<PAGE>
As filed with the Securities and Exchange Commission on July 17, 1997
Registration Nos. 333-26679 and 333-26679-01
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
AMENDMENT NO. 2
to
FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
------------------------
Education Loans Incorporated
(Exact name of registrant as specified in its charter)
South Dakota 45-0350016
(State or other jurisdiction of (I.R.S Employer Identification No.)
incorporation or organization)
Education Loans Incorporated
(Exact name of registrant as specified in its charter)
Delaware 91-1819974
(State or other jurisdiction of (I.R.S Employer Identification No.)
incorporation or organization)
105 First Avenue Southwest
Aberdeen, South Dakota 57401
(605) 622-4400
(Address, including zip code, and telephone number, including area code, of
registrants' principal executive offices)
A. Norgrin Sanderson
105 First Avenue Southwest
Aberdeen, South Dakota 57401
(605) 622-4400
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
Timothy S. Hearn, Esq. David M. Reicher, Esq.
Dorsey & Whitney LLP Foley & Lardner
Pillsbury Center South Firstar Center
220 South Sixth Street 777 East Wisconsin Avenue
Minneapolis, Minnesota Milwaukee, Wisconsin 53202-5367
(612) 340-7802 (414) 297-5763
-------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
The Registrants hereby amend this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrants 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.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS--
EDUCATION LOANS INCORPORATED,
A South Dakota Nonprofit Corporation
Item 14. Other Expenses of Issuance and Distribution.
The following table shows the estimated expenses to be incurred in
connection with the issuance of the securities being registered by the
registrant:
SEC registration fee....................... $ 303
Blue Sky fees and expenses................. *
Trustees' fees and expenses................ *
Printing and engraving expenses............ *
Legal fees and expenses.................... *
Accounting fees and expenses............... *
Rating agency fees......................... *
---------
Total................................. $ *
=========
______________
* To be filed by amendment.
All of the above expenses except the SEC registration fee are estimated.
Item 15. Indemnification of Directors and Officers.
Section 47-22-65.1 of the South Dakota nonprofit statute provides, in
summary, that the directors and officers of the registrant may, under
certain circumstances, be indemnified by the registrant against all
expenses incurred by or imposed upon them as a result of actions, suits or
proceedings brought against them as such directors and officers, or as
directors or officers of any other organization at the request of the
registrant, if they act in good faith and in a manner they reasonably
believe to be in or not opposed to the best interests of the registrant,
and with respect to any criminal action or proceeding, have no reasonable
cause to believe their conduct was unlawful, except that no indemnification
shall be made against expenses in respect of any claim, issue or matters to
which they shall have been adjudged to be liable to the registrant unless
and only to the extent that the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, they are fairly
and reasonably entitled to indemnity for such expenses which such court
shall deem proper. Section 47-22-65.2 of the South Dakota nonprofit statute
also provides that directors and officers of the registrant are entitled to
such indemnification by the registrant to the extent that such persons are
successful on the merits or otherwise in defending any such action, suit or
proceeding.
Article Ten of the Bylaws of the registrant requires the registrant
to, under certain circumstances, indemnify the directors and officers of
the registrant for liabilities incurred by or on behalf of a director or
officer by reason of his or her status as such or as to acts performed in
the course of such person's duties to the registrant in connection with the
investigation, defense, settlement, or appeal of any threatened, pending or
completed action, claim, litigation, suit or proceeding.
<PAGE>
Pursuant to the form of Underwriting Agreement, a copy of which is
included as Exhibit 1.1 hereto, the Underwriters agree to indemnify, under
certain conditions, the registrant, its directors, and certain of its
officers and persons who control the registrant within the meaning of the
Securities Act of 1933 against certain liabilities.
Item 16. Exhibits.
1.1 Form of Underwriting Agreement
3.1a Articles of Incorporation of Education Loans Incorporated, a
South Dakota nonprofit corporation+
3.2a Bylaws of Education Loans Incorporated, a South Dakota
nonprofit corporation+
4.1 Form of Indenture
4.2 Form of First Supplemental Indenture
4.3 Form of Auction Agent Agreement (Taxable Auction Rate Series
1997-1 Notes)
4.4 Form of Auction Agent Agreement (Tax Exempt Auction Rate
Series 1997-1 Notes)
4.5 Form of Broker-Dealer Agreement (Taxable Auction Rate Series
1997-1 Notes)
4.6 Form of Broker-Dealer Agreement (Tax Exempt Auction Rate
Series 1997-1 Notes)
5.1 Opinion of Dorsey & Whitney LLP as to legality*
8.1 Opinion of Dorsey & Whitney LLP as to tax matters*
10.1 Form of Servicing Agreement
10.2 Form of Student Loan Purchase Agreement (Taxable)
10.3 Form of Student Loan Purchase Agreement (Tax Exempt)
10.4 Guarantee Agreement with Education Assistance
Corporation dated _______.*
10.5 Guarantee Agreement with Pennsylvania Higher
Education Assistance Agency dated ________.*
10.6 [Other Guarantee Agreements]*
23.1 Consents of Dorsey & Whitney LLP (included in Exhibits 5.1,
8.1, 99.1 and 99.2)
24.1a Powers of Attorney+
25.1 Statement of Eligibility of Trustee (Form T-1)+
99.1 Opinion of Dorsey & Whitney LLP as to "true sale"
matters*
99.2 Opinion of Dorsey & Whitney LLP as to nonconsolidation *
_______________
* To be filed by amendment.
+ Previously filed.
Item 17. Undertakings.
The undersigned registrant hereby undertakes as follows:
(a) 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 section 15(d) of the Securities and 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.
(b) 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
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 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.
(c) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to
<PAGE>
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of this registration statement as of the time it was declared
effective.
(d) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
<PAGE>
EDUCATION LOANS INCORPORATED,
A South Dakota Nonprofit Corporation
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 amendment to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Aberdeen, State of South Dakota on July 16, 1997.
EDUCATION LOANS INCORPORATED
By: /s/ A. Norgrin Sanderson
---------------------------
A. Norgrin Sanderson
President and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
amendment has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ A. Norgrin Sanderson
- ------------------------- President, Treasurer July 16, 1997
A. Norgrin Sanderson and Director
(principal executive officer,
principal financial and accounting officer)
____________*____________ Chairman of the Board July 16, 1997
V. G. Stoia
____________*____________ Vice Chairman of the Board July 16, 1997
Manley B. Feinstein
____________*____________ Director July 16, 1997
Harvey C. Jewett
*By /s/ A. Norgrin Sanderson
-------------------------
A. Norgrin Sanderson,
as attorney-in-fact
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS--
EDUCATION LOANS INCORPORATED,
A Delaware Corporation
Item 14. Other Expenses of Issuance and Distribution.
The following table shows the estimated expenses to be incurred in
connection with the issuance of the securities being registered by the
registrant:
<TABLE>
<S> <C>
SEC registration fee....................... $ 303
Blue Sky fees and expenses................. *
Trustees' fees and expenses................ *
Printing and engraving expenses............ *
Legal fees and expenses.................... *
Accounting fees and expenses............... *
Rating agency fees......................... *
-------
Total................................. $ *
=======
</TABLE>
______________
* To be filed by amendment.
All of the above expenses except the SEC registration fee are estimated.
All of the above expenses are being paid by the registrant's co-registrant,
Education Loans Incorporated, a South Dakota nonprofit corporation.
Item 15. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of the State of Delaware
(the "DGCL") provides, in summary, that the directors and officers of the
registrant may, under certain circumstances, be indemnified by the
registrant against all expenses incurred by or imposed upon them as a
result of actions, suits or proceedings brought against them as such
directors and officers, or as directors or officers of any other
organization at the request of the registrant, if they act in good faith
and in a manner they reasonably believe to be in or not opposed to the best
interests of the registrant, and with respect to any criminal action or
proceeding, have no reasonable cause to believe their conduct was unlawful,
except that no indemnification shall be made against expenses in respect of
any claim, issue or matters to which they shall have been adjudged to be
liable to the registrant unless and only to the extent that the court in
which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the
circumstances of the case, they are fairly and reasonably entitled to
indemnity for such expenses which such court shall deem proper. Section
145 of the DGCL also provides that directors and officers of the registrant
are entitled to such indemnification by the registrant to the extent that
such persons are successful on the merits or otherwise in defending any
such action, suit or proceeding. The registrant's Bylaws authorize the
registrant to indemnify its officers and directors, under certain
circumstances, as provided by Section 145 of the DGCL.
Pursuant to the form of Underwriting Agreement, a copy of which is
included as Exhibit 1.1 hereto, the Underwriters agree to indemnify, under
certain conditions, the registrant, its directors, and certain of its
officers and persons who control the registrant within the meaning of the
Securities Act of 1933 against certain liabilities.
<PAGE>
Item 16. Exhibits.
1.1 Form of Underwriting Agreement*
3.1b Certificate of Incorporation of Education Loans Incorporated,
a Delaware corporation+
3.2b Bylaws of Education Loans* Incorporated, a Delaware
corporation+
4.1 Form of Indenture*
4.2 Form of First Supplemental Indenture*
4.3 Form of Auction Agent Agreement (Taxable Auction Rate Series
1997-1 Notes)*
4.4 Form of Auction Agent Agreement (Tax Exempt Auction Rate
Series 1997-1 Notes)*
4.5 Form of Broker-Dealer Agreement (Taxable Auction Rate Series
1997-1 Notes)*
4.6 Form of Broker-Dealer Agreement (Tax Exempt Auction Rate
Series 1997-1 Notes)*
5.1 Opinion of Dorsey & Whitney LLP to legality*
8.1 Opinion of Dorsey & Whitney LLP as to tax matters*
10.1 Form of Servicing Agreement*
10.2 Form of Student Loan Purchase Agreement (Taxable)*
10.3 Form of Student Loan Purchase Agreement (Tax Exempt)*
10.4 Guarantee Agreement with Education Assistance Corporation
dated ____________.*
10.5 Guarantee Agreement with Pennsylvania Higher Education
Assistance Agency dated ____________.*
10.6 [Other Guarantee Agreements]*
23.1 Consents of Dorsey & Whitney LLP*
24.1b Powers of Attorney+
25.1 Statement of Eligibility of Trustee (Form T-1)*
99.1 Opinion of Dorsey & Whitney LLP as to "true sale" matters*
99.2 Opinion of Dorsey & Whitney LLP as to nonconsolidation*
----------------
* Incorporated by reference to a similarly numbered exhibit filed or
to be filed by the registrant's co-registrant, Education Loans
Incorporated, a South Dakota nonprofit corporation, on this Form S-3
registration statement.
+ Previously filed.
Item 17. Undertakings.
The undersigned registrant hereby undertakes as follows:
(a) For purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant annual report pursuant to
section 13(a) or section 15(d) of the Securities and 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.
(b) 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
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 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.
(c) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
<PAGE>
(d) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
<PAGE>
EDUCATION LOANS INCORPORATED,
A Delaware Corporation
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 amendment to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Aberdeen, State of South Dakota on July 16, 1997.
EDUCATION LOANS INCORPORATED
By: /s/ A. Norgrin Sanderson
--------------------------
A. Norgrin Sanderson
President and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this amendment
has been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ A. Norgrin Sanderson President, Treasurer July 16, 1997
- ------------------------ and Chairman of the Board
A. Norgrin Sanderson (principal executive officer,
principal financial and accounting officer)
____________*____________ Director July 16, 1997
V. G. Stoia
____________*____________ Director July 16, 1997
Manley B. Feinstein
____________*____________ Director July 16, 1997
Harvey C. Jewett
*By /s/ A. Norgrin Sanderson
- -----------------------------
A. Norgrin Sanderson,
as attorney-in-fact
</TABLE>
<PAGE>
EXHIBIT INDEX
Listing Exhibits filed by
EDUCATION LOANS INCORPORATED,
A South Dakota Nonprofit Corporation
and
EDUCATION LOANS INCORPORATED,
A Delaware Corporation
as Co-Registrants
Number Exhibit
- ------ -------
1.1 Form of Underwriting Agreement
3.1a Articles of Incorporation of Education Loans Incorporated, a South
Dakota nonprofit corporation+
3.1b Certificate of Incorporation of Education Loans Incorporated, a
Delaware corporation+
3.2a Bylaws of Education Loans Incorporated, a South Dakota nonprofit
corporation+
3.2b Bylaws of Education Loans Incorporated, a Delaware corporation+
4.1 Form of Indenture
4.2 Form of First Supplemental Indenture
4.3 Form of Auction Agent Agreement (Taxable Auction Rate Series 1997-1
Notes)
4.4 Form of Auction Agent Agreement (Tax Exempt Auction Rate Series 1997-1
Notes)
4.5 Form of Broker-Dealer Agreement (Taxable Auction Rate Series 1997-1
Notes)
4.6 Form of Broker-Dealer Agreement (Tax Exempt Auction Rate Series 1997-1
Notes)
5.1 Opinion of Dorsey & Whitney LLP as to legality*
8.1 Opinion of Dorsey & Whitney LLP as to tax matters*
10.1 Form of Servicing Agreement
10.2 Form of Student Loan Purchase Agreement (Taxable)
10.3 Form of Student Loan Purchase Agreement (Tax Exempt)
10.4 Guarantee Agreement with Education Assistance Corporation dated
____________.*
10.5 Guarantee Agreement with Pennsylvania Higher Education Assistance
Agency dated ____________.*
10.6 [Other Guarantee Agreements]*
23.1 Consents of Dorsey & Whitney LLP (included in Exhibits 5.1, 8.1, 99.1
and 99.2)
24.1a Powers of Attorney+
24.1b Powers of Attorney+
25.1 Statement of Eligibility of Trustee (Form T-1)+
99.1 Opinion of Dorsey & Whitney LLP as to "true sale" matters*
99.2 Opinion of Dorsey & Whitney LLP as to nonconsolidation*
- ---------------
* To be filed by amendment.
+ Previously filed.
<PAGE>
Exhibit 1.1
$_______,000
Education Loans Incorporated
----------------------------
STUDENT LOAN ASSET-BACKED NOTES, SERIES 1997-1
consisting of
$_______,000 Tax Exempt Auction Rate Student Loan Asset-Backed Notes, Senior
Series 1997-1A through E
$_______,000 Tax Exempt Fixed Rate Student Loan Asset-Backed Notes, Senior
Series 1997-1F
$______,000 Taxable Auction Rate Student Loan Asset-Backed Notes, Senior Series
1997-1G and H
$___________,000 Taxable LIBOR Rate Student Loan Asset-Backed Notes, Senior
Series 1997-1I and J
$______,000 Tax Exempt Fixed Rate Student Loan Asset-Backed Notes, Subordinate
Series 1997-1K
$______,000 Taxable LIBOR Rate Student Loan Asset-Backed Notes, Subordinate
Series 1997-1L
Underwriting Agreement
----------------------
SMITH BARNEY INC.
FBS INVESTMENT SERVICES, INC.
DOUGHERTY DAWKINS LLC
MILLER & SCHROEDER FINANCIAL, INC.
NORWEST INVESTMENT SERVICES, INC.
c/o Smith Barney Inc.
390 Greenwich Street
New York, NY 10013
Dear Sirs:
Education Loans Incorporated (formerly known as Student Loan Finance
Corporation), a South Dakota nonprofit corporation (the "Original Issuer"),
proposes to sell to Smith Barney Inc., FBS Investment Services, Inc., Dougherty
Dawkins LLC, Miller & Schroeder Financial, Inc. and Norwest Investment Services,
Inc. (the "Underwriters"), pursuant to the terms of this Underwriting Agreement
(this "Agreement"), [$_______,000] aggregate principal amount of its Student
Loan Asset-Backed Notes, Series 1997-1 (the "Notes"). The Notes are to be
issued in twelve series designated as Tax Exempt Auction Rate Student Loan
Asset-Backed Notes, Senior Series 1997-1A through 1997-1E (the "Tax Exempt
Auction Rate Series 1997-1 Senior Notes"), Tax Exempt Fixed Rate Student Loan
Asset-Backed Notes, Senior Series 1997-1F (the "Tax Exempt Fixed
<PAGE>
Rate Series 1997-1 Senior Notes"), Taxable Auction Rate Student Loan Asset-
Backed Notes, Senior Series 1997-1G and 1997-1H (the "Taxable Auction Rate
Series 1997-1 Senior Notes"), Taxable LIBOR Rate Student Loan Asset-Backed
Notes, Senior Series 1997-1I and 1997-1J (the "Taxable LIBOR Rate Series 1997-1
Senior Notes"), Tax Exempt Fixed Rate Student Loan Asset-Backed Notes,
Subordinate Series 1997-1K (the "Tax Exempt Fixed Rate Series 1997-1 Subordinate
Notes"), and Taxable LIBOR Rate Student Loan Asset-Backed Notes, Subordinate
Series 1997-1L (the "Taxable LIBOR Rate Series 1997-1 Subordinate Notes").
The Tax Exempt Auction Rate Series 1997-1 Senior Notes, the Tax Exempt
Fixed Rate Series 1997-1 Senior Notes, the Taxable Auction Rate Series 1997-1
Senior Notes, the Taxable LIBOR Rate Series 1997-1 Senior Notes, the Tax Exempt
Series 1997-1 Subordinate Notes and the Taxable Series 1997-1 Subordinate Notes
will be issued in the initial aggregate principal amounts of [$___________,
$__________, $___________, $___________, $___________ and $__________,]
respectively. The initial aggregate principal amounts of each series of Notes
shall be as listed in Appendix A hereto.
The Notes shall be as described in, shall be subject to redemption and
auction, shall have such other provisions and details and shall be issued
pursuant to the First Supplemental Indenture, dated as of July 1, 1997 (the
"Supplemental Indenture"), supplemental to an Indenture of Trust, dated as of
July 1, 1997 (as supplemented and amended, the "Indenture"), between the
Original Issuer and First Bank National Association, as trustee (the "Trustee").
Upon issuance, the Notes will be secured by, among other things, Financed
Student Loans pledged to the Trustee and described in the Prospectus (as
hereinafter defined).
In connection with an election to be made by the Original Issuer under
Section 150(d)(3) of the Internal Revenue Code of 1986, as amended (the "Code"),
Education Loans Incorporated, a separate, newly organized Delaware corporation
(the "Corporation"), will, immediately upon the issuance of the Notes, assume
all of the Original Issuer's liabilities and obligations with respect to the
Notes pursuant to a Contribution Agreement, dated as of July 1, 1997 (the
"Contribution Agreement"), by and among the Original Issuer, the Corporation and
Student Loan Finance Corporation, a newly organized South Dakota corporation
("SLFC"), and the Original Issuer will be released from all such liabilities and
obligations.
Capitalized terms used but not defined herein have the respective
meanings ascribed thereto in Appendix B hereto.
1. Agreement to Sell, Purchase and Resell
(a) The Original Issuer hereby agrees, subject to all of the terms
and conditions set forth herein, to sell to the
-2-
<PAGE>
Underwriters and, upon the basis of the representations, warranties and
agreements of the Original Issuer, the Corporation and SLFC herein contained and
subject to all of the terms and conditions set forth herein, the Underwriters,
jointly and severally (except as hereinafter limited in part with respect to FBS
Investment Services, Inc. in Section 12 hereof) agree to purchase from the
Original Issuer, all (but not less than all) of the Notes at the aggregate
purchase price of [$____________________,] plus interest accrued on the Tax
Exempt Fixed Rate Series 1997-1 Senior Notes and the Tax Exempt Fixed Rate
Series 1997-1 Subordinate Notes from July 1, 1997 to the Closing Date (as
defined in Section 2 hereof), and the Original Issuer hereby agrees to pay to
the Underwriters an aggregate underwriting fee in the amount of
[$________________]. The maturity dates, purchase prices and underwriting fees
for each series of the Notes shall be as listed in Appendix A hereto.
(b) The Tax Exempt Auction Rate Series 1997-1 Senior Notes and the
Taxable Auction Rate Series 1997-1 Senior Notes shall bear interest for the
period commencing on the date of issuance of the Notes through the end of the
respective Initial Interest Periods at rates to be agreed to by the Original
Issuer and the Underwriters pursuant to an executed writing (which may be in
counterparts), and may be evidenced by telegraphic communications or any other
rapid transmission device designed to produce a written record of communication
transmitted, which writing shall be effective no later than the Closing Date,
provided that such interest rates shall not exceed 10% per annum. Thereafter,
such rates per annum shall be determined in accordance with the Supplemental
Indenture. The Tax Exempt Fixed Rate Series 1997-1 Senior Notes maturing June 1,
2010 shall bear interest at the rate of [___%] per annum, the Tax Exempt Fixed
Rate Series 1997-1 Senior Notes maturing June 1, 2020 shall bear interest at the
rate of [___%] per annum, and the Tax Exempt Fixed Rate Series 1997-1
Subordinate Notes shall bear interest at the rate of [___%] per annum. The
Taxable LIBOR Rate Series 1997-1 Senior Note Initial Interest Rate (as defined
in the First Supplemental Indenture) with respect to the Series 1997-1I Notes
shall be [___%] per annum and with respect to the Series 1997-1J Notes shall be
[___%] per annum. The Taxable LIBOR Rate Series 1997-1 Senior Note Interest Rate
(as defined in the First Supplemental Indenture) with respect to each series of
Taxable LIBOR Rate Series 1997-1 Senior Notes will be determined by the Trustee
from time to time as described in the First Supplemental Indenture to equal the
One-Month LIBOR plus [____%] per annum with respect to the Series 1997-1I Notes
and the One-Month LIBOR plus [____%] per annum with respect to the Series 1997-
1J Notes. The Taxable LIBOR Rate Series 1997-1 Subordinate Note Initial Interest
Rate (as defined in the First Supplemental Indenture) with respect to the
Taxable LIBOR Rate Series 1997-1 Subordinate Notes shall be [___%] per annum.
The Taxable LIBOR Rate Series 1997-1 Subordinate Note Interest Rate (as defined
in the First Supplemental Indenture) with respect to the Taxable LIBOR Rate
Series 1997-1 Subordinate Notes will be determined by the
-3-
<PAGE>
Trustee from time to time as described in the First Supplemental Indenture to
equal the One-Month LIBOR plus [____%] per annum.
(c) It is understood that the Underwriters propose to offer the Notes
for sale to the public (which may include selected dealers) as set forth in the
Prospectus. The Underwriters agree to make a bona fide public offering of the
Tax Exempt Series 1997-1 Notes (as defined in the First Supplemental Indenture)
at prices not in excess of the initial public offering prices (which may be
expressed in terms of yield) set forth on the cover page of the Prospectus
referred to below. The Notes may be offered and sold to certain dealers
(including the Underwriters and other dealers depositing such Notes into
investment trusts or mutual funds) at prices lower than such public offering
prices.
(d) Smith Barney Inc. is duly authorized to execute this Agreement
and to act hereunder on behalf of the Underwriters.
(e) Each Underwriter severally represents and agrees that (i) it has
not offered or sold, and will not offer or sell, any Notes to persons in the
United Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or agent)
for the purpose of their businesses or otherwise in circumstances which have not
resulted, and will not result in, an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995; (ii) it
has complied and will comply with all applicable provisions of the Financial
Services Act of 1986 with respect to anything done by it in relation to the
Notes in, from or otherwise involving the United Kingdom; and (iii) it has only
issued or passed on, and will only issue and pass on, in the United Kingdom any
document received by it in connection with the issue of the Notes to a person
who is of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 or to a person to whom such
document may otherwise lawfully be issued, distributed or passed on.
2. Delivery of the Notes and Payment Therefor. At 10:00 A.M., New
York City time, on [______,] 1997, or at such other time or on such earlier or
later business day as shall have been mutually agreed upon by the Original
Issuer, SLFC, the Corporation and the Underwriters (the "Closing Date"), the
Original Issuer will deliver to DTC, for the account of the Underwriters, the
Notes in definitive form bearing CUSIP numbers, duly executed and authenticated,
together with the other documents hereinafter mentioned; and the Underwriters
will accept such delivery and pay the purchase price of the Notes as set forth
in Section 1 hereof in immediately available funds to the account of the
Original Issuer and the Original Issuer shall pay to the Underwriters the
underwriting fee as set forth in Section 1 hereof in immediately
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available funds to the account of Smith Barney. Delivery of the Notes and
payment as aforesaid shall be made at such location in New York, New York as
shall be requested by Smith Barney. Delivery of the other documents shall be at
the offices of Dorsey & Whitney LLP, 250 Park Avenue, 15th Floor, New York, New
York 10022. This payment and delivery is herein called the "Closing". The
Notes delivered at the Closing shall be made available to the Underwriters and
DTC at least two business days prior to the date of the Closing for purposes of
inspection. The Notes shall be prepared and delivered as fully registered notes
in authorized denominations and registered in such manner as the Underwriters
shall have requested.
3. Representations and Warranties of the Original Issuer, SLFC and
the Corporation. The Original Issuer, SLFC and the Corporation represent and
warrant to, and agree with, the Underwriters that:
(a) A registration statement on Form S-3 (File Nos. 333-26679 and
333-26679-01) 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 Underwriters, excluding exhibits to such
registration statement, have been declared effective under the Securities Act of
1933, as amended (the "Securities Act"). 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.
Copies of the Registration Statement, the Preliminary Prospectus and all other
documents which were filed by the Original Issuer and the Corporation with the
Commission on or prior to the date hereof have been delivered to you. The
Original Issuer and the Corporation have satisfied all conditions and
requirements for the use of Form S-3 and the filing of the Registration
Statement under the Securities Act and the applicable rules and regulations
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thereunder (the "Rules and Regulations").
(b) 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, as
of the Closing, 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 Original Issuer by the Underwriters
expressly for use therein. There are no contracts or other documents required by
the Securities Act or by the Rules and Regulations to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement which have not been described or filed as required.
(c) The Commission has not issued and, to the best knowledge of the
Original Issuer and the Corporation, is not threatening to issue any order
preventing or suspending the use of the Registration Statement. No order
preventing or suspending the use of any Preliminary Prospectus or prospectus has
been issued by the Commission or any state regulatory authority or other
jurisdictional regulatory agency ("Blue Sky Authorities").
(d) As of the Closing Date, each consent, approval, authorization or
order of, or filing with, any court or governmental agency or body which is
required to be obtained or made by the Original Issuer, SLFC, the Corporation 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.
(e) The Original Issuer has the requisite power and authority to
execute, deliver and perform its obligations under the Indenture, the
Supplemental Indenture and the Auction Agent Agreements. The Indenture, the
Supplemental Indenture and the Auction Agent Agreements have been duly and
validly authorized by the Original Issuer and, upon their execution and delivery
by the Original Issuer, assuming due authorization, execution and delivery by
the Trustee and, in the case of the Auction Agent Agreements, the Auction Agent,
will be duly executed and delivered by the Original Issuer and will constitute
valid and legally binding agreements of the Original Issuer, enforceable in
accordance with their terms, except as enforcement thereof may be limited by
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bankruptcy, insolvency, reorganization, moratorium or other similar laws of
general applicability affecting creditors' rights or general equitable
principles. The Indenture, the Supplemental Indenture and the Auction Agent
Agreements conform in all material respects to the descriptions thereof in the
Prospectus.
(f) The Original Issuer has the requisite power and authority to
issue the Notes. The Notes have been duly authorized by the Original Issuer and,
when executed by the Original Issuer, authenticated by the Trustee in accordance
with the Indenture and delivered to the Underwriters against payment therefor in
accordance with the terms hereof, will have been validly issued and delivered,
and will constitute valid and legally binding obligations of the Original Issuer
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, 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.
(g) The Original Issuer, SLFC and the Corporation each has the
requisite power and authority to execute, deliver and perform its obligations
under the Contribution Agreement. The Contribution Agreement has been duly and
validly authorized, executed and delivered by the Original Issuer, SLFC and the
Corporation and, upon their execution and delivery, will be duly executed and
delivered by each of the Original Issuer, SLFC and the Corporation and will
constitute a valid and legally binding agreement of each of the Original Issuer,
SLFC and the Corporation, enforceable in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws of general applicability relating to or
affecting creditors' rights or general equitable principles. The Contribution
Agreement conforms in all material respects to the descriptions thereof in the
Prospectus.
(h) SLFC and the Corporation each have the requisite power and
authority to execute, deliver and perform its obligations under the Servicing
Agreement. The Servicing Agreement has been duly and validly authorized by each
of SLFC and the Corporation and, upon execution and delivery, assuming due
authorization, execution and delivery by the Trustee, will be duly executed and
delivered by each of SLFC and the Corporation and will constitute a valid and
legally binding agreement of each of SLFC and the Corporation, enforceable in
accordance with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws of
general applicability relating to or affecting creditors' rights or general
equitable principles. The Servicing Agreement conforms in all material respects
to the description thereof in the Prospectus.
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(i) The Original Issuer is a nonprofit corporation and SLFC is a
corporation and wholly owned subsidiary of the Original Issuer, each is duly
organized, validly existing and in good standing under the laws of the State of
South Dakota, 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
as contemplated in the Prospectus, and is duly qualified to conduct its business
and is in good standing in each jurisdiction where the nature of its properties
or the conduct of its business requires such qualification, except where the
failure so to qualify could not have a material adverse effect on its condition
(financial or other), business, prospectus, properties, net worth or results of
operations.
(j) The Corporation is a Delaware corporation and wholly owned
subsidiary of SLFC, is duly organized, validly existing and in good standing
under the laws of the State of Delaware, 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 as contemplated in the Prospectus and with full
power and authority to own and pledge its assets and to issue the Notes as
described in the Prospectus. The Corporation is duly qualified to conduct its
business and is in good standing in each jurisdiction where the nature of its
properties or the conduct of its business requires such qualification, except
where the failure so to qualify could not have a material adverse effect on its
condition (financial or other), business, prospectus, properties, net worth or
results of operations.
(k) There is no action, suit, proceeding, inquiry or investigation,
at law or in equity, or before or by any court, governmental or public board or
body, pending or known to be threatened against or affecting the Original
Issuer, SLFC or the Corporation or to which the Original Issuer, SLFC, the
Corporation or any of their respective properties is subject, nor to the best of
the knowledge of the Original Issuer, SLFC and the Corporation is there any
basis therefor, that are not disclosed in the Prospectus and wherein an
unfavorable decision, ruling or finding would materially adversely affect the
validity or enforceability of the Notes, the Original Issuer's Authorizing
Resolutions, SLFC's Authorizing Resolution, the Corporation's Authorizing
Resolution, the Basic Documents, the Investment Agreement, the Issuer's Plan,
the [[Prior]] Plan Approval, the Original Issuer's Program Agreements, the State
Request, the Volume Cap Documents, this Agreement or any other agreement or
instrument to which the Original Issuer, SLFC or the Corporation is a party,
used or contemplated for use in the consummation of transactions contemplated by
this Agreement, the Basic Documents or by the Prospectus.
(l) Neither the offer, sale or delivery of the Notes by the Original
Issuer, nor the execution, delivery or performance of
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this Agreement, any of the Basic Documents or any of the Original Issuer's
Program Agreements by the Original Issuer, SLFC or the Corporation, nor the
adoption of the Original Issuer's Authorizing Resolutions, SLFC's Authorizing
Resolution, the Corporation's Authorizing Resolution or the Issuer's Plan, nor
the consummation by the Original Issuer, SLFC or the Corporation 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 Original Issuer, SLFC or
the Corporation 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 Original
Issuer, SLFC or the Corporation is a party or by which the Original Issuer, SLFC
or the Corporation 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 Original
Issuer, SLFC or the Corporation 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 Original Issuer, SLFC or the
Corporation 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.
(m) The Original Issuer, SLFC and the Corporation 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 Original Issuer, SLFC and the Corporation of its respective obligations
under this Agreement have been duly and validly authorized by the Original
Issuer, SLFC and the Corporation, 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, 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.
(n) SLFC and the Corporation have duly adopted SLFC's
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Authorizing Resolutions and the Corporation's Authorizing Resolutions,
respectively, and have duly approved the furnishing and use of the information
contained in the Prospectus, and the taking of any and all such actions as may
be required on the part of SLFC and the Corporation to carry out, give effect to
and consummate the transactions contemplated by this Agreement, the Prospectus
and the Basic Documents, and all approvals necessary in connection with the
foregoing have been obtained.
(o) Neither the Original Issuer, SLFC nor the Corporation is, and
following the consummation of the transactions contemplated hereby and the use
of proceeds from the Notes as described in the Preliminary Prospectus will be,
an "investment company" under the Investment Company Act of 1940, as amended
(the "1940 Act").
(p) Neither the Original Issuer, SLFC, the Corporation 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 Original Issuer, SLFC and the Corporation agrees to comply with such
Section if prior to the completion of the distribution of the Notes it commences
doing such business. The Original Issuer, SLFC and the Corporation are not, and
have not at any time been, in default in the payment of principal of or interest
on any obligations of the Original Issuer, SLFC, or the Corporation,
respectively.
(q) The representations and warranties made by (i) the Original
Issuer herein, in the Indenture, in the Contribution Agreement, in the Auction
Agent Agreement and in any officer's certificate delivered pursuant hereto or
thereto and (ii) the Corporation and SLFC herein, in the Servicing Agreement, in
the Contribution Agreement and in any officer's certificate of the Corporation
or SLFC delivered pursuant hereto or thereto, will be true and correct at the
time made and on and as of the Closing Date.
(r) The Indenture will create a first lien upon the Financed Student
Loans and a valid pledge of and perfected security interest in the entire Trust
Estate, subject only to the provisions of the Indenture permitting the
application thereof for the purposes and on the terms and conditions set forth
therein. On the Closing Date, the Trustee will have legal title to the Trust
Estate for the benefit of the Original Issuer, including without limitation the
Financed Student 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 Notes.
(s) The Original Issuer is a corporation described in Section
501(c)(3) of the Code, it is exempt from federal income tax under Section 501(a)
of the Code and it is not a private foundation within the meaning of Section
509(a) of the Code.
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(t) The Original Issuer has the requisite power and authority to
execute, deliver and perform its obligations under the Original Issuer's Program
Agreements. The Original Issuer's Program Agreements have been duly and validly
authorized by the Original Issuer and, assuming due authorization, execution and
delivery by the other parties thereto, duly executed and delivered by the
Original Issuer and constitute valid and legally binding agreements of the
Original Issuer, enforceable in accordance with their terms, except as
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws of general applicability affecting creditors'
rights or general equitable principles. The Original Issuer's Program Agreements
and the Issuer's Plan conform in all material respects to the descriptions
thereof in the Prospectus.
(u) The Original Issuer has duly adopted the Original Issuer's
Authorizing Resolutions and the Issuer's Plan and has duly approved the
execution, delivery and performance of the Indenture, the Supplemental
Indenture, the Contribution Agreement, this Agreement, the Auction Agent
Agreement, the Original Issuer's Program Agreements, the furnishing and use of
the information contained in the Prospectus, and the taking of any and all such
actions as may be required on the part of the Original Issuer to carry out, give
effect to and consummate the transactions contemplated by this Agreement, the
Prospectus, the Contribution Agreement, the Original Issuer's Program
Agreements, the Indenture, the Supplemental Indenture, the Auction Agent
Agreement, the State Request, and all approvals necessary in connection with the
foregoing have been obtained.
(v) As of the date hereof, the Original Issuer's Program Agreements,
the Issuer's Plan, the [[Prior]] Plan Approval and the State Request are in full
force and effect.
(w) Neither the Original Issuer, SFLC or the Corporation nor any
agent acting on any of their behalf has taken or will take any action that might
cause this Agreement or the sale of the Notes to violate Regulations G, T, U, or
X of the Board of Governors of the Federal Reserve System, in each case as in
effect, or as the same may hereafter be in effect, as of the Closing.
4. Agreements of the Original Issuer, SLFC and the Corporation. The
Original Issuer, SLFC and the Corporation agree with the Underwriters as
follows:
(a) The Original Issuer and the Corporation will prepare the
Prospectus in a form approved by the Underwriters and file such Prospectus
pursuant to Rule 424(b) 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
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Original Issuer and the Corporation will (i) make no further amendment or any
supplement to the Registration Statement or Prospectus which is not approved by
the Underwriters after reasonable notice thereof, (ii) advise the Underwriters,
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 Underwriters with copies thereof;
(iii) advise the Underwriters, 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) use its best efforts to prevent the issuance of
any stop order or other order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus or suspending the qualification of the
Indenture or the Notes for offering or sale in any jurisdiction and, in the
event of the issuance of any stop order or of any other such order, promptly use
its best efforts to obtain the withdrawal of such order.
(b) The Original Issuer will furnish to the Underwriters, 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
Underwriters 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 to comply with the Securities Act or the Trust
Indenture Act, the Original Issuer and the Corporation will notify the
Underwriters and, upon the Underwriters' request, prepare and furnish without
charge to the Underwriters and to any dealer in securities as many copies as the
Underwriters may from time to time reasonably request, an amended Prospectus
which corrects such Statement or omission or effects such compliance.
(c) The Original Issuer, SLFC and the Corporation will cooperate with
the Underwriters and with its counsel in connection with the qualification of,
or procurement of exemptions with respect to, the Notes for offering and sale by
the Underwriters and by dealers, and with the determination of their eligibility
for investment, under the laws of such jurisdictions as the
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Underwriters may designate and will file such consents to service of process or
other documents necessary or appropriate to effect such qualification or
exemptions; provided that in no event shall either the Corporation, SLFC or the
Original Issuer be obligated to qualify to do business in any jurisdiction where
it is not now so qualified (other than the State of South Dakota if not
currently 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 Original Issuer, SLFC and the Corporation 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 the Original Issuer, SLFC or the
Corporation, SLFC, the Original Issuer, SLFC and the Corporation 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 Original Issuer,
SLFC or the Corporation will furnish to the Underwriters (i) as soon as
available, a copy of each document relating to the Original Issuer, the
Corporation 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 Original Issuer, SLFC or the Corporation, as the Underwriters may request
from time to time.
(g) To make generally available to the Noteholders and the
Underwriters as soon as practicable, a copy of each Monthly Servicing Report (as
defined in the Indenture) required under the Indenture and the Servicing
Agreement.
(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 Underwriters because of any failure or refusal on the
part of the Original Issuer, SLFC or the Corporation to comply with the terms or
fulfill any of the conditions of this Agreement, the Original Issuer and SLFC
agree jointly and severally to reimburse the Underwriters for all out-of-pocket
expenses (including, without limitation, fees and expenses of its counsel; costs
related to its due diligence investigation of the Original Issuer, SLFC and the
Corporation; costs of preparing to market and the actual marketing of the Notes;
and costs incurred in the performance of its obligations hereunder) reasonably
incurred by them in their roles as Underwriters, but without any further
obligation on the part of the Original Issuer
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or SLFC 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 "Application of
Series 1997-1 Note Proceeds" in the Prospectus. The Original Issuer, SLFC and
the Corporation will not take or omit to take any action which will in any way
cause the proceeds from the sale of the Notes to be applied in a manner contrary
to that provided for in the Prospectus and the Indenture.
(j) Except as stated in this Agreement and in the Prospectus, neither
the Original Issuer, the Corporation nor SLFC has taken, nor will any of them
take, and each of them will use their best efforts to cause each of their
respective directors and officers not to 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 Fund and
the Reserve Fund shall be made on the Closing Date.
(l) Other than pursuant to your consent and as permitted by the
Securities Act and the Rules and Regulations, the Original Issuer, SLFC and the
Corporation will not distribute any prospectus or other offering material in
connection with the offering of the Notes.
(m) Provided that the Original Issuer has received the Computational
Materials (as defined in Section 11 below) within the time frame set forth in
Section 11, the Original Issuer and the Corporation will cause such
Computational Materials to be filed with the SEC on a Current Report on Form 8-K
(the "Current Report") not later than the date on which the Prospectus is
available for distribution to investors.
5. Indemnification and Contribution. (a) The Original Issuer and
SLFC jointly and severally agree to indemnify and hold harmless the Underwriters
and each person, if any, who controls an 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 in any Preliminary Prospectus, or in any application filed under the
Blue Sky laws of any jurisdiction or other document executed by the Original
Issuer or the Corporation for that purpose, 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
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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 Underwriters furnished in writing to the Original Issuer by or
on behalf of the Underwriters 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
Underwriters (or to the benefit of any person controlling an Underwriter) on
account of any such loss, claim, damage, liability or expense arising from the
sale of the 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 Underwriters 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 Original Issuer or SLFC has previously furnished
sufficient copies thereof to the Underwriters. The foregoing indemnity
agreement shall be in addition to any liability which the Original Issuer or
SLFC may otherwise have.
(b) If any action, suit or proceeding shall be brought against the
Underwriters or any person controlling an Underwriter in respect of which
indemnity may be sought against the Original Issuer or SLFC, the Underwriters 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 Underwriters 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 Underwriters 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 Underwriters or such controlling person and
the indemnifying parties and the Underwriters 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
Underwriters or such controlling person). It is understood, however, that the
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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 Underwriters and controlling persons not having actual or potential
differing interests with the Underwriters 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
Underwriters, 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 Underwriters agree, jointly and severally, to indemnify and
hold harmless the Original Issuer and SLFC and their respective directors and
officers, and any person who controls the Original Issuer and the SLFC within
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 Original Issuer and SLFC to the
Underwriters set forth in paragraph (a) hereof, but only with respect to
information relating to the Underwriters furnished in writing by or on behalf of
the Underwriter expressly for use under the caption "Plan of Distribution" in
the Registration Statement, the Prospectus, or any amendment or supplement
thereto, or any related preliminary prospectus or "Blue Sky" applications. If
any action, suit or proceeding shall be brought against the Original Issuer,
SLFC or the Corporation, 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 Underwriters pursuant to
this paragraph (c), the Underwriters shall have the rights and duties given to
the Original Issuer and SLFC by paragraph (b) above (except that if the Original
Issuer or SLFC shall have assumed the defense thereof, the Underwriters 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 Underwriters' expense), and the Original Issuer and SLFC, their
respective directors and officers, and any such controlling person shall have
the rights and duties given to the Underwriters by paragraph (b) above. The
foregoing indemnity agreement shall be in addition to any liability which the
Underwriters may otherwise have.
(d) If the indemnification provided for in this Section
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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
Original Issuer and SLFC on the one hand and the Underwriters 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 Original Issuer and SLFC on the one hand and the
Underwriters 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 Original Issuer and SLFC on the one hand and the Underwriters 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 Original
Issuer SLFC bear to the total underwriting discounts and commissions received by
the Underwriters. The relative fault of the Original Issuer and SLFC on the one
hand and the Underwriters on the other hand shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Original Issuer or SLFC on the one hand or by the
Underwriters 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 Original Issuer, SLFC and the Underwriters agree that it
would not be just and equitable if contribution pursuant to this Section 5 were
determined by a pro rata allocation or by any other method of allocation that
does not take account of the equitable considerations referred to in paragraph
(d) above. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages liabilities and expenses referred to in paragraph (d)
above shall be deemed to include, subject to the limitations set forth above,
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating any claim or defending any such action, suit or
proceeding. Notwithstanding the provisions of this Section 5, the Underwriters
shall not be required to contribute any amount in excess of the amount received
by the Underwriters over the price paid by the Underwriters for the Notes
purchased by them and distributed to the public less the amount of any damages
which the Underwriters have 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
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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 Original Issuer, SLFC, the Corporation and
the Underwriters set forth in this Agreement shall remain operative and in full
force and effect, regardless of (i) any investigation made by or on behalf of
the Underwriters, Original Issuer, SLFC or the Corporation or any person
controlling any of them or their respective directors or officers, (ii)
acceptance of any Notes and payment therefor hereunder, and (iii) any
termination of this Agreement. A successor to the Underwriters, the Original
Issuer, SLFC or the Corporation or any person controlling any of them or their
respective directors or officers, shall be entitled to the benefits of the
indemnity, contribution and reimbursement agreements contained in this Section
5.
6. Conditions of the Underwriters' Obligations. The obligations of
the Underwriters to purchase the Notes hereunder are subject to the following
conditions:
(a) All actions required to be taken and all filings required to be
made by the Original Issuer, SLFC or the Corporation 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 or the sale of the Notes or the
qualification of the Indenture shall have been issued and no proceedings for
that purpose shall have been instituted or, to the knowledge of the Original
Issuer, SLFC, the Corporation or the Underwriters, shall be contemplated by the
Commission or any Blue Sky Authorities.
(b) Any requests to the Commission for inclusion of additional or
supplemental information in the Registration Statement or the Prospectus shall
have been complied with by the Original Issuer and the Corporation to your
reasonable satisfaction.
