New York 10007-2796, Attention: ABS Monitoring
Department, and its corporate successors.
"Net Loan Rate" shall mean, with respect to any Series, the rate
identified as such in the related Terms Supplement.
"Noteholder" shall mean any person who shall be the registered owner of
any Note or the duly authorized attorney-in-fact or representative of such
person.
"Note Rate" shall mean, with respect to each Class of Notes, the per
annum rate determined as set forth in the related Terms Supplement.
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"Note Register" and "Note Registrar" have the respective meanings
specified in Section 2.6 of the Indenture.
"Notes" shall mean the Asset-Backed Notes issued pursuant to the Master
Indenture and a related Terms Supplement.
"Note Fund" shall mean the Fund so designated and established by
Section 4.6 of the Indenture.
"Note Interest Account" shall mean the Account so designated and
established in the Note Fund by Section 4.6 of the Indenture.
"Note Payment Account" shall mean the Account so designated and
established in the Note Fund by Section 4.6 of the Indenture.
"Office of the Authenticating Agent" shall mean the Principal Corporate
Trust Operations Office of the Indenture Trustee or any designated
Authenticating Agent.
"Officer's Certificate" shall mean a document signed by an Authorized
Officer of the Issuer either attesting to or acknowledging the circumstances,
representations or other matters therein stated or set forth or directing that
an action be taken by the person to whom such document is addressed.
"Opinion of Counsel" shall mean an opinion in writing of a legal
counsel acceptable to the Issuer, the Indenture Trustee, the Owner Trustee, the
Seller, the Servicer or the Administrator, as applicable.
"Outstanding," (A) when used with respect to Notes, shall refer to any
Notes executed, authenticated, issued and delivered under this Indenture other
than Notes (i) for the transfer or exchange of or in lieu of which other Notes
shall have been authenticated and delivered by the Indenture Trustee pursuant to
the Indenture, (ii) which have been canceled or (iii) which at the time are
deemed not to be Outstanding under the Indenture by reason of the limitation of
Section 6.3 of the Indenture, (B) when used with respect to Certificates, shall
refer to any Certificates executed, authenticated, issued and delivered under
the Trust Agreement other than Certificates (i) for the transfer or exchange of
or in lieu of which other Certificates shall have been authenticated and
delivered by the Owner Trustee pursuant to the Trust Agreement or (ii) which
have been canceled, and (C) when used with respect to Financed Loans, shall mean
the principal balance unpaid as of the applicable date.
"Outstanding Amount" shall mean the aggregate principal amount of all
Notes, or Series or Class of Notes, or all Certificates, or Class of
Certificates, as applicable, Outstanding as of the date of determination.
"Owner Trustee" shall mean Fleet National Bank, a national banking
association, not in its individual capacity but solely as Owner Trustee under
the Trust Agreement.
"Penn" shall mean The Trustees of the University of Pennsylvania.
"Penn Guaranty Agreement" shall mean the Penn Graduate Loan Program
Agreement dated as of September 1, 1992, as amended, between Nellie Mae, Inc.
and Penn, insofar as it pertains to Financed Loans.
"Pool Balance" shall mean, at any time, the aggregate principal balance
of the Financed Loans at the end of the preceding Interest Period (including
accrued interest thereon for such Interest Period to the
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extent such interest will be capitalized), after giving effect to the following,
without duplication: (i) all payments in respect of principal received by the
Trust during such Interest Period from or on behalf of borrowers and Guarantors,
(ii) the principal portion of the purchase price of all Financed Loans purchased
from the Trust for such Interest Period from the Seller, the Administration or
the Servicer, and (iii) the principal portion of all Additional Financed Loans
made from the Pre-Funding Account with respect to such Interest Period.
"Pre-Funding Account" means the account designated as such, established
and maintained pursuant to Section 4.3 of the Indenture.
"Principal Corporate Trust Operations Office" shall mean the principal
corporate trust operations office of the Indenture Trustee in Boston,
Massachusetts, or such other office as may be designated by written notice of
the Indenture Trustee to the Issuer and each Noteholder at the address of such
Noteholder as it appears on the books of registry maintained in accordance with
Section 2.6 of the Indenture.
"Principal Factor" shall have the meaning set forth in Section 3.1(a)
of the Indenture.
"Purchase Agreement" shall mean the Master Terms Purchase Agreement
dated June 1, 1996 between Nellie Mae, Inc. and Nellie Mae Funding, LLC, as
amended from time to time.
"Rate Adjustment Date" shall mean, with respect to each Class of Notes
and each Class of Certificates, the date on which the applicable Interest Rate
for such Class of Notes or Certificates, as appropriate, is effective and shall
mean, with respect to each such Class of Notes and Certificates, the date of
commencement of each related Interest Period.
"Rate Determination Date" shall mean the second Business Day
immediately preceding the Rate Adjustment Date for such Interest Period.
"Rating Agency" shall mean (i) Moody's and (ii) Fitch, if the Notes are
then rated by Fitch, or, if either of them no longer exists and has no
successors, then any other rating agency, if any, of nationally recognized
status then rating the Notes.
"Record Date" shall mean the last day of the month.
"Responsible Officer" shall mean, with respect to the Indenture
Trustee, any officer within the Corporate Trust Office of the Indenture Trustee
with direct responsibility for the administration of the Indenture and the other
Basic Documents on behalf of the Indenture Trustee, including any Vice
President, Assistant Vice President, Assistant Treasurer, Assistant Secretary,
or any other officer of the Indenture Trustee customarily performing functions
similar to those performed by any of the above designated officers.
"Reuters LIBO Page" shall mean the display designated as page "LIBO" on
the Reuter Monitor Money Rates Service (or such other page as may replace the
Reuters LIBO Page on that service for the purpose of displaying London interbank
offered rates of major banks for Dollar deposits).
"Revenue Fund" shall mean the Fund established by Section 4.5 of the
Indenture.
"Revenues" shall mean all revenues, receipts and moneys payable into or
to the credit of the Revenue Fund pursuant to Section 4.5 of the Indenture and
any interest earnings on Investment Securities credited to any other Fund or
Account as provided in Section 4.9 of the Indenture.
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"Sales Agreement" shall mean the Master Terms Sales Agreement dated
June 1, 1996, among the Issuer, the Seller and the Owner Trustee, as amended
from time to time.
"Securities" shall mean the Notes and the Certificates together.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Depository" shall mean an organization registered as a
"clearing agency" pursuant to Section 17A of the Exchange Act and shall
initially be The Depository Trust Company.
"Securities Depository Participant" shall mean a broker, dealer, bank,
other financial institution or other person for whom from time to time a
Securities Depository effects book-entry transfers and pledges of securities
deposited with the Securities Depository.
"Seller" shall mean the Nellie Mae Education Funding, LLC, a Delaware
limited liability company.
"Series" shall mean a separate Series of Notes issued pursuant to the
Master Indenture, which Series may, as provided in the related Terms Supplement,
be divided into two or more Classes.
"Servicer Default" shall mean an "Event of Default" as defined in the
Servicing Agreement.
"Servicer" shall mean USA Group Loan Services, Inc., a Delaware
corporation, its corporate successors and assigns, and any other organization
with which, after notice to the Rating Agencies, the Issuer has entered into or
shall in the future enter into a Servicing Agreement providing for the
administration, servicing and collection of, among others, the Financed Loans.
"Services Fund" shall mean the Fund established by Section 4.7 of the
Indenture.
"Servicing Agreement" shall mean the Servicing Agreement between the
Issuer and USA Group Loan Services, Inc. dated as of June 1, 1996, and any other
similar servicing agreement entered into between the Issuer and a Servicer
providing for the administration, servicing and collection of Financed Loans, in
each case as originally executed and as amended or supplemented from time to
time in accordance with the terms thereof and with the Indenture.
"Servicing Fees" shall mean, as of any date of calculation, the sum
owed to the Servicer pursuant to the terms of the Servicing Agreement.
"Student Loan Acquisition Fund" shall mean the Fund established by
Section 4.3 of the Indenture.
"Student Loan Portfolio Fund" shall mean the Fund established by
Section 4.4 of the Indenture.
"Subaccount" shall mean any of the subaccounts established by the
Indenture and the related Terms Supplement.
"Supplemental Indenture" shall mean any supplement to or amendment of
the Indenture entered into by the Issuer and the Indenture Trustee pursuant to
and in accordance with the provisions of Article 9 of the Indenture.
"Supplemental Purchase Agreement" shall mean any Supplemental Purchase
Agreement between Nellie Mae and the Seller.
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"Supplemental Sales Agreement" shall mean any Supplemental Sales
Agreement among the Seller, the Trust and the Owner Trustee.
"TERI" shall mean The Education Resources Institute, Inc., a
Massachusetts corporation.
"TERI Guaranty Agreement" shall mean the Guaranty Agreement dated as
of_________________________ , 1996 between the Issuer and TERI.
"Terms Supplement" shall mean each Supplemental Indenture which
authorizes a particular Series of Notes.
"Transfer Agreement" shall mean a duly written assignment and bill of
sale delivered by the Seller to the Owner Trustee and the Indenture Trustee
evidencing the sale of Additional Financed Loans to the Issuer.
"Transfer Date" shall mean each date on which the Issuer purchases
Additional Financed Loans pursuant to a Supplemental Sales Agreement during a
related Funding Period.
"Treasury Regulations" shall mean regulations, including proposed or
temporary regulations, promulgated under the Code. References in any document or
instrument to specific provisions of proposed or temporary regulations shall
include analogous provisions of final Treasury Regulations or other successor
Treasury Regulations.
"Trust Agreement" shall mean the Trust Agreement dated as of June 1,
1996 between the Depositor and the Owner Trustee, as amended and supplemented
from time to time.
"Trust Estate" shall mean all property of the Issuer from time to time,
including all funds held by the Owner Trustee under the Trust Agreement and all
rights of the Owner Trustee and the Trust pursuant to the Servicing Agreement,
the Administration Agreement, the Sales Agreement and any Supplemental Sales
Agreement.
"Trust Indenture Act" or "TIA" shall mean the Trust Indenture Act of
1939 as in force on the date hereof, unless otherwise specifically provided.
"Trust Supplement" shall mean each supplement to the Trust Agreement
that authorizes an issuance of a Class of Certificates.
"Value of Investment Securities" shall mean, as to each Investment
Security, the market value thereof, if available, and, if not, par if purchased
at par, or the lower of cost or amortized value if purchased at other than par,
or, with respect to Investment Securities described in subparagraph (e) of the
definition thereof, the remaining scheduled principal amount of such obligation.
The amortized value of any such obligation purchased at a premium or discount
shall be computed in accordance with generally accepted accounting principles so
as to recognize daily amortization of such premium or discount, provided that
the value of any such obligation which is callable prior to maturity at the
option of the issuer of such obligation shall be no greater than the price at
which such obligation could be called. Valuation made on any particular date
shall include the amount of interest earned or accrued to such date on any such
moneys or investments.
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Usage
Unless the context clearly indicates otherwise, or may otherwise
require, (i) the term "person" includes a firm, partnership, joint venture,
joint stock company, trust (including any beneficiary thereof), association,
corporation (public or private), unincorporated organization, public body,
public agency and a natural person, and shall also include an executor,
administrator, trustee, receiver or other representative; (ii) the terms
"herein," "hereunder," "hereby," "hereto," "hereof" and any similar terms, refer
to the document as a whole and not to any particular section or subdivision
thereof; and (iii) references to specific provisions of any public law or
statute are to such provisions as they may be amended from time to time. The
definitions set forth in this Exhibit A shall include both the singular and the
plural, and the use of any pronoun shall include both the singular and the
plural and shall include all genders.
A-14
<PAGE> 68
EXHIBIT B
[FORM OF NOTE]
NELLIE MAE EDUCATION LOAN TRUST
ASSET-BACKED NOTES
SERIES 199_
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER (AS DEFINED BELOW)
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS NOTE IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY.
No. [ ] $_______
MATURITY DATED
CLASS DATE DATE CUSIP
REGISTERED NOTEHOLDER: CEDE & CO.
PRINCIPAL AMOUNT: $______________________
NELLIE MAE EDUCATION LOAN TRUST, a Massachusetts business trust
(the "Issuer"), hereby acknowledges itself indebted and, for value received,
hereby promises to pay (but only out of the Indenture Trust Estate) to
CEDE & CO. or registered assigns, upon presentation and surrender hereof on
[Maturity Date] (subject to prior prepayment as described herein), the principal
sum of DOLLARS ($ ) in lawful money of the United States of
America, and to pay interest thereon at the rates, on the dates and subject to
the limitations as provided herein (but only out of said Indenture Trust Estate)
in like lawful money. Unless otherwise defined in this Series 199_ Note,
capitalized terms used in this Series 199_ Note shall have the respective
meaning given to such terms in the Master Trust Indenture dated as of June 1,
1996 (the "Master Indenture"), as supplemented by the First Terms Supplement
dated as of June 1, 1996 (the "Terms Supplement" and together, the "Indenture")
between the Issuer and State Street Bank and Trust Company, as Indenture
Trustee.
This Series 199_ Note is one of a duly authorized issue of notes of
the Issuer designated as "Nellie Mae Education Loan Trust Asset-Backed Notes,
Series 199_", in the aggregate principal amount of $__________ issued under the
authority of the Trust Agreement dated as of June 1, 1996 between the Depositor
and the Owner Trustee and pursuant to the Indenture. The Series 199_ Notes are
issued to finance the acquisition of Financed Loans, and to make certain
deposits to the Trust Funds and Accounts.
B-1
<PAGE> 69
The Master Indenture provides for the issuance, from time to time,
under the conditions, limitations and restrictions set forth therein, of
additional Notes on a parity with all Series of obligations issued or to be
issued under the Indenture, for the purpose of providing additional funds for
the acquisition of Financed Loans (said additional Notes, together with Series
199_ Notes, being collectively referred to herein as the "Notes").
The Series 199_ Notes are being issued by means of a book-entry
system with one Series 199_ Note certificate for each class and maturity of
Series 199_ Notes immobilized at The Depository Trust Company, New York, New
York ("DTC"), not available for distribution to the public, and evidencing
ownership of the Series 199_ Notes in principal amounts of $1,000 of integral
multiples thereof, with transfers of ownership effected on the records of DTC
and its participants pursuant to rules and procedures established by DTC and its
participants. Interest on the Series 199_ Note and principal of the Series 199_
Note, at maturity or upon earlier prepayment, will be paid in New York Clearing
House or equivalent same-day funds to Cede & Co., as nominee of DTC, as
registered owner of the Note. Transfer of principal and interest payments to
participants of DTC is the responsibility of DTC; transfer of principal and
interest payments to beneficial owners by participants of DTC will be the
responsibility of such participants and other nominees of beneficial owners. The
Series 199_ Notes shall be registered in the form of one registered Series 199_
Note for the aggregate principal amount of each maturity in the name of Cede &
Co., as nominee of DTC, provided that if DTC shall request that the Series 199_
Notes be registered in the name of a different nominee, the Indenture Trustee
shall exchange all or any portion of the Series 199_ Notes for an equal
aggregate principal amount of Series 199_ Notes registered in the name of such
nominee or nominees of DTC. During any such period, no person other than DTC or
its nominee shall be entitled to receive from the Issuer or the Indenture
Trustee either a Series 199_ Note or any other evidence of ownership of the
Series 199_ Notes, or any right to receive any payment in respect thereof unless
DTC or its nominee shall transfer record ownership of all or any portion of the
Series 199_ Notes on the registration books maintained by the Indenture Trustee
in connection with discontinuing the book-entry system.
So long as the Series 199_ Notes or any portion thereof are
registered in the name of DTC or any nominee thereof, the Issuer and the
Indenture Trustee may treat DTC (or its nominee) as the sole and exclusive owner
of the Series 199_ Notes registered in its name for the purposes of payment of
the principal of or interest on the Series 199_ Notes, selecting the Series 199_
Notes or portions thereof to be prepaid, giving any notice permitted or required
to be given to Holders under this Indenture, registering the transfer of Series
199_ Notes, obtaining any consent or other action to be taken by Holders and for
all other purposes whatsoever, and neither the Issuer nor the Indenture Trustee
shall be affected by any notice to the contrary. Neither the Issuer nor the
Indenture Trustee shall have any responsibility or obligation to any participant
in DTC, any person claiming a beneficial ownership in the Series 199_ Notes
under or through DTC or any such participant, or any other person not shown on
the registration books of the Indenture Trustee as being a Holder, with respect
to the Series 199_ Notes, the accuracy of any records maintained by DTC or any
such participant, the payment by DTC or any such participant of any amount in
respect of the principal of or interest on the Series 199_ Notes, any notice
which is permitted or required to be given to Holders under this Indenture, the
selection by DTC or any such participant of any person to receive payment in the
event of a partial redemption of the Series 199_ Notes or any consent given or
other action taken by DTC as Holder.
The book-entry system for registration of the ownership of the Series
199_ Notes may be discontinued at any time if DTC determines to resign as
securities depository for the Series 199_ Notes or the Indenture Trustee
determines that continuation of the system of book-entry transfers through DTC
(or through a successor securities depository) is not in the best interests of
the Holders. In either of such events (unless in the case of a determination by
the Indenture Trustee, the Indenture Trustee, at the direction of the Issuer,
appoints a successor securities depository), the Series 199_ Notes shall be
delivered in registered
B-2
<PAGE> 70
certificate form to such persons, and in such principal amounts (and in
Authorized Denominations), as may be designated by DTC, but without any
liability on the part of the Issuer or the Indenture Trustee for the accuracy of
such designation. Whenever DTC requests the Issuer and the Indenture Trustee to
do so, the Issuer and the Indenture Trustee shall cooperate with DTC in taking
appropriate action after reasonable notice to arrange for another securities
depository to maintain custody of certificates evidencing the Series 199_ Notes.
In the event of the discontinuance of the book-entry system as
provided herein, a replacement certificate for this Series 199_ Note may be
issued in accordance with the Indenture and such procedures as the Issuer and
the Indenture Trustee shall deem appropriate.
Reference is hereby made to the Indenture, a copy of which is on file
with the Indenture Trustee, and to all of the provisions thereof, to all of
which provisions the registered owner of this Series 199_ Note, by acceptance
hereof, hereby assents and agrees, for definitions of terms, the descriptions of
and the nature and extent of the security for the Series 199_ Notes, the
education loan purchase program being financed by the issuance of the Series
199_ Notes, the revenues and other assets pledged to the payment of the
principal of and interest on the Series 199_ 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 Series 199_ Notes, the rights and remedies of the registered owners of
the Series 199_ Notes, including the limitations therein contained upon the
right of a registered owner 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 Indenture Trustee thereunder, the terms and
provisions upon which the liens, pledges, charges, trusts, security interests,
assignments and covenants made therein may be discharged at or prior to the
maturity of this Series 199_ Note, this Series 199_ Note thereafter no longer
being secured by the Indenture or being deemed to be outstanding thereunder, and
for the other terms and provisions thereof.
The unpaid principal amount hereof from time to time outstanding
shall bear interest at a variable interest rate determined by the Indenture
Trustee and announced to the Issuer, as described in the Indenture. If the
Indenture Trustee shall fail or refuse to determine the Interest Rate for any
Class of Notes on any Rate Determination Date pursuant to the preceding
sentence, the Interest Rate most recently determined for any Class of Notes
shall remain in effect.
In no event shall the Interest Rate on this Series 199_ Note exceed
18% per annum.
The Series 199_ Notes shall be subject to optional purchase
prepayment and mandatory principal distributions prior to the Maturity Date,
upon the terms and conditions, at such times and according to such terms as are
set forth in the Indenture.
If an Event of Default as defined in the Indenture shall occur, the
principal of and interest on all Notes issued under the Indenture may be
declared due and payable upon the conditions and in the manner and with the
effect provided in the Indenture. The Indenture and the rights and obligations
of the Issuer, the Indenture Trustee and the registered owner hereof may be
modified or amended in the manner and subject to the conditions set forth in the
Indenture.
B-3
<PAGE> 71
In any case where the date fixed for the payment of principal of or
interest on this Series 199_ Note shall not be a Business Day, then payment of
such principal or interest need not be made on such date but may be made on the
next succeeding Business Day with the same force and effect as if made on the
date fixed for the payment thereof.
The Noteholder of this Series 199_ Note shall have no right to
enforce the provisions of the Indenture or to institute action to enforce the
covenants therein, or to take any action with respect to any Event of Default
under the Indenture, or to institute, appear in or defend any suit or other
proceeding with respect thereto, except as provided in the Indenture.
The transfer of this Series 199_ Note may be registered only upon
surrender hereof to the Indenture Trustee together with an assignment duly
executed by the registered owner or its attorney or legal representatives in
such form as shall be satisfactory to the Indenture Trustee. Upon any such
registration of transfer of this Series 199_ Note and subject to the payment of
any fees and charges as provided by the Indenture, the Issuer shall execute and
the Indenture Trustee shall authenticate the deliver in exchange for this Series
199_ Note a new Series 199_ Note or Notes registered in the name of the
transferee, in any denomination or denominations authorized by the Indenture, of
the same maturity and in an aggregate principal amount equal to the unpaid
principal amount of this Series 199_ Note and bearing the same interest as this
Series 199_ Note.
It is hereby certified, recited and declared that all acts,
conditions and things required to have happened, to exist and to have been
performed precedent to and in the issuance of this Series 199_A Note and the
issue of which it is one, have happened, exist and have been performed in
regular and due time, form and manner as required by law.
This Series 199_ Note shall not be entitled to any benefit under the
Indenture, or become valid or obligatory for any purpose, until the certificate
of authentication and registration hereon endorsed shall have been signed by the
Authenticating Agent.
This Series 199_A Note shall be governed by, and construed and
interpreted in accordance with, the laws of the Commonwealth.
Fleet National Bank acts solely as Owner Trustee and not in its
individual capacity and no trustee, shareholder, officer, employee or agent of
Fleet National Bank shall be held personally liable in connection with the
affairs of the Trust.
IN WITNESS WHEREOF, NELLIE MAE EDUCATION LOAN TRUST has caused this
Series 199_ Note to be executed in its name and on its behalf by the manual or
facsimile signature of an Authorized Officer and its seal, or facsimile thereof,
to be affixed, imprinted, engraved or otherwise reproduced hereon as of the date
shown above.
NELLIE MAE EDUCATION LOAN TRUST
By: Fleet National Bank, not in its
individual capacity but solely
as Owner Trustee
Attest:
By: ____________________________ By: _______________________________
Name: Name:
Title: Title:
B-4
<PAGE> 72
(INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION)
This Note is one of the Series 1996-_ Notes designated in and issued under the
provisions of the within mentioned Indenture.
State Street Bank and Trust Company,
as Indenture Trustee
By:_________________________________
Responsible Officer
Date of Authentication: _________
B-5
<PAGE> 73
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OR ASSIGNEE
_______________________________________________________________________________
(Please print or type name and address, including postal zip code, of assignee)
_______________________________________________________________________________
the within Series 1996- Note, and all rights thereunder, hereby irrevocably
constituting and appointing
_________________________________________________________Attorney to transfer
said Series 1996- Note on the books of the Note Registrar, with full power of
substitution in the premises.
Dated:
__________________________*
Signature Guaranteed:
__________________________*
* NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Series 1996- Note in every particular,
without alteration, enlargement or any change whatever.
[END OF FORM OF SERIES 1996- NOTE]
B-6
<PAGE> 74
EXHIBIT C
CERTIFICATE AS TO FINANCED LOANS
State Street Bank and Trust Company, as Indenture Trustee under the
Trust Indenture identified below
Corporate Trust Division
Re: Nellie Mae Education Loan Trust Asset-Backed Notes, Series
1996-A
This Certificate as to the Financed Loans is submitted pursuant to the
provisions of Section 4.3 of the Master Trust Indenture dated as of ___________,
1996 (the "Indenture") between Nellie Mae Education Loan Trust (the "Trust") and
State Street Bank and Trust Company, as Indenture Trustee and Section 4.2 of the
First Terms Supplement between the Trust and the Indenture Trustee dated as of
__________, 1996. All capitalized terms used in this certificate and not
otherwise defined are used herein as defined in the Indenture.
In your capacity as Indenture Trustee, you are hereby authorized and
requested to disburse to the Trust the sum of $_______________ in connection
with the financing or refinancing of Financed Loans. With respect to such
financing or refinancing, the Trust hereby certifies as follows:
1. Each Financed Loan is a Loan authorized by the Indenture to be
so financed or refinanced.
2. You have been provided with evidence that Uniform Commercial
Code financing statements with respect to the Financed Loans have been or will
be promptly filed in such place or places required to perfect the security
interest of the Indenture Trustee in the Financed Loans.
3. The Custodian, as agent for the Indenture Trustee pursuant to
the Custody Agreement, has possession of the promissory notes evidencing the
Financed Loans.
4. The Guaranty Agreements are in effect with respect to certain
Financed Loans, and the Trust is not in default in the performance of any of its
covenants and agreements made in the Guaranty Agreements, and, to the best of
its knowledge, neither Guarantor is in default under any of its covenants and
agreements made in the applicable Guaranty Agreement.
5. The undersigned, as an Authorized Officer of the Trust, is
authorized to sign and submit this Certificate on behalf of the Trust.
WITNESS my hand this_____day of_______________, 1996.
NELLIE MAE EDUCATION LOAN TRUST
By: Fleet National Bank,
not in its individual capacity but
solely as Owner Trustee
By:
Responsible Officer
C-1
<PAGE> 75
EXHIBIT D
[FORM OF MONTHLY STATEMENTS]
D-1
<PAGE> 1
EXHIBIT 4.2
FIRST TERMS SUPPLEMENT
to the
MASTER TRUST INDENTURE
dated as of June 1, 1996
between
NELLIE MAE EDUCATION LOAN TRUST,
as Issuer
and
STATE STREET BANK AND TRUST COMPANY,
as Indenture Trustee
Dated as of June 1, 1996
Issuing
$115,800,000
ASSET-BACKED NOTES
SERIES 1996-A
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 DEFINITIONS........................................................... 2
SECTION 1.1. Definitions and Usage............................................ 2
ARTICLE 2 AUTHORIZATION, TERMS AND ISSUANCE..................................... 3
SECTION 2.1. Authorization of Series 1996-A Notes............................. 3
SECTION 2.2. Purposes......................................................... 3
SECTION 2.3. Terms of Series 1996-A Notes Generally........................... 4
SECTION 2.4. Determination of Interest Rate on the Series 1996-A Notes........ 4
ARTICLE 3 PAYMENT OF THE SERIES 1996-A NOTES PRIOR TO MATURITY.................. 5
SECTION 3.1. Payment of the Series 1996-A Notes Prior to Maturity............. 5
ARTICLE 4 DISPOSITION OF PROCEEDS............................................... 6
SECTION 4.1. Establishment of Subaccounts..................................... 6
SECTION 4.2. Disposition of Proceeds.......................................... 6
ARTICLE 5 MISCELLANEOUS......................................................... 7
SECTION 5.1. First Terms Supplement........................................... 7
SECTION 5.2. Counterparts..................................................... 7
SECTION 5.3. Security Agreement............................................... 7
SECTION 5.4. Governing Law.................................................... 7
SECTION 5.5. Ratification of Master Indenture................................. 7
EXHIBIT A FORM OF SERIES 1996-A NOTE............................................ A-1
EXHIBIT B CERTIFICATE AS TO FINANCED LOANS...................................... B-1
</TABLE>
<PAGE> 3
FIRST TERMS SUPPLEMENT
THIS FIRST TERMS SUPPLEMENT, dated as of June 1, 1996, between NELLIE
MAE EDUCATION LOAN TRUST, a Massachusetts business trust, (the "Issuer" or the
"Trust") acting through FLEET NATIONAL BANK, a national banking association, not
in its individual capacity but solely as owner trustee (the "Owner Trustee"),
and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company as
indenture trustee (the "Indenture Trustee"), under a Master Trust Indenture
dated as of June 1, 1996 (the "Master Indenture").
PRELIMINARY STATEMENT
Section 2.4 of the Master Indenture provides, among other things, that
the Issuer, as provided in the Trust Agreement, and the Indenture Trustee may
enter into an indenture supplemental to the Master Indenture for the purpose of
authorizing a Series of Notes and to specify certain terms of such Series of
Notes. The Issuer has duly authorized the creation of a Series of Notes in an
aggregate principal amount not to exceed $115,800,000 to be known as the
Issuer's Asset-Backed Notes, Series 1996-A (the "Series 1996-A Notes"), and the
Issuer and the Indenture Trustee are executing and delivering this First Terms
Supplement in order to provide for the Series 1996-A Notes. Except as otherwise
specified herein, or as the context may require, capitalized terms used but not
defined herein are defined in the Master Indenture.
GRANTING CLAUSES
The Issuer hereby grants to the Indenture Trustee, for the exclusive
benefit of the Holders of the Series 1996-A Notes, and any Series of Notes that
may be issued hereafter, all of the Issuer's right, title and interest in and to
(a) the 1996 Financed Loans listed in Schedule A to the Sales Agreement (as such
Schedule may be amended from time to time including, but not limited to, by the
purchase by the Trust during the Funding Period of any Additional Financed
Loans) and all obligations of the obligors thereunder, and all written
communications and payments received by the Seller with respect thereto
(including borrower correspondence, notices of death, disability or bankruptcy
and requests for deferrals or forbearance), on and after April 30, 1996 (the
"Initial Cut-Off Date") (or, with respect to the Additional Financed Loans, on
and after the applicable date (each a "Subsequent Cut-off Date")), (b) all funds
on deposit from time to time in the Trust Funds and Accounts (other than the
Certificate Fund) and in all investments and proceeds thereof (including all
income thereon) and (c) all proceeds of the foregoing, including without
limitation, proceeds of the conversion, voluntary or involuntary, of any of the
foregoing into cash or other liquid property. Such grants are made, however, in
trust, to secure the Series 1996-A Notes and any Series of Notes issued
hereafter, equally and ratably without prejudice, priority or distinction,
between any Note and any other Note by reason of difference in time of issuance
or otherwise except to the extent otherwise described herein or in the Master
Indenture, and to secure (i) the payment of all amounts due on the Series 1996-A
Notes and any Series of Notes issued hereafter, as such amounts become due in
accordance with their terms, (ii) the payment of all other sums payable under
the Master Indenture or this First Terms Supplement with respect to the Series
1996-A Notes and any Series of Notes issued hereafter, and (iii) compliance with
the provisions of the Master Indenture and this First Terms Supplement with
respect to the Series 1996-A Notes and any Series of Notes issued hereafter, all
as provided in the Master Indenture and this First Terms Supplement.
The Indenture Trustee acknowledges such grants, accepts the trusts
hereunder in accordance with the provisions hereof and of the Master Indenture
and agrees to perform the duties herein or therein required
1
<PAGE> 4
to the best of its ability to the end that the interests of the Holders of the
Series 1996-A Notes and any Series of Notes issued by the Issuer hereafter may
be adequately and effectively protected.
ARTICLE 1
DEFINITIONS
SECTION 1.1. DEFINITIONS AND USAGE. Unless the context shall clearly
indicate some other meaning or may otherwise require, capitalized terms not
defined herein are defined in Exhibit A to the Master Indenture which also
contains rules as to construction that are applicable herein.
"A-1 Notes" shall mean the Series 1996-A Notes that mature on December
15, 2004.
"A-2 Notes" shall mean the Series 1996-A Notes that mature on December
15, 2018.
"A-1 Notes Spread" shall mean percent ( %), or such other amount
as may be determined from time to time in accordance with Section 2.4 hereof.
"A-2 Notes Spread" shall mean percent ( %), or such other amounts
as may be determined from time to time in accordance with Section 2.4 hereof.
"Closing Date" shall mean with respect to the Series 1996-A Notes,
________, 1996, the date of initial issuance and delivery of the Series 1996-A
Notes hereunder.
"Debt Service Reserve Requirement" shall mean an amount equal to the
greater of (i) two percent (2%) of the aggregate principal amount Outstanding of
the Series 1996-A Notes and the Class 1996-A Certificates or (ii) $500,000.
"Deferred Interest" shall have the meaning set forth in Section 2.4
hereof.
"1996 Financed Loans" shall mean the Financed Loans purchased with the
proceeds of the Series 1996-A Notes and the Class 1996-A Certificates.
"Funding Period" shall mean the period beginning on the Closing Date
and ending on the first to occur of (a) the Distribution Date on which the
amount on deposit in the 1996-A Subaccount in the Pre- Funding Account (after
giving effect to any transfers therefrom on or prior to such Distribution Date)
is less than $100,000, (b) the date on which an Event of Default occurs under
the Indenture, (c) the date on which an Event of Termination occurs under the
Sales Agreement, (d) the date on which an Insolvency Event occurs with respect
to the Seller or (e) the close of business on January 10, 1997.
"Initial Cut-off Date" shall mean, with respect to the Series 1996-A
Notes, April 30, 1996.
"Initial Period" shall mean, as to a Class of the Series 1996-A Notes,
the period commencing on the Closing Date and continuing through ,
1996 with respect to the A-1 Notes, and , 1996 with respect to the A-2
Notes.
"Initial Rate" shall mean a rate equal to the LIBOR Rate determined on
______, 1996 plus ____% for the A-1 Notes, and a rate equal to the LIBOR Rate
determined on ______, 1996 plus ___% for the A-2 Notes.
2
<PAGE> 5
"Initial Rate Adjustment Date" shall mean (i) with respect to the A-1
Notes, ________, 1996 and (ii) with respect to the A-2 Notes, _________, 1996.
"Interest Period" shall mean, with respect to a Class of Series 1996-A
Notes, the applicable Initial Period and thereafter each period commencing on a
Rate Adjustment Date for such Class of Series 1996-A Notes and ending on the day
before (i) the next Rate Adjustment Date for such Class or (ii) the Maturity
Date of such Class, as applicable.
"Interest Rate" shall mean each variable rate of interest per annum
borne by a Class of the Series 1996-A Notes for each Interest Period as
determined in accordance with the provisions of Section 2.4 hereof.
"Maturity Date" shall mean December 15, 2004 with respect to the A-1
Notes; and December 15, 2018 with respect to the A-2 Notes.
"Net Loan Rate" shall mean the weighted average interest rate on the
1996 Financed Loans less ___ percent (___%).
"Primary Parity Trigger" shall mean, as of any date of determination,
an amount (expressed as a percentage) equal to the sum of (i) the Balances then
on deposit in all Funds and Accounts hereunder (excluding Balances attributable
to principal of or accrued interest on Defaulted Loans) and (ii) amounts on
deposit in the lockbox account held by the Servicer and allocable to the 1996
Financed Loans, divided by an amount equal to the principal amount of all Notes
then Outstanding plus all accrued and unpaid interest thereon plus any unpaid
portion of the Administration Requirement. The Primary Parity Trigger shall be
calculated by the Administrator as of the date of the information contained in
the then most recent report of the Servicer provided by the Issuer to the
Indenture Trustee.
"Rate Adjustment Date" shall mean the date on which an Interest Rate is
effective and the date of commencement of each related Interest Period.
"Rate Determination Date" shall mean the second Business Day
immediately preceding the Rate Adjustment Date for such Interest Period.
"Secondary Parity Trigger" shall mean, as of any date of determination,
an amount (expressed as a percentage) equal to the sum of (i) the Balances then
on deposit in all Funds and Accounts hereunder (excluding Balances attributable
to principal of or accrued interest on Defaulted Loans) and (ii) amounts on
deposit in the lockbox account held by the Servicer and allocable to the 1996
Financed Loans, divided by an amount equal to the principal amount of all Notes
and Certificates then Outstanding plus all accrued and unpaid interest thereon
plus any unpaid portion of the Administration Requirement. The Secondary Parity
Trigger shall be calculated by the Administrator as of the date of the
information contained in the then most recent report of the Servicer provided by
the Issuer to the Indenture Trustee.
"Terms Supplement" means this First Terms Supplement, as from time to
time amended or supplemented.
3
<PAGE> 6
ARTICLE 2
AUTHORIZATION, TERMS AND ISSUANCE
SECTION 2.1. AUTHORIZATION OF SERIES 1996-A NOTES. There is hereby
authorized the borrowing of funds, and to evidence such borrowing there are
hereby authorized two Classes of Series 1996-A Notes (collectively, the "Series
1996-A Notes"), designated (i) the "Nellie Mae Education Loan Trust Asset-Backed
Notes Series 1996-A, Class A-1" (the "A-1 Notes") in the aggregate principal
amount of $67,000,000, and (ii) the "Nellie Mae Education Loan Trust
Asset-Backed Notes, Series 1996-A, Class A-2" (the "A-2 Notes") in the aggregate
principal amount of $48,800,000, which Classes shall mature on the dates set
forth in Section 2.3 below.
SECTION 2.2. PURPOSES. The Series 1996-A Notes are authorized to
finance the acquisition by the Issuer of 1996 Financed Loans, and to make
deposits to the Trust Funds and Accounts required hereby.
SECTION 2.3. TERMS OF SERIES 1996-A NOTES GENERALLY. The Series 1996-A
Notes shall be issued in fully registered form, in substantially the form set
forth in Exhibit A hereto with such variations, omissions and insertions as may
be required by the circumstances, as may be required or permitted by the Master
Indenture and this First Terms Supplement, or to be consistent with the Master
Indenture and this First Terms Supplement and necessary or appropriate to
conform to the rules and requirements of any governmental authority or any usage
or requirement of law with respect thereto.
The Series 1996-A Notes may be issued only in Authorized Denominations.
The Series 1996-A Notes shall be dated as of the Closing Date. Each Class of
Notes shall mature on the following Maturity Dates:
<TABLE>
<CAPTION>
Stated
Class Amount Maturity
----- ------ --------
<S> <C> <C>
A-1 $67,000,000 December 15, 2004
A-2 $48,800,000 December 15, 2018
</TABLE>
The A-1 Notes shall be numbered in consecutive numerical order from A-1-1
upwards. The A-2 Notes shall be numbered in consecutive numerical order from
A-2-1 upwards. Each Class of Series 1996-A Notes shall be subject to prepayment
and mandatory distributions of principal prior to maturity as provided in
Article 3 hereof.
Principal of each Series 1996-A Note shall be payable on its Maturity
Date, unless earlier paid as provided herein. Each Series 1996-A Note shall bear
interest at a rate determined in accordance with the provisions and subject to
the limitations set forth in Section 2.4 hereof. Interest shall accrue on the
principal amount from time to time Outstanding until the principal of such
Series 1996-A Note has been paid in full or payment has been duly provided for,
as the case may be, and shall accrue from the later of the Closing Date or the
most recent Distribution Date to which interest has been paid or duly provided
for in full and shall be computed on the basis set forth in Section 2.4 hereof.
Interest on the Series 1996-A Notes shall be paid on each Distribution Date
(except to the extent that moneys are not available to pay Deferred Interest)
and on each date of payment or prepayment of principal thereof to the extent of
interest accrued on the principal then being paid or prepaid.
Payments of principal of and interest on each Series 1996-A Note shall
be made by the Indenture Trustee from its Principal Corporate Trust Operations
Office, in lawful money of the United States, and
4
<PAGE> 7
payment of interest of each Series 1996-A Note shall, if the Holder thereof
holds $1,000,000 or more in aggregate principal amount of Series 1996-A Notes,
be made by the deposit or wire transfer of immediately available funds to the
credit of an account located within the United States specified by such Holder
in duly executed instructions, with signature guaranteed in a manner
satisfactory to the Indenture Trustee, delivered to the Indenture Trustee no
less than ten (10) Business Days prior to the first Distribution Date for which
such deposit or wire transfer of payment of interest is to be effective. If such
instructions are not delivered to the Indenture Trustee by the Holder of
$1,000,000 or more in aggregate principal amount of Series 1996- A Notes in
accordance with this paragraph, and for all other Holders, payment of interest
shall be made by check mailed on the applicable Distribution Date to the
Holder's address as it appears on the books of registry maintained by the
Indenture Trustee pursuant to Section 2.6 of the Master Indenture. Wire
transfers to a Holder made pursuant to this Section 2.3 shall be made without
expense to such Holder.
SECTION 2.4. DETERMINATION OF INTEREST RATE ON THE SERIES 1996-A NOTES.
The Series 1996-A Notes shall bear interest determined as provided in this
Section 2.4. During the Initial Period and each Interest Period thereafter,
interest shall accrue daily and shall be computed for the actual number of days
elapsed on the basis of a year consisting of three hundred sixty (360) days.
The Interest Rate to be borne by the Series 1996-A Notes during the
Initial Period shall be the Initial Rate. The Interest Rate to be borne by the
Series 1996-A Notes during each Interest Period thereafter shall be determined
on each Rate Determination Date for each such Interest Period and shall be equal
to the sum of the LIBOR Rate and, as to the A-1 Notes, the A-1 Notes Spread and,
as to the A-2 Notes, the A-2 Notes Spread, provided, however, that the Interest
Rate borne by the Series 1996-A Notes at any time shall not be greater than
eighteen percent (18%) per annum. Such Interest Rate shall be determined by the
Indenture Trustee and announced to the Issuer by written notice given in
accordance with the Master Indenture on each Rate Determination Date. Such
Interest Rate shall take effect on the Rate Adjustment Date immediately
succeeding such Rate Determination Date.
The determination of the Interest Rate by the Indenture Trustee shall
be conclusive and binding on the Holders of the Series 1996-A Notes, the Issuer
and the Indenture Trustee absent manifest error. If the Indenture Trustee shall
fail to determine the Interest Rate for either Class of Series 1996-A Notes on
any Rate Determination Date pursuant to the preceding sentence, the Interest
Rate most recently determined for such Class of Series 1996-A Notes shall remain
in effect.
Notwithstanding anything contained herein to the contrary, in the event
that the Interest Rate on the Series 1996-A Notes for any Interest Period
exceeds the applicable Net Loan Rate, the Noteholders will receive interest
payments on the Series 1996-A Notes for such Interest Period in an amount equal
to the applicable Net Loan Rate; the difference between the Interest Rate and,
prior to the applicable Maturity Date, the applicable Net Loan Rate for such an
Interest Period shall be deferred ("Deferred Interest") and paid to the
Noteholders on the next succeeding Distribution Date on which funds are
available therefor. On the last Business Day of each Interest Period, the Issuer
shall notify the Indenture Trustee of the Net Loan Rate for such Interest
Period.
Notwithstanding the foregoing, the rate of interest on any Series
1996-A Note for the Initial Period or any Interest Period thereafter shall not
be in excess of the maximum rate of interest which may be charged or collected
by the Holder thereof pursuant to provisions of federal or state law applicable
to such Holder.
5
<PAGE> 8
ARTICLE 3
PAYMENT OF THE SERIES 1996-A NOTES PRIOR TO MATURITY
SECTION 3.1. PAYMENT OF THE SERIES 1996-A NOTES PRIOR TO MATURITY.
(a) Mandatory Principal Distributions. In accordance with Section 3.1
of the Master Indenture, the Series 1996-A Notes are subject to mandatory
principal distributions on each Distribution Date, but only at such times as
there shall be amounts in excess of $5,000 in the 1996-A Subaccount within the
Note Payment Account in the Note Fund. Principal of the A-2 Notes shall not be
prepaid unless no A-1 Notes remain Outstanding.
(b) Optional Purchase Prepayment. On any Distribution Date on or after
which the Balance in the 1996-A Account in the Student Loan Portfolio Fund is
equal to or less than ten percent (10%) of the Initial Pool Balance with respect
to the 1996 Financed Loans, the Seller may repurchase all remaining 1996
Financed Loans at a price equal to the outstanding principal balance of the 1996
Financed Loans, plus accrued and unpaid interest. The proceeds of the sale of
the remaining 1996 Financed Loans shall be credited to the 1996-A Subaccount in
the Note Payment Account within the Note Fund and used on such Distribution Date
to make mandatory principal distributions on the A-2 Notes, if any A-2 Notes
remain Outstanding.