(c) 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
Original Issuer, SLFC or the Corporation not contemplated by the Registration
Statement, which in the opinion of the Underwriters, would materially adversely
affect the market for the Notes, or (ii) any event or development which makes
any statement made in the Registration
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Statement or Prospectus untrue or which, in the opinion of the Original Issuer
and its counsel, the Corporation and its counsel or the Underwriters and their
counsel, requires the filing of any amendment to or change in the Registration
Statement or Prospectus in order to state a material fact required by any law to
be stated therein or necessary in order to make the statements therein not
misleading, if amending or supplementing the Registration Statement or
Prospectus to reflect such event or development would, in the opinion of the
Underwriters, materially adversely affect the market for the Notes.
(d) At the time of the Closing, (i) the Notes, each of the Basic
Documents, the Original Issuer's Program Agreements, the Trustee's Program
Agreements and this Agreement shall have been duly authorized, executed and
delivered, and in full force and effect, and, in the case of the Notes,
authenticated; (ii) the Original Issuer's Authorizing Resolutions, SLFC's
Authorizing Resolution, the Corporation's Authorizing Resolution and the
Issuer's Plan shall have been duly adopted by the Original Issuer, SLFC and the
Corporation, as applicable, and shall be in full force and effect; (iii) the
State Request, the Plan Approval, the TEFRA Approval, the Volume Cap Documents,
and the contracts between the United States Secretary of Education and each of
the Guarantee Agencies shall be duly authorized, executed and delivered and in
full force and effect; (iv) the documents referred to in clauses (i) through
(iii) above shall be in forms satisfactory to the Underwriters and shall not
have been amended, modified or supplemented from the respective forms heretofore
delivered to the Underwriters, except as may have been agreed to in writing by
Smith Barney Inc., and the Original Issuer, SLFC and the Corporation shall have
duly adopted and there shall be in full force and effect such additional
resolutions and agreements, as shall, in the opinion of Dorsey & Whitney LLP,
Minneapolis, Minnesota, be necessary in connection with the transactions
contemplated hereby; and (v) the Original Issuer, SLFC, the Corporation, the
Trustee, the Auction Agent, the Investment Agreement Provider and the Guarantee
Agencies shall perform or have performed all their respective obligations
required under or specified in this Agreement, the Basic Documents, the
Investment Agreement, the Original Issuer's Authorizing Resolutions, SLFC's
Authorizing Resolution, the Corporation's Authorizing Resolution, the Original
Issuer's Program Agreements, the Issuer's Plan, the Plan Approval, the TEFRA
Approval and the Volume Cap Documents to be performed simultaneously with or
prior to Closing.
(e) The Underwriters shall have received on the Closing Date an
opinion of Dorsey & Whitney LLP, Special Counsel to the Original Issuer, SLFC
and the Corporation, dated the Closing Date and addressed to the Underwriters,
in form and scope satisfactory to the Underwriters and their counsel.
(f) The Underwriters shall have received on the Closing
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Date the approving opinion of Dorsey & Whitney LLP, Bond Counsel, dated the
Closing Date and in form and scope satisfactory to the Underwriters and their
counsel, and a letter addressed to the Underwriters to the effect that the
Underwriters may rely on such opinion and consenting to the references to it in
the Prospectus.
(g) The Underwriters shall have received on the Closing Date an
opinion of Rollyn H. Samp, counsel for the Original Issuer, and Rock & Leitz,
P.C., Special Counsel to the Original Issuer, each dated the Closing Date and
addressed to the Underwriters, in form and scope satisfactory to the
Underwriters and their counsel.
(h) The Underwriters shall have received on the Closing Date an
opinion of Davenport, Evans, Hurwitz & Smith, counsel for the Trustee, dated the
Closing Date and addressed to the Underwriters, in form and scope satisfactory
to the Underwriters and their counsel.
(i) The Underwriters shall have received on the Closing Date an
opinion of counsel for the Auction Agent, dated the Closing Date and addressed
to the Underwriters, in form and scope satisfactory to the Underwriters and
their counsel.
(j) The Underwriters shall have received on the Closing Date opinions
of counsel for the Investment Agreement Providers, dated the Closing Date and
addressed to the Underwriters, in form and scope satisfactory to the
Underwriters and their counsel.
(k) The Underwriters shall have received on the Closing Date opinions
of counsel for EAC and PHEAA, each dated the Closing Date and addressed to the
Underwriters, in form and scope satisfactory to the Underwriters and their
counsel.
(l) The Underwriters shall have received on the Closing Date an
opinion or opinions of Foley & Lardner, counsel for the Underwriters, dated the
Closing Date, and addressed to the Underwriters, in form and scope satisfactory
to the Underwriters.
(m) The Underwriters shall have received on the Closing Date from
Eide, Helmeke PLLP, certified public accountants, a agreed-upon procedures
letter dated the Closing Date, and in form and substance satisfactory to the
Underwriters, to the effect that they have carried out certain specified
procedures, not constituting an audit, with respect to certain financial
information pertaining to the Original Issuer and to the Financed Student Loans
and setting forth the results of such specified procedures.
(n) All the representations and warranties of the Original Issuer,
SLFC and the Corporation 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
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Closing Date as if made on and as of the Closing Date.
(o) The Original Issuer, SLFC and the Corporation each 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.
(p) The Underwriters shall have received by instrument dated the
Closing Date (at the option of the Underwriters), in addition to the opinions
referred to in clauses (d) through (k) 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.
(q) The Underwriters shall have received evidence satisfactory to
them that Moody's and Fitch have rated (i) each Series of Notes, other than the
Series 1997-1K and Series 1997-1L Notes, "Aaa" and "AAA", respectively, and (ii)
the Series 1997-1K and Series 1997-1L Notes, "A", and there has not been any
announcement by Moody's or Fitch that (Y) it is downgrading any of its ratings
assigned to the Notes or (Z) it is reviewing its ratings assigned to the Notes
with a view to possible downgrading, or with negative implications, or direction
not determined.
(r) The Underwriters shall have received a certificate of the
President of the Original Issuer, SLFC and the Corporation, as applicable,
affirming the matters specified in Sections 6(n) through (q) and such other
matters as the Underwriters may reasonably request.
(s) The Underwriters shall have received (i) a certificate or
certificates from the Secretary or Assistant Secretary of each of the Original
Issuer, SLFC and the Corporation certifying and attaching copies of (A)
organizational documents, (B) resolutions authorizing this Agreement, the Basic
Documents, the Original Issuer's Program Agreements 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 Original
Issuer and SLFC from the Secretary of State of the State of South Dakota and
with respect to the Corporation from the Secretary of State of the State of
Delaware, dated as of the Closing Date or such earlier date within two weeks of
the Closing Date.
(t) The Underwriters shall have received a certificate of the
Trustee, signed by an officer of the Trustee, dated the
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Closing Date, (i) to the effect that the Trustee received each of the items
enumerated in Section 3.2 of the Indenture; (ii) containing permission to
include the information concerning the Trustee in the Preliminary Prospectus and
the Prospectus; (iii) representing that (A) the Indenture, the Supplemental
Indenture, the Servicing Agreement, the Trustee's Program Agreements, the
Investment Agreement and the Auction Agent Agreement have been duly authorized,
executed and delivered on behalf of the Trustee and are in full force and
effect, (B) such agreements may be used in connection with the public offering
of the Notes, (C) the Trustee is an "eligible lender" under the Higher Education
Act of 1965, as amended, (D) no litigation is pending or, to his or her
knowledge, threatened in any court to restrain or enjoin the issuance or
delivery of any of the Notes, or the collection of revenues pledged or to be
pledged to pay the principal of, and interest on, the Notes, or in any way
contesting or affecting the validity or enforceability of the Notes, the
Indenture, the Supplemental Indenture, the Letter of Representations, the
Auction Agent Agreements, the Investment Agreement, the Trustee's Program
Agreements, or the collection of said revenues or the pledge thereof, (E) there
is no litigation pending or to his or her knowledge threatened against the
Trustee, or involving any of the property or assets under the control of the
Trustee, which involves the possibility of any judgment or liability which may
materially adversely affect the security for the Notes or materially adversely
affect the Trustee or the Program (but in lieu of such certificate the
Underwriters may in their sole discretion accept an opinion of the Trustee's
counsel as to the matters referred to above, acceptable to the Underwriters in
form and substance, that in their opinion the issues raised in any such pending
or threatened litigation are without substance or that the contentions of the
plaintiffs therein are without merit), (F) he or she has carefully examined the
Prospectus with respect to references to the Trustee and that, in his or her
opinion, with respect to references to the Trustee, as of the date of the
Prospectus and at all times subsequent through and including the Closing Date,
the Prospectus did not and does not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading;
(u) The Underwriters shall have received a certified copy of the
Internal Revenue Service's determination letter to the effect that the Original
Issuer is a corporation described in Section 501(c)(3) of the Internal Revenue
Code of 1954, as amended (the "1954 Code"), and is exempt from federal income
tax under Section 501(a) of the 1954 Code, as modified by the Internal Revenue
Service's determination letter, dated June 8, 1984, to the effect that the
Issuer is not a private foundation within the meaning of Section 509(a) of the
1954 Code, certified as of the Closing Date by the Secretary of the Original
Issuer to be true and correct copies thereof and in full force and effect.
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(v) The Underwriters shall have received certified copies of the
State Request, the Basic Documents, the Original Issuer's Authorizing
Resolutions, SLFC's Authorizing Resolution, the Corporation's Authorizing
Resolution, the Original Issuer's Program Agreements, the Issuer's Plan, the
Plan Approval, the Volume Cap Documents, and the TEFRA Approval (together with
affidavits of publication of notice of the Public Hearing and certified copies
of any reports or records of the proceedings of the Public Hearing), in each
case certified as of the Closing Date by the Original Issuer's Secretary to be a
true and correct copy thereof and in full force and effect.
(w) The Underwriters shall have received certified copies of the
Trustee's Program Agreements and the Investment Agreement, in each case
certified as of the Closing Date by a duly authorized officer of the Trustee to
be a true and correct copy thereof and in full force and effect, and certified
copies of the Broker-Dealer Agreements, in each case certified as of the Closing
Date by a duly authorized officer of the Broker-Dealer to be a true and correct
copy thereof and in full force and effect.
(x) The Underwriters shall have received such additional
certificates, instruments and other documents as shall be requested by the
Underwriters, including, without limitation, from the Original Issuer, SLFC, the
Corporation, the Trustee, the Auction Agent, the Investment Agreement Provider,
EAC and PHEAA.
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 Underwriters and counsel
for the Underwriters.
Any certificate or document signed by any officer of the Original
Issuer, SLFC or the Corporation and delivered to the Underwriters, or to counsel
for the Underwriters, shall be deemed a representation and warranty by the
Original Issuer, SLFC or the Corporation, respectively, to the Underwriters as
to the statements made therein.
If these conditions are not satisfied, or if the obligations of the
Underwriters shall be terminated for any reason permitted by this Agreement,
this Agreement shall terminate and neither the Underwriters nor the Original
Issuer, SLFC or the Corporation shall be under further obligation hereunder,
except that the respective obligations of the Original Issuer and SLFC and the
Underwriters for the payment of expenses, as provided in Section 7 hereof, shall
continue in full force and effect.
7. Expenses. The Original Issuer and SLFC, 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 Original Issuer of their
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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) Bond Counsel, counsel and Special Counsel for the Original Issuer, SLFC
and the Corporation, (B) the Trustee and its counsel, (C) the Auction Agent and
its counsel, (D) EAC, PHEAA and their respective counsel, (E) the Investment
Agreement Provider and its counsel, (F) the Depository Trust Company in
connection with the book-entry registration of the Notes and (G) Eide, Helmeke
PLLP, accountants for the Original Issuer, SLFC and the Corporation and issuer
of the specified procedures letter referenced in Section 6(m) hereof; (v) the
fees charged by Moody's and Fitch for rating the Notes; (vi) the Blue Sky
filing fees and expenses; and (vii) the cost of any advertising expenses
requested or undertaken by the Original Issuer, SLFC or the Corporation and
incurred in connection with the public offering of the Notes. The Underwriters
shall be under no obligation to pay any expense incident to the performance of
the obligations of the Original Issuer, SLFC or the Corporation hereunder.
The Underwriters 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 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 their counsel.
8. Effective Date of Agreement. This Agreement shall become
effective upon the execution and delivery hereof by all the parties hereto.
9. Representations, Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements contained in the Agreement or
contained in certificates of officers of the Original Issuer, SFLC or the
Corporation submitted pursuant hereto, shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of the
Underwriters or any officer, director, or controlling person of the
Underwriters, or by or on behalf of the Original Issuer, SFLC or the
Corporation, and shall survive delivery of the Notes to the Underwriters. The
expense payment provisions set forth in Sections 4(h) and 7 hereof and the
indemnification and contribution provisions in Section 5 hereof also shall
survive delivery of the Notes to the Underwriters and any termination or
cancellation of this Agreement.
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10. Termination of Agreement. This Agreement shall be subject to
termination in the absolute discretion of the Underwriters, without liability on
the part of the Underwriters to the Original Issuer, SLFC or the Corporation, by
notice to the Original Issuer, SLFC and the Corporation, if on or 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, Delaware or South Dakota 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 Underwriters, 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
Underwriters; (iv) legislation shall be introduced in or enacted by the Congress
of the United States or adopted by either the House of Representatives or the
Senate or approved by a Committee thereof, or a decision by a court of the
United States or the Tax Court of the United States shall be rendered, or a
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, an announcement by a member of
Congress shall be made relating to legislation which has been introduced or
which is proposed to be introduced, or any other event shall occur, 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 Underwriters materially and
adversely affects the market price of the Notes; (v) legislation shall be
enacted by the States of South Dakota or Delaware, or a decision by a court of
competent jurisdiction of the States of South Dakota or Delaware or any
administrative tribunal of the States of South Dakota or Delaware or other
governmental agency or department thereof shall be rendered with respect to
taxation by the States of South Dakota or Delaware or any of their respective
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
the changing, directly or indirectly, the tax consequences under the States of
South Dakota or Delaware tax laws of interest on securities of the general
character of the Notes in the hands of the holders thereof, which in the opinion
of the Underwriters materially affects the market price of the Notes; (vi)
additional material restrictions not in
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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; (vii) a default shall have occurred in the payment
of principal or interest on outstanding obligations of the Original Issuer, SLFC
or the Corporation, the State of South Dakota, or any agency or authority
thereof, which in the opinion of the Underwriters materially and adversely
affects the market for the Notes; (vii) any rating of the Notes shall have been
changed or withdrawn by Moody's or Fitch, or Moody's or Fitch shall have
announced that it is considering a change or withdrawal of such rating and such
action, in the opinion of the Underwriters, shall materially and adversely
affect the market for the Notes; or (viii) the Plan Approval shall have been
changed, revoked or suspended and such action, in the opinion of the
Underwriters, shall materially and adversely affect the market for the Notes.
Notice of such termination may be given to the Original Issuer, SLFC and the
Corporation, by telegram, telecopy or telephone and shall be subsequently
confirmed by letter.
11. Information Furnished by the Underwriter; Computational
Materials.
(a) The statements set forth under the heading "Plan of Distribution"
in the Prospectus constitute the only information furnished by or on behalf of
the Underwriter as such information is referred to in Sections 3(b) and 5
hereof.
(b) Not later than 10:30 a.m. New York City time, on the Business Day
before the date on which the Current Report relating to the Notes is required to
be filed by the Original Issuer and the Corporation with the SEC pursuant to
Section 4(m) hereof, each Underwriter shall deliver to the Original Issuer and
the Corporation a complete copy of all materials, if any, provided by such
Underwriter to prospective investors in such Notes which constitute
"Computational Materials" within the meaning of the no-action letter dated May
20, 1994 issued by the Division of Corporation Finance of the SEC to Kidder,
Peabody Acceptance Corporation I, Kidder, Peabody & Co. Incorporated, and Kidder
Structured Asset Corporation, the no-action letter dated May 27, 1994 issued by
the Division of Corporation Finance of the SEC to the Public Securities
Association and the no-action letter of February 17, 1995 issued by the SEC to
the Public Securities Association (collectively, the "Kidder/PSA Letters") and
the filing of which is a condition of the relief granted in such letters (such
materials being the "Computational Materials").
Each Underwriter severally and not jointly represents and warrants to
and agrees with the Original Issuer and the Corporation, as of the date hereof
and as of the Closing Date, that the Computational Materials furnished to the
Original Issuer and the Corporation by such Underwriter pursuant to this Section
11(b)
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constitute (either in original, aggregated or consolidated form) all of the
materials furnished to prospective investors in the Notes by such Underwriter
prior to the time of delivery thereof to the Original Issuer and the Corporation
that are required to be filed with the SEC with respect to the Notes in
accordance with the Kidder/PSA Letters and such Computational Materials comply
with the requirements of the Kidder/PSA Letters.
Notwithstanding the foregoing, such Underwriter makes no
representation or warranty with respect to statements in any Computational
Materials relating to the Financed Student Loans which were furnished by or on
behalf of the Original Issuer and the Corporation to such Underwriter.
12. Liability of Underwriters. Except as limited by law or
regulation of the United States Comptroller of the Currency as to commercial
banks' legal capacity to underwrite, the obligation of each particular
Underwriter hereunder is joint and several. To the extent FBS Investment
Services, Inc. is legally limited in respect to its underwriting the Notes, its
obligation hereunder shall be deemed to have been initially and for all purposes
a several and neither a joint or joint and several obligation, and to such
extent its several obligation shall be in the proportion which its participation
(initially identified in writing to the Original Issuer, and thereafter as
modified from time to time by the Underwriters) bears to the aggregate principal
amount of the Notes; provided, however, that each Underwriter not so expressly
limited shall continue to have a joint and several obligation to purchase the
Notes in accordance with the terms of this Purchase Contract.
13. 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 Original Issuer, SLFC or the Corporation, at
105 First Avenue, Southwest, Aberdeen, South Dakota 57401, Attention: A. Norgrin
Sanderson, (ii) if to the Underwriters, to Smith Barney Inc., 390 Greenwich
Street, 2nd Floor, New York, NY 10013, Attention: Harry T. Apfel.
This Agreement has been and is made solely for the benefit of, and
shall be binding upon, the Underwriters, the Company, SLFC, the Original Issuer,
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 Underwriters of any of the Notes in his status as such purchaser.
14. Applicable Law; Counterparts. This Agreement shall be governed
by and construed in accordance with the laws of the
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State of New York applicable to contracts made and to be performed within the
State of New York without giving effect to the choice of laws or conflict of
laws principles thereof.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof or
thereof shall have been executed and delivered on behalf of each party hereto.
The headings of the Sections of this Agreement are inserted for
convenience only and shall not be deemed to be part hereof.
Please confirm that the foregoing correctly sets forth the agreement
among the Original Issuer, SLFC, the Corporation and the Underwriters.
Very truly yours,
EDUCATION LOANS INCORPORATED
(the "Original Issuer")
By_______________________________________
Name:
Title:
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STUDENT LOAN FINANCE CORPORATION
("SLFC")
By_______________________________________
Name:
Title:
EDUCATION LOANS INCORPORATED
(the "Corporation")
By_______________________________________
Name:
Title:
Confirmed as of the date first
above mentioned.
SMITH BARNEY INC.
FBS INVESTMENT SERVICES, INC.
DOUGHERTY DAWKINS LLC
MILLER & SCHROEDER FINANCIAL, INC.
NORWEST INVESTMENT SERVICES, INC.
By Smith Barney Inc.
By:_____________________________
Name:
Title:
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APPENDIX A
----------
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APPENDIX B
----------
CERTAIN DEFINITIONS
Capitalized terms used but not defined in this Appendix B or elsewhere
in this Agreement have the respective meanings ascribed thereto in the
Supplemental Indenture.
"Basic Documents" means the Indenture, the Supplemental Indenture, the
Contribution Agreement, the Auction Agent Agreements, the Broker-Dealer
Agreements, the Servicing Agreement, the Letter of Representations,
____________.
"Corporation's Authorizing Resolutions" means the Resolutions of the
Corporation's board of directors, adopting, accepting, ratifying and approving:
1. the Basic Documents;
2. this Agreement, [[the Investment Agreements,]] the Preliminary
Prospectus and the Prospectus;
3. the Loan Purchase Contracts and the forms of Student Loan
Purchase Agreements; and,
4. [[ ]]
"Original Issuer's Authorizing Resolutions" means the Resolutions of
the Original Issuer's board of directors, adopting, accepting, ratifying and
approving:
1. the Basic Documents;
2. one or more investment agreements (individually and collectively
the "Investment Agreement") between the Trustee and one or more
parties meeting the requirements of the Indenture (individually
and collectively the "Investment Agreement Provider"),
3. the notice and scheduling of the Public Hearing;
4. the Volume Cap Request;
5. this Agreement, the Preliminary Prospectus and the Prospectus;
6. the Loan Purchase Contracts and the forms of Student Loan
Purchase Agreements;
7. the Original Issuer's Program Agreements;
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8. the State Request; and
9. the Issuer's Plan.
"Issuer's Plan" means the Issuer's Plan for Doing Business, dated
February 6, 1981, as amended on September 16, 1983, November 18, 1983, April 22,
1985, January 12, 1987, July 26, 1988, June 6, 1991, June 22, 1993 and May 23,
1996 as required by Section 438 of the Higher Education Act of 1965, as amended
(which term shall include the Issuer's Justifications for the issuance of tax-
exempt obligations submitted to the Department of Education in connection with
the Issuer's Series D Student Loan Revenue Bonds and Series E Student Loan
Revenue Bonds).
"Letter of Representations" means the Blanket Issuer Letter of
Representations, dated as of _____ __, 1997, from the Original Issuer to The
Depository Trust Company ("DTC") containing certain representations to induce
DTC to accept the Notes for deposit.
"Loan Purchase Contracts" means, individually and collectively, the
Student Loan Purchase Agreements between the Original Issuer and the eligible
lenders described in Exhibit [__] to the Supplemental Indenture.
"Original Issuer's Contract of Insurance" shall mean the Contract of
Insurance for Loans to Students Under Title IV Part B of the Higher Education
Act, dated March 12, 1979, and the Contract of Federal Loan Insurance, dated
January 22, 1981, between the Original Issuer and the Secretary of Education,
and any amendment thereof which is hereafter entered into.
"Original Issuer's Guarantee Agreements" shall mean (1) that certain
Lender Agreement for Guarantee of Student Loans With Federal Reinsurance, dated
December 21, 1992, between the Original Issuer and Education Assistance
Corporation, (2) that certain Lender Agreement for Guarantee of Student Loans
With Federal Reinsurance, dated August 17, 1989, between the Original Issuer and
Pennsylvania Higher Education Assistance Agency, (3) that certain Agreement to
Guarantee Loans, dated October 9, 1986, between the Original Issuer and United
Student Aid Funds, Inc., (4) that certain Lender Participation Agreement for
Insurance, dated August 4, 1987, between the Original Issuer and the North
Dakota Guaranteed Student Loan Program, (5) that certain Lender Agreement for
Guarantee of Student Loans With Federal Reinsurance, dated November 1, 1991,
between the Original Issuer and Northstar Guarantee Inc., (6) that certain
Student Loan Guaranty, dated August 24, 1990, between the Original Issuer and
Great Lakes Higher Education Corporation, (7) that certain Agreement for Payment
on Guarantee of Student Loans With Federal Reinsurance, dated October 6, 1994,
between the Original Issuer and Educational Management Credit Corporation
(formerly known as Transitional Guaranty Agency,
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Inc.), [[Iowa, Missouri and Illinois]] and (8) any other agreement between a
Guarantee Agency and the Corporation providing for the insurance or guarantee by
such Guarantee Agency, to the extent provided in the Higher Education Act, of
the principal of and accrued interest on Student Loans made or acquired by the
Original Issuer from time to time, including any supplement thereto or amendment
thereof entered into in accordance with the provisions thereof.
"Original Issuer's Participation Agreement" means the Agreement for
Participation in the Guaranteed Loan Program, dated February 4, 1981, between
the Original Issuer and the United States Secretary of Education.
"Original Issuer's Program Agreements" means the Original Issuer's
Contract of Insurance, the Original Issuer's Participation Agreement, the
Original Issuer's Guarantee Agreements and the Loan Purchase Contracts.
"Plan Approval" means the approval of the Issuer's Plan (as amended on
the date hereof) by the Governor of the State of South Dakota [[, which approval
shall be obtained by the Original Issuer prior to the Closing ]] (and which
includes the Prior Plan Approval).
[[ "Prior Plan Approval" means the approval of the Issuer's Plan (as in
effect prior to the date hereof) by the Governor of the State of South Dakota,
dated _______ __, 1996 (together with prior such approvals by the Governor of
the State of South Dakota and by the United States Secretary of Education). ]]
"Public Hearing" means a public hearing to be held pursuant to Section
147(f) of the Code, relating to the Tax Exempt Series 1997-1 Notes.
"SLFC's Authorizing Resolutions" means the Resolutions of the SLFC's
board of directors, adopting, accepting, ratifying and approving:
1. the Basic Documents;
2. this Agreement, the Preliminary Prospectus and the Prospectus;
3. the Loan Purchase Contracts and the forms of Student Loan
Purchase Agreements; and,
4. [[ ]]
"State Request" means the letter, dated May 11, 1987, from the
Governor of the State of South Dakota to the Original Issuer.
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"TEFRA Approval" means the Governor's approval of the issuance of the
Notes for the purposes of Section 147(f) of the Code [[, which approval shall be
obtained by the Original Issuer prior to the Closing]].
"Trustee's Program Agreements" means the Trustee Contract of Insurance
and the Trustee Guarantee Agreement.
"Volume Cap Documents" means the Volume Cap Request, the executive
orders of the Governor of the State of South Dakota and relevant legislation of
the State of South Dakota legislature providing for a system of allocating the
State's ceiling on private activity bonds, and the allocations to the Original
Issuer, dated December 22, 1993, December 28, 1994, December 29, 1995 and
December 30, 1996 of portions of such State ceiling, and the certifications of
the Governor of the State of South Dakota that the Tax Exempt Series 1997-1
Notes meet the requirements of Section 146 of the Code.
"Volume Cap Request" means the Original Issuer's applications for
allocations of the State of South Dakota's volume cap with respect to private
activity bonds, dated December 21, 1993, December 28, 1994, December 27, 1995
and December [__,] 1996 and the Original Issuer's Carryforward Elections of
Unused Private Activity Bond Limitations, dated December 30, 1993, December 30,
1994, December 29, 1995 and December 30, 1996.
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EXHIBIT 4.1
Draft of 7/15/97
----------------
================================================================================
INDENTURE OF TRUST
BETWEEN
EDUCATION LOANS INCORPORATED
AND
FIRST BANK NATIONAL ASSOCIATION
AS TRUSTEE
-------------------------------
DATED AS OF JULY 1, 1997
-------------------------------
================================================================================
<PAGE>
CROSS REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- ---------
<S> <C>
310(a)(1)......................................................... 7.13
(a)(2)......................................................... 7.13
(a)(3)......................................................... 7.12
(a)(4)......................................................... N.A.2
(a)(5)......................................................... 7.13
(b)............................................................ 7.8; 7.13
(c)............................................................ N.A.
311(a)............................................................ 7.14
(b)............................................................ 7.14
(c)............................................................ N.A.
312(a)............................................................ 12.1
(b)............................................................ 12.2
(c)............................................................ 12.2
313(a)............................................................ 12.4
(b)(1)......................................................... 12.4
(b)(2)......................................................... 12.4
(c)............................................................ 13.4
(d)............................................................ 12.4
314(a)............................................................ 12.3
(b)............................................................ 13.12;13.13
(c)(1)......................................................... 1.4
(c)(2)......................................................... 1.4
(c)(3)......................................................... 1.4
(d)............................................................ 1.4
(e)............................................................ 1.4
(f)............................................................ 1.4
315(a)............................................................ 7.1
(b)............................................................ 7.3; 13.4
(c)............................................................ 7.1
(d)............................................................ 7.1
(e)............................................................ 6.11
316(a)(last sentence)............................................. 1.1
(a)(1)(A)...................................................... 6.4
(a)(1)(B)...................................................... 6.13
(a)(2)......................................................... N.A.
(b)............................................................ 6.9
(c)............................................................ N.A.
317(a)(1)......................................................... 6.3
(a)(2)......................................................... 6.10
(b)............................................................ 7.17
318(a)............................................................ 13.11
</TABLE>
______________
1 Note: This Cross Reference Table shall not, for any purpose, be deemed to
be part of this Indenture.
2 N.A. means Not Applicable.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
PARTIES............................................................................ vii
RECITALS........................................................................... vii
GRANTING CLAUSES................................................................... viii
ARTICLE ONE -- DEFINITIONS AND GENERAL PROVISIONS.................................. 1-1
Section 1.1. Definitions.................................................... 1-1
Section 1.2. Definitions of General Terms................................... 1-28
Section 1.3. Computations................................................... 1-29
Section 1.4. Compliance Certificates and Opinions, etc...................... 1-29
Section 1.5. Evidence of Action by the Corporation.......................... 1-32
Section 1.6. Exclusion of Notes Held By or For the
Corporation.................................................... 1-32
Section 1.7. Exhibits....................................................... 1-32
Section 1.8. Incorporation by Reference of Trust Indenture Act.............. 1-32
ARTICLE TWO -- NOTE FORMS.......................................................... 2-1
Section 2.1. Forms Generally................................................ 2-1
Section 2.2. Form of Notes.................................................. 2-1
ARTICLE THREE -- THE NOTES......................................................... 3-1
Section 3.1. General Title.................................................. 3-1
Section 3.2. General Limitations; Issuable in Series; Purposes
and Conditions for Issuance; Payment of
Principal and Interest......................................... 3-1
Section 3.3. Terms of Particular Series..................................... 3-3
Section 3.4. Form and Denominations......................................... 3-4
Section 3.5. Execution, Authentication and Delivery......................... 3-4
Section 3.6. Temporary Notes................................................ 3-5
Section 3.7. Registration, Transfer and Exchange............................ 3-5
Section 3.8. Mutilated, Destroyed, Lost and Stolen Notes.................... 3-7
Section 3.9. Interest Rights Preserved; Dating of Notes..................... 3-8
Section 3.10. Persons Deemed Holders......................................... 3-8
Section 3.11. Cancellation................................................... 3-8
Section 3.12. Class B and Class C Notes...................................... 3-8
ARTICLE FOUR -- CREATION OF FUNDS AND ACCOUNTS; CREDITS
THERETO AND PAYMENTS THEREFROM................................. 4-1
Section 4.1. Creation of Funds and Accounts................................. 4-1
Section 4.2. Acquisition Fund............................................... 4-1
Section 4.3. Administration Fund............................................ 4-4
</TABLE>
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<TABLE>
<S> <C>
Section 4.4. Reserve Fund................................................... 4-6
Section 4.5. Rebate Fund.................................................... 4-8
Section 4.6. Revenue Fund................................................... 4-12
Section 4.7. Note Fund...................................................... 4-15
Section 4.7.1. Interest Account............................................... 4-15
Section 4.7.2. Principal Account.............................................. 4-18
Section 4.7.3. Retirement Account............................................. 4-24
Section 4.8. Surplus Fund................................................... 4-25
Section 4.9. Termination.................................................... 4-32
Section 4.10. Pledge......................................................... 4-32
Section 4.11. Investments.................................................... 4-33
Section 4.12. Transfer of Investment Securities.............................. 4-34
ARTICLE FIVE -- COVENANTS TO SECURE NOTES; REPRESENTATIONS AND
WARRANTIES..................................................... 5-1
Section 5.1. Trustee to Hold Financed Student Loans......................... 5-1
Section 5.2. Credit Enhancement Facilities, Demand Purchase
Agreements and Swap Agreements................................. 5-1
Section 5.3. Enforcement and Amendment of Guarantee
Agreements..................................................... 5-2
Section 5.4. Enforcement and Amendment of Certificates
of Insurance and Contract of Insurance......................... 5-2
Section 5.5. Acquisition, Collection and Assignment of
Student Loans.................................................. 5-2
Section 5.6. Enforcement of Financed Student Loans.......................... 5-3
Section 5.7. Servicing and Other Agreements................................. 5-4
Section 5.8. Administration and Collection of Financed Student
Loans.......................................................... 5-4
Section 5.9. Books of Account; Annual Audit................................. 5-5
Section 5.10. Punctual Payments.............................................. 5-5
Section 5.11. Further Assurances............................................. 5-5
Section 5.12. Protection of Security; Power To Issue Notes
and Pledge Revenues and Other Funds............................ 5-5
Section 5.13. No Encumbrances................................................ 5-6
Section 5.14. Tax Covenant................................................... 5-7
Section 5.15. Limitation on Administrative Expenses and
Note Fees; Reports............................................. 5-7
Section 5.16. Continuing Existence; Merger and Consolidation................. 5-8
Section 5.17. Fidelity Bonds................................................. 5-9
Section 5.18. Amendment of Student Loan Purchase
Agreements..................................................... 5-9
Section 5.19. Enforcement and Amendment of Guarantee Agreements,
Certificates of Insurance
and Contract of Insurance...................................... 5-9
Section 5.20. Amendment of Remarketing Agreements
and Depositary Agreements...................................... 5-10
</TABLE>
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<TABLE>
<S> <C>
Section 5.21. Additional Covenants of the Corporation After
Section 150(d)(3) Transfer..................................... 5-10
Section 5.22. Representations and Warranties of the Corporation.............. 5-13
Section 5.23. Trustee to Furnish Monthly Servicing Report.................... 5-15
Section 5.24. Use of Trustee Eligible Lender Number.......................... 5-15
ARTICLE SIX -- DEFAULTS AND REMEDIES............................................. 6-1
Section 6.1. Events of Default.............................................. 6-1
Section 6.2. Acceleration................................................... 6-3
Section 6.3. Other Remedies; Rights of Beneficiaries........................ 6-5
Section 6.4. Direction of Proceedings by Acting
Beneficiaries Upon Default..................................... 6-7
Section 6.5. Waiver of Stay or Extension Laws............................... 6-7
Section 6.6. Application of Moneys.......................................... 6-7
Section 6.7. Remedies Vested in Trustee..................................... 6-11
Section 6.8. Limitation on Suits by Beneficiaries........................... 6-11
Section 6.9. Unconditional Right of Noteholders To
Enforce Payment................................................ 6-11
Section 6.10. Trustee May File Proofs of Claims.............................. 6-12
Section 6.11. Undertaking for Costs.......................................... 6-13
Section 6.12. Termination of Proceedings..................................... 6-13
Section 6.13. Waiver of Defaults and Events of Default....................... 6-13
Section 6.14. Inspection of Books and Records................................ 6-14
ARTICLE SEVEN -- FIDUCIARIES..................................................... 7-1
Section 7.1. Acceptance of the Trustee...................................... 7-1
Section 7.2. Fees, Charges and Expenses of the Trustee, Paying
Agents, Note Registrar, Authenticating Agents,
Deposit Agents, Remarketing Agents, Depositaries,
Auction Agents and Broker-Dealers.............................. 7-4
Section 7.3. Notice to Beneficiaries if Default Occurs...................... 7-4
Section 7.4. Intervention by Trustee........................................ 7-5
Section 7.5. Successor Trustee, Paying Agents, Authenticating
Agents, Deposit Agents and Depositaries........................ 7-5
Section 7.6. Resignation by Trustee, Paying Agents,
Authenticating Agents, Deposit Agents
and Depositaries............................................... 7-5
Section 7.7. Removal of Trustee............................................. 7-6
Section 7.8. Appointment of Successor Trustee............................... 7-6
Section 7.9. Concerning any Successor Trustee............................... 7-7
Section 7.10. Trustee Protected in Relying Upon Resolutions,
Etc............................................................ 7-7
Section 7.11. Successor Trustee as Custodian of Funds........................ 7-7
Section 7.12. Co-Trustee..................................................... 7-7
Section 7.13. Corporate Trustee Required; Eligibility;
Disqualification............................................... 7-9
</TABLE>
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<TABLE>
<S> <C>
Section 7.14. Preferential Collection of Claims Against
Corporation.................................................... 7-10
Section 7.15. Statement by Trustee of Funds and Accounts
and Other Matters.............................................. 7-10
Section 7.16. Trustee, Authenticating Agent, Note
Registrar, Paying Agents, Deposit Agents,
Remarketing Agents, Depositaries, Auction Agents
and Broker-Dealers May Buy, Hold, Sell or
Deal in Notes.................................................. 7-10
Section 7.17. Authenticating Agent and Paying Agents;
Paying Agents To Hold Moneys in Trust.......................... 7-11
Section 7.18. Removal of Authenticating Agent
and Paying Agents; Successors.................................. 7-12
Section 7.19. Appointment and Qualifications of Deposit Agents............... 7-12
Section 7.20. Appointment and Qualifications of Depositaries................. 7-13
Section 7.21. Remarketing Agents............................................. 7-15
Section 7.22. Qualifications of Remarketing Agents........................... 7-15
ARTICLE EIGHT -- SUPPLEMENTAL INDENTURES......................................... 8-1
Section 8.1. Supplemental Indentures Not Requiring Consent
of Beneficiaries............................................... 8-1
Section 8.2. Supplemental Indentures Requiring Consent
of Beneficiaries............................................... 8-2
Section 8.3. Rights of Trustee.............................................. 8-3
Section 8.4. Opinion and Rating Agency Approval
Required Prior to Execution of Supplemental
Indenture...................................................... 8-4
Section 8.5. Consent of Depositaries........................................ 8-4
Section 8.6. Consent of Remarketing Agents.................................. 8-4
Section 8.7. Consent of Auction Agents...................................... 8-4
Section 8.8. Consent of Broker-Dealers...................................... 8-4
Section 8.9. Conformity With Trust Indenture Act............................ 8-5
ARTICLE NINE -- NOTEHOLDERS' MEETINGS............................................ 9-1
Section 9.1. Purposes for Which Noteholders' Meetings
May Be Called.................................................. 9-1
Section 9.2. Place of Meetings of Noteholders............................... 9-1
Section 9.3. Call and Notice of Noteholders' Meetings....................... 9-1
Section 9.4. Persons Entitled To Vote at Noteholders' Meetings.............. 9-2
Section 9.5. Determination of Voting Rights; Conduct and
Adjournment of Meetings........................................ 9-2
Section 9.6. Counting Votes and Recording Action of Meetings................ 9-3
Section 9.7. Revocation by Noteholders...................................... 9-3
ARTICLE TEN -- REDEMPTION AND PREPAYMENT......................................... 10-1
Section 10.1. Right of Redemption and Prepayment............................. 10-1
</TABLE>
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<TABLE>
<S> <C>
Section 10.2. Election to Redeem, Prepay or Purchase;
Notice to Trustee; Senior Asset Requirement.................... 10-1
Section 10.3. Selection by Trustee of Notes To Be Redeemed................... 10-2
Section 10.4. Notice of Redemption........................................... 10-2
Section 10.5. Notes Payable on Redemption Date and Sinking
Fund Payment Date.............................................. 10-3
Section 10.6. Notes Redeemed or Prepaid in Part.............................. 10-4
Section 10.7. Purchase of Notes.............................................. 10-4
ARTICLE ELEVEN -- DEFEASANCE; MONEYS HELD FOR PAYMENT
OF DEFEASED NOTES.............................................. 11-1
Section 11.1. Discharge of Liens and Pledges; Notes No Longer
Outstanding and Deemed To Be Paid Hereunder.................... 11-1
Section 11.2. Notes Not Presented for Payment When Due;
Moneys Held for the Notes after Due Date
of Notes....................................................... 11-3
ARTICLE TWELVE -- NOTEHOLDERS' LISTS AND REPORTS................................. 12-1
Section 12.1. Note Registrar To Furnish Trustee Names
and Addresses to Noteholders................................... 12-1
Section 12.2. Preservation of Information; Communications
to Noteholders................................................. 12-1
Section 12.3. Reports by Corporation......................................... 12-1
Section 12.4. Reports by Trustee............................................. 12-2
ARTICLE THIRTEEN -- MISCELLANEOUS................................................ 13-1
Section 13.1. Consent, Etc., of Noteholders.................................. 13-1
Section 13.2. Limitation of Rights........................................... 13-1
Section 13.3. Severability................................................... 13-1
Section 13.4. Notices........................................................ 13-2
Section 13.5. Counterparts................................................... 13-3
Section 13.6. Indenture Constitutes a Security Agreement..................... 13-3
Section 13.7. Payments Due on Non-Business Days.............................. 13-3
Section 13.8. Notices to Rating Agencies..................................... 13-3
Section 13.9. Governing Law.................................................. 13-3
Section 13.10. Rights of Other Beneficiaries.................................. 13-3
Section 13.11. Conflict with Trust Indenture Act.............................. 13-3
Section 13.12. Opinions as to Trust Estate.................................... 13-4
Section 13.13. Recording of Indenture......................................... 13-4
Section 13.14. No Petition.................................................... 13-5
Section 13.15. Income Tax Characterization.................................... 13-5
SIGNATURES......................................................................... 13-6
EXHIBIT A Eligible Loan Acquisition Certificate.......................... A-1
EXHIBIT B Eligible Loan Origination Certificate.......................... B-1
</TABLE>
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<TABLE>
<S> <C>
EXHIBIT C Student Loan Acquisition Certificate........................... C-1
EXHIBIT D Form of Updating Eligible Loan Acquisition
Certificate.................................................... D-1
</TABLE>
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THIS INDENTURE OF TRUST, dated as of July 1, 1997, between EDUCATION
LOANS INCORPORATED, a nonprofit corporation duly organized and existing under
the laws of the State of South Dakota (herein called the "Corporation"), and
FIRST BANK NATIONAL ASSOCIATION, a national banking association duly
established, existing and authorized to accept and execute trusts of the
character herein set out under and by virtue of the laws of the United States
(herein called the "Trustee");
RECITALS OF THE CORPORATION
WHEREAS, the Trustee has entered into certain contracts and
agreements, herein identified, with the Secretary of Education (hereinafter,
together with the former United States Commissioner of Education, referred to as
the "Secretary of Education") and each Guarantee Agency (as hereinafter
defined), to provide an insurance or guarantee program for student loans
incurred under the Higher Education Act of 1965, as amended, and the regulations
promulgated by the United States Department of Education thereunder (hereinafter
referred to as the "Higher Education Act"), that the Trustee on behalf of the
Corporation may acquire with the proceeds of the sale of the Corporation's
bonds, notes or other obligations, and it is contemplated that the Trustee may
in the future enter into comparable agreements with other Guarantee Agencies;
and
WHEREAS, each Guarantee Agency has entered into agreements with the
Secretary of Education for the payment by the Secretary of Education of amounts
authorized to be paid pursuant to the Higher Education Act, including
reimbursement of certain amounts to be paid upon certain defaulted student loans
guaranteed or insured by such Guarantee Agency, and interest subsidy payments
and Special Allowance Payments to holders of loans guaranteed or insured by such
Guarantee Agency, and it is contemplated that any other Guarantee Agency as
described in the preceding paragraph will enter into comparable agreements; and
WHEREAS, the Corporation has duly authorized the execution and
delivery of this Indenture to provide for the issuance of its Notes, to be
issued in one or more series (hereinafter referred to as the "Notes") and for
the purposes as in this Indenture provided; and
WHEREAS, all things necessary to make the Notes, when executed by the
Corporation and authenticated and delivered by the Trustee hereunder, the valid
obligations of the Corporation, and to make this Indenture a valid agreement of
the Corporation in accordance with their and its terms, have been done;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
The Corporation, in consideration of the premises and the acceptance
by the Trustee of the trusts hereby created and of the purchase and acceptance
of the Notes by the Holders thereof, the execution and delivery of any Swap
Agreement (as
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hereinafter defined) by any Swap Counterparty (as hereinafter defined), the
execution and delivery of any Credit Enhancement Facility (as hereinafter
defined) by any Credit Facility Provider (as hereinafter defined), the execution
and delivery of any Demand Purchase Agreement (as hereinafter defined) by any
Credit Facility Provider, and the acknowledgment thereof by the Trustee, in
order to secure the payment of the principal of, premium, if any, and interest
on and any Carry-Over Amounts (and accrued interest thereon) with respect to the
Notes according to their tenor and effect and the performance and observance by
the Corporation of all the covenants expressed or implied herein and in the
Notes and in any such Swap Agreement, Credit Enhancement Facility or Demand
Purchase Agreement, does hereby grant to the Trustee, and to its successors in
trust, and to them and their assigns, forever, a security interest in the
following:
GRANTING CLAUSE FIRST
All rights, title, interest and privileges of the Corporation (1) with
respect to Financed Student Loans, in, to and under the Contract of Insurance,
the Federal Reimbursement Contracts, the Certificate of Insurance, any Servicing
Agreement, the Student Loan Purchase Agreements (including, but not limited to,
those agreements described in Exhibits H-1 through H-6 to the First Supplemental
Indenture), any Non-Delivery Fees and the Guarantee Agreements, (2) in, to and
under all Financed Student Loans (including the evidences of indebtedness
thereof and related documentation), the proceeds of the sale of the Notes
(until expended for the purpose for which the Notes were issued) and the
revenues, moneys, evidences of indebtedness and securities (including any
earnings thereon) in and payable into the Acquisition Fund, Note Fund, Revenue
Fund, Reserve Fund, Administration Fund, Rebate Fund and Surplus Fund, in the
manner and subject to the prior applications provided in Article Four hereof,
and (3) in, to and under any Credit Enhancement Facility, any Demand Purchase
Agreement, any Swap Agreement, any Swap Counterparty Guarantee, any Depositary
Agreement, any Remarketing Agreement, any Auction Agent Agreement and any
Broker-Dealer Agreement, all as hereinbefore and hereinafter defined, including
any contract or any evidence of indebtedness or other rights of the Corporation
to receive any of the same whether now existing or hereafter coming into
existence, and whether now or hereafter acquired;
GRANTING CLAUSE SECOND
All proceeds from any property described in these Granting Clauses and
any and all other property of every name and nature from time to time hereafter
by delivery or by writing of any kind conveyed, pledged, assigned or
transferred, as and for additional security hereunder by the Corporation or by
anyone in its behalf or with its written consent to the Trustee, which is hereby
authorized to receive any and all such property at any and all times and to hold
and apply the same subject to the terms hereof;
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TO HAVE AND TO HOLD all the same with all privileges and appurtenances
hereby conveyed and assigned, or agreed or intended so to be, to the Trustee and
its successors in said trust and to them and their assigns forever;
IN TRUST NEVERTHELESS, upon the terms and trust herein set forth (i)
for the equal and proportionate benefit, security and protection of all present
and future Senior Beneficiaries (as hereinafter defined), without privilege,
priority or distinction as to lien or otherwise of any of the Senior
Beneficiaries over any of the other, (ii) for the equal and proportionate
benefit, security and protection of all present and future Subordinate
Beneficiaries (as hereinafter defined), without privilege, priority or
distinction as to the lien or otherwise of any of the Subordinate Beneficiaries
over any of the other, but on a basis subordinate to the Senior Beneficiaries on
the terms described herein, and (iii) for the equal and proportionate benefit,
security and protection of all present and future Holders of Class C Notes (as
hereinafter defined), but on a basis subordinate to the Senior Beneficiaries and
the Subordinate Beneficiaries on the terms described herein;
PROVIDED, HOWEVER, that if the Corporation, its successors or assigns,
shall well and truly pay, or cause to be paid, the principal of and premium, if
any, on the Notes and the interest and any Carry-Over Amounts (and accrued
interest thereon) with respect thereto due and to become due thereon, or provide
fully for payment thereof as herein provided, at the times and in the manner
mentioned in the Notes, according to the true intent and meaning thereof, and
shall make the payments into the Trust Funds as required under Article Four
hereof, or shall provide, as permitted hereby, for the payment thereof by
depositing with the Trustee sums sufficient for payment of the entire amount due
and to become due thereon as herein provided, and shall well and truly keep,
perform and observe all the covenants and conditions pursuant to the terms of
this Indenture to be kept, performed and observed by it, and shall pay to the
Trustee, any Swap Counterparty and any Credit Facility Provider all sums of
money due or to become due to them in accordance with the terms and provisions
hereof, then (except as provided in Sections 4.5 and 5.14 hereof or otherwise
provided in a Supplemental Indenture) this Indenture and the rights hereby
granted shall cease, terminate and be void; otherwise, this Indenture shall be
and remain in full force and effect.
NOW, THEREFORE, it is mutually covenanted and agreed for the benefit
of all Holders of the Notes and for the benefit of any Swap Counterparty and any
Credit Facility Provider, as follows:
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ARTICLE ONE
DEFINITIONS AND GENERAL PROVISIONS
Section 1.1. Definitions. In this Indenture the following terms have
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the following respective meanings unless the context hereof clearly requires
otherwise:
"Account" shall mean any of the Accounts created or established by
this Indenture.
"Accountant" shall mean Eide, Helmeke & Co., Certified Public
Accountants, Aberdeen, South Dakota, any other registered or certified public
accountant or firm of such accountants duly licensed to practice and practicing
as such under the laws of the State, selected and paid by the Corporation, who
is Independent and not under the domination of the Corporation, but who may be
regularly retained to make annual or similar audits of the books or records of
the Corporation.
"Acquisition Fund" shall mean the Acquisition Fund created and
established by Section 4.1 hereof.
"Acting Beneficiaries Upon Default" shall mean, as such term is used
in Article Six hereof:
(a) at any time that any Senior Obligations are Outstanding,
(i) for purposes of clause (i) of Section 6.2(A) hereof, (x) the
Holders of a majority in aggregate Principal Amount of Class A Notes
Outstanding or (y) (unless the Trustee shall, in its sole discretion,
determine that acceleration of the maturity of the Outstanding Notes is not
in the overall interest of the Senior Beneficiaries) any Other Senior
Beneficiary,
(ii) for purposes of clause (ii) of Section 6.2(A) hereof, (x) the
Holders of one hundred percent (100%) in aggregate Principal Amount of
Class A Notes Outstanding, or (y) (unless the Trustee shall, in its sole
discretion, determine that acceleration of the maturity of the Outstanding
Notes is not in the overall interest of the Senior Beneficiaries) all Other
Senior Beneficiaries,
(iii) for purposes of Sections 6.2(B), 6.3, 6.4 and 6.13 hereof, (x)
the Holders of a majority in aggregate Principal Amount of the Class A
Notes Outstanding, unless the Trustee shall have received or shall
thereafter receive conflicting requests or directions from one or more
Other Senior Beneficiaries; or (y) any Other Senior Beneficiary, unless
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the Trustee shall, in its sole discretion, determine that the requesting
action is not in the overall interest of the Senior Beneficiaries or shall
have received or shall thereafter receive conflicting requests or
directions from one or more Other Senior Beneficiaries or the Holders of a
majority in aggregate Principal Amount of the Class A Notes Outstanding;
and
(iv) for all other purposes hereunder, the Holders of a majority in
aggregate Principal Amount of Class A Notes Outstanding or any Other Senior
Beneficiary;
(b) at any time that no Senior Obligations are Outstanding but
Subordinate Obligations are Outstanding,
(i) for purposes of clause (i) of Section 6.2(A) hereof, (x) the
Holders of a majority in aggregate Principal Amount of Class B Notes
Outstanding or (y) (unless the Trustee shall, in its sole discretion,
determine that acceleration of the maturity of the Outstanding Notes is not
in the overall interest of the Subordinate Beneficiaries) any Other
Subordinate Beneficiary,
(ii) for purposes of clause (ii) of Section 6.2(A) hereof, (x) the
Holders of one hundred percent (100%) in aggregate Principal Amount of
Class B Notes Outstanding or (y) (unless the Trustee shall, in its sole
discretion, determine that acceleration of the maturity of the Outstanding
Notes is not in the overall interest of the Subordinate Beneficiaries) all
Other Subordinate Beneficiaries,
(iii) for purposes of Sections 6.2(B), 6.3, 6.4 and 6.13 hereof, (x)
the Holders of a majority in aggregate Principal Amount of the Class B
Notes Outstanding, unless the Trustee shall have received or shall
thereafter receive conflicting requests or directions from one or more
Other Subordinate Beneficiaries, or (y) any Other Subordinate
Beneficiaries, unless the Trustee shall, in its sole discretion, determine
that the requested action is not in the overall interest of the Subordinate
Beneficiaries or shall have received or shall thereafter receive
conflicting requests or directions from one or more Other Subordinate
Beneficiaries or the Holders of a majority in aggregate Principal Amount of
the Class B Notes Outstanding; and
(iv) for all other purposes hereunder, the Holders of a majority in
aggregate Principal Amount of Class B Notes Outstanding or any Other
Subordinate Beneficiary; and
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(c) at any time that no Senior Obligations are Outstanding and no
Subordinate Obligations are Outstanding, for all purposes hereunder, the Holders
of a majority in aggregate Principal Amount of Class C Notes Outstanding.
"Administration Fund" shall mean the Administration Fund created and
established by Section 4.1 hereof.
"Administrative Expenses" shall mean the Corporation's actual
expenses, excluding Note Fees but including Servicing Fees and any other
expenses of the Corporation incurred in connection with the servicing of
Financed Student Loans, of carrying out and administering its powers, duties and
functions under (1) its articles of incorporation, its bylaws, the Student Loan
Purchase Agreements, any Servicing Agreement, the Contract of Insurance, the
Guarantee Agreements, any Certificate of Insurance, the Program, the Higher
Education Act or any requirement of the laws of the United States or the
Statutes with respect to the Program, as such powers, duties and functions
relate to Financed Student Loans, (2) any Swap Agreement, Credit Enhancement
Facility or Demand Purchase Agreement (other than amounts payable thereunder
which constitute Other Obligations), (3) any Remarketing Agreement, Depositary
Agreement, Auction Agent Agreement or Broker-Dealer Agreement, and (4) this
Indenture. Such expenses may include, without limiting the generality of the
foregoing, salaries, supplies, utilities, mailing, labor, materials, office
rent, maintenance, furnishings, equipment, machinery, telephones, travel
expenses, insurance premiums, and legal, accounting, management, consulting and
banking services and expenses, and payments for pension, retirement, health and
hospitalization and life and disability insurance benefits; but shall not
include (i) debt service on the Notes or any other bonds, notes or other
evidences of indebtedness of the Corporation, (ii) amounts payable under any
Other Obligation or (iii) Costs of Issuance or the fees, costs or expenses of
the Corporation with respect to any other bonds, notes or indebtedness of the
Corporation.
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control," when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Aggregate Value" means on any calculation date the sum of the Values
of all assets of the Trust Estate, less moneys in any Fund or Account which the
Corporation is then entitled to receive for deposit into the Rebate Fund but has
not yet removed from the Trust Estate, and less any funds to be used to pay
Costs of Issuance unless, under the provisions of a Supplemental Indenture, such
funds are not to be applied to the payment of Costs of Issuance to the extent
the Senior Asset Requirement would not be met after such payment.
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"Arbitrage Regulations" shall mean the Treasury Regulations pertaining
to Section 148 of the Code, now or hereafter promulgated, including Treasury
Regulations, Sections 1.148-0 through 1.148-11 and 1.150-1.
"Auction Agent" shall mean, with respect to any series of Notes, any
bank, national banking association or trust company designated as such with
respect to such Notes pursuant to the provisions of a Supplemental Indenture,
and its successor or successors, and any bank, national banking association or
trust company at any time substituted in its place pursuant to such Supplemental
Indenture.
"Auction Agent Agreement" shall mean, with respect to any series of
Notes, an agreement among an Auction Agent, the Trustee and the Corporation
setting forth the rights and obligations of the Auction Agent acting in such
capacity with respect to such Notes under this Indenture and the related
Supplemental Indenture, including any supplement thereto or amendment thereof
entered into in accordance with the provisions thereof.
"Authenticating Agent," when used with respect to a series of Notes,
shall mean a bank or trust company appointed for the purpose of receiving,
authenticating and delivering Notes of that series in connection with transfers,
exchanges and registrations as in this Indenture provided, and its successor or
successors and any other bank or trust company which may at any time be
substituted in its place as Authenticating Agent pursuant to this Indenture.
"Authorized Officer," when used with reference to the Corporation,
shall mean the chairman of the Board, the president, any vice president, the
secretary or other person designated in writing to the Trustee from time to time
by the Board.
"Balance," when used with reference to any Account or Fund, shall mean
the aggregate sum of all assets standing to the credit of such Account or Fund,
including, without limitation, Investment Securities computed at the Value of
Investment Securities; Notes purchased with moneys standing to the credit of
such Fund or Account computed at the Principal Amount of such Notes; Financed
Student Loans computed at the Principal Balance thereof; and lawful money of the
United States; provided, however, that (1) the Balance of the Interest Account
shall not include amounts standing to the credit thereof which are being held
therein for (A) the payment of past due and unpaid interest on Notes, or (B) the
payment of interest on Notes that are deemed no longer Outstanding as a result
of the defeasance thereof pursuant to subparagraph (ii) of the first paragraph
of Section 11.1 hereof, and (2) the Balances of the Principal Account and the
Retirement Account shall not include amounts standing to the credit thereof
which are being held therein for the payment of principal of or premium, if any,
on Notes which are deemed no longer Outstanding in accordance with the
provisions of subparagraph (ii) of the first paragraph of Section 11.1 hereof.
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"Beneficiaries" shall mean, collectively, all Senior Beneficiaries,
all Subordinate Beneficiaries and all Holders of any Outstanding Class C Notes.
"Board" shall mean the Board of Directors of the Corporation.
"Board Resolution" shall mean a copy of a resolution certified by the
secretary or an assistant secretary of the Corporation to have been duly adopted
by the Board and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Bond Counsel" shall mean any Counsel of nationally recognized
standing in the field of law relating to municipal bonds.
"Bond Year," when used with respect to a series of Tax Exempt Notes,
shall have the meaning ascribed thereto in the Supplemental Indenture providing
for the issuance of such series of Notes.
"Broker-Dealer" shall mean, with respect to any series of Notes, any
broker or dealer (each as defined in the Securities Exchange Act of 1934, as
amended), commercial bank or other entity permitted by law to perform the
functions required of a broker-dealer set forth in the auction procedures
relating to such Notes, designated as such with respect to such Notes pursuant
to the provisions of a Supplemental Indenture, and its successor or successors,
and any broker or dealer, commercial bank or other entity at any time
substituted in its place pursuant to such Supplemental Indenture.
"Broker-Dealer Agreement" shall mean, with respect to any series of
Notes, an agreement between an Auction Agent and a Broker-Dealer, and approved
by the Corporation, setting forth the rights and obligations of the Broker-
Dealer acting in such capacity with respect to such Notes under this Indenture
and the related Supplemental Indenture, including any supplement thereto or
amendment thereof entered into in accordance with the provisions thereof.
"Budgeted Administrative Expenses" shall mean, with respect to each
Fiscal Year, subject to the provisions of Section 5.15 hereof, an amount of
Administrative Expenses budgeted by the Corporation for such Fiscal Year, as
evidenced by a Board Resolution adopted prior to the commencement of such Fiscal
Year; provided that such Budgeted Administrative Expenses shall not exceed (and,
in the absence of a Board Resolution with respect thereto, shall be assumed to
be equal to) the amount of Administrative Expenses permitted to be paid, or
reimbursed to the Corporation, from the Administration Fund pursuant to any
Supplemental Indenture providing for the issuance of a series of Notes.
"Business Day" shall mean, except as otherwise provided in a
Supplemental Indenture, a day of the year other than a Saturday, a Sunday or a
day on which banks located in the city in which the Principal Office of the
Trustee is
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located, in the city in which the Principal Office of any Authenticating Agent
is located, in the city in which the Principal Office of any Paying Agent (other
than the Trustee) is located, in the city in which the Principal Office of any
Auction Agent is located, or in the city in which the Principal Office of any
Depositary is located, are required or authorized by law to remain closed, or on
which The New York Stock Exchange is closed.
"Carry-Over Amount" shall mean, if and to the extent specifically
provided for as such in a Supplemental Indenture with respect to a series of
Variable Rate Notes, the amount, if any, by which (i) the interest payable on
such series with respect to a given interest period is exceeded by (ii) the
interest that otherwise would have been payable with respect to such interest
period but for a limitation on the interest rate for such interest period based
upon the anticipated return on Financed Student Loans, together with the unpaid
portion of any such excess from prior interest periods. To the extent required
by a Supplemental Indenture providing for any Carry-Over Amount, interest will
accrue on such Carry-Over Amount until paid. Any reference to "principal" or
"interest" in this Indenture and in the related Notes shall not include, within
the meanings of such words, any Carry-Over Amount or any interest accrued on any
Carry-Over Amount.
"Cash Flow Projection" shall mean a projection as to future revenues
and cash flow through the final Stated Maturity of the Outstanding Notes based
upon existing facts and, to the extent not so based, upon assumptions accepted
by each Rating Agency (including, without limitation, assumptions relating to
variable rates of interest under Swap Agreements, Credit Enhancement Facilities
and Demand Purchase Agreements and on any Notes) and the following assumptions:
(1) a thirty (30)-day lag in receipt of borrower payments, and a sixty (60)-day
lag in receipt of federal payments, with respect to Financed Student Loans; (2)
no prepayments of principal of Financed Student Loans; (3) bond-equivalent rates
of 91-day or 52-week U.S. Treasury bills (for purposes of determining returns on
Financed Student Loans that are based upon such rates or averages thereof) equal
to known rates (or averages) for such time as they are known, and thereafter
equal to ________________ percent (_______%) per annum; and (4) a reinvestment
rate of ________________ percent (_______%) per annum. The foregoing
assumptions may, pursuant to a Supplemental Indenture as provided in
Section 8.1(h) hereof, be replaced with or supplemented by such other reasonable
assumptions as will not result in the withdrawal or reduction of the then-
current rating of any of the Unenhanced Outstanding Notes, as evidenced by
written confirmation to that effect from each Rating Agency, or, if no
Unenhanced Notes are then Outstanding, but Other Obligations are Outstanding, as
are acceptable to the Other Beneficiaries holding such Other Obligations, as
evidenced in writing to the Trustee by each such Other Beneficiary.
"Certificate of Insurance" shall mean a certificate of federal loan
insurance issued with respect to an Eligible Loan by the Secretary of Education
pursuant to the provisions of the Higher Education Act.
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"Class A Notes" shall mean any Notes designated in a Supplemental
Indenture as Class A Notes, which are secured under this Indenture on a basis
senior to any Subordinate Obligations and any Class C Notes (as such seniority
is described in Section 3.12 hereof), and on a parity with Other Senior
Obligations.
"Class B Notes" shall mean any Notes designated in a Supplemental
Indenture as Class B Notes, which are secured under this Indenture on a basis
subordinate to any Senior Obligations (as such subordination is described in
Section 3.12 hereof and elsewhere herein), on a parity with Other Subordinate
Obligations but on a basis senior to any Class C Notes (as such seniority is
described in Section 3.12 hereof and elsewhere herein).
"Class C Notes" shall mean any Notes designated in a Supplemental
Indenture as Class C Notes, which are secured under this Indenture subordinate
to any Senior Obligations and any Subordinate Obligations (as such subordination
is described in Section 3.12 hereof and elsewhere herein).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Consolidation Loan" shall mean a Student Loan authorized under
Section 428C of the Higher Education Act.
"Contract of Insurance" shall mean the Contract of Federal Loan
Insurance, dated January 28, 1981, entered into between the Trustee and the
Secretary of Education, and any other document evidencing the eligibility of the
Trustee to receive payments of principal and interest from the Secretary of
Education with respect to Insured Loans Financed hereunder (or, in the event a
co-trustee has been appointed pursuant to Section 7.12 hereof, such Contract of
Federal Loan Insurance and other documentation relating to such co-trustee), and
any amendment thereof which is hereafter entered into.
"Corporation" shall mean Education Loans Incorporated, a nonprofit
corporation duly organized and existing under the laws of the State, and any
successor thereto under this Indenture, including, upon completion of the
Section 150(d)(3) Transfer, EdLinc, and, for purposes of any provision contained
herein and required by the TIA, each other obligor on the Notes.
"Corporation Request," "Corporation Order," "Corporation Certificate"
or "Corporation Consent" shall mean, respectively, a written request, order,
certificate or consent signed in the name of the Corporation by an Authorized
Officer and delivered to the Trustee.
"Corporation Swap Payment" means a payment due to a Swap Counterparty
from the Corporation pursuant to the applicable Swap Agreement (including, but
not limited to, payments in respect of any early termination of such Swap
Agreement).
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"Costs of Issuance" shall mean all items of expense directly or
indirectly payable by or reimbursable to the Corporation and related to the
authorization, sale and issuance of a series of the Notes, including, but not
limited to, printing costs, costs of preparation and reproduction of documents,
filing fees, initial fees and charges of the Trustee, any Authenticating Agent,
any Deposit Agent, any Remarketing Agent, any Depositary, any Auction Agent or
any Broker-Dealer, legal fees and charges, fees and disbursements of
underwriters, consultants and professionals, underwriters' discount, costs of
credit ratings, fees and charges for preparation, execution, transportation and
safekeeping of such Notes, other costs incurred by the Corporation in
anticipation of the issuance of such Notes and any other cost, charge or fee in
connection with the issuance of such Notes.
"Counsel" shall mean a person, or firm of which such a person is a
member, authorized in any state to practice law.
"Counterparty Swap Payment" means a payment due to or received by the
Corporation from a Swap Counterparty pursuant to a Swap Agreement (including,
but not limited to, payments in respect of any early termination of such Swap
Agreement) and amounts received by the Corporation under any related Swap
Counterparty Guarantee.
"Credit Enhancement Facility" shall mean, if and to the extent
provided for in a Supplemental Indenture described in Section 8.1(i) hereof,
with respect to Notes of one or more series of the same class, an insurance
policy insuring, or a letter of credit or surety bond providing a direct or
indirect source of funds for, the timely payment of principal of and interest on
such Notes (but not necessarily principal due upon acceleration thereof under
Section 6.2 hereof), and all agreements entered into by the Corporation or the
Trustee with respect thereto.
"Credit Facility Provider" means, if and to the extent provided for in
a Supplemental Indenture entered into pursuant to Section 8.1(i), any Person or
Persons engaged by the Corporation (i) pursuant to a Demand Purchase Agreement,
to provide credit enhancement or liquidity for the Corporation's obligation to
repurchase or redeem Notes of one or more series of the same class subject to a
remarketing which have not been remarketed, or (ii) pursuant to a Credit
Enhancement Facility, to provide credit enhancement for the payment of the
principal of and interest on any or all of the Notes of one or more series.
"Debt Service" shall mean: (1) with respect to any Notes, as of any
particular date and with respect to any particular period, the aggregate of the
moneys to be paid or set aside on such date or during such period for the
payment (or retirement) of the principal of, premium, if any, and interest on
Notes, after giving effect to any Corporation Swap Payments and Counterparty
Swap Payments, and (2) with respect to Other Obligations, as of any particular
date and with respect to any particular period, the aggregate of the moneys to
be paid or set aside on such date or during such period for the payment of
amounts payable by the Corporation under
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any Swap Agreements, Credit Enhancement Facilities or Demand Purchase
Agreements, including, inter alia, fees payable by the Corporation to the Credit
Facility Provider thereunder.
"Defaulted Interest" shall have the meaning given in Section 3.2
hereof.
"Deemed Tendered" shall mean, with respect to any Note, a Note deemed
tendered in accordance with the provisions of the Supplemental Indenture
providing for the issuance thereof.
"Demand Note" shall mean a Note required to be purchased by or on
behalf of the Corporation, at the option of the Holder thereof, upon receipt of
a Purchase Demand.
"Demand Purchase Agreement" shall mean any or all of the credit
facilities, reimbursement agreements, standby purchase agreements and the like,
pertaining to Notes of one or more series issued with a tender right granted to
or tender obligation imposed on the Holder thereof, if and to the extent
provided for in a Supplemental Indenture described in Section 8.1(i) hereof.
"Deposit Agent" shall mean any bank or banking association having
trust powers or trust company designated as such pursuant to the provisions of
Section 7.19 hereof and its successor or successors and any other bank or
banking association having trust powers or trust company at any time substituted
in its place pursuant to this Indenture.
"Depositary" shall mean, with respect to any series of Notes, any
commercial bank or banking association having trust powers or trust company
designated as such with respect to such Notes pursuant to the provisions of
Section 7.20 hereof and its successor or successors and any other commercial
bank or banking association having trust powers or trust company at any time
substituted in its place pursuant to this Indenture.
"Depositary Agreement" shall mean an agreement among a Depositary, the
Trustee, the Corporation, any Remarketing Agent and/or any related Credit
Facility Provider setting forth the rights and obligations of the Depositary
acting in such capacity under this Indenture and otherwise meeting the
requirements of Section 7.20 hereof, including any supplement thereto or
amendment thereof entered into in accordance with the provisions thereof.
"EdLinc" shall mean Education Loans Incorporated, a corporation duly
organized and existing under the laws of the State of Delaware.
"Eligible Borrower" shall mean a borrower who is eligible under the
Higher Education Act to be the obligor of a loan for financing a program of
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post-secondary education, including a borrower who is eligible under the Higher
Education Act to be an obligor of a Plus Loan.
"Eligible Loan" shall mean: (A) a Student Loan which: (1) has been or
will be made to an Eligible Borrower for post-secondary education; (2) is either
(a) Insured, or (b) Guaranteed by a Guarantee Agency to the extent of not less
than ninety-eight percent (98%) of the principal thereof and all accrued
interest thereon; (3) is an "eligible loan" as defined in Section 438 of the
Higher Education Act for purposes of receiving Special Allowance Payments (other
than nonsubsidized Stafford Loans originally financed by the Corporation); and
(4) bears interest at a rate per annum not less than or in excess of the
applicable rate of interest provided by the Higher Education Act, or such lesser
rates as may be approved by each Rating Agency; or (B) any other Student Loan if
the Corporation shall have caused to be provided to the Trustee: (1) written
advice from each Rating Agency that treating such type of loan as an Eligible
Loan will not adversely affect any rating or ratings then applicable to any of
the Unenhanced Notes or, if no Unenhanced Notes are then Outstanding, but Other
Obligations are Outstanding, such Other Beneficiaries holding such Other
Obligations consent to the treatment of such type of loan an Eligible Loan, as
evidenced in writing to the Trustee by each such Other Beneficiary, and (2) a
written opinion of Bond Counsel to the effect that treating such type of loan as
an Eligible Loan will not, under then existing law, affect the exclusion from
gross income for federal income tax purposes of interest on any Tax Exempt Notes
then outstanding.
"Eligible Loan Acquisition Certificate" shall mean a certificate
signed by an Authorized Officer of the Corporation and substantially in the form
attached as Exhibit A hereto.
"Eligible Loan Origination Certificate" shall mean a certificate
signed by an Authorized Officer of the Corporation and substantially in the form
attached as Exhibit B hereto.
"Event of Default" shall mean one of the events described as such in
Section 6.1 hereof.
"Excess Earnings" shall mean, with respect to any series of Tax Exempt
Notes, the amount, if any, which, if applied to reduce the yield on all Student
Loans Financed, in whole or in part, with amounts allocated to such Notes, would
be necessary to reduce such yield to the yield on such Notes plus such
additional spread as would not cause such Notes to be "arbitrage bonds" under
Section 148 of the Code.
"Excess Earnings Account" shall mean the Account by that name created
and established by Section 4.1 hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
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"Federal Reimbursement Contract" shall mean any agreement between a
Guarantee Agency and the Secretary of Education providing for the payment by the
Secretary of Education of amounts authorized to be paid pursuant to the Higher
Education Act, including (but not necessarily limited to) reimbursement of
amounts paid or payable upon defaulted Financed Student Loans and other student
loans guaranteed or insured by the Guarantee Agency and interest subsidy
payments to holders of qualifying student loans guaranteed or insured by the
Guarantee Agency.
"Financed," when used with respect to Student Loans or Eligible Loans,
shall mean Student Loans or Eligible Loans, as the case may be, acquired or
originated by the Trustee on behalf of the Corporation with moneys in the
Acquisition Fund or the Surplus Account, any Eligible Loans received in exchange
for Financed Student Loans upon the sale thereof or substitution therefor in
accordance with Section 4.2 hereof and any other Student Loans deemed to be
"Financed" with moneys in the Acquisition Fund and the Surplus Account pursuant
to this Indenture, but does not include Student Loans released from the lien of
this Indenture and sold, as permitted in this Indenture, to any purchaser,
including a trustee for the holders of the Corporation's bonds, notes or other
evidences of indebtedness.
"Fiscal Year" shall mean the fiscal year of the Corporation as
established from time to time.
"FISL Loans" shall mean student loans insured under the FISL Program.
"FISL Program" shall mean the federal loan insurance program created
under the Higher Education Act whereby the Secretary of Education directly
insures the repayment of at least eighty percent (80%) of the principal of (or
in certain cases up to one hundred percent (100%) of the principal of and
accrued interest on) student loans under the Higher Education Act.
"Fitch" shall mean Fitch Investors Service, L.P., its successors and
their assigns, and, if such partnership shall be dissolved or liquidated or
shall no longer perform the functions of a securities rating agency, "Fitch"
shall be deemed to refer to any other nationally recognized securities rating
agency designated by the Trustee, at the written direction of the Corporation.
"Government Obligations" shall mean direct obligations of, or
obligations the full and timely payment of the principal of and interest on
which are unconditionally guaranteed by, the United States of America.
"Governor" shall mean the chief executive officer of the State.
"Guarantee" or "Guaranteed" shall mean, with respect to a Student
Loan, the insurance or guarantee by a Guarantee Agency, to the extent provided
in
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the Higher Education Act, of the principal of and accrued interest on such
Student Loan, and the coverage of such Student Loan by one or more Federal
Reimbursement Contracts providing, among other things, for reimbursement to the
Guarantee Agency for losses incurred by it on defaulted Financed Student Loans
insured or guaranteed by the Guarantee Agency to the extent provided in the
Higher Education Act.
"Guarantee Agency" shall mean (1) Education Assistance Corporation,
and its successors and assigns, including, without limitation, the Secretary of
Education, (2) Pennsylvania Higher Education Assistance Agency, and its
successors and assigns, including, without limitation, the Secretary of
Education, (3) United Student Aid Funds, Inc., and its successors and assigns,
including, without limitation, the Secretary of Education, (4) Student Loans of
North Dakota, and its successors and assigns, including, without limitation, the
Secretary of Education, (5) Northstar Guarantee Inc., and its successors and
assigns, including, without limitation, the Secretary of Education, (6) Great
Lakes Higher Education Corporation, and its successors and assigns, including,
without limitation, the Secretary of Education, (7) Educational Credit
Management Corporation (formerly known as Transitional Guaranty Agency, Inc.),
and its successors and assigns, including, without limitation, the Secretary of
Education, (8) Iowa College Aid Commission, and its successors and assigns,
including, without limitation, the Secretary of Education, (9) Missouri
Coordinating Board for Higher Education, and its successors and assigns,
including, without limitation, the Secretary of Education, (10) Illinois Student
Assistance Commission, and its successors and assigns, including, without
limitation, the Secretary of Education, (11) California Student Aid Commission,
and its successors and assigns, including, without limitation, the Secretary of
Education, or (12) any other state agency or private nonprofit institution or
organization which administers a Guarantee Program, subject to confirmation of
ratings on any Outstanding Unenhanced Notes or, if no Unenhanced Notes are then
Outstanding but Other Obligations are Outstanding, consent of each Other
Beneficiary holding such Outstanding Other Obligations, as evidenced in writing
to the Trustee by each such Other Beneficiary.
"Guarantee Agreements" shall mean, collectively, (1) that certain
Lender Agreement for Guarantee of Student Loans With Federal Reinsurance, dated
________________________, between the Trustee and Education Assistance
Corporation, (2) that certain Lender Agreement for Guarantee of Student Loans
With Federal Reinsurance, dated ___________________, between the Trustee and
Pennsylvania Higher Education Assistance Agency, (3) that certain Agreement to
Guarantee Loans, dated ___________________, between the Trustee and United
Student Aid Funds, Inc., (4) that certain Lender Participation Agreement for
Insurance, dated ___________________, between the Trustee and Student Loans of
North Dakota, (5) that certain Lender Agreement for Guarantee of Student Loans
With Federal Reinsurance, dated ___________________, between the Trustee and
Northstar Guarantee, Inc., (6) that certain Student Loan Guaranty, dated
September 11, 1992, between the Trustee and Great Lakes Higher Education
Corporation, (7) that certain Agreement for Payment on Guarantee of Student
Loans
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With Federal Reinsurance, dated ___________________, between the Trustee
and Educational Credit Management Corporation (formerly known as Transitional
Guaranty Agency, Inc.), (8) that certain ______________________________________,
dated ___________________________, between the Trustee and Iowa College Aid
Commission, (9) that certain ______________________________________, dated
___________________________, between the Trustee and Missouri Coordinating Board
for Higher Education, (10) that certain Holder Agreement, dated July 7, 1997,
between the Trustee and Illinois Student Assistance Commission, (11) that
certain Consolidation Loan Program Lender Participation Agreement, dated July 6,
1997, between the Trustee and California Student Aid Commission, and (12) any
other agreement between a Guarantee Agency and the Trustee providing for the
insurance or guarantee by such Guarantee Agency, to the extent provided in the
Higher Education Act, of the principal of and accrued interest on Student Loans
acquired by the Trustee from time to time, including any supplement thereto or
amendment thereof entered into in accordance with the provisions thereof and
hereof.
"Guarantee Program" shall mean a Guarantee Agency's student loan
insurance program pursuant to which such Guarantee Agency guarantees or insures
Student Loans.
"Guaranteed Loan" shall mean a Student Loan which is Guaranteed.
"Higher Education Act" shall mean the Higher Education Act of 1965, as
amended or supplemented from time to time, and all regulations promulgated
thereunder.
"Holder," when used with respect to any Note, shall mean the Person in
whose name such Note is registered in the Note Register.
"Income Account" shall mean the Account by that name created and
established by Section 4.1 hereof.
"Indenture" shall mean this Indenture of Trust, including any
supplement hereto or amendment hereof entered into in accordance with the
provisions hereof.
"Independent," when used with respect to any specified Person, means
such a Person who (i) is in fact independent; (ii) does not have any direct
financial interest or any material indirect financial interest in the
Corporation, other than the payment to be received under a contract for services
to be performed by such Person; and (iii) is not connected with the Corporation
as an official, officer, employee, promoter, underwriter, trustee, partner,
affiliate, subsidiary, director or Person performing similar functions.
Whenever it is herein provided that any Independent Person's opinion or
certificate shall be furnished to the Trustee, such Person shall be appointed by
the Corporation or the Trustee, as the case may be, and such opinion or
certificate shall state that the signer has read this definition and that the
signer is Independent within the meaning hereof.
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"Independent Certificate" shall mean a certificate or opinion to be
delivered to the Trustee under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 1.4, made by an
Independent appraiser or other expert appointed by a Corporation Order and
approved by the Trustee in the exercise of reasonable care, and such opinion or
certificate shall state that the signer has read the definition of "Independent"
in this Indenture and that the signer is Independent within the meaning thereof.
"Initial Notes" shall mean the Notes of the initial twelve (12) series
hereunder issued contemporaneously with the execution and delivery of this
Indenture.
"Insurance" or "Insured" or "Insuring" shall mean, with respect to a
Student Loan, the insuring by the Secretary of Education (as evidenced by a
Certificate of Insurance or other document or certification issued under the
provisions of the Higher Education Act) under the Higher Education Act of one
hundred percent (100%) of the principal of and accrued interest on such Student
Loan; provided, however, that a Student Loan for which an application for
insurance commitment was received by the Secretary of Education prior to March
1, 1973, shall be deemed Insured if insured by the Secretary of Education to the
extent of one hundred percent (100%) of the principal amount of such Student
Loan.
"Insured Loan" shall mean a Student Loan which is Insured.
"Interest Account" shall mean the Account by that name created and
established by Section 4.1 hereof.
"Interest Payment Date" shall mean each regularly scheduled interest
payment date on the Notes [which, except in the case of any Variable Rate Notes,
including those Initial Notes constituting Variable Rate Notes (as to which such
dates shall be specified in the Supplemental Indenture providing for the
issuance thereof), shall be each June 1 and December 1] or, with respect to the
payment of interest upon redemption or acceleration of a Note, purchase of a
Note by the Trustee on a Mandatory Tender Date (to the extent such Mandatory
Tender Date is designated as an Interest Payment Date in the related
Supplemental Indenture) or the payment of Defaulted Interest, such date on which
such interest is payable under this Indenture.
"Investment Securities" shall mean any of the following:
1. Government Obligations;
2. 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
Trustee or any of its affiliates), provided that, at the time of deposit or
purchase, if the
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investment is for a period exceeding one year, such depository institution
shall have long-term unsecured debt rated by each Rating Agency not lower
than in its highest applicable Specific Rating Category or, if the
investment is for a period of less than one year, such depository
institution shall have short-term unsecured debt rated by each Rating
Agency not lower than its highest applicable Specific Rating Category;
3. Obligations issued or guaranteed as to principal and interest by
any of the following: (a) the Government National Mortgage Association; (b)
the Federal National Mortgage Association; or (c) the Federal Farm Credit
Banks, the Federal Intermediate Credit Banks, the Export-Import Bank of the
United States, the Federal Land Banks, the Student Loan Marketing
Association, the Federal Financing Bank, the Federal Home Loan Banks, the
Federal Home Loan Mortgage Corporation or the Farmers Home Administration,
or any agency or instrumentality of the United States of America which
shall be established for the purpose of acquiring the obligations of any of
the foregoing or otherwise providing financing therefor, provided that any
such obligation described in this clause (c) shall either be rated by Fitch
or, if not rated by Fitch, rated by Moody's, (i) if such obligation has a
term of less than one year, not lower than in its highest applicable
Specific Rating Category, or (ii) if such obligation has a term of one year
or longer, not lower than in its highest applicable Specific Rating
Category;
4. Repurchase agreements or reverse repurchase agreements with banks
(which may include the Trustee or any of its affiliates) which are members
of the Federal Deposit Insurance Corporation or with government bond
dealers insured by the Securities Investor Protection Corporation, which
such agreements are secured by securities which are Government Obligations
to a level sufficient to obtain a rating by each Rating Agency in its
highest Specific Rating Category, or with brokers or dealers whose
unsecured long-term debt is rated by each Rating Agency in its highest
Specific Rating Category;
5. Any money market fund, including a qualified regulated investment
company described in Internal Revenue Service Notice 87-22, 1987-1 C.B.
466, rated by each Rating Agency not lower than its highest applicable
Specific Rating Category;
6. Any debt instrument; provided that if such instrument has a term
of less than one year, it is rated by each Rating Agency not lower than in
its highest applicable Specific Rating Category, and if such instrument has
a term of one year or longer, it is rated by each Rating Agency not lower
than in its highest applicable Specific Rating Category;
7. Any investment agreement which constitutes a general obligation of
a Person, or the obligations under which are unconditionally guaranteed by
a
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Person, whose debt, unsecured securities, deposits or claims paying ability
is rated by each Rating Agency, (a) if such investment agreement has a term
of less than one year, not lower than in its highest applicable Specific
Rating Category, or (b) if such investment agreement has a term of one year
or longer, not lower than in its highest applicable Specific Rating
Category; and
8. Any other investment if the Trustee shall have received written
evidence from each Rating Agency that treating such investment as an
Investment Security will not cause any rating then applicable to any
Unenhanced Outstanding Notes to be lowered or withdrawn or, if no
Unenhanced Notes are then Outstanding, but Other Obligations are
Outstanding, is acceptable to such Other Beneficiaries, as evidenced in
writing to the Trustee by each such Other Beneficiary.
"Joint Sharing Agreement" shall mean any agreement entered into in
accordance with Section 5.24(2) hereof.
"Lender" shall mean any "eligible lender" (as defined in the Higher
Education Act and the applicable Student Loan Purchase Agreement) permitted to
participate as a seller of Student Loans to the Corporation under the Program
and which has received an eligible lender designation from the Secretary of
Education with respect to Insured Loans or from a Guarantee Agency with respect
to Guaranteed Loans.
"Mandatory Tender Date" shall mean, with respect to any Note, a date
on which such Note is required to be tendered for purchase by or on behalf of
the Corporation in accordance with the provisions in the Supplemental Indenture
providing for the issuance thereof.
"Maturity," when used with respect to any Note, shall mean the date on
which the principal of such Note becomes due and payable as therein or herein
provided, whether at the Stated Maturity thereof or by declaration of
acceleration, call for redemption or otherwise.
"Monthly Payment Date" shall mean the 12th day of each calendar month
(or, in the event such 12th day is not a Business Day, the next preceding
Business Day); provided that any transfers to be made from the Revenue Fund on a
Monthly Payment Date shall, as to amounts therein constituting payments in
respect of Financed Student Loans, include only such payments as have been
deposited in the Revenue Fund as of the last day of the preceding calendar
month.
"Monthly Servicing Report" shall mean the monthly report prepared by
the Servicer in accordance with any Servicing Agreement.
"Moody's" shall mean Moody's Investors Service, Inc., its successors
and their assigns, and, if such corporation shall be dissolved or liquidated or
shall no
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longer perform the functions of a securities rating agency, "Moody's" shall be
deemed to refer to any other nationally recognized securities rating agency
designated by the Trustee, at the written direction of the Corporation.
"Non-Delivery Fee" shall mean any fee received by the Corporation or
the Trustee from a Lender upon the failure of the Lender, in whole or in part,
to perform its obligation to sell Eligible Loans to the Corporation pursuant to
a Student Loan Purchase Agreement.
"Note Fees" shall mean the fees, costs and expenses, excluding Costs
of Issuance, of the Trustee and any Paying Agents, Authenticating Agent, Deposit
Agents, Remarketing Agents, Depositaries, Auction Agents, Broker-Dealers,
Counsel, Note Registrar, Accountants and other consultants and professionals
incurred by the Corporation in carrying out and administering its powers, duties
and functions under (1) its articles of incorporation, its bylaws, the Student
Loan Purchase Agreements, any Servicing Agreement, the Contract of Insurance,
the Guarantee Agreements, any Certificate of Insurance, the Program, the Higher
Education Act or any requirement of the laws of the United States or any State
with respect to the Program, as such powers, duties and functions relate to
Financed Student Loans, (2) any Swap Agreement, Credit Enhancement Facility or
Demand Purchase Agreement (other than any amounts payable thereunder which
constitute Other Obligations), (3) any Remarketing Agreement, Depositary
Agreement, Auction Agent Agreement or Broker-Dealer Agreement and (4) this
Indenture.
"Note Fund" shall mean the Fund by that name created and established
by Section 4.1 hereof.
"Note Register" shall mean the register maintained by the Note
Registrar pursuant to Section 3.7 hereof.
"Note Registrar" shall mean the Trustee, or, if so designated pursuant
to the terms of a Supplemental Indenture, the Authenticating Agent, serving in
such capacity under the terms of this Indenture, unless and until a Corporation
Order is delivered to the Authenticating Agent and the Trustee directing that
the Authenticating Agent or the Trustee, as the case may be, become the Note
Registrar and the Authenticating Agent or the Trustee, as the case may be,
agrees to serve in such capacity hereunder.
"Noteholder" shall mean the Holder of any Note.
"Notes" shall mean all Notes issued pursuant to this Indenture in
accordance with the provisions of Article Three hereof.
"Other Beneficiary" shall mean an Other Senior Beneficiary or an Other
Subordinate Beneficiary.
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"Other Obligations" shall mean, collectively, Other Senior Obligations
and Other Subordinate Obligations.
"Other Senior Beneficiary" shall mean a Person who is a Senior
Beneficiary other than as a result of ownership of Class A Notes.
"Other Senior Obligation" shall mean the Corporation's obligations to
pay any amounts under any Senior Swap Agreements, any Senior Credit Enhancement
Facilities and any Senior Demand Purchase Agreements.
"Other Subordinate Beneficiary" shall mean a Person who is a
Subordinate Beneficiary other than as a result of ownership of Class B Notes.
"Other Subordinate Obligation" shall mean the Corporation's
obligations to pay any amounts under any Subordinate Swap Agreements, any
Subordinate Credit Enhancement Facilities and any Subordinate Demand Purchase
Agreements.
"Outstanding," (1) when used with respect to any Note, shall (a) have
the construction given to such word in Sections 1.6, 3.7 and 11.1 hereof, i.e.,
a Note shall not be Outstanding hereunder if such Note is at the time not deemed
to be Outstanding hereunder by reason of the operation and effect of Section
1.6, Section 3.7 or Section 11.1 hereof, and (b) not include any Note Deemed
Tendered; and (2) when used with respect to any Other Obligation, shall mean all
Other Obligations which have become, or may in the future become, due and
payable and which have not been paid or otherwise satisfied.
"Paying Agent" shall mean the Trustee and any other commercial bank
designated herein or in accordance herewith as a place at which principal of,
premium, if any, or interest on any Note is payable.
"Person" shall mean any individual, corporation, limited liability
company, partnership, joint venture, association, joint stock company, trust,
incorporated organization or government or any agency or political subdivision
thereof.
"Plus Loan" shall mean a Student Loan made pursuant to Section 428B of
the Higher Education Act.
"Prepayment Date," when used with respect to any Note, a portion of
the Principal Amount of which is to be paid prior to its Stated Maturity, shall
mean the date fixed for such prepayment by or pursuant to this Indenture.
"Principal Account" shall mean the Account by that name created and
established by Section 4.1 hereof.
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<PAGE>
"Principal Amount," when used with respect to a Note, shall mean the
original principal amount of such Note less all payments previously made to the
Holder thereof in respect of principal.