ARTICLE 4
DISPOSITION OF PROCEEDS
SECTION 4.1. ESTABLISHMENT OF SUBACCOUNTS. The following subaccounts
and accounts are hereby established: (i) within the Cost of Issuance Account,
the 1996-A Subaccount; (ii) within the Debt Service Reserve Fund, the 1996-A
Debt Service Reserve Account; (iii) within the Acquisition Account, the 1996-A
Subaccount; (iv) within the Pre-Funding Account, the 1996-A Subaccount; (v)
within the Student Loan Portfolio Fund, the 1996-A Account; (vi) within the
Revenue Fund, the 1996-A Account; (vii) within the Note Payment Account, the
1996-A Subaccount; (viii) within the Note Interest Account, the 1996-A
Subaccount; and (ix) within the Administration Account, the 1996-A Subaccount.
SECTION 4.2. DISPOSITION OF PROCEEDS. All proceeds of the issuance and
sale of the Series 1996- A Notes hereunder shall be deposited with the Indenture
Trustee on the Closing Date and the Indenture Trustee shall apply such proceeds
to the applicable Trust Funds, Accounts and Subaccounts designated for the
Series 1996-A Notes as follows:
(i) to the 1996-A Subaccount in the Cost of Issuance Account, the
amount of [$______];
(ii) to the 1996-A Subaccount in the Note Interest Account, the
amount of [$______];
(iii) to the 1996-A Debt Service Reserve Account, the amount of
[$_______];
(iv) to the 1996-A Subaccount in the Acquisition Account, the
amount of [$________]; and
(v) to the 1996-A Subaccount in the Pre-Funding Account, the
amount of [$________], constituting the remainder of the
proceeds.
6
<PAGE> 9
The Indenture Trustee shall deposit to the credit of the 1996-A
Subaccount of the Acquisition Account the amount required by this Section 4.2.
Such amount shall be paid to or upon order of the Issuer on the Closing Date to
finance Loans, upon receipt by the Indenture Trustee of a certificate from the
Issuer in the form set forth in Exhibit B hereto. Any amount remaining in the
1996-A Subaccount of the Acquisition Account at the close of business on the
Closing Date shall be credited to the 1996-A Subaccount in the Pre-Funding
Account.
The Indenture Trustee shall deposit to the credit of the 1996-A
Subaccount in the Pre-Funding Account the amount required by this Section 4.2.
Such amount shall be paid to or upon the order of the Issuer to finance Loans,
upon receipt by the Indenture Trustee of a certificate from the Issuer in the
form set forth in Exhibit B hereto.
On November 15, 1996, any amounts credited to the 1996-A Subaccount in
the Pre-Funding Account which have not been expended or committed for the
purchase of Additional Loans as set forth in an Officer's Certificate of the
Issuer shall be credited to the 1996-A Subaccount within the Note Payment
Account in the Note Fund. Transfer of amounts in the 1996-A Subaccount in the
Pre-Funding Account to the 1996-A Subaccount within the Note Payment Account may
occur at any time during the Funding Period, if and to the extent that, the
Issuer certifies to the Indenture Trustee, based upon a certification received
by the Issuer from the Seller, that the amount of Loans originated or committed
will be insufficient to utilize the entire amount deposited in the 1996-A
Subaccount of the Pre-Funding Account.
At the end of the Funding Period, any amounts remaining in the 1996-A
Subaccount in the Pre- Funding Account shall be deposited in the 1996-A
Subaccount within the Note Payment Account in the Note Fund.
Pursuant to clause Eighth of Section 4.5(b) of the Master Indenture,
from the funds remaining in the 1996-A Revenue Account, after the transfers
required by clauses First through Seventh have been satisfied, an amount equal
to one-twelfth of eighty hundredths percent (0.80%) of the principal of the
Financed Loans Outstanding as of the end of the prior month shall be transferred
to the Owner Trustee for distribution to the Depositor and NMI Education Loan
Corporation, provided, however, that no such transfer shall occur if, after the
transfers required by clauses First through Seventh have been satisfied, the
Primary Parity Trigger is less than one hundred fourteen and seventy-eight
hundredths percent (114.78%) or the Secondary Parity Trigger is less than one
hundred five and seventy-four hundredths percent (105.74%) and provided,
further, that if, after the transfers required by clauses First through Seventh
have been satisfied, the Primary Parity Trigger is equal to or greater than one
hundred twenty-five percent (125%), then any funds remaining in the 1996-A
Revenue Account, after the transfers required by clauses First through Seventh
have been satisfied, shall be transferred to the Owner Trustee for distribution
to the Depositor and NMI Education Loan Corporation.
Notwithstanding the provisions of Section 4.5(b) of the Master
Indenture, if the Primary Parity Trigger is less than one hundred four percent
(104%) after the transfer described in clause Second has been completed, then
all remaining amounts shall be transferred to the 1996-A Subaccount within the
Note Payment Account in lieu of the transfers described in clauses Third through
Eleventh of such Section 4.5(b).
Notwithstanding the provisions of Section 4.5(b) of the Master
Indenture, if the Primary Parity Trigger is less than one hundred twelve and
seventy-eight hundredths percent (112.78%) after the transfer described in
clause Fourth has been completed, then all remaining amounts shall be
transferred to the 1996-A Subaccount within the Note Payment Account in lieu of
the transfers described in clauses Fifth through Eleventh of such Section
4.5(b).
7
<PAGE> 10
ARTICLE 5
MISCELLANEOUS
SECTION 5.1. FIRST TERMS SUPPLEMENT. This First Terms Supplement is
adopted pursuant to the provisions of the Master Indenture.
SECTION 5.2. COUNTERPARTS. This First Terms Supplement may be
simultaneously executed in several counterparts, each of which shall be an
original and all of which shall constitute but one and the same instrument.
SECTION 5.3. SECURITY AGREEMENT. This First Terms Supplement
constitutes a security agreement for the purposes of the Uniform Commercial
Code.
SECTION 5.4. GOVERNING LAW. This First Terms Supplement shall be
governed by and construed in accordance with the laws of the Commonwealth.
SECTION 5.5. RATIFICATION OF MASTER INDENTURE. As supplemented by this
First Terms Supplement, the Master Indenture as so supplemented by this First
Terms Supplement shall be read, taken and construed as one and the same
instrument. Each addition to and amendment of the Master Indenture contained
herein is solely for purposes of the Series 1996-A Notes, and shall have no
effect on any other Series of Notes issued pursuant to the Master Indenture. If
any term of this First Terms Supplement conflicts with any term of the Master
Indenture, this First Terms Supplement shall control for purposes of the Series
1996-A Notes.
8
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have caused this First Terms
Supplement to be duly executed as of the day and year first above written.
NELLIE MAE EDUCATION LOAN TRUST
By: Fleet National Bank,
not in its individual capacity
but solely as Owner Trustee
Attest:
By: By:
---------------------------------- ---------------------------------
Name: Name:
Title: Title:
STATE STREET BANK AND TRUST COMPANY,
not in its individual capacity
but solely as Indenture Trustee
Attest:
By: By:
---------------------------------- ---------------------------------
Name: Name:
Title: Title:
9
<PAGE> 12
EXHIBIT A
FORM OF SERIES 1996-A NOTE
NELLIE MAE EDUCATION LOAN TRUST
ASSET-BACKED NOTES
SERIES 1996-A
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER (AS DEFINED BELOW)
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS NOTE IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY.
No. [A-1-_][A-2-_] $_______
MATURITY DATED
CLASS DATE DATE CUSIP
[A-1 December 15, 2004 ]
[A-2 December 15, 2018 ]
REGISTERED NOTEHOLDER: CEDE & CO.
PRINCIPAL AMOUNT: $______________________
NELLIE MAE EDUCATION LOAN TRUST, a Massachusetts business trust (the
"Issuer"), hereby acknowledges itself indebted and, for value received, hereby
promises to pay (but only out of the Indenture Trust Estate) to CEDE & CO. or
registered assigns, upon presentation and surrender hereof on [Maturity Date]
(subject to prior redemption as described herein), the principal sum of
DOLLARS ($ ) in lawful money of the United States of America, and to pay
interest thereon at the rates, on the dates and subject to the limitations as
provided herein (but only out of said Indenture Trust Estate) in like lawful
money. Unless otherwise defined in this Series 1996-A Note, capitalized terms
used in this Series 1996-A Note shall have the respective meaning given to such
terms in the Master Trust Indenture dated as of June 1, 1996 (the "Master
Indenture"), as supplemented by the First Terms Supplement dated as of June 1,
1996 (the "First Terms Supplement" and together, the "Indenture") between the
Issuer and State Street Bank and Trust Company, as Indenture Trustee.
This Series 1996-A Note is one of a duly authorized issue of notes of
the Issuer designated as "Nellie Mae Education Loan Trust Asset-Backed Notes,
Series 1996-A", in the aggregate principal amount of $115,800,000 issued under
the authority of the Trust Agreement dated as of June 1 between the Depositor
A-1
<PAGE> 13
and the Owner Trustee and pursuant to the Indenture. The Series 1996-A Notes are
issued to finance the acquisition of 1996 Financed Loans, and to make certain
deposits to the Trust Funds and Accounts.
The Master Indenture provides for the issuance, from time to time,
under the conditions, limitations and restrictions set forth therein, of
additional Notes on a parity with all Series of obligations issued or to be
issued under the Indenture, for the purpose of providing additional funds for
the acquisition of 1996 Financed Loans (said additional Notes, together with
Series 1996-A Notes, being collectively referred to herein as the "Notes").
The Series 1996-A Notes are being issued by means of a book-entry
system with one Series 1996- A Note certificate for each class and maturity of
Series 1996-A Notes immobilized at The Depository Trust Company, New York, New
York ("DTC"), not available for distribution to the public, and evidencing
ownership of the Series 1996-A Notes in principal amounts of $1,000 of integral
multiples thereof, with transfers of ownership effected on the records of DTC
and its participants pursuant to rules and procedures established by DTC and its
participants. Interest on the Series 1996-A Note and principal of the Series
1996-A Note, at maturity or upon earlier redemption, will be paid in New York
Clearing House or equivalent next-day funds to Cede & Co., as nominee of DTC, as
registered owner of the Note. Transfer of principal and interest payments to
participants of DTC is the responsibility of DTC; transfer of principal and
interest payments to beneficial owners by participants of DTC will be the
responsibility of such participants and other nominees of beneficial owners. The
Series 1996-A Notes shall be registered in the form of one registered Series
1996-A Note for the aggregate principal amount of each maturity in the name of
Cede & Co., as nominee of DTC, provided that if DTC shall request that the
Series 1996-A Notes be registered in the name of a different nominee, the
Indenture Trustee shall exchange all or any portion of the Series 1996-A Notes
for an equal aggregate principal amount of Series 1996-A Notes registered in the
name of such nominee or nominees of DTC. During any such period, no person other
than DTC or its nominee shall be entitled to receive from the Issuer or the
Indenture Trustee either a Series 1996-A Note or any other evidence of ownership
of the Series 1996-A Notes, or any right to receive any payment in respect
thereof unless DTC or its nominee shall transfer record ownership of all or any
portion of the Series 1996-A Notes on the registration books maintained by the
Indenture Trustee in connection with discontinuing the book-entry system.
So long as the Series 1996-A Notes or any portion thereof are
registered in the name of DTC or any nominee thereof, the Issuer and the
Indenture Trustee may treat DTC (or its nominee) as the sole and exclusive owner
of the Series 1996-A Notes registered in its name for the purposes of payment of
the principal of or interest on the Series 1996-A Notes, selecting the Series
1996-A Notes or portions thereof to be redeemed, giving any notice permitted or
required to be given to Holders under this Indenture, registering the transfer
of Series 1996-A Notes, obtaining any consent or other action to be taken by
Holders and for all other purposes whatsoever, and neither the Issuer nor the
Indenture Trustee shall be affected by any notice to the contrary. Neither the
Issuer nor the Indenture Trustee shall have any responsibility or obligation to
any participant in DTC, any person claiming a beneficial ownership in the Series
1996-A Notes under or through DTC or any such participant, or any other person
not shown on the registration books of the Indenture Trustee as being a Holder,
with respect to the Series 1996-A Notes, the accuracy of any records maintained
by DTC or any such participant, the payment by DTC or any such participant of
any amount in respect of the principal of or interest on the Series 1996-A
Notes, any notice which is permitted or required to be given to Holders under
this Indenture, the selection by DTC or any such participant of any person to
receive payment in the event of a partial redemption of the Series 1996-A Notes
or any consent given or other action taken by DTC as Holder.
The book-entry system for registration of the ownership of the Series
1996-A Notes may be discontinued at any time if DTC determines to resign as
securities depository for the Series 1996-A Notes
A-2
<PAGE> 14
or the Indenture Trustee determines that continuation of the system of
book-entry transfers through DTC (or through a successor securities depository)
is not in the best interests of the Holders. In either of such events (unless in
the case of a determination by the Indenture Trustee, the Indenture Trustee, at
the direction of the Issuer, appoints a successor securities depository), the
Series 1996-A Notes shall be delivered in registered certificate form to such
persons, and in such principal amounts (and in Authorized Denominations), as may
be designated by DTC, but without any liability on the part of the Issuer or the
Indenture Trustee for the accuracy of such designation. Whenever DTC requests
the Issuer and the Indenture Trustee to do so, the Issuer and the Indenture
Trustee shall cooperate with DTC in taking appropriate action after reasonable
notice to arrange for another securities depository to maintain custody of
certificates evidencing the Series 1996-A Notes.
In the event of the discontinuance of the book-entry system as
provided herein, a replacement certificate for this Series 1996-A Note may be
issued in accordance with the Indenture and such procedures as the Issuer and
the Indenture Trustee shall deem appropriate.
Reference is hereby made to the Indenture, a copy of which is on file
with the Indenture Trustee, and to all of the provisions thereof, to all of
which provisions the registered owner of this Series 1996-A Note, by acceptance
hereof, hereby assents and agrees, for definitions of terms, the descriptions of
and the nature and extent of the security for the Series 1996-A Notes, the
education loan purchase program being financed by the issuance of the Series
1996-A Notes, the revenues and other assets pledged to the payment of the
principal of and interest on the Series 1996-A 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 Series 1996-A Notes, the rights and remedies of the registered owners of
the Series 1996-A Notes, including the limitations therein contained upon the
right of a registered owner 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 Indenture Trustee thereunder, the terms and
provisions upon which the liens, pledges, charges, trusts, security interests,
assignments and covenants made therein may be discharged at or prior to the
maturity of this Series 1996-A Note, this Series 1996-A Note thereafter no
longer being secured by the Indenture or being deemed to be outstanding
thereunder, and for the other terms and provisions thereof.
The unpaid principal amount hereof from time to time outstanding
shall bear interest at a variable interest rate determined by the Indenture
Trustee and announced to the Issuer, as described in the Indenture. If the
Indenture Trustee shall fail or refuse to determine the Interest Rate for any
Class of Notes on any Rate Determination Date pursuant to the preceding
sentence, the Interest Rate most recently determined for any Class of Notes
shall remain in effect.
In no event shall the Interest Rate on this Series 1996-A Note exceed
18% per annum.
The Series 1996-A Notes shall be subject to optional prepayment and
mandatory principal distributions prior to the Maturity Date, upon the terms and
conditions, at such times and according to such terms as are set forth in the
Indenture.
If an Event of Default as defined in the Indenture shall occur, the
principal of and interest on all Notes issued under the Indenture may be
declared due and payable upon the conditions and in the manner and with the
effect provided in the Indenture. The Indenture and the rights and obligations
of the Issuer, the Indenture Trustee and the registered owner hereof may be
modified or amended in the manner and subject to the conditions set forth in the
Indenture.
A-3
<PAGE> 15
In any case where the date fixed for the payment of principal of or
interest on this Series 1996-A Note shall not be a Business Day, then payment of
such principal or interest need not be made on such date but may be made on the
next succeeding Business Day with the same force and effect as if made on the
date fixed for the payment thereof.
The Noteholder of this Series 1996-A Note shall have no right to
enforce the provisions of the Indenture or to institute action to enforce the
covenants therein, or to take any action with respect to any Event of Default
under the Indenture, or to institute, appear in or defend any suit or other
proceeding with respect thereto, except as provided in the Indenture.
The transfer of this Series 1996-A Note may be registered only upon
surrender hereof to the Indenture Trustee together with an assignment duly
executed by the registered owner or its attorney or legal representatives in
such form as shall be satisfactory to the Indenture Trustee. Upon any such
registration of transfer of this Series 1996-A Note and subject to the payment
of any fees and charges as provided by the Indenture, the Issuer shall execute
and the Indenture Trustee shall authenticate the deliver in exchange for this
Series 1996-A Note a new Series 1996-A Note or Notes registered in the name of
the transferee, in any denomination or denominations authorized by the
Indenture, of the same maturity and in an aggregate principal amount equal to
the unpaid principal amount of this Series 1996-A Note and bearing the same
interest as this Series 1996-A Note.
It is hereby certified, recited and declared that all acts,
conditions and things required to have happened, to exist and to have been
performed precedent to and in the issuance of this Series 1996-A Note and the
issue of which it is one, have happened, exist and have been performed in
regular and due time, form and manner as required by law.
This Series 1996-A Note shall not be entitled to any benefit under
the Indenture, or become valid or obligatory for any purpose, until the
certificate of authentication and registration hereon endorsed shall have been
signed by the Authenticating Agent.
This Series 1996-A Note shall be governed by, and construed and
interpreted in accordance with, the laws of the Commonwealth.
Fleet National Bank acts solely as Owner Trustee and not in its
individual capacity and no trustee, shareholder, officer, employee or agent of
Fleet National Bank shall be held personally liable in connection with the
affairs of the Trust.
IN WITNESS WHEREOF, NELLIE MAE EDUCATION LOAN TRUST has caused this
Series 1996-A Note to be executed in its name and on its behalf by the manual or
facsimile signature of an Authorized Officer and its seal, or facsimile thereof,
to be affixed, imprinted, engraved or otherwise reproduced hereon as of the date
shown above.
NELLIE MAE EDUCATION LOAN TRUST
By: Fleet National Bank, not in its individual capacity but
solely as Owner Trustee
Attest:
By: By:
------------------------ --------------------------
Name: Name:
Title: Title:
A-4
<PAGE> 16
(INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION)
This Note is one of the Series 1996-A Notes designated in and issued under the
provisions of the within mentioned Indenture.
STATE STREET BANK AND TRUST COMPANY, as
Indenture Trustee
By:
--------------------------------------
Responsible Officer
Date of Authentication: _________
A-5
<PAGE> 17
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OR ASSIGNEE
______________________________________________________________________________
(Please print or type name and address, including postal zip code, of assignee)
______________________________________________________________________________
the within Series 1996_A Note, and all rights thereunder, hereby irrevocably
constituting and appointing
___________________________________________________Attorney to transfer said
Series 1996_A Note on the books of the Note Registrar, with full power of
substitution in the premises.
Dated:
*
_____________________
Signature Guaranteed:
*
_____________________
* NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Series 1996_A Note in every particular,
without alteration, enlargement or any change whatever.
[END OF FORM OF SERIES 1996_A NOTE]
A_6
<PAGE> 18
EXHIBIT B
CERTIFICATE AS TO FINANCED LOANS
State Street Bank and Trust Company, as Indenture Trustee under the
Trust Indenture identified below
Corporate Trust Division
Re: Nellie Mae Education Loan Trust Asset_Backed Notes, Series 1996_A
This Certificate as to the Financed Loans is submitted pursuant to the
provisions of Section 4.3 of the Master Trust Indenture dated as of June 1, 1996
(the "Indenture") between Nellie Mae Education Loan Trust (the "Trust") and
State Street Bank and Trust Company, as Indenture Trustee and Section 4.2 of the
First Terms Supplement between the Trust and the Indenture Trustee dated as of
June 1, 1996. All capitalized terms used in this certificate and not otherwise
defined are used herein as defined in the Indenture.
In your capacity as Indenture Trustee, you are hereby authorized and
requested to disburse to the Trust the sum of $_______________ in connection
with the financing or refinancing of Financed Loans. With respect to such
financing or refinancing, the Trust hereby certifies as follows:
1. Each Financed Loan is a Loan authorized by the Indenture to be so
financed or refinanced.
2. You have been provided with evidence that Uniform Commercial Code
financing statements with respect to the Financed Loans have been or will be
promptly filed in such place or places required to perfect the security interest
of the Indenture Trustee in the Financed Loans.
3. The Custodian, as agent for the Indenture Trustee pursuant to the
Custody Agreement, has possession of the promissory notes evidencing the
Financed Loans.
4. The Guaranty Agreements are in effect with respect to certain
Financed Loans, and the Trust is not in default in the performance of any of its
covenants and agreements made in the Guaranty Agreements, and, to the best of
its knowledge, neither Guarantor is in default under any of its covenants and
agreements made in the applicable Guaranty Agreement.
5. The undersigned, as an Authorized Officer of the Trust, is
authorized to sign and submit this Certificate on behalf of the Trust.
WITNESS my hand this ___ day of _________ , 1996.
NELLIE MAE EDUCATION LOAN TRUST
By: Fleet National Bank,
not in its individual capacity
but solely as Owner
Trustee
By:____________________________
B_1
<PAGE> 1
EXHIBIT 4.3
TRUST AGREEMENT
between
NELLIE MAE EDUCATION FUNDING, LLC
as Depositor,
and
FLEET NATIONAL BANK,
not in its individual capacity but solely
as Owner Trustee
Dated as of June 1, 1996
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TABLE OF CONTENTS
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ARTICLE I Definitions and Usage.......................................................... 1
SECTION 1.1. Definitions and Usage............................................... 1
ARTICLE II Organization................................................................... 1
SECTION 2.1. Creation of Trust; Name............................................. 1
SECTION 2.2. Office and Situs of the Trust....................................... 1
SECTION 2.3. Purpose and Powers.................................................. 1
SECTION 2.4. Appointment of Owner Trustee........................................ 2
SECTION 2.5. Initial Capital Contribution of Trust Estate........................ 2
SECTION 2.6. Declaration of Trust................................................ 2
SECTION 2.7. Liability of the Certificateholders................................. 2
SECTION 2.8. Title to Trust Property............................................. 3
SECTION 2.9. Representations and Warranties of the Depositor..................... 3
SECTION 2.10. Federal Income Tax Allocations...................................... 4
SECTION 2.11. Required Net Worth.................................................. 4
ARTICLE III Certificates and Transfer of Interests......................................... 4
SECTION 3.1. Initial Beneficial Ownership........................................ 4
SECTION 3.2. Certificates........................................................ 4
SECTION 3.3. Authentication of Certificates...................................... 4
SECTION 3.4. Registration of Transfer and Exchange of Certificates............... 5
SECTION 3.5. Mutilated, Destroyed, Lost or Stolen Certificates................... 5
SECTION 3.6. Persons Deemed Owners............................................... 6
SECTION 3.7. Access to List of Certificateholders' Names and Addresses........... 6
SECTION 3.8. Maintenance of Office or Agency..................................... 6
SECTION 3.9. Appointment of Certificate Paying Agent............................. 6
SECTION 3.10. Disposition by Depositor and NMELC. ............................... 7
SECTION 3.11. Book-Entry Certificates............................................. 7
SECTION 3.12. Notices to Securities Depository.................................... 8
SECTION 3.13. Definitive Certificates............................................. 8
SECTION 3.14. Determination of Interest Rate...................................... 9
SECTION 3.15. No Listing on Securities Market..................................... 9
ARTICLE IV Actions by Owner Trustee....................................................... 9
SECTION 4.1. Prior Notice to Rating Agencies and Certificateholders
with Respect to Certain Matters..................................... 9
SECTION 4.2. Action by Certificateholders with Respect to Certain Matters........ 9
SECTION 4.3. Action by Certificateholders with Respect to Bankruptcy............. 9
SECTION 4.4. Restrictions on Certificateholders' Power........................... 10
SECTION 4.5. Majority Control.................................................... 10
ARTICLE V Application of Trust Funds; Certain Duties..................................... 10
SECTION 5.1. Application of Trust Funds.......................................... 10
SECTION 5.2. Method of Payment................................................... 13
SECTION 5.3. Segregation of Moneys: No Interest.................................. 13
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SECTION 5.4. Accounting and Reports to the Noteholders, Certificateholders, the
Internal Revenue Service and Others................................. 13
SECTION 5.5. Signature on Returns; Tax Matters Partner........................... 14
SECTION 5.6. Capital Accounts.................................................... 14
ARTICLE VI Authority and Duties of Owner Trustee.......................................... 15
SECTION 6.1. General Authority................................................... 15
SECTION 6.2. General Duties...................................................... 15
SECTION 6.3. Action upon Instruction............................................. 15
SECTION 6.4. No Duties Except as Specified in this Agreement or in Instructions.. 16
SECTION 6.5. No Action Except Under Specified Documents or Instructions.......... 16
SECTION 6.6. Restrictions........................................................ 17
ARTICLE VII Concerning the Owner Trustee................................................... 17
SECTION 7.1. Acceptance of Trusts and Duties..................................... 17
SECTION 7.2. Furnishing of Documents............................................. 18
SECTION 7.3. Representations and Warranties...................................... 18
SECTION 7.4. Reliance; Advice of Counsel......................................... 19
SECTION 7.5. Not Acting in Individual Capacity................................... 19
SECTION 7.6. Owner Trustee Not Liable for Certificates or Financed Loans......... 19
SECTION 7.7. Owner Trustee May Own Certificates and Notes........................ 20
ARTICLE VIII Compensation of Owner Trustee.................................................. 20
SECTION 8.1. Owner Trustee's Fees and Expenses................................... 20
SECTION 8.2. Payments to the Owner Trustee....................................... 20
ARTICLE IX Termination of Trust Agreement................................................. 20
SECTION 9.1. Termination of Trust Agreement...................................... 20
SECTION 9.2. Dissolution upon Insolvency of the Depositor........................ 21
ARTICLE X Successor Owner Trustees and Additional Owner Trustees......................... 21
SECTION 10.1. Eligibility Requirements for Owner Trustee.......................... 21
SECTION 10.2. Resignation or Removal of Owner Trustee............................. 22
SECTION 10.3. Successor Owner Trustee............................................. 22
SECTION 10.4. Merger or Consolidation of Owner Trustee............................ 23
SECTION 10.5. Appointment of Co-Owner Trustee or Separate Owner Trustee........... 23
ARTICLE XI Miscellaneous.................................................................. 24
SECTION 11.1. Supplements and Amendments.......................................... 24
SECTION 11.2. No Legal Title to Trust Estate in Certificateholders................ 25
SECTION 11.3. Limitations on Rights of Others..................................... 25
SECTION 11.4. Notices............................................................. 26
SECTION 11.5. Severability........................................................ 26
SECTION 11.6. Separate Counterparts............................................... 26
SECTION 11.7. Successors and Assigns.............................................. 26
SECTION 11.8. No Petition......................................................... 26
SECTION 11.9. No Recourse......................................................... 26
SECTION 11.10. Headings............................................................ 27
SECTION 11.11. Governing Law....................................................... 27
SECTION 11.12. Creation of Trust and Delivery of Trust Agreement................... 27
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TRUST AGREEMENT dated as of June 1, 1996, between Nellie Mae Education
Funding, LLC, a Delaware limited liability company, as Depositor (the
"Depositor") and Fleet National Bank, a national banking association, not in its
individual capacity but solely as Owner Trustee (the "Owner Trustee").
The Depositor and the Owner Trustee hereby agree as follows:
ARTICLE I
Definitions and Usage
SECTION 1.1. Definitions and Usage. Unless the context shall clearly
indicate some other meaning or may otherwise require, capitalized terms used but
not defined herein are defined in Exhibit A hereto, which also contains rules as
to construction and usage that are applicable herein.
ARTICLE II
Organization
SECTION 2.1. Creation of Trust; Name. There is hereby created a Trust
which shall be known as "Nellie Mae Education Loan Trust," in which name the
Owner Trustee may conduct the business of the Trust, make and execute contracts
and other instruments on behalf of the Trust and sue and be sued. The Trust
shall constitute a Massachusetts trust within the meaning of Chapter 182 of the
Massachusetts General Laws for which the Depositor has filed a copy of this
Agreement as the declaration of trust with the Secretary of the Commonwealth and
with the Clerk of the City of Boston, Massachusetts.
SECTION 2.2. Office and Situs of the Trust. The registered office in
Massachusetts and situs of the Trust shall be in care of the Owner Trustee at
One Federal Street Boston, Massachusetts, 02211 or at such other office as the
Owner Trustee may designate.
SECTION 2.3. Purpose and Powers. The purpose of the Trust is to engage
in the following activities:
(i) to issue one or more Classes of Certificates pursuant to
this Agreement and the applicable Trust Supplement, and to sell the
Certificates in one or more transactions;
(ii) to issue one or more Series of Notes pursuant to the
Indenture and the applicable Terms Supplement and to sell the Notes in
one or more transactions;
(iii) with the proceeds of the sale of the Notes and the
Certificates, to purchase Loans, from time to time, pursuant to the
Sales Agreement or a Supplemental Sales Agreement, to fund one or more
subaccounts within the Pre-Funding Account, to fund one or more
subaccounts within the Acquisition Account and to fund one or more
accounts within the Debt Service Reserve Fund, all in accordance with
the Indenture;
(iv) to assign, grant, transfer, pledge, mortgage and convey
the Indenture Trust Estate to the Indenture Trustee pursuant to the
Indenture and the applicable Terms Supplement and to hold, manage and
distribute to the Certificateholders any portion of the Indenture Trust
Estate released from the lien of, and remitted to the Trust pursuant
to, the Indenture and the applicable Terms Supplement;
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(v) to enter into and perform its obligations under the Basic
Documents to which it is to be a party;
(vi) to engage in those activities, including entering into
agreements, that are necessary, suitable or convenient to accomplish
the foregoing or are incidental thereto or connected therewith; and
(vii) to engage in such other activities as may be required in
connection with conservation of the Trust Estate and the making of
distributions to the Certificateholders, the Noteholders and others,
including the Administrator and the Servicer, as contemplated by the
Basic Documents.
The Trust shall not engage in any activity other than in connection with the
foregoing or other than as required or authorized by the terms of this Agreement
or the other Basic Documents.
SECTION 2.4. Appointment of Owner Trustee. The Depositor hereby (i)
appoints the Owner Trustee as trustee of the Trust effective as of the date
hereof to have all the rights, powers and duties set forth herein and (ii)
ratifies all actions of the Owner Trustee taken on behalf of the Trust prior to
the execution hereof.
SECTION 2.5. Initial Capital Contribution of Trust Estate. The
Depositor hereby sells, assigns, transfers, conveys and sets over to the Owner
Trustee, as of the date hereof, the sum of $1.00. The Owner Trustee hereby
acknowledges receipt in trust from the Depositor of the foregoing contribution,
which shall constitute the initial Trust Estate and shall be deposited in the
Revenue Fund. The Depositor shall pay the organizational expenses of the Trust
as they may arise or shall, upon the request of the Owner Trustee, promptly
reimburse the Owner Trustee for any such expenses, including reasonable fees and
expenses of counsel, paid by the Owner Trustee.
SECTION 2.6. Declaration of Trust. The Owner Trustee hereby declares
that it will hold the Trust Estate in trust upon and subject to the conditions
set forth herein for the use and benefit of the Certificateholders, subject to
the obligations of the Trust under the Indenture and the other Basic Documents.
It is the intention of the parties hereto that the Trust constitute a trust
under Massachusetts law and that this Agreement constitute the governing
instrument of such trust. If for any reason it is determined that the Trust does
not qualify as a trust under Chapter 182 of the Massachusetts General Laws, it
shall be a trust, nonetheless, under the common law of Massachusetts. It is the
intention of the parties hereto that, solely for Federal income tax purposes,
the Trust shall be treated as a partnership, with the assets of the partnership
being the Financed Loans and other assets held by the Trust, the partners of the
partnership being the Certificateholders (including the Depositor and NMI
Education Loan Corporation ("NMELC")) in their capacity as Certificateholders
and as recipients of distributions from the Trust) and the Notes being debt of
the partnership. The parties agree that, unless otherwise required by
appropriate Federal tax authorities, they shall treat the Trust as a partnership
for Federal tax purposes, and the Trust will file or cause to be filed annual or
other necessary returns, reports and other forms consistent with the
characterization of the Trust as a partnership for Federal tax purposes.
Effective as of the date hereof, the Owner Trustee shall have all rights, powers
and duties set forth herein with respect to accomplishing the purposes of the
Trust.
SECTION 2.7. Liability of the Certificateholders.
(a) The Depositor shall be liable directly to and will
indemnify the injured party for all losses, claims, damages,
liabilities and expenses of the Trust (including expenses, to the
extent that the portion of the Trust Estate that would remain if all
the Notes were paid in full would not
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be sufficient to pay any such liabilities, or if such liabilities in
fact were not paid out of the Trust Estate) to the extent that the
Depositor would be liable if the Trust were a partnership under the
Massachusetts Uniform Limited Partnership Act in which the Depositor
were a general partner; provided, however, that the Depositor shall not
be liable for any losses incurred by a beneficial owner of a Note in
its capacity as a Noteholder or to any Certificateholder. In addition,
any third party creditors of the Trust (other than in connection with
the obligations to Noteholders excepted above) shall be deemed third
party beneficiaries of this paragraph. The obligations of the Depositor
under this paragraph shall be evidenced by the Certificates described
in Section 3.10, which shall be deemed to be a separate Class of
Certificates from all other Certificates issued by the Trust; provided
that the rights and obligations evidenced by all Certificates,
regardless of Class, except as provided in this Section 2.7 and in
Sections 2.10 and 3.10 hereof shall be identical.
(b) No Certificateholder, other than to the extent set forth
in paragraph (a), shall have any personal liability for any liability
or obligation of the Trust.
SECTION 2.8. Title to Trust Property. Legal title to all of the Trust
Estate, including without limitation, the Financed Loans, shall be vested at all
times in the Owner Trustee (or a co-trustee and/or a separate trustee if the
Owner Trustee deems it necessary or desirable pursuant to Section 10.5) except
where applicable law in any jurisdiction requires title to any part of the Trust
Estate to be vested in the Trust, in which case title shall be deemed to be
vested in the Trust. Notwithstanding the foregoing, to the extent the Depositor
is deemed to retain any right, title or interest in the Trust Estate, the
Depositor grants to the Owner Trustee for the benefit of the Trust a security
interest therein.
SECTION 2.9. Representations and Warranties of the Depositor. The
Depositor hereby represents and warrants to the Owner Trustee that:
(a) The Depositor is duly organized, validly existing and in
good standing under the laws of the Commonwealth, with power and
authority to own its properties and to conduct its business as such
properties are currently owned and such business is presently
conducted.
(b) The Depositor has the power and authority to execute and
deliver this Agreement and to carry out its terms; the Depositor has
full power and authority to sell and assign the property to be sold and
assigned to and deposited with the Trust (or with the Owner Trustee on
behalf of the Trust) and the Depositor has duly authorized such sale
and assignment and deposit to the Trust (or to the Owner Trustee on
behalf of the Trust) by all necessary action; and the execution,
delivery and performance of this Agreement have been duly authorized by
the Depositor by all necessary action.
(c) This Agreement constitutes a legal, valid and binding
obligation of the Depositor enforceable in accordance with its terms.
(d) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time or both) a default
under, the certificate of organization or operating agreement of the
Depositor or any material indenture, agreement or other material
instrument to which the Depositor is a party or by which it is bound;
nor result in the creation or imposition of any lien upon any of its
properties pursuant to the terms of any such indenture, agreement or
other instrument (other than pursuant to the Basic Documents); nor
violate any law or, to the Depositor's knowledge, any order, rule or
regulation applicable to the Depositor of any court or of any Federal
or state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Depositor or its
properties.
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(e) No consent, authorization or approval of, or filing with.
any Federal or state governmental or administrative authority is
required to be obtained by the Depositor prior to its entering into
this Agreement or in connection with its consummation of the
transactions contemplated by the Basic Documents.
SECTION 2.10. Federal Income Tax Allocations. For federal income tax
purposes, as of the close of each month items of gross income of the Trust
(consisting of a proportionate part of each item of gross income) shall be
allocated among the Certificateholders in proportion to, but not in excess of,
the following amount:
for each Certificate, to the holder of such Certificate, the
total interest paid on such Certificate from the commencement
of the Trust through the end of such month, plus the amount of
interest, if any, accrued through the end of such month and
reasonably expected to be paid on such Certificate during the
next month, minus the aggregate income allocated for such
Certificate under this sentence for all prior periods.
All other items of gross income and all items of deduction and loss
shall be allocated to the Depositor and NMELC in proportion to the amount of the
Certificates issued to the Depositor and NMELC pursuant to Section 3.10.
SECTION 2.11. Required Net Worth. For so long as any Notes or
Certificates shall remain outstanding, the Depositor shall take all actions
necessary to maintain its net worth (exclusive of its interest in the Trust)
equal to $ or such other amount as satisfies the then existing Internal
Revenue Service guidelines concerning the net worth requirements for general
partners of partnerships, as set forth in Revenue Procedure 92-88 or successor
pronouncements.
ARTICLE III
Certificates and Transfer of Interests
SECTION 3.1. Initial Beneficial Ownership. Upon the formation of the
Trust by the contribution by the Depositor pursuant to Section 2.5 and until the
issuance of Certificates, the Depositor shall be the sole beneficial owner of
the Trust.
SECTION 3.2. Certificates. Each Class of Certificates shall be issued
in Authorized Denominations; provided, however, that the Certificates issued to
the Depositor and NMELC pursuant to Section 3.10 may be issued in such
denomination as to include any residual amount of the Certificate Balance (but
in no case less than $1,000 in principal amount). The Certificates shall be
executed on behalf of the Trust by manual or facsimile signature of an
authorized officer of the Owner Trustee. Certificates bearing the manual or
facsimile signatures of individuals who were, at the time when such signatures
shall have been affixed, authorized to sign on behalf of the Trust, shall be
valid and binding obligations of the Trust, notwithstanding that such
individuals or any of them shall have ceased to be so authorized prior to the
authentication and delivery of such Certificates or did not hold such offices at
the date of authentication and delivery of such Certificates.
SECTION 3.3. Authentication of Certificates. Upon the initial sale of
Financed Loans to the Trust pursuant to the Sales Agreement, and from time to
time in connection with any subsequent sale of Financed Loans to the Trust
pursuant to a Supplemental Sales Agreement, Certificates shall be issued, in
Authorized Denominations, in an aggregate principal amount and with such terms
and designation, including the
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designation that each particular Class of Certificates is identified with a
particular Series of Notes, all as shall be provided in a related Trust
Supplement. No Certificate shall entitle its holder to any benefit under this
Agreement, or shall be valid for any purpose, unless there shall appear on such
Certificate a certificate of authentication substantially in the form set forth
in Exhibit B, executed by the Owner Trustee by manual signature; such
authentication shall constitute conclusive evidence that such Certificate shall
have been duly authenticated and delivered hereunder. All Certificates shall be
dated the date of their authentication. The Maturity Date for each Class of
Certificates shall occur later than the Maturity Date for all related Classes of
Notes.
SECTION 3.4. Registration of Transfer and Exchange of Certificates. The
Certificate Registrar shall keep or cause to be kept, at the office or agency
maintained pursuant to Section 3.8, a Certificate Register in which, subject to
such reasonable regulations as it may prescribe, the Owner Trustee shall provide
for the registration of and transfers and exchanges of Certificates. The Owner
Trustee shall be the initial Certificate Registrar.
Upon surrender for registration of transfer of any Certificate at the
office or agency maintained pursuant to Section 3.8, the Owner Trustee shall
execute, authenticate and deliver in the name of the designated transferee or
transferees, one or more new Certificates, in authorized denominations of a like
aggregate amount dated the date of authentication by the Owner Trustee or any
authenticating agent. At the option of a Certificateholder, Certificates may be
exchanged for other Certificates of Authorized Denominations of a like aggregate
amount upon surrender of the Certificates to be exchanged at the office or
agency maintained pursuant to Section 3.8.
Every Certificate presented or surrendered for registration of transfer
or exchange shall be accompanied by a written instrument of transfer
substantially in the form set forth in Exhibit B hereto duly executed by the
Certificateholder or his attorney duly authorized in writing, with such
signature guaranteed by an entity acceptable to the Owner Trustee. Each
Certificate surrendered for registration of transfer or exchange shall be
cancelled and subsequently disposed of by the Owner Trustee in accordance with
its customary practice.
No service charge shall be made for any registration of transfer or
exchange of Certificates, but the Owner Trustee or the Certificate Registrar may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer or exchange of Certificates.
The preceding provisions of this Section 3.4 notwithstanding, the Owner
Trustee shall not be required to make and the Certificate Registrar need not
register transfers or exchanges of Certificates, for a period of fifteen (15)
days preceding any Distribution Date with respect to the Certificates.
The Certificates and any beneficial interest in such Certificates may
not be acquired by a Benefit Plan. By accepting and holding a Certificate or an
interest therein, the Certificateholder thereof or Certificate Owner thereof
shall be deemed to have represented and warranted that it is not a Benefit Plan,
and is not using assets of a Benefit Plan to purchase any Certificates.
SECTION 3.5. Mutilated, Destroyed, Lost or Stolen Certificates. If (a)
any mutilated Certificate shall be surrendered to the Certificate Registrar, or
if the Certificate Registrar shall receive evidence to its satisfaction of the
destruction, loss or theft of any Certificate, and (b) there shall be delivered
to the Certificate Registrar and the Owner Trustee such security or indemnity as
may be required by them to save each of them harmless, then in the absence of
notice that such Certificate shall have been acquired by a bona fide purchaser,
the Owner Trustee, on behalf of the Trust, shall execute and the Owner Trustee
shall authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen
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Certificate, a new Certificate of like tenor and denomination. In connection
with the issuance of any new Certificate under this Section 3.5, the Owner
Trustee and the Certificate Registrar may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection therewith. Any duplicate Certificate issued pursuant to this Section
3.5 shall constitute conclusive evidence of ownership in the Trust, as if
originally issued, whether or not the lost, stolen or destroyed Certificate,
shall be found at any time.
SECTION 3.6. Persons Deemed Owners. Prior to due presentation of a
Certificate for registration of transfer, the Owner Trustee, the Certificate
Registrar and any agent may treat the person in whose name any Certificate shall
be registered in the Certificate Register as the owner of such Certificate for
the purpose of receiving distributions pursuant to Section 5.1 and for all other
purposes whatsoever, and neither the Owner Trustee, the Certificate Registrar
nor any agent of any thereof shall be bound by any notice to the contrary.
SECTION 3.7. Access to List of Certificateholders' Names and Addresses.
The Owner Trustee shall furnish or cause to be furnished to the Depositor within
fifteen (15) days after receipt by the Owner Trustee of a request therefor from
the Depositor in writing, a list, in such form as the Depositor may reasonably
require, of the names and addresses of the Certificateholders as of the most
recent Record Date. If three or more Certificateholders or one or more
Certificateholders evidencing not less than twenty-five percent (25%) of the
Certificate Balance apply in writing to the Owner Trustee, and such application
states that the applicants desire to communicate with other Certificateholders
with respect to their rights under this Agreement or under the Certificates and
such application is accompanied by a copy of the communication that such
applicants propose to transmit, then the Owner Trustee shall, within five
Business Days after the receipt of such application, afford such applicants
access during normal business hours to the current list of Certificateholders.
Upon receipt of any such application, the Owner Trustee will promptly notify the
Depositor by providing a copy of such application and a copy of the list of
Certificateholders produced in response thereto. Each Certificateholder, by
receiving and holding a Certificate, shall be deemed to have agreed not to hold
any of the Depositor, the Certificate Registrar or the Owner Trustee accountable
by reason of the disclosure of its name and address, regardless of the source
from which such information was derived.
SECTION 3.8. Maintenance of Office or Agency. The Owner Trustee shall
maintain in the City of Boston, Massachusetts, an office or offices or agency or
agencies where Certificates may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Owner Trustee in respect
of the Certificates and the other Basic Documents may be served. The Owner
Trustee initially designates its corporate trust department, One Federal Street,
Boston, Massachusetts, 02211 as such office. The Owner Trustee shall give prompt
written notice to the Depositor and to the Certificateholders of any change in
the location of the Certificate Register or any such office or agency.