"Principal Balance," when used with respect to a Student Loan, shall
mean the unpaid principal amount thereof (including any unpaid capitalized
interest thereon that is authorized to be capitalized under the Higher Education
Act for purposes of Special Allowance Payments, federal interest subsidy
payments, a borrower's liability to a lender and the amount of the lender's loss
on a guarantee or insurance claim) as of a given date.
"Principal Office" shall mean (i) when used with respect to the
Trustee, the principal office of the Trustee for the performance of its duties
as trustee hereunder, which office as of the date of execution of this Indenture
is located at the address specified in Section 13.4 hereof, and (ii) when used
with respect to a Paying Agent (other than the Trustee), an Authenticating
Agent, the Note Registrar, a Depositary, a Remarketing Agent, an Auction Agent
or a Broker-Dealer, such office designated in writing to the Trustee and the
Corporation as the location of its principal office for the performance of its
duties as Paying Agent, Authenticating Agent, Note Registrar, Depositary,
Remarketing Agent, Auction Agent or Broker-Dealer, as the case may be, under
this Indenture.
"Principal Payment Date" shall mean the Stated Maturity of principal
of any Serial Note and the Sinking Fund Payment Date for any Term Note, which,
unless otherwise specified with respect to any Variable Rate Notes, including
those Initial Notes constituting Variable Rate Notes, in the Supplemental
Indenture providing for the issuance thereof, shall occur on a June 1 or an
December 1.
"Program" shall mean the program to be administered by the Corporation
(or, after the Section 150(d)(3) Transfer, the Servicer) for the purchase of
Student Loans from Lenders or origination of Student Loans in order to increase
the supply of moneys available for new Student Loans, thereby assisting students
in obtaining a post-secondary school education.
"Purchase Date" shall mean, with respect to a Demand Note, the date
specified in a Purchase Demand (provided that such date is not less than the
required number of calendar days after receipt of such Purchase Demand by the
Depositary) as the date on which the Holder of the Demand Note identified in
such Purchase Demand is demanding purchase of such Note, or a specified portion
thereof, in accordance with the applicable provisions of the related
Supplemental Indenture, or the next preceding or succeeding Business Day, as
specified in such Supplemental Indenture, if such date is not a Business Day.
"Purchase Demand" shall mean, with respect to a Demand Note, a written
demand, in the form required by the related Supplemental Indenture, by the
Holder thereof that such Note, or, in the case of a partial purchase demand, a
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specified portion thereof, be purchased in accordance with the applicable
provisions of such Supplemental Indenture.
"Rating Agency" shall mean any rating agency that shall have an
outstanding rating on any of the Notes pursuant to request by the Corporation.
"Rating Agency Condition" shall mean, with respect to any action, that
each of the Rating Agencies shall have notified the Corporation and the Trustee
in writing that such action will not result in a reduction, qualification or
withdrawal of the then-current rating of any of the Notes.
"Rating Category" shall mean one of the general rating categories of a
Rating Agency, without regard to any refinement or gradation of such rating
category by a numerical modifier or otherwise.
"Rebate Account" shall mean the Account by that name created and
established by Section 4.1 hereof.
"Rebate Amount" shall have the meaning ascribed thereto in Section
4.5(A) hereof.
"Rebate Fund" shall mean the Rebate Fund created and established by
Section 4.1 hereof.
"Redemption Date," when used with respect to any Note to be redeemed,
shall mean the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price," when used with respect to any Note to be redeemed,
means the price at which it is to be redeemed pursuant to this Indenture.
"Regular Record Date" shall mean, with respect to an Interest Payment
Date for any series of Notes, unless the Supplemental Indenture authorizing the
issuance of such series of Notes otherwise provides, the fifteenth day (whether
or not a Business Day) of the calendar month immediately preceding such Interest
Payment Date.
"Regulations" shall mean the regulations promulgated from time to time
by the Department of the Treasury under the Code relating to the tax exemption
of interest on Tax Exempt Notes, including, without limitation, Treasury
Regulations, Sections 1.144-0 to 1.144-2, 1.148-0 to 1.148-11, 1.149(b)-1,
1.149(g)-1, 1.150-1 and 1.150-2.
"Remarketing Agent" shall mean, with respect to any series of Notes,
any securities dealer designated as such with respect to such Notes pursuant to
the
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provisions of Section 7.21 hereof and its successor or successors and any
securities dealer at any time substituted in its place pursuant to this
Indenture.
"Remarketing Agreement" shall mean an agreement between a Remarketing
Agent and the Corporation setting forth the rights and obligations of the
Remarketing Agent acting in such capacity under this Indenture and otherwise
meeting the requirements of Section 7.21 hereof, including any supplement
thereto or amendment thereof entered into in accordance with the provisions
thereof.
"Repayment Account" shall mean the Account by that name created and
established by Section 4.1 hereof.
"Reserve Fund" shall mean the Reserve Fund created and established by
Section 4.1 hereof.
"Reserve Fund Requirement" shall mean, at any time, an amount equal to
the greater of (1) two percent (2.00%) of the aggregate Principal Amount of
Class A Notes and Class B Notes then Outstanding, and (2) $500,000; or, as
determined upon the issuance of any Class A Notes or any Class B Notes, such
lesser or greater amount as will not cause any Rating Agency to lower or
withdraw any rating on any Unenhanced Outstanding Notes, as confirmed in writing
to the Trustee by each Rating Agency or, if no Unenhanced Notes are then
Outstanding, but Other Obligations are Outstanding, and the Reserve Fund
Requirement is to be reduced, such lesser amount as is acceptable to the Other
Beneficiaries holding such Other Obligations, as evidenced in writing to the
Trustee by each such Other Beneficiary.
"Retirement Account" shall mean the Account by that name created and
established by Section 4.1 hereof.
"Revenue Fund" shall mean the Revenue Fund created and established by
Section 4.1 hereof.
"Secretary of Education" shall mean the Commissioner of Education,
Department of Health, Education and Welfare of the United States, and the
Secretary of the United States Department of Education (who succeeded to the
functions of the Commissioner of Education pursuant to the Department of
Education Organization Act), or any other officer, board, body, commission or
agency succeeding to the functions thereof under the Higher Education Act.
"Section 150(d)(3) Transfer" shall mean the transfer of all of the
Corporation's right, title and interest in and to the Trust Estate from
Education Loans Incorporated, a South Dakota nonprofit corporation, to SLFC, and
from SLFC to EdLinc, together with the assumption by EdLinc of all of the
obligations and liabilities of the Corporation hereunder and under the Notes and
any Other Obligations, all in accordance with Section 150(d)(3) of the Code.
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"Senior Asset Requirement" shall mean, as of the date of
determination, that:
(a) the Senior Percentage is at least equal to one hundred ten percent
(110%) (or such lower percentage specified in a Corporation Certificate
delivered to the Trustee which, if Unenhanced Class A Notes are
Outstanding, shall not result in the lowering or withdrawal of the
outstanding rating assigned by any Rating Agency to any of the Unenhanced
Class A Notes Outstanding prior to such action being taken by the
Corporation, as evidenced in writing to the Trustee by each such Rating
Agency, or, if no Unenhanced Class A Notes are Outstanding but Other Senior
Obligations are Outstanding, is acceptable to the Other Senior
Beneficiaries holding such Other Senior Obligations, as evidenced in
writing to the Trustee by each such Other Senior Beneficiary), and
(b) the Subordinate Percentage is at least equal to one hundred
percent (100%) (or such lower percentage specified in a Corporation
Certificate delivered to the Trustee which, if Unenhanced Class B Notes are
Outstanding, shall not result in the lowering or withdrawal of the
outstanding rating assigned by any Rating Agency to any of the Unenhanced
Class B Notes Outstanding prior to such action being taken by the
Corporation, as evidenced in writing to the Trustee by each such Rating
Agency, or, if no Unenhanced Class B Notes are Outstanding but Other
Subordinate Obligations are Outstanding, is acceptable to the Other
Subordinate Beneficiaries holding such Other Subordinate Obligations, as
evidenced in writing to the Trustee by each such Other Subordinate
Beneficiary).
"Senior Beneficiaries" shall mean (1) the Holders of any Outstanding
Class A Notes, and (2) any Other Senior Beneficiary holding any Other Senior
Obligation that is Outstanding.
"Senior Credit Enhancement Facility" shall mean a Credit Enhancement
Facility designated as a Senior Credit Enhancement Facility in the Supplemental
Indenture pursuant to which such Credit Enhancement Facility is furnished by the
Corporation.
"Senior Credit Enhancement Provider" shall mean any Person who
provides a Senior Credit Enhancement Facility or a Senior Demand Purchase
Agreement.
"Senior Demand Purchase Agreement" shall mean a Demand Purchase
Agreement designated as a Senior Demand Purchase Agreement in the Supplemental
Indenture pursuant to which such Demand Purchase Agreement is furnished by the
Corporation.
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"Senior Obligations" shall mean, collectively, the Class A Notes and
any Other Senior Obligations.
"Senior Percentage" shall mean, as of the date of determination, the
percentage resulting by dividing the Aggregate Value by the sum of (i) the
aggregate Principal Amount of Outstanding Class A Notes plus accrued interest
thereon and (ii) accrued Corporation Swap Payments under Senior Swap Agreements
and (iii) other payments accrued and owing by the Corporation on Other Senior
Obligations.
"Senior Swap Agreement" shall mean a Swap Agreement designated as a
Senior Swap Agreement in the Supplemental Indenture pursuant to which such Swap
Agreement is furnished by the Corporation.
"Senior Swap Counterparty" shall mean any Person who provides a Senior
Swap Agreement.
"Serial Notes" shall mean all Notes other than Term Notes.
"Servicer" shall mean, after the Section 150(d)(3) Transfer, SLFC, and
any other organization with which the Corporation and the Trustee have entered
into a Servicing Agreement, subject to confirmation of ratings on any then
Outstanding Unenhanced Notes, as evidenced by written confirmation to the
Trustee to that effect from each Rating Agency, or, if no Unenhanced Notes are
then Outstanding but Other Obligations are Outstanding, consent of each Other
Beneficiary holding such Outstanding Other Obligations, as evidenced in writing
to the Trustee by each such Other Beneficiary.
"Servicing Agreement" shall mean, after the Section 150(d)(3)
Transfer, the Servicing Agreement, dated as of July 1, 1997, among the
Corporation, the Trustee and SLFC, as servicer, and any other agreement among
the Corporation, the Trustee and a Servicer under which the Servicer agrees to
act as the Corporation's agent in connection with the administration and
collection of Financed Student Loans in accordance with this Indenture.
"Servicing Fees" shall mean any fees payable by the Corporation to a
Servicer in respect of Financed Student Loans pursuant to the provisions of a
Servicing Agreement.
"Sinking Fund Payment Date" shall mean the date on which any Term Note
is to be called for redemption pursuant to subsection (A) or (B) of Section
4.7.2 hereof and the applicable provisions of the Supplemental Indenture
providing for the issuance thereof, or, if not redeemed, the Stated Maturity
thereof.
"SLFC" shall mean Student Loan Finance Corporation, a corporation duly
organized and existing under the laws of the State of South Dakota.
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"SLS Loan" shall mean a Student Loan made pursuant to former Section
428A of the Higher Education Act.
"Special Allowance Payments" shall mean special allowance payments
authorized to be made by the Secretary of Education by Section 438 of the Higher
Education Act, or similar allowances authorized from time to time by federal law
or regulation.
"Special Record Date" shall mean, with respect to the payment of any
Defaulted Interest means a date fixed by the Trustee pursuant to Section 3.2
hereof.
"Special Redemption and Prepayment Account" shall mean the Account by
that name created and established by Section 4.1 hereof.
"Special Redemption and Prepayment Account Requirement" shall mean the
amount specified for a series of Notes in the Supplemental Indenture authorizing
the issuance of Notes of such series.
"Specific Rating Category" shall mean a specific rating category of a
Rating Agency, taking into account any refinement or gradation of a Rating
Category by a numerical or other qualifier. For so long as any of the Notes are
rated by Moody's: (a) references to the highest applicable Specific Rating
Category shall be, with respect to obligations or investments having a term of
less than one year, to a rating of "P-1" (or, if Moody's revises its rating
schedule from time to time, such rating as Moody's shall advise the Trustee in
writing is comparable to "P-1" under such revised rating schedule), and with
respect to obligations or investments having a term of one year or longer, to a
rating of "Aaa" (or, if Moody's revises its rating schedule from time to time,
such rating as Moody's shall advise the Trustee in writing is comparable to
"Aaa" under such revised rating schedule); and (b) references to the third
highest applicable Specific Rating Category shall be, with respect to
obligations or investments having a term of one year or longer, to a rating of
"Aa2" (or, if Moody's revises its rating schedule from time to time, such rating
as Moody's shall advise the Trustee in writing is comparable to "Aa2" under such
revised rating schedule). For so long as any of the Notes are rated by Fitch:
(a) references to the highest applicable Specific Rating Category shall be, with
respect to obligations or investments having a term of less than one year, to a
rating of "F-1+" (or, if Fitch revises its rating schedule from time to time,
such rating as Fitch shall advise the Trustee in writing is comparable to "F-1+"
under such revised rating schedule), and with respect to obligations or
investments having a term of one year or longer, to a rating of "AAA" (or, if
Fitch revises its rating schedule from time to time, such rating as Fitch shall
advise the Trustee in writing is comparable to "AAA" under such revised rating
schedule); and (b) references to the third highest applicable Specific Rating
Category shall be, with respect to obligations or investments having a term of
one year or longer, to a rating of "AA" (or, if Fitch revises its rating
schedule from time to time, such rating as Fitch shall advise the Trustee in
writing is comparable to "AA" under such revised rating schedule).
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<PAGE>
"Stated Maturity," when used with respect to any Note or any
installment of interest thereon, shall mean the date specified in such Note as
the fixed date on which principal of such Note or such installment of interest
is due and payable.
"Statutes" shall mean the South Dakota Codified Laws, as amended.
"Student Loan" shall mean a loan to an Eligible Borrower for post-
secondary education and described in Section 144(b)(1) (if Financed from the
proceeds of Tax Exempt Notes) and Section 150(d) (if Financed prior to the
Section 150(d)(3) Transfer) of the Code.
"Student Loan Acquisition Certificate" shall mean a certificate signed
by an Authorized Officer of the Corporation and substantially in the form
attached as Exhibit C hereto.
"Student Loan Purchase Agreements" shall mean all agreements between
the Corporation and a Lender providing for the sale by such Lender to the
Corporation of Student Loans Financed or to be Financed under this Indenture and
substantially in the forms which are on file with the Trustee, including
amendments thereto made in accordance with Section 5.18 hereof.
"Subaccount" shall mean any subaccount of an Account created or
established by a Supplemental Indenture.
"Subordinate Beneficiaries" shall mean (1) the Holders of any
Outstanding Class B Notes, and (2) any Other Subordinate Beneficiary holding any
Other Subordinate Obligation that is Outstanding.
"Subordinate Credit Enhancement Facility" shall mean a Credit
Enhancement Facility designated as a Subordinate Credit Enhancement Facility in
the Supplemental Indenture pursuant to which such Credit Enhancement Facility is
furnished by the Corporation.
"Subordinate Credit Facility Provider" shall mean any Person who
provides a Subordinate Credit Enhancement Facility or a Subordinate Demand
Purchase Agreement.
"Subordinate Demand Purchase Agreement" shall mean a Demand Purchase
Agreement designated as a Subordinate Demand Purchase Agreement in the
Supplemental Indenture pursuant to which such Demand Purchase Agreement is
furnished by the Corporation.
"Subordinate Obligations" shall mean, collectively, the Class B Notes
and any Other Subordinate Obligations.
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<PAGE>
"Subordinate Percentage" shall mean, as of the date of determination,
the percentage resulting by dividing the Aggregate Value by the sum of (i) the
aggregate Principal Amount of Outstanding Class A Notes and Class B Notes plus
accrued interest thereon, (ii) accrued Corporation Swap Payments and (iii) other
payments accrued and owing by the Corporation on Other Obligations.
"Subordinate Swap Agreement" shall mean a Swap Agreement designated as
a Subordinate Swap Agreement in the Supplemental Indenture pursuant to which
such Swap Agreement is furnished by the Corporation.
"Subordinate Swap Counterparty" shall mean any Person who provides a
Subordinate Swap Agreement.
"Supplemental Indenture" shall mean any amendment of or supplement to
this Indenture made in accordance with Article Eight hereof.
"Surplus Account" shall mean the Account by that name created and
established by Section 4.1 hereof.
"Surplus Fund" shall mean the Fund by that name created and
established by Section 4.1 hereof.
"Swap Agreement" shall mean an interest rate exchange agreement
between the Corporation and a Swap Counterparty, as originally executed and as
amended or supplemented, or other interest rate hedge agreement between the
Corporation and a Swap Counterparty, as originally executed and as amended or
supplemented, in each case approved by each Rating Agency, for the purpose of
converting, in whole or in part, (i) the Corporation's fixed interest rate
liability on all or a portion of any Notes to a variable rate liability, (ii)
the Corporation's variable rate liability on all or a portion of the Notes to a
fixed rate liability or (iii) the Corporation's variable rate liability on all
or a portion of the Notes to a different variable rate liability.
"Swap Counterparty" shall mean any Person with whom the Corporation
shall, from time to time, enter into a Swap Agreement.
"Swap Counterparty Guarantee" shall mean a guarantee in favor of the
Corporation given in connection with the execution and delivery of a Swap
Agreement under this Indenture.
"Tax Exempt Notes" shall mean each series of Notes that is issued with
the intent that interest thereon be excludable from gross income for purposes of
federal income taxation, as evidenced by an opinion of Bond Counsel to that
effect delivered upon issuance of such series of Notes.
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<PAGE>
"Tax Matters Certificate" shall mean, with respect to one or all
series of Tax Exempt Notes, the applicable Corporation Certificate or
Certificates relating to arbitrage and other tax matters delivered in connection
with the issuance of such series of Notes, as the same may be amended or
supplemented in accordance with its or their terms.
"Term Notes" shall mean Notes the payment of the principal of which is
provided for from moneys credited to the Principal Account pursuant to
subsection (A) or (B) of Section 4.7.2 hereof.
"Trust Estate" shall mean the Trust Estate as described in the
Granting Clauses hereof.
"Trust Funds" shall mean, in the aggregate, all of the Funds and
Accounts.
"Trust Indenture Act" or "TIA" shall mean the Trust Indenture Act of
1939, as amended, as in force on the date hereof, unless otherwise specifically
provided.
"Trustee" shall mean First Bank National Association, as trustee under
this Indenture, and its successor or successors and any other corporation which
may at any time be substituted in its place pursuant to this Indenture.
"Unenhanced Note" shall mean, with respect to a Class A Note or a
Class B Note, any Note the payment of the principal of and interest on which is
not secured by a Credit Enhancement Facility or a Demand Purchase Agreement.
"Value" shall mean, on any calculation date when required under this
Indenture, the value of the Trust Estate calculated by the Corporation, in
accordance with the following:
(1) with respect to any Eligible Loan, the Principal Balance thereof,
plus any unamortized premiums, accrued interest and Special Allowance
Payments thereon;
(2) with respect to any funds of the Corporation on deposit in any
commercial bank or as to any banker's acceptance or repurchase agreement or
investment agreement, the amount thereof plus accrued interest thereon;
(3) with respect to any Investment Securities of an investment
company, the bid price of the shares as reported by the investment company;
(4) as to other investments, (i) the bid price published by a
nationally recognized pricing service, or (ii) if the bid and asked prices
thereof are published on a regular basis in The Wall Street Journal (or, if
not there, then
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<PAGE>
in The New York Times): the average of the bid and asked prices for such
investments so published on or most recently prior to such time of
determination plus accrued interest thereon;
(5) as to investments the bid prices of which are not published by a
nationally recognized pricing service and the bid and asked prices of which
are not published on a regular basis in The Wall Street Journal or The New
York Times the lower of the bid prices at such time of determination for
such investments by any two nationally recognized government securities
dealers (selected by the Corporation in its absolute discretion) at the
time making a market in such investments, plus accrued interest thereon;
and
(6) any accrued but unpaid Swap Counterparty Payment, unless the Swap
Counterparty is in default of its obligations under the Swap Agreement.
"Value of Investment Securities" shall mean (i) as to demand bank
deposits, bank time deposits which may be withdrawn without penalty by the
depositor upon fourteen (14) days' or less notice and Investment Securities
which mature not more than six (6) months from the date of computation, the
amount of such deposits and the par value of such Investment Securities, and
(ii) as to Investment Securities, other than demand bank deposits and bank time
deposits described in clause (i), which mature more than six (6) months after
the date of computation, the par value thereof or, if purchased at more or less
than par, the cost thereof adjusted to reflect the amortization or premium or
discount, as the case may be, paid upon their purchase. The computation made
under this paragraph shall include accrued interest.
"Variable Rate Notes" shall mean Notes whose interest rate is not
fixed but varies on a periodic basis as specified in the Supplemental Indenture
providing for the issuance thereof.
Section 1.2. Definitions of General Terms. Unless the context shall
----------------------------
clearly indicate otherwise, or may otherwise require, in this Indenture the
terms "herein," "hereunder," "hereby," "hereto," "hereof" and any similar terms
refer to this Indenture as a whole and not to any particular article, section or
subdivision hereof.
Unless the context shall clearly indicate otherwise, or may otherwise
require, in this Indenture: (i) references to articles, sections and other
subdivisions, whether by number or letter or otherwise, are to the respective or
corresponding articles, sections or subdivisions of this Indenture as such
articles, sections or subdivisions may be amended from time to time; (ii)
references to articles, chapters, subchapters and sections of the Statutes, or
to any public law or other statute of the United States or any section thereof,
are to the respective or corresponding chapters, subchapters, sections and
statutes as they may be amended from time to time; (iii) the word "heretofore"
means before the date of execution of this Indenture, the
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word "now" means at the date of execution of this Indenture, and the word
"hereafter" means after the date of execution of this Indenture.
Section 1.3. Computations. Unless the facts shall then be otherwise,
------------
all computations required for the purposes of this Indenture shall be made on
the assumption that: (i) the principal of and interest on all Notes shall be
paid as and when the same become due; (ii) all credits required by this
Indenture to be made to any Fund or Account shall be made in the amounts and at
the times required; (iii) all Notes required by this Indenture to be redeemed
from moneys credited to the Note Principal Account shall be redeemed on the
respective Sinking Fund Payment Dates therefor in the amounts and at the times
as required by this Indenture; and (iv) all Corporation Swap Payments and
Counterparty Swap Payments (unless the Swap Counterparty is then in default of
its obligations under the Swap Agreement) shall be paid when the same become
due.
Section 1.4. Compliance Certificates and Opinions, etc.
------------------------------------------
(a) Upon any application or request by the Corporation to the Trustee
to take any action under any provision of this Indenture, the Corporation shall
furnish to the Trustee (i) a Corporation Certificate stating that all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with, (ii) an opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent, if any, have been
complied with and (iii) (if required by the TIA) an Independent Certificate from
a firm of certified public accountants meeting the applicable requirements of
this Section, except that, in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(i) a statement that each signatory of such certificate or opinion has
read or has caused to be read such covenant or condition and the
definitions herein relating thereto;
(ii) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(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
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<PAGE>
(iv) a statement as to whether, in the opinion of each such signatory,
such condition or covenant has been complied with.
(b) (i) Prior to the deposit of any property or securities with the
Trustee that is to be made the basis for the release of any property
subject to the lien created by this Indenture, the Corporation shall, in
addition to any obligation imposed in Section 1.4(a) or elsewhere in this
Indenture, furnish to the Trustee (1) a Corporation Certificate certifying
or stating the opinion of each person signing such certificate as to the
fair value (within 90 days of such deposit) to the Corporation of the
property or securities to be so deposited, (2) an opinion of Counsel either
stating that, in the opinion of such Counsel, such action has been taken
with respect to the recording and filing of this Indenture and any other
requisite documents, and with respect to the execution and filing of any
financing statements and continuation statements, as are necessary to
perfect and make effective the first priority lien and security interest in
favor of the Trustee, for the benefit of the Trustee, created by this
Indenture in the property or securities to be so deposited, and reciting
the details of such action, or stating that, in the opinion of such
Counsel, no such action is necessary to make such lien and security
interest effective, and (3) evidence that the Rating Agency Condition has
been satisfied.
(ii) Whenever the Corporation is required to furnish to the Trustee a
Corporation Certificate certifying or stating the opinion of any signer
thereof as to the matters described in clause (i) above, the Corporation
shall also deliver to the Trustee an Independent Certificate as to the same
matters, if the fair value to the Corporation of the property to be so
deposited and of all other such property made the basis of any such
withdrawal or release since the commencement of the then-current fiscal
year of the Corporation, as set forth in the certificates delivered
pursuant to clause (i) above and this clause (ii), is 10% or more of the
Outstanding Principal Amount of the Notes, but such a certificate need not
be furnished with respect to any property so deposited, if the fair value
thereof to the Corporation as set forth in the related Corporation
Certificate is less than $25,000 or less than 1% of the Outstanding
Principal Amount of the Notes.
(iii) Other than with respect to any release described in clause (A)
or (B) of Section 1.4(b)(v), whenever any property or securities are to be
released from the lien created by this Indenture, the Corporation shall
also furnish to the Trustee a Corporation Certificate certifying or stating
the opinion of each person signing such certificate as to the fair value
(within 90 days of such release) of the property or securities proposed to
be released and stating that in the opinion of such person the proposed
release will not impair the security created by this Indenture in
contravention of the provisions hereof.
(iv) Whenever the Corporation is required to furnish to the Trustee a
Corporation Certificate certifying or stating the opinion of any signer
thereof
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<PAGE>
as to the matters described in clause (iii) above, the Corporation shall
also furnish to the Trustee an Independent Certificate as to the same
matters if the fair value of the property or securities and of all other
property or securities (other than property described in clauses (A) or (B)
of Section 1.4(b)(v)) released from the lien created by this Indenture
since the commencement of the then current fiscal year, as set forth in the
certificates required by clause (iii) above and this clause (iv), equals
10% or more of the Outstanding Principal 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
Corporation Certificate is less than $25,000 or less than one percent of
the then Outstanding Principal Amount of the Notes.
(v) Notwithstanding any other provision of this Section, the
Corporation may, without compliance with the other provisions of this
Section, (A) collect, liquidate, sell or otherwise dispose of Student Loans
as and to the extent permitted or required by this Indenture and the
Servicing Agreement, and (B) make cash payments out of the Funds and
Accounts as and to the extent permitted or required by this Indenture.
(c) 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 Corporation
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 or the Corporation, stating that the information with respect to
such factual matters is in the possession of the Servicer or the Corporation,
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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<PAGE>
Whenever in this Indenture, in connection with any application or
certificate or report to the Trustee, it is provided that the Corporation shall
deliver any document as a condition of the granting of such application, or as
evidence of the Corporation'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 Corporation to have such application granted or to
the sufficiency of such certificate or report. The foregoing shall not, however,
be construed to affect the Trustee's right to rely upon the truth and accuracy
of any statement or opinion contained in any such document as provided in
Article VII.
Section 1.5. Evidence of Action by the Corporation. Except as
-------------------------------------
otherwise specifically provided in this Indenture, any request, direction,
command, order, notice, certificate or other instrument of, by or from the
Corporation shall be effective and binding upon the Corporation for the purposes
of this Indenture if signed by an Authorized Officer.
Section 1.6. Exclusion of Notes Held By or For the Corporation. In
-------------------------------------------------
determining whether the Holders of the requisite Principal Amount of Notes
Outstanding have given any request, demand, authorization, direction, notice,
consent or waiver hereunder, Notes owned by the Corporation shall be disregarded
and deemed not to be Outstanding, except that, in determining whether the
Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent, or waiver, only Notes which the
Trustee knows to be so owned shall be disregarded.
Section 1.7. Exhibits. Attached to and by reference made a part of
--------
this Indenture are the following Exhibits:
Exhibit A: Form of Eligible Loan Acquisition Certificate;
---------
Exhibit B: Form of Eligible Loan Origination Certificate;
---------
Exhibit C: Form of Student Loan Acquisition Certificate; and
---------
Exhibit D: Form of Updating Eligible Loan Acquisition Certificate.
---------
Section 1.8. 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 and any Other Obligations.
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<PAGE>
"indenture security holder" means a Noteholder or Other Beneficiary.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Corporation 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.
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<PAGE>
ARTICLE TWO
NOTE FORMS
Section 2.1. Forms Generally. The Notes and the Trustee's
---------------
certificate of authentication shall be in substantially the forms set forth in
this Article Two, with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Indenture or by the
Supplemental Indenture providing for the issuance thereof, 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 signing 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.
Section 2.2. Form of Notes. The Notes shall be in substantially the
-------------
following form:
EDUCATION LOANS INCORPORATED
STUDENT LOAN ASSET-BACKED NOTE
[SENIOR] [SUBORDINATE] [JUNIOR SUBORDINATE] SERIES ____
CLASS ___________
No. R___________ $
Stated Date of Original Interest
Maturity Date Issue Rate CUSIP
------------- ---------------- -------- -----
REGISTERED HOLDER:
PRINCIPAL AMOUNT:
2-1
<PAGE>
FOR VALUE RECEIVED, EDUCATION LOANS INCORPORATED, a nonprofit
corporation organized under the laws of the State of South Dakota (the
"Corporation," which term includes any successor corporation under the Indenture
hereinafter referred to), acknowledges itself indebted and hereby promises to
pay to the registered holder specified above, or registered assigns (the
"Registered Holder"), but solely from the revenues and receipts hereinafter
specified and not otherwise, the Principal Amount specified above on the Stated
Maturity Date specified above (subject to the right of prior redemption
hereinafter mentioned), upon presentation and surrender of this Note at the
Principal Office (as defined in the Indenture) of the Trustee hereinafter
referred to or, at the option of the Registered Holder hereof, at the Principal
Office of any duly appointed Paying Agent, and to pay, from the source and in
the manner hereinafter provided, interest on said principal sum to the
Registered Holder hereof from the date hereof until the payment of said
principal sum in full, at the rate per annum specified above, payable
semiannually on the first day of June and December in each year, commencing
_____________, ________, by check or draft mailed to the Person who is the
Registered Holder hereof as of 5:00 p.m. in the city in which the Principal
Office of the Note Registrar is located on the fifteenth day of the calendar
month, whether or not a Business Day (as defined in the Indenture), preceding
such interest payment date (the "Record Date"), at the address of such
Registered Holder as it appears on the Note Register maintained by the Note
Registrar[; provided that, if the Registered Holder of this Note is the
Registered Holder of Notes of this series in the aggregate Principal Amount of
$1,000,000 or more (or, if less than $1,000,000 in Principal Amount of Notes of
such series is outstanding, the Registered Holder of all outstanding Notes), at
the direction of such Registered Holder such principal and interest shall be
payable by electronic transfer by the Trustee in immediately available funds to
an account designated by such Registered Holder]. In addition, interest on this
Note is payable at the maturity hereof in the same manner as the principal
hereof, unless the date of such maturity is a regularly scheduled interest
payment date, in which event interest is payable in the manner set forth in the
preceding sentence. Any interest not so timely paid or duly provided for shall
cease to be payable to the Person who is the Registered Holder hereof at the
close of business on the Record Date and shall be payable to the Person who is
the Registered Holder hereof at the close of business on a special record date
for the payment of any such defaulted interest. Such special record date shall
be fixed by the Trustee whenever moneys become available for payment of the
defaulted interest, and notice of the special record date shall be given to the
Registered Holder hereof not less than ten days prior thereto by first-class
mail to such Registered Holder as shown on the Note Register on a date selected
by the Trustee, stating the date of the special record date and the date fixed
for the payment of such defaulted interest. The principal of, premium, if any,
and interest on this Note are payable in lawful money of the United States of
America.
This Note is one of an authorized issue of Notes (hereinafter called
the "Notes"), issued and to be issued by the Corporation in one or more series
pursuant to an Indenture of Trust, dated as of July 1, 1997, as [amended and]
supplemented by a __________ Supplemental Indenture of Trust, dated as of
______________,
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<PAGE>
(collectively, the "Indenture"), each between the Corporation and First Bank
National Association, Minneapolis, Minnesota, as Trustee (the "Trustee," which
term includes any successor trustee under the Indenture). As provided in the
Indenture, the Notes are issuable in series which may vary as in the Indenture
provided or permitted. This Note is one of a series (the "Series ________
Notes") limited to an aggregate Principal Amount of $________________, the
proceeds of which will be used by the Corporation to __________________.
Reference is hereby made to the Indenture, copies of which are on file
in the principal corporate trust office of the Trustee, and to all of the
provisions of which any Registered Holder of this Note by his acceptance hereof
hereby assents, for definitions of terms; the description of and the nature and
extent of the security for the various classes of Notes and Other Obligations
(as defined in the Indenture) secured thereunder; the student loan acquisition
program being financed by the issuance of the Notes; the revenues and other
moneys pledged to the payment of the principal of, premium, if any, and interest
on the Notes and the Other Obligations; the nature and extent and manner of
enforcement of the pledge; the conditions upon which Notes may be issued or
Other Obligations may be incurred by the Corporation thereunder, payable from
such revenues and other moneys thereunder as Senior Obligations, Subordinate
Obligations or Class C Notes (each as defined in the Indenture); the conditions
upon which the Indenture may be amended or supplemented with or without the
consent of the Holders of the Notes; the rights and remedies of the Registered
Holder hereof with respect hereto and thereto, including the limitations upon
the right of a Registered Holder hereof to institute any suit, action or
proceeding in equity or at law with respect hereto and thereto; the rights,
duties and obligations of the Corporation and the Trustee thereunder; the terms
and provisions upon which the liens, pledges, charges, trusts and covenants made
therein may be discharged at or prior to the maturity or redemption of this
Note, and this Note thereafter no longer be secured by the Indenture, or be
deemed to be Outstanding (as defined in the Indenture) thereunder; and for the
other terms and provisions thereof.
The Notes and Other Obligations are limited obligations of the
Corporation, payable solely from the revenues and assets of the Corporation
pledged therefor under the Indenture, including certain notes evidencing Student
Loans and the proceeds of the Corporation's bonds, notes or other evidences of
indebtedness, if any, issued with respect to the Notes.
Each Noteholder, by acceptance of a Note, covenants and agrees that by
accepting the benefits of the Indenture and such Note that such Noteholder will
not at any time institute against the Corporation, or join in any institution
against the Corporation, any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceedings under any United States Federal or state bankruptcy
or similar law in connection with any obligations relating to the Notes, the
Indenture or the Servicing Agreement.
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<PAGE>
The Corporation has structured the Indenture and the Notes with the
intention that the Notes will qualify under applicable federal, state, local and
foreign tax law as indebtedness of the Corporation secured by the Trust Estate.
The Corporation, the Trustee, the Servicer and each Noteholder agree to treat
and to take no action inconsistent with the treatment of the Notes as such
indebtedness for purposes of federal, state, local and foreign income or
franchise taxes and any other tax imposed on or measured by income. Each
Noteholder, by acceptance of its Note, agrees to be bound by the provisions of
this paragraph. Each Noteholder agrees that it will cause any Person acquiring
an interest in a Note through it to comply with the Indenture as to treatment as
indebtedness under applicable tax law, as described in this paragraph.
[The Series ______________ Notes constitute Class B Notes under the
Indenture which are subordinated in right of payment, the direction of remedies
and certain other matters in accordance with the terms of the Indenture to the
rights of Class A Notes issued from time to time under the Indenture and Other
Senior Beneficiaries thereunder. A failure to pay principal of, premium, if
any, or interest on this Class B Note will not constitute an Event of Default
under the Indenture if any Senior Obligation is Outstanding (each as defined in
the Indenture).]
[The Series ______________ Notes constitute Class C Notes under the
Indenture which are subordinated in right of payment, the direction of remedies
and certain other matters in accordance with the terms of the Indenture to the
rights of Class A Notes and Class B Notes issued from time to time under the
Indenture and Other Senior Beneficiaries and Other Subordinate Beneficiaries (as
defined in the Indenture) thereunder. A failure to pay principal of, premium,
if any, or interest on this Class C Note will not constitute an Event of Default
under the Indenture if any Senior Obligation is Outstanding or any Subordinate
Obligation (as defined in the Indenture) is Outstanding.]
[At this point in the Note form of any series should be inserted the
paragraphs, if any, relating to the terms of redemption for that series.]
Notice of redemption shall be given by first-class mail mailed at
least 30 days before the Redemption Date to each Registered Holder of Notes to
be redeemed at his last address appearing on the Note Register; but no defect in
or failure to give such notice of redemption shall affect the validity of
proceedings for redemption of any Note not affected by such defect or failure.
All Notes so called for redemption will cease to bear interest on such
Redemption Date, provided funds for their redemption have been duly deposited,
and, except for the purpose of payment, shall no longer be protected by the
Indenture and shall not be deemed Outstanding thereunder.
It is provided in the Indenture that Notes of a denomination larger
than $[5,000] may be redeemed in part ($[5,000] or an integral multiple thereof)
and that upon any partial redemption of any such Note the same shall be
surrendered in
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<PAGE>
exchange for one or more new Notes of the same series in authorized form for the
unredeemed portion of principal.
If provision is made for the payment of principal of, premium, if any,
and interest on this Note in accordance with the Indenture, this Note shall no
longer be deemed Outstanding under the Indenture, shall cease to be entitled to
the benefits of the Indenture and shall thereafter be payable solely from the
funds provided for such payment.
If an Event of Default shall occur, the principal of all the
Outstanding Notes may and, under certain circumstances, shall be declared due
and payable in the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Corporation and the rights of the Holders of the Notes and Other Beneficiaries
under the Indenture at any time by the Corporation with, among other things, the
consent of the Holders of two-thirds of the aggregate Principal Amount of Class
A Notes at the time Outstanding, if affected thereby, and with the consent of
the Holders of two-thirds of the aggregate Principal Amount of Class B Notes at
the time Outstanding, if affected thereby. The Indenture also contains
provisions permitting the Holders of specified percentages in aggregate
Principal Amount of the Class A Notes at the time Outstanding or Other Senior
Beneficiaries or, if no Senior Obligations are Outstanding, the Holders of
specified percentages in aggregate Principal Amount of the Class B Notes at the
time Outstanding or Other Subordinate Beneficiaries, on behalf of the Holders of
all the Notes, to waive certain past defaults under the Indenture and their
consequences. Any such consent or waiver shall be conclusive and binding upon
the Registered Holder of this Note and upon all future Registered Holders hereof
and of any Note issued in exchange herefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Note.
This Note is transferable by the Registered Holder hereof upon
surrender of this Note for transfer at the Principal Office of the Note
Registrar (which shall be the Trustee unless and until the Authenticating Agent
becomes the Note Registrar under the Indenture) or at the Principal Office of a
duly appointed Authenticating Agent (the "Authenticating Agent," which term
includes any successor Authenticating Agent under the Indenture), duly endorsed
or accompanied by a written instrument of transfer in form satisfactory to the
Note Registrar or the Authenticating Agent, as the case may be, and executed by
the Registered Holder hereof or his attorney duly authorized in writing, with
signature guarantees satisfactory to the Note Registrar or the Authenticating
Agent, as the case may be. This Note may also be exchanged for one or more other
Notes of the same series and Stated Maturity upon surrender hereof at the
Principal Office of the Note Registrar or the Principal Office of an
Authenticating Agent. Thereupon the Corporation shall execute and the Trustee or
the Authenticating Agent, as the case
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may be, shall authenticate and deliver, in exchange for this Note, one or more
new fully registered Notes in the name of the transferee, of an authorized
denomination, in aggregate Principal Amount equal to the Principal Amount of
this Note, of the same series and Stated Maturity and bearing interest at the
same rate.
The Corporation may require payment by the Registered Holder hereof of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any transfer or exchange of this Note, other than
certain exchanges specifically exempted under the Indenture and not involving
any transfer.
The Corporation, the Trustee, each Paying Agent, any Authenticating
Agent, the Note Registrar and any other agent of the Corporation may treat the
Person in whose name this Note is registered on the Note Register as the
absolute owner hereof for all purposes, whether or not this Note is overdue, and
neither the Corporation, the Trustee, any Paying Agent, any Authenticating
Agent, the Note Registrar nor any other such agent shall be affected by notice
to the contrary.
IT IS HEREBY CERTIFIED, RECITED, COVENANTED 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 Note have happened, do exist,
and have been performed in regular and due time, form and manner as so required.
This Note shall not be valid or become obligatory for any purpose or
be entitled to any security or benefit under the Indenture until the Certificate
of Authentication hereon shall have been signed by the Trustee or by the
Authenticating Agent by the manual signature of one of its authorized
representatives.
IN WITNESS WHEREOF, the Corporation has caused this Note to be
executed in its name by the facsimile signatures of its President and Secretary,
and a facsimile of its corporate seal to be reproduced hereon.
EDUCATION LOANS INCORPORATED
__________________________
President
(SEAL)
__________________________
Secretary
Dated:
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<PAGE>
CERTIFICATE OF AUTHENTICATION
This Note is one of the Notes of the series designated therein and
issued under the provisions of the within-mentioned Indenture.
FIRST BANK NATIONAL
ASSOCIATION, _________________________
as Trustee [or __________ ____________
as Authenticating Agent
By____________________________ By_____________________________
Authorized Representative Authorized Representative]
Representative]
__________________________________
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto ____________ the within Note and irrevocably appoints ______________,
attorney-in-fact, to transfer the within Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated _______________________
PLEASE INSERT SOCIAL SECURITY ____________________________________
OR OTHER IDENTIFYING NUMBER NOTICE: The signature to this
OF ASSIGNEE assignment must correspond with the
name as it appears upon the face of
______________________________ the Within Note in every particular,
without any alteration whatsoever.
SIGNATURE GUARANTEED:
______________________________
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<PAGE>
ARTICLE THREE
THE NOTES
Section 3.1. General Title. There is hereby created and established
-------------
an issue of Notes of the Corporation to be known and designated as "Student Loan
Asset-Backed Notes," which Notes may be issued in series as hereinafter
provided. With respect to the Notes of any particular series, the Corporation
may incorporate in or add to the general title of such Notes any words, letters
or figures designed to distinguish that series.
Section 3.2. General Limitations; Issuable in Series; Purposes and
-----------------------------------------------------
Conditions for Issuance; Payment of Principal and Interest. The aggregate
- ----------------------------------------------------------
Principal Amount of Notes that may be authenticated and delivered and
Outstanding under this Indenture is not limited, except as may be limited by
law. The Notes may be issued in series as from time to time authorized by the
Board.
Notes shall be issued only for the purposes of (a) providing funds for
the origination or purchase, or both, by the Corporation of Eligible Loans
(including, for this purpose, the acquisition under this Indenture of Eligible
Loans previously purchased or originated by the Corporation from other available
moneys of the Corporation), or (b) refunding at or before their Stated Maturity
any or all Outstanding Notes issued for that purpose, and (c) paying
Administrative Costs, Note Fees, Costs of Issuance and capitalized interest on
the Notes being issued and making deposits to the Reserve Fund.
The Notes, including the principal thereof, premium, if any, and
interest thereon and any Carry-Over Amounts (and accrued interest thereon) with
respect thereto, and Other Obligations are limited obligations of the
Corporation, payable solely from the revenues and assets of the Corporation
pledged therefor under this Indenture.
The Stated Maturities and Sinking Fund Payment Dates of all Notes
shall occur on a June 1 or an December 1 (unless otherwise specified with
respect to any Variable Rate Notes, including those Initial Notes constituting
Variable Rate Notes, in the Supplemental Indenture providing for the issuance
thereof). All Corporation Swap Payments and other payments to be made by the
Corporation to Credit Facility Providers shall be payable on a regularly
scheduled Interest Payment Date. Except as otherwise provided in a Supplemental
Indenture with respect to the series of Notes authorized thereby, interest on
each Note shall be calculated to accrue on the basis of a 360-day year composed
of twelve 30-day months. In the event a default occurs in the due and punctual
payment of any interest on any Note, interest shall be payable thereon to the
extent permitted by law on the overdue installment of interest, at the interest
rate borne by the Note in respect of which such interest is overdue.