SECTION 3.9. Appointment of Certificate Paying Agent. The Certificate
Paying Agent shall make distributions to Certificateholders from the amounts
received from the Indenture Trustee out of the Trust Funds and Accounts pursuant
to Section 5.1 and shall report the amounts of such distributions to the Owner
Trustee. Any Certificate Paying Agent shall have the revocable power to receive
such funds from the Indenture Trustee for the purpose of making the
distributions referred to above. The Owner Trustee may revoke such power and
remove the Certificate Paying Agent for any reason. The Certificate Paying Agent
shall initially be the Owner Trustee, and any co-paying agent chosen by the
Owner Trustee. The Owner Trustee shall furnish the Indenture Trustee notice
identifying each co-paying agent within two days of any such appointment. The
Owner Trustee shall be permitted to resign as Certificate Paying Agent upon 30
days' written notice to the Owner Trustee. In the event that the Owner Trustee
shall no longer be the Certificate Paying Agent, the Owner Trustee shall appoint
a successor to act as Certificate Paying Agent
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(which shall be a bank or trust company); provided that if the Owner Trustee is
unsuccessful in appointing a successor Certificate Paying Agent, the Owner
Trustee may petition a court of competent jurisdiction to appoint a successor
Certificate Paying Agent. The Owner Trustee shall give notice to the Rating
Agencies of the appointment of a successor Certificate Paying Agent. The Owner
Trustee shall cause such successor Certificate Paying Agent or any additional
Certificate Paying Agent appointed by the Owner Trustee to execute and deliver
to the Owner Trustee an instrument in which such successor Certificate Paying
Agent or additional Certificate Paying Agent shall agree with the Owner Trustee
that, as Certificate Paying Agent, such successor Certificate Paying Agent or
additional Certificate Paying Agent will hold all sums, if any, held by it for
payment to the Certificateholders in trust for the benefit of the
Certificateholders entitled thereto until such sums shall be paid to such
Certificateholders. The Certificate Paying Agent shall return all unclaimed
funds to the Owner Trustee and upon removal of a Certificate Paying Agent such
Certificate Paying Agent shall also return all funds in its possession to the
Owner Trustee. The provisions of Sections 7.1, 7.3, 7.4, 7.5 and 8.1 shall apply
to the Owner Trustee also in its role as Certificate Paying Agent and
Certificate Registrar, for so long as the Owner Trustee shall act as Certificate
Paying Agent or Certificate Registrar and, to the extent applicable, to any
other paying agent appointed hereunder. Any reference in this Agreement to the
Certificate Paying Agent shall include any co-paying agent unless the context
requires otherwise.
SECTION 3.10. Disposition by Depositor and NMELC. On and after each
Closing Date, the Depositor shall retain beneficial and record ownership of
Certificates in an amount such that the aggregate amount of Certificates then
owned by the Depositor represents at least one percent (1%) of the Certificate
Balance. On and after each Closing Date, NMELC shall retain beneficial and
record ownership of Certificates in an amount such that the aggregate amount of
Certificates then owned by NMELC represents at least one ninety-ninth (1/99th)
of the aggregate amount of the Certificates then owned by the Depositor.
Any attempted transfer of any Certificate that would reduce such
interest of the Depositor and NMELC below the respective levels described herein
shall be void. The Owner Trustee shall cause any Certificate issued to the
Depositor or to NMELC on the Closing Date (and any Certificate issued in
exchange therefor) to contain a legend stating "THIS CERTIFICATE IS
NONTRANSFERABLE." The right of the Depositor and NMELC to receive the amounts
payable to it in accordance with Section 5.1(a) of this Trust Agreement shall
not be transferable or assignable.
SECTION 3.11. Book-Entry Certificates. The Certificates, upon original
issuance, will be issued in the form of a typewritten Certificate or
Certificates representing Book-Entry Certificates, to be delivered to the
Depository Trust Company, the initial Securities Depository, by, or on behalf
of, the Trust; provided, however, that one Definitive Certificate (as defined
below) of each Class may be issued to the Depositor and NMELC pursuant to
Section 3.10. Such Book-Entry Certificate or Book-Entry Certificates shall
initially be registered on the Certificate Register in the name of Cede & Co.,
the nominee of the initial Securities Depository, and no Certificate Owner
(other than the Depositor and NMELC) will receive a Definitive Certificate
representing such Certificate Owner's interest in such Certificate, except as
provided in Section 3.13. Unless and until definitive, fully registered
Certificates (the "Definitive Certificates") have been issued to Certificate
Owners pursuant to Section 3.13 and except for the Certificates issued to the
Depositor and NMELC pursuant to Section 3.10:
(i) the provisions of this Section shall be in full force and
effect;
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(ii) the Certificate Registrar, the Certificate Paying Agent
and the Owner Trustee shall be entitled to deal with the Securities
Depository for all purposes of this Agreement (including the payment of
principal of and interest on the Certificates and the giving of
instructions or directions hereunder) as the sole Certificateholder and
shall have no obligation to the Certificate Owners;
(iii) to the extent that the provisions of this Section
conflict with any other provisions of this Agreement, the provisions of
this Section shall control;
(iv) the rights of Certificate Owners shall be exercised only
through the Securities Depository and shall be limited to those
established by law and agreements between such Certificate Owners and
the Securities Depository and/or the Securities Depository
Participants. Unless and until Definitive Certificates are issued
pursuant to Section 3.13, the initial Securities Depository will make
book-entry transfers among the Securities Depository Participants and
receive and transmit payments of principal of and interest on the
Certificates to such Securities Depository Participants; and
(v) whenever this Agreement requires or permits actions to be
taken based upon instructions or directions of Certificateholders of
Certificates evidencing a specified percentage of the Certificate
Balance, the Securities Depository shall be deemed to represent such
percentage only to the extent that it has received instructions to such
effect from Certificate Owners and/or Securities Depository
Participants owning or representing, respectively, such required
percentage of the beneficial interest in the Certificates and has
delivered such instructions to the Owner Trustee.
SECTION 3.12. Notices to Securities Depository. Whenever a notice or
other communication to the Certificateholders is required under this Agreement,
unless and until Definitive Certificates shall have been issued to Certificate
Owners pursuant to Section 3.13 and except for the Certificates issued to the
Depositor and to NMELC pursuant to Section 3.10, the Owner Trustee shall give
all such notices and communications specified herein to be given to
Certificateholders to the Securities Depository, and shall have no obligations
to the Certificate Owners.
SECTION 3.13. Definitive Certificates. If (i) the Securities Depository
advises the Owner Trustee that it is no longer willing or able to discharge
properly its responsibilities with respect to the Certificates, and the Owner
Trustee is unable to locate a qualified successor, (ii) the Owner Trustee elects
to terminate the book-entry system through the Securities Depository or (iii)
after the occurrence of an Event of Default, a Servicer Default or an
Administrator Default, Certificate Owners representing beneficial interests
aggregating more than half of the Certificate Balance advise the Securities
Depository (which shall then notify the Owner Trustee) in writing that the
continuation of a book-entry system through the Securities Depository is no
longer in the best interest of the Certificate Owners, then the Owner Trustee
shall cause the Securities Depository to notify all Certificate Owners of the
occurrence of any such event and of the availability of the Definitive
Certificates to Certificate Owners requesting the same. Upon surrender to the
Owner Trustee of the typewritten Certificate or Certificates representing the
Book-Entry Certificates by the Securities Depository, accompanied by
registration instructions, the Owner Trustee shall execute and authenticate the
Definitive Certificates in accordance with the instructions of the Securities
Depository. Neither the Certificate Registrar nor the Owner Trustee shall be
liable for any delay in delivery of such instructions and may conclusively rely
on, and shall be protected in relying on, such instructions. Upon the issuance
of Definitive Certificates, the Owner Trustee shall recognize the registered
holders of the Definitive Certificates as Certificateholders. The Definitive
Certificates shall, at the expense of the Depositor, be printed, lithographed or
engraved or may be produced in any other manner as is reasonably acceptable to
the Owner Trustee, as evidenced by its execution thereof.
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SECTION 3.14. Determination of Interest Rate. Each Class of
Certificates shall accrue interest during each Interest Period at the Interest
Rate set forth in the related Trust Supplement.
SECTION 3.15. No Listing on Securities Market. The Certificates shall
not be listed on any established securities market. For this purpose, an
established securities market includes any national securities exchange
registered under the Securities Exchange Act or exempted from registration
because of the limited volume of transactions, any local exchange, and any over
the counter market characterized by an interdealer quotation system which
regularly disseminates quotations of obligations by identified brokers or
dealer, by electronic means or otherwise.
ARTICLE IV
Actions by Owner Trustee
SECTION 4.1. Prior Notice to Rating Agencies and Certificateholders
with Respect to Certain Matters. With respect to the following matters, the
Owner Trustee shall not take action unless at least thirty days before the
taking of such action, the Owner Trustee shall have notified the Rating Agencies
and the Certificateholders in writing of the proposed action and the
Certificateholders shall not have notified the Owner Trustee in writing prior to
the thirtieth day after such notice is given that such Certificateholders have
withheld consent:
(a) the initiation of any material claim or lawsuit by the
Trust (except claims or lawsuits brought in connection with the
collection of the Financed Loans) and the compromise of any material
action, claim or lawsuit brought by or against the Trust (except with
respect to the aforementioned claims or lawsuits for collection of
Financed Loans);
(b) the amendment of the Indenture or a Terms Supplement by a
supplemental indenture in circumstances where the consent of any
Noteholder is required;
(c) the amendment, change or modification of the
Administration Agreement, except to cure any ambiguity or to amend or
supplement any provision in a manner or add any provision that would
not materially adversely affect the interests of the
Certificateholders; or
(d) the appointment pursuant to the Indenture or a Terms
Supplement of a successor Note Registrar or Indenture Trustee or
pursuant to this Agreement of a successor Certificate Registrar or
Certificate Paying Agent, or the consent to the assignment by the Note
Registrar, Certificate Paying Agent, Indenture Trustee or Certificate
Registrar of its obligations under the Indenture or this Agreement, as
applicable.
SECTION 4.2. Action by Certificateholders with Respect to Certain
Matters. The Owner Trustee shall not have the power, except upon the direction
of the Certificateholders, to (a) remove the Administrator, (b) remove the
Servicer or (c) except as expressly provided in the Basic Documents, sell the
Financed Loans after the termination of the Indenture.
SECTION 4.3. Action by Certificateholders with Respect to Bankruptcy.
The Owner Trustee shall not have the power to commence a voluntary proceeding in
bankruptcy relating to the Trust without the unanimous prior approval of all
Certificateholders (other than the Depositor and NMELC) and the delivery to the
Owner Trustee by each such Certificateholder of a certificate certifying that
such Certificateholder believes that the Trust is insolvent.
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SECTION 4.4. Restrictions on Certificateholders' Power. The
Certificateholders shall not direct the Owner Trustee to take or refrain from
taking any action if such action or inaction would be contrary to any obligation
of the Trust or the Owner Trustee under this Agreement or any of the other Basic
Documents or would be contrary to Section 2.3 hereof nor shall the Owner Trustee
be permitted to follow any such direction, if given.
SECTION 4.5. Majority Control. Except as expressly provided herein, any
action that may be taken by the Certificateholders under this Agreement may be
taken by the Certificateholders of Certificates evidencing more than half of the
Certificate Balance. Except as expressly provided herein, any written notice of
the Certificateholders delivered pursuant to this Agreement shall be effective
if signed by Certificateholders of Certificates evidencing more than half of the
Certificate Balance at the time of the delivery of such notice.
ARTICLE V
Application of Trust Funds; Certain Duties
SECTION 5.1. Application of Trust Funds.
(a) There is hereby established a Fund, to be held by the Owner Trustee
on behalf of the Certificateholders and designated the "Nellie Mae Education
Loan Trust Certificate Fund" (referred to hereafter as the "Certificate Fund").
The Certificate Fund shall be used only for the payment of principal of and
interest on the Certificates, except to the extent otherwise provided in this
Trust Agreement or a related Trust Supplement. The Certificate Fund shall
consist of two Accounts, which are hereby established, to be held by the Owner
Trustee on behalf of the Certificateholders and designated the "Certificate
Interest Account" and the "Certificate Payment Account." Each particular Class
of Certificates shall be identified to a particular Series of Notes pursuant to
Section 3.3 hereof and the related Trust Supplement. The Owner Trustee shall
maintain separate subaccounts within the Certificate Interest Account and the
Certificate Payment Account for each such Class and, after the creation of any
such subaccounts, references in this Trust Agreement to the Certificate Interest
Account or the Certificate Payment Account shall be deemed to refer to the
applicable subaccount.
Moneys received from the Indenture Trustee pursuant to clause fourth of
Section 4.2 of the Indenture or clause Third of Section 4.5(b) of the Indenture
shall be deposited in the Certificate Interest Account. Moneys shall also be
deposited in the Certificate Interest Account from the Certificate Payment
Account as provided below. Moneys on deposit in the Certificate Interest Account
shall be applied by the Owner Trustee to the payment of interest on Certificates
when due (whether on a Distribution Date or upon the prepayment or payment of
the Certificates in accordance with the terms of this Trust Agreement and the
related Trust Supplement) without further authorization or direction.
Moneys received from the Indenture Trustee pursuant to clause fifth of
Section 4.2 of the Indenture, Section 4.5(a) of the Indenture, clause Tenth of
Section 4.5(b) of the Indenture or Section 4.6(b) of the Indenture shall be
deposited in the Certificate Payment Account. Moneys on deposit in the
Certificate Payment Account shall be applied by the Owner Trustee to the payment
of principal of Certificates when due (whether on a Distribution Date or upon
the prepayment or payment of the Certificates in accordance with the terms of
this Trust Agreement and the related Trust Supplement) without further
authorization or direction. Prior to application thereof in accordance with the
preceding sentence, moneys on deposit in the Certificate Payment Account shall
be transferred by the Owner Trustee and used to make up any deficiency in the
Certificate Interest Account.
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Notwithstanding the preceding two paragraphs of this Section 5.1(a), if
a particular Class of Certificates identified with a particular Series of Notes
pursuant to Section 3.3 hereof and the related Terms Supplement has been paid in
full (other than Certificates of such particular Class that are owned by the
Depositor and NMELC), then moneys received by the Owner Trustee from the
Indenture Trustee pursuant to clauses fourth and fifth of Section 4.2 of the
Indenture, clauses Third and Tenth of Section 4.5(b) of Indenture and Section
4.6(b) of the Indenture shall be distributed promptly to the Depositor and NMELC
in proportion to the amount of the Certificates issued to the Depositor and
NMELC pursuant to Section 3.10.
No later than the close of business on the Distribution Date, the
Certificate Paying Agent will distribute to Certificateholders on a pro rata
basis with respect to the payment of interest and pursuant to the procedures set
forth in subsection (e) below with respect to the payment of principal;
provided, however, that if the Owner Trustee receives funds for distribution to
Certificateholders after 12:00 noon on any day it shall use all reasonable
efforts to distribute such funds to Certificateholders on such day but shall not
be liable for any damages if such funds are distributed on the following
Business Day. Notwithstanding the foregoing, all amounts received by the Owner
Trustee from the Indenture Trustee pursuant to clauses Eighth and Eleventh of
Section 4.5(b) of the Indenture shall be distributed promptly to the Depositor
and NMELC in proportion to the amount of the Certificates issued to the
Depositor and NMELC pursuant to Section 3.10. Such distributions shall not
reduce the principal amount of the respective Certificates held by the Depositor
and NMELC and no other Certificateholder shall be entitled to or have a claim
for such amounts.
(b) No later than two Business Days preceding any Distribution Date,
the Owner Trustee shall certify in writing to the Indenture Trustee the amount
of interest, including Deferred Interest, payable on such Distribution Date.
(c) No later than the Business Day following its receipt thereof, the
Owner Trustee shall send to each Certificateholder the statement provided to the
Owner Trustee by the Administrator pursuant to Section 2.3 of the Administration
Agreement relating to such Distribution Date.
(d) In the event that any withholding tax is imposed on the Trust's
payment (or allocations of income) to a Certificateholder, such tax shall reduce
the amount otherwise distributable to the Certificateholder in accordance with
this Section. The Owner Trustee is hereby authorized to and shall, upon receipt
of written instructions of the Administrator identifying the appropriate amount,
retain from amounts otherwise distributable to the Certificateholders sufficient
funds for the payment of any tax that is legally owed by the Trust (but such
authorization shall not prevent the Owner Trustee from contesting any such tax
in appropriate proceedings, and withholding payment of such tax, if permitted by
law, pending the outcome of such proceedings). The amount of any withholding tax
imposed with respect to a Certificateholder shall be treated as cash distributed
to such Certificateholder at the time it is withheld by the Trust to be remitted
to the appropriate taxing authority. If there is a possibility that withholding
tax is payable with respect to a distribution (such as a distribution to a
non-U.S. Certificateholder), the Owner Trustee in its sole discretion may (but
unless otherwise required by law shall not be obligated to) withhold such
amounts in accordance with this paragraph (d). In the event that a
Certificateholder wishes to apply for a refund of any such withholding tax, the
Owner Trustee shall reasonably cooperate with such Certificateholder in making
such claim so long as such Certificateholder agrees to reimburse the Owner
Trustee for any out-of-pocket expenses incurred.
(e) The Certificates shall be subject to optional purchase prepayment
or mandatory principal distribution prior to the applicable Maturity Date upon
the terms and conditions and on such dates as may be set forth in the related
Trust Supplement.
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In the event of the optional purchase prepayment or mandatory
distribution of principal at any time of only part of any Class of Certificates,
moneys available for such prepayment or distribution shall be applied to the
payment of a portion of the principal of each Certificate of such Class in
accordance with the ratio which the outstanding principal amount of such
Certificate bears to the Certificate Balance of such Class. Such ratio will be
expressed as a seven-digit decimal, which will initially be 1.0000000 and will
thereafter decline to reflect the reduction in the Certificate Balance of a
Certificate after such prepayment or distribution (the "Principal Factor").
Following any prepayment or principal distribution in part, the Certificate
Balance of each affected Certificate shall be deemed to be an amount equal to
the original principal amount of such Certificate multiplied by the Principal
Factor.
As provided in the Master Indenture, on any Distribution Date on or
after which the Balance in the applicable Account of the Student Loan Portfolio
Fund is equal to or less than a certain percentage (as specified in the related
Terms Supplement) of the Initial Pool Balance with respect to the applicable
Financed Loans, the Seller may repurchase all such remaining Financed Loans at a
purchase price equal to the outstanding principal balance of such Financed
Loans, plus accrued and unpaid interest. The proceeds of the sale of any such
Financed Loans shall be credited to the applicable subaccount in the Note
Payment Account within the Note Fund and used on such Distribution Date for
mandatory distributions of principal. Pursuant to Section 4.6(b) of the Master
Indenture, after all of the Notes of the applicable Series have been paid in
full, any amounts remaining in the applicable subaccount in the Note Payment
Account shall be transferred to the Owner Trustee. Pursuant to Section 5.1(a)
herein, amounts received by the Owner Trustee pursuant to Section 4.6(b) of the
Master Indenture shall be deposited in the applicable subaccount in the
Certificate Payment Account.
All Certificates shall be subject to mandatory principal distributions
on each Distribution Date as a whole or in part on the terms hereinafter set
forth prior to their respective Maturity Dates, from moneys on deposit in the
applicable subaccount in the Certificate Payment Account with respect to the
payment of principal and in the applicable subaccount in the Certificate
Interest Account with respect to the payment of interest. Accrued interest on
the amount of principal so distributed shall be payable on such Distribution
Date, provided that Deferred Interest shall be payable only to the extent that
funds are available therefor. Mandatory distributions of principal shall occur
as aforesaid at such times, but only at such times, as there shall be in excess
of $5,000 in the Certificate Payment Account of the Certificate Fund on the
third Business Day immediately preceding a Distribution Date.
Except as otherwise provided in the related Trust Supplement, notice of
optional purchase prepayment of Certificates shall be given at the Issuer's
request by the Owner Trustee in the name and for and on behalf of the Issuer not
less than thirty (30) days prior to the date of prepayment. Notice of optional
purchase prepayment of any Certificate shall be given within the time period
specified in the related Trust Supplement by first class mail, postage prepaid,
to the Holders of such Class of Certificates at the address of such Holder as it
appears in the Certificate Register or by transmitting such notice by telex or
telecopier to such Holder who shall have submitted a written request to the
Trustee for notice of optional purchase prepayment by such means, to the telex
or telecopier number set forth in such request. A copy of any notice so
transmitted shall also be mailed to such Holder at the address of such Holder
set forth in the Certificate Register, provided, however, that neither failure
by the Trustee to so mail a copy of such notice nor any defect in such copy
shall affect the validity of such notice so transmitted in accordance herewith
and provided, further, that neither failure by the Trustee to so transmit a copy
of such notice by telex or telecopier or any defect therein shall affect the
validity of such notice so mailed in accordance herewith.
Each notice of optional purchase prepayment shall state (i) the amount
of principal of the Class of the Certificates to be prepaid, the prepayment date
and the applicable Principal Factor (after giving effect to such prepayment or
distribution); (ii) that the interest on the Certificates, or on the principal
amount
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thereof to be prepaid shall cease to accrue from and after such prepayment date;
and (iii) that on the prepayment date there will become due and payable on each
said Certificate the principal amount thereof to be prepaid and the interest
accrued on such principal amount to such date.
If notice of optional purchase prepayment of a Certificate shall have
been duly given as hereinbefore provided and if moneys for the payment of such
Certificate (or of the principal amount thereof subject to such prepayment), and
the interest to accrue to the prepayment date with respect to such Certificate
(or portion thereof) shall be held for the purpose of such payment by the Owner
Trustee, then such Certificate or portion thereof shall, on the prepayment date
designated in such notice, become due and payable, and interest on said
Certificate or portion thereof shall cease to accrue.
All Certificates surrendered pursuant to the provisions of this Section
5.1 shall be cancelled.
SECTION 5.2. Method of Payment. Subject to Section 9.1(c),
distributions required to be made to Certificateholders on any Distribution Date
shall be made to each Certificateholder of record on the applicable Record Date
either by wire transfer, in immediately available funds, to the account of such
Certificateholder at a bank or other entity having appropriate facilities
therefore, if such Certificateholder shall have provided to the Certificate
Registrar appropriate written instructions (which may be standing instructions)
at least five Business Days prior to such Distribution Date and such
Certificateholder's Certificates in the aggregate evidence a denomination of not
less than $1,000,000, or, if not, by check mailed to such Certificateholder at
the address of such Certificateholder appearing in the Certificate Register;
provided, however, that, unless Definitive Certificates have been issued
pursuant to Section 3.13, with respect to Certificates registered on the Record
Date in the name of the nominee of the Securities Depository (initially, such
nominee to be Cede & Co.), distributions will be made by wire transfer in
immediately available funds to the account designated by such nominee.
Notwithstanding the foregoing, the final distribution in respect of any
Certificate (whether on the Maturity Date or otherwise) will be payable only
upon presentation and surrender of such Certificate at the corporate trust
office of the Owner Trustee maintained pursuant to Section 3.8 hereof or such
other location specified in writing to the Certificateholder thereof.
SECTION 5.3. Segregation of Moneys: No Interest. Subject to Section
5.1, moneys received by the Owner Trustee hereunder shall be deposited in the
Certificate Fund and invested in Investment Securities in accordance with
instructions received from the Administrator. The Owner Trustee shall not be
liable for any interest thereon or losses suffered in connection therewith.
SECTION 5.4. Accounting and Reports to the Noteholders,
Certificateholders, the Internal Revenue Service and Others. The Owner Trustee
shall (a) maintain (or cause to be maintained) the books of the Trust on a
calendar year basis on the accrual method of accounting, (b) deliver (or cause
to be delivered) to each Certificateholder (and to each person who was a
Certificateholder at any time during the applicable calendar year), as may be
required by the Code and applicable Treasury Regulations, such information as
may be required (including Schedule K-1) to enable each such Certificateholder
to prepare its Federal and state income tax returns, (c) file (or cause to be
filed) such tax returns relating to the Trust (including a partnership
information return, Internal Revenue Service Form 1065), and make such elections
as may from time to time be required or appropriate under any applicable state
or Federal statute or rule or regulation thereunder so as to maintain the
Trust's characterization as a partnership for Federal income tax purposes, (d)
cause such tax returns to be signed in the manner required by law and (e)
collect (or cause to be collected) any withholding tax as described in and in
accordance with Section 5.1(d) with respect to income or distributions to
Certificateholders. The Owner Trustee shall elect under Section 1278 of the Code
to include in income currently any market discount that accrues with respect to
the Financed Loans. Neither
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the Owner Trustee, nor the Administrator on behalf of the Owner Trustee, shall
make the election provided under Section 754 of the Code. The Owner Trustee
shall be entitled to hire an independent accounting firm to perform the
functions described in this Section 5.4.
SECTION 5.5. Signature on Returns; Tax Matters Partner.
(a) The Owner Trustee shall sign on behalf of the Trust the
tax returns of the Trust unless otherwise required by applicable law.
(b) The Depositor shall be designated the "tax matters
partner" of the Trust pursuant to Section 6231(a)(7)(A) of the Code and
applicable Treasury Regulations.
SECTION 5.6. Capital Accounts. The Trust shall maintain accounts
("Capital Accounts") with respect to each Certificateholder (including the
Depositor and NMELC) in accordance with the following provisions:
(a) Each Certificateholder's Capital Account shall be
increased by the Capital Contributions (as defined below) of such
Certificateholder, such Certificateholder's distributive share of gain
(and any liquidated gain) and any items in the nature of income or gain
which are specially allocated to such Certificateholder pursuant to
Section 2.10 of this Agreement.
(b) Each Certificateholder's Capital Account shall be reduced
by any amount distributed to such Certificateholder (including, in the
case of the Depositor and NMELC, any amount released or otherwise
distributed to the Depositor and NMELC pursuant to clauses Eighth and
Eleventh of Section 4.5(b) of the Indenture) and such
Certificateholder's distributive share of losses and deductions (and
any liquidating loss), including any special allocation pursuant to
Section 2.10.
(c) In the event all or a portion of a Certificate is
transferred in accordance with the terms of this Agreement, the
transferee shall succeed to the Capital Account of the transferor to
the extent it related to such Certificate or a portion thereof.
(d) Notwithstanding the above, the Capital Accounts shall be
adjusted in accordance with the provisions governing the economic
rights of the Certificateholders, as set forth herein and in the Basic
Documents.
"Capital Contribution" means the amount of any cash and the
fair market value of any property contributed to the Trust by a
Certificateholder (including any amounts deemed to be contributed in
connection with the original issuance of the Certificates), including,
in the case of the Depositor, the fair market value of any Financed
Loans deemed to be contributed by the Depositor to the Trust, taking
into account the provisions of Section 707(a)(2)(B) of the Code and the
Regulations thereunder. The foregoing provisions and the other
provisions of this Agreement relating to the maintenance of Capital
Accounts are intended to comply with Section 1.704-1(b) of the Treasury
Regulations and shall be interpreted in a manner consistent therewith.
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ARTICLE VI
Authority and Duties of Owner Trustee
SECTION 6.1. General Authority. The Owner Trustee is authorized and
directed to execute and deliver the Basic Documents to which the Trust is to be
a party and each certificate or other document attached as an exhibit to or
contemplated by the Basic Documents to which the Trust is to be a party, in each
case, in such form as the Depositor shall approve as evidenced conclusively by
the Owner Trustee's execution thereof, and, on behalf of the Trust, to direct
the Indenture Trustee to authenticate and deliver such Notes as may from time to
time be authorized by the Indenture and any related Terms Supplement. The Owner
Trustee is also authorized and directed on behalf of the Trust to acquire and
hold legal title to the Financed Loans from the Depositor or upon the direction
of the Depositor.
In addition to the foregoing, the Owner Trustee is authorized to take
all actions required of the Trust pursuant to the Basic Documents. The Owner
Trustee is further authorized from time to time to take such action as the
Administrator directs or instructs with respect to the Basic Documents
(including, without limitation, the execution thereof) or with respect to the
administration of the Trust.
SECTION 6.2. General Duties. It shall be the duty of the Owner Trustee
to discharge (or cause to be discharged) all its responsibilities pursuant to
the terms of this Agreement and the other Basic Documents to which the Trust is
a party and to administer the Trust in the best interests of the
Certificateholders, subject to and in accordance with the provisions of this
Agreement and the other Basic Documents. Without limiting the foregoing, the
Owner Trustee shall on behalf of the Trust file any claim or claims that may
exist on behalf of the Trust against the Depositor in connection with any claims
paying procedure as part of an insolvency or receivership proceeding involving
the Depositor. Notwithstanding the foregoing, the Owner Trustee shall be deemed
to have discharged its duties and responsibilities hereunder and under the other
Basic Documents to the extent the Administrator has agreed in the Administration
Agreement to perform any act or to discharge any duty of the Owner Trustee
hereunder or under any other Basic Document, and the Owner Trustee shall not be
held liable for the default or failure of the Administrator to carry out its
obligations under the Administration Agreement. Except as expressly provided in
the Basic Documents, the Owner Trustee shall have no obligation to administer,
service or collect the Financed Loans or to maintain, monitor or otherwise
supervise the administration, servicing or collection of the Financed Loans.
SECTION 6.3. Action upon Instruction.
(a) Subject to Article IV, Section 7.1 and in accordance with
the terms of the Basic Documents, the Certificateholders may by written
instruction direct the Owner Trustee in the management of the Trust.
Such direction may be exercised at any time by written instruction of
the Certificateholders pursuant to Article IV.
(b) The Owner Trustee shall not be required to take any action
hereunder or under any other Basic Document if the Owner Trustee shall
have reasonably determined, or shall have been advised by counsel, that
such action is likely to result in liability on the part of the Owner
Trustee or is contrary to the terms hereof or of any other Basic
Document or is otherwise contrary to law.
(c) Except as expressly otherwise provided, whenever the Owner
Trustee is unable to determine the appropriate course of action between
alternative courses of action permitted or required by the terms of
this Agreement or under any other Basic Document, the Owner Trustee
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shall promptly give notice (in such form as shall be appropriate under
the circumstances) to the Certificateholders requesting instruction as
to the course of action to be adopted, and to the extent the Owner
Trustee acts in good faith in accordance with any written instruction
received from the Certificateholders of Certificates evidencing more
than half of the Certificate Balance at the time of delivery of such
instructions, the Owner Trustee shall not be liable on account of such
action to any person. If the Owner Trustee shall not have received
appropriate instruction within 30 days of such notice (or within such
shorter period of time as reasonably may be specified in such notice or
may be necessary under the circumstances) the Owner Trustee may, but
shall be under no duty to, take or refrain from taking such action, not
inconsistent with this Agreement or the other Basic Documents, as it
shall deem to be in the best interests of the Certificateholders, and
shall have no liability to any person for such action or inaction.
(d) If the Owner Trustee is unsure as to the application of
any provision of this Agreement or any other Basic Document or any
agreement entered into by the Owner Trustee on behalf of the Trust or
any such provision is ambiguous as to its application, or is, or
appears to be, in conflict with any other applicable provision, or if
this Agreement permits any determination by the Owner Trustee or is
silent or is incomplete as to the course of action that the Owner
Trustee is required to take with respect to a particular set of facts,
the Owner Trustee may give notice (in such form as shall be appropriate
under the circumstances) to the Certificateholders requesting
instruction and, to the extent that the Owner Trustee acts or refrains
from acting in good faith in accordance with any such instruction
received from Certificateholders of Certificates evidencing more than
half of the Certificate Balance at the time of delivery of such
instructions, the Owner Trustee shall not be liable, on account of such
action or inaction, to any person. If the Owner Trustee shall not have
received appropriate instruction within 30 days of such notice (or
within such shorter period of time as reasonably may be specified in
such notice or may be necessary under the circumstances) the Owner
Trustee may, but shall be under no duty to, take or refrain from taking
such action, not inconsistent with this Agreement or the other Basic
Documents or such other agreements, as it shall deem to be in the best
interests of the Certificateholders, and shall have no liability to any
person for such action or inaction.
SECTION 6.4. No Duties Except as Specified in this Agreement or in
Instructions. The Owner Trustee shall not have any duty or obligation to manage,
make any payment with respect to, register, record, sell, service, dispose of or
otherwise deal with the Trust Estate, or to otherwise take or refrain from
taking any action under, or in connection with, any document contemplated hereby
to which the Owner Trustee is a party, except as expressly provided by the terms
of this Agreement or in any document or written instruction received by the
Owner Trustee pursuant to Section 6.3 hereof. No implied duties or obligations
shall be read into this Agreement or any other Basic Document against the Owner
Trustee. The Owner Trustee shall have no responsibility for filing any financing
or continuation statement in any public office at any time or to otherwise
perfect or maintain the perfection of any security interest or lien granted to
it hereunder or to prepare or file any Commission filing for the Trust or to
record this Agreement or any other Basic Document. The Owner Trustee
nevertheless agrees that it will, at its own cost and expense, promptly take all
action as may be necessary to discharge any liens on any part of the Trust
Estate that result from actions by, or claims against, Fleet National Bank in
its individual capacity or as the Owner Trustee that are not related to the
ownership or the administration of the Trust Estate.
SECTION 6.5. No Action Except Under Specified Documents or
Instructions. The Owner Trustee shall not manage, control, use, sell, service,
dispose of or otherwise deal with any part of the Trust Estate except (i) in
accordance with the powers granted to and the authority conferred upon the Owner
Trustee pursuant to this Agreement, (ii) in accordance with the other Basic
Documents to which it is a party and (iii)
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in accordance with any document or instruction delivered to the Owner Trustee
pursuant to Section 6.3 hereof.
SECTION 6.6. Restrictions. The Owner Trustee shall not take any action
(i) that is inconsistent with the purposes of the Trust set forth in Section 2.3
or (ii) that, to the actual knowledge of the Owner Trustee, would result in the
Trust's becoming taxable as a corporation for Federal income tax purposes. The
Certificateholders shall not direct the Owner Trustee to take any action that
would violate the provisions of this Section.
ARTICLE VII
Concerning the Owner Trustee
SECTION 7.1. Acceptance of Trusts and Duties. The Owner Trustee accepts
the trusts hereby created and agrees to perform its duties hereunder with
respect to such trusts but only upon the terms of this Agreement for the benefit
of the Certificateholders. The Owner Trustee also agrees to disburse all moneys
actually received by it constituting part of the Trust Estate under the terms of
this Agreement and the other Basic Documents. The Owner Trustee shall not be
answerable or accountable hereunder or under any other Basic Document under any
circumstances, except (i) for its own willful misconduct or gross negligence or
(ii) in the case of the inaccuracy of any representation or warranty contained
in Section 7.3 expressly made by the Owner Trustee. In particular, but not by
way of limitation (and subject to the exceptions set forth in the preceding
sentence):
(a) the Owner Trustee shall not be liable for any error of
judgment made by a Responsible Officer of the Owner Trustee;
(b) the Owner Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in accordance with the
direction or instructions of the Administrator, the Depositor or
Holders of Certificates evidencing the requisite percentage of the
Certificate Balance;
(c) no provision of this Agreement or any other Basic Document
shall require the Owner Trustee to expend or risk funds or otherwise
incur any financial liability in the performance of any of its rights
or powers hereunder or under any other Basic Document, if the Owner
Trustee shall have reasonable grounds for believing that repayment of
such funds or adequate indemnity against such risk or liability is not
reasonably assured or provided to it;
(d) under no circumstances shall the Owner Trustee be liable
for indebtedness evidenced by or arising under any of the Basic
Documents, including the principal of and interest on the Notes or for
any amounts owing under the Certificates;
(e) the Owner Trustee shall not be responsible for or in
respect of the validity or sufficiency of this Agreement or for the due
execution hereof by the Depositor or for the form, character,
genuineness, sufficiency, value or validity of any of the Trust Estate
or for or in respect of the validity or sufficiency of the Basic
Documents, other than the certificate of authentication on the
Certificates, and the Owner Trustee shall in no event assume or incur
any liability, duty or obligation to any Noteholder or to any
Certificateholder, other than as expressly provided for herein and in
the other Basic Documents;
(f) the Owner Trustee shall not be liable for the action or
inaction, default or misconduct of the Depositor, Administrator,
Servicer or the Indenture Trustee under this Agreement
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or any of the other Basic Documents or otherwise and the Owner Trustee
shall have no obligation or liability to perform the obligations of the
Trust under this Agreement or the other Basic Documents that are
required to be performed by the Administrator under the Administration
Agreement, the Indenture Trustee under the Indenture or the Servicer
under the Servicing Agreement; and
(g) the Owner Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Agreement, or to
institute, conduct or defend any litigation under this Agreement or
otherwise or in relation to this Agreement or any other Basic Document,
at the request, order or direction of any of the Certificateholders,
unless such Certificateholders have offered to the Owner Trustee
security or indemnity satisfactory to it against the costs, expenses
and liabilities that may be incurred by the Owner Trustee therein or
thereby. The right of the Owner Trustee to perform any discretionary
act enumerated in this Agreement or in any other Basic Document shall
not be construed as a duty, and the Owner Trustee shall not be
answerable for other than its negligence or willful misconduct in the
performance of any such act.
SECTION 7.2. Furnishing of Documents. The Owner Trustee shall furnish
to the Certificateholders promptly upon receipt of a written request therefor,
duplicates or copies of all reports, notices, requests, demands, certificates,
financial statements and any other instruments furnished to the Owner Trustee
under the Basic Documents. On each Distribution Date, the Owner Trustee shall
provide to each Certificateholder of record as of the related Record Date the
information provided by the Administrator to the Owner Trustee on the related
Distribution Date pursuant to Section 2.3 of the Administration Agreement.
SECTION 7.3. Representations and Warranties. The Owner Trustee hereby
represents and warrants to the Depositor, for the benefit of the
Certificateholders, that:
(a) It is a national banking association duly organized and
validly existing in good standing under the laws of the United States.
It has all requisite corporate power and authority to execute, deliver
and perform its obligations under this Agreement.
(b) It has taken all corporate action necessary to authorize
the execution and delivery by it of this Agreement, and this Agreement
will be executed and delivered by one of its officers who is duly
authorized to execute and deliver this Agreement on its behalf, and
when so executed, shall be an enforceable obligation of the Owner
Trustee in accordance with its terms, subject to the effect of
applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws relating to or affecting
creditors' rights generally and court decisions with respect thereto
and subject to the application of equitable principles in any
proceeding, whether at law or in equity.
(c) Neither the execution nor the delivery by it of this
Agreement, nor the consummation by it of the transactions contemplated
hereby nor compliance by it with any of the terms or provisions hereof
will, to its knowledge, contravene any Federal or Massachusetts state
law, governmental rule or regulation governing the banking or trust
powers of the Owner Trustee or any judgment or order binding on it, or
constitute any default under its charter documents or by-laws or any
indenture, mortgage, contract, agreement or instrument to which it is a
party or by which any of its properties may be bound.
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SECTION 7.4. Reliance; Advice of Counsel.
(a) The Owner Trustee shall incur no liability to anyone in
acting upon any signature, instrument, direction, notice, resolution,
request, consent, order, certificate, report, opinion, bond, or other
document or paper believed by it to be genuine and believed by it to be
signed by the proper party or parties. The Owner Trustee may accept a
certified copy of a resolution of the board of directors or other
governing body of any corporate party as conclusive evidence that such
resolution has been duly adopted by such body and that the same is in
full force and effect. As to any fact or matter the method of the
determination of which is not specifically prescribed herein, the Owner
Trustee may for all purposes hereof rely on a certificate, signed by
the president or any vice president or by the treasurer or other
authorized officers of the relevant party, as to such fact or matter
and such certificate shall constitute full protection to the Owner
Trustee for any action taken or omitted to be taken by it in good faith
in reliance thereon.
(b) In the exercise or administration of the trusts hereunder
and in the performance of its duties and obligations under this
Agreement or the other Basic Documents, the Owner Trustee (i) may act
directly or through its agents, including the Administrator, or
attorneys pursuant to agreements entered into with any of them, and the
Owner Trustee shall not be liable for the conduct or misconduct of such
agents or attorneys if such agents or attorneys shall have been
selected by the Owner Trustee with reasonable care or by the
Administrator or Depositor, and (ii) may consult with counsel,
accountants and other skilled persons to be selected with reasonable
care and employed by it or selected and employed by the Administrator
or Depositor. The Owner Trustee shall not be liable for anything done,
suffered or omitted in good faith by it in accordance with the opinion
or advice of any such counsel, accountants or other such persons and
not contrary to this Agreement or any other Basic Document.
SECTION 7.5. Not Acting in Individual Capacity. Except for the
representations and warranties set forth in Section 7.3, in accepting the trusts
hereby created, Fleet National Bank acts solely as Owner Trustee hereunder and
not in its individual capacity and all persons having any claim against the
Owner Trustee by reason of the transactions contemplated by this Agreement or
any other Basic Document shall look only to the Trust Estate for payment or
satisfaction thereof.
SECTION 7.6. Owner Trustee Not Liable for Certificates or Financed
Loans. The recitals contained herein and in the Certificates (other than the
signature of the Owner Trustee on the Certificates) shall be taken as the
statements of the Depositor and the Owner Trustee assumes no responsibility for
the correctness thereof. The Owner Trustee makes no representations as to the
validity or sufficiency of this Agreement, the Certificates or any other Basic
Document (other than the signature of and authentication by the Owner Trustee on
the Certificates) or the Notes, or of any Financed Loan or related documents.
The Owner Trustee shall at no time have any responsibility or liability for or
with respect to the sufficiency of the Trust Estate or its ability to generate
the payments to be distributed to Certificateholders under this Agreement or the
Noteholders under the Indenture, including without limitation, the existence and
contents of any computer or other record of any Financed Loan; the validity of
the assignment of any Financed Loan to the Trust; the completeness of any
Financed Loan; the performance or enforcement (except as expressly set forth in
any Basic Document) of any Financed Loan; the compliance by the Administrator or
Depositor or the Indenture Trustee with any warranty or representation or
covenant made under any Basic Document or in any related document or the
accuracy of any such warranty or representation or any action or inaction of the
Depositor, Administrator or the Indenture Trustee taken in the name of the Owner
Trustee; and the failure of the Financed Loans to be serviced in conformity with
the Servicing Agreement.
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SECTION 7.7. Owner Trustee May Own Certificates and Notes. The Owner
Trustee in its individual or any other capacity may become the owner or pledgee
of the Certificates or Notes and may deal with the Depositor, the Administrator
and the Indenture Trustee and the Servicer in banking or trust transactions with
the same rights as it would have if it were not Owner Trustee, including serving
as a trustee of other trusts dealing in any student loans, including trusts
which purchase student loans from the Trust.
ARTICLE VIII
Compensation of Owner Trustee
SECTION 8.1. Owner Trustee's Fees and Expenses. The Owner Trustee shall
receive as compensation for its services, a fee equal to the amount agreed upon
in writing between the Administrator and the Owner Trustee at the times set
forth in the Administration Agreement and the Owner Trustee shall be entitled to
be reimbursed by the Depositor or the Administrator for all reasonable
out-of-pocket expenses incurred by it hereunder.
SECTION 8.2. Payments to the Owner Trustee. Any amount paid to the
Owner Trustee for services rendered pursuant to Section 8.1 hereof or pursuant
to the Administration Agreement shall be deemed not to be a part of the Trust
Estate immediately after such payment.
ARTICLE IX
Termination of Trust Agreement
SECTION 9.1. Termination of Trust Agreement.