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The principal of and premium, if any, on the Notes, together with
interest payable on the Notes at the Maturity thereof if the date of such
Maturity is other than a regularly scheduled Interest Payment Date, shall,
except as hereinafter provided or as otherwise provided in a Supplemental
Indenture, be payable upon presentation and surrender of such Notes at the
Principal Office of the Trustee or, at the option of the Holder, at the
Principal Office of a duly appointed Paying Agent. Interest due on the Notes on
each regularly scheduled Interest Payment Date shall, except as hereinafter
provided or as otherwise provided in a Supplemental Indenture, be payable by
check or draft drawn upon the Trustee mailed to the Person who is the Holder
thereof as of 5:00 p.m. in the city in which the Principal Office of the Note
Registrar is located on the Regular Record Date relating thereto, at the address
of such Holder as it appears on the Note Register. Any interest not so timely
paid or duly provided for (herein referred to as "Defaulted Interest") shall
cease to be payable to the Person who is the Holder thereof at the close of
business on the Regular Record Date and shall be payable to the Person who is
the Holder thereof at the close of business on a Special Record Date for the
payment of any such defaulted interest. Such Special Record Date shall be fixed
by the Trustee whenever moneys become available for payment of the Defaulted
Interest, and notice of the Special Record Date shall be given to the Holders of
the Notes not less than ten (10) days prior thereto by first-class mail to each
such Holder as shown on the Note Register on a date selected by the Trustee,
stating the date of the Special Record Date and the date fixed for the payment
of such Defaulted Interest. All payments of principal of, premium, if any, and
interest on the Notes shall be made in lawful money of the United States of
America.
After the issuance of the Initial Notes, and from time to time, one or
more additional series of Notes may be issued upon compliance with the
provisions of Article Three hereof (except where specifically indicated
otherwise in this Section 3.2) in such Principal Amounts as may be determined by
the Corporation for any of the purposes hereinbefore specified in this Section
3.2 upon compliance with the following conditions and any additional conditions
specified in a Supplemental Indenture:
A. The Trustee shall have certified that there is no deficiency in the
Rebate Fund or the Note Fund and that, after the issuance of the series of
Notes then to be issued, there will not be a deficiency in the Reserve
Fund.
B. An Authorized Officer of the Corporation shall have certified (as
evidenced by a Corporation Certificate filed with the Trustee) that the
Corporation is not in default in the performance of any of its covenants
and agreements in this Indenture made (unless, in the opinion of Counsel,
any such default does not deprive any Beneficiary in any material respect
of the security afforded by this Indenture).
C. The Trustee shall have been provided with a Cash Flow Projection
giving effect to such issuance of Notes which shall reflect that, after
such
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<PAGE>
issuance, the Senior Asset Requirement will be met; provided that no such
Cash Flow Projection shall be required if Unenhanced Notes are then
Outstanding and each Rating Agency confirms in writing to the Trustee that
it will not require such Cash Flow Projection.
D. If such Notes are to be Class A Notes or Class B Notes, the Trustee
shall have been provided with written evidence from each Rating Agency that
such series of Notes is rated (i) if such Notes are to be Class A Notes, at
least as high as the outstanding rating assigned by each Rating Agency to
any Outstanding Class A Notes, and (ii) if such Notes are to be Class B
Notes, at least as high as the outstanding rating assigned by each Rating
Agency to any Outstanding Class B Notes.
E. If any Unenhanced Notes are Outstanding, each Rating Agency shall
have confirmed that no outstanding ratings on any of the Outstanding
Unenhanced Notes will be reduced or withdrawn as a result of such issuance,
as evidenced by written confirmations thereof delivered to the Trustee from
each Rating Agency, or, if no Unenhanced Notes are then Outstanding, but
Other Obligations are Outstanding, the Other Beneficiaries holding such
Other Obligations consent to the issuance of such Notes, as evidenced in
writing to the Trustee by each such Other Beneficiary.
In calculating the Reserve Fund Requirement, all Notes to be defeased by a
series of refunding Notes shall be deemed not Outstanding as of the date of
calculation.
Section 3.3. Terms of Particular Series. Each series of Notes shall
--------------------------
be created by and issued pursuant to a Supplemental Indenture and such
Supplemental Indenture shall designate Notes of each series as Class A Notes,
Class B Notes or Class C Notes. The Notes of each series shall bear such date
or dates, shall be payable at such place or places, shall have such Stated
Maturities and Sinking Fund Payment Dates on June 1 or December 1 (unless
otherwise specified with respect to any Variable Rate Notes, including those
Initial Notes constituting Variable Rate Notes, in the Supplemental Indenture
providing for the issuance thereof), shall bear interest at such rate or rates,
from such date or dates, payable in such installments and on Interest Payment
Dates and at such place or places, may be redeemable at such Redemption Price or
Prices and upon such terms (in addition to the prices and terms herein specified
for redemption of all Notes) and may be prepayable upon such terms as shall be
provided for in the Supplemental Indenture creating that series. The
Supplemental Indenture creating any series of Notes may contain a provision
limiting the aggregate Principal Amount of the Notes of that series or the
aggregate Principal Amount of Notes which may thereafter be issued.
All Notes of the same series shall be substantially identical in tenor
and effect, except as to denomination, the differences specified herein or in a
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<PAGE>
Supplemental Indenture between interest rates, Stated Maturities and redemption
provisions.
Section 3.4. Form and Denominations. Except as otherwise set forth
----------------------
in the Supplemental Indenture providing for the issuance thereof, the Notes of
each series shall be issued in substantially the form set forth in Article Two
hereof. The Notes of each series shall be distinguished from the Notes of other
series and Term Notes shall be distinguished from Serial Notes in such manner as
the Board may determine.
The Notes of any series may be issuable as fully registered Notes
only, of single Stated Maturities.
The Notes of each series shall be issuable in such denominations as
shall be provided in the provisions of the Supplemental Indenture creating such
series. In the absence of any such provisions with respect to the Notes of any
particular series, the Notes of such series shall be in the denomination of
$5,000 in original Principal Amount or any integral multiple thereof.
Section 3.5. Execution, Authentication and Delivery. The Notes shall
--------------------------------------
be executed on behalf of the Corporation by the president or any vice president
of the Corporation and attested by the secretary or an assistant secretary of
the Corporation, either or both of which signatures may be facsimiles, and a
facsimile of the seal of the Corporation.
Notes bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Corporation shall bind the
Corporation, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Notes or did
not hold such offices at the date of such Notes.
At any time and from time to time after the execution and delivery of
this Indenture, the Corporation may deliver Notes executed by the Corporation to
the Trustee or the Authenticating Agent for authentication; and, upon
Corporation Order, the Trustee or the Authenticating Agent, as the case may be,
shall authenticate and deliver such Notes as in this Indenture provided and not
otherwise.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for in Article
Two hereof executed by the Trustee or the Authenticating Agent by manual
signature of one of its authorized officers, and such certificate upon any Note
shall be conclusive evidence, and the only evidence, that such Note has been
duly authenticated and delivered hereunder.
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<PAGE>
Section 3.6. Temporary Notes. Pending the preparation of definitive
---------------
Notes, the Corporation may execute and, upon Corporation Order, the Trustee
shall authenticate and deliver, temporary Notes which are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any denomination,
substantially of the tenor of the definitive Notes in lieu of which they are
issued, in fully registered form, without coupons, and with such appropriate
insertions, omissions, substitutions and other variations as the officers of the
Corporation executing such Notes may determine, as evidenced by their signing of
such Notes.
If temporary Notes are issued, the Corporation will cause definitive
Notes to be prepared without unreasonable delay. After the preparation of
definitive Notes, the temporary Notes shall be exchangeable for definitive Notes
upon surrender of the temporary Notes at the Principal Office of the Trustee,
without charge to the Holder. Upon surrender for cancellation of any one or
more temporary Notes, the Corporation shall execute and the Trustee shall
authenticate and deliver in exchange therefor a like Principal Amount of
definitive Notes of the same series and Stated Maturity of authorized
denominations. Until so exchanged the temporary Notes shall in all respects be
entitled to the same benefits under this Indenture as definitive Notes.
Section 3.7. Registration, Transfer and Exchange. The Corporation
-----------------------------------
shall cause to be kept at the Principal Office of the Note Registrar a Note
Register in which, subject to such reasonable regulations as it may prescribe,
the Corporation shall provide for the registration of Notes and of transfers of
Notes as herein provided. The Corporation may, in a Supplemental Indenture,
appoint an Authenticating Agent for the purpose of receiving, authenticating and
delivering Notes in connection with transfers, exchanges and registrations as
herein provided. Unless an Authenticating Agent is designated to serve in such
capacity pursuant to a Supplemental Indenture or is otherwise directed, and
agrees, to so serve in accordance with a Corporation Order, the Trustee shall be
Note Registrar for the purpose of registering Notes and transfer of Notes as
herein provided. At reasonable times and under reasonable regulations
established by the Note Registrar, the Note Register may be inspected and copied
by the Corporation or by the Holders (or a designated representative thereof) of
ten percent (10%) or more in Principal Amount of Notes then Outstanding.
The Trustee and any Authenticating Agent shall adhere, with respect to
transfer of Notes, to the standards for efficiency in transfer agent performance
established in Securities and Exchange Commission Rules 17Ad-2 through 17Ad-7
under the Securities Exchange Act of 1934, most particularly Rule 17Ad-2, which
requires that registered transfer agents process at least ninety percent (90%)
of routine items (such as certificates presented for transfer) received during
any month within three (3) business days of their receipt.
Upon surrender for transfer or exchange of any Note at the Principal
Office of the Note Registrar or at the Principal Office of any Authenticating
Agent, or
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<PAGE>
on a Purchase Date or Mandatory Tender Date with respect to Notes which are
Deemed Tendered, whether or not surrendered on such date, the Corporation shall
execute, and the Trustee or the Authenticating Agent, as the case may be, shall
authenticate and deliver, in the name of the designated transferee or
transferees, including transferees designated by a Depositary with respect to
Notes Deemed Tendered, or in exchange for the Note surrendered, one or more new
fully registered Notes of any authorized denomination or denominations, of like
aggregate Principal Amount, of the same series, having the same Stated Maturity
and interest rate and bearing numbers not previously assigned.
All Notes executed, delivered and authenticated pursuant to the
preceding paragraph shall be registered in the name of the Holder presenting the
Note for exchange or the designated transferee, as the case may be, on the Note
Register on the date of such transfer or exchange.
All Notes surrendered upon any exchange or transfer provided for in
this Indenture shall be promptly canceled by the Trustee upon receipt thereof
from the Note Registrar or the Authenticating Agent, as the case may be, and
thereafter disposed of as directed by Corporation Order.
All Notes issued upon any transfer or exchange of Notes, including
Notes issued in lieu of Notes Deemed Tendered, whether or not surrendered, shall
be the valid obligations of the Corporation evidencing the same debt, and
entitled to the same security and benefits under this Indenture, as the Notes
surrendered upon such transfer or exchange or in lieu of which such Notes were
issued.
Every Note presented or surrendered for transfer or exchange shall be
duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Note Registrar or the Authenticating Agent, as the case may
be, duly executed, by the Holder thereof or his attorney duly authorized in
writing, with such signature guaranteed by an "eligible guarantor institution"
meeting the requirements of the Note Registrar or the Authenticating Agent, as
the case may be, which requirements include membership or participation in a
"signature guarantee program" determined by the Note Registrar or the
Authenticating Agent, as the case may be, in accordance with the Exchange Act,
and such other documents as the Trustee may require.
The Corporation may require payment by the Noteholder of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any transfer or exchange of Notes, other than exchanges upon a
partial redemption of a Note not involving any transfer. All other expenses
incurred by the Corporation, the Trustee, the Note Registrar or the
Authenticating Agent in connection with any transfer or exchange of Notes shall
be paid by the Corporation.
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<PAGE>
Except in connection with a Purchase Demand, the Corporation shall not
be required to transfer any Note (i) during a period beginning at the opening of
business fifteen (15) days before any selection of Notes of the same series for
redemption and ending at the close of business on the day of such selection,
(ii) selected for redemption in whole or in part, (iii) after receipt by the
Depositary of a properly completed Purchase Demand with respect thereto, or (iv)
on or after the date notice of a Mandatory Tender Date is given through such
Mandatory Tender Date. In the event that a Note is transferred in connection
with a Purchase Demand either during the period referred to in clause (i) or
after being selected for redemption in whole or in part, the Note Registrar or
the Authenticating Agent, as appropriate, shall give written notice to any
transferee thereof that such Note may be, or has been, selected for redemption,
as the case may be.
Section 3.8. Mutilated, Destroyed, Lost and Stolen Notes. If a
-------------------------------------------
mutilated Note is surrendered to the Trustee or the Note Registrar, the
Corporation shall execute and the Trustee or any Authenticating Agent shall
authenticate and deliver in exchange therefor a new Note of the same series and
of like tenor and Principal Amount, Stated Maturity and interest rate, bearing a
number not contemporaneously outstanding. If the Corporation, the Note
Registrar, any Authenticating Agent and the Trustee receive evidence to their
satisfaction of the destruction, loss or theft of any Note, and there is
delivered to the Corporation, the Note Registrar, any Authenticating Agent and
the Trustee such security or indemnity as may be required by them to save each
of them harmless, then, in the absence of notice to the Corporation, the Note
Registrar, any Authenticating Agent or the Trustee that such Note has been
acquired by a bona fide purchaser, the Corporation shall execute and upon its
request the Trustee or any Authenticating Agent shall authenticate and deliver,
in exchange for or in lieu of such destroyed, lost or stolen Note, a new Note of
the same series and of like tenor, Principal Amount, Stated Maturity and
interest rate.
In case any such mutilated, destroyed, lost or stolen Note has become
or is about to become due and payable, the Corporation in its discretion may,
instead of issuing a new Note, pay such Note.
Every new Note issued pursuant to this Section 3.8 in lieu of any
destroyed, lost or stolen Note shall constitute an original additional
contractual obligation of the Corporation, whether or not the destroyed, lost or
stolen Note shall be at any time enforceable by anyone, and shall be entitled to
all the benefits of this Indenture equally and proportionately with any and all
other Notes of such series duly issued and authenticated hereunder. Neither the
Corporation, the Trustee, the Note Registrar nor any Authenticating Agent 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 which
may be issued hereunder or for the purpose of determining any percentage of
Notes Outstanding hereunder, but both the original and duplicate Note shall be
treated as one and the same.
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<PAGE>
Upon the issuance of any new Note under this Section 3.8, the
Corporation may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Note Registrar, any
Authenticating Agent and the Trustee) connected therewith.
The provisions of this Section 3.8 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Notes.
Section 3.9. Interest Rights Preserved; Dating of Notes. Each Note
------------------------------------------
delivered under this Indenture upon transfer of or in exchange for or in lieu of
any other Note shall carry all the rights to interest accrued and unpaid, and to
accrue, which were carried by such other Note. Each Note shall bear an original
issue date as provided in the Supplemental Indenture authorizing the issuance of
the series of Notes of which such Note is a part and, upon the original delivery
of a series of Notes or an exchange or transfer of Notes pursuant to Section 3.7
hereof, the Trustee or the Authenticating Agent, as the case may be, shall date
each Note to be delivered as of the date of authentication thereof, except as
may be otherwise provided in a Supplemental Indenture with respect to Notes of
the series authorized to be issued thereby.
Section 3.10. Persons Deemed Holders. The Corporation, the Trustee,
----------------------
each Authenticating Agent, each Paying Agent, each Note Registrar, each
Depositary and any other agent of the Corporation may, except in the case of
Notes Deemed Tendered, treat the Person in whose name any Registered Note is
registered as the owner of such Note for the purpose of receiving payment of
principal of (and premium, if any), interest on and any Carry-Over Amounts (and
accrued interest thereon) with respect to such Note and for all other purposes
whatsoever, whether or not such Note be overdue, and neither the Corporation,
the Trustee, any Authenticating Agent, any Paying Agent, any Note Registrar, any
Depositary nor any other agent of the Corporation shall be affected by notice to
the contrary.
Section 3.11. Cancellation. All Notes surrendered for payment,
------------
redemption, transfer or exchange, if surrendered to the Trustee, shall be
promptly canceled by it, and, if surrendered to any Person other than the
Trustee, shall be delivered to the Trustee and, if not already canceled, shall
be promptly canceled by it. The Corporation may at any time deliver to the
Trustee for cancellation any Notes previously authenticated and delivered
hereunder, which Notes so delivered shall be promptly canceled by the Trustee.
All canceled Notes held by the Trustee shall be disposed of as directed by a
Corporation Order.
Section 3.12. Class B and Class C Notes. The Corporation may at any time
-------------------------
issue a series of Notes pursuant to Section 3.2 hereof which is subordinate in
rights to the Senior Obligations. Such subordinate obligations shall either be
on a parity with the Subordinate Obligations in all respects or may be
subordinate to the
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Subordinate Obligations in respect of each of the provisions of this Indenture
which express the subordination of the Subordinate Obligations.
3-9
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ARTICLE FOUR
CREATION OF FUNDS AND ACCOUNTS;
CREDITS THERETO AND PAYMENTS THEREFROM
Section 4.1. Creation of Funds and Accounts. There are hereby
------------------------------
created and established the following Funds and Accounts to be held by the
Trustee, or, in the case of the Acquisition Fund, the Revenue Fund or the
Administration Fund, by the Trustee or a Deposit Agent, and maintained in
accordance with the provisions of this Indenture:
1. An Acquisition Fund.
2. An Administration Fund.
3. A Reserve Fund.
4. A Rebate Fund, within which there shall be a Rebate Account and an
Excess Earnings Account.
5. A Revenue Fund, within which there shall be a Repayment Account
and an Income Account.
6. A Note Fund, within which there shall be an Interest Account, a
Principal Account and a Retirement Account.
7. A Surplus Fund, within which there shall be a Special Redemption
and Prepayment Account and a Surplus Account.
Section 4.2. Acquisition Fund. With respect to each series of Notes,
----------------
the Trustee shall, upon delivery to the initial purchasers thereof and from the
proceeds thereof, credit to the Acquisition Fund the amount, if any, specified
in the Supplemental Indenture providing for the issuance of such series of
Notes. The Trustee shall also deposit in the Acquisition Fund: (i) any funds to
be transferred thereto from the Revenue Fund as provided in Section 4.6 hereof
or from the Surplus Fund as provided in Section 4.8 hereof, and (ii) any other
amounts specified in a Supplemental Indenture to be deposited therein. In
addition, the Trustee shall also credit to the Acquisition Fund any Eligible
Loans transferred thereto from the Surplus Account pursuant to Section 4.8
hereof (any such Eligible Loans so transferred being thereafter deemed to have
been Financed with moneys in the Acquisition Fund).
Balances in the Acquisition Fund shall be used only for (a) the
acquisition of Eligible Loans pursuant to a Student Loan Purchase Agreement
(including, for this purpose, the acquisition of Eligible Loans previously
purchased or originated by the Corporation or the Trustee on behalf of the
Corporation
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pursuant to a Student Loan Purchase Agreement from other available moneys of the
Corporation), (b) the origination of Eligible Loans, (c) the redemption or
purchase of Notes as provided in a Supplemental Indenture providing for the
issuance of such Notes, (d) the payment of Debt Service on the Class A Notes and
Other Senior Obligations when due (upon transfer to the Note Fund as set forth
in the following paragraph), (e) the payment of the purchase price of any Class
A Notes required to be purchased on a Purchase Date or a Mandatory Tender Date
(upon transfer to the Note Fund as set forth in the following paragraph), or (f)
to cure deficiencies in the Rebate Fund (upon transfer to the Rebate Fund as set
forth in the following paragraph). The Trustee shall make or shall authorize the
Deposit Agent to make payments to Lenders from the Acquisition Fund for the
acquisition of Eligible Loans (such payments to be made at purchase prices not
in excess of the amount specified therefor in the Supplemental Indenture which
created the Account in the Acquisition Fund from which such purchase price is to
be withdrawn), including the payment of reasonable transfer or assignment fees,
if applicable, upon receipt by the Trustee of an Eligible Loan Acquisition
Certificate and all documents, opinions and certificates required thereby.
Within three (3) Business Days after the disbursement of moneys from the
Acquisition Fund for the purchase of Eligible Loans pursuant to an Eligible Loan
Acquisition Certificate, the Corporation shall forward to the Trustee an
updating Corporation Certificate substantially in the form of Exhibit D hereto
with respect to such Eligible Loans. The Trustee shall make or shall authorize
the Deposit Agent to make payments from the Acquisition Fund for the origination
of Eligible Loans upon receipt by the Trustee of an Eligible Loan Origination
Certificate and all documents, opinions and certificates required thereby.
Balances in the Acquisition Fund (other than any portion of such
Balance consisting of Student Loans) shall be (i) transferred to the credit of
the Rebate Fund to the extent necessary, after transfers thereto from the
Revenue Fund, the Surplus Fund, the Reserve Fund, the Administration Fund and
the Note Fund, to make any deposit to the credit of the Rebate Fund required by
Section 4.5 hereof, (ii) after such transfer, if any, to be made pursuant to the
preceding clause (i) has been taken into account, transferred to the credit of
the Note Fund on the last Business Day preceding any Interest Payment Date,
Principal Payment Date or Redemption Date to the extent required to pay the Debt
Service due on the Class A Notes and any Other Senior Obligations, all as
provided in Section 4.7 hereof, and (iii) after such transfers, if any, to be
made pursuant to the preceding clauses (i) and (ii) have been taken into
account, transferred to the credit of the Principal Account on any Purchase Date
or Mandatory Tender Date with respect to Class A Notes, to the extent required
by Section 4.7.2(C) hereof. Transfers of amounts from the Acquisition Fund to
the Rebate Fund and the Note Fund pursuant to the preceding sentence shall be
made by the Trustee without any further authorization or direction. In the event
that, after transfers to the Rebate Fund from all other Funds and Accounts, a
deficiency exists in the Rebate Fund under Section 4.5 hereof, the Trustee shall
use its best efforts to sell Student Loans included in the Balance of the
Acquisition Fund at the best price available to the extent of such deficiency;
and the
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proceeds of any such sale shall be credited to the Rebate Fund, to the extent of
any deficiency in the Rebate Fund, and otherwise to the Revenue Fund. If any
amounts have been transferred to either or both of the Rebate Fund or the Note
Fund pursuant to this paragraph, the Trustee shall, to the extent necessary to
cure the deficiency in the Acquisition Fund as a result of such transfer or
transfers, transfer to the Acquisition Fund amounts from the Revenue Fund in the
manner provided in Section 4.6 hereof.
The unpaid principal balance of Financed Student Loans in the
Acquisition Fund shall be included in the Balance of the Acquisition Fund until
such Financed Student Loans shall have been paid in full or sold or exchanged as
herein provided. Interest and principal payments, including Insurance payments
and Guarantee payments, and Special Allowance Payments received with respect to
Financed Student Loans (excluding, except as otherwise provided in a
Supplemental Indenture, any federal interest subsidy payments and Special
Allowance Payments that accrued prior to the date on which such Student Loans
were Financed) and proceeds from the sale or other conveyance of Financed
Student Loans (except as otherwise provided in the preceding paragraph) shall be
credited, in the case of such principal and interest, including Insurance
payments and Guarantee payments, and Special Allowance Payments, to the Revenue
Fund as provided in Section 4.6 hereof; in the case of the portion of the
proceeds of such sale or other conveyance which represents payment of the
principal of Financed Student Loans sold, to the Principal Account; and in the
case of the portion of the proceeds of such sale or other conveyance which
represent payment of accrued interest on and Special Allowance Payments with
respect to Financed Student Loans sold, to the Interest Account.
The Corporation may direct the Trustee to sell to any purchaser one or
more Student Loans Financed with moneys in the Acquisition Fund in exchange for
one or more Eligible Loans (of approximately the same aggregate Principal
Balance and accrued noncapitalized borrower interest as such Financed Student
Loans) which (1) evidence the additional obligations of Eligible Borrowers whose
Student Loans have been previously Financed hereunder, or (2) are to be
substituted for Financed Student Loans which are not Eligible Loans; provided
that (I) no such sale and exchange shall cause the Corporation to breach any of
its representations or covenants contained in the Tax Matters Certificate
furnished by the Corporation in connection with the issuance of any series of
Tax Exempt Notes, and (II) prior to any such sale and exchange the Trustee shall
have received an Eligible Loan Acquisition Certificate and an updating
Corporation Certificate substantially in the form of Exhibit D hereto and all
documents, opinions and certifications required thereby with respect to all
Eligible Loans to be so transferred to this Indenture in exchange, together with
(A) except in the case of Eligible Loans referred to in the preceding clause (2)
or unless the Principal Balance of Eligible Loans sold or exchanged within the
preceding twelve (12)-month period pursuant to this paragraph will not, together
with the Principal Balance of Eligible Loans then proposed to be sold or
exchanged, exceed $1,000,000, a Corporation Certificate that, based on a Cash
Flow
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Projection, such sale and exchange will not materially adversely affect the
Corporation's ability to pay Debt Service on the Outstanding Notes and
Outstanding Other Obligations, Carry-Over Amounts (including accrued interest
thereon) with respect to Outstanding Notes, Administrative Expenses or Note Fees
or to make the required deposits to the credit of the Rebate Fund, and (B) a
written instrument satisfactory to the Trustee assigning all right, title,
interest and privilege of the Corporation in, to and under the student loan
purchase agreement pursuant to which each such Eligible Loan to be transferred
to this Indenture was acquired by the Trustee on behalf of the Corporation, to
the extent such right, title, interest and privilege relate to such Eligible
Loan; and thereafter the Corporation and the Trustee shall amend the Exhibit or
Exhibits to the applicable Supplemental Indentures to reflect the addition of
such student loan purchase agreements and such agreements shall become Student
Loan Purchase Agreements for all purposes under this Indenture. Any money
received by the Corporation in connection with a sale and exchange of Financed
Student Loans pursuant to this paragraph, including those moneys representing
the excess of the aggregate Principal Balance of and accrued noncapitalized
borrower interest on such Financed Student Loans released from this Indenture
over the aggregate Principal Balance of and accrued noncapitalized borrower
interest on the Eligible Loans transferred to this Indenture in exchange
therefor, shall be deposited to the credit of the Principal Account and the
Interest Account in accordance with the preceding paragraph. Any such Eligible
Loans so transferred to this Indenture in exchange for Student Loans previously
Financed from the Acquisition Fund shall, for all purposes of this Indenture, be
deemed to have been Financed with moneys in the Acquisition Fund and shall be
credited to the Acquisition Fund and included in the Balance thereof.
Pending application of moneys in the Acquisition Fund for one or more
authorized purposes, such moneys shall be invested in Investment Securities, as
provided in Section 4.11 hereof, and any earnings on or income from said
investments shall be deposited in the Revenue Fund as provided in Section 4.6
hereof.
Section 4.3. Administration Fund. With respect to each series of
-------------------
Notes, the Trustee shall, upon delivery thereof and from the proceeds thereof,
credit to the Administration Fund the amount, if any, specified in the
Supplemental Indenture providing for the issuance of such series of Notes. The
Trustee shall also credit to the Administration Fund all amounts transferred
thereto from the Revenue Fund and the Surplus Account. Except as otherwise
provided in this Section 4.3, amounts in the Administration Fund shall, upon
receipt by the Trustee of Corporation Orders directing the payment to designated
payees in designated amounts for stated services, or, in the case of
reimbursement of the Corporation for its expenses, to the Corporation, and in
each case certifying that such payment is authorized by this Indenture, be used
for and applied only to pay Costs of Issuance, Administrative Expenses and Note
Fees or to reimburse another fund, account or other source of the Corporation
for the previous payment of Costs of Issuance, Administrative Expenses or Note
Fees. Payments from the Administration Fund
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for such purposes shall be made by check or wire transfer by the Trustee or a
Deposit Agent, but only in accordance with such Corporation Orders.
Balances in the Administration Fund shall be applied to the following
purposes in the following order of priority: first, to remedy deficiencies in
the Rebate Fund to the extent and in the manner provided in Section 4.5 hereof;
second, to remedy deficiencies in the Interest Account to the extent and in the
manner provided in Section 4.7.1 hereof for the payment of interest on Class A
Notes or Other Senior Obligations payable therefrom; third, to remedy
deficiencies in the Principal Account to the extent and in the manner provided
in subsections (A) and (C) of Section 4.7.2 hereof for the redemption or payment
of principal or the purchase price of Class A Notes or the payment of Other
Senior Obligations payable therefrom; fourth, to remedy deficiencies in the
Retirement Account to the extent and in the manner provided in Section 4.7.3
hereof for the redemption of Class A Notes or the payment of Other Senior
Obligations payable therefrom; fifth, to remedy deficiencies in the Interest
Account to the extent and in the manner provided in Section 4.7.1 hereof for the
payment of interest on Class B Notes or Other Subordinate Obligations payable
therefrom; sixth, to remedy deficiencies in the Principal Account to the extent
and in the manner provided in subsections (A) and (C) of Section 4.7.2 hereof
for the payment of principal or the purchase price of Class B Notes or the
payment of Other Subordinate Obligations payable therefrom; seventh, to remedy
deficiencies in the Retirement Account to the extent and in the manner provided
in Section 4.7.3 hereof for the redemption of Class B Notes or the payment of
Other Subordinate Obligations payable therefrom; and, eighth, to pay Costs of
Issuance, Note Fees and Administrative Expenses.
Amounts in the Administration Fund may, subject to the last sentence
of this paragraph and any limitations specified in a Supplemental Indenture, be
paid out for Costs of Issuance or Note Fees at any time upon receipt of a
Corporation Order and shall be paid in the full amount designated therein;
provided that the aggregate amount of Costs of Issuance paid or reimbursed from
amounts in the Administrative Fund or any other Fund or Account in respect of a
particular series of Notes shall under no circumstances exceed the amount, if
any, specified therefor in the Supplemental Indenture authorizing the issuance
of Notes of such series. Amounts in the Administration Fund may, subject to the
last sentence of this paragraph and any limitations specified in a Supplemental
Indenture, be paid out for Administrative Expenses, or to reimburse the
Corporation for the prior payment of Administrative Expenses, at any time, in
cumulative amounts in any given Fiscal Year not in excess of (A) the amount of
Budgeted Administrative Expenses for that Fiscal Year, unless an Authorized
Officer of the Corporation shall certify in writing to the Trustee that
Administrative Expenses in an increased amount (i) are reasonable and necessary
in light of all circumstances then existing, (ii) will not materially adversely
affect the ability of the Corporation to pay or perform, as the case may be, all
of its obligations under this Indenture, and (iii) can be paid out of amounts
deposited into the Administration Fund pursuant to the provisions of this
Indenture, plus (B) the amount of Administrative Expenses for any prior Fiscal
Year
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previously paid by the Corporation from a source other than the Administration
Fund and requested to be reimbursed to such source, provided that the amount of
such Administrative Expenses, together with all other Administrative Expenses
for such prior Fiscal Year previously paid or reimbursed from the Administration
Fund, shall not exceed the Budgeted Administrative Expenses for such prior
Fiscal Year. Notwithstanding the foregoing provisions of this Section 4.3, no
amounts in the Administration Fund shall be paid out for Costs of Issuance, Note
Fees or Administrative Expenses unless, after giving effect to such payment
(taking into account, for this purpose, all previous such payments from the
Administration Fund and all payments from the Surplus Fund with respect to Costs
of Issuance, Note Fees, Administrative Expenses and any other uses permitted by
clause (iii) of the sixth paragraph of Section 4.8 hereof), as to each series of
Tax Exempt Notes, either (i) at least ninety percent (90%) of the net proceeds
of such series will, at the time of such payment, have been used directly or
indirectly to make or finance student loans described in Section 144(b)(1)(A) of
the Code, or (ii) at least ninety-five percent (95%) of the net proceeds of such
series will, at the time of such payment, have been used directly or indirectly
to make or finance student loans described in Section 144(b)(1)(B) of the Code,
as applicable, all within the meaning of such Section 144(b) of the Code.
The Trustee shall transfer and credit to the Administration Fund
moneys available hereunder for transfer thereto from the sources set forth in
the following paragraph and in such amounts and at such times as an Authorized
Officer of the Corporation shall direct by Corporation Order; provided such
Corporation Order shall certify that the amounts are required and have been or
will be expended within the next ninety (90) days for a purpose for which the
Administration Fund may be used and applied.
Deposits to the credit of the Administration Fund shall be made from
the following sources in the following order of priority: the Income Account to
the extent and in the manner provided in Section 4.6 hereof; and the Surplus
Account to the extent and in the manner provided in Section 4.8 hereof.
Pending transfers from the Administration Fund, the moneys therein
shall be invested in Investment Securities, as provided in Section 4.11 hereof,
and any earnings on or income from such investments shall be deposited in the
Revenue Fund as provided in Section 4.6 hereof.
Section 4.4. Reserve Fund. The Reserve Fund is established only for
------------
the security of the Senior Beneficiaries and the Subordinate Beneficiaries, and
not for the Holders of the Class C Notes (other than to provide funds for
transfers to the Rebate Fund for Tax Exempt Class C Notes as hereinafter set
forth). Immediately upon the delivery of any series of Class A Notes or Class B
Notes, and from the proceeds thereof or, at the option of the Corporation, from
any amounts to be transferred thereto from the Surplus Fund pursuant to Section
4.8 hereof and from any other available moneys of the Corporation not otherwise
credited to or payable
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into any Fund or Account under this Indenture or otherwise subject to the pledge
and security interest created by this Indenture, the Trustee shall credit to the
Reserve Fund the amount, if any, specified in the Supplemental Indenture
providing for the issuance of that series of Notes, such that upon issuance of
such Notes, the Balance in the Reserve Fund shall not be less than the Reserve
Fund Requirement.
If on any Monthly Payment Date the Balance in the Reserve Fund shall
be less than the Reserve Fund Requirement, the Trustee shall transfer and credit
thereto an amount equal to the deficiency from the following Funds and Accounts
in the following order of priority: the Repayment Account (to the extent not
required for credit to the Rebate Fund, the Note Fund or the Acquisition Fund),
the Income Account (to the extent not required for credit to the Rebate Fund,
the Note Fund, the Acquisition Fund or the Administration Fund) and the Surplus
Fund (to the extent not required for credit to the Rebate Fund, the Note Fund or
the Administration Fund); provided, however, that any such transfer from the
Surplus Fund shall be made only to the extent that that portion of the Balance
thereof not consisting of Eligible Loans is sufficient therefor.
The Balance in the Reserve Fund shall be used and applied solely for
(i) transfers to the Rebate Fund to the extent necessary, after transfers
thereto from the Revenue Fund and the Surplus Fund, to make any deposit to the
credit of the Rebate Fund required by Section 4.5 hereof, and (ii) after such
transfer, if any, to be made pursuant to the preceding clause (i) has been taken
into account, the payment when due of Debt Service on the Class A Notes, the
Class B Notes and the Other Obligations and the purchase price of Class A Notes
and Class B Notes on a Purchase Date or Mandatory Tender Date and the other
purposes specified in Section 4.7 hereof, and shall be so used and applied by
transfer by the Trustee to the credit of the Note Fund, (a) at any time and to
the extent that the Balance therein and the Balances available for deposit to
the credit thereof from the Revenue Fund and the Surplus Fund (other than that
portion of the Balance thereof consisting of Eligible Loans) are insufficient to
meet the requirements specified in Section 4.7 hereof for deposit to the credit
of the Note Fund at such time (provided, however, that such amounts shall be
applied, first, to the payment of interest on the Class A Notes and the payment
of Other Senior Obligations payable from the Interest Account, second, to the
payment of principal and the purchase price of the Class A Notes and the payment
of Other Senior Obligations payable from the Principal Account, third, to the
payment of interest on the Class B Notes and the payment of Other Subordinate
Obligations payable from the Interest Account, and, fourth, to the payment of
principal and the purchase price of the Class B Notes and the payment of Other
Subordinate Obligations payable from the Principal Account), and (b) at any time
when a portion of the Balance therein is required to be transferred to the
Retirement Account to pay a portion of the Redemption Price of Class A Notes or
Class B Notes to be redeemed as provided in a Supplemental Indenture relating
thereto; provided, however, that on the Stated Maturity or any Redemption Date
of any Class A Notes or Class B Notes, amounts in the Reserve Fund shall, upon
Corporation Order, be applied to the payment at maturity or redemption of all
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Outstanding Class A Notes or Class B Notes of a series, to the extent that such
application, and payment of all deposits to be made to the credit of the Rebate
Fund required by Section 4.5 hereof upon such redemption, will not reduce the
Balance of the Reserve Fund below the Reserve Fund Requirement (calculated as
though the Notes to be retired on such Stated Maturity or Redemption Date were
not Outstanding as of the date of such calculation), and, after giving effect to
such payment or redemption, the conditions of Section 10.2 will be met; and
provided, further, that at any time when the aggregate of the Balances in the
Note Fund, the Reserve Fund and the Surplus Fund (exclusive of Student Loans)
equals an amount sufficient to discharge and satisfy the obligations of the
Corporation with respect to all of the Outstanding Class A Notes, Class B Notes
and Other Obligations and to make all deposits to the credit of the Rebate Fund
required by Section 4.5 hereof, all in the manner described in Section 11.1
hereof, said Balances shall, upon Corporation Order, be so applied.
Notwithstanding the foregoing, if on any Monthly Payment Date the Balance in the
Reserve Fund exceeds the Reserve Fund Requirement, such excess shall, upon
Corporation Order, be transferred to the Principal Account, to the extent
necessary to make the deposits required to be made to the credit of the
Principal Account on such Monthly Payment Date pursuant to the provisions of
Section 4.7.2 hereof, whether or not other moneys are available to make such
deposits.
Pending transfers from the Reserve Fund, the moneys therein shall be
invested in Investment Securities as provided in Section 4.11 hereof, and any
earnings on or income from such investments shall be deposited in the Revenue
Fund as provided in Section 4.6 hereof.
Section 4.5. Rebate Fund. The Corporation and the Trustee recognize
-----------
that the exclusion from gross income for purposes of federal income taxation of
the interest paid on Tax Exempt Notes of any series is dependent upon compliance
with the provisions of Section 148 of the Code. For each issue (as defined in
the Regulations) of Tax Exempt Notes, a separate subaccount shall be established
in the Rebate Account and the Excess Earnings Account.
(A) The Corporation and the Trustee shall, unless and until the
Corporation delivers to the Trustee a written opinion of Bond Counsel as
described in the last paragraph of this Section 4.5(A), make the determinations
and take the actions hereinafter by this Section 4.5(A) required and make such
further or different determinations and take such further or different actions
as are necessary, in the opinion of Bond Counsel, to comply with the
requirements of Section 148(f) of the Code and the Treasury Regulations
pertaining thereto with respect to each series of Tax Exempt Notes. In respect
of each series of Tax Exempt Notes, the Trustee, on behalf of, and as agent for,
the Corporation, shall rebate to the United States, not later than sixty (60)
days after the end of the five-Bond Year period for such series, and not later
than sixty (60) days after the end of each five-Bond Year period thereafter for
such series, an amount which ensures that at least ninety percent (90%) of the
Rebate Amount (as hereinafter defined) for such series at the
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time of such payment will have been paid to the United States, and within sixty
(60) days after the payment or redemption of all principal of the Notes of such
series, an amount sufficient to pay the remaining unpaid balance of the Rebate
Amount, all in the manner and as required by Section 148 of the Code and the
Treasury Regulations pertaining thereto. As used herein, "Rebate Amount" means,
with respect to a series of Tax Exempt Notes, the amount described in Section
148(f)(2) of the Code, computed in accordance with the provisions of said
Section 148(f)(2) and the Arbitrage Regulations.
The Corporation shall determine the Rebate Amount for each series of
Tax Exempt Notes within forty-five (45) days after the close of each Bond Year
therefor and upon payment or redemption of all principal of the Notes of such
series, and shall, upon each such determination, furnish the Trustee with a
Corporation Certificate verifying such determination and with any supporting
documentation required to calculate or evidence the Rebate Amount in accordance
with the Code and applicable regulations. The Corporation and the Trustee shall
retain records of such determinations until six (6) years after final payment or
redemption of principal of the Notes of such series. Upon each such
determination, the Trustee shall transfer to the subaccount in the Rebate
Account relating to the Notes of such series, from the Balances in the Revenue
Fund, the Surplus Fund (other than that portion of the Balance therein
consisting of Eligible Loans), the Reserve Fund, the Administration Fund, the
Surplus Fund (including any portion of the Balance therein consisting of
Eligible Loans), the Retirement Account, the Principal Account, the Interest
Account and the Acquisition Fund, in that order of priority, the Rebate Amount
so determined, and shall separately account for, or cause to be separately
accounted for, the earnings from the investment thereof.
In determining the Rebate Amount for a series of Tax Exempt Notes, the
Corporation and the Trustee shall take into account all amounts held under this
Indenture and, pending the application of such amounts to the purpose for which
such amounts were removed, all amounts removed from under this Indenture, to the
extent such are allocable under the Regulations to Notes of such series.
Moneys in a Subaccount in the Rebate Account shall be paid by the
Trustee to the United States at such times and in such amounts as are necessary
to comply with the provisions of Section 148(f) of the Code with respect to the
series of Tax Exempt Notes to which such Subaccount relates. In addition, upon
receipt by the Trustee of a Corporation Certificate certifying that certain
amounts in a Subaccount in the Rebate Account are not subject to rebate and an
opinion of Bond Counsel to the effect that failure to rebate such amounts will
not cause interest on the Notes of the series to which such Subaccount relates
to become includable in gross income of the owners thereof for federal income
tax purposes under both existing laws, regulations, rulings and decisions and
any then pending federal legislation, the Trustee shall transfer any such
amounts to the credit of the Revenue Fund. Moneys in the Rebate Account shall
not be available for transfer to any Fund or Account under this Indenture,
except the Revenue Fund under the
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circumstances described in the preceding sentence, and shall be applied solely
to meet the Corporation's rebate obligations.
In making the computations required to make the deposits and rebates
provided for in this Section 4.5(A) with respect to a series of Tax Exempt
Notes, the Corporation and the Trustee shall comply with the applicable
provisions of the Tax Matters Certificate furnished by the Corporation in
connection with the issuance of the Notes of such series, as such may be amended
or supplemented from time to time in accordance with its terms.
The Trustee shall verify at least annually from the date of delivery
of a series of Tax Exempt Notes that (i) all requirements of this Section 4.5(A)
with respect to such series of Notes have been met on a continuing basis, (ii)
adequate procedures have been established and are being complied with to ensure
continuing compliance with the requirements of the Tax Matters Certificate
furnished by the Corporation in connection with the issuance of the Notes of
such series, as such may be amended or supplemented from time to time in
accordance with its terms, (iii) the proper amounts are deposited into the
Subaccount in the Rebate Account relating to Notes of the series, and (iv) the
timely payment of all amounts due and owing to the United States Treasury from
the Rebate Account has occurred.
Pending payments from the Rebate Account, the moneys in the
Subaccounts therein shall be invested in Investment Securities as provided in
Section 4.11 hereof, and any earnings on or income from such investments shall
be retained in such respective Subaccounts.
Notwithstanding the foregoing, in the event the Trustee is furnished
with a written opinion of Bond Counsel to the effect that it is not necessary
under either existing laws, regulations, rulings and decisions or any then
pending federal legislation to pay any portion of earnings on investments held
under this Indenture or otherwise to the United States in order to assure the
exclusion from gross income for federal income tax purposes of interest on the
Tax Exempt Notes of any series, the requirements set forth in the preceding
portion of this Section 4.5(A) (with respect to the portion of such earnings
specified in such opinion) need not be complied with and shall no longer be
effective and all amounts at the time on deposit in the Subaccount in the Rebate
Account to which such series of Notes relates (to the extent covered by such
opinion) shall be transferred to the Revenue Fund.
(B) The Corporation shall calculate the Excess Earnings with respect
to each series of Tax Exempt Notes to the extent and in the manner provided in
the Supplemental Indenture pursuant to which such Notes were issued. In this
regard, a portion of the proceeds of the Initial Notes will be applied to the
purchase of certain Eligible Loans previously financed with the proceeds of
other bonds or notes of the Corporation, thereby refunding such bonds or notes.
Notwithstanding anything in this Indenture to the contrary, Excess Earnings
shall be computed on
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such Eligible Loans, and applied in the priority, as specified in the
Supplemental Indenture providing for the issuance of the Initial Notes.
The Corporation shall furnish the Trustee, upon each calculation of
Excess Earnings with respect to a series of Tax Exempt Notes, with a Corporation
Certificate verifying such calculation and with any supporting documentation
required to calculate or evidence the Excess Earnings in accordance with the
Arbitrage Regulations. The Corporation and the Trustee shall retain records of
such calculations until six (6) years after final payment or redemption of
principal of the Tax Exempt Notes of that series. Upon each such calculation
and a determination pursuant to the related Supplemental Indenture that a
transfer is to be made to the Excess Earnings Account, the Trustee shall
transfer to the Excess Earnings Account (but only after any required transfers
to the Rebate Account have been made or taken into account), from the Balances
in the Revenue Fund, the Surplus Fund (other than that portion of the Balance
therein consisting of Eligible Loans), the Reserve Fund, the Administration
Fund, the Surplus Fund (including any portion of the Balance therein consisting
of Eligible Loans), the Retirement Account, the Principal Account, the Interest
Account and the Acquisition Fund, in that order of priority, the amount so
determined.
All amounts in the Excess Earnings Account, including all investment
earnings thereon, shall remain therein until transferred to the Revenue Fund or
paid by the Trustee to the United States Department of the Treasury or for such
other purpose, as the Corporation shall specify, upon receipt by the Trustee of
(a) a Corporation Order directing the Trustee to so transfer or pay a specified
amount, and (b) a written opinion of Bond Counsel to the effect that any such
transfer or payment, upon satisfaction of any conditions set forth in such
opinion (e.g., forgiveness of indebtedness on all or a portion of the related
Financed Student Loans), would not cause interest on the related series of Tax
Exempt Notes to be includable in the gross income of any owners thereof for
federal income tax purposes. The Corporation shall consult with Bond Counsel on
or within thirty (30) days before each date on which, pursuant to the Arbitrage
Regulations or otherwise, amounts are required to be paid to the United States
Department of the Treasury with respect to Excess Earnings, to determine what,
if any, action may be necessary to be taken with respect to disposition of any
amounts in the Excess Earnings Account to prevent each applicable series of Tax
Exempt Notes from becoming "arbitrage bonds" under Section 148 of the Code, and
the Corporation agrees to take any such action as shall be necessary to prevent
each such series of Tax Exempt Notes from becoming arbitrage bonds. In any
event, the Corporation and the Trustee shall comply with all provisions and
restrictions, including, but not limited to, those with respect to the Excess
Earnings Account, set forth in the Tax Matters Certificate furnished by the
Corporation in connection with the issuance of each series of Tax Exempt Notes.
Amounts in the Excess Earnings Account shall be used only for the
purposes specified in the preceding paragraph, and shall not be available for
any
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other purpose, including, but not limited to, payment of Debt Service on or the
purchase price of the Notes or Other Obligations.
The Trustee shall verify at least annually from the date of delivery
of each series of Tax Exempt Notes that (i) all requirements of this Section
4.5(B) have been met on a continuing basis with respect to such series,
(ii) adequate procedures have been established and are being complied with to
ensure continuing compliance with the requirements of the applicable Tax Matters
Certificate, (iii) the proper amounts are deposited into the Excess Earnings
Account with respect to such series of Tax Exempt Notes, and (iv) the timely
payment to the United States Treasury or other disposition of amounts with
respect to Excess Earnings provided for in this Section 4.5(B) has occurred with
respect to such series of Tax Exempt Notes.
Pending payments or transfers from the Excess Earnings Account, the
moneys therein shall be invested in Investment Securities as provided in Section
4.11 hereof, and any earnings on or income from such investments shall be
retained therein.
Notwithstanding the foregoing, in the event the Trustee is furnished
with a written opinion of Bond Counsel to the effect that it is unnecessary
under both existing laws, regulations, rulings and decisions and any then
pending federal legislation to pay any portion of Excess Earnings to the United
States (or take any other action with respect thereto) in order to assure the
exclusion from gross income for federal income tax purposes of interest on one
or more series of Tax Exempt Notes, the requirements set forth in the preceding
portion of this Section 4.5(B) with respect to such series of Notes (but only
with respect to the portion of such Excess Earnings specified in such opinion)
need not be complied with and shall no longer be effective and all amounts at
the time on deposit in the Excess Earnings Account (to the extent covered by
such opinion) shall be transferred to the Revenue Fund.
(C) The provisions of this Section 4.5 shall remain in full force and
effect notwithstanding the defeasance of the Notes pursuant to Article Eleven
hereof or any other provision hereof.
[INSERT CASH FLOW PROVISION RELATING TO ELIGIBLE LENDER NUMBER
OVERLAP.]
Section 4.6. Revenue Fund. The Trustee and any Deposit Agent shall
------------
credit to the Revenue Fund: (i) all amounts received as interest, including
federal interest subsidy payments, and principal payments with respect to
Financed Student Loans, including all Insurance payments and Guarantee payments,
and all Special Allowance Payments with respect to Financed Student Loans
(excluding, unless otherwise provided in a Supplemental Indenture, any federal
interest subsidy payments and Special Allowance Payments that accrued prior to
the date on which such Student Loans were Financed), (ii) unless otherwise
provided in a Supplemental Indenture, proceeds of the resale to a Lender of any
Financed Student
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Loans pursuant to such Lender's repurchase obligation under the applicable
Student Loan Purchase Agreement, (iii) all amounts received as earnings on or
income from Investment Securities in the Acquisition Fund, the Reserve Fund, the
Administration Fund, the Surplus Fund and the Note Fund, (iv) all Non-Delivery
Fees, (v) all amounts to be transferred to the Revenue Fund from the Rebate
Fund, and (vi) any amounts received by the Trustee pursuant to the
indemnification provisions of any Joint Sharing Agreement.
Pending transfers from the Revenue Fund, the moneys therein shall be
invested in Investment Securities as provided in Section 4.11 hereof, and any
earnings on or income from said investments shall be retained therein.
The Corporation shall cause all amounts required to be credited to the
Revenue Fund, upon receipt by the Corporation, a Lender or a Servicer, or any
agent thereof, as the case may be, to be forthwith transmitted to the Trustee or
any Deposit Agent therefor for such credit. On each Monthly Payment Date and on
any other date on which the Balance in the Note Fund is not sufficient to pay
all amounts payable therefrom on such date, all such moneys theretofore received
and then held by a Deposit Agent shall be transferred to the Trustee. The
Trustee shall deposit and credit all revenues to be credited to the Revenue Fund
as follows: all such revenues received as payments of principal of Financed
Student Loans shall be credited by the Trustee forthwith upon receipt to the
Repayment Account; and all other revenues and amounts, including all such
revenues received as payments of interest on or Special Allowance Payments with
respect to Financed Student Loans, income from Investment Securities and Non-
Delivery Fees, shall be credited by the Trustee forthwith upon receipt to the
Income Account.
On each Monthly Payment Date and on any other date on which the
Balance in the Note Fund is not sufficient to pay all amounts payable therefrom
on such date, the Trustee shall, from the moneys received since the preceding
Monthly Payment Date in the Repayment Account, (1) make any periodic rebate fee
payments required to be made to the Secretary of Education in connection with
Financed Student Loans, and (2) transfer the remainder of such moneys, as
follows:
First, to the credit of the Rebate Fund to the extent and in the
manner provided in Section 4.5 hereof; second, to the credit of the
Interest Account to the extent and in the manner provided in Section 4.7.1
hereof for the payment of interest on Class A Notes or Other Senior
Obligations payable therefrom; third, to the credit of the Principal
Account to the extent and in the manner provided in subsections (A) and (C)
of Section 4.7.2 hereof for the redemption or payment of principal or the
purchase price of the Class A Notes or the payment of Other Senior
Obligations payable therefrom; fourth, to the credit of the Retirement
Account, to the extent and in the manner provided in Section 4.7.3 hereof
for the redemption of Class A Notes or the payment of Other Senior
Obligations payable therefrom; fifth, to the credit of the Acquisition Fund
to the extent and in the manner provided in Section 4.2
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hereof; sixth, to the credit of the Interest Account to the extent and in
the manner provided in Section 4.7.1 hereof for the payment of interest on
Class B Notes or Other Subordinate Obligations payable therefrom; seventh,
to the credit of the Principal Account to the extent and in the manner
provided in subsections (A) and (C) of Section 4.7.2 hereof for the payment
of principal or the purchase price of Class B Notes or the payment of Other
Subordinate Obligations payable therefrom; eighth, to the credit of the
Retirement Account, to the extent and in the manner provided in Section
4.7.3 hereof for the redemption of Class B Notes or the payment of Other
Subordinate Obligations payable therefrom; ninth, to the credit of the
Reserve Fund to the extent and in the manner provided in Section 4.4
hereof; tenth, to the credit of the Principal Account to the extent and in
the manner provided in Section 4.7.2(B) hereof for the redemption of Class
B Notes; eleventh, to the credit of the Special Redemption and Prepayment
Account to the extent and in the manner provided in Section 4.8 hereof; and
twelfth, to the credit of the Surplus Account in the manner provided in
Section 4.8 hereof.
On each Monthly Payment Date and on any other date on which the
Balance in the Note Fund is not sufficient to pay all amounts payable therefrom
on such date, the Trustee shall, after transferring all amounts received in the
Repayment Account pursuant to the preceding paragraph, from the moneys received
since the preceding Monthly Payment Date in the Income Account, (1) to the
extent amounts in the Repayment Account were not sufficient therefor, make any
periodic rebate fee payments required to be made to the Secretary of Education
in connection with Financed Student Loans, and (2) transfer the remainder of
such moneys as follows:
First, to the credit of the Rebate Fund to the extent and in the
manner provided in Section 4.5 hereof; second, to the credit of the
Interest Account to the extent and in the manner provided in Section 4.7.1
hereof for the payment of interest on Class A Notes or Other Senior
Obligations payable therefrom; third, to the credit of the Principal
Account to the extent and in the manner provided in subsections (A) and (C)
of Section 4.7.2 hereof for the redemption or payment of principal or the
purchase price of Class A Notes or the payment of Other Senior Obligations
payable therefrom; fourth, to the credit of the Retirement Account, to the
extent and in the manner provided in Section 4.7.3 hereof for the
redemption of Class A Notes or for the payment of Other Senior Obligations
payable therefrom; fifth, to the credit of the Acquisition Fund to the
extent and in the manner provided in Section 4.2 hereof; sixth, to the
credit of the Interest Account to the extent and in the manner provided in
Section 4.7.1 hereof for the payment of interest on Class B Notes or Other
Subordinate Obligations payable therefrom; seventh, to the credit of the
Principal Account to the extent and in the manner provided in subsections
(A) and (C) of Section 4.7.2 hereof for the payment of principal or the
purchase price of Class B Notes or the payment of Other Subordinate
Obligations payable therefrom; eighth, to the credit of the Retirement
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Account, to the extent and in the manner provided in Section 4.7.3 hereof
for the redemption of Class B Notes or the payment of Other Subordinate
Obligations payable therefrom; ninth, to the credit of the Administration
Fund to the extent and in the manner provided in Section 4.3 hereof; tenth,
to the credit of the Reserve Fund to the extent and in the manner provided
in Section 4.4 hereof; eleventh, to the credit of the Principal Account to
the extent and in the manner provided in Section 4.7.2(B) hereof for the
redemption of Class B Notes; twelfth, to the credit of the Special
Redemption and Prepayment Account to the extent and in the manner provided
in Section 4.8 hereof; and thirteenth, to the credit of the Surplus Account
in the manner provided in Section 4.8 hereof.
Section 4.7. Note Fund. The Note Fund shall be used only for the
---------
payment when due of principal of, premium, if any, and interest on the Class A
Notes and the Class B Notes, the purchase price of the Class A Notes and the
Class B Notes to be purchased on a Purchase Date or Mandatory Tender Date or
otherwise in accordance with Section 10.7 hereof, Other Obligations and Carry-
Over Amounts (including any accrued interest thereon) and to make transfers to
the credit of the Rebate Fund required by Section 4.5 hereof. The principal of
and interest on the Class C Notes shall be payable from the Surplus Fund as
provided in Section 4.8 hereof.
The Trustee shall identify the Monthly Payment Date for each
installment of interest, installment of principal for Serial Notes and sinking
fund installment for Term Notes with respect to each series of Notes.
Section 4.7.1. Interest Account. With respect to each series of
----------------
Class A Notes or Class B Notes, the Trustee shall, upon delivery to the original
purchasers thereof and from the proceeds thereof, credit to the Interest Account
the amount, if any, specified in the Supplemental Indenture providing for the
issuance of such series of Notes. The Trustee shall also deposit in the
Interest Account (i) that portion of the proceeds from the sale of Financed
Student Loans as is specified in Section 4.2 hereof, (ii) that portion of the
proceeds from the sale of the Corporation's bonds, notes or other evidences of
indebtedness, if any, to be used to pay interest on the Class A Notes or the
Class B Notes, (iii) all Counterparty Swap Payments, (iv) all payments under any
Credit Enhancement Facilities by Credit Facility Providers to be used to pay
interest on Class A Notes or Class B Notes, and (v) all amounts required to be
transferred thereto from the Funds and Accounts specified in the last sentence
of the following paragraph. The moneys in the Interest Account shall be
invested in Investment Securities as provided in Section 4.11 hereof, and any
earnings on or income from such investments shall be deposited in the Revenue
Fund as provided in Section 4.6 hereof.
To provide for the payment of each installment of interest which falls
due upon Class A Notes or Class B Notes on each regularly scheduled Interest
Payment Date and all Corporation Swap Payments and fees to a Credit Facility
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<PAGE>
Provider payable on such Interest Payment Date, the Trustee shall make six (6)
equal monthly deposits to the credit of the Interest Account not later than the
six (6) Monthly Payment Dates preceding such Interest Payment Date, to aggregate
the full amount of such interest, payment and fees, except that if the first
such Interest Payment Date occurs in six (6) months and fifteen (15) days or
less from the date on which the Class A Notes or Class B Notes of such series
are delivered to the initial purchasers thereof, then the Trustee shall make
equal monthly deposits to the credit of the Interest Account not later than each
Monthly Payment Date beginning with the calendar month following the calendar
month in which such Notes are delivered to the initial purchasers and ending
with the last such Monthly Payment Date prior to such first Interest Payment
Date (provided, however, with respect to any Variable Rate Notes, deposits shall
be made in an amount equal to the interest accrued on such Notes from the last
previous Monthly Payment Date or regularly scheduled Interest Payment Date
therefor, whichever is later, to that Monthly Payment Date or, in the case of
the last Monthly Payment Date preceding a regularly scheduled Interest Payment
Date, to such regularly scheduled Interest Payment Date), to aggregate the full
amount of such interest, payment and fees, and except that the Corporation shall
receive a credit against such payments for any accrued Counterparty Swap
Payments that are to be paid on or before the next regularly scheduled Interest
Payment Date if the Swap Counterparty is not then in default in its obligations
under the Swap Agreement and if the Swap Counterparty or any obligor under a
related Swap Counterparty Guarantee has unsecured long-term debt rated by each
Rating Agency in any of its three (3) highest Rating Categories. Anything in
this paragraph to the contrary notwithstanding, the Trustee shall, if so
instructed in writing by an Authorized Officer of the Corporation, deposit to
the credit of the Interest Account on any Monthly Payment Date for any
installment of interest a larger amount than is required to be made on such
Monthly Payment Date. If, on any Interest Payment Date (including any Redemption
Date occurring on a date that is not a regularly scheduled Interest Payment
Date) or other date on which Class A Notes or Class B Notes are to be purchased
in accordance with Section 4.7.2(F) or 4.7.3 hereof, moneys in the Interest
Account are insufficient to pay the accrued interest due on the Class A Notes
and Class B Notes and all Corporation Swap Payments and fees to a Credit
Facility Provider payable on such Interest Payment Date or constituting a
portion of the purchase price of Notes to be so purchased, the Trustee shall
immediately deposit to the credit of the Interest Account an amount equal to
such deficiency. In making the deposits required to be deposited and credited to
the Interest Account, the amounts credited to the Interest Account pursuant to
the first two (2) sentences of this Section and other deposits and credits
otherwise made or required to be made to the Interest Account shall, to the
extent available for such purpose, be taken into consideration and allowed for.
Each deposit required by this Section 4.7.1 to pay the foregoing amounts shall
be made by transfer from the following Funds and Accounts, in the following
order of priority: the Revenue Fund, the Surplus Fund (other than that portion
of the Balance thereof consisting of Eligible Loans), the Reserve Fund, the
Administration Fund, the Surplus Fund (including any portion of the Balance
thereof consisting of Eligible Loans), the Retirement Account, the Principal
Account and, as to Class A
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<PAGE>
Notes and Other Senior Obligations only, the Acquisition Fund (other than that
portion of the Balance thereof consisting of Student Loans); provided that such
transfers shall be made from the Retirement Account or the Principal Account in
respect of Subordinate Obligations only if, and to the extent, any amounts to be
so transferred are in excess of the requirements of such Accounts with respect
to Senior Obligations payable therefrom.
If, as of any regularly scheduled Interest Payment Date, any Carry-
Over Amount (including any accrued interest thereon) is due and payable with
respect to a series of Notes, as provided in the related Supplemental Indenture,
the Trustee shall transfer to the Interest Account (to the extent amounts are
available therefor in the Surplus Account in accordance with the second
paragraph of Section 4.8 hereof, after taking into account all other amounts
payable from the Surplus Fund in accordance with such paragraph on such Interest
Payment Date) an amount equal to such Carry-Over Amount (including any accrued
interest thereon) so due and payable. The Trustee shall make payment of any
Carry-Over Amount (and any interest accrued thereon) on an Interest Payment Date
in the same manner as it pays interest on the related series of Notes on such
Interest Payment Date.
The moneys in the Interest Account required for the payment of
interest on the Class A Notes or the Class B Notes of any series (including,
without limitation, the payment of that portion of the purchase price of Class A
Notes or Class B Notes purchased pursuant to Section 4.7.2(F) or 4.7.3 hereof
attributable to accrued interest thereon), any Corporation Swap Payments or fees
payable to a Credit Facility Provider under a Credit Enhancement Facility or
Demand Purchase Agreement or any Carry-Over Amount (including any accrued
interest thereon) shall be applied by the Trustee to the payment of such
interest or amounts when due without further authorization or direction.
Balances in the Interest Account shall be transferred to the credit of
the Rebate Fund to the extent necessary, after transfers thereto from the
Revenue Fund, the Surplus Fund, the Reserve Fund, the Administration Fund, the
Retirement Account and the Principal Account, to make any deposit to the credit
of the Rebate Fund required by Section 4.5 hereof.
Balances in the Interest Account shall be transferred to the credit of
the Principal Account to the extent necessary, after transfers thereto from the
Revenue Fund, the Surplus Fund, the Reserve Fund and the Administration Fund, to
make payment of the principal and purchase price of Class A Notes, as provided
in Section 4.7.2 hereof.
The moneys in the Interest Account required for (A) transfer to the
Rebate Fund as hereinbefore provided shall be transferred to such Fund without
further authorization or direction, and (B) transfer to the Principal Account
for payment of the principal or purchase price of Class A Notes, as provided in
Section
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<PAGE>
4.7.2 hereof, shall be transferred to such Account without further authorization
or direction.
Notwithstanding any other provisions of this Article Four, deposits to
the credit of the Interest Account required to be made on each Monthly Payment
Date by this Section 4.7.1 or on any other date on which the Balance in the
Interest Account is not sufficient to pay all amounts payable therefrom on such
date, and any other amounts at any time on deposit in the Interest Account,
shall be applied in the following order of priority: first, to the extent
hereinabove provided, for transfers to the Rebate Fund; second, to the payment
of interest on all Class A Notes, Corporation Swap Payments under Senior Swap
Agreements and fees payable to Senior Credit Facility Providers under a Senior
Credit Enhancement Facility or Senior Demand Purchase Agreement, and if such
money (after the transfers hereinabove described, including all amounts, to the
extent necessary, in the Principal Account) is less than such interest and Other
Senior Obligations on an Interest Payment Date, such money shall be applied, pro
rata, among such indebtedness based upon such amounts then owing to Senior
Beneficiaries and to be paid from the Interest Account; third, by transfer to
the Principal Account or the Retirement Account, to the extent required under
Section 4.7.2 and 4.7.3 hereof, in respect of amounts with respect to the
principal of the Class A Notes or other amounts owed to Other Senior
Beneficiaries payable therefrom; fourth, to the payment of interest on all Class
B Notes, Corporation Swap Payments under Subordinate Swap Agreements and fees
payable to Subordinate Credit Facility Providers, and if such money (after the
transfers hereinabove described, including all amounts, to the extent necessary,
in the Principal Account over and above the amount on deposit therein to meet
any accrued obligations to pay principal of the Class A Notes or amounts, other
than fees, to Senior Credit Facility Providers) is less than such interest and
Other Subordinate Obligations on an Interest Payment Date, such money shall be
applied, pro rata, among such indebtedness based upon such amounts then owing to
Subordinate Beneficiaries and to be paid from the Interest Account; and fifth,
to the payment of all Carry-Over Amounts (including any accrued interest
thereon) due and payable on all series of Notes, and if such money is less than
such Carry-Over Amounts (including any accrued interest thereon) on an Interest
Payment Date, such money shall be applied, pro rata, among such Carry-Over
Amounts (including any accrued interest thereon) based upon such amounts then
otherwise due and payable to Noteholders and to be paid from the Interest
Account.
Other Obligations payable from the Interest Account shall include
reimbursement to any Credit Facility Provider for interest paid on Class A Notes
or Class B Notes from amounts paid by the Credit Facility Provider under a
Credit Enhancement Facility.
Section 4.7.2. Principal Account. In making the payments, deposits
-----------------
and credits required by subsections (A), (B) and (C) of this Section 4.7.2, an
amount deposited and credited or required to be deposited and credited to the
Principal
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<PAGE>
Account representing premium on Term Notes paid as part of the purchase price
thereof and any other deposits and credits otherwise made or required to be made
to the Principal Account shall, to the extent available for such purpose, be
taken into consideration and allowed for. The Trustee shall also deposit to the
credit of Principal Account: (i) that portion of the proceeds from the sale of
Financed Student Loans as is specified in Section 4.2 hereof, (ii) that portion
of the proceeds from the sale of the Corporation's bonds, notes or other
evidences of indebtedness, if any, to be used to pay principal of the Class A
Notes and the Class B Notes on a Principal Payment Date, (iii) all payments
under any Credit Enhancement Facility or Demand Purchase Agreement to be used to
pay principal of Class A Notes or Class B Notes or the purchase price of Class A
Notes or Class B Notes to be purchased on a Purchase Date or Mandatory Tender
Date, and (iv) all amounts required to be transferred thereto from the Funds and
Accounts specified in subsection (D) of this Section 4.7.2.
Other Obligations payable from the Principal Account shall include
reimbursement to any Credit Facility Provider for principal or the purchase
price paid on Class A Notes or Class B Notes from amounts paid by the Credit
Facility Provider under a Credit Enhancement Facility or Demand Purchase
Agreement.
(A) To provide for the payment of each installment of principal which
falls due upon Class A Serial Notes, Class B Serial Notes or Class B Term Notes
at the Stated Maturity thereof or Class A Term Notes on a Sinking Fund Payment
Date therefor, the Trustee shall make six (6) (if the principal of Notes of such
series is payable semiannually) or twelve (12) (if the principal of Notes of
such series is payable annually) equal monthly deposits to the credit of the
Principal Account not later than the six (6) or twelve (12) Monthly Payment
Dates, as the case may be, preceding such Principal Payment Date, to aggregate
the full amount of such installment, except that if the first such Principal
Payment Date of a series of Notes occurs within twelve (12) months and fifteen
(15) days after the date on which the Class A Notes or Class B Notes of such
series are delivered to the initial purchasers thereof, then the Trustee shall
make equal monthly deposits to the credit of the Principal Account not later
than each Monthly Payment Date for such installment beginning with the calendar
month following the month in which such Notes are delivered to the initial
purchasers and ending with the last such Monthly Payment Date prior to such
first Principal Payment Date, to aggregate the full amount of such installment.
In making the deposits and credits required by this subsection (A), any amounts
deposited or required to be deposited and credited to the Principal Account
representing premium on Class A or Class B Serial Notes or Class A Term Notes
paid as part of the purchase price thereof and any other deposits and credits
otherwise made or required to be made to the Principal Account shall, to the
extent available for such purpose, be taken into consideration and allowed for.
The moneys in the Principal Account required for the payment of the
principal of Class A Serial Notes, Class B Serial Notes or Class B Term Notes at
the Stated Maturity thereof or of Class A Term Notes on a Sinking Fund Payment
Date therefor or for the payment of Other Obligations (other than fees,
Corporation Swap
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<PAGE>
Payments and reimbursements for amounts paid under a Credit Enhancement Facility
to pay interest on Class A Notes or Class B Notes, all of which are payable from
the Interest Account) shall be applied by the Trustee to such payment when due
without further authorization or direction, subject, however, to subsection (D)
of this Section 4.7.2.
(B) To meet each specified sinking fund installment which falls due
upon Class B Term Notes on each Sinking Fund Payment Date for each series of
Class B Notes which includes Term Notes (other than the Stated Maturity thereof,
as to which subsection (A) of this Section 4.7.2 shall govern), the Trustee
shall:
(1) determine (commencing as of the Monthly Payment Date not less
than seven (7) calendar months, if such Sinking Fund Payment Dates occur
semiannually, or twelve (12) calendar months, if such Sinking Fund Payment
Dates occur annually, before the first Sinking Fund Payment Date for Class
B Term Notes of such series) with regard to each specified sinking fund
installment which falls due upon such Class B Term Notes on each Sinking
Fund Payment Date (other than the Stated Maturity thereof) the amount
which, if deposited to the credit of the Principal Account on each of the
six (6) successive Monthly Payment Dates, if such Sinking Fund Payment
Dates occur semiannually, or on each of the eleven (11) successive Monthly
Payment Dates, if such Sinking Fund Payment Dates occur annually, for such
installment which are before the last Monthly Payment Date before such
Sinking Fund Payment Date, would in the aggregate equal the full amount of
such installment, except that if the installment due on the first Sinking
Fund Payment Date for the Class B Term Notes of any series is less than
seven (7) calendar months, if such Sinking Fund Payment Dates occur
semiannually, or twelve (12) calendar months, if such Sinking Fund Payment
Dates occur annually, after the month in which such Notes are delivered to
the initial purchasers thereof, the Trustee shall determine the amount
which, if deposited to the credit of the Principal Account on each of the
Monthly Payment Dates occurring during the period beginning with the
calendar month following the month in which such Notes are delivered to the
initial purchasers thereof and ending with the next-to-the-last Monthly
Payment Date prior to such Sinking Fund Payment Date, would in the
aggregate equal the full amount of such installment;
(2) express the monthly amount so determined for each such sinking
fund installment on a cumulative basis, so that the cumulative amount for
any Monthly Payment Date for that installment will be the sum of the amount
for such Monthly Payment Date and the amounts of the preceding such Monthly
Payment Dates; and
(3) on each such Monthly Payment Date (a) determine whether in fact
and to what extent the contingency, if any, specified in the Supplemental
Indenture authorizing the issuance of such Notes has been satisfied which
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requires a deposit on such Monthly Payment Date to the credit of the
Principal Account on account of such sinking fund installment, as specified
in the Supplemental Indenture authorizing such series of Notes, (b)
determine the amount of any such deposit if so required, which for each
such Monthly Payment Date shall not exceed the cumulative amount therefor,
less the sum of all prior deposits made on account of such sinking fund
installment, and (c) deposit to the credit of the Principal Account any
amount so determined to be required to be deposited on such Monthly Payment
Date.
To the extent that on any such Sinking Fund Payment Date (other than
the Stated Maturity of such Notes) the aggregate of the deposits thus actually
made to the credit of the Principal Account as of the next-to-the-last Monthly
Payment Date before such Sinking Fund Payment Date on account of the sinking
fund installment due on such Sinking Fund Payment Date shall be less than the
full amount of such sinking fund installment, the amount of such deficiency
shall be added to the amount of the sinking fund installment otherwise due on
the next Sinking Fund Payment Date and the increased amount shall thereupon be
deemed to be the amount due for the next sinking fund installment. However,
nothing contained in this paragraph shall be construed to create an Event of
Default in the event of any such deficiency unless a sinking fund installment of
such Class B Term Notes shall not only be due and not applied to the redemption
or purchase of Notes in accordance with the provisions of the Supplemental
Indenture authorizing the issuance of the Notes of such series and subsection
(F) of this Section 4.7.2, but also all contingencies, if any, specified in such
Supplemental Indenture upon the obligation so to apply it as of such time shall
in fact have been satisfied. Any such contingencies specified in a Supplemental
Indenture authorizing the issuance of a series of Class B Notes must be
identical to the contingencies, if any, specified in any other Supplemental
Indenture authorizing a series of Class B Notes any Note of which is then
Outstanding.
Subject to subsection (D) of this Section 4.7.2, in the event that, in
any year in which sinking fund installments are due with respect to two (2) or
more series of Class B Notes, payments on account of such sinking fund
installments are not deposited and accumulated in the Principal Account in the
full amount thereof (taking into account any reduction in or credit against such
installments as provided in the Supplemental Indenture pursuant to which such
Class B Notes were issued) on or before the next-to-the-last Monthly Payment
Date prior to the Sinking Fund Payment Date with respect thereto, such payments
as shall have been accumulated shall be allocated as follows: (i) first, to the
payment of any such Class B Term Notes whose Stated Maturity is such Sinking
Fund Payment Date (as provided in subsection (A) of this Section 4.7.2), and
(ii) otherwise, between the series of Class B Notes in proportion to the
respective total amounts of sinking fund installments due on such Sinking Fund
Payment Date.
The Trustee shall without further authorization or direction apply the
moneys deposited to the credit of the Principal Account pursuant to this
subsection
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(B), on each Sinking Fund Payment Date, to the retirement of the Class B Term
Notes in accordance with the provisions in the Supplemental Indenture pursuant
to which such Notes were issued; subject, however, to subsection (D) of this
Section 4.7.2. The Trustee shall give notice of all such redemptions, in the
name and on behalf of the Corporation, in accordance with the provisions of
Article Ten hereof.
(C) In the event that the Corporation is required to furnish moneys
to the Depositary to purchase Notes on a Purchase Date or Mandatory Tender Date,
the Trustee shall, subject to the applicable provisions of the related
Supplemental Indenture, immediately deposit to the credit of the Principal
Account moneys sufficient to pay the purchase price thereof. Moneys in the
Principal Account required for the payment of the purchase price of such Notes
shall, subject to the applicable provisions of the related Supplemental
Indenture, be applied by the Trustee to such payment without further
authorization or direction.
(D) Each deposit required to be made to the credit of the Principal
Account by subsections (A), (B) and (C) of this Section 4.7.2 shall be made by
transfer from the following Funds, in the following order of priority: (1) in
the case of subsection (A) and subsection (C), the Revenue Fund, the Surplus
Fund (other than that portion of the Balance thereof consisting of Eligible
Loans), the Reserve Fund, the Administration Fund, the Surplus Fund (including
that portion of the Balance thereof consisting of Eligible Loans), and (2) in
the case of subsection (B), the Revenue Fund and the Surplus Fund (other than
that portion of the Balance thereof consisting of Eligible Loans); provided,
however, that if principal is payable on Class A Notes at the Stated Maturity
thereof or upon a Sinking Fund Payment Date therefor, or the purchase price is
payable on Class A Notes on a Purchase Date or Mandatory Tender Date, and money
credited to the Principal Account, after the foregoing transfers, is
insufficient to pay such principal or purchase price, funds shall be
transferred, to the extent necessary, to the Principal Account for this purpose
from (i) the Interest Account, but only to the extent that the Balance in the
Interest Account exceeds any then accrued payments of interest on the Class A
Notes, Corporation Swap Payments under Senior Swap Agreements and fees owing to
Senior Credit Facility Providers and (ii) thereafter from the Acquisition Fund
(other than that portion of the Balance thereof consisting of Student Loans).
Notwithstanding any other provisions of this Article Four, deposits to
the credit of the Principal Account required to be made on each Monthly Payment
Date by this Section 4.7.2 or on any other date on which the Balance in the
Principal Account is not sufficient to pay all amounts payable therefrom on such
date, and any other amounts on deposit in the Principal Account, shall be
applied in the following order of priority: first, to the extent required by
subsection (E) of this Section 4.7.2, for transfer to the Rebate Fund; second,
to the extent required by Section 4.7.1, to the Interest Account for the payment
of interest on Class A Notes and Other Senior Obligations payable therefrom;
third, to the payment of Class A Notes at their Stated Maturity or on a Sinking
Fund Payment Date or amounts due on Other Senior Obligations payable from the
Principal Account; fourth, to the
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payment of the purchase price of Class A Notes on a Purchase Date or Mandatory
Tender Date; fifth, to the extent required by Section 4.7.1, to the Interest
Account for the payment of interest on Class B Notes and Other Subordinate
Obligations payable therefrom; sixth, to the amounts due with respect to Class B
Notes to be paid at their Stated Maturity or amounts due on Other Subordinate
Obligations payable from the Principal Account; seventh, to the payment of the
purchase price of Class B Notes on a Purchase Date or Mandatory Tender Date;
and, eighth, to the amounts due with respect to Class B Term Notes to be
redeemed on a Sinking Fund Payment Date. Any moneys in the Principal Account
required to be so transferred to the Interest Account shall be transferred by
the Trustee to such Account without further authorization or direction.
(E) Balances in the Principal Account shall be transferred to the
credit of the Rebate Fund to the extent necessary, after transfers thereto from
the Revenue Fund, the Surplus Fund, the Reserve Fund, the Administration Fund
and the Retirement Account, to make any deposit to the credit of the Rebate Fund
required by Section 4.5 hereof. Any moneys in the Principal Account required to
be so transferred to the Rebate Fund shall be transferred by the Trustee to such
Fund without further authorization or direction.
(F) Subject to Section 10.2 hereof, balances in the Principal Account
may also be applied to the purchase of Class A Notes or Class B Notes at a
purchase price (including any brokerage or other charges) not to exceed the
Principal Amount thereof plus accrued interest, in accordance with the
provisions of Section 10.7 hereof, as determined by the Corporation at such
time, provided the Trustee shall have first certified that no deficiencies exist
at such time in the Note Fund or the Rebate Fund. Any such purchase shall be
limited to those Class A Notes or Class B Notes whose Stated Maturity or Sinking
Fund Payment Date is the next succeeding Principal Payment Date. If any moneys
credited to the Principal Account for the retirement of the Term Notes are
applied to the purchase of such Notes as provided in this subsection (F), the
Principal Amount of such Notes to be redeemed on the next respective Sinking
Fund Payment Date shall be reduced by the Principal Amount of the Notes so
purchased; provided, however, that no Term Notes shall be so purchased during
the interval between the date on which notice of redemption of said Notes on a
Sinking Fund Payment Date is given and the date of redemption set forth in such
notice, unless the Notes so purchased are Notes called for redemption in such
notice or are purchased from moneys other than those credited to the Principal
Account with respect to sinking fund installments.
Any purchase of Class A Notes or Class B Notes pursuant to this
subsection (F) may be made with or without tenders of Notes and at either public
or private sale.
(G) All Class A Notes or Class B Notes retired by redemption,
purchase (other than on a Purchase Date or Mandatory Tender Date) or payment at
maturity pursuant to this Section 4.7.2 shall be canceled and shall not be
reissued. The
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accrued interest to be paid on the redemption, purchase (other than on a
Purchase Date or Mandatory Tender Date) or payment at Stated Maturity of such
Notes shall be paid from the Interest Account. Any Notes purchased or otherwise
Deemed Tendered on a Purchase Date or Mandatory Tender Date with moneys
furnished pursuant to this Section 4.7.2 shall not be canceled or the
indebtedness represented thereby otherwise extinguished except at the direction
of the Corporation, it being the intention of the Corporation that, absent such
a direction, such Notes remain outstanding and represent a continuing
indebtedness of the Corporation, whether such Notes are held by the Corporation,
the Remarketing Agent or others for the account of the Corporation, any
Remarketing Agent for its own account, any Depositary, the Trustee, any Credit
Facility Provider or any other purchaser.
(H) The moneys in the Principal Account shall be invested in
Investment Securities as provided in Section 4.11 hereof, and any earnings on or
income from such investments shall be deposited in the Revenue Fund as provided
in Section 4.6 hereof.
Section 4.7.3. Retirement Account. The Trustee shall deposit to the
------------------
credit of the Retirement Account (i) any amounts transferred thereto from the
Reserve Fund and the Surplus Fund, (ii) that portion of the proceeds from the
sale of the Corporation's bonds, notes or other evidences of indebtedness, if
any, to be used to pay the principal or Redemption Price of Class A Notes or
Class B Notes on a date other than the Stated Maturity thereof or a Sinking Fund
Payment Date therefor, and (iii) all payments made by a Credit Facility Provider
under a Credit Enhancement Facility to be used to pay the Redemption Price of
Class A Notes or Class B Notes payable from the Retirement Account. All Class A
Notes or Class B Notes which are to be retired other than with moneys in the
Principal Account, or the principal of which is to be prepaid, shall be retired
or prepaid with moneys deposited to the credit of the Retirement Account.
Other Obligations payable from the Retirement Account shall include
reimbursement to any Credit Facility Provider for the Redemption Price or amount
or prepayment paid on Class A Notes or Class B Notes from amounts paid by the
Credit Facility Provider under a Credit Enhancement Facility.
Balances in the Retirement Account shall be transferred to the credit
of the Rebate Fund to the extent necessary, after transfers thereto from the
Revenue Fund, the Surplus Fund, the Reserve Fund and the Administration Fund, to
make any deposit to the credit of the Rebate Fund required by Section 4.5
hereof. Any moneys in the Retirement Account required to be so transferred to
the Rebate Fund shall be transferred by the Trustee to such Fund without further
authorization or direction.
After taking into account any transfers required by the preceding
paragraph, Balances in the Retirement Account shall be transferred to the credit
of the Interest Account to the extent required by Section 4.7.1 hereof in
respect of any
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accrued obligation in respect of payment of interest on Class A Notes or Class B
Notes and payment of Other Obligations payable from the Interest Account. Any
moneys in the Retirement Account required to be so transferred to the Interest
Account shall be transferred by the Trustee to the Interest Account without
further authorization or direction.
Subject to Section 10.2 hereof, balances in the Retirement Account may
also be applied to the purchase of Class A Notes or Class B Notes at a purchase
price (including any brokerage or other charges) not to exceed the Principal
Amount thereof plus accrued interest plus any then applicable redemption
premium, in accordance with the provisions of Section 10.7 hereof, as determined
by the Corporation at such time; provided the Trustee shall have first certified
that no deficiencies exist at such time in the Note Fund or the Rebate Fund.
In the event that Class A Notes or Class B Notes are to be redeemed
from the Retirement Account on a date other than a regularly scheduled Interest
Payment Date or are to be purchased from Balances in the Retirement Account
pursuant to the preceding paragraph, accrued interest on such Notes shall
nonetheless be paid from the Interest Account.
The moneys in the Retirement Account required for the payment of the
Redemption Price of Class A Notes or Class B Notes to be redeemed or for the
prepayment of Class A Notes or Class B Notes to be prepaid shall be applied by
the Trustee to such payment or prepayment when due without further authorization
or direction.
The moneys in the Retirement Account shall be invested in Investment
Securities as provided in Section 4.11 hereof, and any earnings on or income
from such investment shall be deposited in the Revenue Fund as provided in
Section 4.6 hereof.
Section 4.8. Surplus Fund. On each Monthly Payment Date the Trustee
------------
shall transfer from the Revenue Fund to (I) the Special Redemption and
Prepayment Account any amounts which are not then required to be transferred
from the Revenue Fund to the Rebate Fund, the Note Fund, the Acquisition Fund,
the Administration Fund or the Reserve Fund to the extent necessary to increase
the Balance in the Special Redemption and Prepayment Account to equal the
aggregate of the Special Redemption and Prepayment Account Requirements for each
series of Notes any Note of which is then Outstanding, and (II) the Surplus
Account any amounts which are not then required to be transferred from the
Revenue Fund to the Rebate Fund, the Note Fund, the Acquisition Fund, the
Administration Fund, the Reserve Fund or the Special Redemption and Prepayment
Account. The Trustee shall also credit to the Surplus Account the proceeds of
the resale to a Lender of any Student Loans previously purchased with moneys in
the Surplus Account pursuant to the repurchase obligation of the Lender under
the applicable Student Loan Purchase Agreement.
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Balances in the Surplus Fund shall be applied to the following
purposes in the following order of priority: first, to remedy deficiencies in
the Rebate Fund to the extent and in the manner provided in Section 4.5 hereof;
second, to remedy deficiencies in the Interest Account to the extent and in the
manner provided in Section 4.7.1 hereof for the payment of interest on Class A
Notes or Other Senior Obligations payable therefrom; third, to remedy
deficiencies in the Principal Account to the extent and in the manner provided
in Section 4.7.2 hereof for the payment of Class A Notes at the Stated Maturity
thereof or on a Sinking Fund Payment Date therefor, the purchase price of Class
A Notes on a Purchase Date or Mandatory Tender Date therefor or Other Senior
Obligations payable therefrom; fourth, to remedy deficiencies in the Retirement
Account to the extent and in the manner provided in Section 4.7.3 hereof for the
redemption or payment of Class A Notes or for the payment of Other Senior
Obligations payable therefrom; fifth, to remedy deficiencies in the Interest
Account to the extent and in the manner provided in Section 4.7.1 hereof for the
payment of interest on Class B Notes and Other Subordinate Obligations payable
therefrom; sixth, to remedy deficiencies in the Principal Account to the extent
and in the manner provided in Section 4.7.2 hereof for the payment of Class B
Notes at the Stated Maturity thereof, the purchase price of Class B Notes on a
Purchase Date or Mandatory Tender Date therefor and Other Subordinate
Obligations payable therefrom; seventh, to remedy deficiencies in the Retirement
Account to the extent and in the manner provided in Section 4.7.3 hereof for the
redemption or payment of Class B Notes or for the payment of Other Subordinate
Obligations payable therefrom; eighth, to make deposits to the credit of the
Administration Fund to the extent and in the manner provided in Section 4.3
hereof (provided that such transfers shall only be made from Balances in the
Surplus Account); ninth, to remedy deficiencies in the Reserve Fund to the
extent and in the manner provided in Section 4.4 hereof; tenth, to remedy
deficiencies in the Principal Account to meet the sinking fund installment with
respect to Class B Term Notes on a Sinking Fund Payment Date (other than the
Stated Maturity thereof); eleventh, to make transfers to the credit of the
Retirement Account to redeem or prepay Class A Notes or Class B Notes as
provided in a Supplemental Indenture relating thereto (provided that any such
transfers shall only be made from Balances in the Special Redemption and
Prepayment Account); and twelfth, to make deposits to the credit of the Interest
Account for the payment of Carry-Over Amounts (and accrued interest thereon) to
the extent and in the manner provided in Section 4.7.1 hereof (provided that
such transfers shall only be made from Balances in the Surplus Account).
Notwithstanding the foregoing, Balances in the Surplus Fund consisting of
Eligible Loans shall not be required to be applied (1) pursuant to priorities
first through seventh in the preceding sentence until after any transfers from
the Reserve Fund have been taken into account, and (2) in any event pursuant to
priorities eighth through twelfth in the preceding sentence. If the amounts in
the Surplus Fund are to be used to remedy any such deficiency or to make a
transfer to the credit of the Administration Fund or the Retirement Account,
transfers shall be made first from any cash or Investment Securities included in
the Surplus Account and the Special Redemption and Prepayment
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Account, in that order of priority, and thereafter from the proceeds of any sale
of Student Loans included in the Surplus Account.
Balances in the Special Redemption and Prepayment Account may also be
transferred to the Acquisition Fund for the acquisition or origination of
Eligible Loans as provided in Section 4.2 hereof and as further authorized or
limited in a Supplemental Indenture. Balances in the Special Redemption and
Prepayment Account shall be transferred to the Acquisition Fund to be so used
upon receipt by the Trustee of a Corporation Request directing such transfer,
accompanied by an Eligible Loan Acquisition Certificate or an Eligible Loan
Origination Certificate and all documents, opinions and certificates required
thereby.
Subject to Section 10.2 hereof, balances in the Special Redemption and
Prepayment Account (other than any portion thereof to be applied to the
mandatory prepayment of principal of any Notes) may also be transferred to the
Note Fund for the purchase of Notes at a purchase price (including any brokerage
or other charges) not to exceed the greater of the Principal Amount thereof or,
if such purchase occurs during the period when such Notes are subject to
redemption at the option of the Corporation from such funds, the Redemption
Price set forth in the Supplemental Indenture authorizing the issuance of such
Notes that would be applicable to the redemption of Notes pursuant thereto on
the date of such purchase, in either case plus accrued interest, in accordance
with the provisions of Section 10.7 hereof, as determined by the Corporation at
such time, provided that the Trustee shall have first certified that no
deficiencies exist at such time in the Note Fund, the Rebate Fund or the Reserve
Fund, any such Balances to be so used are not required to be applied to the
prepayment of principal of any Notes and, if the purchase price of any Note to
be so purchased is to exceed the Principal Amount thereof plus accrued interest
thereon, the Trustee shall have been provided with a Corporation Certificate
certifying that, based on a Cash Flow Projection, any such purchase of Notes
will not materially adversely affect the Corporation's ability to pay Debt
Service on the Outstanding Notes, Outstanding Other Obligations, Carry-Over
Amounts (including accrued interest thereon) with respect to Outstanding Notes,
Administrative Expenses or Note Fees or to make required deposits to the Rebate
Fund.