(a) This Trust Agreement and the Trust shall terminate upon
the earlier of (i) the final distribution by the Owner Trustee of all
moneys or other property or proceeds of the Trust Estate in accordance
with the terms of the Indenture, any related Terms Supplement, the
Administration Agreement, Article V herein and any Trust Supplement,
whether at the Certificate Maturity Date or otherwise, (ii) the
expiration of 21 years from the death of the last survivor of the
descendants of Joseph P. Kennedy, the late Ambassador of the United
States to the Court of St. James, living on the date hereof, and (iii)
the time provided in Section 9.2. The bankruptcy, liquidation,
dissolution, death or incapacity of any Certificateholder, other than
the Depositor as described in Section 9.2, shall not (x) operate to
terminate this Agreement or the Trust, nor (y) entitle such
Certificateholder's legal representatives or heirs to claim an
accounting or to take any action or proceeding in any court for a
partition or winding up of all or any part of the Trust or Trust Estate
nor (z) otherwise affect the rights, obligations and liabilities of the
parties hereto.
(b) Except as provided in Section 9.1(a), neither the
Depositor, NMELC nor any Certificateholder shall be entitled to revoke
or terminate the Trust.
(c) Notice of any termination of the Trust, specifying the
Distribution Date upon which the Certificateholders shall surrender
their Certificates to the Certificate Paying Agent for payment of the
final distribution and cancellation, shall be given promptly by the
Owner Trustee by letter to Certificateholders mailed within five
Business Days of receipt of notice of such termination from the
Administrator given pursuant to the Administration Agreement, stating
(i) the Distribution Date upon which final payment of the Certificates
shall be made upon presentation and surrender
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of the Certificates at the office of the Certificate Paying Agent
therein designated, (ii) the amount of any such final payment and (iii)
that the Record Date otherwise applicable to such Distribution Date is
not applicable, payments being made only upon presentation and
surrender of the Certificates at the office of the Certificate Paying
Agent therein specified. The Owner Trustee shall give such notice to
the Certificate Registrar (if other than the Owner Trustee) and the
Certificate Paying Agent at the time such notice is given to
Certificateholders. Upon presentation and surrender of the
Certificates, the Certificate Paying Agent shall cause to be
distributed to Certificateholders amounts distributable on such
Distribution Date pursuant to Section 5.1 and any related Trust
Supplement. Certificates shall cease to accrue any interest as of the
termination date of the Trust.
In the event that all the Certificateholders shall not
surrender their Certificates for cancellation within six months after
the date specified in the above-mentioned written notice, the Owner
Trustee shall give a second written notice to the remaining
Certificateholders to surrender their Certificates for cancellation and
receive the final distribution with respect thereto. If within one year
after the second notice all the Certificates shall not have been
surrendered for cancellation, the Owner Trustee may take appropriate
steps, or may appoint an agent to take appropriate steps, to contact
the remaining Certificateholders concerning surrender of their
Certificates, and the cost thereof shall be paid out of the funds and
other assets that shall remain subject to this Agreement. Any funds
remaining in the Trust after exhaustion of such remedies and no later
than five years after the first such notice shall be distributed by the
Owner Trustee promptly to the Depositor and NMELC in proportion to the
amount of the Certificates issued to the Depositor and NMELC pursuant
to Section 3.10.
SECTION 9.2. Dissolution upon Insolvency of the Depositor.
Notwithstanding the provisions of Chapter 182 of the Massachusetts General Laws,
if an Insolvency Event shall occur with respect to the Depositor, (i) the Trust
created hereunder shall dissolve and (ii) this Agreement shall be terminated in
accordance with Section 9.1 90 days after the date of such Insolvency Event,
unless, before the end of such 90-day period, the Owner Trustee shall have
received written instructions from the Certificateholders (other than the
Depositor and NMELC) representing more than half of the Certificate Balance (not
including the Certificate Balance of Certificates held by the Depositor and
NMELC), to the effect that each such party disapproves of the liquidation of the
Financed Loans and termination of the Trust, in which event the Trust shall
continue in accordance with the Basic Documents. Promptly after the occurrence
of any Insolvency Event which respect to the Depositor, (i) the Depositor shall
give the Indenture Trustee, the Owner Trustee and each Rating Agency written
notice of such Insolvency Event and (ii) the Owner Trustee shall, upon the
receipt of such written notice from the Depositor, give prompt written notice to
the Certificateholders and the Indenture Trustee, of the occurrence of such
event; provided, however, that any failure to give a notice required by this
sentence shall not prevent or delay, in any manner, a termination of the Trust
pursuant to the first sentence of this Section 9.2. Upon a termination of the
Trust pursuant to this Section 9.2, the Owner Trustee shall direct the Indenture
Trustee promptly to sell the assets of the Trust (other than the Trust Funds and
Accounts) in a commercially reasonable manner and on commercially reasonable
terms. The proceeds of such a sale of the assets of the Trust shall be deposited
in the Revenue Fund.
ARTICLE X
Successor Owner Trustees and Additional Owner Trustees
SECTION 10.1. Eligibility Requirements for Owner Trustee. The Owner
Trustee shall at all times be a corporation or association being authorized to
exercise corporate trust powers and hold legal title to the Financed Loans. If
the Owner Trustee shall publish reports of condition at least annually, pursuant
to law
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or to the requirements of the aforesaid supervising or examining authority, then
for the purpose of this Section 10.1, the combined capital and surplus of the
Owner Trustee shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published. In case at any time
the Owner Trustee shall cease to be eligible in accordance with the provisions
of this Section 10.1, the Owner Trustee shall resign immediately in the manner
and with the effect specified in Section 10.2.
SECTION 10.2. Resignation or Removal of Owner Trustee. The Owner
Trustee may at any time resign and be discharged from the trusts hereby created
by giving written notice thereof to the Administrator and the Depositor. The
Depositor may dismiss the Owner Trustee or any co-paying agent at any time for
its failure to act in accordance with the terms of this Agreement; provided,
however, that prior to any such dismissal, the Depositor shall have given the
Owner Trustee or the co-paying agent, as the case may be, notice identifying
such failure, and shall have given the Owner Trustee or the co-paying agent, as
the case may be, two Business Days to cure such failure, if such failure relates
to the distribution of funds to Certificateholders, and 30 days to cure all
other failures. Upon receiving such notice of resignation or dismissal, the
Depositor shall promptly appoint a successor Owner Trustee meeting the
eligibility requirements of Section 10.1 by written instrument, in duplicate,
one copy of which instrument shall be delivered to the resigning Owner Trustee
and one copy to the successor Owner Trustee. If no successor Owner Trustee shall
have been so appointed and have accepted appointment within 30 days after the
giving of such notice of resignation or dismissal, the resigning or dismissed
Owner Trustee, as the case may be, may petition any court of competent
jurisdiction for the appointment of a successor Owner Trustee; provided,
however, that such right to appoint or to petition for the appointment of any
such successor shall in no event relieve the resigning or dismissed Owner
Trustee, as the case may be, from any obligations otherwise imposed on it under
the Basic Documents until such successor has in fact assumed such appointment.
If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 10.1 and shall fail to resign after
written request therefor by the Depositor, or if at any time an Insolvency Event
with respect to the Owner Trustee shall have occurred and be continuing, then
the Depositor may remove the Owner Trustee. If the Depositor shall remove the
Owner Trustee under the authority of the immediately preceding sentence, the
Depositor shall promptly appoint a successor Owner Trustee by written
instrument, in duplicate, one copy of which instrument shall be delivered to the
outgoing Owner Trustee so removed and one copy to the successor Owner Trustee
and payment of all fees owed to the outgoing Owner Trustee.
Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section shall
not become effective until acceptance of appointment by the successor Owner
Trustee pursuant to Section 10.3 and payment of all fees and expenses owed to
the outgoing Owner Trustee. The Administrator shall provide notice of such
resignation or removal of the Owner Trustee to each of the Rating Agencies.
SECTION 10.3. Successor Owner Trustee. Any successor Owner Trustee
appointed pursuant to Section 10.2 shall execute, acknowledge and deliver to the
Depositor, the Administrator and to its predecessor Owner Trustee an instrument
accepting such appointment under this Agreement, and thereupon the resignation
or removal of the predecessor Owner Trustee shall become effective and such
successor Owner Trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties, and obligations of its
predecessor under this Agreement, with like effect as if originally named as
Owner Trustee. The predecessor Owner Trustee shall upon payment of its fees and
expenses deliver to the successor Owner Trustee all documents, statements,
moneys and properties held by it under this Agreement and the Administrator and
the predecessor Owner Trustee shall execute and deliver such
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instruments and do such other things as may reasonably be required for fully and
certainly vesting and confirming in the successor Owner Trustee all such rights,
powers, duties and obligations.
No successor Owner Trustee shall accept appointment as provided in this
Section 10.3 unless at the time of such acceptance such successor Owner Trustee
shall be eligible pursuant to Section 10.1 and shall have made the
representations and warranties set forth in Section 7.3 to the Depositor, for
the benefit of the Certificateholders.
Upon acceptance of appointment by a successor Owner Trustee pursuant to
this Section, the Administrator shall mail notice of the successor of such Owner
Trustee to all Certificateholders, the Indenture Trustee, the Noteholders, and
the Rating Agencies. If the Administrator shall fail to mail such notice within
10 days after acceptance of appointment by the successor Owner Trustee, the
successor Owner Trustee shall cause such notice to be mailed at the expense of
the Administrator.
SECTION 10.4. Merger or Consolidation of Owner Trustee Any corporation
into which the Owner Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Owner Trustee shall be a party, or any corporation
succeeding to all or substantially all the corporate trust business of the Owner
Trustee, shall, without the execution or filing of any instrument or any further
act on the part of any of the parties hereto, anything herein to the contrary
notwithstanding, be the successor of the Owner Trustee hereunder; provided that
such corporation shall be eligible pursuant to Section 10.1; provided further
that the Owner Trustee shall mail notice of such merger or consolidation to the
Rating Agencies.
SECTION 10.5. Appointment of Co-Owner Trustee or Separate Owner
Trustee. Notwithstanding any other provisions of this Agreement, at any time,
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Trust may at the time be located, the Depositor and the Owner
Trustee acting jointly shall have the power and shall execute and deliver all
instruments to appoint one or more persons approved by the Owner Trustee meeting
the eligibility requirements of clauses (i) and (ii) of Section 10.1, to act as
co-trustee, jointly with the Owner Trustee, or separate trustee or separate
trustees, of all or any part of the Trust Estate, and to vest in such person, in
such capacity, such title to the Trust Estate, or any part thereof, and, subject
to the other provisions of this Section, such powers, duties, obligations,
rights and trusts as the Depositor and the Owner Trustee may consider necessary
or desirable. If the Depositor shall not have joined in such appointment within
15 days after the receipt by it of a request so to do, the Owner Trustee alone
shall have the power to make such appointment. No co-trustee or separate trustee
under this Agreement shall be required to meet the terms of eligibility as a
successor trustee pursuant to clauses (iii), (iv) and (v) of Section 10.1 and no
notice of the appointment of any co-trustee or separate trustee shall be
required pursuant to Section 10.3. The expenses incurred in connection with the
retention of any co-trustee shall be deemed an expense of the Trust to be borne
by the Depositor.
Each separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Owner Trustee shall be conferred upon and exercised or
performed by the Owner Trustee and such separate trustee or co-trustee
jointly (it being understood that such separate trustee or co-trustee
is not authorized to act separately without the Owner Trustee joining
in such act) except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed,
the Owner Trustee shall be incompetent or unqualified to perform such
act or acts, in which event such rights, powers, duties, and
obligations (including the holding of title to the Trust or any portion
thereof in
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any such jurisdiction) shall be exercised and performed singly by such
separate trustee or co-trustee, solely at the direction of the Owner
Trustee;
(ii) no trustee under this Agreement shall be personally
liable by reason of any act or omission of any other trustee under this
Agreement; and
(iii) the Depositor and the Owner Trustee acting jointly may
at any time accept the resignation of or remove any separate trustee or
co-trustee.
Any notice, request or other writing given to the Owner Trustee shall
be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article X. Each separate trustee and co-trustee, upon its
acceptance of the trusts conferred, shall be vested with the estates or property
specified in its instrument of appointment, either jointly with the Owner
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Owner Trustee. Each such instrument shall be filed with the Owner
Trustee and a copy thereof given to the Administrator and to the Depositor.
Any separate trustee or co-trustee may at any time appoint the Owner
Trustee as its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustees
shall die, become incapable of acting, resign or be removed, all its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Owner Trustee, to the extent-permitted by law, without the appointment of a new
or successor trustee.
ARTICLE XI
Miscellaneous
SECTION 11.1. Supplements and Amendments.
(a) This Agreement, including the Exhibits hereto, may be
amended by the Depositor and the Owner Trustee, with prior written
notice to the Rating Agencies, without the consent of any of the
Noteholders or the Certificateholders, (i) to cure any ambiguity, (ii)
to change the registered office of the Trust in Massachusetts set forth
in Section 2.2 hereof, (iii) to correct or supplement any provisions in
this Agreement or for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions in this
Agreement or of modifying in any manner the rights of the Noteholders
or the Certificateholders; provided, however, that such action shall
not, as evidenced by an Opinion of Counsel, adversely affect in any
material respect the interests of any Noteholder or Certificateholder.
(b) This Agreement may also be amended from time to time by
the Depositor and the Owner Trustee, with prior written notice to the
Rating Agencies, (i) with the consent of the Noteholders of Notes
evidencing not less than a majority of the Outstanding Amount of the
Notes and (ii) with the consent of the Certificateholders of
Certificates evidencing not less than a majority of the Certificate
Balance for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of the Noteholders or the
Certificateholders; provided, however, that no such amendment shall (a)
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increase or reduce in any manner the amount of, or accelerate or delay
the timing of, collections of payments on Financed Loans or
distributions that shall be required to be made for the benefit of the
Noteholders or the Certificateholders, (b) reduce the aforesaid
percentage of the Outstanding Amount of the Notes and the Certificate
Balance required to consent to any such amendment, without the consent
of all the outstanding Noteholders and Certificateholders or (c) modify
Sections 2.7 or 3.10 or the last sentence of Section 3.2, or any other
Sections without an Opinion of Counsel that such amendment will not
cause the Trust to be taxed as a corporation.
Promptly after the execution of any such amendment or consent,
the Owner Trustee shall furnish written notification of the substance
of such amendment or consent to each Certificateholder, the Indenture
Trustee and each of the Rating Agencies.
It shall not be necessary for the consent of the
Certificateholders, the Noteholders or the Indenture Trustee pursuant
to this Section to approve the particular form of any proposed
amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consents
(and any other consents of Certificateholders provided for in this
Agreement or in any other Basic Document) and of evidencing the
authorization of the execution thereof by Certificateholders shall be
subject to such reasonable requirements as the Owner Trustee may
prescribe.
(c) Prior to the execution of any amendment to this Agreement,
the Owner Trustee shall be entitled to receive and rely upon an Opinion
of Counsel stating that the execution of such amendment is authorized
or permitted by this Agreement. The Owner Trustee may, but shall not be
obligated, to enter into any such amendment which affects the Owner
Trustee's own rights, duties or immunities under this Agreement or
otherwise.
(d) Notwithstanding anything to the contrary contained in this
Section 11.1, or elsewhere in this Agreement, without the consent of
any Certificateholders but with prior notice by the Depositor to the
Rating Agencies, the Depositor and the Owner Trustee (upon written
direction from the Depositor), at any time and from time to time, may
enter into one or more Trust Supplements to authorize and set forth the
terms of any Class of Certificates that have not theretofore been
authorized by a Trust Supplement.
SECTION 11.2. No Legal Title to Trust Estate in Certificateholders. The
Certificateholders shall not have legal title to any part of the Trust Estate.
The Certificateholders shall be entitled to receive distributions with respect
to their undivided beneficial ownership interest therein only in accordance with
Articles V and IX. No transfer, by operation of law or otherwise, of any right,
title, or interest of the Certificateholders to and in their beneficial
ownership interest in the Trust Estate shall operate to terminate this Agreement
or the trusts hereunder or entitle any transferee to an accounting or to the
transfer to it of legal title to any part of the Trust Estate.
SECTION 11.3. Limitations on Rights of Others. Except for Section 2.7,
the provisions of this Agreement are solely for the benefit of the Owner
Trustee, the Depositor, NMELC, the Certificateholders, the Administrator and, to
the extent expressly provided herein, the Indenture Trustee and the Noteholders,
and nothing in this Agreement (other than Section 2.7), whether express or
implied, shall be construed to give to any other person any legal or equitable
right, remedy or claim in the Trust Estate or under or in respect of this
Agreement or any covenants, conditions or provisions contained herein.
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SECTION 11.4. Notices.
(a) Unless otherwise expressly specified or permitted by the terms
hereof, all notices shall be in writing and shall be deemed given upon receipt
by the intended recipient or three Business Days after mailing if mailed by
certified mail, postage prepaid (except that notice to the Owner Trustee shall
be deemed given only upon actual receipt by the Owner Trustee), if to the Owner
Trustee, addressed to its Corporate Trust Office at One Federal Street, Boston,
Massachusetts, 02211, telefax: 617/346-5501; if to the Depositor, addressed to
50 Braintree Hill Park, Suite 300, Braintree, Massachusetts, 02184, telefax:
617/380-3915; or, as to each party, at such other address or facsimile number as
shall be designated by such party in a written notice to each other party.
(b) Any notice required or permitted to be given to a Certificateholder
shall be given (i) by first-class mail, postage prepaid, at the address of such
Certificateholder as shown in the Certificate Register, or (ii) by facsimile if
the Certificate Register contains a facsimile number for such Certificateholder.
Any notice so mailed or sent by facsimile within the time prescribed in this
Agreement shall be conclusively presumed to have been duly given, whether or not
the Certificateholder receives such notice.
SECTION 11.5. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 11.6. Separate Counterparts. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 11.7. Successors and Assigns. All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, the
Depositor, and its successors, NMELC, and its successors, and the Owner Trustee
and its successors, each Certificateholder and its successors and permitted
assigns, all as herein provided. Any request, notice, direction, consent, waiver
or other instrument or action by a Certificateholder shall bind the successors
and assigns of such Certificateholder.
SECTION 11.8. No Petition.
(a) The Depositor and NMELC will not at any time institute against the
Trust any bankruptcy proceedings under any Federal or state bankruptcy or
similar law in connection with any obligations relating to the Certificates, the
Notes, this Agreement or any of the other Basic Documents.
(b) The Owner Trustee (not in its individual capacity but solely as
Owner Trustee), by entering into this Agreement, and each Certificateholder, by
accepting a Certificate, hereby covenant and agree that they will not at any
time institute against the Depositor or the Trust, or join in any institution
against the Depositor or the Trust of any bankruptcy, reorganization,
arrangement, insolvency, receivership or liquidation proceedings, or other
proceedings under any Federal or state bankruptcy or similar law in connection
with any obligations relating to the Certificates or the Notes, this Agreement
or any of the other Basic Documents.
SECTION 11.9. No Recourse. Each Certificateholder by accepting a
Certificate acknowledges that such Certificateholder's Certificates represent
beneficial interests in the Trust only and do not represent interests in or
obligations of the Depositor, NMELC, the Administrator, the Owner Trustee, the
Indenture
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<PAGE> 30
Trustee or any affiliate thereof or any officer, director or employee of any
thereof and no recourse may be had against such parties or their assets, except
as may be expressly set forth in this Agreement, the Certificates or the other
Basic Documents.
SECTION 11.10. Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 11.11. Governing Law. This Agreement shall be construed in
accordance with the laws of the Commonwealth, without reference to its conflict
of law provisions, and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws.
SECTION 11.12. Creation of Trust and Delivery of Trust Agreement. This
Trust Agreement shall be deemed for all purposes executed and delivered at the
Owner Trustee's corporate trust office in the City of Boston, Massachusetts and
the Trust shall be created and effective upon delivery of this Trust Agreement
executed by the Depositor to such office and acceptance thereof by the Owner
Trustee at such office, which acceptance shall be evidenced conclusively by the
Owner Trustee's execution hereof.
Fleet National Bank acts solely as Owner Trustee and not in its
individual capacity and no trustee, employee, shareholder, officer or agent of
Fleet National Bank shall be held personally liable in connection with the
affairs of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement
to be duly executed by their respective officers hereunto duly authorized, as of
the day and year first above written.
FLEET NATIONAL BANK, not in
its individual capacity
but solely as owner trustee
By
---------------------------------
Name:
Title:
NELLIE MAE EDUCATION FUNDING , LLC,
as Depositor
By
---------------------------------
Name:
Title:
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<PAGE> 31
EXHIBIT A
DEFINITIONS AND USAGE
Definitions
"Account" shall mean any of the accounts established by the Indenture.
"Acquisition Account" shall mean the Account so designated and
established in the Student Loan Acquisition Fund by Section 4.3 of the
Indenture.
"Additional Financed Loans" shall mean the Financed Loans to be
transferred to the Owner Trustee during a Funding Period pursuant to the related
Sales Agreement, each of which will be listed on Schedule A to the related
Transfer Agreement.
"Administration Account" shall mean the Account so designated and
established in the Services Fund by Section 4.7 of the Indenture.
"Administration Agreement" shall mean the Administration Agreement
dated as of June 1, 1996, among the Issuer, the Owner Trustee, the Indenture
Trustee and the Administrator, as amended from time to time.
"Administrator Default" shall have the meaning specified in the
Administration Agreement.
"Administration Fee" shall mean, as of any date of calculation, the sum
owed to the Administrator pursuant to the terms of the Administration Agreement.
"Administration Requirement" shall mean, as of any date of calculation
and with respect to a particular Series, the Administrative Expenses due as of
such date with respect to such Series.
"Administrative Expenses" shall mean the fees and expenses of the
Indenture Trustee, the Owner Trustee, the Authenticating Agent, the
Administrator and the Servicer, provided, however, that the fees and expenses
described shall not exceed any amount specified in the related Terms Supplement.
"Administrator" shall mean Nellie Mae, Inc., a Massachusetts non-profit
corporation, or any successors or assigns.
"Affiliate" shall mean, with respect to any specified person, any other
person controlling or controlled by or under common control with such specified
person. For the purposes of this definition, "control," when used with respect
to any specified person, shall mean the power to direct the management and
policies of such person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise, and the terms "controlling" and
"controlled" shall have meanings correlative to the foregoing.
"Authenticating Agent" shall mean the Indenture Trustee and any bank,
trust company or other financial institution designated by the Indenture Trustee
as authenticating agent for the Indenture Trustee hereunder, or any successor or
successors thereto appointed pursuant to Section 6.8 of the Indenture.
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"Authorized Denominations" shall mean, with respect to the initial
offering of the Securities, $20,000 or any integral multiple thereof, and in all
other respects shall mean $1,000 or any integral multiple thereof.
"Authorized Officer," when used with reference to the Issuer, shall
mean any officer of the Owner Trustee or the Administrator, as applicable, in
matters relating to the Issuer and who is identified on the list of Authorized
Officers delivered by the Owner Trustee to the Indenture Trustee on the Closing
Date relating to the initial issuance of a Series of Notes.
"Balances" when used with reference to any Account or Fund shall mean
the sum of the following assets in or deposited to the credit of such Account or
Fund: (i) Investment Securities computed at the Value of Investment Securities;
(ii) Financed Loans computed at the Outstanding balance of their principal
amounts plus accrued but unpaid interest; and (iii) lawful money of the United
States.
"Basic Documents" shall mean the Trust Agreement, the Indenture, each
Terms Supplement, each Trust Supplement, the Sales Agreement, the Purchase
Agreement, the Administration Agreement, the Servicing Agreement and other
documents and certificates to be delivered in connection therewith and all
amendments and supplements thereto.
"Benefit Plan" shall mean any (i) employee benefit plan (as defined in
Section 3(3) of ERISA) which is subject to the provisions of Title I of ERISA,
(ii) plans described in Section 4975 (e)(1) of the Code, including individual
retirement accounts described in Section 408(a) of the Code or Keogh plans or
(iii) or any entity (including an insurance company general account) whose
underlying assets include plan assets by reason of a plan's investment in such
entity.
"Book-Entry Certificate" shall mean a beneficial interest in the
Certificates, ownership and transfer of which shall be made through book entries
by a Securities Depository as described in Section 3.11 of the Trust Agreement.
"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which banks in the City of Boston, Massachusetts, or New York, New
York are required or authorized by law or executive order to close.
"Capitalized Interest" shall mean all interest which has been accrued
but not paid on Financed Loans for which the borrower is entitled to elect, and
has elected, to defer payments of principal of and interest on such Loan.
"Certificate" shall mean a certificate evidencing the beneficial
interest of a Certificateholder in the Trust, substantially in the form of
Exhibit B to the Trust Agreement.
"Certificate Balance" shall equal, initially, the Initial Certificate
Balance and, thereafter, shall equal the Initial Certificate Balance increased
by the principal balance of each subsequent Class of Certificates issued
pursuant to a Trust Supplement and reduced by all amounts allocable to principal
previously distributed to Certificateholders. Notwithstanding the foregoing,
where any provision of the Trust Agreement or a Trust Supplement permits or
authorizes Certificateholders holding a specified percentage or amount of the
Certificate Balance to take any action or grant any approval, the holders of the
Certificates shall be deemed to have a Certificate Balance equal to 99%.
"Certificate Fund" shall mean the fund so designated and established by
Section 5.1 of the Trust Agreement.
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"Certificate Interest Account" shall mean the Account so designated and
established in the Certificate Fund by Section 5.1 of the Trust Agreement.
"Certificate Owner" shall mean, with respect to a Book-Entry
Certificate, the person who is the beneficial owner of such Book-Entry
Certificate, as reflected on the books of the Securities Depository, or on the
books of a person maintaining an account with such Securities Depository
(directly as a Securities Depository Participant or as an indirect participant,
in each case in accordance with the rules of such Securities Depository).
"Certificate Paying Agent" shall mean any paying agent or co-paying
agent appointed pursuant to Section 3.9 of the Trust Agreement, which shall
initially be the Owner Trustee.
"Certificate Payment Account" shall mean the Account so designated and
established in the Certificate Fund by Section 5.1 of the Trust Agreement.
"Certificate Interest Rate" shall mean, with respect to any Class of
Certificates, the per annum rate determined as set forth in the related Trust
Supplement.
"Certificate Register" and "Certificate Registrar" shall mean the
register and the registrar appointed pursuant to the Trust Agreement.
"Certificateholder" shall mean a person in whose name a Certificate is
registered in the Certificate Register.
"Certification," "Instruction," "Order," "Request" or "Requisition" of
the Issuer, as the case may be, shall mean, respectively, a certification,
direction, instruction, order, request or requisition which shall, unless
otherwise specifically provided herein, be in writing and signed in the name of
the Issuer by an Authorized Officer.
"Class" shall mean, (i) with respect to any Series of Notes, all Notes
of such Series whose final installment of principal has the same Maturity Date
and (ii) with respect to the Certificates, all Certificates whose final
installment of principal has the same Maturity Date.
"Closing Date" shall mean, with respect to Certificates, the date
identified as such in the related Trust Supplement and, with respect to Notes,
the date identified as such in the related Terms Supplement.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and Treasury Regulations promulgated thereunder.
"Collector" shall mean the Administrator or collection agency retained
by the Administrator to collect amounts outstanding on Financed Loans upon
acceleration after default.
"Commonwealth" shall mean The Commonwealth of Massachusetts.
"Cost of Issuance Account" shall mean the Account so designated and
established in the Services Fund by Section 4.7 of the Indenture.
"Costs of Issuance" for each Series of Notes or Certificates shall mean
all items of expense allocable to the authorization, issuance, sale and delivery
of such Series of Notes or Certificates, including without limitation costs of
planning and feasibility studies, costs of financial advisory, legal, accounting
and
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management services and services of other consultants and professionals and
related charges, fees and disbursements, costs of preparation and reproduction
of documents, costs of preparation and printing of any offering document
relating to the Notes or Certificates, advertising and printing costs, filing
and recording fees, any initial fees and charges of the Indenture Trustee,
Authenticating Agent or Owner Trustee, rating agency fees, costs of preparation,
execution, transportation and safekeeping of Notes or Certificates, and any
other costs, charges or fees incurred in connection with the issuance of the
Notes or Certificates.
"Cumulative Default Rate," with respect to any Series, shall have the
meaning set forth in the related Terms Supplement.
"Custodian," shall mean USA Loan Services, Inc., a Delaware
corporation, its corporate successor or assigns and any other organization with
which the Indenture Trustee and the Issuer have entered into or will enter into
in a custody agreement.
"Custody Agreement" shall mean the agreement to be entered into among
the Indenture Trustee, the Custodian and the Issuer regarding the custody of the
promissory notes signed by the obligors of the Financed Loans.
"Debt Service Reserve Fund" shall mean the fund so designated and
established by Section 4.2 of the Indenture.
"Defaulted Loan" shall mean a Financed Loan which is more than 180 days
delinquent in payment of principal or interest.
"Deferred Interest" with respect to each Series and Class of Notes
shall have the meaning set forth in the related Terms Supplement and with
respect to each Class of Certificates shall have the meaning set forth in the
related Trust Supplement.
"Definitive Certificates" shall have the meaning specified in Section
3.13 of the Trust Agreement.
"Depositor" shall mean the Seller in its capacity as depositor under
the Trust Agreement.
"Distribution Date" shall mean as to each Series and Class of Notes and
to each Class of Certificates, the fifteenth (15th) day of each month.
"Dollar" and "$" shall mean the lawful currency of the United States of
America.
"DTC Representation Letter" shall have the meaning set forth in Section
2.12 of the Indenture.
"Event of Default" shall have the meaning specified in Section 7.1 of
the Indenture.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Financed Loan" shall mean any Loan which, from time to time, is
assigned by the Issuer to the Indenture Trustee to serve as security for the
payment of all amounts due to Noteholders under the Notes and included in the
Student Loan Portfolio Fund. The initial Financed Loans subject to the lien of
the Indenture shall be listed on the Schedule of Financed Loans set forth in
Schedule A to the Sales Agreement. The Financed Loans to be pledged by the
Issuer to the Indenture Trustee in connection with the issuance of
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<PAGE> 35
each additional Series of Notes shall be listed on the Schedule of Financed
Loans appearing on Schedule A to the related Supplemental Sales Agreement. A
master Schedule of Financed Loans listing all Financed Loans shall be maintained
by the Issuer. Each Schedule of Financed Loans shall be amended from time to
time by the Issuer to reflect accurately the Financed Loans then subject to the
lien of the Indenture.
"Fitch" shall mean Fitch Investors Service, Inc. (whose address is One
State Street Plaza, New York, New York 10004) and its corporate successors.
"Fund" shall mean any of the Funds established by the Indenture or the
Trust Agreement.
"Funding Period," with respect to each Series, shall have the meaning
set forth in the related Terms Supplement.
"Guarantor" shall mean TERI or Penn, as applicable or any other
guarantor as specified in the related Terms Supplement; provided that the Trust
shall notify the Rating Agencies prior to entering into any other guaranty
agreement.
"Guaranty Agreement" shall mean the TERI Guaranty Agreement or the Penn
Guaranty Agreement, as applicable, including, in either case, any supplement or
amendment thereto entered into in accordance with the provisions thereof, or any
other guaranty agreement as specified in the related Terms Supplement.
"Holder" or "Holders" shall mean a registered owner of the Notes or the
Certificates, as the context requires.
"Indenture" shall mean the Master Indenture and any Terms Supplement,
each as from time to time amended or supplemented with respect to which the
Notes issued thereunder are still Outstanding.
"Indenture Trust Estate" shall mean (i) all Revenues; (ii) the Balances
on deposit in all subaccounts, Accounts and Funds (whether derived from proceeds
of sale of the Notes, from Revenues or from any other source, excluding the
Certificate Fund); (iii) all rights, title, interest and privileges of the
Issuer as owner of the Financed Loans in and to (a) the Financed Loans,
including all promissory notes evidencing the indebtedness for Financed Loans
and all related documentation, and all rights of the Issuer to receive any and
all payments of any nature and from any source with respect to the Financed
Loans, (b) each Guaranty Agreement insofar as it relates to Financed Loans, (c)
the Administration Agreement, (d) the Servicing Agreement and (e) any Sales
Agreements with the Seller with respect to the Financed Loans; (iv) all products
and proceeds of any of the foregoing; and (v) all other property of every kind
and nature which is now or from time to time hereafter pledged, assigned or
transferred as and for security hereunder to the Indenture Trustee by the Issuer
or by anyone on its behalf.
"Indenture Trustee" shall mean State Street Bank and Trust Company, a
Massachusetts trust company, not in its individual capacity but solely as
Indenture Trustee under the Indenture.
"Independent" shall mean, when used with respect to any specified
person, that the person (a) is in fact independent of the Issuer, any other
obligor upon the Notes, the Seller and any Affiliate of any of the foregoing
persons, (b) does not have any direct financial interest or any material
indirect financial interest in the Issuer, any such other obligor, the Seller or
any Affiliate of any of the foregoing persons and (c) is not connected with the
Issuer, any such other obligor, the Seller or any Affiliate of any of the
foregoing persons as an officer, employee, promoter, underwriter, trustee,
partner, director or person performing similar functions.
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"Independent Certificate" shall mean a certificate or opinion to be
delivered to the Indenture Trustee under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 11.10 of the
Indenture, made by an Independent appraiser or other expert appointed by an
Issuer Order and approved by the Indenture Trustee in the exercise of reasonable
care, and such opinion or certificate shall state that the signer has read the
definition of "Independent" and that the signer is Independent within the
meaning thereof.
"Initial Certificate Balance" shall mean, with respect to any Class of
Certificates, the amount identified as such in the related Trust Supplement.
"Initial Certificate Interest Rate" shall mean, with respect to each
Class of Certificates, the rate identified as such in the related Trust
Supplement.
"Initial Note Interest Rate" shall mean, with respect to each Class of
Notes, the rate identified as such in the related Terms Supplement.
"Initial Period" shall mean, as to any Class of Notes and Class of
Certificates, the period commencing on the Closing Date and continuing with
respect to each Class of Notes, through the day immediately preceding the
Initial Rate Adjustment Date for such Class of Notes, and with respect to each
Class of Certificates, through the day immediately preceding the Initial Rate
Adjustment Date for such Class of Certificates.
"Initial Pool Balance" shall mean, with respect to any Series, the sum
of the related Pool Balance as of the Closing Date, plus the principal balance
of each Additional Financed Loan purchased by the Issuer on each Transfer Date
during the related Funding Period.
"Initial Rate Adjustment Date" shall mean, as to any Class of Notes,
the date specified in the related Terms Supplement, and with respect to any
Class of Certificates, the date specified in the related Trust Supplement.
"Insolvency Event" means, with respect to a specified person, (a) the
filing or entry of a decree or order for relief by a court having jurisdiction
in the premises in respect of such person or any substantial part of its
property in an involuntary case under any applicable Federal or state
bankruptcy, insolvency or other similar law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official for such person or any substantial part of its property, or
ordering the winding-up or liquidation of such person's affairs, and such decree
or order shall remain unstayed and in effect for a period of 60 consecutive
days; or (b) the commencement by such person of a voluntary case under any
applicable Federal or state bankruptcy, insolvency or other similar law now or
hereafter in effect, or the consent by such person to the entry of an order for
relief in an involuntary case under such law, or the consent by such person to
the appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for such person or any
substantial part of its property, or the making by such person any general
assignment for the benefit of creditors, or the failure by such person generally
to pay its debts as such debts become due, or the taking of action by such
person in furtherance of any of the foregoing.
"Interest Period" shall mean, as to each Series and Class of Notes and
each Class of Certificates, the Initial Period and thereafter each period
commencing on a Rate Adjustment Date and ending on the day before the next Rate
Adjustment Date.
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"Interest Rate" shall mean, with respect to each Class of Notes, the
rate of interest per annum borne by such Class of Notes as set forth in the
related Terms Supplement, and with respect to each Class of Certificates, the
rate of interest per annum borne by such Class of Certificates as set forth in
the related Trust Supplement.
"Investment Securities" shall mean any of the following:
(a) direct obligations of, or obligations on which the timely
payment of the principal of and interest on which are unconditionally
and fully guaranteed by, the United States of America;
(b) interest-bearing time or demand deposits, certificates of
deposit or other similar banking arrangements with any bank, trust
company, national banking association or other depository institution
(including the Indenture Trustee or any of its affiliates), provided
that, at the time of deposit or purchase, (i) if such deposit,
certificate or other arrangement shall be payable in more than one
year, the depository institution shall have senior long-term debt rated
by each Rating Agency in its highest rating category and (ii) if such
deposit, certificate or other arrangement shall be payable in one year
or less, the depository institution shall have short-term debt which is
rated P1 by Moody's (if Moody's is rating such short-term debt) and
F-1+ by Fitch (if Fitch is rating such short-term debt);
(c) bonds, debentures, notes or other evidences of
indebtedness issued or guaranteed by any of the following agencies:
Federal Farm Credit Banks; Federal Home Loan Mortgage Corporation; the
Export-Import Bank of the United States; the Federal National Mortgage
Association; the Tennessee Valley Authority; the Government National
Mortgage Association; the Federal Financing Bank; the Farmers Home
Administration;
(d) with the prior review of the Rating Agencies as to form,
repurchase agreements and reverse repurchase agreements with banks
(which may include the Indenture Trustee or any of its affiliates)
which are members of the Federal Deposit Insurance Corporation, the
outstanding, unsecured long-term debt securities of which are rated Aaa
by Moody's and AAA by Fitch (if Fitch is rating such securities);
(e) overnight repurchase agreements and reverse repurchase
agreements (i) with counterparties the outstanding, unsecured debt
securities of which are rated P1 by Moody's and F1+ by Fitch and (ii)
which are at least 102% collateralized by securities described in
subparagraph (a) of this definition which are held by a third-party
collateral agent in a segregated trust account;
(f) investment agreements or guaranteed investment contracts,
secured by collateral securities or unsecured as the Issuer may
determine, which may be entered into by and among the Issuer, the
Indenture Trustee and any bank, bank holding company, corporation or
any other financial institution whose outstanding, unsecured long term
debt securities are rated AAA by Fitch (if Fitch is rating such
securities) and Aaa by Moody's, or by an insurance company whose
claims-paying ability is so rated, provided further that any such
agreement must:
(i) clearly state the exact entity
guarantor, the value of invested funds guaranteed, the rate of
guaranteed interest, and the termination date;
(ii) contain an unconditional,
irrevocable pledge by the guarantor and be written in favor of
the Indenture Trustee;
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(iii) not be cancelable for failure to
pay any fees or premiums and its enforceability must be
warranted;
(iv) provide that demands for funds be
honored on terms and conditions determined by the Issuer and
the issuer of such agreement and be credited to the Indenture
Trustee in immediately available funds;
(v) clearly establish the basis for
compounding or computation of interest, and provide that all
guaranteed interest accrue to the payment date;
(vi) provide that failure to meet
collateral or other provisions shall result in acceleration of
the agreement at the option of the Issuer or of the Indenture
Trustee acting on behalf of the Issuer and provide that merger
or acquisition of the issuer of the agreement, or assumption
of the obligations of the agreement, with or by another entity
if combined with a credit or claims paying ability rating
downgrade below the standards set forth in this subsection (f)
shall result in acceleration of the agreement at the option of
the Issuer or of the Indenture Trustee acting on behalf of the
Issuer (after confirmation by Moody's and Fitch that such
acceleration will not affect the ratings assigned to the
Notes); and may provide that other designated events relating
to the issuer of the agreement or its parent or any related
entity, if combined with a credit or claims paying ability
rating downgrade below the standards set forth in this
subsection (f) shall result in acceleration of the agreement
at the option of the Issuer (or Indenture Trustee acting on
behalf of the Issuer); and
(vii) be accompanied by an Opinion of
Counsel, on which the Indenture Trustee may conclusively rely,
stating that such agreement satisfies the requirements of
clauses (i) through (vi) above;
(g) any debt instrument rated Aaa by Moody's and AAA by Fitch
(if Fitch is rating such debt instrument);
(h) commercial paper rated P1 by Moody's and F1+ by Fitch (if
Fitch is rating such commercial paper);
(i) shares of a money market or mutual fund, provided that the
fund is rated AAAm or AAAm-G by Moody's and Fitch, (if Fitch is rating
such securities); and
(j) any other investment agreement or guaranteed investment
contract approved in writing by each Rating Agency.
Notwithstanding the foregoing, investments described in
subparagraphs (g) and (h) shall not include any "margin security" as such term
is defined in Regulation T of the Board of Governors of the Federal Reserve
System or any "margin stock" as such term is defined in Regulation G, U or X of
the Board of Governors of the Federal Reserve System.
"Issuer" shall mean the Nellie Mae Education Loan Trust established
under the Trust Agreement until a successor replaces it and, thereafter, shall
mean the successor and, for purposes of any provision contained in the Indenture
and required by the TIA, each other obligor of the Notes.
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"Issuer Order" and "Issuer Request" shall mean a written order or
request signed in the name of the Issuer by any one of its Authorized Officers
and delivered to the Indenture Trustee.
"LIBOR Rate" shall mean, with respect to any Class of Notes or Class of
Certificates, the rate per annum equal to (a) the annual rate of interest
published or reported by the Telerate Service (by reference to the screen page
currently designated as "Page 3750" on that service or such other service as may
be nominated by the British Bankers' Association as the information vendor for
the purpose of displaying British Bankers' Association Interest Settlement Rates
for U.S. dollar deposits) as of 11:00 a.m., London time, on the Rate
Determination Date for a one month period, or (b) if such a rate does not appear
on Telerate Page 3750, the "LIBOR Rate" for the given day shall be the
arithmetic mean of the offered rates for dollar deposits for a one month period
commencing on the Rate Determination Date, which rate appears on Reuters LIBO
Page as of 11:00 a.m., London time, on the Rate Determination Date. If the rate
described above does not appear on Telerate Page 3750 and fewer than two rates
appear on Reuters LIBO Page, the "LIBOR Rate" for the applicable Rate
Determination Date shall be determined in good faith by the Indenture Trustee
from such source as it shall determine to be comparable to Telerate Page 3750
and Reuters LIBO Page.
"LIBOR Rate Certificates" shall mean a Class of Certificates for which
the related Interest Rate is based upon LIBOR.
"LIBOR Rate Notes" shall mean a Class of Notes for which the related
Interest Rate is based upon LIBOR.
"Lien" shall mean a security interest, lien, charge, pledge, equity or
encumbrance of any kind, other than tax liens and other liens, if any, which
attach to the respective Financed Loan by operation of law as a result of any
act or omission.
"Loan" or "Loans" shall mean any loan acquired by the Issuer from the
Seller.
"Master Indenture" shall mean the Master Trust Indenture dated as of
June 1, 1996 between the Issuer and the Indenture Trustee, as amended or
supplemented from time to time.
"Maturity Date" shall mean, as to each Series and Class of Notes, the
stated maturity date identified as such in the related Terms Supplement and, as
to each Class of Certificates, the stated maturity date identified as such in
the related Trust Supplement.
"Minimum Authorized Denomination" shall mean, with respect to the
initial offering of the Securities, $20,000, and in all other respects shall
mean $1,000.
"Moody's" shall mean Moody's Investors Service, Inc. (whose address is
99 Church Street, New York, New York 10007-2796, Attention: ABS Monitoring
Department, and its corporate successors.
"Net Loan Rate" shall mean, with respect to any Series, the rate
identified as such in the related Terms Supplement.
"Noteholder" shall mean any person who shall be the registered owner of
any Note or the duly authorized attorney-in-fact or representative of such
person.
"Note Rate" shall mean, with respect to each Class of Notes, the per
annum rate determined as set forth in the related Terms Supplement.
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"Note Register" and "Note Registrar" have the respective meanings
specified in Section 2.6 of the Indenture.
"Notes" shall mean the Asset-Backed Notes issued pursuant to the Master
Indenture and a related Terms Supplement.
"Note Fund" shall mean the Fund so designated and established by
Section 4.6 of the Indenture.
"Note Interest Account" shall mean the Account so designated and
established in the Note Fund by Section 4.6 of the Indenture.
"Note Payment Account" shall mean the Account so designated and
established in the Note Fund by Section 4.6 of the Indenture.
"Office of the Authenticating Agent" shall mean the Principal Corporate
Trust Operations Office of the Indenture Trustee or any designated
Authenticating Agent.