Balances in the Surplus Fund may, subject to the last sentence of the
following paragraph, also be applied, as determined by the Corporation from time
to time, to the payment of principal of, premium, if any, or interest on Class C
Notes when due or upon the redemption thereof at the option of the Corporation;
provided that (A) the Trustee shall have certified that no deficiencies exist at
such time in the Note Fund, the Rebate Fund or the Reserve Fund, (B) after
taking into account any such payments of interest on the Class C Notes, the
Senior Percentage will not be less than one hundred ________ percent (1______%)
(or such lower percentage specified in a Corporation Certificate delivered to
the Trustee which, if Unenhanced Class A Notes are Outstanding, shall not result
in the lowering or withdrawal of the outstanding rating assigned by any Rating
Agency to any of the Unenhanced Class A Notes Outstanding, as evidenced in
writing to the Trustee by each such Rating Agency, or if no Unenhanced Class A
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Notes are Outstanding but Other Senior Obligations are Outstanding, is
acceptable to the Other Senior Beneficiaries holding such Other Senior
Obligations, as evidenced in writing to the Trustee by each such Other Senior
Beneficiary), and the Subordinate Percentage will not be less than ___________
percent (_____%) (or such lower percentage specified in a Corporation
Certificate delivered to the Trustee which, if Unenhanced Class B Notes are
Outstanding, shall not result in the lowering or withdrawal of the outstanding
rating assigned by any Rating Agency to any of the Unenhanced Class B Notes
Outstanding, as evidenced in writing to the Trustee by each such Rating Agency,
or if no Unenhanced Class B Notes are Outstanding but Other Subordinate
Obligations are Outstanding, is acceptable to the Other Subordinate
Beneficiaries holding such Other Subordinate Obligations, as evidenced in
writing to the Trustee by each such Other Subordinate Beneficiary); and (C)
after taking into account any such payments of principal of or premium, if any,
on the Class C Notes, the Senior Asset Requirement will be met. If the amounts
in the Surplus Fund are to be used to pay principal of, premium or interest on
the Class C Notes in accordance with this paragraph, payments shall be made
first from any cash or Investment Securities in the Surplus Account and the
Special Redemption and Prepayment Account, in that order of priority, then from
the proceeds of any sale of Student Loans in the Surplus Account not
constituting Eligible Loans, and thereafter from the proceeds of any sale of
Eligible Loans in the Surplus Account.
Subject to Section 10.2 hereof and to the last sentence of this
paragraph, balances in the Surplus Account may also be applied to any one or
more of the following purposes at any time as determined by the Corporation at
such time, provided the Trustee shall have first certified that no deficiencies
exist at such time in the Note Fund, the Rebate Fund, the Reserve Fund or the
Special Redemption and Prepayment Account:
(i) transfer to the Retirement Account for the redemption of Class A
Notes or Class B Notes; provided that, if the Redemption Price of any Note
to be so redeemed is to exceed the Principal Amount thereof, the Trustee
shall have received a Corporation Certificate certifying that any such
Balances to be so used are not reasonably expected to be needed to pay Debt
Service on the Outstanding Notes and Outstanding Other Obligations, Carry-
Over Amounts (including accrued interest thereon) with respect to
Outstanding Notes, Administrative Expenses or Note Fees or to make required
transfers to the Rebate Fund;
(ii) transfer to the Principal Account or the Retirement Account for
the purchase of Class A Notes or Class B Notes at a purchase price
(including any brokerage or other charge) not to exceed the greater of the
Principal Amount thereof or, if such purchase occurs during the period when
such Notes are subject to redemption at the option of the Corporation from
such funds, the Redemption Price set forth in the Supplemental Indenture
authorizing the
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issuance of such Notes that would be applicable to the redemption of Notes
pursuant thereto on the date of such purchase, in either case plus accrued
interest, in accordance with the provisions of Section 10.7 hereof,
provided that, if the purchase price of any Note to be so purchased is to
exceed the Principal Amount thereof plus accrued interest thereon, the
Trustee shall have first received a Corporation Certificate certifying
that, based on a Cash Flow Projection, any such purchase of Notes will not
materially adversely affect the Corporation's ability to pay Debt Service
on the Outstanding Notes and Outstanding Other Obligations, Carry-Over
Amounts (including accrued interest thereon) with respect to Outstanding
Notes, Administrative Expenses or Note Fees or to make required deposits to
the Rebate Fund; or
(iii) upon the receipt by the Trustee of a Corporation Certificate
that the Balance in the Administration Fund is at least equal to the
Budgeted Administrative Expenses and Note Fees for the next succeeding
ninety (90) days, and that, based on a Cash Flow Projection, any moneys to
be so used are not reasonably expected to be needed for the payment of Debt
Service on the Outstanding Notes and Outstanding Other Obligations, Carry-
Over Amounts (including accrued interest thereon) with respect to
Outstanding Notes, Administrative Expenses or Note Fees or for transfer to
the Rebate Fund: (a) the acquisition of Student Loans meeting the
requirements of clauses (A)(1) and (A)(2) or (B) of the definition of
"Eligible Loan" in Section 1.1 hereof, the moneys to be applied from the
Surplus Account for such purpose being no more than the Principal Balance
of such Student Loans, plus accrued noncapitalized interest thereon payable
by the Eligible Borrower, if any, to the date of purchase, reasonable
transfer, origination and assignment fees, if applicable, and a premium not
to exceed that assumed in the most recent Cash Flow Projection delivered in
conjunction with the issuance of a series of Notes [or such greater premium
the payment of which will not materially adversely affect the Corporation's
ability to pay Debt Service on the Outstanding Notes, Other Indenture
Obligations, Carry-Over Amounts (including accrued interest thereon) with
respect to Outstanding Notes, Administrative Expenses or Note Fees or to
make required transfers to the Rebate Fund, as shown in a subsequent Cash
Flow Projection received by the Trustee, and which will not result in the
lowering or withdrawal of the outstanding rating assigned by any Rating
Agency to any of the Unenhanced Senior or Subordinate Notes Outstanding, as
evidenced in writing to the Trustee by each such Rating Agency], and being
paid to the Lender upon the receipt by the Trustee of a Student Loan
Acquisition Certificate and all documents, opinions and certifications
required thereby; (b) to reimburse another fund, account or other source of
the Corporation for the previous payment of Costs of Issuance, to the
extent not previously reimbursed from the Surplus Account; and (c) for such
other purposes as the Corporation shall determine upon receipt by the
Trustee of an opinion of Counsel that such use will not violate any
covenants of the Corporation contained in Sections 5.14 or 5.16 hereof, is
authorized by the Corporation's Articles of Incorporation
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and Bylaws, and will not violate the provisions of Section 150(d) of the
Code; provided, however, that Balances in the Surplus Account shall not be
applied to any of the purposes specified in the preceding clauses (iii)(b)
or (c) or to the purchase of Student Loans that are not Eligible Loans
unless, after taking into account any such application and excluding, for
these purposes only, from the calculation of Aggregate Value, any Financed
Student Loans which are not Eligible Loans and any moneys reasonably
expected to be needed for transfer to the Rebate Fund or to be used to pay
Costs of Issuance, Note Fees or Administrative Expenses, (1) the Senior
Percentage will not be less than one hundred ____________ percent
(1_______%) (or such lower percentage specified in a Corporation
Certificate delivered to the Trustee which, if Unenhanced Class A Notes are
Outstanding, shall not result in the lowering or withdrawal of the
outstanding rating assigned by any Rating Agency to any of the Unenhanced
Class A Notes Outstanding, as evidenced in writing to the Trustee by each
such Rating Agency, or if no Unenhanced Class A Notes are Outstanding but
Other Senior Obligations are Outstanding, is acceptable to the Other Senior
Beneficiaries holding such Outstanding Other Senior Obligations, as
evidenced in writing to the Trustee by each such Other Senior Beneficiary),
and (2) the Subordinate Percentage will not be less than one hundred
_________ percent (_____%) (or such lower percentage specified in a
Corporation Certificate delivered to the Trustee which, if Unenhanced Class
B Notes are Outstanding, shall not result in the lowering or withdrawal of
the outstanding rating assigned by any Rating Agency to any of the
Unenhanced Class B Notes Outstanding, as evidenced in writing to the
Trustee by each such Rating Agency, or if no Unenhanced Class B Notes are
Outstanding but Other Subordinate Obligations are Outstanding, is
acceptable to the Other Subordinate Beneficiaries holding such Outstanding
Other Subordinate Obligations, as evidenced in writing to the Trustee by
each such Other Subordinate Beneficiary); and provided, further, that
Balances in the Surplus Account may, to the extent provided in a
Supplemental Indenture, be applied to the purchase of Eligible Loans as
specified in the preceding clause (iii)(a) without satisfying any other
condition of this clause (iii).
Notwithstanding the foregoing, no amounts in the Surplus Fund shall be paid out
with respect to Costs of Issuance, Note Fees or Administrative Expenses, or for
any other use permitted by the preceding paragraph or clause (iii) above,
unless, after giving effect to such payment (taking into account, for this
purpose, all previous such payments from the Surplus Fund and all payments from
the Administration Fund with respect to Costs of Issuance, Note Fees and
Administrative Expenses), as to each series of Tax Exempt Notes, either (i) at
least ninety percent (90%) of the net proceeds of such series will, at the time
of such payment, have been used directly or indirectly to make or finance
student loans described in Section 144(b)(1)(A) of the Code, or (ii) at least
ninety-five percent (95%) of the net proceeds of such series will, at the time
of such payment, have been used directly or indirectly to make or finance
student loans described in Section 144(b)(1)(B) of the Code, as applicable, all
within the meaning of such Section 144(b) of the Code.
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The unpaid principal balance of Student Loans Financed with moneys in
the Surplus Account shall be included in the Balance of the Surplus Account
until such Financed Student Loans shall have been paid in full or sold as
hereinafter provided; provided that, to the extent provided in a Supplemental
Indenture, any such Student Loans so Financed and constituting Eligible Loans
shall, upon the financing thereof, be credited to, and included in the Balance
of, the Acquisition Fund and shall thereafter not be deemed to have been
Financed with moneys in the Surplus Account. Interest and principal payments,
including Insurance and Guarantee payments and similar payments made by any
other Person, and Special Allowance Payments (excluding any federal interest
subsidy payments and Special Allowance Payments that accrued prior to the date
on which such Student Loans were Financed) received with respect to Student
Loans Financed with moneys in the Surplus Account shall be credited to the
Revenue Fund as provided in Section 4.6 hereof.
The Trustee shall use its best efforts to sell Student Loans included
in the Balance of the Surplus Account at the best price available to the extent
necessary to make any transfer or payment therefrom as provided in the second
paragraph of this Section 4.8. In addition, the Corporation may, at any time,
sell to any purchaser (A) one or more Eligible Loans Financed with moneys in the
Surplus Account at a price not less than one hundred percent (100%) of the
Principal Balance thereof plus accrued noncapitalized interest thereon payable
by the Eligible Borrower, or (B) one or more Student Loans Financed with moneys
in the Surplus Account that are not Eligible Loans at a price not less than the
lesser of one hundred percent (100%) of the Principal Balance thereof or the
percentage of the Principal Balance thereof paid to finance such Student Loan
plus, in either case, accrued noncapitalized interest thereon payable by the
Eligible Borrower; provided that no such sale shall cause the Corporation to
breach any of its representations or covenants contained in the Tax Matters
Certificate furnished by the Corporation in connection with the issuance of any
series of Tax Exempt Notes.
Student Loans from time to time held in the Surplus Account may also
be purchased at any time with the proceeds of the Corporation's bonds, notes or
other evidences of indebtedness, at a purchase price equal to one hundred
percent (100%) of the Principal Balance of the Student Loans so purchased plus
accrued noncapitalized interest thereon payable by the Eligible Borrower, if
any.
Any money received by the Corporation in connection with a sale of
Financed Student Loans pursuant to the preceding two (2) paragraphs shall be
deposited to the credit of the Surplus Account.
Pending transfers from the Surplus Fund, the moneys therein shall be
invested in Investment Securities as provided in Section 4.11 hereof, and any
earnings on or income from such investments shall be deposited in the Revenue
Fund as provided in Section 4.6 hereof.
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Section 4.9. Termination. When no Notes remain Outstanding and no
-----------
Other Obligations are Outstanding, the Trustee and any Deposit Agents shall
transfer to the Corporation, or to the order of the Corporation, the Balances in
all Funds and Accounts if, and to the extent that, such Balances are in excess
of amounts needed to pay principal of, premium, if any, and interest on, and any
Carry-Over Amounts (and accrued interest thereon) due and payable with respect
to the Notes, to make all payments to the United States Treasury or otherwise
required by Section 4.5 hereof, and to pay the fees, compensation and expenses
of the Trustee and any Authenticating Agent, Note Registrar, Remarketing Agents,
Depositaries, Auction Agents, Broker-Dealers, Deposit Agents and Paying Agents.
To the extent that such Balances are needed to pay such amounts or fees, the
Trustee shall retain such Balances hereunder and pay such amounts or fees to the
Persons to whom such amounts are due and payable as provided hereunder. In the
event that any portion or all of the Balances in the Funds and Accounts payable
to the Corporation pursuant to this Section consist of Investment Securities
which are payable solely to the Trustee and cannot be effectively transferred to
the Corporation, the Trustee shall continue to hold such Investment Securities
under this Indenture on behalf of the Corporation until such time as such
securities can be transferred to the Corporation or amounts payable thereunder
received, whether by acceleration at the option of the holder thereof, at
maturity or otherwise, all at the direction of an Authorized Officer of the
Corporation.
Section 4.10. Pledge. The Notes, including the principal thereof,
------
premium, if any, and interest thereon and any Carry-Over Amounts (and accrued
interest thereon) with respect thereto, and Other Obligations shall be limited
obligations of the Corporation specifically secured as provided in the Granting
Clauses hereof. Financed Student Loans purchased with the proceeds of the
Corporation's bonds, notes or other obligations as described in Section 4.8
hereof, or resold to a Lender pursuant to its repurchase obligation under a
Student Loan Purchase Agreement, or sold or exchanged for Eligible Loans in
accordance with the provisions of Section 4.2 or Section 4.8 hereof, shall,
contemporaneously with receipt by the Trustee of the purchase price thereof in
freely transferable funds, including any Eligible Loans to be received in
exchange therefor, no longer be pledged to nor serve as security for the
principal of, premium, if any, and interest on and any Carry-Over Amounts (and
accrued interest thereon) with respect to the Notes or any Other Obligations.
The Corporation pledges and agrees with the Beneficiaries that the
Corporation will not limit or alter its powers to fulfill the terms of any
agreements made in this Indenture or in any Notes or in any way impair the
rights and remedies of the Beneficiaries until the Notes, together with interest
thereon, including interest on any unpaid installments of interest, and all
costs and expenses in connection with any action or proceeding by or on behalf
of the Holders and all amounts owing to Other Beneficiaries, are fully met and
discharged.
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The Notes, including the principal thereof, premium, if any, and
interest thereon and any Carry-Over Amounts (and accrued interest thereon) with
respect thereto, and any Other Obligations shall be secured hereunder by the
foregoing pledge of the Financed Student Loans, revenues, securities and other
moneys hereby made, and by a lien thereon, subject to the priorities expressly
provided in Section 3.12 or elsewhere herein. The pledge in the Granting
Clauses hereof shall constitute a prior and paramount lien and charge on such
Financed Student Loans, revenues, contract rights, securities and other moneys
from time to time held hereunder (subject only to the valid exercise of the
constitutional powers of the United States of America, valid bankruptcy,
insolvency, reorganization, moratorium and other laws affecting creditors'
rights, and to the provisions of this Indenture permitting the application of
such Financed Student Loans, revenues, securities and other moneys for the
purposes and on the terms and conditions hereof), over and ahead of any claims
(whether in tort, contract or otherwise irrespective of whether the parties
possessing such claims have notice of the foregoing pledges or charges),
encumbrances or obligations of any nature hereafter arising or incurred, and
over and ahead of all other indebtedness payable from or secured by such
revenues which may hereafter be created or incurred. The pledge of such
Financed Student Loans, revenues, securities and other moneys made herein and
hereby shall be valid and binding from the time of the delivery of and payment
for the first series of Notes issued hereunder, and such Financed Student Loans,
revenues, securities and other moneys shall thereupon be immediately subject to
the lien, pledge and charge hereof upon receipt thereof by the Corporation or
any Lender, Servicer, Trustee, Paying Agent, Deposit Agent, Remarketing Agent,
Depositary, Auction Agent or Broker-Dealer, or any agent thereof, without any
physical delivery or segregation thereof or further act.
No Beneficiary shall be required to see that the moneys derived from
any Note are applied to the purpose or purposes for which the Note is issued.
The validity of the Notes 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 such Notes.
The pledge of the Financed Student Loans, revenues, securities and
other moneys made hereby includes the pledge of any contract or any evidence of
indebtedness or other rights of the Corporation to receive any of the same,
whether now existing or hereafter coming into existence, and whether now or
hereafter acquired, and the proceeds thereof.
Section 4.11. Investments. Moneys held by the Trustee or any Deposit
-----------
Agent for the credit of any Fund or Account shall be invested by the Trustee or
such Deposit Agent, in accordance with the Sections hereof relating to such
Funds and Accounts, as directed by the Corporation, to the fullest extent
practicable and reasonable, in Investment Securities which shall mature or be
redeemable at the option of the holder prior to the respective dates when the
moneys held for the credit of such Fund or Account will be required for the
purposes intended.
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Subject to the provisions of Section 5.14 hereof and to the right of
the Corporation to direct the investment of funds hereunder, moneys in any Fund
or Account or any combination of Funds and Accounts shall be continuously
invested and reinvested or deposited and redeposited by the Trustee or any
Deposit Agent in the highest yield Investment Securities reasonably known to the
Trustee or such Deposit Agent, with a view toward maximizing yield (with proper
preservation of principal) and minimizing the instances of uninvested funds.
The Investment Securities purchased shall be held by the Trustee or any Deposit
Agent and shall be deemed at all times to be part of such Fund or Account or
combination thereof, and the Trustee or any Deposit Agent shall inform the
Corporation of the details of all such investments. The Trustee or any Deposit
Agent shall sell at the best price obtainable, or present for redemption, any
Investment Securities purchased by it as an investment whenever it shall be
necessary to provide moneys to meet any payment from such Fund or Account. The
Trustee may purchase from or sell to itself or an affiliate, as principal or
agent, any Investment Securities. The Trustee or any Deposit Agent shall advise
the Corporation in writing, on or before the fifth day of each calendar month,
of all investments held for the credit of each Fund or Account in its custody
under the provisions of this Indenture as of the end of the preceding month.
Anything herein to the contrary notwithstanding, neither the Trustee
nor any Deposit Agent shall make any investment of moneys in any Fund or Account
which would cause any series of Tax Exempt Notes to be "arbitrage bonds" within
the meaning of Section 148 of the Code or which would cause any series of Tax
Exempt Notes to be "federally guaranteed" within the meaning of Section 149(b)
of the Code; and, to this end, the Trustee and each Deposit Agent shall comply
with all provisions with respect to investment of moneys in the Funds and
Accounts specified in the Tax Matters Certificate furnished by the Corporation
in connection with the issuance of each series of Tax Exempt Notes.
If any Investment Securities include any "book-entry" securities, the
Trustee and any Deposit Agent shall have such Investment Securities held in the
name of the Trustee or such Deposit Agent at the appropriate Federal Reserve
Bank or other depository, and the Trustee or such Deposit Agent shall take such
other actions as are necessary to maintain a prior perfected security interest
in such "book-entry" Investment Securities in accordance with federal
regulations or applicable law regarding "book-entry" securities.
Section 4.12. Transfer of Investment Securities. Whenever any
---------------------------------
transfer is required by this Indenture to be made from any Fund or Account to
any other Fund or Account, the Trustee may use Investment Securities, or
allocable portions thereof, included in the Balance of the former to the extent
necessary to make such transfer, but only to the extent such Investment
Securities are permissible investments for the Fund or Account to which they are
to be transferred. The amount of any such transfer of Investment Securities
shall be the
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Value of Investment Securities determined with respect thereto as of the date of
transfer.
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ARTICLE FIVE
COVENANTS TO SECURE NOTES; REPRESENTATIONS AND WARRANTIES
Section 5.1. Trustee to Hold Financed Student Loans. The Corporation
--------------------------------------
shall cause all Financed Student Loans to be endorsed and otherwise conveyed to
the Trustee on behalf of the Corporation in accordance with the provisions of
the applicable Student Loan Purchase Agreement [or, in the case of any
origination of Financed Student Loans, shall cause such Student Loans to be
originated in the name of the Trustee]. The Trustee shall be the legal owner of
all Financed Student Loans for all purposes of the Higher Education Act and each
Guarantee Program. The Trustee shall so hold such Financed Student Loans in its
capacity as trustee of an express trust created pursuant to this Indenture and,
in such capacity, shall be acting on behalf of the Corporation, as the
beneficial owner of such Student Loans, as well as the Holders of the Notes and
all Other Beneficiaries, as their interests may appear.
Section 5.2. Credit Enhancement Facilities, Demand Purchase
----------------------------------------------
Agreements and Swap Agreements. The Corporation may from time to time enter
- ------------------------------
into or obtain the benefit of any Credit Enhancement Facility, any Demand
Purchase Agreement or any Swap Agreement with respect to any Class A Notes or
Class B Notes of any series; provided that (i) a Supplemental Indenture is
entered into in accordance with the provisions of Section 8.01(i) hereof, and
(ii) any such Credit Enhancement Facility, Demand Purchase Agreement or Swap
Agreement satisfies any conditions specified in a prior Supplemental Indenture.
No Supplemental Indenture shall authorize the execution of a Swap
Agreement unless, as of the date the Corporation enters into such Swap
Agreement, either the Swap Counterparty or the Person executing a Swap
Counterparty Guarantee relating thereto has outstanding obligations rated by
each Rating Agency not lower than in its third highest Specific Rating Category
(or each Rating Agency has a comparable other rating with respect to such Swap
Counterparty Guarantee, such as a comparable rating of claims paying ability or
deposits) and no such Swap Agreement shall be designated as a Senior Swap
Agreement unless, as of the date the Corporation enters into such Swap
Agreement, the Senior Asset Requirement will be met and, if Unenhanced Notes are
Outstanding, the Trustee shall have received written confirmation from each
Rating Agency that the execution and delivery of the Swap Agreement will not
cause the reduction or withdrawal of any rating or ratings then applicable to
any Unenhanced Notes.
Notwithstanding anything in this Indenture to the contrary, (1) any
Supplemental Indenture authorizing the execution by the Corporation of a Senior
Swap Agreement, Subordinate Swap Agreement, Senior Credit Enhancement Facility,
Subordinate Credit Enhancement Facility, Senior Demand Purchase Agreement or
Subordinate Demand Purchase Agreement may include provisions with respect to the
application and use of all amounts to be paid thereunder, (2) no
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amounts paid under any such Credit Enhancement Facility or Demand Purchase
Agreement shall be part of the Trust Estate except to the extent, if any,
specifically provided in such Supplemental Indenture and no Beneficiaries shall
have any rights with respect to any such amounts so paid except as may be
specifically provided in such Supplemental Indenture, (3) Notes of one or more
series or any portions thereof may be secured by a pledge of any or all amounts
payable pursuant to such Credit Enhancement Facility or Demand Purchase
Agreement, in the manner and to the extent provided in such Supplemental
Indenture, and such Notes may be either Class A Notes or Class B Notes for
purposes hereof, and (4) the Corporation's obligations under any such Credit
Enhancement Facility, Demand Purchase Agreement or Swap Agreement shall be
limited obligations, payable solely from the revenues and assets of the
Corporation pledged therefor under this Indenture.
Section 5.3. Enforcement and Amendment of Guarantee Agreements. So
-------------------------------------------------
long as any Notes or Other Obligations are Outstanding and Financed Eligible
Loans are Guaranteed by a Guarantee Agency, the Corporation (a) will, from and
after the date on which the Trustee on its behalf shall have either entered
into, or succeeded to the rights and interests of any Lender under, any
Guarantee Agreement covering Financed Eligible Loans, cause the Trustee to
maintain such Guarantee Agreement and diligently enforce the Trustee's rights
thereunder; (b) will cause the Trustee to enter into such other similar or
supplemental agreements as shall be required to maintain benefits for all
Financed Eligible Loans covered thereby, and (c) will not voluntarily consent to
or permit any rescission of or consent to any amendment to or otherwise take any
action under or in connection with any such Guarantee Agreement or any similar
or supplemental agreement which in any manner will materially adversely affect
the rights of the Holders from time to time of the Notes or Other Beneficiaries
hereunder.
Section 5.4. Enforcement and Amendment of Certificates of Insurance
------------------------------------------------------
and Contract of Insurance. So long as any Notes or Other Obligations are
- -------------------------
Outstanding, the Corporation (a) will cause the Trustee to maintain all
Certificates of Insurance and the Contract of Insurance and diligently enforce
the Trustee's rights thereunder; (b) will cause the Trustee to enter into such
other similar or supplemental agreements as shall be required to maintain
benefits for all Financed Eligible Loans covered thereby, and (c) will not
voluntarily consent to or permit any rescission of or consent to any amendment
to or otherwise take any action under or in connection with any such
Certificates of Insurance or the Contract of Insurance or any similar or
supplemental agreement which in any manner will materially adversely affect the
rights of any Beneficiaries.
Section 5.5. Acquisition, Collection and Assignment of Student Loans.
-------------------------------------------------------
The Corporation shall, except as provided in Section 4.8 with regard to the
Surplus Fund, cause the Trustee to originate or acquire only Eligible Loans with
moneys in any of the Funds and shall diligently cause to be collected all
principal and interest payments (subject to any adjustments described in Section
5.6 hereof) on all the
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Financed Student Loans and, subject to the following proviso, all Non-Delivery
Fees and other sums to which the Corporation is entitled pursuant to any Student
Loan Purchase Agreement, and all grants, subsidies, donations, insurance
payments, Special Allowance Payments and all defaulted payments Guaranteed or
Insured by any Guarantee Agency or by the Secretary of Education which relate to
such Financed Student Loans; provided that the Corporation may, in its
discretion, waive its right to receive any portion or all of the Non-Delivery
Fees to which the Corporation is otherwise entitled under the Student Loan
Purchase Agreements, as evidenced by a Corporation Certificate to that effect.
The Corporation shall also make, or cause to be made by Lenders or Servicers,
every effort to perfect the Corporation's, the Trustee's or such Lender's or
Servicer's claims for payment from the Secretary of Education or a Guarantee
Agency, as soon as possible, of all payments related to such Financed Student
Loans. The Corporation will cause the Trustee to assign such Financed Student
Loans for payment of guarantee or insurance benefits within the time required
under applicable law and regulations. The Corporation shall cause all United
States and applicable State statutes, rules and regulations which apply to the
Program and to Financed Student Loans to be complied with.
Section 5.6. Enforcement of Financed Student Loans. The Corporation
-------------------------------------
shall cause to be diligently enforced, and shall cause to be taken all steps,
actions and proceedings reasonably necessary for the enforcement of, all terms,
covenants and conditions of all Financed Student Loans and agreements in
connection therewith, including the prompt payment of all principal and interest
payments (as such payments may be adjusted to take into account (i) any discount
the Corporation may cause to be made available to borrowers who make payments on
Financed Student Loans through automatic withdrawals, and (ii) any reduction in
the interest payable on Financed Student Loans provided for in any special
program under which such loans were originated) and all other amounts due the
Trustee thereunder. The Corporation shall not permit the release of the
obligations of any borrower under any Financed Student Loan and shall at all
times, to the extent permitted by law, cause to be defended, enforced, preserved
and protected the rights and privileges of the Corporation, the Trustee and the
Beneficiaries under or with respect to each Financed Student Loan and agreement
in connection therewith. The Corporation shall not consent or agree to or
permit any amendment or modification of any Financed Student Loan or agreement
in connection therewith which will in any manner materially adversely affect the
rights or security of the Beneficiaries. Nothing in this Section 5.6 or in
Sections 5.5 and 5.7 hereof shall be construed to prevent the Corporation from
settling a default or curing a delinquency on any Financed Student Loan on such
terms as shall be required by law. Notwithstanding the foregoing, (1) the
Corporation may cause the Trustee to forgive the indebtedness on all or a
portion of the Financed Student Loans or take such other action as may be
provided in the written opinion of Bond Counsel, as provided in Section 4.5(B)
hereof, to the extent necessary to prevent interest on any series of Tax Exempt
Notes from being includable in the gross income of the owners thereof for
federal income tax purposes, and may cause the Trustee to forgive the remaining
indebtedness on
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any Financed Student Loan having a principal balance not in excess of $100 if,
in the reasonable judgment of the Corporation evidenced by a Corporation
Certificate delivered to the Trustee, the cost of collection of the remaining
indebtedness of such Financed Student Loan would exceed such remaining
indebtedness, and (2) the Corporation may amend the terms of a Financed Student
Loan to provide for a different rate of interest thereon to the extent required
by law or, if such Financed Student Loan is a Plus or SLS Loan, to effect a
reissuance of such Plus or SLS Loan at a variable rate.
Section 5.7. Servicing and Other Agreements. The Corporation may
------------------------------
contract with other Persons to assist it in performing its duties under this
Indenture, and any performance of such duties by a Person identified to the
Trustee in a Corporation Certificate shall be deemed to be action taken by the
Corporation. The Corporation may, and prior to or contemporaneously with the
Section 150(d)(3) Transfer shall, enter into a Servicing Agreement providing for
the servicing of the Financed Student Loans and performance of certain of its
other obligations under this Indenture, including, without limitation, those
obligations described in this Section and Sections 5.5, 5.6 and 5.8 hereof.
The Corporation shall cause to be diligently enforced and taken all
reasonable steps, actions and proceedings necessary for the enforcement of all
terms, covenants and conditions of all Servicing Agreements, including the
prompt payment of all principal and interest payments and all other amounts due
the Corporation or the Trustee thereunder, including all grants, subsidies,
donations, insurance payments, Special Allowance Payments and all defaulted
payments Guaranteed and/or Insured by any Guarantee Agency and/or by the
Secretary of Education which relate to any Financed Student Loans. The
Corporation shall not permit the release of the obligations of any Servicer
under any Servicing Agreement and shall at all times, to the extent permitted by
law, cause to be defended, enforced, preserved and protected the rights and
privileges of the Corporation, the Trustee and the Beneficiaries under or with
respect to each Servicing Agreement. The Corporation shall not consent or agree
to or permit any amendment or modification of any Servicing Agreement which will
in any manner materially adversely affect the rights or security of the
Beneficiaries.
Any Servicing Agreement shall require the Servicer to administer and
collect all Financed Student Loans in the manner provided in this Section 5.7
and Section 5.8 hereof.
Section 5.8. Administration and Collection of Financed Student Loans.
--------------------------------------------------------
All Financed Student Loans shall be administered and collected either by the
Corporation or by a Servicer selected by the Corporation (and, after the Section
150(d)(3) Transfer, shall be so administered and collected by a Servicer) in a
competent, diligent and orderly fashion and in accordance with all requirements
of the Higher Education Act, the Secretary of Education, this Indenture, the
Contract of
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Insurance and each applicable Certificate of Insurance, the Federal
Reimbursement Contract, each Guarantee Program and each Guarantee Agreement.
Section 5.9. Books of Account; Annual Audit. The Corporation shall
------------------------------
cause to be kept and maintained proper books of account relating to the Program
in which full, true and correct entries will be made, in accordance with
generally accepted accounting principles, of all dealings or transactions of or
in relation to the business and affairs of the Corporation, and within one
hundred twenty (120) days after the end of each Fiscal Year shall cause such
books of account to be audited by an Accountant. A copy of each audit report,
annual balance sheet and income and expense statement showing in reasonable
detail the financial condition of the Corporation as at the close of each Fiscal
Year, and summarizing in reasonable detail the income and expenses for such
year, including the transactions relating to the Funds and Accounts, shall be
filed promptly with the Trustee and shall be available for inspection by any
Noteholder or Other Beneficiary.
Section 5.10. Punctual Payments. The Corporation shall duly and
-----------------
punctually pay, or cause to be paid, the principal of, premium, if any, and
interest on and any Carry-Over Amount (and accrued interest thereon) due and
payable with respect to each and every Note and each Other Obligation from the
revenues and other assets pledged hereunder on the dates and at the places, and
in the manner provided, in the Notes and with respect to each Other Obligation
according to the true intent and meaning thereof, and the Corporation shall
faithfully do and perform and at all times fully observe and keep any and all of
its covenants, undertakings, stipulations and provisions contained in the Notes,
the Other Obligations and in this Indenture.
Section 5.11. Further Assurances. The Corporation shall at any and
------------------
all times, insofar as it may be authorized so to do, pass, make, do, execute,
acknowledge and deliver all and every such further resolutions, indentures,
acts, deeds, conveyances, assignments, transfers and assurances as may be
necessary or desirable for the better assuring, conveying, granting, assigning
and confirming any and all of the rights, revenues, securities and other moneys
hereby pledged or charged with or assigned to the payment of the Notes, any Swap
Agreement, Credit Enhancement Facility or Demand Purchase Agreement or intended
so to be, or which the Corporation may hereafter become bound to pledge or
charge or assign.
Section 5.12. Protection of Security; Power To Issue Notes and Pledge
-------------------------------------------------------
Revenues and Other Funds. The Corporation is duly authorized under all
- ------------------------
applicable law to create and issue the Notes, to enter into this Indenture, to
enter into Other Obligations and to pledge the revenues and other moneys,
Financed Student Loans, securities, properties, rights, interests and evidences
of indebtedness purported to be pledged by this Indenture in the manner and to
the extent provided in this Indenture. The revenues and other moneys,
securities, evidences of indebtedness and properties so pledged are and will be
free and clear of any pledge, lien, charge or encumbrance thereon or with
respect thereto prior to, or of equal
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<PAGE>
rank with, the pledge created by this Indenture, except as otherwise expressly
provided herein, and all action on the part of the Corporation to that end has
been duly and validly taken. The Notes and the provisions of this Indenture,
each Supplemental Indenture and each Other Obligation are and will be valid and
legally enforceable obligations of the Corporation in accordance with their
terms and the terms of this Indenture and each Supplemental Indenture. The
Corporation shall at all times, to the extent permitted by law, defend, preserve
and protect the pledge of the revenues and other moneys, Financed Student Loans,
securities, properties, rights, interests and evidences of indebtedness pledged
under this Indenture and each Supplemental Indenture and all the rights of the
Beneficiaries hereto against all claims and demands of all Persons whomsoever.
The pledge of the revenues and other moneys, Financed Student Loans,
securities, properties, rights, interests and evidences of indebtedness made
hereby includes the pledge of any contract or any evidence of indebtedness or
other rights of the Corporation to receive any of the same, whether now existing
or hereafter coming into existence, and whether now or hereafter acquired, and
the proceeds thereof.
In consideration of the purchase and acceptance of the Notes by those
who shall hold the same from time to time and the execution and delivery by
Other Beneficiaries of any Other Obligations, the provisions of this Indenture
shall be a part of the contract of the Corporation with the Beneficiaries and
shall be deemed to be and shall constitute a contract between the Corporation,
the Trustee and the Beneficiaries.
Section 5.13. No Encumbrances. The Corporation will not create, or
---------------
permit the creation of, any pledge, lien, charge or encumbrance upon the
Financed Student Loans or the revenues and other moneys, securities, properties,
rights, interests and evidences of indebtedness pledged under this Indenture,
except only as to a lien subordinate to the lien of this Indenture created by
any other indenture authorizing the issuance of bonds, notes or other evidences
of indebtedness of the Corporation the proceeds of which have been or will be
used to refund or otherwise retire all or a portion of the Outstanding Notes
(but only upon receipt by the Trustee of an opinion of Counsel that the creation
of such lien will not be prejudicial to the Trustee or the Holders of any
Outstanding Notes or any Other Beneficiary) or as otherwise provided in or
permitted by this Indenture. The Corporation will not issue any bonds or other
evidences of indebtedness, other than the Notes as permitted by this Indenture
and other than Swap Agreements, Credit Enhancement Facilities and Demand
Purchase Agreements relating to Notes as permitted by this Indenture, secured by
a pledge of the revenues and other moneys, securities, properties, rights,
interests and evidences of indebtedness herein pledged or held aside by the
Corporation or by a fiduciary under this Indenture, creating a lien or charge on
such revenues and other moneys, securities, properties, rights, interests and
evidences of indebtedness equal or superior to the lien of this Indenture;
provided that nothing in this Indenture shall prevent the Corporation from
issuing
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obligations secured by assets and revenues of the Corporation other than the
revenues and other moneys, securities, properties, rights, interests and
evidences of indebtedness pledged in this Indenture.
Section 5.14. Tax Covenant. The Corporation recognizes that the
------------
Holders of Tax Exempt Notes from time to time will have accepted them on, and
paid therefor a price which reflects, the understanding that interest on such
Notes is excludable from the gross income of the owner thereof for federal
income tax purposes under laws in force at the time such Notes shall have been
delivered. In this connection the Corporation covenants that (a) it will not
take or omit to take any action which may render the interest on any of the Tax
Exempt Notes includable in gross income for purposes of federal income taxation,
(b) it will use the proceeds of the Notes and any other funds of the Corporation
in such a manner that the use thereof would not cause the Tax Exempt Notes to be
"arbitrage bonds" under Section 148 of the Code and the Treasury Regulations
pertaining thereto, and (c) it will not permit at any time any proceeds of the
Notes or any other funds of the Corporation to be used, directly or indirectly,
in a manner which would result in the inclusion of the interest on any Tax
Exempt Note in gross income for purposes of federal income taxation otherwise
afforded by the Code (including, without limitation, by reason of the violation
of any limitation imposed by Sections 141 through 150 of the Code). In
particular, the Corporation shall not use, or permit the use of, any proceeds of
Tax Exempt Notes or any other moneys attributable to Tax Exempt Notes in the
Funds and Accounts unless, after giving effect to such use, as to each series of
Tax Exempt Notes, either (i) at least ninety percent (90%) of the net proceeds
of such series will, at the time of such use, have been used directly or
indirectly to make or finance student loans described in Section 144(b)(1)(A) of
the Code, or (ii) at least ninety-five percent (95%) of the net proceeds of such
series will, at the time of such payment, have been used directly or indirectly
to make or finance student loans described in Section 144(b)(1)(B) of the Code,
as applicable, all within the meaning of such Section 144(b) of the Code. The
foregoing covenants shall remain in full force and effect notwithstanding the
defeasance of the Tax Exempt Notes of any series pursuant to Article Eleven
hereof and notwithstanding any other provision hereof. The president, the
secretary and other officers and employees of the Corporation shall execute and
deliver from time to time, on behalf of the Corporation, such certificates,
instruments and documents as shall be deemed necessary or advisable to evidence
compliance by the Corporation with said Section 148 and the regulations
thereunder with respect to the use of the proceeds of such Notes. Such
certificates, instruments and documents may contain such stipulations as shall
be necessary or advisable in connection with the stated purpose of this Section
5.14 and the foregoing provisions hereof, and the Corporation and Trustee hereby
covenant and agree to comply with the provisions of any such stipulation
throughout the term of the Tax Exempt Notes of such series.
Section 5.15. Limitation on Administrative Expenses and Note Fees;
----------------------------------------------------
Reports. The Corporation covenants and agrees that the Administrative Expenses
- -------
and Note Fees will not, in any Fiscal Year, exceed those that are reasonable and
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<PAGE>
necessary in light of all circumstances then existing and will not, in any
event, be in such amounts as will materially adversely affect the ability of the
Corporation to pay or perform, as the case may be, all of its obligations under
this Indenture or the security of any Beneficiaries.
Section 5.16. Continuing Existence; Merger and Consolidation. The
----------------------------------------------
Corporation will maintain its existence as a corporation and will not dispose of
all or substantially all of its assets (by sale, lease or otherwise), except as
otherwise specifically authorized under this Indenture or under comparable
provisions of any future indenture of the Corporation with respect to subsequent
issues of bonds, notes or other obligations of the Corporation, or consolidate
with or merge into another corporation or permit any other corporation to
consolidate with or merge into it unless:
A. the surviving, resulting or transferee corporation, as the case
may be, shall be organized under the laws of the United States or one of
the states thereof;
B. at least thirty (30) days before any merger, consolidation or
transfer of assets becomes effective, the Corporation shall give the
Trustee written notice of the proposed transaction;
C. immediately after giving effect to any merger, consolidation or
transfer of assets, no Event of Default shall have occurred and be
continuing;
D. the Rating Agency Condition shall have been satisfied with respect
to any merger, consolidation or transfer of assets;
E. prior to any merger, consolidation or transfer of assets, an
opinion of Bond Counsel shall be delivered to the Trustee stating that such
merger, consolidation or transfer of assets will not cause interest on any
series of Tax Exempt Notes to become includable in the gross income for
federal income tax purposes of recipients thereof; and
F. prior to or concurrently with any merger, consolidation or
transfer of assets, (1) any action as is necessary to maintain the lien and
security interest created in favor of the Trustee by this Indenture shall
have been taken, (2) the surviving, resulting or transferee corporation, as
the case may be, if other than the Corporation, shall deliver to the
Trustee an instrument assuming all of the obligations of the Corporation
under this Indenture, any Notes, any Swap Agreement, any Credit Enhancement
Facility, any Demand Purchase Agreement, any Remarketing Agreement, any
Depositary Agreement, any Auction Agent Agreement, the Student Loan
Purchase Agreements and any Servicing Agreement, together with the consent
of the other parties, if any, to each such instrument to such assumption,
and (3) the Corporation shall have delivered to the Trustee and each Rating
Agency a
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Corporation Certificate and an opinion of Counsel (which shall describe the
actions taken as required by clause (1) of this paragraph or that no such
action need be taken) each stating that all conditions precedent herein
provided for relating to such merger, consolidation or transfer of assets
have been compiled with (including any filing required by the Exchange
Act).
Anything elsewhere in this Section 5.16 to the contrary
notwithstanding, the Corporation is authorized to take all such action as is
necessary to consummate the Section 150(d)(3) Transfer, which Section 150(d)(3)
Transfer is hereby expressly authorized.
Section 5.17. Fidelity Bonds. The Corporation shall obtain and
--------------
maintain in force fidelity bonds upon all personnel insuring against any loss or
damage which the Trustee or the Corporation might suffer as a consequence of any
act of such personnel in an amount required by any supervising agency of the
federal or any State government, or, if not so required, in such reasonable
amount as may be determined from time to time by the Corporation.
Section 5.18. Amendment of Student Loan Purchase Agreements. The
---------------------------------------------
Corporation shall notify the Trustee in writing of any proposed amendments to
the Student Loan Purchase Agreements. No such amendment shall become effective
unless and until the Trustee consents in writing thereto, which consent shall
not be given unless the Trustee receives an opinion of Counsel that such
amendment is required by the Higher Education Act or is not to the prejudice of
the Holders of the Notes or Other Beneficiaries.
Section 5.19. Enforcement and Amendment of Guarantee Agreements,
--------------------------------------------------
Certificates of Insurance and Contract of Insurance. So long as any Notes are
- ---------------------------------------------------
Outstanding or other obligations to Other Beneficiaries are Outstanding and
Financed Eligible Loans are Guaranteed by a Guarantee Agency, the Trustee (a)
will maintain the Guarantee Agreements and will diligently enforce its rights
thereunder; (b) will enter into such other similar or supplemental agreements as
shall be required to maintain the benefits thereof for all Financed Eligible
Loans; and (c) will not voluntarily consent to or permit any rescission of or
consent to any amendment to or otherwise take any action under or in connection
with the Guarantee Agreements or any similar or supplemental agreements which in
any manner will adversely affect the rights of the Holders from time to time of
the Notes or Other Beneficiaries.
So long as any Notes are Outstanding or Other Obligations are
Outstanding, the Trustee (a) will maintain all Certificates of Insurance and the
Contract of Insurance and diligently enforce its rights thereunder; (b) will
enter into such other similar or supplemental agreements as shall be required to
maintain the benefits thereof for all Financed Eligible Loans; (c) will not
voluntarily consent to or permit any rescission of or consent to any amendment
to or otherwise take any action under or in connection with any such
Certificates of Insurance or the
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Contract of Insurance or any similar or supplemental agreement which in any
manner will adversely affect the rights of the Holders from time to time of the
Notes; and (d) will maintain its status as an "eligible lender" under the Higher
Education Act.