"Officer's Certificate" shall mean a document signed by an Authorized
Officer of the Issuer either attesting to or acknowledging the circumstances,
representations or other matters therein stated or set forth or directing that
an action be taken by the person to whom such document is addressed.
"Opinion of Counsel" shall mean an opinion in writing of a legal
counsel acceptable to the Issuer, the Indenture Trustee, the Owner Trustee, the
Seller, the Servicer or the Administrator, as applicable.
"Outstanding," (A) when used with respect to Notes, shall refer to any
Notes executed, authenticated, issued and delivered under this Indenture other
than Notes (i) for the transfer or exchange of or in lieu of which other Notes
shall have been authenticated and delivered by the Indenture Trustee pursuant to
the Indenture, (ii) which have been canceled or (iii) which at the time are
deemed not to be Outstanding under the Indenture by reason of the limitation of
Section 6.3 of the Indenture, (B) when used with respect to Certificates, shall
refer to any Certificates executed, authenticated, issued and delivered under
the Trust Agreement other than Certificates (i) for the transfer or exchange of
or in lieu of which other Certificates shall have been authenticated and
delivered by the Owner Trustee pursuant to the Trust Agreement or (ii) which
have been canceled, and (C) when used with respect to Financed Loans, shall mean
the principal balance unpaid as of the applicable date.
"Outstanding Amount" shall mean the aggregate principal amount of all
Notes, or Series or Class of Notes, or all Certificates, or Class of
Certificates, as applicable, Outstanding as of the date of determination.
"Owner Trustee" shall mean Fleet National Bank, a national banking
association, not in its individual capacity but solely as Owner Trustee under
the Trust Agreement.
"Penn" shall mean The Trustees of the University of Pennsylvania.
"Penn Guaranty Agreement" shall mean the Penn Graduate Loan Program
Agreement dated as of September 1, 1992, as amended, between Nellie Mae, Inc.
and Penn, insofar as it pertains to Financed Loans.
"Pool Balance" shall mean, at any time, the aggregate principal balance
of the Financed Loans at the end of the preceding Interest Period (including
accrued interest thereon for such Interest Period to the
A-10
<PAGE> 41
extent such interest will be capitalized), after giving effect to the following,
without duplication: (i) all payments in respect of principal received by the
Trust during such Interest Period from or on behalf of borrowers and Guarantors,
(ii) the principal portion of the purchase price of all Financed Loans purchased
from the Trust for such Interest Period from the Seller, the Administration or
the Servicer, and (iii) the principal portion of all Additional Financed Loans
made from the Pre-Funding Account with respect to such Interest Period.
"Pre-Funding Account" means the account designated as such, established
and maintained pursuant to Section 4.3 of the Indenture.
"Principal Corporate Trust Operations Office" shall mean the principal
corporate trust operations office of the Indenture Trustee in Boston,
Massachusetts, or such other office as may be designated by written notice of
the Indenture Trustee to the Issuer and each Noteholder at the address of such
Noteholder as it appears on the books of registry maintained in accordance with
Section 2.6 of the Indenture.
"Principal Factor" shall have the meaning set forth in Section 3.1(a)
of the Indenture.
"Purchase Agreement" shall mean the Master Terms Purchase Agreement
dated June 1, 1996 between Nellie Mae, Inc. and Nellie Mae Funding, LLC, as
amended from time to time.
"Rate Adjustment Date" shall mean, with respect to each Class of Notes
and each Class of Certificates, the date on which the applicable Interest Rate
for such Class of Notes or Certificates, as appropriate, is effective and shall
mean, with respect to each such Class of Notes and Certificates, the date of
commencement of each related Interest Period.
"Rate Determination Date" shall mean the second Business Day
immediately preceding the Rate Adjustment Date for such Interest Period.
"Rating Agency" shall mean (i) Moody's and (ii) Fitch, if the Notes are
then rated by Fitch, or, if either of them no longer exists and has no
successors, then any other rating agency, if any, of nationally recognized
status then rating the Notes.
"Record Date" shall mean the last day of the month.
"Responsible Officer" shall mean, with respect to the Indenture
Trustee, any officer within the Corporate Trust Office of the Indenture Trustee
with direct responsibility for the administration of the Indenture and the other
Basic Documents on behalf of the Indenture Trustee, including any Vice
President, Assistant Vice President, Assistant Treasurer, Assistant Secretary,
or any other officer of the Indenture Trustee customarily performing functions
similar to those performed by any of the above designated officers.
"Reuters LIBO Page" shall mean the display designated as page "LIBO" on
the Reuter Monitor Money Rates Service (or such other page as may replace the
Reuters LIBO Page on that service for the purpose of displaying London interbank
offered rates of major banks for Dollar deposits).
"Revenue Fund" shall mean the Fund established by Section 4.5 of the
Indenture.
"Revenues" shall mean all revenues, receipts and moneys payable into or
to the credit of the Revenue Fund pursuant to Section 4.5 of the Indenture and
any interest earnings on Investment Securities credited to any other Fund or
Account as provided in Section 4.9 of the Indenture.
A-11
<PAGE> 42
"Sales Agreement" shall mean the Master Terms Sales Agreement dated
June 1, 1996, among the Issuer, the Seller and the Owner Trustee, as amended
from time to time.
"Securities" shall mean the Notes and the Certificates together.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Depository" shall mean an organization registered as a
"clearing agency" pursuant to Section 17A of the Exchange Act and shall
initially be The Depository Trust Company.
"Securities Depository Participant" shall mean a broker, dealer, bank,
other financial institution or other person for whom from time to time a
Securities Depository effects book-entry transfers and pledges of securities
deposited with the Securities Depository.
"Seller" shall mean the Nellie Mae Education Funding, LLC, a Delaware
limited liability company.
"Series" shall mean a separate Series of Notes issued pursuant to the
Master Indenture, which Series may, as provided in the related Terms Supplement,
be divided into two or more Classes.
"Servicer Default" shall mean an "Event of Default" as defined in the
Servicing Agreement.
"Servicer" shall mean USA Group Loan Services, Inc., a Delaware
corporation, its corporate successors and assigns, and any other organization
with which, after notice to the Rating Agencies, the Issuer has entered into or
shall in the future enter into a Servicing Agreement providing for the
administration, servicing and collection of, among others, the Financed Loans.
"Services Fund" shall mean the Fund established by Section 4.7 of the
Indenture.
"Servicing Agreement" shall mean the Servicing Agreement between the
Issuer and USA Group Loan Services, Inc. dated as of June 1, 1996, and any other
similar servicing agreement entered into between the Issuer and a Servicer
providing for the administration, servicing and collection of Financed Loans, in
each case as originally executed and as amended or supplemented from time to
time in accordance with the terms thereof and with the Indenture.
"Servicing Fees" shall mean, as of any date of calculation, the sum
owed to the Servicer pursuant to the terms of the Servicing Agreement.
"Student Loan Acquisition Fund" shall mean the Fund established by
Section 4.3 of the Indenture.
"Student Loan Portfolio Fund" shall mean the Fund established by
Section 4.4 of the Indenture.
"Subaccount" shall mean any of the subaccounts established by the
Indenture and the related Terms Supplement.
"Supplemental Indenture" shall mean any supplement to or amendment of
the Indenture entered into by the Issuer and the Indenture Trustee pursuant to
and in accordance with the provisions of Article 9 of the Indenture.
"Supplemental Purchase Agreement" shall mean any Supplemental Purchase
Agreement between Nellie Mae and the Seller.
A-12
<PAGE> 43
"Supplemental Sales Agreement" shall mean any Supplemental Sales
Agreement among the Seller, the Trust and the Owner Trustee.
"TERI" shall mean The Education Resources Institute, Inc., a
Massachusetts corporation.
"TERI Guaranty Agreement" shall mean the Guaranty Agreement dated as of
_______________, 1996 between the Issuer and TERI.
"Terms Supplement" shall mean each Supplemental Indenture which
authorizes a particular Series of Notes.
"Transfer Agreement" shall mean a duly written assignment and bill of
sale delivered by the Seller to the Owner Trustee and the Indenture Trustee
evidencing the sale of Additional Financed Loans to the Issuer.
"Transfer Date" shall mean each date on which the Issuer purchases
Additional Financed Loans pursuant to a Supplemental Sales Agreement during a
related Funding Period.
"Treasury Regulations" shall mean regulations, including proposed or
temporary regulations, promulgated under the Code. References in any document or
instrument to specific provisions of proposed or temporary regulations shall
include analogous provisions of final Treasury Regulations or other successor
Treasury Regulations.
"Trust Agreement" shall mean the Trust Agreement dated as of June 1,
1996 between the Depositor and the Owner Trustee, as amended and supplemented
from time to time.
"Trust Estate" shall mean all property of the Issuer from time to time,
including all funds held by the Owner Trustee under the Trust Agreement and all
rights of the Owner Trustee and the Trust pursuant to the Servicing Agreement,
the Administration Agreement, the Sales Agreement and any Supplemental Sales
Agreement.
"Trust Indenture Act" or "TIA" shall mean the Trust Indenture Act of
1939 as in force on the date hereof, unless otherwise specifically provided.
"Trust Supplement" shall mean each supplement to the Trust Agreement
that authorizes an issuance of a Class of Certificates.
"Value of Investment Securities" shall mean, as to each Investment
Security, the market value thereof, if available, and, if not, par if purchased
at par, or the lower of cost or amortized value if purchased at other than par,
or, with respect to Investment Securities described in subparagraph (e) of the
definition thereof, the remaining scheduled principal amount of such obligation.
The amortized value of any such obligation purchased at a premium or discount
shall be computed in accordance with generally accepted accounting principles so
as to recognize daily amortization of such premium or discount, provided that
the value of any such obligation which is callable prior to maturity at the
option of the issuer of such obligation shall be no greater than the price at
which such obligation could be called. Valuation made on any particular date
shall include the amount of interest earned or accrued to such date on any such
moneys or investments.
A-13
<PAGE> 44
Usage
Unless the context clearly indicates otherwise, or may otherwise
require, (i) the term "person" includes a firm, partnership, joint venture,
joint stock company, trust (including any beneficiary thereof), association,
corporation (public or private), unincorporated organization, public body,
public agency and a natural person, and shall also include an executor,
administrator, trustee, receiver or other representative; (ii) the terms
"herein," "hereunder," "hereby," "hereto," "hereof" and any similar terms, refer
to the document as a whole and not to any particular section or subdivision
thereof; and (iii) references to specific provisions of any public law or
statute are to such provisions as they may be amended from time to time. The
definitions set forth in this Exhibit A shall include both the singular and the
plural, and the use of any pronoun shall include both the singular and the
plural and shall include all genders.
A-14
<PAGE> 45
EXHIBIT B
[FORM OF CERTIFICATE]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER (AS
DEFINED BELOW) OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS CERTIFICATE MAY NOT BE ACQUIRED BY OR FOR THE ACCOUNT OF A BENEFIT
PLAN (AS DEFINED BELOW).
THIS CERTIFICATE IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL
AGENCY.
[THIS CERTIFICATE IS NONTRANSFERABLE.](1)
NUMBER $______________________
CUSIP NO.
NELLIE MAE EDUCATION LOAN TRUST
ASSET BACKED CERTIFICATES
evidencing an undivided interest in the Trust, as defined below, the
property of which includes a pool of student loans sold to the Trust by
Nellie Mae Education Funding, LLC.
(This Certificate does not represent an interest in or obligation of
the Depositor or NMI Education Loan Corporation ("NMELC"), the Servicer
(as defined below), the Owner Trustee (as defined below) or any of
their respective affiliates, except to the extent described below.)
THIS CERTIFIES THAT Cede & Co. is the registered owner of [$________]
dollars non- assessable, fully-paid, undivided interest in the Nellie Mae
Education Loan Trust (the "Trust"), a trust formed under the laws of The
Commonwealth of Massachusetts by Nellie Mae Education Funding, LLC (the
"Depositor"). The Trust was created pursuant to a Trust Agreement dated as of
June 1, 1996 (the "Trust Agreement") between the Depositor and Fleet National
Bank, a national banking association, not in its individual capacity but solely
as owner trustee on behalf of the Trust (the "Owner Trustee"), a summary of
certain of the pertinent provisions of which is set forth below. To the extent
not otherwise defined herein, the capitalized terms used herein have the
meanings assigned to them in Exhibit A to the Trust Agreement.
_________
(1) To be included only on the Certificates issued to Nellie Mae Funding,
LLC and NMI Education Loan Corporation on the Closing Date and any
Certificates issued in exchange therefor.
B-1
<PAGE> 46
This Certificate is one of the duly authorized Certificates designated
as "Asset Backed Certificates" (herein called the "Certificates"). This
Certificate is issued under and is subject to the terms, provision and
conditions of the Trust Agreement, to which Trust Agreement the holder of this
Certificate by virtue of the acceptance hereof assents and by which such holder
is bound. The property of the Trust includes a pool of student loans (the
"Financed Loans"), all moneys paid thereunder on or after _______, 1996 (or, in
the case of Financed Loans that constitute Additional Financed Loans, on or
after the date such Additional Financed Loans are acquired, certain bank
accounts and the proceeds thereof and certain other rights under the Trust
Agreement, the Sales Agreement, the Servicing Agreement and the Administration
Agreement and all proceeds of the foregoing. The rights of the holders of the
Certificates to the assets of the Trust are subordinated to the rights of the
holders of the Notes issued under the Indenture dated June 1, 1996 between the
Trust and State Street Bank and Trust Company, as Indenture Trustee, and
designated as "Asset Backed Notes", as set forth in the Trust Agreement,
Indenture and the Administration Agreement.
Under the Trust Agreement, to the extent of funds available therefor,
distributions will be made on the Certificates on each Distribution Date at the
Interest, commencing on [______], 1996, to the person in whose name this
Certificate is registered as of the close of business on the last day of the
month immediately preceding the Distribution Date (such day the "Record Date")
in the manner set forth in the Trust Agreement, the Indenture and the
Administration Agreement. The Maturity Date is [__________].
Each holder of this Certificate acknowledges and agrees that its rights
to receive distributions in respect of this Certificate from available funds are
subordinated to the rights of the Noteholders as described in the Trust
Agreement and Indenture.
It is the intent of the Depositor, NMELC, the Administrator and the
Certificateholders that, solely for Federal income tax purposes, the Trust will
be treated as a partnership and the Certificateholders (including Nellie Mae
Education Funding, LLC and NMELC in their capacity as recipients of
distributions from the excess amounts in the Revenue Fund) will be treated as
partners in that partnership. Nellie Mae Education Funding, LLC, NMELC and the
other Certificateholders by acceptance of a Certificate (and the Certificate
Owners by acceptance of a beneficial interest in a Certificate), agree to treat,
and to take no action inconsistent with the treatment of, the Certificates for
such Federal income tax purposes as partnership interests in the Trust.
Each Certificateholder or Certificate Owner, by its acceptance of a
Certificate or, in the case of a Certificate Owner, a beneficial interest in a
Certificate agrees that such Certificateholder or Certificate Owner, as the case
may be, will not at any time institute against the Depositor or the Trust, or
join in any institution against the Depositor or the Trust, any bankruptcy,
reorganization, arrangement, insolvency, receivership or liquidation
proceedings, or other proceedings under any United States Federal or state
bankruptcy or similar law in connection with any obligations relating to the
Certificates, the Notes, the Trust Agreement or any of the other Basic
Documents.
Distributions on this Certificate will be made as provided in the Trust
Agreement by the Owner Trustee by wire transfer or by check mailed to the
Certificateholder of record in the Certificate Register without the presentation
or surrender of this Certificate or the making of any notation hereon, except
that with respect to Certificates registered on the Record Date in the name of
the nominee of the Securities Depository (initially, such nominee to be Cede &
Co.), payments will be made by wire transfer in immediately available funds to
the account designated by such nominee. Except as otherwise provided in the
Trust Agreement and notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Owner Trustee of the pendency
of such distribution and only upon presentation and surrender of this
Certificate at the office or agency maintained for the purpose of the Owner
Trustee in the City of Boston.
B-2
<PAGE> 47
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been
executed by an authorized representative of the Owner Trustee or its
authenticating agent, by manual signature, this Certificate shall not entitle
the holder hereof to any benefit under the Trust Agreement or the Administration
Agreement or be valid for any purpose.
The Certificates do not represent an obligation of, or an interest in,
the Depositor, the Administrator, the Owner Trustee, USA Group Loan Services,
Inc., as Servicer (the "Servicer") or any affiliates of any of them, and no
recourse may be had against such parties or their assets, except as may be
expressly set forth herein, in the Trust Agreement or in the other Basic
Documents. In addition, this Certificate is not guaranteed by any governmental
agency or instrumentality and is limited in right of payment to certain
collections respecting the Financed Loans, all as more specifically set forth in
the Trust Agreement. A copy of each of the Trust Agreement, the Sales Agreement,
the Purchase Agreement, the Servicing Agreement, the Indenture and the
Administration Agreement may be examined during normal business hours at the
principal office of the Administrator, and at such other places, if any,
designated by the Administrator, by any Certificateholder upon request.
The Trust Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations of the
Depositor and the rights of the Certificateholders under the Trust Agreement at
any time by the Depositor and the Owner Trustee with the consent of the holders
of the Notes and the Certificates each voting as a class evidencing not less
than a majority of the outstanding principal balance of the Notes and the
Certificate Balance. Any such consent by the holder of this Certificate shall be
conclusive and binding on such holder and on all future holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Trust Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the Holders of
any of the Certificates.
As provided in the Trust Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registerable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies maintained by Fleet National Bank in its
capacity as Certificate Registrar, or by any successor Certificate Registrar,
accompanied by a written instrument of transfer in form satisfactory to the
Owner Trustee and the Certificate Registrar duly executed by the holder hereof
or such holder's attorney duly authorized in writing, and thereupon one or more
new Certificates of authorized denominations evidencing the same aggregate
interest in the Trust will be issued to the designated transferee.
The Certificates are issuable only as registered Certificates without
coupons in Authorized Denominations of $20,000 or in integral multiples in
excess thereof; provided, however, that the Certificates issued to Nellie Mae
Education Funding, LLC and NMELC may be issued in such denominations as to
include any residual amount of the Certificate Balance. As provided in the Trust
Agreement and subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of authorized denominations evidencing the
same aggregate denomination, as requested by the holder surrendering the same.
No service charge will be made for any such registration of transfer or
exchange, but the Owner Trustee or the Certificate Registrar may require payment
of a sum sufficient to cover any tax or governmental charge payable in
connection therewith.
The Owner Trustee and the Certificate Registrar and any agent of the
Owner Trustee and the Certificate Registrar treat the person in whose name this
Certificate is registered as the owner hereof for all
B-3
<PAGE> 48
purposes, and neither the Owner Trustee nor the Certificate Registrar or any
such agent shall be affected by any notice to the contrary.
This Certificate (including any beneficial interests therein) may not
be transferred directly or indirectly to a Benefit Plan. By accepting and
holding this Certificate, the holder hereof shall be deemed to have represented
and warranted that it is not a Benefit Plan.
This Certificate may not be transferred to any person who is not a U.S.
Person, as such term is defined in Section 7701(a)(30) of the Internal Revenue
Code, as amended.
The obligations and responsibilities created by the Trust Agreement and
the Trust created thereby shall terminate upon the payment to Certificateholders
of all amounts required to be paid to them pursuant to the Trust Agreement, the
Indenture and the Administration Agreement and the disposition of all property
held as part of the Trust.
This Certificate shall be construed in accordance with the laws of The
Commonwealth of Massachusetts without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
shall be determined in accordance with such laws.
Fleet National Bank acts solely as Owner Trustee and not in its
individual capacity and no trustee, employee, shareholder, officer or agent of
Fleet National Bank shall be held personally liable in connection with the
affairs of the Trust.
IN WITNESS WHEREOF, the Owner Trustee on behalf of the Trust and not in
its individual capacity has caused this Certificate to be duly executed as of
the date set forth below.
NELLIE MAE EDUCATION LOAN TRUST
By: Fleet National Bank,
not in its individual
capacity but solely as
Owner Trustee,
ATTEST:
By:
- ------------ ---------------------------------
Authorized Signatory
Date:
-------
B-4
<PAGE> 49
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the
within-mentioned Trust Agreement.
FLEET NATIONAL BANK, not in its individual
capacity but solely as Owner Trustee,
By:
--------------------------
Authorized Representative
Date: [ ], 1996 or
---------
By:
--------------------------
Authorized Representative
B-5
<PAGE> 50
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OR ASSIGNEE
________________________________________________________________________________
(Please print or type name and address, including postal zip code, of assignee)
________________________________________________________________________________
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
___________________________________________Attorney to transfer said Certificate
on the books of the Certificate Registrar, with full power of substitution in
the premises.
Dated:
_____________________________*
Signature Guaranteed:
_____________________________*
* NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial bank
or trust company.
[END OF FORM OF CERTIFICATE]
B_6
<PAGE> 1
EXHIBIT 4.4
FIRST TRUST SUPPLEMENT
to the
TRUST AGREEMENT
dated as of June 1, 1996
between
NELLIE MAE EDUCATION FUNDING, LLC,
as Depositor
and
FLEET NATIONAL BANK,
as Owner Trustee
Dated as of June 1, 1996
Issuing
$7,700,000
ASSET-BACKED CERTIFICATES
1996-A
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1
DEFINITIONS................................................ 1
SECTION 1.1. Definitions and Usage....................................................... 1
ARTICLE 2
AUTHORIZATION, TERMS AND ISSUANCE...................................... 2
SECTION 2.1. Authorization of Series 1996-A Certificates................................. 2
SECTION 2.2. Purposes.................................................................... 2
SECTION 2.3. Terms of Series 1996-A Certificates Generally............................... 2
SECTION 2.4. Determination of Interest Rate on the Series 1996-A Certificates............ 3
ARTICLE 3
PAYMENT OF THE SERIES 1996-A CERTIFICATES PRIOR TO MATURITY......................... 4
SECTION 3.1. Payment of the Series 1996-A Certificates Prior to Maturity................. 4
ARTICLE 4
ESTABLISHMENT OF 1996-A SUBACCOUNTS..................................... 4
SECTION 4.1. Establishment of Subaccounts................................................ 4
ARTICLE 5
MISCELLANEOUS................................................ 5
SECTION 5.1. First Trust Supplement...................................................... 5
SECTION 5.2. Counterparts................................................................ 5
SECTION 5.3. Governing Law............................................................... 5
SECTION 5.4. Ratification of Trust Agreement............................................. 5
EXHIBIT A FORM OF SERIES 1996-A CERTIFICATE........................................... A-1
</TABLE>
<PAGE> 3
FIRST TRUST SUPPLEMENT
THIS FIRST TRUST SUPPLEMENT, dated as of June 1, 1996, between NELLIE
MAE EDUCATION FUNDING, LLC, a Delaware limited liability company, (the
"Depositor") and FLEET NATIONAL BANK, a national banking association, not in its
individual capacity but solely as owner trustee (the "Owner Trustee") under a
Trust Agreement dated as of June 1, 1996 (the "Trust Agreement") relating to the
Nellie Mae Education Loan Trust, a Massachusetts business trust (the "Trust").
PRELIMINARY STATEMENT
Section 11.1(d) of the Trust Agreement provides, among other things,
that without the consent of any Certificateholders but with prior notice by
Depositor to the Rating Agencies by the Depositor, the Depositor and the Owner
Trustee may enter into a Trust Supplement to authorize and set forth the terms
of a Class of Trust Certificates. The Trust has duly authorized the creation of
a Class of Certificates to be designated the Nellie Mae Education Loan Trust
Asset-Backed Certificates, 1996-A (the "1996-A Certificates"), the Depositor has
delivered the required notice by Depositor to the Rating Agencies and the
Depositor and the Owner Trustee are executing and delivering this First Trust
Supplement in order to provide for the 1996-A Certificates. The 1996-A
Certificates represent undivided interests in the Trust.
ARTICLE 1
DEFINITIONS
SECTION 1.1. DEFINITIONS AND USAGE. Unless the context shall clearly
indicate some other meaning or may otherwise require, capitalized terms not
defined herein are defined in Exhibit A to the Trust Agreement which also
contains rules as to construction that are applicable herein.
"Certificate Spread" shall mean ___ percent (__%), or such other amount
as may be determined from time to time in accordance with Section 2.4 hereof.
"Closing Date" shall mean with respect to the 1996-A Certificates,
________, 1996, the date of initial issuance and delivery of the 1996-A
Certificates hereunder.
"Deferred Interest" shall have the meaning set forth in Section 2.4
hereof.
"Initial Period" shall mean the period commencing on the Closing Date
and continuing through , 1996.
"Initial Certificate Interest Rate" shall mean ____% per annum.
"Initial Rate Adjustment Date" shall mean ________, 1996.
"Interest Period" shall mean the Initial Period and thereafter each
period commencing on a Rate Adjustment Date for the 1996-A Certificates and
ending on the day before (i) the next Rate Adjustment Date or (ii) the Maturity
Date of such Class, as applicable.
1
<PAGE> 4
"Interest Rate" shall mean each variable rate of return annum borne by
the 1996-A Certificates for each Interest Period as determined in accordance
with the provisions of Section 2.4 hereof.
"Maturity Date" shall mean December 15, 2018.
"Net Loan Rate" shall mean the weighted average interest rate on the
Financed Loans less ___ percent (___%).
"Rate Adjustment Date" shall mean the date on which the Interest Rate
is effective and the date of commencement of each related Interest Period.
"Rate Determination Date" shall mean the second Business Day
immediately preceding the Rate Adjustment Date for such Interest Period.
"Trust Supplement" means this First Trust Supplement, as from time to
time amended or supplemented.
"1996 Financed Loans" shall mean the Financed Loans purchased with the
proceeds of the Series 1996-A Notes and the 1996-A Certificates.
ARTICLE 2
AUTHORIZATION, TERMS AND ISSUANCE
SECTION 2.1. AUTHORIZATION OF SERIES 1996-A CERTIFICATES. There is
hereby authorized by the Trust a single class of 1996-A Certificates designated
the "Nellie Mae Education Loan Trust Asset- Backed Certificates Series 1996-A"
(the "1996-A Certificates") in the aggregate principal amount of $7,700,000. The
1996-A Certificates shall be identified with the Nellie Mae Education Loan Trust
Asset- Backed Notes Series 1996-A.
SECTION 2.2. PURPOSES. The Financed Student Loans will be pledged by
the Trust to the Indenture Trustee pursuant to the terms of the Master
Indenture. The 1996-A Certificates are authorized to finance the acquisition by
the Trust of the Financed Loans and to make deposits into the Funds and
Accounts.
SECTION 2.3. TERMS OF SERIES 1996-A CERTIFICATES GENERALLY. The 1996-A
Certificates shall be issued in fully registered form, in substantially the form
set forth in Exhibit A hereto, with such variations, omissions and insertions as
may be required by the circumstances, as may be required or permitted by the
Trust Agreement and this First Trust Supplement, or be consistent with the Trust
Agreement and this First Trust Supplement and necessary or appropriate to
conform to the rules and requirements of any governmental authority or any usage
or requirement of law with respect thereto.
The 1996-A Certificates may be issued only in Authorized Denominations.
The 1996-A Certificates shall be dated as of the Closing Date. The 1996-A
Certificates shall mature on December 15, 2018, the Maturity Date.
The 1996-A Certificates shall be numbered in consecutive numerical
order from A-1 upwards. The 1996-A Certificates shall be subject to prepayment
and mandatory distributions of principal prior to maturity as provided in
Section 5.1 of the Trust Agreement.
2
<PAGE> 5
Principal of the 1996-A Certificates shall be payable on the Maturity
Date, unless earlier paid as provided herein. Each 1996-A Certificate shall bear
interest at a rate determined in accordance with the provisions and subject to
the limitations set forth in Section 2.4 hereof. Interest shall accrue on the
Certificate Balance from time to time Outstanding until the principal of such
1996-A Certificate has been paid in full or payment has been duly provided for,
as the case may be, and shall accrue from the later of the Closing Date or the
most recent Distribution Date to which interest has been paid or duly provided
for in full and shall be computed on the basis set forth in Section 2.4 hereof.
Interest on the 1996-A Certificates shall be paid on each Distribution Date
(except to the extent that moneys are not available to pay Deferred Interest)
and on each date of payment or prepayment of principal thereof to the extent of
interest accrued on the principal then being paid or prepaid.
Payments of principal of and interest on each 1996-A Certificate shall
be made by the Owner Trustee from its Principal Corporate Trust Operations
Office, in lawful money of the United States, and payment of interest of each
1996-A Certificate shall, if the Holder thereof holds $1,000,000 or more in
aggregate principal amount of 1996-A Certificates, be made by the deposit or
wire transfer of immediately available funds to the credit of an account located
within the United States specified by such Holder in duly executed instructions,
with signature guaranteed in a manner satisfactory to the Owner Trustee,
delivered to the Owner Trustee no less than ten (10) Business Days prior to the
first Distribution Date for which such deposit or wire transfer of payment of
interest is to be effective. If such instructions are not delivered to the Owner
Trustee by the Holder of $1,000,000 or more in aggregate principal amount of
1996-A Certificates in accordance with this paragraph, and for all other
Holders, payment of interest shall be made by check mailed on the applicable
Distribution Date to the Holder's address as it appears on the books of registry
maintained by the Owner Trustee pursuant to Section 3.4 of the Trust Agreement.
Wire transfers to a Holder made pursuant to this Section 2.3 shall be made
without expense to such Holder.
SECTION 2.4. DETERMINATION OF INTEREST RATE ON THE SERIES 1996-A
CERTIFICATES. The 1996- A Certificates shall bear interest determined as
provided in this Section 2.4. During the Initial Period and each Interest Period
thereafter, interest shall accrue daily and shall be computed for the actual
number of days elapsed on the basis of a year consisting of three hundred sixty
(360) days.
The Interest Rate to be borne by the 1996-A Certificates during the
Initial Period shall be the Initial Rate. The Interest Rate to be borne by the
1996-A Certificates during each Interest Period thereafter shall be determined
on each Rate Determination Date for each such Interest Period and shall be equal
to the sum of the LIBOR Rate and the Certificate Spread, provided, however, that
the Interest Rate borne by the 1996- A Certificates at any time shall not be
greater than eighteen percent (18%) per annum. Such Interest Rate shall be
determined by the Owner Trustee and announced to the Issuer by written notice
given on each Rate Determination Date. Such Interest Rate shall take effect on
the Rate Adjustment Date immediately succeeding such Rate Determination Date.
The determination of the Interest Rate by the Owner Trustee shall be
conclusive and binding on the Holders of the 1996-A Certificates, the Issuer and
the Owner Trustee absent manifest error. If the Owner Trustee shall fail to
determine the Interest Rate for the 1996-A Certificates on any Rate
Determination Date pursuant to the preceding sentence, the Interest Rate most
recently determined for such 1996-A Certificates shall remain in effect.
Notwithstanding anything contained herein to the contrary, in the event
that the Interest Rate on the 1996-A Certificates for any Interest Period
exceeds the applicable Net Loan Rate, the Certificateholders will receive
interest payments on the 1996-A Certificates for such Interest Period in an
amount equal to the applicable Net Loan Rate; the difference between the
Interest Rate and, prior to the Maturity Date, the Net Loan Rate for such an
Interest Period shall be deferred ("Deferred Interest") and paid to the
3
<PAGE> 6
Certificateholders on the next succeeding Distribution Date on which funds are
available therefor. On the last Business Day of each Interest Period, the Issuer
shall notify the Owner Trustee of the Net Loan Rate for such Interest Period.
Notwithstanding the foregoing, the rate of interest on any 1996-A
Certificate for the Initial Period or any Interest Period thereafter shall not
be in excess of the maximum rate of interest which may be charged or collected
by the Holder thereof pursuant to provisions of federal or state law applicable
to such Holder.
ARTICLE 3
PAYMENT OF THE SERIES 1996-A CERTIFICATES PRIOR TO MATURITY
SECTION 3.1. PAYMENT OF THE SERIES 1996-A CERTIFICATES PRIOR TO
MATURITY.
(a) Mandatory Principal Distributions. In accordance with Section 5.1
of the Trust Agreement, the 1996-A Certificates are subject to mandatory
principal distributions on each Distribution Date, but only at such times as
there shall be amounts in excess of $5,000 in the 1996-A Subaccount within the
Certificate Payment Account in the Certificate Fund. Principal of the
Certificates shall not be prepaid unless no Series 1996-A Notes remain
Outstanding.
(b) Optional Purchase Payment. On any Distribution Date on or after
which the Balance in the 1996-A Account in the Student Loan Portfolio Fund is
equal to or less than ten percent (10%) of the Initial Pool Balance with respect
to the 1996 Financed Loans, the Seller may repurchase all remaining 1996
Financed Loans at a price equal to the outstanding principal balance of the 1996
Financed Loans, plus accrued and unpaid interest. The proceeds of the sale of
the remaining 1996 Financed Loans shall be credited to the 1996-A Subaccount in
the Note Payment Account within the Note Fund and used on such Distribution Date
to make mandatory principal distributions on the A-2 Notes, if any A-2 Notes
remain Outstanding.
Pursuant to Section 4.6(b) of the Master Indenture, after all of the
Series 1996-A Notes have been paid in full, any amounts remaining in the 1996-A
Subaccount in the Note Payment Account in the Note Fund shall be transferred to
the Owner Trustee. Pursuant to Section 5.1(a) of the Trust Agreement, amounts
received by the Owner Trustee pursuant to Section 4.6(b) of the Master Indenture
shall be deposited in the 1996-A Subaccount in the Certificate Payment Account
in the Certificate Fund to make mandatory principal distributions.
ARTICLE 4
ESTABLISHMENT OF 1996-A SUBACCOUNTS
SECTION 4.1. ESTABLISHMENT OF SUBACCOUNTS. The 1996-A Subaccount within
the Certificate Interest Account and the 1996-A Subaccount within the
Certificate Payment Account are hereby established.
4
<PAGE> 7
ARTICLE 5
MISCELLANEOUS
SECTION 5.1. FIRST TRUST SUPPLEMENT. This First Trust Supplement is
adopted pursuant to the provisions of the Trust Agreement.
SECTION 5.2. COUNTERPARTS. This First Trust Supplement may be
simultaneously executed in several counterparts, each of which shall be an
original and all of which shall constitute but one and the same instrument.
SECTION 5.3. GOVERNING LAW. This First Trust Supplement shall be
governed by and construed in accordance with the laws of the Commonwealth.
SECTION 5.4. RATIFICATION OF TRUST AGREEMENT. As supplemented by this
First Trust Supplement, the Trust Agreement as so supplemented by this First
Trust Supplement shall be read, taken and construed as one and the same
instrument. Each addition to and amendment of the Trust Agreement contained
herein is solely for purposes of the 1996-A Certificates, and shall have no
effect on any other Class of Certificates of Notes issued pursuant to the Trust
Agreement. If any term of this First Trust Supplement conflicts with any term of
the Trust Agreement, this First Trust Supplement shall control for purposes of
the 1996-A Certificates.
Fleet National Bank acts solely as Owner Trustee and not in its
individual capacity and no trustee, shareholder, officer, employee or agent of
Fleet National Bank shall be held personally liable in connection with the
affairs of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this First Trust
Supplement to be duly executed as of the day and year first above written.
NELLIE MAE EDUCATION FUNDING, LLC
Attest:
By: ________________________ By: ___________________________________
Name: Name:
Title: Title:
FLEET NATIONAL BANK, not in its
individual capacity but solely as Owner
Trustee,
Attest:
By: ________________________ By: ___________________________________
Name: Name:
Title: Title:
5
<PAGE> 8
EXHIBIT A
FORM OF SERIES 1996-A CERTIFICATE
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER (AS
DEFINED BELOW) OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS CERTIFICATE MAY NOT BE ACQUIRED BY OR FOR THE ACCOUNT OF A BENEFIT
PLAN (AS DEFINED BELOW).
THIS CERTIFICATE IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL
AGENCY.
[THIS CERTIFICATE IS NONTRANSFERABLE.](1)
NUMBER $7,700,000
CUSIP NO.
NELLIE MAE EDUCATION LOAN TRUST
ASSET BACKED CERTIFICATES
evidencing an undivided interest in the Trust, as defined below, the
property of which includes a pool of student loans sold to the Trust by
Nellie Mae Education Funding, LLC.
(This Certificate does not represent an interest in or obligation of
the Depositor or NMI Education Loan Corporation ("NMELC") (as defined
below), the Servicer (as defined below), the Owner Trustee (as defined
below) or any of their respective affiliates, except to the extent
described below.)
THIS CERTIFIES THAT Cede & Co. is the registered owner of $7,700,000
dollars non-assessable, fully-paid, undivided interest in the Nellie Mae
Education Loan Trust (the "Trust"), a trust formed under the laws of The
Commonwealth of Massachusetts by Nellie Mae Education Funding, LLC (the
"Depositor"). The Trust was created pursuant to a Trust Agreement dated as of
June 1, 1996 (the "Trust Agreement") between the Depositor and Fleet National
Bank, a national banking association, not in its individual capacity but solely
as owner trustee on behalf of the Trust (the "Owner Trustee"), a summary of
certain of the pertinent provisions of which is set forth below. To the extent
not otherwise defined herein, the capitalized terms used herein have the
meanings assigned to them in Exhibit A to the Trust Agreement.
- --------
(1) To be included only on the Certificates issued to Nellie Mae Funding, LLC
and NMI Education Loan Corporation on the Closing Date and any Certificates
issued in exchange therefor.
A-1
<PAGE> 9
This Certificate is one of the duly authorized Certificates designated
as "Asset Backed Certificates" (herein called the "Certificates"). This
Certificate is issued under and is subject to the terms, provision and
conditions of the Trust Agreement, to which Trust Agreement the holder of this
Certificate by virtue of the acceptance hereof assents and by which such holder
is bound. The property of the Trust includes a pool of student loans (the "1996
Financed Loans"), all moneys paid thereunder on or after _______, 1996 (or, in
the case of Financed Loans that constitute Additional Financed Loans, on or
after the date such Additional Financed Loans are acquired, certain bank
accounts and the proceeds thereof and certain other rights under the Trust
Agreement, the Sales Agreement, the Servicing Agreement and the Administration
Agreement and all proceeds of the foregoing. The rights of the holders of the
Certificates to the assets of the Trust are subordinated to the rights of the
holders of the Notes issued under the Indenture dated June 1, 1996 between the
Trust and State Street Bank and Trust Company, as Indenture Trustee, and
designated as "Asset Backed Notes", as set forth in the Trust Agreement,
Indenture and the Administration Agreement.
Under the Trust Agreement, to the extent of funds available therefor,
distributions will be made on the Certificates on each Distribution Date at the
Interest Rate (as defined below), commencing on [______], 1996, to the Person in
whose name this Certificate is registered as of the close of business on the
last day of the month immediately preceding the Distribution Date (such day the
"Record Date") in the manner set forth in the Trust Agreement and the Indenture.
The Maturity Date is December 15, 2018.
Each holder of this Certificate acknowledges and agrees that its rights
to receive distributions in respect of this Certificate from available funds are
subordinated to the rights of the Noteholders as described in the Trust
Agreement and the Indenture.
It is the intent of the Depositor, NMELC, the Administrator and the
Certificateholders that, solely for Federal income tax purposes, the Trust will
be treated as a partnership and the Certificateholders (including Nellie Mae
Education Funding, LLC and NMELC in their capacity as recipients of
distributions from the excess amounts in the Revenue Fund) will be treated as
partners in that partnership. Nellie Mae Education Funding, LLC, NMELC and the
other Certificateholders by acceptance of a Certificate (and the Certificate
Owners by acceptance of a beneficial interest in a Certificate), agree to treat,
and to take no action inconsistent with the treatment of, the Certificates for
such Federal income tax purposes as partnership interests in the Trust.
Each Certificateholder or Certificate Owner, by its acceptance of a
Certificate or, in the case of a Certificate Owner, a beneficial interest in a
Certificate agrees that such Certificateholder or Certificate Owner, as the case
may be, will not at any time institute against the Depositor or the Trust, or
join in any institution against the Depositor or the Trust, any bankruptcy,
reorganization, arrangement, insolvency, receivership or liquidation
proceedings, or other proceedings under any United States Federal or state
bankruptcy or similar law in connection with any obligations relating to the
Certificates, the Notes, the Trust Agreement or any of the other Basic
Documents.
Distributions on this Certificate will be made as provided in the Trust
Agreement by the Owner Trustee by wire transfer or by check mailed to the
Certificateholder of record in the Certificate Register without the presentation
or surrender of this Certificate or the making of any notation hereon, except
that with respect to Certificates registered on the Record Date in the name of
the nominee of the Securities Depository (initially, such nominee to be Cede &
Co.), payments will be made by wire transfer in immediately available funds to
the account designated by such nominee. Except as otherwise provided in the
Trust Agreement and notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Owner Trustee of the pendency
of such distribution and only upon presentation and surrender of this
Certificate at the office or agency maintained for the purpose of the Owner
Trustee in the City of Boston, Massachusetts.
A-2
<PAGE> 10
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been
executed by an authorized representative of the Owner Trustee or its
authenticating agent, by manual signature, this Certificate shall not entitle
the holder hereof to any benefit under the Trust Agreement or the Administration
Agreement or be valid for any purpose.
The Certificates do not represent an obligation of, or an interest in,
the Depositor, the Administrator, the Owner Trustee, USA Group Loan Services,
Inc., as Servicer (the "Servicer") or any affiliates of any of them, and no
recourse may be had against such parties or their assets, except as may be
expressly set forth herein, in the Trust Agreement or in the other Basic
Documents. In addition, this Certificate is not guaranteed by any governmental
agency or instrumentality and is limited in right of payment to certain
collections respecting the Financed Loans, all as more specifically set forth in
the Trust Agreement. A copy of each of the Trust Agreement, the Sales Agreement,
the Purchase Agreement, the Servicing Agreement, the Indenture and the
Administration Agreement may be examined during normal business hours at the
principal office of the Administrator, and at such other places, if any,
designated by the Administrator, by any Certificateholder upon request.
The Trust Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations of the
Depositor and the rights of the Certificateholders under the Trust Agreement at
any time by the Depositor and the Owner Trustee with the consent of the holders
of the Notes and the Certificates each voting as a class evidencing not less
than a majority of the outstanding principal balance of the Notes and the
Certificate Balance. Any such consent by the holder of this Certificate shall be
conclusive and binding on such holder and on all future holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Trust Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the holders of
any of the Certificates.
As provided in the Trust Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registerable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies maintained by Fleet National Bank in its
capacity as Certificate Registrar, or by any successor Certificate Registrar,
accompanied by a written instrument of transfer in form satisfactory to the
Owner Trustee and the Certificate Registrar duly executed by the holder hereof
or such holder's attorney duly authorized in writing, and thereupon one or more
new Certificates of authorized denominations evidencing the same aggregate
interest in the Trust will be issued to the designated transferee.
The Certificates are issuable only as registered Certificates without
coupons in Authorized Denominations of $20,000 or in integral multiples in
excess thereof; provided, however, that the Certificates issued to the Nellie
Mae Education Funding, LLC and NMELC may be issued in such denominations as to
include any residual amount of the Certificate Balance. As provided in the Trust
Agreement and subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of authorized denominations evidencing the
same aggregate denomination, as requested by the holder surrendering the same.
No service charge will be made for any such registration of transfer or
exchange, but the Owner Trustee or the Certificate Registrar may require payment
of a sum sufficient to cover any tax or governmental charge payable in
connection therewith.
The Owner Trustee and the Certificate Registrar and any agent of the
Owner Trustee and the Certificate Registrar treat the person in whose name this
Certificate is registered as the owner hereof for all
A-3
<PAGE> 11
purposes, and neither the Owner Trustee nor the Certificate Registrar or any
such agent shall be affected by any notice to the contrary.
This Certificate (including any beneficial interests therein) may not
be transferred directly or indirectly to a Benefit Plan. By accepting and
holding this Certificate, the holder hereof shall be deemed to have represented
and warranted that it is not a Benefit Plan.
This Certificate may not be transferred to any person who is not a U.S.
Person, as such term is defined in Section 7701(a)(30) of the Internal Revenue
Code, as amended.
The obligations and responsibilities created by the Trust Agreement and
the Trust created thereby shall terminate upon the payment to Certificateholders
of all amounts required to be paid to them pursuant to the Trust Agreement, the
Indenture and the Administration Agreement and the disposition of all property
held as part of the Trust.
This Certificate shall be construed in accordance with the laws of the
Commonwealth, without reference to its conflict of law provisions, and the
obligations, rights and remedies of the parties hereunder shall be determined in
accordance with such laws.
Fleet National Bank acts solely as Owner Trustee and not in its
individual capacity and no trustee, shareholder, officer, employee or agent of
Fleet National Bank shall be held personally liable in connection with the
affairs of the Trust.
IN WITNESS WHEREOF, the Owner Trustee on behalf of the Trust and not in
its individual capacity has caused this Certificate to be duly executed as of
the date set forth below.
NELLIE MAE EDUCATION LOAN TRUST
By: Fleet National Bank,
not in its individual
ATTEST: capacity but solely as
Owner Trustee,
By: _________________________ By: ______________________________
Name: Authorized Signatory
Title:
Date:
A-4
<PAGE> 12
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned Trust
Agreement.
FLEET NATIONAL BANK, not in its individual
capacity but solely as Owner Trustee,
By: ______________________________________
Authorized Representative
Date: [________], 1996 or
By: ______________________________________
Authorized Representative
A-5
<PAGE> 13
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OR ASSIGNEE
__________________________________________________
(Please print or type name and address, including postal zip code, of assignee)
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
______________________ Attorney to transfer said Certificate on the books of the
Certificate Registrar, with full power of substitution in the premises.
Dated:
_____________________*
Signature Guaranteed:
_____________________*
* NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement
or any change whatever. Such signature must be guaranteed by a member firm of
the New York Stock Exchange or a commercial bank or trust company.
[END OF FORM OF 1996-A CERTIFICATE]
A-6
<PAGE> 1
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, Massachusetts 02111
701 Pennsylvania Avenue, N.W. Telephone: 617/542-6000
Washington, D.C. 20004 Fax: 617/542-2241
Telephone: 202/434-7300
Fax: 202/434-7400
June 17, 1996
Nellie Mae Education Funding, LLC
50 Braintree Hill Park - Suite 300
Braintree, Massachusetts 02184
Re: Nellie Mae Education Funding, LLC
Registration Statement on Form S-3 (No. 333-4418)
Dear Sir or Madam:
We have acted as counsel to Nellie Mae Education Funding, LLC, a
Delaware limited liability company (the "Seller"), as originator of the Nellie
Mae Education Loan Trust, a Massachusetts business trust (the "Trust"), in
connection with the preparation and filing of a Registration Statement on Form
S-3, originally filed with the Securities and Exchange Commission on May 3,
1996, as amended on June 17, 1996 (the "Registration Statement"). The
Registration Statement relates to the offering of Libor Rate Class A-1 Asset
Backed Notes (the "Class A-1 Notes"), Libor Rate Class A-2 Asset Backed Notes
(the "Class A-2 Notes") (the Class A-1 Notes and the Class A-2 Notes
collectively, the "1996-A Notes") and Libor Rate Asset Backed Certificates (the
"1996-A Certificates"). The Notes will be issued by the Trust pursuant to the
Master Indenture dated as of June 1, 1996 (the "Master Indenture") between the
Trust and State Street Bank and Trust Company, as indenture trustee (the
"Indenture Trustee"), and a related Terms Supplement authorizing the 1996-A
Series (the "First Terms Supplement" and, together with the Master Indenture,
the "Indenture"). The 1996-A Certificates will be issued pursuant to the Trust
Agreement dated as of June 1, 1996 (the "Trust Agreement"), between the Seller
and Fleet National Bank, as owner trustee (the "Owner Trustee"), and a related
Trust Supplement authorizing the 1996-A Certificates (the "First Trust
Supplement" and, together with the Trust Agreement, the "Trust Agreement").
In that connection, we have examined originals or copies, certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as we have deemed necessary or appropriate for the
purposes of this opinion, including but not limited to (a) a prospectus forming
a part of the Registration Statement (the "Prospectus"), (b) the forms of the
following documents filed as exhibits to the Registration Statement: (i) the
Master Indenture, (ii) the Trust Agreement, (iii) the First Terms Supplement,
(iv) the
<PAGE> 2
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
Nellie Mae Education Funding, LLC
June 17, 1996
Page 2
First Trust Supplement and (v) the Administration Agreement, among Nellie Mae,
Inc., as Administrator, the Seller, the Owner Trustee and the Indenture Trustee,
(c) a specimen of the Class A-1 Notes, (d) a specimen of the Class A-2 Notes and
(e) a specimen of the 1996- A Certificates.
In our examination, we have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such copies.
Based upon such examination and subject to the foregoing, we are of the
following opinion:
1. When the Trust Agreement has been duly and validly authorized by all
necessary action on the part of the Seller and the Trust, and upon execution and
delivery thereof by the Seller and the Trust, the Trust Agreement will
constitute the legal, valid and binding agreement of the Seller and the Trust,
enforceable against the Seller and the Trust in accordance with its terms.
2. When the Master Indenture has been duly and validly authorized by
all necessary action on the part of the Trust and the Indenture Trustee, and
upon execution and delivery thereof by the Trust and the Indenture Trustee, the
Master Indenture will constitute the legal, valid and binding agreement of the
Trust, enforceable against the Trust in accordance with its terms.
3. When the 1996-A Certificates have been duly and validly authorized
by all necessary action on the part of the Trust (subject to the terms thereof
being otherwise in compliance with applicable law at such time) and when issued,
executed and delivered in accordance with the provisions of the Trust Agreement,
and when sold as described in the Registration Statement, the 1996-A
Certificates will be validly issued, fully paid and nonassessable 1996-A
Certificates representing undivided interests in the Trust, in accordance with
their terms.
4. When the 1996-A Notes have been duly and validly authorized by all
necessary action on the part of the Trust (subject to the terms thereof being
otherwise in compliance with applicable law at such time) and when issued,
executed and delivered in accordance with the provisions of the Master
Indenture, and when sold as described in the Registration Statement, the 1996-A
Notes will be validly issued 1996-A Notes and will constitute valid and binding
obligations of the Trust in accordance with their terms.
<PAGE> 3
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
Nellie Mae Education Funding, LLC
June 17, 1996
Page 3
The opinions set forth above are subject, as to enforcement of
remedies, to applicable bankruptcy, reorganization, fraudulent conveyance,
insolvency, moratorium or other laws affecting creditors' rights generally from
time to time in effect and to general principles of equity.
Our opinion is limited to the law of the Commonwealth of Massachusetts,
and we express no opinion with respect to the law of any other jurisdiction. No
opinion is expressed herein with respect to the qualification of the 1996-A
Notes or the 1996-A Certificates under the securities or blue sky laws of any
state or any foreign jurisdiction.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name and the reference to our firm
whenever it appears in such Registration Statement, including the Prospectus
constituting a part thereof, as originally filed or as subsequently amended. In
giving such permission, we do not admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended, or the rules and regulations of the Securities and Exchange
Commission issued thereunder, with respect to any part of the Registration
Statement, including this exhibit.
Very truly yours,
/s/ Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
<PAGE> 1
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, Massachusetts 02111
701 Pennsylvania Avenue, N.W. Telephone: 617/542-6000
Washington, D.C. 20004 Fax: 617/542-2241
Telephone: 202/434-7300
Fax: 202/434-7400
June 17, 1996
Nellie Mae Education Funding, LLC
50 Braintree Hill Park - Suite 300
Braintree, Massachusetts 02184
Re: Nellie Mae Education Funding, LLC
Registration Statement on Form S-3 (No. 333-4418)
Dear Sir or Madam:
We have acted as special Federal income tax counsel for Nellie Mae
Education Funding, LLC, a Delaware limited liability company (the "Seller"), as
originator of the Nellie Mae Education Loan Trust, a Massachusetts business
trust (the "Trust"), in connection with the preparation and filing of a
Registration Statement on Form S-3, originally filed with the Securities and
Exchange Commission on May 3, 1996, as amended on June 17, 1996 (the
"Registration Statement"). The Registration Statement relates to the offering of
Libor Rate Class A-1 Asset Backed Notes (the "Class A-1 Notes"), Libor Rate
Class A-2 Asset Backed Notes (the "Class A-2 Notes") (the Class A-1 Notes and
the Class A-2 Notes collectively, the "1996-A Notes") and Libor Rate Asset
Backed Certificates (the "1996-A Certificates"). The Notes will be issued by the
Trust pursuant to the Master Indenture dated as of June 1, 1996 (the "Master
Indenture") between the Trust and State Street Bank and Trust Company, as
indenture trustee (the "Indenture Trustee"), and a related Terms Supplement
authorizing the 1996-A Series (the "First Terms Supplement" and, together with
the Master Indenture, the "Indenture"). The 1996-A Certificates will be issued
pursuant to the Trust Agreement dated as of June 1, 1996 (the "Trust
Agreement"), between the Seller and Fleet National Bank, as owner trustee (the
"Owner Trustee"), and a related Trust Supplement authorizing the 1996-A
Certificates (the "First Trust Supplement" and, together with the Trust
Agreement, the "Trust Agreement").
In that connection, we have examined originals or copies, certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as we have deemed necessary or appropriate for the
purposes of this opinion, including but not limited to (a) a prospectus forming
a part of the Registration Statement relating to the 1996-A
<PAGE> 2
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
Nellie Mae Education Funding, LLC
June 17, 1996
Page 2
Certificates and 1996-A Notes (the "Prospectus"), (b) the forms of the following
documents filed as exhibits to the Registration Statement: (i) the Master
Indenture, (ii) the Trust Agreement, (iii) the First Terms Supplement, (iv) the
First Trust Supplement and (v) the Administration Agreement among Nellie Mae,
Inc., as Administrator, the Seller, the Owner Trustee and the Indenture Trustee,
(c) a specimen of the Class A-1 Notes, (d) a specimen of the Class A-2 Notes and
(e) a specimen of the 1996-A Certificates.
In our examination, we have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such copies.
Based upon the foregoing, we hereby confirm that the statements in the
Prospectus under the headings "SUMMARY OF TERMS - Tax Considerations" and
"CERTAIN FEDERAL INCOME TAX CONSEQUENCES", to the extent they constitute matters
of law or legal conclusions with respect thereto, are correct in all material
respects.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name and the reference to our firm
whenever it appears in such Registration Statement, including the Prospectus
constituting a part thereof, as originally filed or as subsequently amended. In
giving such permission, we do not admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended, or the rules and regulations of the Securities and Exchange
Commission issued thereunder, with respect to any part of the Registration
Statement, including this exhibit.
Very truly yours,
/s/ Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNED TO ACT AS TRUSTEE
Check if an Application to Determined Eligibility
of a Trustee Pursuant to Section 305(b)(2)__
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
John R. Towers, Esq. Senior Vice President and Corporate Secretary
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
------------
NELLIE MAE EDUCATION FUNDING, LLC
(Exact name of obligor as specified in its charter)
MASSACHUSETTS 04-3313443
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
50 BRAINTREE HILL PARK
SUITE 300
BRAINTREEE, MASSACHUSETTS 02184
(617) 849-1325
(Address of principal executive offices) (Zip Code)
------------
Nellie Mae Education Loan Trust
$ ______ Libor Rate Asset Backed Class A-1 Notes
$ ______ Libor Rate Asset Backed Class A-2 Notes
$ ____________ Libor Rate Asset Backed Certificates
(Title of indenture securities)
<PAGE> 2
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO
WHICH IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington,
D.C., Federal Deposit Insurance Corporation, Washington, D.C.
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its
parent, State Street Boston Corporation.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF
ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN
EFFECT.
A copy of the Articles of Association of the trustee, as now in
effect, is on file with the Securities and Exchange Commission
as Exhibit 1 to Amendment No. 1 to the Statement of Eligibility
and Qualification of Trustee (Form T-1) filed with the
Registration Statement of Morse Shoe, Inc. (File No. 22-17940)
and is incorporated herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the trustee
to commence business was necessary or issued is on file with the
Securities and Exchange Commission as Exhibit 2 to Amendment No.
1 to the Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with the Registration Statement of Morse Shoe,
Inc. (File No. 22-17940) and is incorporated herein by reference
thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE
TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS
SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise corporate
trust powers is on file with the Securities and Exchange
Commission as Exhibit 3 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with
the Registration Statement of Morse Shoe, Inc. (File No.
22-17940) and is incorporated herein by reference thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is on
file with the Securities and Exchange Commission as Exhibit 4
to the Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with the Registration Statement of Eastern
Edison Company (File No. 33-37823) and is incorporated herein
by reference thereto.
1
<PAGE> 3
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4, IF THE OBLIGOR IS
IN DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(b) OF THE ACT.
The consent of the trustee required by Section 321(b) of the
Act is annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING
AUTHORITY.
A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its supervising
or examining authority is annexed hereto as Exhibit 7 and made a
part hereof.
NOTES
In answering any item of the Statement of Eligibility and
Qualification which relates to matters peculiarly within the knowledge of the
obligor or any underwriter for the obligor, the trustee as relied upon
information furnished to it by the obligor and the underwriters, and the
trustee disclaims responsibility for the accuracy or completeness of such
information.
The answer furnished to Item 2. of the statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known as the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility and qualification to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of Boston
and The Commonwealth of Massachusetts, on the 24TH DAY OF MAY, 1996.
STATE STREET BANK AND TRUST COMPANY
By: /s/ E. Decker Adams
-------------------
E. Decker Adams
Vice President
2
<PAGE> 4
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, in connection with the proposed issuance by NELLIE MAE
EDUCATION FUNDING, LLC of its LIBOR RATE ASSET BACKED CLASS A-1 NOTES, LIBOR
RATE ASSET BACKED CLASS A-2 NOTES AND LIBOR RATE ASSET BACKED CERTIFICATES, we
hereby consent that reports of examination by Federal, State, Territorial or
District authorities may be furnished by such authorities to the Securities and
Exchange Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ E. Decker Adams
------------------------------
E. Decker Adams
Vice President
Dated: May 24, 1996
3
<PAGE> 5
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company of
Boston, Massachusetts and foreign and domestic subsidiaries, a state banking
institution organized and operating under the banking laws of this commonwealth
and a member of the Federal Reserve System, at the close of business December
31, 1995, published in accordance with a call made by the Federal Reserve Bank
of this District pursuant to the provisions of the Federal Reserve Act and in
accordance with a call made by the Commissioner of Banks under General Laws,
Chapter 172, Section 22(a).
<TABLE>
<CAPTION>
THOUSANDS OF
DOLLARS
<S> <C> <C> <C>
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin...................................... 1,331,827
Interest-bearing balances............................................................... 5,971,326
Securities...................................................................................... 6,325,054
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary..................................................... 5,436,994
Loans and lease financing receivables:
Loans and leases, net of unearned income.......................... 4,308,339
Allowance for loan and lease losses............................... 63,491
Loans and leases, net of unearned income and allowances................................. 4,244,848
Assets held in trading accounts................................................................. 1,042,846
Premises and fixed assets....................................................................... 374,362
Other real estate owned......................................................................... 3,223
Investments in unconsolidated subsidiaries...................................................... 31,624
Customers' liability to this bank on acceptances outstanding.................................... 57,472
Intangible assets............................................................................... 68,384
Other assets.................................................................................... 670,058
----------
Total assets.................................................................................... 24,558,018
=========
LIABILITIES
Deposits:
In domestic offices..................................................................... 6,880,231
Noninterest-bearing...................................... 4,728,115
Interest-bearing......................................... 2,152,116
In foreign offices and Edge subsidiary.................................................. 9,607,427
Noninterest-bearing...................................... 28,265
Interest-bearing......................................... 9,579,162
Federal funds purchased and securities sold under agreements to
repurchase in domestic offices of the bank and of its
Edge subsidiary......................................................................... 5,913,969
Demand notes issued to the U.S. Treasury and Trading Liabilities................................ 530,406
Other borrowed money............................................................................ 493,191
Bank's liability on acceptances executed and outstanding........................................ 57,387
Other liabilities............................................................................... 620,287
----------
Total liabilities............................................................................... 24,102,898
----------
EQUITY CAPITAL
Common stock.................................................................................... 29,176
Surplus......................................................................................... 228,448
Undivided profits............................................................................... 1,197,496
----------
Total equity capital............................................................................ 1,455,120
----------
Total liabilities and equity capital............................................................ 25,558,018
=========
</TABLE>
4
<PAGE> 6
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Charles F. Kaye
5
<PAGE> 1
EXHIBIT 99.1
MASTER TERMS PURCHASE AGREEMENT
This Master Terms Purchase Agreement ("Master Purchase Agreement")
dated as of June 1, 1996 between Nellie Mae, Inc. ("Nellie Mae") and Nellie Mae
Education Funding, LLC ("Funding"), shall be effective upon execution by the
parties hereto.
WHEREAS, Nellie Mae is the owner of certain student loans;
WHEREAS, Nellie Mae may desire to sell its interest in such loans from
time to time and Funding may desire to purchase such loans from Nellie Mae;
NOW, THEREFORE, in connection with the mutual promises contained
herein, the parties hereto agree as follows:
SECTION 1. TERMS
This Master Purchase Agreement establishes the terms under which Nellie
Mae may sell and Funding may purchase the Student Loans (and all obligations of
the Borrowers thereunder) specified on each Purchase Agreement ("Purchase
Agreement") as the parties may execute from time to time pursuant to this Master
Purchase Agreement. Each such Purchase Agreement shall be substantially in the
form of Attachment A hereto, incorporating by reference the terms of this Master
Purchase Agreement, and shall be a separate agreement among Nellie Mae and
Funding with respect to the Student Loans covered by the terms of such Purchase
Agreement. If the terms of a Purchase Agreement conflict with the terms of this
Master Purchase Agreement, the terms of such Purchase Agreement shall supersede
and govern with respect to the Student Loans covered by the terms of such
Purchase Agreement. Notwithstanding the foregoing, to the extent Nellie Mae is
deemed to retain any right, title or interest in the Student Loans, Nellie Mae
grants to Funding a security interest therein.
SECTION 2. DEFINITIONS
Capitalized terms used but not otherwise defined herein shall have the
definitions set forth in Exhibit A to the Master Indenture.
For purposes hereof:
(A) "Bill of Sale" means that document executed by an authorized
officer of Nellie Mae which shall set forth the Student Loans offered by Nellie
Mae and accepted for purchase by Funding and which shall sell, assign and convey
to Funding and its assignees all rights, title and interest of Nellie Mae in the
Student Loans listed on the Bill of Sale and will certify that the
representations and warranties made by Nellie Mae pursuant to Section 5 of this
Master Purchase Agreement are true and correct.
(B) "Borrower" means the obligor on a Student Loan.
(C) "Cutoff Date" means a date agreed to by Nellie Mae and Funding to
use in determining the Principal Balance and accrued interest for purposes of
completing the Student Loan Transmittal Summary Form.
<PAGE> 2
(D) "Delinquent" means the period any payment of principal or interest
due on a Student Loan is overdue.
(E) "Note" means the promissory note of the Borrower and any amendment
thereto evidencing the Borrower's obligation with regard to the Student Loan.
(F) "Principal Balance" means the outstanding principal amount of the
Student Loan, plus accrued interest.
(G) "Purchase Price" means the price paid for the Student Loans as set
forth in the Bill of Sale.
(H) "Qualified Loan" means a Student Loan offered for sale by Nellie
Mae under the Purchase Agreement which as of the Cutoff Date is current or no
more Delinquent than permitted under the Purchase Agreement in payment of
principal or interest, which is owned by Nellie Mae and which, as of the
effective date of the Bill of Sale, is supported by the following documentation:
(a) for each Student Loan:
1. loan application, and any supplement thereto,
2. original promissory note and any addendum thereto or
a certified copy thereof,
(b) for each Student Loan only if applicable:
1. payment history (or similar document) including (i) an
indication of the Principal Balance and the date
through which interest has been paid, each as of the
Cutoff Date and (ii) an accounting of the allocation
of all payments by Borrower or on Borrower's behalf to
principal and interest on the Student Loan,
2. documentation which supports periods of current or
past deferment or past forbearance,
3. a collection history, if the Student Loan was ever in
a delinquent status, including detailed summaries of
contacts and including the addresses or telephone
numbers used in contacting or attempting to contact
Borrower and any endorser,
4. evidence of all requests for skip-tracing assistance
and current address of Borrower, if located,
5. evidence of requests for pre-claims assistance, and
6. a record of any event resulting in a change to or
confirmation of any data regarding the Student Loan.
(I) "Student Loan" means the Note or Notes offered for sale pursuant to
the Purchase Agreement and related documentation together with any guaranties
and other rights relating thereto.
- 2 -
<PAGE> 3
(J) "Student Loan Transmittal Summary Forms" means the forms provided
to Nellie Mae by Funding and completed by Nellie Mae which list, by Borrower,
the Student Loans subject to the Bill of Sale and the outstanding Principal
Balance and accrued interest thereof as of the Cutoff Date.
(K) "Trust Student Loans" means Student Loans which have been purchased
for the benefit of the Trust pursuant to a Sales Agreement.
SECTION 3. SALE/PURCHASE
(A) Consummation of Sale and Purchase. The sale and purchase of
Qualified Loans pursuant to a Purchase Agreement shall be consummated upon
Funding's receipt from Nellie Mae of the Bill of Sale and the payment by Funding
to Nellie Mae of the Purchase Price, and when consummated such sale and purchase
shall be effective as of the date of the Bill of Sale. Nellie Mae and Funding
shall use their best efforts to perform promptly their respective obligations
pursuant to such Purchase Agreement.
(B) Settlement of the Purchase Price. On the date of the Bill of Sale,
Funding shall pay Nellie Mae the Purchase Price by wire transfer of immediately
available funds to the account specified by Nellie Mae.
SECTION 4. CONDITIONS TO PURCHASE
(A) Activities Prior to the Purchase Date. Nellie Mae shall provide any
assistance requested by Funding in determining that all required documentation
on the Student Loans is present and correct.
(B) Continued Servicing. Following the execution of each Purchase
Agreement, Nellie Mae shall cause to be serviced all Student Loans subject to
such Purchase Agreement until the date of the Bill of Sale.
(C) Bill of Sale/Student Loan Transmittal Summary Form.
(i) Nellie Mae shall deliver to Funding a Bill of Sale
executed by an authorized officer of Nellie Mae,
covering Student Loans offered by Nellie Mae and
accepted by Funding as set forth thereon, selling,
assigning and conveying to Funding and its assignees
all right, title and interest of Nellie Mae in each of
the Student Loans, and stating that the
representations and warranties made by Nellie Mae in
Section 5 of this Master Purchase Agreement are true
and correct on and as of the date of the Bill of Sale;
and
(ii) Nellie Mae shall deliver to Funding, within fifteen
days following the execution of each Purchase
Agreement, the Student Loan Transmittal Summary Form
identifying each of the Qualified Loans which is the
subject of the Bill of Sale and setting forth the
unpaid Principal Balance of each such Student Loan.
(D) Endorsement. Nellie Mae shall provide a blanket endorsement
transferring the entire interest of Nellie Mae in the Student Loans to Funding
with the form of endorsement provided for in the Purchase Agreement.
At the direction of and in such form as Funding may designate, Nellie
Mae also agrees to individually endorse any Qualified Loan as Funding may
request from time to time.
- 3 -
<PAGE> 4
(E) Officer's Certificate. Nellie Mae shall furnish to Funding an
Officer's Certificate in substantially the form attached hereto, in connection
with the execution of this Master Purchase Agreement and at such other times as
the Officers listed on such certificate shall change.
(F) Student Loan Transfer Statement. Upon Funding's request, Nellie Mae
shall deliver to Funding one (1) or more Student Loan Transfer Statements
provided by Funding, executed by Nellie Mae and dated the date of the Bill of
Sale. Nellie Mae agrees that Funding may use the Bill of Sale, including the
Student Loan Transmittal Summary Form attached to the Bill of Sale, as official
notification to any Guarantor of the sale by Nellie Mae to Funding of the
Student Loans listed on the Bill of Sale.
(G) Power of Attorney. Nellie Mae hereby grants to Funding an
irrevocable power of attorney, which power of attorney is coupled with an
interest, to individually endorse or cause to be individually endorsed in the
name of Nellie Mae any Qualified Student Loan to evidence the transfer of such
Qualified Student Loan to Funding and to cause to be transferred physical
possession of any Note from Nellie Mae or the Servicer to Funding or any
custodian on their behalf.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF NELLIE MAE AND FUNDING
(A) Nellie Mae represents and warrants to Funding that with respect to
a portfolio of Student Loans as of the date of each Purchase Agreement and Bill
of Sale:
(i) Nellie Mae is duly organized and existing under the
laws of the applicable jurisdiction;
(ii) Nellie Mae has all requisite power and authority to
enter into and to perform the terms of the Purchase
Agreement; and
(iii) Nellie Mae has not, with respect to any Student Loan
purchased under Purchase Agreements executed pursuant
to this Master Purchase Agreement, agree to release
any Guarantor, if any, from any of its contractual
obligations as an insurer of such Student Loan.
(B) Nellie Mae represents and warrants to Funding as to the Student
Loans purchased by Funding under each Purchase Agreement and each Bill of Sale
executed pursuant to this Master Purchase Agreement that:
(i) Nellie Mae has good title to, and is the sole owner
of, the Student Loans, free and clear of all security
interests, liens, charges, claims or encumbrances of
any nature and no right of rescission, offsets,
defenses or counterclaims have been asserted or
threatened with respect to the Student Loans;
(ii) The Student Loans are Qualified Loans and the
description of the Student Loans set forth in the
Purchase Agreement and the Student Loan Transmittal
Summary Form is true and correct;
(iii) Nellie Mae is authorized to sell, assign, transfer and
repurchase the Student Loans; and the sale, assignment
and transfer of such Student Loans is or, in the case
of a Student Loan repurchase by Nellie Mae, will be
made pursuant to and consistent with the laws and
regulations under which Nellie Mae operates, and will
not violate
- 4 -
<PAGE> 5
any decree, judgment or order of any court or agency,
or conflict with or result in a breach of any of the
terms, conditions or provisions of any agreement or
instrument to which Nellie Mae is a party or by which
Nellie Mae or its property is bound, or constitute a
default (or an event which could constitute a default
with the passage of time or notice or both)
thereunder;
(iv) The Student Loans are each in full force and effect in
accordance with their terms and are legal, valid and
binding obligations of the respective Borrowers
thereunder subject to no defenses (except the defenses
of infancy);
(v) Any payments on the Student Loans received by Nellie
Mae which have been allocated to reduction of
principal and interest on such Student Loans have been
allocated on a simple interest basis; the information
with respect to the Student Loans as of the Cutoff
Date as stated on the Student Loan Transmittal Summary
Form is true and correct;
(vi) Due diligence and reasonable care have been exercised
in the making, administering, servicing and collecting
the Student Loans and, with respect to any Student
Loan for which repayment terms have been established,
all disclosures of information required to be made
have been made;
(vii) Each Student Loan has been duly made and serviced in
accordance with the provisions of all applicable
federal and state laws;
(viii) No Student Loan is more than sixty (60) days
delinquent as of the Cutoff Date and no default,
breach, violation or event permitting acceleration
under the terms of any Student Loan exists; and
neither Nellie Mae nor any predecessor holder of any
Student Loan has waived any of the foregoing other
than as permitted by the Basic Documents;
(ix) It is the intention of Nellie Mae and Funding, and
Nellie Mae hereby warrants, that the transfer and
assignment herein contemplated constitute a valid sale
of the Student Loans from Nellie Mae to Funding and
that the beneficial interest in and title to such
Student Loans not be part of Nellie Mae's estate in
the event of the bankruptcy of Nellie Mae or the
appointment of a receiver with respect to Nellie Mae;
(x) There is only one original executed copy of the
promissory note evidencing each Student Loan; and
(xi) No Borrower of any Student Loan as of the Cutoff Date
is known by Nellie Mae as being currently involved in
a bankruptcy proceeding.
(C) Funding represents and warrants that as of the date of each
Purchase Agreement and each Bill of Sale:
(i) Funding is a Massachusetts limited liability company
duly organized and validly existing in good standing
under the laws of the Commonwealth and having an
office located within the Commonwealth. It has all
requisite power and authority to execute, deliver and
perform its obligations under this Purchase Agreement;
- 5 -
<PAGE> 6
(ii) Funding has taken all action necessary to authorize
the execution and delivery by it of the Purchase
Agreement, and the Purchase Agreement will be executed
and delivered by one of its officers who is duly
authorized to execute and deliver the Purchase
Agreement on its behalf; and
(iii) Neither the execution nor the delivery by it of this
Master Purchase Agreement and each Purchase
Agreement, nor the consummation by it of the
transactions contemplated hereby nor compliance by it
with any of the terms or provisions hereof will
contravene any Federal or state law, governmental
rule or regulation governing the Funding or any
judgment or order binding on it, or constitute any
default under its certificate of incorporation or
operating agreement or any indenture, mortgage,
contract, agreement or instrument to which it is a
party or by which any of its properties may be bound.
SECTION 6. REPURCHASE OF TRUST STUDENT LOANS; REIMBURSEMENT
Each party to this Agreement shall give notice to the other party
promptly, in writing, upon the discovery of any breach of Nellie Mae's
representations and warranties made pursuant to Section 5 hereof which has a
materially adverse effect on the interest of Funding in any Trust Student Loan.
In the event of such a material breach which is not curable, Nellie Mae shall
repurchase any affected Trust Student Loan not later than 120 days following the
date of discovery of such material breach. In the event of such a material
breach which is curable, unless the material breach shall have been cured within
360 days following the date of discovery of such material breach, Nellie Mae
shall repurchase such Trust Student Loan not later than the sixtieth day
following the end of such 360-day period.
The sole remedy of Funding, the Owner Trustee, the Certificateholders
and the Noteholders with respect to a breach by Nellie Mae pursuant to Section 5
hereof shall be to require Nellie Mae to repurchase Trust Student Loans or to
reimburse Funding as provided above. The Owner Trustee shall have no duty to
conduct any affirmative investigation as to the occurrence of any condition
requiring the repurchase of any Trust Student Loan.
SECTION 7. OBLIGATION TO REMIT SUBSEQUENT PAYMENTS AND FORWARD COMMUNICATIONS
(A) Any payment received by Nellie Mae with respect to amounts accrued
after the date of the Bill of Sale for any Student Loan sold to Funding, which
payment is not reflected in the Student Loan Transmittal Summary Form, shall be
received by Nellie Mae in trust for the account of Funding and Nellie Mae hereby
disclaims any title to or interest in any such amounts. Within two (2) business
days following the date or receipt, Nellie Mae shall remit to Funding an amount
equal to any such payments on a list provided by Funding identifying the Student
Loans with respect to which such payments were made, the amount of each such
payment and the date each such payment was received.
(B) Any written communication received at any time by Nellie Mae with
respect to any Student Loan subject to a Purchase Agreement shall be transmitted
by Nellie Mae to Servicer within two (2) business days of receipt. Such
communications shall include, but not be limited to, letters, notices of death
or disability, notices of bankruptcy, forms requesting deferment of repayment or
loan cancellation, and like documents.
- 6 -
<PAGE> 7
SECTION 8. CONTINUING OBLIGATION OF NELLIE MAE
Nellie Mae shall provide all reasonable assistance necessary for
Funding to resolve account problems raised by any Borrower or any Guarantor
provided such account problems are attributable to or are alleged to be
attributable to (a) an event occurring during the period Nellie Mae owned the
Student Loan, or (b) a payment made or alleged to have been made to Nellie Mae.
Further, Nellie Mae agrees to execute any financing statements at the request of
Funding in order to reflect Funding's interest in the Student Loans.
SECTION 9. LIABILITY OF NELLIE MAE: INDEMNITIES
Nellie Mae shall be liable in accordance herewith only to the extent of
the obligations specifically undertaken by Nellie Mae under this Purchase
Agreement.
(A) Nellie Mae shall indemnify, defend and hold harmless Funding and
its officers, directors, employees and agents from and against any taxes that
may at any time be asserted against any such Person with respect to the
transactions contemplated herein and in the other Basic Documents, including any
sales, gross receipts, general corporation, tangible personal property,
privilege or license taxes (but, in the case of Funding, not including any taxes
asserted with respect to, and as of the date of, the sale of the Student Loans
to Funding, or asserted with respect to ownership of the Trust Student Loans)
and costs and expenses in defending against the same.
(B) Nellie Mae shall indemnify, defend and hold harmless Funding in its
individual capacity, and the officers, directors, employees and agents of
Funding from and against any and all costs, expenses, losses, claims, damages
and liabilities arising out of, or imposed upon such Person through, Nellie
Mae's willful misfeasance, bad faith or negligence in the performance of its
duties under the Purchase Agreement, or by reason of reckless disregard of its
obligations and duties under the Purchase Agreement.
Indemnification under this Section shall survive the termination of
this Master Purchase Agreement, and shall include reasonable fees and expenses
of counsel and expenses of litigation. If Nellie Mae shall have made any
indemnity payments pursuant to this Section and the Person to or on behalf of
whom such payments are made thereafter shall collect any of such amounts from
others, such Person shall promptly repay such amounts to Nellie Mae, without
interest.
SECTION 10. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF
NELLIE MAE
Any Person (a) into which Nellie Mae may be merged or consolidated, (b)
which may result from any merger or consolidation to which Nellie Mae shall be a
party or (c) which may succeed to the properties and assets of Nellie Mae
substantially as a whole, shall be the successor to Nellie Mae without the
execution or filing of any document or any further act by any of the parties to
this Purchase Agreement; provided, however, that Nellie Mae hereby covenants
that it will not consummate any of the foregoing transactions except upon
satisfaction of the following: (i) the surviving Person, if other than Nellie
Mae, executes an agreement of assumption to perform every obligation of Nellie
Mae under the Purchase Agreement, (ii) immediately after giving effect to such
transaction, no representation or warranty made pursuant to Section 5 shall have
been breached, (iii) the surviving Person, if other than Nellie Mae, shall have
delivered to Funding an Officers' Certificate and an Opinion of Counsel each
stating that such consolidation, merger or succession and such agreement of
assumption comply with this Section and that all conditions precedent, if any,
provided for in this Purchase Agreement relating to such transaction have been
complied with, and that any conditions set by the Rating Agencies shall have
been satisfied with respect to such transaction
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<PAGE> 8
(iv) if Nellie Mae is not the surviving entity, Nellie Mae shall have delivered
to Funding an Opinion of Counsel either (A) stating that, in the opinion of such
counsel, all financing statements and continuation statements and amendments
thereto have been executed and filed that are necessary fully to preserve and
protect the interest of Funding in the Student Loans and reciting the details of
such filings, or (B) stating that, in the opinion of such counsel, no such
action shall be necessary to preserve and protect such interests.
SECTION 11. LIMITATION ON LIABILITY OF NELLIE MAE AND OTHERS
Nellie Mae and any director or officer or employee or agent thereof may
rely in good faith on the advice of counsel or on any document of any kind,
prima facie properly executed and submitted by any Person respecting any matters
arising hereunder (provided that such reliance shall not limit in any way Nellie
Mae's obligations under Section 6). Nellie Mae shall not be under any obligation
to appear in, prosecute or defend any legal action that shall not be incidental
to its obligations under this Master Purchase Agreement or any Purchase
Agreement, and that in its opinion may involve it in any expense or liability.
Except as provided herein, the repurchase and reimbursement obligations of
Nellie Mae will constitute the sole remedy available to Funding for uncured
breaches; provided, however, that the information with respect to the Student
Loans listed on the Bill of Sale may be adjusted in the ordinary course of
business subsequent to the date of the Bill of Sale and (i) to the extent that
the aggregate Principal Balance of the Student Loans listed on the Bill of Sale
is less than the aggregate Principal Balance stated on the Student Loan
Transmittal Summary Form, Nellie Mae shall remit such amount to Funding and (ii)
to the extent that the aggregate Principal Balance of the Student Loans listed
on the Bill of Sales is greater than the aggregate Principal Balance stated on
the Student Loan Transmittal Summary Form, Funding shall furnish such amount to
Nellie Mae. Such reconciliation payment shall be made from time to time but no
less frequently than semi-annually.
SECTION 12. EXPENSES
Except as otherwise provided herein, each party to this Master Purchase
Agreement or any Purchase Agreement shall pay its own expense incurred in
connection with the preparation, execution and delivery of this Master Purchase
Agreement and any Purchase Agreement and the transactions contemplated herein or
therein.
SECTION 13. SURVIVAL OF COVENANTS/SUPERSESSION
All covenants, agreements, representations and warranties made herein
and in or pursuant to any Purchase Agreements executed pursuant to this Master
Purchase Agreement shall survive the consummation of the purchase of the Student
Loans provided for in each Purchase Agreement. All covenants, agreements,
representations and warranties made or furnished pursuant hereto by or on behalf
of Nellie Mae shall bind and inure to the benefit of any successors or assigns
of Funding and shall survive with respect to each Student Loan. Each Purchase
Agreement supersedes all previous agreements and understandings between Funding
and Nellie Mae with respect to the subject matter thereof. This Master Purchase
Agreement and any Purchase Agreement may be changed, modified or discharged, and
any rights or obligations hereunder may be waived, only by a written instrument
signed by a duly authorized officer of the party against whom enforcement of any
such waiver, change, modification or discharge is sought. The waiver by Funding
of any covenant, agreement, representation or warranty required to be made or
furnished by Nellie Mae or the waiver by Funding of any provision herein
contained or contained in any Purchase Agreement shall not be deemed to be a
waiver of any breach of any other covenant, agreement, representation, warranty
or provision herein contained, nor shall any waiver or any custom or practice
which may evolve between the
- 8 -
<PAGE> 9
parties in the administration of the terms hereof or of any Purchase Agreement,
be construed to lessen the right of Funding to insist upon the performance by
Nellie Mae in strict accordance with said terms.
SECTION 14. COMMUNICATION AND NOTICE REQUIREMENTS
All communications, notices and approvals provided for hereunder shall
be in writing and mailed or delivered to Nellie Mae or Funding, as the case may
be, addressed as set forth in the Purchase Agreement or at such other address as
either party may hereafter designate by notice to the other party. Notice given
in any such communication, mailed to Nellie Mae or Funding by appropriately
addressed registered mail, shall be deemed to have been given on the day
following the date of such mailing.
SECTION 15. FORM OF INSTRUMENTS
All instruments and documents delivered in connection with this Master
Purchase Agreement and any Purchase Agreement, and all proceedings to be taken
in connection with this Master Purchase Agreement and any Purchase Agreement and
the transactions contemplated herein and therein, shall be in a form as set
forth in the attachments hereto, and Funding shall have received copies of such
documents as it or its counsel shall reasonably request in connection therewith.
Any instrument or document which is substantially in the same form as an
Attachment hereto or a recital herein will be deemed to be satisfactory as to
form.
SECTION 16. AMENDMENT
This Master Purchase Agreement and any Purchase Agreement may be
amended by the parties thereto without the consent of the related Noteholders or
Certificateholders for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of such Master Terms and
Purchase Agreements or of modifying in any manner the rights of such Noteholders
or Certificateholders; provided that such action will not, in the opinion of
counsel satisfactory to the related Indenture Trustee, materially and adversely
affect the interest of any such Noteholder or Certificateholder.
In addition, this Master Purchase Agreement and any Purchase Agreement
may also be amended from time to time by Nellie Mae and Funding, with the
consent of the Noteholders of Notes evidencing a majority of the Outstanding
Amount of the Notes and the consent of the Certificateholders of Certificates
evidencing a majority of the Certificate Balance, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Master Purchase Agreement or any Purchase Agreements or of modifying in any
manner the rights of the Noteholders or the Certificateholders; provided,
however, that no such amendment shall (a) increase or reduce in any manner the
amount of, or accelerate or delay the time of, collections of payments with
respect to Student Loans or distributions that shall be required to be made for
the benefit of the Noteholders or the Certificateholders or (b) reduce the
aforesaid percentage of the Outstanding Amount of the Notes and the Certificate
Balance of Certificates, the Noteholders or the Certificateholders of which are
required to consent to any such amendment, without the consent of all
outstanding Noteholders and Certificateholders.
Promptly after the execution of any such amendment or consent (or, in
the case of the Rating Agencies, five Business Days prior thereto), Funding
shall furnish written notification of the substance of such amendment or consent
to the Indenture Trustee, each Certificateholder, and each of the Rating
Agencies.
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<PAGE> 10
It shall not be necessary for the consent of Certificateholders or
Noteholders pursuant to this Section to approve the particular form of any
proposed amendment or consent, but it shall be sufficient in such consent shall
approve the substance thereof.
Prior to the execution of any amendment to this Master Purchase
Agreement, Funding shall be entitled to receive and rely upon an Opinion of
Counsel stating that execution of such amendment is authorized or permitted by
this Agreement. Funding may, but shall not be obligated to, enter into any such
amendment which affects Funding's own rights, duties or immunities under this
Master Purchase Agreement or otherwise.
SECTION 17. NON-PETITION COVENANTS
Notwithstanding any prior termination of this Master Purchase Agreement
Nellie Mae and Funding shall not acquiesce, petition or otherwise invoke or
cause Funding to invoke the process of any court or government authority for the
purpose of commencing or sustaining a case against Funding under any Federal or
state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of Funding or any substantial part of its property, or ordering the winding up
or liquidation of the affairs of the Funding.
SECTION 18. GOVERNING LAW
This Master Purchase Agreement and any Purchase Agreement shall be
government by and construed in accordance with the laws of the Commonwealth.
NELLIE MAE, INC. NELLIE MAE EDUCATION FUNDING, LLC
(SELLER) (PURCHASER)
By:__________________________ By:____________________________
Name:________________________ Name:__________________________
Title:_______________________ Title:_________________________
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<PAGE> 11
ATTACHMENT A
PURCHASE AGREEMENT
Dated as of ___________, 1996
PURCHASE AGREEMENT NUMBER 1
Nellie Mae, Inc. ("Nellie Mae") hereby offers for sale to Nellie Mae
Education Funding, LLC ("Funding") the entire right, title and interest of
Nellie Mae in the Student Loans described in the Bill of Sale and Student Loan
Transmittal Summary Form incorporated herein and, to the extent indicated below,
Funding accepts Nellie Mae's offer. In order to qualify as Qualified Loans, no
payment of principal or interest shall be more than sixty (60) days Delinquent
as of the Cutoff Date which date shall be __________, 1996. Notwithstanding the
foregoing, to the extent Nellie Mae is deemed to retain any right, title or
interest in the Student Loans, Nellie Mae grants to Funding a security interest
therein.
TERMS, CONDITIONS AND COVENANTS
In consideration of the Purchase Price, Nellie Mae hereby sells to
Funding the entire right, title and interest of Nellie Mae in the Student Loans
accepted for purchase, subject to all the terms and conditions of the Master
Terms Purchase Agreement ("Master Terms Agreement") and any amendments thereto,
incorporated herein by reference, among Nellie Mae and Funding. The Purchase
Price of the Student Loans shall equal $________.
This document shall constitute a Purchase Agreement as referred in the
Master Terms Agreement and, except as modified herein, each term used herein
shall have the same meaning as in the Master Terms Agreement. All references in
the Master Terms Agreement to Student Loans or Qualified Loans shall be deemed
to refer to the Student Loans governed by this Purchase Agreement. Nellie Mae
hereby makes, as of the date hereof, all the representations and warranties
contained in the Master Terms Agreement and makes such representations and
warranties with respect to the Student Loans governed by this Purchase
Agreement.
Nellie Mae authorizes Funding to use a copy of the Bill of Sale,
including the Student Loan Transmittal Summary Form attached to the Bill of
Sale, as official notification to any Guarantor of assignment on the date of
purchase.
The parties hereto intend that the transfer of Student Loans described
in the Bill of Sale and Student Loan Transmittal Summary Form be, and be
construed as, a valid sale of such Student Loans from Nellie Mae to Funding.
However, in the event that notwithstanding the intention of the parties, such
transfer is deemed to be a transfer for security, then Nellie Mae hereby grants
Funding a first priority security interest in and to all Student Loans described
in the Bill of Sale and Student Loan Transmittal Summary Form to secure a loan
in an amount equal to the Purchase Price of such loans.
NELLIE MAE, INC. NELLIE MAE EDUCATION FUNDING LLC
(SELLER) (PURCHASER)
By:___________________ By:___________________________
Name:_________________ Name:_________________________
Title:________________ Title:________________________
A-1
<PAGE> 12
PURCHASE AGREEMENT NUMBER 1
BLANKET ENDORSEMENT DATED __________, 1996
Nellie Mae, Inc. ("Nellie Mae"), by execution of this instrument,
hereby endorses the attached promissory note which is one (1) of the promissory
notes ("the Notes") described in the Bill of Sale executed by Nellie Mae in
favor of Nellie Mae Education Funding, LLC ("Funding"). This endorsement is in
blank, unrestricted form and without recourse except as provided in Section 6 of
the Master Terms Agreement referred to in the Purchase Agreement among Nellie
Mae and Funding which covers this promissory note.
This endorsement may be effected by attaching either this instrument or
a facsimile hereof to each or any of the Notes.
Notwithstanding the foregoing, Nellie Mae agrees to individually
endorse each Note in the form provided by Funding as Funding may from time to
time require or if such individual endorsement is required by any Guarantor of
the Note.
THE SALE AND PURCHASE OF THE STUDENT LOANS SHALL BE SUBJECT TO THE TERMS,
CONDITIONS AND COVENANTS, INCLUDING THE BLANKET ENDORSEMENT, AS SET FORTH IN THE
PURCHASE AGREEMENT. BY EXECUTION HEREOF, NELLIE MAE ACKNOWLEDGES THAT NELLIE MAE
HAS READ, UNDERSTANDS AND AGREES TO BE BOUND BY ALL TERMS, CONDITIONS AND
COVENANTS OF THE PURCHASE AGREEMENT. THE SALE AND PURCHASE SHALL BE CONSUMMATED
UPON FUNDING'S PAYMENT TO NELLIE MAE OF THE PURCHASE PRICE AND, UNLESS OTHERWISE
AGREED BY NELLIE MAE AND FUNDING, SHALL BE EFFECTIVE AS OF THE DATE OF THE BILL
OF SALE.
SELLER
____________________________________________
Nellie Mae, Inc.
50 Braintree Hill Park
Suite 300
Braintree, Massachusetts 02184
By: ___________________________
(Signature of Authorized
Officer of Seller)
Name: __________________________
Title: _____________________________
PURCHASER
______________________________________
Nellie Mae Education Funding, LLC
By:___________________________________
(Signature of Authorized
Officer for Purchaser)
Name:________________________________
Title:________________________________
Date of Purchase: ____________, 1996
_______________________________________________________________________________
NOTE: Boxed areas on this form are to be completed by Purchaser.
_______________________________________________________________________________
_ 1 _
<PAGE> 13
BILL OF SALE DATED ____________, 1996
The undersigned ("Nellie Mae"), for value received and pursuant to the
terms and conditions of Purchase Agreement Number 1 ("Purchase Agreement")
between Nellie Mae Education Funding, LLC ("Funding") and Nellie Mae, does
hereby sell, assign and convey to Funding and its assignees all right, title and
interest of Nellie Mae in the Student Loans identified herein which Funding has
accepted for purchase. The portfolio accepted for purchase by Funding and the
effective date of sale and purchase are described below and the individual
Borrower accounts are listed on Schedule A attached hereto.
Nellie Mae hereby makes the representations and warranties set forth in
Section 5 of the Master Terms Purchase Agreement incorporated by reference in
the Purchase Agreement. Nellie Mae authorizes Funding to use a copy of this
document as official notification to any Guarantor of assignment to Funding of
the Student Loans on the date of purchase.
LISTING OF LOANS
OFFERED BY NELLIE MAE ACCEPTED BY FUNDING
<TABLE>
<CAPTION>
Number of Principal Number of Principal Purchase
Loans* Balance* Loans Balance Price
___________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
__________ __________ __________ __________ __________
</TABLE>
*Based upon Nellie Mae's estimated calculations, which may be adjusted upward or
downward based upon Funding's reconciliation.
SELLER
____________________________________________
Nellie Mae, Inc.
50 Braintree Hill Park
Suite 300
Braintree, Massachusetts 02184
By: ___________________________
(Signature of Authorized
Officer of Seller)
Name: __________________________
Title: _____________________________
PURCHASER
______________________________________
Nellie Mae Education Funding, LLC
By:___________________________________
(Signature of Authorized
Officer for Purchaser)
Name:________________________________
Title:________________________________
Date of Purchase: ___________, 1996
_______________________________________________________________________________
NOTE: Boxed areas on this form are to be completed by Purchaser.
_______________________________________________________________________________
_ 2 _
<PAGE> 14
OFFICER'S CERTIFICATE
I, _________________________________________, of Nellie Mae, Inc. (the
"Nellie Mae"), hereby certify to Nellie Mae Education Funding, LLC that:
1. The person(s) named below are at the date hereof the duly elected,
qualified and acting officers of Nellie Mae holding the offices indicated and
the signature following each name is the genuine signature of the person named:
<TABLE>
<CAPTION>
TITLE NAME SIGNATURE
----- ---- ---------
<S> <C> <C>
_________________________________ ________________________ ____________________________________
_________________________________ ________________________ ____________________________________
_________________________________ ________________________ ____________________________________
_________________________________ ________________________ ____________________________________
</TABLE>
2. Any of the above-named person(s) is duly authorized to sign
agreements provided for the sale of student loans to Nellie Mae Education
Funding, LLC.
WITNESS my hand this day _____ of ________________________, 1996.
By:______________________________________________
(Not an officer listed above)
Name:____________________________________________
Title:___________________________________________
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<PAGE> 1
EXHIBIT 99.2
MASTER TERMS SALES AGREEMENT
This Master Terms Sales Agreement (the "Master Sales Agreement") dated
as of June 1, 1996 among Nellie Mae Education Funding, LLC (the "Seller"),
Nellie Mae Education Loan Trust (the "Purchaser") and Fleet National Bank, not
in its individual capacity but solely as owner trustee (the "Owner Trustee") for
the benefit of the Purchaser under the Trust Agreement dated as of June 1, 1996
between the Seller and the Owner Trustee, shall be effective upon execution by
the parties hereto.
WHEREAS, Seller is the owner of certain student loans;
WHEREAS, Seller may desire to sell its interest in such loans from time
to time and the Purchaser may desire to purchase such loans from Seller;
NOW, THEREFORE, in connection with the mutual promises contained
herein, the parties hereto agree as follows:
SECTION 1. TERMS
This Master Sales Agreement establishes the terms under which Seller
may sell and the Purchaser may purchase the Student Loans (and all obligations
of the Borrowers thereunder) specified on each Sales Agreement ("Sales
Agreement") as the parties may execute from time to time pursuant to this Master
Sales Agreement. Each such Sales Agreement shall be substantially in the form of
Attachment A hereto, incorporating by reference the terms of this Master Sales
Agreement, and shall be a separate agreement among the Seller, Purchaser, and
the Owner Trustee on behalf of Purchaser with respect to the Student Loans
covered by the terms of such Sales Agreement. If the terms of a Sales Agreement
conflict with the terms of this Master Sales Agreement, the terms of such Sales
Agreement shall supersede and govern with respect to the Student Loans covered
by the terms of such Sales Agreement. Notwithstanding the foregoing, to the
extent the Seller is deemed to retain any right, title or interest in the
Student Loans, the Seller grants to the Owner Trustee for the benefit of the
Trust a security interest therein.
SECTION 2. DEFINITIONS
Capitalized terms used but not otherwise defined herein shall have the
definitions set forth in Exhibit A to the Master Indenture.
For purposes hereof:
(A) "Bill of Sale" means that document executed by an authorized
officer of Seller which shall set forth the Student Loans offered by
Seller and accepted for purchase by the Owner Trustee for the benefit
of Purchaser and which shall sell, assign and convey to the Owner
Trustee for the benefit of Purchaser and its assignees all rights,
title and interest of Seller in the Student Loans listed on the Bill of
Sale and will certify that the representations and warranties made by
Seller pursuant to Section 5 of this Master Sales Agreement are true
and correct.
(B) "Borrower" means the obligor on a Student Loan.
(C) "Cutoff Date" means a date agreed to by Seller and Purchaser to use
in determining the Principal Balance and accrued interest for purposes
of completing the Student Loan Transmittal Summary Form.
<PAGE> 2
(D) "Delinquent" means the period any payment of principal or interest
due on the Student Loan is overdue.
(E) "Note" means the promissory note of the Borrower and any amendment
thereto evidencing the Borrower's obligation with regard to a student
loan.
(F) "Principal Balance" means the outstanding principal amount of the
Student Loan, plus accrued interest.
(G) "Purchase Price" means the price paid for the Student Loans as set
forth in the Bill of Sale.
(H) "Qualified Loan" means a Student Loan offered for sale by the
Seller under the Sales Agreement which as of the Cutoff Date is current
or no more Delinquent than permitted under the Sales Agreement in
payment of principal or interest, is owned by Seller and which is
supported by the following documentation as of the effective date of
the Bill of Sale:
(a) for each Student Loan:
1. loan application, and any supplement thereto,
2. original promissory note and any addendum thereto or a
certified copy thereof,
(b) for each Student Loan only if applicable:
1. payment history (or similar document) including (i) an
indication of the Principal Balance and the date through
which interest has been paid, each as of the Cutoff Date
and (ii) an accounting of the allocation of all payments
by Borrower or on Borrower's behalf to principal and
interest on the Student Loan,
2. documentation which supports periods of current or past
deferment or past forbearance,
3. a collection history, if the Student Loan was ever in a
delinquent status, including detailed summaries of
contacts and including the addresses or telephone
numbers used in contacting or attempting to contact
Borrower and any endorser,
4. evidence of all requests for skip-tracing assistance and
current address of Borrower, if located,
5. evidence of requests for pre-claims assistance, and
6. a record of any event resulting in a change to or
confirmation of any data regarding the Student Loan.
(I) "Student Loan" means the Note or Notes offered for sale pursuant to
the Sales Agreement and related documentation together with any
guaranties and other rights relating thereto.
(J) "Student Loan Transmittal Summary Forms" means the forms provided
to Seller by Purchaser and completed by Seller which list, by Borrower,
the Student Loans subject to the Bill of Sale and the outstanding
Principal Balance and accrued interest thereof as of the Cutoff Date.
- 2 -
<PAGE> 3
(K) "Trust Student Loans" means Student Loans which have been purchased
for the benefit of the Trust pursuant to a Sales Agreement.
SECTION 3. SALE/PURCHASE
(A) Consummation of Sale and Purchase. The sale and purchase of
Qualified Loans pursuant to a Sales Agreement shall be consummated upon
Purchaser's receipt from Seller of the Bill of Sale and the payment by Purchaser
to Seller of the Purchase Price, and when consummated such sale and purchase
shall be effective as of the date of the Bill of Sale. Seller and Purchaser
shall use their best efforts to perform promptly their respective obligations
pursuant to such Sales Agreement.
(B) Settlement of the Purchase Price. Purchaser on the date of the Bill
of Sale shall pay Seller the Purchase Price by wire transfer of immediately
available funds to the account specified by Seller.
SECTION 4. CONDITIONS TO PURCHASE
(A) Activities Prior to the Sale. Following the execution of each Sales
Agreement, Seller shall provide any assistance requested by Purchaser in
determining that all required documentation on the Student Loans is present and
correct.
(B) Continued Servicing. Following the execution of each Sales
Agreement, Seller shall service, or cause to be serviced, all Student Loans
until the date of the Bill of Sale.
(C) Bill of Sale/Student Loan Transmittal Summary Form.
(i) Seller shall deliver to Purchaser a Bill of Sale
executed by an authorized officer of Seller covering
Student Loans offered by Seller and accepted by
Purchaser as set forth thereon, selling, assigning and
conveying to the Owner Trustee on behalf of Purchaser
and its assignees all right, title and interest of
Seller in each of the Student Loans, and stating that
the representations and warranties made by Seller in
Section 5 of this Master Sales Agreement are true and
correct on and as of the date of the Bill of Sale; and
(ii) Seller shall deliver to Purchaser, within fifteen days
following the execution of each Sales Agreement, the
Student Loan Transmittal Summary Form, attached to the
Bill of Sale, identifying each of the Qualified Loans
which is the subject of the Bill of Sale and setting
forth the unpaid Principal Balance of each such
Student Loan.
(D) Endorsement. Seller shall provide a blanket endorsement
transferring the entire interest of Seller in the Student Loans to the Owner
Trustee on behalf of Purchaser with the form of endorsement provided for in the
Sales Agreement.
At the direction of and in such form as Purchaser may designate, Seller
also agrees to individually endorse any Qualified Loan as Purchaser may request
from time to time.
(E) Officer's Certificate. Seller shall furnish to Purchaser an
Officer's Certificate in substantially the form of attached hereto in connection
with the execution of this Master Sales Agreement and at such other times as the
officers listed on such certificate shall change.
- 3 -
<PAGE> 4
(F) Student Loan Transfer Statement. Upon Purchaser's request, Seller
shall deliver to Purchaser one (1) or more Student Loan Transfer Statements
provided by Purchaser, executed by Seller and dated the date of the Bill of
Sale. Seller agrees that Purchaser and the Owner Trustee may use the Bill of
Sale, including the Student Loan Transmittal Summary Form attached to the Bill
of Sale, as official notification to any Guarantor of the assignment by Seller
to the Owner Trustee on behalf of Purchaser of the Student Loans listed on the
Bill of Sale.
(G) Power of Attorney. Seller hereby grants to the Owner Trustee for
the benefit of Purchaser an irrevocable power of attorney, which power of
attorney is coupled with an interest, to individually endorse or cause to be
individually endorsed in the name of Seller any Qualified Loan to evidence the
transfer of such Qualified Loan to the Owner Trustee for the benefit of
Purchaser and to cause to be transferred physical possession of any Note from
the Seller or the Servicer to the Owner Trustee or the Indenture Trustee or any
custodian on their behalf.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SELLER AND OWNER TRUSTEE
(A) Seller represents and warrants to Purchaser that with respect to a
portfolio of Student Loans as of the date of each Sales Agreement and Bill of
Sale:
(i) Seller is duly organized and existing under the laws
of the applicable jurisdiction;
(ii) Seller has all requisite power and authority to enter
into and to perform the terms of the Sales Agreement;
and
(iii) Seller has not, with respect to any Student Loan
purchased under Sales Agreements executed pursuant to
this Master Sales Agreement, agree to release any
Guarantor, if any, from any of its contractual
obligations as an insurer of such Student Loan.
(B) Seller represents and warrants to Purchaser as to the Student Loans
purchased by Purchaser under each Sales Agreement and each Bill of Sale executed
pursuant to this Master Sales Agreement that:
(i) Seller has good title to, and is the sole owner of,
the Student Loans, free and clear of all security
interests, liens, charges, claims or encumbrances of
any nature and no right of rescission, offsets,
defenses or counterclaims have been asserted or
threatened with respect to the Student Loans;
(ii) The Student Loans are Qualified Loans and the
description of the Student Loans set forth in the
Sales Agreement and the Student Loan Transmittal
Summary Form is true and correct;
(iii) Seller is authorized to sell, assign, transfer and
repurchase the Student Loans; and the sale, assignment
and transfer of such Student Loans is or, in the case
of a Student Loan repurchase by Seller, will be made
pursuant to and consistent with the laws and
regulations under which Seller operates, and will not
violate any decree, judgment or order of any court or
agency, or conflict with or result in a breach of any
of the terms, conditions or provisions of any
agreement or instrument to which Seller is a party or
by which Seller or its property is bound, or
constitute a default (or an event which could
constitute a default with the passage of time or
notice or both) thereunder;
- 4 -
<PAGE> 5
(iv) The Student Loans are each in full force and effect in
accordance with their terms and are legal, valid and
binding obligations of the respective Borrowers
thereunder subject to no defenses (except the defenses
of infancy);
(v) Any payments on the Student Loans received by Seller
which have been allocated to reduction of principal
and interest on such Student Loans have been allocated
on a simple interest basis; the information with
respect to the Student Loans as of the Cutoff Date as
stated on the Student Loan Transmittal Summary Form is
true and correct;
(vi) Due diligence and reasonable care have been exercised
in the making, administering, servicing and collecting
the Student Loans and, with respect to any Student
Loan for which repayment terms have been established,
all disclosures of information required to be made
have been made;
(vii) Each Student Loan has been duly made and serviced in
accordance with the provisions of all applicable
federal and state laws;
(viii) No Student Loan is more than sixty (60) days
delinquent as of the Cutoff Date and no default,
breach, violation or event permitting acceleration
under the terms of any Student Loan exits; and
neither Seller nor any predecessor holder of any
Student Loan has waived any of the foregoing other
than as permitted by the Basic Documents;
(ix) It is the intention of Seller, the Owner Trustee and
Purchaser, and Seller hereby warrants, that the
transfer and assignment herein contemplated constitute
a valid sale of the Student Loans from Seller to the
Owner Trustee on behalf of Purchaser and that the
beneficial interest in and title to such Student Loans
not be part of Seller's estate in the event of the
bankruptcy of Seller or the appointment of a receiver
with respect to Seller;
(x) There is only one original executed copy of the
promissory note evidencing each Student Loan; and
(xi) No Borrower of any Student Loan as of the Cutoff Date
is known by Seller as being currently involved in a
bankruptcy proceeding.
(C) The Owner Trustee represents and warrants that as of the date of
each Sales Agreement and each Bill of Sale:
(i) The Owner Trustee is a national banking association
duly organized and validly existing in good standing
under the laws of the United States and having an
office located within the City of Boston,
Massachusetts. It has all requisite corporate power
and authority to execute, deliver and perform its
obligations under this Sales Agreement;
(ii) The Owner Trustee has taken all corporate action
necessary to authorize the execution and delivery by
it of the Sales Agreement, and the Sales Agreement
will be executed and delivered by one of its officers
who is duly authorized to execute and deliver the
Sales Agreement on its behalf; and
- 5 -
<PAGE> 6
(iii) Neither the execution nor the delivery by it of this
Master Sales Agreement and each Sales Agreement, nor
the consummation by it of the transactions
contemplated hereby nor compliance by it with any of
the terms or provisions hereof will contravene any
Federal or state law, governmental rule or regulation
governing the banking or trust powers of the Owner
Trustee or any judgment or order binding on it, or
constitute any default under its charter documents or
by-laws or any indenture, mortgage, contract,
agreement or instrument to which it is a party or by
which any of its properties may be bound.
SECTION 6. REPURCHASE OF TRUST STUDENT LOANS; REIMBURSEMENT
Each party to this Agreement shall give notice to the other such
parties promptly, in writing, upon the discovery of any breach of Seller's
representations and warranties made pursuant to Section 5 hereof which has a
materially adverse effect on the interest of Purchaser in any Trust Student
Loan. In the event of such a material breach which is not curable, Seller shall
repurchase any affected Trust Student Loan not later than 120 days following the
date of discovery of such material breach. In the event of such a material
breach which is curable, unless the material breach shall have been cured within
360 days following the date of discovery of such material breach, Seller shall
repurchase such Trust Student Loan not later than the sixtieth day following the
end of such 360-day period.
The sole remedy of Purchaser, the Owner Trustee, the Certificateholders
and the Noteholders with respect to a breach by Seller pursuant to Section 5
hereof shall be to require Seller to repurchase Trust Student Loans or to
reimburse Purchaser as provided above. The Owner Trustee shall have no duty to
conduct any affirmative investigation as to the occurrence of any condition
requiring the repurchase of any Trust Student Loan.
SECTION 7. OBLIGATION TO REMIT SUBSEQUENT PAYMENTS AND FORWARD COMMUNICATIONS
(A) Any payment received by Seller with respect to amounts accrued
after the date of the Bill of Sale for any Student Loan sold to Purchaser, which
payment is not reflected in the Student Loan Transmittal Summary Form, shall be
received by Seller in trust for the account of Purchaser and Seller hereby
disclaims any title to or interest in any such amounts. Within two (2) business
days following the date or receipt, Seller shall remit to Purchaser an amount
equal to any such payments on a list provided by Purchaser identifying the
Student Loans with respect to which such payments were made, the amount of each
such payment and the date each such payment was received.
(B) Any written communication received at any time by Seller with
respect to any Student Loan subject to a Sales Agreement shall be transmitted by
Seller to Servicer within two (2) business days of receipt. Such communications
shall include, but not be limited to, letters, notices of death or disability,
notices of bankruptcy, forms requesting deferment of repayment or loan
cancellation, and like documents.
SECTION 8. CONTINUING OBLIGATION OF SELLER
Seller shall provide all reasonable assistance necessary for Purchaser
to resolve account problems raised by any Borrower or any Guarantor provided
such account problems are attributable to or are alleged to be attributable to
(a) an event occurring during the period Seller owned the Student Loan, or (b) a
payment made or alleged to have been made to Seller. Further, Seller agrees to
execute any financing statements at the request of Purchaser in order to reflect
Purchaser's interest in the Student Loans.
- 6 -
<PAGE> 7
SECTION 9. LIABILITY OF SELLER: INDEMNITIES
Seller shall be liable in accordance herewith only to the extent of the
obligations specifically undertaken by Seller under this Sales Agreement.
(A) Seller shall indemnify, defend and hold harmless Purchaser and the
Owner Trustee in its individual capacity and their officers, directors,
employees and agents from and against any taxes that may at any time be asserted
against any such Person with respect to the transactions contemplated herein and
in the other Basic Documents (except any such income taxes arising out of fees
paid to the Owner Trustee), including any sales, gross receipts, general
corporation, tangible personal property, privilege or license taxes (but, in the
case of Purchaser, not including any taxes asserted with respect to, and as of
the date of, the sale of the Student Loans to the Owner Trustee on behalf of
Purchaser, or asserted with respect to ownership of the Trust Student Loans) and
costs and expenses in defending against the same.
(B) Seller shall indemnify, defend and hold harmless Purchaser and the
Owner Trustee in its individual capacity, and the officers, directors, employees
and agents of Purchaser, and the Owner Trustee from and against any and all
costs, expenses, losses, claims, damages and liabilities arising out of, or
imposed upon such Person through, Seller's willful misfeasance, bad faith or
negligence in the performance of its duties under the Sales Agreement, or by
reason of reckless disregard of its obligations and duties under the Sales
Agreement.
(C) Seller shall be liable as primary obligor for, and shall indemnify,
defend and hold harmless the Owner Trustee in its individual capacity and its
officers, directors, employees and agents from and against, all costs, expenses,
losses, claims, damages, obligations and liabilities arising out of, incurred in
connection with or relating to the Sales Agreement, the other Basic Documents,
the acceptance or performance of the trusts and duties set forth herein and in
the Sales Agreement or the action or the inaction of the Owner Trustee
hereunder, except to the extent that such cost, expense, loss, claim, damage,
obligation or liability: (a) shall be due to the willful misfeasance, bad faith
or negligence (except for errors in judgment) of the Owner Trustee or (b) shall
arise from the breach by the Owner Trustee of any of its representations or
warranties made in its individual capacity set forth in this Master Sales
Agreement or any Sales Agreement. In the event of any claim, action or
proceeding for which indemnity will be sought pursuant to this paragraph, the
Owner Trustee's choice of legal counsel shall be subject to the approval of
Seller, which approval shall not be unreasonably withheld.
Indemnification under this Section shall survive the resignation or
removal of the Owner Trustee and the termination of this Master Sales Agreement,
and shall include reasonable fees and expenses of counsel and expenses of
litigation. If Seller shall have made any indemnity payments pursuant to this
Section and the Person to or for the benefit of whom such payments are made
thereafter shall collect any of such amounts from others, such Person shall
promptly repay such amounts to Seller, without interest.
SECTION 10. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF
SELLER
Any Person (a) into which Seller may be merged or consolidated, (b)
which may result from any merger or consolidation to which Seller shall be a
party or (c) which may succeed to the properties and assets of Seller
substantially as a whole, shall be the successor to Seller without the execution
or filing of any document or any further act by any of the parties to this
Master Sales Agreement, provided, however, that Seller hereby covenants that it
will not consummate any of the foregoing transactions except upon satisfaction
of the following: (i) the surviving Person, if other than Seller, executes an
agreement of assumption to perform every obligation of Seller under the Master
Sales Agreement, (ii) immediately after
- 7 -
<PAGE> 8
giving effect to such transaction, no representation or warranty made pursuant
to Section 5 shall have been breached, (iii) the surviving Person, if other than
Seller, shall have delivered to the Owner Trustee an Officers' Certificate and
an Opinion of Counsel each stating that such consolidation, merger or succession
and such agreement of assumption comply with this Section and that all
conditions precedent, if any, provided for in this Sales Agreement relating to
such transaction have been complied with, and that any conditions set by the
Rating Agencies shall have been satisfied with respect to such transaction (iv)
if Seller is not the surviving entity, Seller shall have delivered to the Owner
Trustee an Opinion of Counsel either (A) stating that, in the opinion of such
counsel, all financing statements and continuation statements and amendments
thereto have been executed and filed that are necessary fully to preserve and
protect the interest of Purchaser and the Owner Trustee in the Student Loans and
reciting the details of such filings, or (B) stating that, in the opinion of
such counsel, no such action shall be necessary to preserve and protect such
interests.
SECTION 11. LIMITATION ON LIABILITY OF SELLER AND OTHERS
Seller and any director or officer or employee or agent thereof may
rely in good faith on the advice of counsel or on any document of any kind,
prima facie properly executed and submitted by any Person respecting any matters
arising hereunder (provided that such reliance shall not limit in any way
Seller's obligations under Section 6). Seller shall not be under any obligation
to appear in, prosecute or defend any legal action that shall not be incidental
to its obligations under this Master Sales Agreement or any Sales Agreement, and
that in its opinion may involve it in any expense or liability. Except as
provided herein, the repurchase and reimbursement obligations of Seller will
constitute the sole remedy available to Purchaser for uncured breaches;
provided, however, that the information with respect to the Loans listed on the
Bill of Sale may be adjusted in the ordinary course of business subsequent to
the date of the Bill of Sale and (i) to the extent that the aggregate Principal
Balance of the Student Loans listed on Student Loan Transmittal Summary Form is
less than the aggregate Principal Balance stated on the Bill of Sale, Seller
shall remit such amount to the Owner Trustee on behalf of Purchaser and (ii) to
the extent that the aggregate Principal Balance of the Student Loans listed on
the Student Loan Transmittal Summary Form is greater than the aggregate
Principal Balance stated on the Bill of Sale, the Owner Trustee, on behalf of
the Purchaser, shall furnish such amount to the Seller. Such reconciliation
payment shall be made from time to time but no less frequently than
semi-annually.
SECTION 12. LIMITATION OF LIABILITY OF OWNER TRUSTEE
Notwithstanding anything contained herein to the contrary, this Master
Sales Agreement and any Sales Agreement have been signed by Fleet National Bank
not in its individual capacity but solely in its capacity as Owner Trustee for
Purchaser and in no event shall Fleet National Bank in its individual capacity
have any liability for the representations, warranties, covenants, agreements or
other obligations of Purchaser, under this Master Sales Agreement or any Sales
Agreement or in any of the certificates, notices or agreements delivered
pursuant hereto, as to all of which recourse shall be had solely to the assets
of Purchaser or the Seller, as the case may be.
SECTION 13. EXPENSES
Except as otherwise provided herein, each party to this Master Sales
Agreement or any Sales Agreement shall pay its own expense incurred in
connection with the preparation, execution and delivery of this Master Sales
Agreement and any Sales Agreement and the transactions contemplated herein or
therein.
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<PAGE> 9
SECTION 14. SURVIVAL OF COVENANTS/SUPERSESSION
All covenants, agreements, representations and warranties made herein
and in or pursuant to any Sales Agreements executed pursuant to this Master
Sales Agreement shall survive the consummation of the purchase of the Student
Loans provided for in each Sales Agreement. All covenants, agreements,
representations and warranties made or furnished pursuant hereto by or on behalf
of Seller shall bind and inure to the benefit of any successors or assigns of
Purchaser and shall survive with respect to each Student Loan. Each Sales
Agreement supersedes all previous agreements and understandings between
Purchaser and Seller with respect to the subject matter thereof. This Master
Sales Agreement and any Sales Agreement may be changed, modified or discharged,
and any rights or obligations hereunder may be waived, only by a written
instrument signed by a duly authorized officer of the party against whom
enforcement of any such waiver, change, modification or discharge is sought. The
waiver by Purchaser of any covenant, agreement, representation or warranty
required to be made or furnished by Seller or the waiver by Purchaser of any
provision herein contained or contained in any Sales Agreement shall not be
deemed to be a waiver of any breach of any other covenant, agreement,
representation, warranty or provision herein contained, nor shall any waiver or
any custom or practice which may evolve between the parties in the
administration of the terms hereof or of any Sales Agreement, be construed to
lessen the right of Purchaser to insist upon the performance by Seller in strict
accordance with said terms.
SECTION 15. COMMUNICATION AND NOTICE REQUIREMENTS
All communications, notices and approvals provided for hereunder shall
be in writing and mailed or delivered to Seller or Purchaser, as the case may
be, addressed as set forth in the Sales Agreement or at such other address as
either party may hereafter designate by notice to the other party. Notice given
in any such communication, mailed to Seller or Purchaser by appropriately
addressed registered mail, shall be deemed to have been given on the day
following the date of such mailing.
SECTION 16. FORM OF INSTRUMENTS
All instruments and documents delivered in connection with this Master
Sales Agreement and any Sales Agreement, and all proceedings to be taken in
connection with this Master Sales Agreement and any Sales Agreement and the
transactions contemplated herein and therein, shall be in a form as set forth in
the attachments hereto, and Purchaser shall have received copies of such
documents as it or its counsel shall reasonably request in connection therewith.
Any instrument or document which is substantially in the same form as an
Attachment hereto or a recital herein will be deemed to be satisfactory as to
form.
SECTION 17. AMENDMENT
This Master Sales Agreement and any Sales Agreement may be amended by
the parties thereto without the consent of the related Noteholders or
Certificateholders for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of such Master Sales Agreement
and Sales Agreements or of modifying in any manner the rights of such
Noteholders or Certificateholders; provided that such action will not, in the
opinion of counsel satisfactory to the related Indenture Trustee, materially and
adversely affect the interest of any such Noteholder or Certificateholder.
In addition, this Master Sales Agreement and any Sales Agreement may
also be amended from time to time by Seller, the Owner Trustee and Purchaser,
with the consent of the Noteholders of Notes evidencing a majority of the
Outstanding Amount of the Notes and the consent of the Certificateholders of
Certificates evidencing a majority of the Certificate Balance, for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions of this Master Sales Agreement or any Sales Agreements
- 9 -
<PAGE> 10
or of modifying in any manner the rights of the Noteholders or the
Certificateholders; provided, however, that no such amendment shall (a) increase
or reduce in any manner the amount of, or accelerate or delay the time of,
collections of payments with respect to Student Loans or distributions that
shall be required to be made for the benefit of the Noteholders or the
Certificateholders or (b) reduce the aforesaid percentage of the Outstanding
Amount of the Notes and the Certificate Balance of Certificates, the Noteholders
or the Certificateholders of which are required to consent to any such
amendment, without the consent of all outstanding Noteholders and
Certificateholders.
Promptly after the execution of any such amendment or consent (or, in
the case of the Rating Agencies, five Business Days prior thereto), the Owner
Trustee shall furnish written notification of the substance of such amendment or
consent to the Indenture Trustee, each Certificateholder, and each of the Rating
Agencies.
It shall not be necessary for the consent of Certificateholders or
Noteholders pursuant to this Section to approve the particular form of any
proposed amendment or consent, but it shall be sufficient in such consent shall
approve the substance thereof.
Prior to the execution of any amendment to this Master Sales Agreement,
the Owner Trustee shall be entitled to receive and rely upon an Opinion of
Counsel stating that execution of such amendment is authorized or permitted by
this Agreement. The Owner Trustee may, but shall not be obligated to, enter into
any such amendment which affects the Owner Trustee's own rights, duties or
immunities under this Master Sales Agreement or otherwise.
SECTION 18. NON-PETITION COVENANTS
Notwithstanding any prior termination of this Master Sales Agreement,
Seller and the Owner Trustee shall not acquiesce, petition or otherwise invoke
or cause Purchaser to invoke the process of any court or government authority
for the purpose of commencing or sustaining a case against Purchaser under any
Federal or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignees, trustee, custodian, sequestrator or other similar
official of Purchaser or any substantial part of its property, or ordering the
winding up or liquidation of the affairs of the Purchaser.
SECTION 19. GOVERNING LAW
This Master Sales Agreement and any Sales Agreement shall be government
by and construed in accordance with the laws of the Commonwealth.
NELLIE MAE EDUCATION FUNDING, LLC NELLIE MAE EDUCATION LOAN TRUST
(Seller) (Purchaser)
By: Fleet National Bank, as Owner Trustee
By:______________________ By:______________________________
Name:____________________ Name:____________________________
Title:___________________ Title:___________________________
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<PAGE> 11
FLEET NATIONAL BANK,
not in its individual capacity but
solely as Owner Trustee
By:_______________________________
Name:_____________________________
Title:____________________________
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<PAGE> 12
ATTACHMENT A
SALES AGREEMENT
Dated as of ________ ___, 1996
SALES AGREEMENT NUMBER 1
Nellie Mae Education Funding, LLC ("Seller") hereby offers for sale to
the Fleet National Bank, as Owner Trustee for the benefit of Nellie Mae
Education Loan Trust (the "Trust" or the "Purchaser") under the Trust Agreement
dated as of June 1, 1996 between Seller and the Owner Trustee, the entire right,
title and interest of Seller in the Student Loans described in the Bill of Sale
and Student Loan Transmittal Summary Form incorporated herein and, to the extent
indicated below, the Owner Trustee for the benefit of the Trust accepts Seller's
offer. In order to qualify as Qualified Loans, no payment of principal or
interest shall be more than sixty (60) days Delinquent as of the Cutoff Date
which date shall be ________ __, 1996. Notwithstanding the foregoing, to the
extent the Seller is deemed to retain any right, title or interest in the
Student Loans, the Seller grants to the Owner Trustee for the benefit of the
Trust a security interest therein.
TERMS, CONDITIONS AND COVENANTS
In consideration of the Purchase Price, Seller hereby sells to the
Owner Trustee for the benefit of the Trust the entire right, title and interest
of Seller in the Student Loans accepted for purchase, subject to all the terms
and conditions of the Master Terms Sales Agreement ("Master Sales Agreement")
and any amendments thereto, incorporated herein by reference, among Seller, the
Trust and the Owner Trustee. The Purchase Price of the Students Loans shall
equal $________ .
This document shall constitute a Sales Agreement as referred top in the
Master Sales Agreement and, except as modified herein, each term used herein
shall have the same meaning as in the Master Sales Agreement. All references in
the Master Sales Agreement to Student Loans or Qualified Loans shall be deemed
to refer to the Students Loans governed by this Sales Agreement. Seller hereby
makes, as of the date hereof, all the representations and warranties contained
in the Master Sales Agreement and makes such representations and warranties with
respect to the Student Loans governed by this Sales Agreement.
Seller authorizes the Owner Trustee for the benefit of the Trust to use
a copy of the Bill of Sale, including the Student Loan Transmittal Summary Form
attached to the Bill of Sale, as official notification to any Guarantor of
assignment to the Owner Trustee on behalf of the Trust of the Student Loans on
the date of purchase.
The parties hereto intend that the transfer of Student Loans described
in the Bill of Sale and Student Loan Transmittal Summary Form be, and be
construed as, a valid sale of such Student Loans from Seller to the Owner
Trustee for the benefit of the Trust. However, in the event that notwithstanding
the intention of the parties, such transfer is deemed to be a transfer for
security, then Seller hereby grants to the Owner Trustee for the benefit of the
Trust a first priority security interest in and to all Student Loans described
in the Bill of Sale and Student Loan Transmittal Summary Form to secure a loan
in an amount equal to the Purchase Price of such loans.
A-1
<PAGE> 13
NELLIE MAE EDUCATION FUNDING, LLC NELLIE MAE EDUCATION LOAN TRUST
(SELLER) (PURCHASER)
By: Fleet National Bank, as Owner
Trustee
By:___________________________ By:_________________________________
Name:_________________________ Name:_______________________________
Title:________________________ Title:______________________________
FLEET NATIONAL BANK,
not in its individual capacity but
solely as Owner Trustee
By:_________________________________
Name:_______________________________
Title:______________________________
A-2
<PAGE> 14
SALES AGREEMENT NUMBER 1
BLANKET ENDORSEMENT DATED _________ __, 1996
Nellie Mae Education Funding, LLC ("Seller"), by execution of this
instrument, hereby endorses the attached promissory note which is one (1) of the
promissory notes ("the Notes") described in the Bill of Sale executed by Seller
in favor of the Fleet National Bank as the Owner Trustee for the benefit of
Nellie Mae Education Loan Trust ("Purchaser"). This endorsement is in blank,
unrestricted form and without recourse except as provided in Section 6 of the
Master Sales Agreement referred to in the Sales Agreement among Seller,
Purchaser, and the Owner Trustee which covers this promissory note.
This endorsement may be effected by attaching either this instrument or
a facsimile hereof to each or any of the Notes.
Notwithstanding the foregoing, Seller agrees to individually endorse
each Note in the form provided by Purchaser as Purchaser may from time to time
require or if such individual endorsement is required by any Guarantor of the
Note.
THE SALE AND PURCHASE OF THE LOANS SHALL BE SUBJECT TO THE TERMS, CONDITIONS AND
COVENANTS, INCLUDING THE BLANKET ENDORSEMENT, AS SET FORTH IN THE SALES
AGREEMENT. BY EXECUTION HEREOF, SELLER ACKNOWLEDGES THAT SELLER HAS READ,
UNDERSTANDS AND AGREES TO BE BOUND BY ALL TERMS, CONDITIONS AND COVENANTS OF THE
SALE AGREEMENT. THE SALE AND PURCHASE SHALL BE CONSUMMATED UPON PURCHASER'S
PAYMENT TO SELLER OF THE PURCHASE PRICE AND, UNLESS OTHERWISE AGREED BY SELLER
AND PURCHASER, SHALL BE EFFECTIVE AS OF THE DATE OF THE BILL OF SALE.
SELLER
____________________________________________
Nellie Mae Education Funding, LLC
50 Braintree Hill Park
Suite 300
Braintree, Massachusetts 02184
By: ______________________________
(Signature of Authorized
Officer of Seller)
Name: ______________________________
Title: _____________________________
PURCHASER
______________________________________
Fleet National Bank, not in this individual capacity but solely as Owner Trustee
for the benefit of the Nellie Mae Education Loan Trust under the Trust Agreement
dated _________, 1996
By:___________________________________
(Signature of Authorized
Officer for Purchaser)
Name:________________________________
Title:________________________________
Date of Purchase: ________ __, 1996
_______________________________________________________________________________
NOTE: Boxed areas on this form are to be completed by Purchaser
_______________________________________________________________________________
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<PAGE> 15
BILL OF SALE DATED _______ __, 1996
The undersigned ("Seller"), for value received and pursuant to the
terms and conditions of Sale Agreement Number 1 ("Sales Agreement") among Nellie
Mae Education Loan Trust ("Purchaser"), and Fleet National Bank, as Owner
Trustee for the benefit of Purchaser under the Trust Agreement dated as of June
1, 1996 between Purchaser and the Owner Trustee, does hereby sell, assign and
convey to the Owner Trustee for the benefit of Purchaser and its assignees all
right, title and interest of Seller, in the Student Loans identified herein
which the Owner Trustee for the benefit of Purchaser has accepted for purchase.
The portfolio accepted for purchase by the Owner Trustee for the benefit of
Purchaser and the effective date of sale and purchase are described below and
the individual Borrower accounts are listed on the Schedule A attached hereto.
Seller hereby makes the representations and warranties set forth in
Section 5 of the Master Terms Sales Agreement incorporated by reference in the
Sales Agreement. Seller authorizes the Owner Trustee on behalf of Purchaser to
use a copy of this document as official notification to any Guarantor of
assignment to the Owner Trustee for the benefit of Purchaser of the Loans on the
date of purchase.
<TABLE>
<CAPTION>
LISTING OF LOANS
OFFERED BY ACCEPTED BY
SELLER OWNER TRUSTEE
NUMBER OF PRINCIPAL NUMBER OF PRINCIPAL PURCHASE
LOANS* BALANCE* LOANS BALANCE PRICE
___________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
__________ __________ __________ __________ __________
</TABLE>
*Based upon Seller's estimated calculations, which may be adjusted upward or
downward based upon Purchaser's reconciliation.
SELLER
____________________________________________
Nellie Mae Education Funding, LLC
50 Braintree Hill Park
Suite 300
Braintree, Massachusetts 02184
By: ___________________________
(Signature of Authorized
Officer of Seller)
Name: __________________________
Title: _____________________________
PURCHASER
______________________________________
Fleet National Bank, not in this individual capacity but solely as Owner Trustee
for the benefit of the Nellie Mae Education Loan Trust under the Trust Agreement
dated _________, 1996
By:___________________________________
(Signature of Authorized
Officer for Purchaser)
Name:________________________________
Title:________________________________
Date of Purchase: ____________, 1996
_______________________________________________________________________________
NOTE: Boxed areas on this form are to be completed by Purchaser.
_______________________________________________________________________________
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<PAGE> 16
OFFICER'S CERTIFICATE
I, _________________________________________, of the Nellie Mae
Education Funding, LLC (the "Seller"), hereby certify to Nellie Mae Education
Loan Trust that:
1. The person(s) named below are at the date hereof the duly elected,
qualified and acting officers of Seller holding the offices indicated and the
signature following each name is the genuine signature of the person named:
<TABLE>
<CAPTION>
TITLE NAME SIGNATURE
----- ---- ---------
<S> <C> <C>
________________________________ ________________________ _________________________
________________________________ ________________________ _________________________
________________________________ ________________________ _________________________
________________________________ ________________________ _________________________
</TABLE>
2. Any of the above-named person(s) is duly authorized to sign
agreements provided for the sale of student loans to Nellie Mae Education Loan
Trust.
WITNESS my hand this day _____ of ________________________, 1996.
By:____________________________________________
(Not an officer listed above)
Name:__________________________________________
Title:_________________________________________
- 3 -
<PAGE> 1
EXHIBIT 99.3
ADMINISTRATION AGREEMENT
among
NELLIE MAE, INC.,
as Administrator
NELLIE MAE EDUCATION LOAN TRUST,
as Issuer
FLEET NATIONAL BANK
not in its individual capacity
but solely as Owner Trustee
and
STATE STREET BANK AND TRUST COMPANY,
not in its individual capacity
but solely as Indenture Trustee
Dated as of June 1, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
SECTION 1.1 Definitions and Usage..................................................... 1
ARTICLE II
SECTION 2.1 Duties with Respect to the Basic Documents................................ 2
SECTION 2.2 Duties with Respect to the Issuer......................................... 3
SECTION 2.3 Statements to Certificateholders and Noteholders.......................... 4
SECTION 2.4 Non-Ministerial Matters................................................... 5
SECTION 2.6 Compensation.............................................................. 5
SECTION 2.7 Administrator Expenses.................................................... 5
ARTICLE III
SECTION 3.1 Administrator's Certificate............................................... 6
SECTION 3.2 Annual Statement as to Compliance; Notice of Default...................... 6
ARTICLE IV
SECTION 4.2 Liability of Administrator; Indemnities................................... 7
SECTION 4.3 Merger or Consolidation of, or Assumption of the Obligations of
Administrator............................................................. 8
SECTION 4.4 Limitation on Liability of the Administrator and Others................... 9
SECTION 4.5 Administrator May Own Certificates or Notes............................... 9
SECTION 4.6 Resignation of Nellie Mae, Inc. as Administrator.......................... 9
ARTICLE V
SECTION 5.1 Administrator Default..................................................... 10
SECTION 5.2 Appointment of Successor.................................................. 10
SECTION 5.3 Notification to Noteholders and Certificateholders........................ 11
SECTION 5.4 Waiver of Past Defaults................................................... 11
ARTICLE VI
SECTION 6.1 Termination............................................................... 12
ARTICLE VII
SECTION 7.1 Protection of Interests in Trust.......................................... 12
ARTICLE VIII
SECTION 8.1 Independence of the Administrator......................................... 12
SECTION 8.2 No Joint Venture.......................................................... 12
SECTION 8.3 Other Activities of Administrator......................................... 13
</TABLE>
ii
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 8.4 Powers of Attorney........................................................ 13
SECTION 8.5 Amendment................................................................. 13
SECTION 8.6 Assignment................................................................ 14
SECTION 8.7 Limitations on Rights of Others........................................... 14
SECTION 8.8 Assignment to Indenture Trustee........................................... 14
SECTION 8.9 Non-petition Covenants.................................................... 14
SECTION 8.10 Limitation of Liability of Owner Trustee and Indenture Trustee............ 14
SECTION 8.11 Governing Law............................................................. 15
SECTION 8.12 Headings.................................................................. 15
SECTION 8.13 Counterparts.............................................................. 15
SECTION 8.14 Severability.............................................................. 15
</TABLE>
iii
<PAGE> 4
ADMINISTRATION AGREEMENT
Nellie Mae, Inc. (the "Administrator"), Nellie Mae Education Loan Trust
(the "Issuer" or the "Trust"), Fleet National Bank, not in its individual
capacity but solely as Owner Trustee (the "Owner Trustee"), and State Street
Bank and Trust Company, not in its individual capacity but solely as Indenture
Trustee (the "Indenture Trustee") agree as follows:
WHEREAS, the Issuer was created pursuant to a Trust Agreement dated as
of June 1, 1996 (the "Trust Agreement") between Nellie Mae Funding Corporation,
LLC as Depositor, and Fleet National Bank, as Owner Trustee;
WHEREAS, the Issuer may issue from time to time, in one or more Series
and one or more Classes, Asset-Backed Notes (the "Notes") pursuant to the Master
Indenture dated as of June 1, 1996 (the "Indenture"), between the Issuer and the
Indenture Trustee and a related Terms Supplement;
WHEREAS, the Issuer may issue from time to time, in one or more
Classes, Asset-Backed Certificates (the "Certificates") pursuant to the Trust
Agreement and a related Trust Supplement;
WHEREAS, the Issuer has entered into or will enter into certain
agreements in connection with the issuance of the Notes and the Certificates,
including without limitation, the Sales Agreement, the Purchase Agreement, the
Servicing Agreement, the Guaranty Agreements, the Indenture and related Terms
Supplements, the Trust Agreement and related Trust Supplements and this
Administration Agreement (all such agreements being collectively referred to
herein as the "Basic Documents");
WHEREAS, pursuant to the Basic Documents, the Issuer, the Owner Trustee
and the Indenture Trustee are required to perform certain duties in connection
with (a) the Notes and the Trust Estate therefor pledged to the Indenture
Trustee pursuant to the Indenture and related Terms Supplements and (b) the
Certificates pursuant to the Trust Agreement and related Trust Supplements;
WHEREAS, pursuant to the Trust Agreement, the Owner Trustee is directed
to enter into this Agreement, and the Issuer and the Indenture Trustee desire to
enter into this Agreement, in order for the Administrator to perform certain of
the duties of the Issuer, the Indenture Trustee and the Owner Trustee referred
to in the preceding clause, and to provide such additional services consistent
with the terms of the Basic Documents as the Issuer and the Owner Trustee may
from time to time request;
WHEREAS, the Administrator has the capacity to provide the services
required hereby and is willing to perform such services for the Issuer, the
Owner Trustee and the Indenture Trustee on the terms set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties agree as follows:
ARTICLE I
SECTION 1.1 Definitions and Usage. Except as otherwise specified herein
or as the context may otherwise require, capitalized terms used but not
otherwise defined herein are defined in Exhibit A hereto, which also contains
rules as to usage that shall be applicable herein.
<PAGE> 5
ARTICLE II
SECTION 2.1 Duties with Respect to the Basic Documents. The
Administrator shall exercise the duties of the Issuer and the Owner Trustee
under the Indenture, each related Terms Supplement, the Trust Agreement and each
related Trust Supplement, as set forth below. The Administrator shall monitor
the performance of the Issuer and shall advise the Owner Trustee when action by
the Issuer or the Owner Trustee is necessary to comply with the Issuer's or the
Owner Trustee's duties under the Indenture, each related Terms Supplement, the
Trust Agreement and any of the other Basic Documents. The Administrator shall
prepare for execution, if required, by the Issuer or shall cause the preparation
by other appropriate persons of all such documents, reports, filings,
instruments, certificates and opinions as it shall be the duty of the Issuer to
prepare, file or deliver pursuant to the Indenture, each related Terms
Supplement, the Trust Agreement or any of the other Basic Documents. In
furtherance of the foregoing, the Administrator shall take all appropriate
action, including but not limited to, such actions as outlined herein, in the
related Terms Supplement (references are to sections of the Indenture):
a. preparing or obtaining the documents and instruments required
for authentication of the Notes and delivering the same to the
Indenture Trustee (Section 2.3);
b. preparing, obtaining or filing the instruments, opinions and
certificates and other documents required for the release of
collateral (Section 2.14);
c. obtaining and preserving the Issuer's qualification to do
business in each jurisdiction in which such qualification is
or shall be necessary to protect the validity and
enforceability of the Indenture, the Notes and each instrument
and agreement included in the Indenture Trust Estate (Section
5.10);
d. preparing all supplements, amendments, financing statements,
continuation statements, instruments of further assurance and
other instruments, in accordance with Section 5.3 of the
Indenture, necessary to protect the Indenture Trust Estate
(Section 5.3 and 5.2);
e. the delivery by the Issuer of the Opinion of Counsel on the
Closing Date and the annual delivery of Opinions of Counsel,
in accordance with Section 5.10 of the Indenture, as to the
Indenture Trust Estate, and the annual delivery of the
Officers' Certificate of the Issuer and certain other
statements, in accordance with Section 5.12 of the Indenture,
as to compliance with the Indenture (Sections 5.10 and 5.12);
f. in the event of a Servicer Default, the taking of all
reasonable steps available to enforce the Issuer's rights
under the Basic Documents in respect of such Servicer Default
(Section 5.4);
g. monitoring the Issuer's obligations as to the satisfaction and
discharge of the Indenture and preparation of an Officers'
Certificate of the Issuer and obtaining of the Opinion of
Counsel and the Independent Certificate relating thereto
(Section 10.1);
h. sale of the Indenture Trust Estate in a commercially
reasonable manner if an Event of Default has occurred and is
continuing (Section 7.1) or an Insolvency Event with respect
to the Seller has occurred and is continuing (Section 6.5(b));
i. preparing and, after execution by the Issuer, filing with the
Commission, any applicable State agencies and the Indenture
Trustee, documents required to be filed on a periodic basis
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with, and summaries thereof as may be required by rules and
regulations prescribed by, the Commission and any applicable
State agencies (Section 8.3);
j. the preparation of an Issuer Request and Officer's Certificate
of the Issuer and the obtaining of an Opinion of Counsel and
Independent Certificates, if necessary, for the release of the
Indenture Trust Estate (Sections 10.3 and 10.4);
k. the preparation of Issuer Orders and the obtaining of Opinions
of Counsel with respect to the execution of supplemental
indentures (Sections 9.1, 9.2 and 9.3);
l. the preparation of or obtaining of the documents and
instruments required for the execution and authentication of
new Notes conforming to any supplemental indenture and the
delivery of the same to the Owner Trustee and the Indenture
Trustee, respectively (Section 9.6);
m. the preparation of all Officers' Certificates of the Issuer,
and the coordination of obtaining Opinions of Counsel and
Independent Certificates with respect to any requests by the
Issuer of the Indenture Trustee to take any action under the
Indenture (Section 11.10 (a));
n. the preparation and delivery of Officers' Certificates of the
Issuer and the obtaining of Independent Certificates, if
necessary, for the release of property from the lien of the
Indenture (Section 11.10 (b));
o. the preparation and delivery to Noteholders and the Indenture
Trustee of any agreements with respect to notice provisions
(Section 11.5);
p. the recording of the Indenture, if applicable (Section 11.13);
and
q. the preparation and delivery of investment instructions to the
Indenture Trustee (Section 4.9).
SECTION 2.2 Duties with Respect to the Issuer.
A. In addition to the duties of the Administrator set forth above and
in the other Basic Documents, the Administrator shall perform such calculations
and shall prepare for execution by the Issuer or the Owner Trustee or shall
cause the preparation by other appropriate persons of all such documents,
reports, filings, instruments, certificates and opinions as it shall be the duty
of the Issuer or the Owner Trustee to prepare, file or deliver pursuant to the
Basic Documents, and at the request of the Owner Trustee shall take all
appropriate action that it is the duty of the Issuer to take pursuant to the
Basic Documents. Subject to Section 8.1, and in accordance with the directions
of the Owner Trustee, the Administrator shall administer, perform or supervise
the performance of such other activities in connection with the Trust Estate
(including the Basic Documents) as are not covered by any of the foregoing
provisions and as are expressly requested by the Owner Trustee and are
reasonably within the capability of the Administrator. Duties of the
Administrator with respect to the Financed Loans shall include management of the
Financed Loan portfolio, including servicing oversight, audit and review,
pre-claims activity and post-default collection activity, which activities shall
be performed either by the Administrator or by a third-party contractor selected
by the Administrator.
B. The Administrator shall perform the duties of the Administrator
specified in Section 10.2 of the Trust Agreement required to be performed in
connection with the resignation or removal of the Owner
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Trustee, and any other duties expressly required to be performed by the
Administrator under the Trust Agreement and the other Basic Documents.
C. In carrying out the foregoing duties or any of its other obligations
under this Agreement, the Administrator may enter into transactions with or
otherwise deal with any of its Affiliates; provided, however, that the terms of
any such transactions or dealings shall be, in the Administrator's opinion, no
less favorable to the Issuer than would be available from unaffiliated parties.
SECTION 2.3 Statements to Certificateholders and Noteholders. On each
Distribution Date the Administrator will provide instructions as to the payments
which will take place on that day including:
a. The amount of principal to be prepaid on the Notes;
b. The amount of principal to be prepaid on the Certificates;
c. The amount of interest to be paid on the Notes;
d. The amount of interest to be paid on the Certificates;
e. The amount of the Administration Fee if any, to be paid; and
f. The amount of Servicing fee billed by the Servicer for the
preceding month to be transferred to the applicable subaccount
within the Administration Account.
Additionally on the 20th of each month, or the next Business Day if
such day is not a Business Day, the Administrator will provide to the Owner
Trustee, the Indenture Trustee and the Rating Agencies the following information
all as of the preceding month end:
g. The aggregate Outstanding principal balance of Notes;
h. The aggregate Outstanding Certificate Balance;
i. The balance of each Account in the Debt Service Reserve Fund;
j. The total Financed Loans outstanding;
k. Summary of delinquent Financed Loans;
l. The Primary Parity Trigger and the Secondary Parity Trigger;
m. The weighted average interest rate on the Financed Loans; and
n. The aggregate amount of Financed Loans repurchased by the
Seller or purchased by the Servicer during the preceding
month.
The Administrator shall also provide instructions for the periodic
payment of fees to the Rating Agencies and for the annual payment of fees to and
the periodic payment for reimbursement of out-of-pocket expenses incurred by the
Indenture Trustee and the Owner Trustee.
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A copy of the statements referred to above may be obtained by any
Certificate Owner or Noteholder by a written request to the Owner Trustee or the
Indenture Trustee, respectively, addressed to the respective Corporate Trust
Office.
SECTION 2.4 Non-Ministerial Matters. With respect to matters that in
the reasonable judgment of the Administrator are non-ministerial, the
Administrator shall not take any action unless within a reasonable time before
the taking of such action, the Administrator shall have notified the Rating
Agencies and the Owner Trustee of the proposed action and the Owner Trustee
shall not have withheld consent or provided an alternative direction. For the
purpose of the preceding sentence, "non-ministerial matters" shall include:
a. the amendment of or any supplement to the Indenture;
b. the initiation of any claim or lawsuit by the Issuer and the
compromise of any action, claim or lawsuit brought by or
against the Issuer (other than in connection with the
collection of the Financed Loans);
c. the amendment, change or modification of the Basic Documents;
d. the appointment of successor Note Registrars, successor Paying
Agents and successor Indenture Trustees pursuant to the
Indenture or the appointment of successor administrators or
successor servicers, or the consent to the assignment by the
Note Registrar, Paying Agent or Indenture Trustee of its
obligations under the Indenture; and
e. the removal of the Indenture Trustee.
SECTION 2.5 Except as expressly provided herein or in the other Basic
Documents, the Administrator shall not be obligated to, and shall not (1) make
any payments to the Noteholders under the Basic Documents, (2) take any other
action that the Issuer directs the Administrator not to take on its behalf, (3)
in connection with its duties hereunder assume any indemnification obligation of
any other person or (4) service the Financed Loans.
SECTION 2.6 Compensation. As compensation for the performance of the
Administrator's obligations under this Agreement and as reimbursement for its
expenses related thereto, the Administrator shall be entitled on each
Distribution Date to an amount, prior to the date that is one year after the
Closing Date, equal to one-twelfth (1/12) of forty hundredths of one percent
(0.40%) of the principal of the Financed Loans Outstanding as of the end of the
prior month and, thereafter, equal to one-twelfth (1/12) of twenty hundredths of
one percent (0.20%) of the principal of the Financed Loans Outstanding as of the
end of the prior month, plus in either case all reasonable out-of-pocket
expenses (payable in arrears), which shall be solely an obligation of the
Issuer.
SECTION 2.7 Administrator Expenses. The Administrator shall pay all
expenses incurred by it in connection with activities hereunder, including fees
and disbursements of independent accountants, taxes imposed on the Administrator
and expenses incurred in connection with distributions and reports to the
Certificateholders and the Noteholders.
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ARTICLE III
SECTION 3.1 Administrator's Certificate.
On the Business Day that a payment is made to the Servicer, the
Administrator shall deliver to the Indenture Trustee an Officer's Certificate of
the Administrator containing all information necessary for the Indenture Trustee
to pay the Servicer on such date.
SECTION 3.2 Annual Statement as to Compliance; Notice of Default.
A. The Administrator shall deliver to the Owner Trustee and the
Indenture Trustee on or before 120 days after the end of the fiscal year of the
Administrator, an Officer's Certificate of the Administrator dated as of
December 31 of the preceding year, stating that (i) a review of the activities
of the Administrator during the preceding 12-month period (or, in the case of
the first such certificate, during the period from the Closing Date to December
31, 1996) and of its performance under this Agreement has been made under such
officers' supervision and (ii) to the best of such officers' knowledge, based on
such review, the Administrator has fulfilled its obligations in all material
respects under this Agreement and throughout such year or, if there has been a
material default in the fulfillment of any such obligation, specifying each such
material default known to such officers and the nature and status thereof. The
Indenture Trustee shall send a copy of each such Officers' Certificate to the
Rating Agencies. A copy of each such Officers' Certificate may be obtained by
any Certificateholder or Noteholder by a request in writing to the Owner Trustee
addressed to its Corporate Trust Office, together with evidence satisfactory to
the Owner Trustee that such person is one of the foregoing parties. Upon the
telephone request of the Owner Trustee, the Indenture Trustee will promptly
furnish to the Owner Trustee a list of Noteholders as of the date specified by
the Owner Trustee.
B. The Administrator shall deliver to the Owner Trustee, the Indenture
Trustee and the Rating Agencies, promptly after having obtained knowledge
thereof, but in no event later than five Business Days thereafter, written
notice in an Officers' Certificate of the Administrator of any event which with
the giving of notice or lapse of time, or both, would become an Administrator
Default.
ARTICLE IV
SECTION 4.1 Representations of Administrator. Nellie Mae, Inc., as
Administrator, makes the following representations on which the Issuer is deemed
to have relied in acquiring the Financed Loans. The representations speak as of
the execution and delivery of this Agreement and as of the Closing Date and
shall survive the sale of the Financed Loans to the Owner Trustee on behalf of
the Issuer and the pledge thereof to the Indenture Trustee pursuant to the
Indenture.
A. Organization and Good Standing. The Administrator is duly organized
and validly existing with the power and authority to own its properties and to
conduct its business as such properties are currently owned and such business is
presently conducted.
B. Power and Authority. The Administrator has the corporate power and
authority to execute and deliver this Agreement and to carry out its terms, and
the execution, delivery and performance of this Agreement have been duly
authorized by the Administrator by all necessary corporate action.
C. Binding Obligation. This Agreement constitutes a legal, valid and
binding obligation of the Administrator enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency,
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reorganization and similar laws relating to creditors' rights generally and
subject to general principles of equity.
D. No Violation. The consummation of the transactions contemplated by
this Agreement and the fulfillment of the terms hereof or thereof do not
conflict with, result in any breach of any of the terms and provisions of, nor
constitute (with or without notice or lapse of time or both) a default under,
the charter or by-laws of the Administrator, or any indenture, agreement or
other instrument to which the Administrator is a party or by which it shall be
bound; nor result in the creation or imposition of any lien upon any of its
properties pursuant to the terms of any such indenture, agreement or other
instrument (other than pursuant to the Basic Documents); nor violate any law or,
to the knowledge of the Administrator, any order, rule or regulation applicable
to the Administrator of any court or of any Federal or state regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Administrator or its properties.
E. No Proceedings. There are no proceedings or investigations pending
against the Administrator or, to its best knowledge, threatened against the
Administrator, before any court, regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Administrator or its
properties: (i) asserting the invalidity of this Agreement or of the other Basic
Documents, the Notes or the Certificates, (ii) seeking to prevent the issuance
of the Notes or the Certificates or the consummation of any of the transactions
contemplated by this Agreement or any of the other Basic Documents, (iii)
seeking any determination or ruling that could reasonably be expected to have a
material and adverse effect on the performance by the Administrator of its
obligations under, or the validity or enforceability of, this Agreement, any of
the other Basic Documents, the Notes or the Certificates or (iv) seeking to
affect adversely the Federal or state income tax attributes of the Issuer, the
Notes or the Certificates.
F. All Consents. All authorizations, consents, orders or approvals of
or registrations or declarations with any court, regulatory body, administrative
agency or other government instrumentality required to be obtained, effected or
given by the Administrator in connection with the execution and delivery by the
Administrator of this Agreement and the performance by the Administrator of the
transactions contemplated by this Agreement have been duly obtained, affected or
given and are in full force and effect.
SECTION 4.2 Liability of Administrator; Indemnities. The Administrator
shall be liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Administrator under this Agreement.
The Administrator shall indemnify, defend and hold harmless the Issuer,
the Certificateholders and the Noteholders and any of the officers, directors,
employees and agents of the Issuer from and against any and all costs, expenses,
losses, claims, damages and liabilities to the extent that such cost, expense,
loss, claim, damage or liability arose out of, or was imposed upon any such
person through, the negligence, willful misfeasance or bad faith of the
Administrator in the performance of its duties under this Agreement or by reason
of reckless disregard of its obligations and duties hereunder or thereunder.
The Administrator shall indemnify the Indenture Trustee in its
individual capacity and any of its officers, directors, employees and agents
against any and all loss, liability or expense (including attorneys' fees)
incurred by it in connection with the performance of its duties under the
Indenture and the other Basic Documents. The Indenture Trustee shall notify the
Issuer and the Administrator promptly of any claim for which it may seek
indemnity. Failure by the Indenture Trustee to so notify the Issuer and the
Administrator shall not relieve the Issuer or the Administrator of its
obligations hereunder and under the other Basic Documents. The Administrator
shall defend the claim and the Administrator shall not be liable for the legal
fees and expenses of the Indenture Trustee after it has assumed such defense;
provided, however, that in the
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event that there may be a conflict between the positions of the Indenture
Trustee and the Administrator in conducting the defense of such claim, the
Indenture Trustee shall be entitled to separate counsel, the fees and expenses
of which shall be paid by the Administrator on behalf of the Issuer. Neither the
Issuer nor the Administrator need reimburse any expense or indemnify against any
loss, liability or expense incurred by the Indenture Trustee through the
Indenture Trustee's own willful misconduct, negligence or bad faith.
The Administrator shall indemnify the Owner Trustee in its individual
capacity and any of its officers, directors, employees and agents against any
and all loss, liability, claims, damages, costs, penalties, taxes (excluding
taxes payable by it on any compensation received by it for its services as
trustee) or expense (including attorneys' fees) incurred by the Owner Trustee in
connection with the performance of its duties under the Trust Agreement and the
other Basic Documents provided, however, that neither the Issuer nor the
Administrator need reimburse any expense or indemnify against any loss,
liability or expense incurred by the Owner Trustee through the Owner Trustee's
own willful misconduct, negligence or bad faith.
The Owner Trustee shall notify the Administrator promptly of any claim
for which it may seek indemnity. Failure by the Owner Trustee to so notify the
Administrator shall not relieve the Administrator of its obligations hereunder
and under the other Basic Documents. The Administrator shall defend the claim
and the Administrator shall not be liable for the legal fees and expenses of the
Owner Trustee after it has assumed such defense; provided, however, that, in the
event that there may be a conflict between the positions of the Owner Trustee
and the Administrator in conducting the defense of such claim, the Owner Trustee
shall be entitled to separate counsel, the fees and expenses of which shall be
paid by the Administrator on behalf of the Issuer.
For purposes of this Section, in the event of the termination of the
rights and obligations of the Administrator (or any successor thereto pursuant
to Section 4.3) as Administrator pursuant to Section 5.1, or a resignation by
such Administrator pursuant to this Agreement, such Administrator shall be
deemed to be the Administrator pending appointment of a successor Administrator
pursuant to Section 5.2.
Indemnification under this Section shall survive the resignation or
removal of the Owner Trustee or the Indenture Trustee or the termination of this
Agreement and shall include reasonable fees and expenses of counsel and expenses
of litigation. If the Administrator shall have made any indemnity payments
pursuant to this Section and the person to or on behalf of whom such payments
are made thereafter collects any of such amounts from others, such person shall
promptly repay such amounts to the Administrator, without interest.
SECTION 4.3 Merger or Consolidation of, or Assumption of the
Obligations of Administrator. Any person (a) into which the Administrator may be
merged or consolidated, (b) which may result from any merger or consolidation to
which the Administrator shall be a party or (c) which may succeed to the
properties and assets of the Administrator substantially as a whole, shall be
the successor to the Administrator without the execution or filing of any
document or any further act by any of the parties to this Agreement; provided,
however, that the Administrator hereby covenants that it will not consummate any
of the foregoing transactions except upon satisfaction of the following: (i) the
surviving Administrator, if other than Nellie Mae, Inc. or an Affiliate,
executes an agreement of assumption to perform every obligation of the
Administrator under this Agreement, (ii) immediately after giving effect to such
transaction, no representation or warranty made pursuant to Section 4.1 shall
have been breached and no Administrator Default, and no event that, after notice
or lapse of time, or both, would become an Administrator Default shall have
occurred and be continuing, (iii) the surviving Administrator, if other than
Nellie Mae, Inc. or an Affiliate, shall have delivered to the Owner Trustee and
the Indenture Trustee an Officers' Certificate and an Opinion of Counsel each
stating that such consolidation, merger or succession and such agreement of
assumption comply with this section and that all conditions precedent, if any,
provided for in this Agreement
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relating to such transaction have been complied with, and that the Rating
Agencies shall have been satisfied with respect to such transaction, (iv) unless
Nellie Mae, Inc. or an Affiliate is the surviving entity, such transaction will
not result in a material adverse Federal or state tax consequence to the Issuer,
the Noteholders or the Certificateholders and (v) unless Nellie Mae, Inc. or an
Affiliate is the surviving entity, the Administrator shall have delivered to the
Owner Trustee and the Indenture Trustee an Opinion of Counsel either (A) stating
that, in the opinion of such counsel, all financing statements and continuation
statements and amendments thereto have been executed and filed that are
necessary fully to preserve and protect the interest of the Owner Trustee and
Indenture Trustee, respectively, in the Trust Estate and reciting the details of
such filings, or (B) stating that, in the opinion of such counsel, no such
action shall be necessary to preserve and protect such interests. Anything in
this Section 4.3 to the contrary notwithstanding, the Administrator may at any
time assign its rights, obligations and duties under this Agreement to an
Affiliate provided that the Rating Agencies confirm that such assignment will
not result in a downgrading or a withdrawal of the ratings then applicable to
the Notes and the Certificates.
SECTION 4.4 Limitation on Liability of the Administrator and Others.
Neither the Administrator nor any of its directors, officers, employees or
agents shall be under any liability to the Issuer, the Noteholders or the
Certificateholders, or to the Indenture Trustee or the Owner Trustee except as
provided under this Agreement for any action taken or for refraining from the
taking of any action pursuant to this Agreement or for errors in judgment;
provided, however, that these provisions shall not protect the Administrator or
any such person against any liability that would otherwise be imposed by reason
of willful misfeasance, bad faith or negligence in the performance of duties or
by reason of reckless disregard of obligations and duties under this Agreement.
The Administrator and any of its directors, officers, employees or agents may
rely in good faith on the advice of counsel or on any document of any kind,
prima facie properly executed and submitted by any person respecting any matters
arising hereunder.
Except as provided in this Agreement, the Administrator shall not be
under any obligation to appear in, prosecute or defend any legal action that
shall not be incidental to its duties to administer the Financed Loans and the
Trust in accordance with this Agreement and that in its opinion may involve it
in any expense or liability; provided, however, that the Administrator may
undertake any reasonable action that it may deem necessary or desirable in
respect of this Agreement and the other Basic Documents and the rights and
duties of the parties to this Agreement and the other Basic Documents and the
interests of the Certificateholders under the Trust Agreement and the
Noteholders under the Indenture.
SECTION 4.5 Administrator May Own Certificates or Notes. The
Administrator and any Affiliate thereof may in its individual or any other
capacity become the owner or pledgee of Certificates or Notes with the same
rights as it would have if it were not the Administrator or an Affiliate
thereof, except as expressly provided herein or in any other Basic Document.
SECTION 4.6 Resignation of Nellie Mae, Inc. as Administrator. Nellie
Mae, Inc. may resign from the obligations and duties imposed on it as
Administrator under this Agreement only in accordance with this Section 4.6.
Nellie Mae shall provide written notice of its intention to resign to the Owner
Trustee and the Indenture Trustee at the least 120 days prior to effective time
of the resignation and such written notice shall be confirmed in writing at the
earliest practicable time; provided, however, no such resignation shall become
effective until the Indenture Trustee or a successor Administrator shall have
assumed the responsibilities and obligations of Nellie Mae, Inc. in accordance
with Section 5.2 hereof. Anything in this Section 4.6 to the contrary
notwithstanding, the Administrator may resign at any time subsequent to the
assignment of its duties and obligations hereunder pursuant to Section 4.3.
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ARTICLE V
SECTION 5.1 Administrator Default. If any one of the following events
(an "Administrator Default") shall occur and be continuing:
A. any failure by the Administrator to direct the Indenture
Trustee to make any required distributions from any of the
Trust Funds and Accounts which failure continues unremedied
for five Business Days after written notice of such failure is
received by the Administrator from the Indenture Trustee or
the Owner Trustee or after discovery of such failure by an
officer of the Administrator; or
B. any failure by the Administrator duly to observe or to perform
in any material respect any other covenant or agreement of the
Administrator set forth in this Agreement or any other Basic
Document, which failure shall (i) materially and adversely
affect the rights of Noteholders or Certificateholders and
(ii) continue unremedied for a period of 60 days after the
date on which written notice of such failure, requiring the
sale to be remedied, shall have been given (A) to the
Administrator by the Indenture Trustee or the Owner Trustee or
(B) to the Administrator, the Indenture Trustee and the Owner
Trustee by the Noteholders or Certificateholders, as
applicable, representing not less than 25% of the Outstanding
amount of the Notes or 25% of the Outstanding Certificate
Balance (including any Certificates owned by the Seller); or
C. an Insolvency Event occurs with respect to the Administrator;
then, and in each and every case, so long as the Administrator Default shall not
have been remedied, either the Indenture Trustee, Owner Trustee or the
Noteholders evidencing not less than 25% of the Outstanding Amount of the Notes
shall give written notice to the Administrator of such Administrator Default and
the Indenture Trustee and the Owner Trustee, may then terminate all the rights
and obligations (other than the obligations set forth in Section 4.2) of the
Administrator under this Agreement. On or after the receipt by the Administrator
of such written notice, all authority and power of the Administrator under this
Agreement, whether with respect to the Notes, the Certificates, the Financed
Loans or otherwise, shall, without further action, pay to and be vested in the
Indenture Trustee or such successor Administrator as may be appointed under
Section 5.2; and, without limitation, the Indenture Trustee and the Owner
Trustee are hereby authorized and empowered to execute and deliver, for the
benefit of the predecessor Administrator, as attorney-in-fact or otherwise, any
and all documents and other instruments, and to do or accomplish all other acts
or things necessary or appropriate to effect the purposes of such notice of
termination. The predecessor Administrator shall cooperate with the successor
Administrator, the Indenture Trustee and the Owner Trustee in effecting the
termination of the responsibilities and rights of the predecessor Administrator
under this Agreement. All reasonable costs and expenses (including attorneys'
fees) incurred in connection with amending this Agreement to reflect such
succession as Administrator pursuant to this Section shall be paid by the
predecessor Administrator upon presentation of reasonable documentation of such
costs and expenses. Upon receipt of notice of the occurrence of an Administrator
Default, the Owner Trustee shall give notice thereof to the Rating Agencies.
SECTION 5.2 Appointment of Successor.
A. Upon receipt by the Administrator of notice of termination pursuant
to Section 5.1, or the resignation by the Administrator in accordance with the
terms of this Agreement, the predecessor Administrator shall continue to perform
its functions as Administrator under this Agreement in the case of termination,
only until the date specified in such termination notice or, if no such date is
specified in a notice
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of termination, until receipt of such notice and, in the case of resignation,
until the date 120 days from the delivery to the Owner Trustee and the Indenture
Trustee of written notice of such resignation (or written confirmation of such
notice) in accordance with the terms of this Agreement. In the event of the
termination or resignation hereunder of the Administrator, the Issuer shall
appoint a successor Administrator acceptable to the Owner Trustee and the
Indenture Trustee, and the successor Administrator shall accept its appointment
by a written assumption in form acceptable to the Indenture Trustee. In the
event that a successor Administrator has not been appointed at the time when the
predecessor Administrator has ceased to act as Administrator in accordance with
this section, the Indenture Trustee without further action shall automatically
be appointed the successor Administrator and the Indenture Trustee shall be
entitled to the Administration Fee. Notwithstanding the above, the Indenture
Trustee shall, if it shall be unwilling or legally unable so to act, appoint or
petition a court of competent jurisdiction to appoint any established
institution whose regular business shall include the servicing of student loans,
as the successor to the Administrator under this Agreement.
B. Upon appointment, the successor Administrator (including the
Indenture Trustee acting as successor Administrator), shall be the successor in
all respects to the predecessor Administrator and shall be subject to all the
responsibilities, duties and liabilities placed on the predecessor Administrator
that arise thereafter or are related thereto and shall be entitled to an amount
agreed to by such successor Administrator (which shall not exceed the
Administration Fee unless such compensation arrangements will not result in a
downgrading or withdrawal of any rating on the Notes or the Certificates by
either Rating Agency) and all the rights granted to the predecessor
Administrator by the terms and provisions of this Agreement.
C. The Indenture Trustee, to the extent it is acting as successor
Administrator pursuant hereto and thereto, shall be entitled to resign to the
extent a qualified successor Administrator has been appointed and has assumed
all the obligations of the Administrator in accordance with the terms of this
Agreement and the other Basic Documents.
SECTION 5.3 Notification to Noteholders and Certificateholders. Upon
any termination or resignation of, or appointment of a successor to, the
Administrator pursuant to this Article V, the Owner Trustee shall give prompt
written notice thereof to Certificateholders and the Indenture Trustee shall
give prompt written notice thereof to Noteholders and the Rating Agencies
(which, in the case of any such appointment of a successor, shall consist of
prior written notice thereof to the Rating Agencies).
SECTION 5.4 Waiver of Past Defaults. The Noteholders evidencing a
majority of the Outstanding Amount of the Notes (or the Certificateholders
evidencing a majority of the Outstanding Certificate Balance, in the case of any
default which does not adversely affect the Indenture Trustee or the
Noteholders) may, on behalf of all Noteholders and Certificateholders, waive in
writing any default by the Administrator in the performance of its obligations
hereunder and any consequences thereof, except a default in making any required
deposits to or payments from any of the Trust Funds and Accounts (or giving
instructions regarding the same) in accordance with this Agreement. Upon any
such waiver of a past default, such default shall cease to exist, and any
Administrator Default arising therefrom shall be deemed to have been remedied
for every purpose of this Agreement. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereto.
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ARTICLE VI
SECTION 6.1 Termination.
A. Sale of Trust Assets. Upon any sale of the assets of the Trust,
including pursuant to Section 9.2 of the Trust Agreement, the Administrator
shall instruct the Indenture Trustee in writing to deposit the net proceeds from
such sale after all payments and reserves therefrom (including the expenses of
such sale) have been made in the Revenue Fund. On the first Distribution Date
following the date on which such funds are deposited in the Revenue Fund, the
Administrator shall instruct the Indenture Trustee and the Owner Trustee to make
the distributions set forth in the Indenture and the Trust Supplement.
ARTICLE VII
SECTION 7.1 Protection of Interests in Trust.
A. The Administrator shall execute and file such financing statements
and cause to be executed and filed such continuation statements, all in such
manner and in such places as may be required by law fully to preserve, maintain,
and protect the interest of the Issuer, the Owner Trustee and the Indenture
Trustee in the Financed Loans and in the proceeds thereof. The Administrator
shall deliver to the Owner Trustee and the Indenture Trustee file-stamped copies
of, or filing receipts for, any document filed as provided above, as soon as
available following such filing.
B. The Administrator shall monitor the Seller and the Servicer
regarding any change in name, identity or corporate structure in any manner that
would, could or night make any financing statement or continuation statement
filed in accordance with paragraph A above seriously misleading within the
meaning of Section 9-402(7) of the UCC. The Administrator shall give the Owner
Trustee and the Indenture Trustee written notice and shall promptly file
appropriate amendments to all previously filed financing statements or
continuation statements.
C. The Administrator shall monitor the Seller and the Servicer
regarding any relocation of their principal executive office if, as a result of
such relocation, the applicable provisions of the UCC would require the filing
of any amendment of any previously filed financing or continuation statement or
of any new financing statement and shall promptly file any such amendment.
D. The Administrator shall, to the extent required by applicable law,
cause the Certificates and the Notes to be registered with the Commission
pursuant to Section 12(b) or Section 12(g) of the Exchange Act within the time
periods specified in such sections.
ARTICLE VIII
SECTION 8.1 Independence of the Administrator. For all purposes of this
Agreement, the Administrator shall be an independent contractor. Unless
expressly authorized by the Issuer, the Administrator shall have no authority to
act for or represent the Issuer or the Owner Trustee in any way and shall not
otherwise be deemed an agent of the Issuer or the Owner Trustee.
SECTION 8.2 No Joint Venture. Nothing contained in this Agreement (i)
shall constitute the Administrator and either of the Issuer or the Owner Trustee
as members of any partnership, joint venture, association, syndicate,
unincorporated business or other separate entity, (ii) shall be construed to
impose any
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liability as such on any of them or (iii) shall be deemed to confer on any of
them any express, implied or apparent authority to incur any obligation or
liability on behalf of the others.
SECTION 8.3 Other Activities of Administrator. Nothing herein shall
prevent the Administrator or its Affiliates from engaging in other businesses
or, in its sole discretion, from acting in a similar capacity as an
administrator for any other person or entity even though such person or entity
may engage in business activities similar to those of the Issuer, the Owner
Trustee or the Indenture Trustee.
SECTION 8.4 Powers of Attorney. The Owner Trustee and the Indenture
Trustee shall upon the written request of the Administrator furnish the
Administrator with any powers of attorney and other documents reasonably
necessary or appropriate to enable the Administrator to carry out its
administrative duties hereunder.
SECTION 8.5 Amendment. This Agreement (other than Sections 2.1 and 2.2)
may be amended by the Administrator, the Owner Trustee and the Indenture
Trustee, without the consent of any of the Noteholders or the
Certificateholders, to cure any ambiguity, to correct or supplement any
provisions in this Agreement or for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions in this Agreement or
of modifying in any rights of the Noteholders or the Certificateholders;
provided, however, that such action shall not, as evidenced by an Opinion of
Counsel delivered to the Owner Trustee and the Indenture Trustee, adversely
affect in any material respect the interests of any Noteholder or
Certificateholder.
Sections 2.1 and 2.2 may be amended from time to time by a written
amendment duly executed and delivered by the Owner Trustee, the Indenture
Trustee and the Administrator, without the consent of the Noteholders and the
Certificateholders, for the purpose of adding any provision to or changing in
any manner or eliminating any of the provisions of such Article; provided that
such amendment will not, in an Opinion of Counsel obtained on behalf of the
Issuer and satisfactory to the Indenture Trustee and the Owner Trustee,
materially and adversely affect the interest of any Noteholder or
Certificateholder.
This Agreement (other than Sections 2.1 and 2.2) may also be amended
from time to time by the Administrator, the Indenture Trustee and the Owner
Trustee, and Sections 2.1 and 2.2 may also be amended by the Owner Trustee, the
Administrator and the Indenture Trustee, with the consent of the Noteholders of
Notes evidencing a majority of the Outstanding amount of the Notes and the
consent of the Certificateholders of Certificates evidencing a majority of the
Certificate Balance, for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of the Noteholders or the Certificateholders;
provided, however, that no such amendment shall (a) increase or reduce in any
manner the amount of, or accelerate or delay the timing of, collections of
payments with respect to Financed Loans or distributions that shall be required
to be made for the benefit of the Noteholders or the Certificateholders or (b)
reduce the aforesaid percentage of the Outstanding Amount of the Notes and the
Certificate Balance, the Noteholders or the Certificateholders of which are
required to consent to any such amendment, without the consent of all
Noteholders and Certificateholders.
Promptly after the execution of any such amendment (or, in the case of
the Rating Agencies, fifteen days prior thereto), the Owner Trustee shall
furnish written notification of the substance off such amendment to each
Certificateholder, the Indenture Trustee and each of the Rating Agencies.
It shall not be necessary for the consent of Certificateholders or
Noteholders pursuant to this section to approve the particular form of any
proposed amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof.
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Prior to the execution of any amendment to this Agreement, the Owner
Trustee and the Indenture Trustee shall be entitled to receive and rely upon an
Opinion of Counsel stating that the execution of such amendment is authorized or
permitted by this Agreement. The Owner Trustee and the Indenture Trustee may,
but shall not be obligated to, enter into any such amendment which affects the
Owner Trustee's or the Indenture Trustee's, as applicable, own rights, duties or
immunities under this Agreement or otherwise.
SECTION 8.6 Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 4.3 and 4.6 of this Agreement,
this Agreement may not be assigned by the Administrator. This Agreement may be
assigned by the Owner Trustee only to its permitted successor pursuant to the
Trust Agreement.
SECTION 8.7 Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the Issuer, the Indenture Trustee and
the Owner Trustee and for the benefit of the Certificateholders and the
Noteholders, as third party beneficiaries, and nothing in this Agreement,
whether express or implied, shall be construed to give to any other person any
legal or equitable right, remedy or claim in the Trust Estate or under or in
respect of this Agreement or any covenants, conditions or provisions contained
herein.
SECTION 8.8 Assignment to Indenture Trustee. The Administrator hereby
acknowledges and consents to any grant by the Issuer to the Indenture Trustee
pursuant to the Indenture for the benefit of the Noteholders of a security
interest in all right, title and interest of the Issuer in, to and under the
Financed Loans and the assignment of any or all of the Issuer's rights and
obligations under this Agreement and the Sales Agreement to the Indenture
Trustee. The Administrator shall inform the Servicer of the assignment by the
Issuer to the Indenture Trustee pursuant to the Indenture for the benefit of the
Noteholder of any and all of the Issuer's rights and obligations under this
Agreement and under the Servicing Agreement.
SECTION 8.9 Non-petition Covenants.
A. Notwithstanding any prior termination of this Agreement, the
Administrator shall not, prior to the date which is one year and one day after
the termination of this Agreement, acquiesce, petition or otherwise invoke or
cause the Issuer to invoke the process of any court or government authority for
the purpose of commencing or sustaining a case against the Issuer under any
Federal or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Issuer or any substantial part of its property, or ordering the winding
up or liquidation of the affairs of the Issuer.
B. Notwithstanding any prior termination of this Agreement, the
Administrator, the Issuer and the Owner Trustee shall not, prior to the date
which is one year and one day after the termination of this Agreement,
acquiesce, petition or otherwise invoke the process of any court or government
authority for the purpose of commencing or sustaining a case against the Seller
under any Federal or state bankruptcy, insolvency or similar law or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Seller or any substantial part of its property, or
ordering the winding up or liquidation of the affairs of the Seller.
SECTION 8.10 Limitation of Liability of Owner Trustee and Indenture
Trustee.
A. Notwithstanding anything contained herein to the contrary, this
Agreement has been signed by Fleet National Bank not in its individual capacity
but solely in its capacity as Owner Trustee of the Issuer and in no event shall
Fleet National Bank in its individual capacity have any liability for the
representations, warranties, covenants, agreements or other obligations of the
Issuer or the Owner Trustee hereunder or in
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any of the certificates, notices or agreements delivered pursuant hereto, as to
all of which recourse shall be had solely to the assets of the Issuer.
B. Notwithstanding anything contained herein to the contrary, this
Agreement has been accepted by State Street Bank and Trust Company not in its
individual capacity but solely as Indenture Trustee and in no event shall State
Street Bank and Trust Company have any liability for the representations,
warranties, covenants, agreements or other obligations of the Issuer hereunder
or in any of the certificates, notices or agreements delivered pursuant hereto,
as to all of which recourse shall be had solely to the assets of the Issuer.
SECTION 8.11 Governing Law. This Agreement shall be construed in
accordance with the laws of the Commonwealth, without reference to its conflict
of law provisions, and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws.
SECTION 8.12 Headings. The section headings hereof have been inserted
for convenience of reference only and shall not be construed to affect the
meaning, construction or effect of this Agreement.
SECTION 8.13 Counterparts. This Agreement may be executed in
counterparts, each of which when so executed shall together constitute but one
and the some agreement.
SECTION 8.14 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
Fleet National Bank acts solely as Owner Trustee and not in its
individual capacity and no trustee, shareholder, officer, employee or agent of
Fleet National Bank shall be held personally liable in connection with the
affairs of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
NELLIE MAE EDUCATION LOAN TRUST
By Fleet National Bank, not in its Individual
capacity but solely as Owner Trustee,
By:_____________________________________
Name:___________________________________
Title:__________________________________
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NELLIE MAE, INC., as Administrator
By:______________________________
Name:____________________________
Title:___________________________
FLEET NATIONAL BANK,
not in its individual capacity but
solely as Owner Trustee
By:______________________________
Name:____________________________
Title:___________________________
STATE STREET BANK AND TRUST COMPANY, not
in its individual capacity but solely as
Indenture Trustee
By:______________________________
Name:____________________________
Title:___________________________
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