Section 5.20. Amendment of Remarketing Agreements and Depositary
--------------------------------------------------
Agreements. The Corporation shall notify the Trustee and any related Credit
- ----------
Facility Provider in writing of any proposed amendments to any Remarketing
Agreement or Depositary Agreement. No such amendment shall become effective
unless and until (1) the Trustee consents in writing thereto, which consent
shall not be given unless the Trustee receives an opinion of Counsel that such
amendment is required by a Credit Enhancement Facility, a Demand Purchase
Agreement or this Indenture or is not to the material prejudice of the Holders
of the Notes, and (2) any related Credit Facility Provider consents in writing
thereto, which consent shall not be unreasonably withheld, provided that no
consent of the Credit Facility Provider shall be required if the Credit Facility
Provider receives an opinion of Counsel that such amendment is required by this
Indenture.
Section 5.21. Additional Covenants of the Corporation After Section
-----------------------------------------------------
150(d)(3) Transfer. The Corporation, after the Section 150(d)(3) Transfer,
- ------------------
agrees and covenants for the benefit of the Trustee, each Noteholder and each
Other Beneficiary, during the term of this Indenture, and to the fullest extent
permitted by applicable law, that:
(a) No Other Business. It shall not engage in any business other than
-----------------
financing, originating, purchasing, owning, selling and managing Student
Loans in the manner contemplated by its certificate of incorporation and
this Indenture and activities incidental thereto.
(b) No Borrowing. It shall not issue, incur, assume, guarantee or
------------
otherwise become liable, directly or indirectly, for any indebtedness
except for (i) the Notes and (ii) any Other Obligations or other
indebtedness permitted by or arising under this Indenture and permitted by
its certificate of incorporation. The proceeds of the Notes shall be used
exclusively to fund the origination or purchase of Student Loans and for
such other purposes as are specified in this Indenture.
(c) Guarantees, Loans, Advances and Other Liabilities. Except as
-------------------------------------------------
contemplated by its certificate of incorporation and this Indenture, it
shall not make any loan or advance or credit to, or guarantee (directly or
indirectly or by an instrument having the effect of assuming another's
payment or performance on any obligation or capability of so doing or
otherwise), endorse or otherwise become contingently liable, directly or
indirectly, in connection with the obligations, stocks or dividends of, or
own, purchase, repurchase or acquire (or agree contingently to do so) any
stock, obligations, assets or
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securities of, any other interest in, or make any capital contribution to,
any other Person.
(d) Restricted Payments. Except as permitted by its certificate of
-------------------
incorporation and this Indenture, it shall not, directly or indirectly,
(i) make any distribution (by reduction of capital or otherwise), whether
in cash, property, securities or a combination thereof, with respect to any
ownership or equity interest or security in or of the Corporation,
(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. The Corporation will not,
directly or indirectly, make payments to or distributions from any of the
Funds or Accounts except in accordance with this Indenture.
(e) Non-petition. It shall not, for any reason, institute proceedings
------------
for itself to be adjudicated a bankrupt or insolvent, or consent to the
institution of bankruptcy or insolvency proceedings against itself, or file
a petition seeking or consenting to reorganization or relief under any
applicable Federal or state law relating to the bankruptcy of itself, or
consent to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of itself or a substantial part of
its assets or any part of the Trust Estate or cause or permit itself to
make any assignment for the benefit of creditors, or admit in writing its
inability to pay its debts generally as they become due, or declare or
effect a moratorium on its debt or take any action in furtherance of any
such action.
(f) Other Parties. It shall obtain from each counterparty to each
-------------
agreement entered into on or after the Section 150(d)(3) Transfer to which
it is a party, an agreement by each such counterparty that such
counterparty shall not institute against, or join any other Person in
instituting against, it, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings or other similar proceedings under
the laws of the United States or any state of the United States.
(g) Separate Business. It will:
-----------------
(i) (A) maintain and prepare financial reports, financial
statements, books and records and bank accounts separate from those of
its Affiliates and any other person or entity and (B) not permit any
Affiliate or any other person or entity independent access to its bank
accounts;
(ii) not commingle its funds and other assets with those of any
Affiliate, any guarantor of any of the obligations of the Corporation
(each, a "Guarantor"), any Affiliate of any Guarantor or any other
person or entity;
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(iii) conduct its own business in its own name and
will hold all of its assets in its own name;
(iv) remain solvent and pay its debts and liabilities
(including employment and overhead expenses) from its assets as the
same become due;
(v) do all things necessary to observe corporate formalities,
and preserve its existence as a single-purpose, bankruptcy-remote
entity in accordance with the standards of the Rating Agencies
providing ratings on the Notes, as such standards are in effect on the
date of issuance of the Notes;
(vi) enter into transactions with Affiliates only if each such
transaction is commercially reasonable and on substantially similar
terms as a transaction that would be entered into on an arm's length
basis with a person or entity other than an Affiliate of the
Corporation;
(vii) pay the salaries of its own employees from its own funds
and maintain a sufficient number of employees in light of its
contemplated business operations;
(viii) compensate each of its consultants and agents from its
own funds for services provided to it and pay from its own assets all
obligations of any kind incurred;
(ix) not (i) acquire obligations or securities of any
Affiliate or any of the stockholders of the Corporation or (ii) buy or
hold any evidence of indebtedness issued by any other person or
entity, other than cash, Investment Securities, investment-grade
securities and Student Loans;
(x) allocate fairly and reasonably and pay from its own funds
the cost of (i) any overhead expenses (including paying for any office
space) shared with any Affiliate of the Corporation and (ii) any
services (such as asset management, legal and accounting) that are
provided jointly to the Corporation and one or more of its Affiliates;
(xi) maintain and utilize separate stationery, invoices and
checks bearing its own name and allocate separate office space (which
may be a separately identified area in office space shared with one or
more Affiliates of the Corporation) and maintain a separate sign in
the office directory of the building in which the Corporation
maintains its principal place of business;
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(xii) not make any loans or advances to, or pledge its assets
for the benefit of, any other person or entity, including, without
limitation, any Affiliate or Guarantor or any Affiliate of any
Guarantor (except as contemplated by its certificate of incorporation
and this Indenture);
(xiii) be, and at all times will hold itself out to the public
as, a legal entity separate and distinct from any other person or
entity;
(xiv) in the event that any authorized officer knows of any
misunderstanding regarding the separate identity of the Corporation,
correct such misunderstanding;
(xv) not identify itself or any of its Affiliates as a
division or part of any other entity; and
(xvi) maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in
light of its contemplated business operations.
Section 5.22. Representations and Warranties of the Corporation. By
-------------------------------------------------
execution of this Agreement, the Corporation makes the following representations
and warranties:
(a) Organization and Good Standing. It has been duly organized and is
------------------------------
validly existing as a corporation in good standing under the laws of the
State of South Dakota, with power and authority to own its properties and
to conduct its business as such properties are currently owned and as such
business is currently conducted and is proposed to be conducted pursuant to
this Indenture.
(b) Due Qualification. It is duly qualified to do business as a
-----------------
foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or
lease of its property, the conduct of its business and the performance of
its obligations under this Indenture, the Notes and each Other Obligation
requires such qualification.
(c) Power and Authority. It has the power and authority to execute
-------------------
and deliver this Indenture and to perform its obligations pursuant thereto;
and the execution, delivery and performance of this Indenture, the Notes
and each Other Obligation have been duly authorized by all necessary
corporate action.
(d) No Consent Required. No consent, license, approval or
-------------------
authorization of, or registration or declaration with, any Person or any
governmental authority, bureau or agency is required to be obtained by the
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Corporation in connection with the execution, delivery or performance of
this Indenture, the Notes or any Other Obligation, except for such as have
been obtained, effected or made.
(e) No Violation. The consummation of the transactions contemplated
------------
by this Indenture, the Notes and each Other Obligation and the fulfillment
of its obligations under this Indenture, the Notes and each Other
Obligation will not conflict with, result in any breach of any of the terms
and provisions of or constitute (with or without notice, lapse of time or
both) a default under, its articles or certificate of incorporation or by-
laws, or any indenture, agreement, mortgage, deed of trust or other
instrument to which it is a party or by which it is bound, or result in the
creation or imposition of any lien upon any of its properties pursuant to
the terms of any such indenture, agreement, mortgage, deed of trust or
other instrument, or violate any law, order, rule or regulation applicable
to it of any court or of any Federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over it or any of its properties.
(f) No Proceedings. There are no proceedings or investigations
--------------
pending or, to its knowledge, threatened against it before any court,
regulatory body, administrative agency or other tribunal or governmental
instrumentality having jurisdiction over it or its properties (A) asserting
the invalidity of this Indenture, any Note or any Other Obligation,
(B) seeking to prevent the issuance of the Notes or the consummation of any
of the transactions contemplated by this Indenture, any Note or any Other
Obligation, (C) seeking any determination or ruling that might materially
and adversely affect its performance of its obligations under, or the
validity or enforceability of, this Indenture, any Note or any Other
Obligation, or (D) seeking to adversely affect the Federal income tax or
other Federal, state or local tax attributes of any Note.
(g) Place of Business. The principal executive offices of the
-----------------
Corporation are in Aberdeen, South Dakota, and the offices where the
Corporation keeps its records concerning the Financed Student Loans and
related documents are in Aberdeen, South Dakota.
(h) Not an Investment Company. The Corporation is not an "investment
-------------------------
company" within the meaning of the Investment Company Act of 1940, as
amended, or is exempt from all provisions of such Act.
(i) Binding Obligations. This Indenture, the Notes and each Other
-------------------
Obligation constitutes the legal, valid and binding obligation of the
Corporation, enforceable against the Corporation in accordance with its
terms, except (A) as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect, affecting the enforcement of creditors' rights
in general,
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and (B) as such enforceability may be limited by general principles of
equity (whether considered in a suit at law or in equity).
Section 5.23. Trustee to Furnish Monthly Servicing Report. The
-------------------------------------------
Trustee shall distribute to each Noteholder (and to each Person requesting a
copy thereof that is the beneficial owner of a Note, as evidenced to the
satisfaction of the Trustee, at such address as such beneficial owner shall
specify in writing to the Trustee) a copy of each Monthly Servicing Report
within two (2) Business Days after receipt thereof.
Section 5.24. Use of Trustee Eligible Lender Number. The Trustee
-------------------------------------
covenants and agrees not to hold any other student loans under the federal
eligible lender number under which it holds any Financed Student Loans without
(1) the express written consent of the Corporation and SLFC, and (2) having
caused the beneficial owner of any such student loans (and any other appropriate
Persons) to have entered into an agreement with the Corporation and the Trustee,
whereby the Corporation and such other beneficial owner covenant to indemnify
each other in respect of federal interest subsidies, Special Allowance Payments,
Insurance payments, Guarantee payments or any other payments by the Secretary of
Education or a Guarantee Agency (a) received by the Trustee on their behalf, (b)
later determined by the Secretary of Education or a Guarantee Agency to have
been incorrectly or inappropriately paid to the Trustee, and (c) for which the
Secretary of Education or a Guarantee Agency reimburses itself, in whole or in
part, by withholding payments to the Trustee with respect to student loans held
by the Trustee on behalf of the other party.
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ARTICLE SIX
DEFAULTS AND REMEDIES
Section 6.1. Events of Default. If any of the following events
-----------------
occur, it is hereby defined as and declared to be and to constitute an Event of
Default, whatever the reason therefor and whether voluntary or involuntary or
effected by operation of law:
(A) default in the due and punctual payment of any interest on any
Class A Note; or
(B) default in the due and punctual payment of the principal of, or
premium, if any, on, any Class A Note, whether at the Stated Maturity
thereof, at the date fixed for redemption thereof (including, but not
limited to, Sinking Fund Payment Dates) or otherwise upon the maturity
thereof; or
(C) default by the Corporation in its obligation to purchase any Class
A Note on a Purchase Date or Mandatory Tender Date therefor; or
(D) default in the due and punctual payment of any amount owed by the
Corporation to any Other Senior Beneficiary under a Senior Swap Agreement,
Senior Credit Enhancement Facility or Senior Demand Purchase Agreement; or
(E) if no Senior Obligations are Outstanding, default in the due and
punctual payment of any interest on any Class B Note; or
(F) if no Senior Obligations are Outstanding, default in the due and
punctual payment of the principal of, or premium, if any, on, any Class B
Note, whether at the Stated Maturity thereof, at the date fixed for
redemption thereof (including, but not limited to, Sinking Fund Payment
Dates) or otherwise upon the maturity thereof; or
(G) if no Senior Obligations are Outstanding, default by the
Corporation in its obligation to purchase any Class B Note on a Purchase
Date or Mandatory Tender Date therefor; or
(H) if no Senior Obligations are Outstanding, default in the due and
punctual payment of any amount owed by the Corporation to any Other
Subordinate Beneficiary under a Subordinate Swap Agreement, Subordinate
Credit Enhancement Facility or Subordinate Demand Purchase Agreement; or
(I) if no Senior Obligations or Subordinate Obligations are
Outstanding, default in the due and punctual payment of any interest on any
Class C Note; or
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(J) if no Senior Obligations or Subordinate Obligations are
Outstanding, default in the due and punctual payment of the principal of,
or premium, if any, on, any Class C Note, whether at the Stated Maturity
thereof, at the date fixed for redemption thereof (including, but not
limited to, Sinking Fund Payment Dates) or otherwise upon the maturity
thereof; or
(K) default in the performance of any of the Corporation's obligations
with respect to the transmittal of moneys to be credited to the Revenue
Fund, the Rebate Fund, the Acquisition Fund or the Note Fund under the
provisions hereof and such default shall have continued for a period of
thirty (30) days; or
(L) default in the performance or observance of any other of the
covenants, agreements or conditions on the part of the Corporation in this
Indenture or in the Notes contained, and such default shall have continued
for a period of thirty (30) days after written notice thereof, specifying
such default, shall have been given by the Trustee to the Corporation,
which may give such notice in its discretion and shall give such notice at
the written request of the Acting Beneficiaries Upon Default, or by the
Holders of not less than ten percent (10%) in aggregate Principal Amount of
the Outstanding Notes to the Corporation and the Trustee; provided that,
except with respect to the Corporation's covenants contained in Section
5.14 hereof, if the default is such that it can be corrected, but not
within such thirty (30) days, it shall not constitute an Event of Default
if corrective action is instituted by the Corporation within such thirty
(30) days and is diligently pursued until the default is corrected; or
(M) if the Corporation shall
(1) admit in writing its inability to pay its debts generally as
they become due; or
(2) consent to the appointment of a custodian (as that term is
defined in the federal Bankruptcy Code) for or assignment to a
custodian of the whole or any substantial part of the Corporation's
property, or fail to stay, set aside or vacate within ninety (90) days
from the date of entry thereof any order or decree entered by a court
of competent jurisdiction ordering such appointment or assignment; or
(3) commence any proceeding or file a petition under the
provisions of the federal Bankruptcy Code for liquidation,
reorganization or adjustment of debts, or under any insolvency law or
other statute or law providing for the modification or adjustment of
the rights of creditors or fail to stay, set aside or vacate within
ninety (90) days from the date of entry thereof any order or decree
entered by a court of competent jurisdiction pursuant to an
involuntary proceeding,
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whether under federal or state law, providing for liquidation or
reorganization of the Corporation or modification or adjustment of the
rights of creditors.
Section 6.2. Acceleration. (A) (i) Whenever any Event of Default
------------
described in subsection (A), (B), (C), (D), (E), (F), (G), (H), (I), (J), (K) or
(M) of Section 6.1 shall have occurred and be continuing, the Trustee may (and
upon the written request of the Acting Beneficiaries Upon Default, the Trustee
shall), by notice in writing delivered to the Corporation, declare the principal
of and interest accrued on all Notes then Outstanding due and payable. A copy
of such notice shall also be provided to any Depositary, any Remarketing Agent,
any Auction Agent and any Broker-Dealer.
(ii) Whenever any Event of Default described in subsection (L) of
Section 6.1 shall have occurred and be continuing, (1) the Trustee may, by
notice in writing delivered to the Corporation, declare the principal of and
interest accrued on all Notes then Outstanding due and payable; and (2) the
Trustee shall, upon the written request of the Acting Beneficiaries Upon
Default, by notice in writing delivered to the Corporation, declare the
principal of and accrued interest on all Notes then Outstanding due and payable.
A copy of such notice shall also be provided to any Depositary, any Remarketing
Agent, any Auction Agent and any Broker-Dealer.
(B) In the event that the Trustee shall declare the principal of and
interest accrued on all Notes then Outstanding due and payable in accordance
with subsection (A) of this Section 6.2, such principal and interest shall
become immediately due and payable on the date of declaration. At any time
after such a declaration of acceleration has been made, but before a judgment or
decree for payment of the money due has been obtained by the Trustee, the Acting
Beneficiaries Upon Default may, by written notice to the Corporation and the
Trustee, rescind and annul such declaration and its consequences if:
(1) There has been paid to or deposited with the Trustee by or for the
account of the Corporation, or provision satisfactory to the Trustee has
been made for the payment of, a sum sufficient to pay:
(a) if Senior Obligations are Outstanding:
(i) all overdue installments of interest on all Class A
Notes;
(ii) the principal of (and premium, if any, on) any Class A
Notes which have become due otherwise than by such declaration of
acceleration, together with interest thereon at the rate or rates
borne by such Class A Notes;
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(iii) to the extent that payment of such interest is
lawful, interest upon overdue installments of interest on the
Class A Notes at the rate or rates borne by such Class A Notes;
(iv) all Other Senior Obligations which have become due
other than as a direct result of such declaration of
acceleration;
(v) all other sums required to be paid to satisfy the
Corporation's obligations with respect to the transmittal of
moneys to be credited to the Revenue Fund, the Rebate Fund, the
Acquisition Fund and the Interest Account under the provisions of
this Indenture; and
(vi) all sums paid or advanced by the Trustee under this
Indenture and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel
and any Paying Agents, Deposit Agents, Remarketing Agents,
Depositaries, Auction Agents and Broker-Dealers; or
(b) if no Senior Obligations are Outstanding but Subordinate
Obligations are Outstanding:
(i) all overdue installments of interest on all Class B
Notes;
(ii) the principal of (and premium, if any, on) any Class
B Notes which have become due other than by such declaration of
acceleration, together with interest thereon at the rate or rates
borne by such Class B Notes;
(iii) to the extent that payment of such interest is
lawful, interest upon overdue installments of interest on the
Class B Notes at the rate or rates borne by such Class B Notes;
(iv) all Other Subordinate Obligations which have become
due otherwise as a direct result of such declaration of
acceleration;
(v) all other sums required to be paid to satisfy the
Corporation's obligations with respect to the transmittal of
moneys to be credited to the Revenue Fund, the Rebate Fund, the
Acquisition Fund and the Interest Account under the provisions of
this Indenture; and
(vi) all sums paid or advanced by the Trustee under this
Indenture and the reasonable compensation, expenses,
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disbursements and advances of the Trustee, its agents and counsel
and any Paying Agents, Deposit Agents, Remarketing Agents,
Depositaries, Auction Agents and Broker-Dealers; or
(c) if no Senior Obligations or Subordinate Obligations are
Outstanding:
(i) all overdue installments of interest on all Class C
Notes and all overdue sinking fund installments for the
retirement of Class C Term Notes;
(ii) the principal of (and premium, if any, on) any Class
C Notes which have become due otherwise than by such declaration
of acceleration and interest thereon at the rate or rates borne
by such Class C Notes;
(iii) to the extent that payment of such interest is
lawful, interest upon overdue installments of interest on the
Class C Notes at the rate or rates borne by such Class C Notes;
(iv) all other sums required to be paid to satisfy the
Corporation's obligations with respect to the transmittal of
moneys to be credited to the Revenue Fund, the Rebate Fund and
the Acquisition Fund under the provisions of this Indenture; and
(v) all sums paid or advanced by the Trustee under this
Indenture and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel
and any Paying Agents, Deposit Agents, Remarketing Agents,
Depositaries, Auction Agents and Broker-Dealers.
(2) All Events of Default, other than the non-payment of the principal
of Notes or Other Obligations which have become due solely by, or as a
direct result of, such declaration of acceleration, have been cured or
waived as provided in Section 6.13 hereof.
No such rescission and annulment shall affect any subsequent default or impair
any right consequent thereon.
Section 6.3. Other Remedies; Rights of Beneficiaries. If an Event of
---------------------------------------
Default has occurred and is continuing, the Trustee may (a) institute judicial
proceedings in its own name and as or on behalf of a trustee of an express trust
for the collection of all amounts then payable on the Notes and any Other
Obligations or under this Indenture with respect thereto, whether by declaration
or otherwise, enforce any judgment obtained, and collect from the Corporation
and any other
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obligor upon such Notes and Other Obligations moneys adjudged due, and (b)
pursue any other available remedy by suit at law or in equity to enforce the
covenants of the Corporation herein, including, without limitation, any remedy
of a secured party under the South Dakota Uniform Commercial Code, foreclosure
and mandamus, and may pursue such appropriate judicial proceedings as the
Trustee shall deem most effective to protect and enforce, or aid in the
protection and enforcement of, the covenants and agreements herein.
If an Event of Default shall have occurred and is continuing, and if
it shall have been requested so to do by the Holders of not less than twenty-
five percent (25%) in aggregate Principal Amount of all Notes then Outstanding
or any Other Beneficiary and shall have been indemnified as provided in Section
7.1 hereof, the Trustee shall be obliged to exercise such one or more of the
rights and powers conferred by this Section 6.3 as the Trustee, being advised by
its Counsel, shall deem most expedient in the interests of the Beneficiaries;
provided, however, that the Trustee shall have the right to decline to comply
with any such request if the Trustee shall be advised by Counsel that the action
so requested may not lawfully be taken or if the Trustee receives, before
exercising such right or power, contrary instructions from the Holders of not
less than a majority in aggregate Principal Amount of the Notes then Outstanding
or from any Other Beneficiary.
Notwithstanding any other provisions of this Article Six, if an "Event
of Default" (as defined therein) occurs under a Swap Agreement, a Credit
Enhancement Facility or a Demand Purchase Agreement and, as a result, the Other
Beneficiary that is a party thereto is entitled to exercise one or more remedies
thereunder, such Other Beneficiary may exercise such remedies, including,
without limitation, the termination of such agreement, as provided therein, in
its own discretion; provided that the exercise of any such remedy shall not
adversely affect the legal ability of the Trustee or Acting Beneficiaries Upon
Default to exercise any remedy available hereunder.
No remedy by the terms of this Indenture conferred upon or reserved to
the Trustee or to the Beneficiaries is intended to be exclusive of any other
remedy, but each and every such remedy shall be cumulative and shall be in
addition to any other remedy given to the Trustee or to the Beneficiaries
hereunder or now or hereafter existing at law or in equity or by statute. The
assertion or employment of any right or remedy hereunder shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
No delay or omission to exercise any right or power accruing upon any
Event of Default shall impair any such right or power or shall be construed to
be a waiver of any such Event of Default or acquiescence therein; and every such
right and power may be exercised from time to time and as often as may be deemed
expedient by the Trustee or the Acting Beneficiaries Upon Default, as the case
may be.
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Section 6.4. Direction of Proceedings by Acting Beneficiaries Upon
-----------------------------------------------------
Default. The Acting Beneficiaries Upon Default shall have the right, at any
- -------
time, by an instrument or instruments in writing executed and delivered to the
Trustee, to direct the method and place of conducting all proceedings to be
taken in connection with the enforcement of the terms and conditions of this
Indenture; provided that (a) such direction shall not be otherwise than in
accordance with the provisions of law and of this Indenture; (b) the Trustee
shall not determine that the action so directed would be unjustly prejudicial to
the Holders of Notes or Other Beneficiaries not taking part in such direction,
other than by effect of the subordination of any of their interests hereunder;
and (c) the Trustee may take any other action deemed proper by the Trustee which
is not inconsistent with such direction.
Section 6.5. Waiver of Stay or Extension Laws. To the extent that
--------------------------------
such rights may lawfully be waived, neither the Corporation nor anyone claiming
through it or under it shall or will set up, claim, or seek to take advantage of
any stay or extension laws now or hereafter in force, which may affect the
covenants or agreements contained in this Indenture, or in the Notes, and the
Corporation, for itself and all who may claim through or under it, hereby
waives, to the extent that it lawfully may do so, the benefit of all such laws.
Section 6.6. Application of Moneys. All moneys received by the
---------------------
Trustee pursuant to any right given or action taken under the provisions of this
Article Six shall, after, except as otherwise provided in a Supplemental
Indenture, payment of the cost and expenses of the proceedings resulting in the
collection of such moneys and of the expenses, liabilities and advances incurred
or made by the Trustee with respect thereto (provided that any moneys or
Investment Securities held pursuant to Section 11.1 hereof with respect to Notes
no longer deemed Outstanding hereunder shall not be available for, nor be
applied to, the payment of any such costs, expenses, liabilities or advances),
be applied as follows:
(A) Unless the principal of all the Outstanding Notes shall have
become or shall have been declared due and payable, all such moneys shall
be applied:
FIRST: To the payment to the Senior Beneficiaries of all installments
of principal and interest then due on the Class A Notes and all Other
Senior Obligations, and if the amount available shall not be sufficient to
pay all such amounts in full, then to the payment ratably, in proportion to
the amounts due, without regard to due date, to the Class A Noteholders and
to each Other Senior Beneficiary, without any discrimination or preference;
(the Trustee shall apply the amount so apportioned to the Class A
Noteholders, as follows:
first, to the payment of the Holders of the Class A
Notes of all installments of interest (other than interest
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on overdue principal) then due and payable in the order in
which such installments became due and payable, and if the
amount available shall not be sufficient to pay in full any
particular installment, then to the payment, ratably,
according to the amounts due on such installment and other
amounts, to the Persons entitled thereto, without any
discrimination or preference, and
second, to the payment to the Holders of the Class A
Notes of the unpaid principal of any of the Class A Notes
which shall have become due and payable (other than Class A
Notes called for redemption for the payment of which money
is held pursuant to the provisions of this Indenture) in the
order of their stated payment dates, with interest on the
Principal Amount of such Notes at the respective rates
specified therein from the respective dates upon which such
Class A Notes became due and payable, and, if the amount
available shall not be sufficient to pay in full the
principal of the Class A Notes by their stated terms due and
payable on any particular date, then to the payment of such
principal, ratably, according to the amount of such
principal then due on such date, to the Persons entitled
thereto without any discrimination or preference;)
SECOND: To the payment to the Subordinate Beneficiaries of all
installments of principal and interest then due on the Class B Notes and
all Other Subordinate Obligations, and if the amount available shall not be
sufficient to pay all such amounts in full, then to the payment ratably, in
proportion to the amounts due, without regard to due date, to the Class B
Noteholders and to each Other Subordinate Beneficiary, without any
discrimination or preference;
(the Trustee shall apply the amount so apportioned to the Class B
Noteholders, as follows:
first, to the payment of the Holders of the Class B
Notes of all installments of interest (other than interest
on overdue principal) then due and payable in the order in
which such installments became due and payable, and if the
amount available shall not be sufficient to pay in full any
particular installment, then to the payment, ratably,
according to the amounts due on such installment and other
amounts, to the Persons entitled thereto, without any
discrimination or preference, and
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<PAGE>
second, to the payment to the Holders of the Class B
Notes of the unpaid principal of any of the Class B Notes
which shall have become due and payable (other than Class B
Notes called for redemption for the payment of which money
is held pursuant to the provisions of this Indenture) in the
order of their stated payment dates, with interest on the
Principal Amount of such Notes at the respective rates
specified therein from the respective dates upon which such
Class B Notes became due and payable, and, if the amount
available shall not be sufficient to pay in full the
principal of the Class B Notes by their stated terms due and
payable on any particular date, then to the payment of such
principal, ratably, according to the amount of such
principal then due on such date, to the Persons entitled
thereto without any discrimination or preference;)
THIRD, to the payment of the Holders of the Class C Notes of all
installments of interest (other than interest on overdue principal) then
due and payable in the order in which such installments became due and
payable, and if the amount available shall not be sufficient to pay in full
any particular installment, then to the payment, ratably, according to the
amounts due on such installment and other amounts, to the Persons entitled
thereto, without any discrimination or preference; and
FOURTH, to the payment to the Holders of the Class C Notes of the
unpaid principal of any of the Class C Notes which shall have become due
and payable (other than Class C Notes called for redemption for the payment
of which money is held pursuant to the provisions of this Indenture) in the
order of their stated payment dates, with interest on the Principal Amount
of such Class C Notes at the respective rates specified therein from the
respective dates upon which such Class C Notes became due and payable, and,
if the amount available shall not be sufficient to pay in full the
principal of the Class C Notes by their stated terms due and payable on any
particular date, then to the payment of such principal, ratably, according
to the amount of such principal then due on such date, to the Persons
entitled thereto without any discrimination or preference.
(B) If the principal of all Outstanding Notes shall have become due or
shall have been declared due and payable and such declaration has not been
annulled and rescinded under the provisions of this Article Six, all such
moneys shall be applied, as follows:
FIRST, to the payment to the Senior Beneficiaries of the principal and
interest then due and unpaid upon the Class A Notes and all Other Senior
Obligations, without preference or priority of principal over interest or
of
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<PAGE>
interest over principal, or of any installment of interest over any other
installment of interest, or of any Senior Beneficiary over any other Senior
Beneficiary, ratably, according to the amounts due, to the Persons entitled
thereto without any discrimination or preference; and
SECOND, to the payment to the Subordinate Beneficiaries of the
principal and interest then due and unpaid upon the Class B Notes and all
Other Subordinate Obligations, 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 Subordinate
Beneficiary over any other Subordinate Beneficiary, ratably, according to
the amounts due, to the Persons entitled thereto without any discrimination
or preference, and
THIRD, to the payment of the principal and premium, if any, and
interest then due and unpaid upon the Class C 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 Class C Note over any other Class C Note, ratably, according to the
amounts due respectively for principal and interest, and other amounts
owing, to the Persons entitled thereto without any discrimination or
preference.
(C) If the principal of all the Outstanding Notes shall have been
declared due and payable and if such declaration shall thereafter have been
rescinded and annulled under the provisions of Section 6.2 hereof, then
(subject to the provisions of paragraph (B) of this Section 6.6, in the
event that the principal of all the Outstanding Notes shall later become or
be declared due and payable) the money held by the Trustee hereunder shall
be applied in accordance with the provisions of paragraph (A) of this
Section 6.6.
Whenever moneys are to be applied by the Trustee pursuant to the
provisions of this Section 6.6, such moneys shall be applied by it at such
times, and from time to time, as the Trustee 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 Trustee shall apply such funds, it shall fix the date (which shall
be an Interest Payment Date unless it shall deem another date more suitable)
upon which such application is to be made and upon such date interest on the
amounts of principal to be paid shall cease to accrue. The Trustee shall give
such notice as it may deem appropriate of the deposits with it of any such
moneys and of the fixing of any such date, and shall not be required to make
payment to the Holder of any unpaid Note until such Note shall be presented to
the Trustee for appropriate endorsement or for cancellation if fully paid.
Whenever all Notes and interest thereon and all Other Obligations have
been fully paid under the provisions of this Section 6.6, and all expenses and
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charges of the Trustee have been paid, the Corporation and the Trustee shall be
restored to their former positions hereunder.
Section 6.7. Remedies Vested in Trustee. All rights of action,
--------------------------
including the right to file proof of claims under this Indenture or under any of
the Notes may be enforced by the Trustee without the possession of any of the
Notes or the production thereof in any trial or other proceedings relating
thereto, and any such suit or proceeding instituted by the Trustee shall be
brought in its name as Trustee without the necessity of joining as plaintiffs or
defendants any Beneficiaries, and any recovery of judgment shall be for the
equal benefit of all Beneficiaries in respect of which such judgment has been
recovered.
Section 6.8. Limitation on Suits by Beneficiaries. Except as may be
------------------------------------
permitted in a Supplemental Indenture with respect to an Other Beneficiary, no
Holder of any Note or Other Beneficiary shall have any right to institute any
suit, action or proceeding in equity or at law for the enforcement of this
Indenture or for the execution of any trust hereof or for the appointment of a
receiver or any other remedy hereunder unless (1) an Event of Default shall have
occurred and be continuing, (2) the Holders of not less than twenty-five percent
(25%) in aggregate Principal Amount of Notes then Outstanding or any Other
Beneficiary shall have made written request to the Trustee, (3) such Beneficiary
or Beneficiaries shall have offered to the Trustee indemnity, as provided in
Section 7.1 hereof, (4) the Trustee shall have thereafter failed for a period of
sixty (60) days after the receipt of the request and indemnification or refused
to exercise the powers hereinbefore granted or to institute such action, suit or
proceeding in its own name and (5) no direction inconsistent with such written
request shall have been given to the Trustee during such sixty (60)-day period
by the Holders of not less than a majority in aggregate Principal Amount of the
Notes then Outstanding or by any Other Beneficiary; it being understood and
intended that no one or more Holders of the Notes or any Other Beneficiary shall
have any right in any manner whatsoever to affect, disturb or prejudice the lien
of this Indenture by its, his, her or their action or to enforce any right
hereunder 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 and for the benefit of the Holders of all Outstanding Notes and Other
Beneficiaries hereunder as their interests may appear hereunder; provided,
however, that, notwithstanding the foregoing provisions of this Section 6.8, the
Acting Beneficiaries Upon Default may institute any such suit, action or
proceeding in their own names for the benefit of the Holders of all Outstanding
Notes and Other Beneficiaries hereunder.
Section 6.9. Unconditional Right of Noteholders To Enforce Payment.
-----------------------------------------------------
Notwithstanding any other provision in this Indenture, the Holder of any Note
shall have the right, which is absolute and unconditional, to receive payment of
the principal of, premium, if any, and interest on such Note in accordance with
the terms thereof and hereof and, upon the occurrence of an Event of Default
with
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<PAGE>
respect thereto, to institute suit for the enforcement of any such payment,
and such right shall not be impaired without the consent of such Holder.
Section 6.10. Trustee May File Proofs of Claims. In case of the
---------------------------------
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Corporation or the property of the Corporation, the
Trustee (irrespective of whether the principal of the Notes shall then be due
and payable as therein expressed or by declaration or otherwise and irrespective
of whether the Trustee shall have made any demand on the Corporation for the
payment of overdue principal or interest) shall be entitled and empowered, by
intervention in such proceeding or otherwise,
A. to file and prove a claim for the whole amount of principal,
premium, if any, and interest owing and unpaid in respect of the Notes then
Outstanding and to file such other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee (including any
claim for the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and Counsel and any Paying Agents,
Authenticating Agents, Note Registrar, Deposit Agents, Remarketing Agents,
Depositaries, Auction Agents and Broker-Dealers) and of the Beneficiaries
allowed in such judicial proceeding, and
B. to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any receiver, assignee, trustee, liquidator, sequestrator or other similar
official in any such judicial proceeding is hereby authorized by each Noteholder
to make such payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Noteholders, to pay to
the Trustee any amount due to it for the reasonable compensation, expenses and
disbursements of the Trustee, its agents and Counsel and any Paying Agents,
Authenticating Agents, Note Registrar, Deposit Agents, Remarketing Agents,
Depositaries, Auction Agents and Broker-Dealers.
Nothing herein shall affect the right of any Paying Agent,
Authenticating Agent, Note Registrar, Deposit Agent, Remarketing Agent,
Depositary, Auction Agent or Broker-Dealer or to file proofs of claim on their
own behalf in any such proceeding.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Noteholder or Other
Beneficiary any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof or Other Beneficiary, or
to authorize the Trustee to vote in respect of the claim of any Noteholder in
any such proceeding.
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<PAGE>
Section 6.11. Undertaking for Costs. The Corporation and the Trustee
---------------------
agree, and each Holder of any Note by his acceptance thereof 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 Trustee for any action taken or omitted by it as 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 6.11 shall not apply to (a) any
suit instituted by the Trustee, (b) any suit instituted by any Noteholder, or
group of Noteholders, in each case holding in the aggregate more than ten
percent (10%) of the Outstanding Principal Amount of the Notes or (c) any suit
instituted by any Noteholder for the enforcement of the payment of the principal
of, premium, if any, or interest on any Note in accordance with Section 6.9
hereof.
Section 6.12. Termination of Proceedings. In case the Trustee or any
--------------------------
Beneficiary shall have proceeded to enforce any right under this Indenture by
the appointment of a receiver, or otherwise, and such proceedings shall have
been discontinued or abandoned for any reason, or shall have been determined
adversely to the Trustee or such Beneficiary, then and in every such case the
Corporation and the Trustee or such Beneficiary shall, subject to any final
determination in such proceedings, be restored to their former positions and
rights hereunder with respect to this Indenture, and all rights, remedies and
powers of the Trustee and the Beneficiaries shall continue as if no such
proceedings had been taken.
Section 6.13. Waiver of Defaults and Events of Default. The Trustee
----------------------------------------
shall, unless the Trustee has declared the principal of and interest on all
Outstanding Notes immediately due and payable in accordance with Section 6.2
hereof and a judgment or decree for payment of the money due has been obtained
by the Trustee, waive any default or Event of Default hereunder and its
consequences but only upon written request of the Acting Beneficiaries Upon
Default; provided, however, that there shall not be waived (a) any Event of
Default arising from the acceleration of the maturity of the Notes, except upon
the rescission and annulment of such declaration as described in Section 6.2
hereof; (b) any Event of Default in the payment when due of any amount owed to
any Beneficiary (including payment of principal of or interest on any Note)
except with the consent of such Beneficiary or unless, prior to such waiver, the
Corporation has paid or deposited (or caused to be paid or deposited) with the
Trustee a sum sufficient to pay all amounts owed to such Beneficiary (including,
to the extent permitted by law, interest upon overdue installments of interest);
(c) any Event of Default arising from the failure of the Corporation to pay
unpaid expenses of the Trustee, its agents and counsel, and any Authenticating
Agent, Paying Agents, Note Registrar, Deposit Agents, Remarketing Agents,
Depositaries, Auction Agents and Broker-Dealers as required by this Indenture,
unless, prior to such waiver, the Corporation has paid or deposited (or caused
to be paid or deposited) with the Trustee sums required to
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<PAGE>
satisfy such obligations of the Corporation under the provisions of this
Indenture; or (d) any default in respect of a covenant or provision hereof
which, under Article Eight hereof, cannot be modified or amended without the
consent of the Holder of each Note affected thereby. No such waiver shall extend
to any subsequent or other default or Event of Default, or impair any right
consequent thereon.
Section 6.14. Inspection of Books and Records. The Corporation
-------------------------------
covenants that if an Event of Default shall have happened and shall not have
been remedied, the books of record and account of the Corporation relating to
the Program shall at all times be subject to the inspection and use of the
Trustee and any Holder of at least twenty five percent (25%) of the Principal
Amount of any series of Notes any of which are then Outstanding and of their
respective agents and attorneys.
The Corporation covenants that if an Event of Default shall have
happened and shall not have been remedied, the Corporation will continue to
account, as a trustee of an express trust, for all other money, securities and
property pledged under this Indenture.
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<PAGE>
ARTICLE SEVEN
FIDUCIARIES
Section 7.1. Acceptance of the Trustee. The Trustee hereby accepts
-------------------------
the trusts imposed upon it by this Indenture, and agrees to perform said trusts,
but only upon and subject to the following terms and conditions:
(A) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture; but in the case of any such certificates or
opinions which by any provisions hereof are specifically required to
be furnished to the Trustee, the Trustee shall be under a duty to
examine the same to determine whether or not they conform to the
requirements of this Indenture.
(B) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as
a prudent man would exercise or use under the circumstances in the conduct
of his own affairs.
(C) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that
(1) this subsection (C) shall not be construed to limit the
effect of subsection (A) of this Section;
(2) the Trustee shall not be liable for any error of judgment
made in good faith, unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with
the direction of the Acting Beneficiaries Upon Default relating to the
time, method and place of conducting any proceeding for any remedy
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<PAGE>
available to the Trustee, or exercising any trust or power conferred
upon the Trustee, under this Indenture; and
(4) no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to
it.
(D) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of
this Section 7.1 and to the provisions of the TIA.
(E) The Trustee may execute any of the trusts or powers hereof and
perform any of its duties by or through attorneys, agents, receivers, or
employees but shall be answerable for the conduct of the same in accordance
with the standard specified in subsection (B) above, and shall be entitled
to advice of Counsel concerning all matters of trusts hereof and duties
hereunder, and may in all cases pay such reasonable compensation to any
attorney, agent, receiver or employee retained or employed by it in
connection herewith. The Trustee may act upon the opinion or advice of any
attorney or accountant selected by it in the exercise of reasonable care.
The Trustee shall not be responsible for any loss or damage resulting from
any action or nonaction based on its good faith reliance upon such opinion
or advice.
(F) The Trustee shall not be responsible for any recital herein or in
the Notes (except with respect to the certificate of the Trustee endorsed
on the Notes), or for the investment of moneys or for the filing or
refiling of this Indenture, or the filing of financing statements, or for
the validity of the execution by the Corporation of this Indenture, or of
any Supplemental Indenture or instrument of further assurance, or for the
sufficiency of the security for the Notes issued hereunder or intended to
be secured hereby.
(G) The Trustee shall not be accountable for the use or application by
the Corporation of any of the Notes or the proceeds thereof or for the use
or application of any money paid over by the Trustee in accordance with the
provisions of this Indenture or for the use and application of money
received by any Paying Agent. The Trustee may become the Holder of Notes
secured hereby with the same rights it would have if not Trustee.
(H) The Trustee shall be protected in acting upon any notice, order,
requisition, request, consent, certificate, order, opinion (including an
opinion of Counsel), affidavit, letter, telegram or other paper or document
in good
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<PAGE>
faith deemed by it to be genuine and correct and to have been
signed or sent by the proper person or persons. Any action taken by the
Trustee pursuant to this Indenture upon the request or authority or consent
of any person who at the time of making such request or giving such
authority or consent is the Holder of any Note shall be conclusive and
binding upon all future Holders of the same Note and Notes issued in
exchange therefor or in place thereof.
(I) As to the existence or nonexistence of any fact or as to the
sufficiency or authenticity of any instrument, paper or proceeding, the
Trustee shall be entitled to rely upon a Corporation Certificate as
sufficient evidence of the facts stated therein.
(J) At any and all reasonable times, the Trustee, and its duly
authorized agents, attorneys, experts, engineers, accountants and
representatives, shall have the right fully to inspect all books, papers
and records of the Corporation pertaining to the Program, and to take such
memoranda from and in regard thereto as may be desired.
(K) The Trustee shall not be required to give any bond or surety in
respect of the execution of the said trusts and powers or otherwise in
respect of the premises.
(L) Notwithstanding anything elsewhere in this Indenture contained,
the Trustee, in respect to the authentication of any Notes, the withdrawal
of any cash or any action whatsoever within the purview of this Indenture,
and any Authenticating Agent, in respect of the authentication of Notes,
shall have the right, but shall not be required, to demand any showings,
certificates, opinions (including opinions of Counsel), appraisals or other
information, or corporate action or evidence thereof, in addition to that
by the terms hereof required as a condition of such action by the Trustee
or the Authenticating Agent, as the case may be, deemed desirable for the
purpose of establishing the right of the Corporation to the authentication
of any Notes, the withdrawal of any cash, or the taking of any other action
by the Trustee or the Authenticating Agent, as the case may be.
(M) Before taking any action hereunder requested by Noteholders or by
any Other Beneficiary, the Trustee may require that it be furnished an
indemnity bond or other indemnity satisfactory to it for the reimbursement
of all expenses to which it may be put and to protect it against all
liability, except liability which results from the negligence or willful
misconduct of the Trustee, by reason of any action so taken by the Trustee.
(N) The Trustee shall periodically file Uniform Commercial Code
continuation statements and take such other actions described in Section
4.11 hereof as required to maintain and continue the perfection of any
security
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<PAGE>
interests granted by the Corporation as debtor to the Trustee as
secured party hereunder.
(O) So long as the Trustee shall act as holder of Financed Student
Loans, the Trustee (i) shall, upon receipt of a Corporation Order, take all
necessary actions to receive all benefits to which such Financed Student
Loans are entitled under the provisions of the Higher Education Act;
provided, however, that the Trustee shall not be required to take any
actions that may be performed by the Corporation or by a Servicer; (ii)
shall not consent to any amendment to the Contract of Insurance or any
Guarantee Agreement relating to any Financed Student Loans prior to
receiving a Corporation Consent to such amendment (unless such amendment is
required by the Higher Education Act); and (iii) shall, upon receipt of a
Corporation Order, take all reasonable steps, actions and proceedings
necessary or appropriate for the enforcement of the Contract of Insurance
and each Guarantee Agreement.
Section 7.2. Fees, Charges and Expenses of the Trustee, Paying
-------------------------------------------------
Agents, Note Registrar, Authenticating Agents, Deposit Agents, Remarketing
- --------------------------------------------------------------------------
Agents, Depositaries, Auction Agents and Broker-Dealers. The Trustee and each
- -------------------------------------------------------
Paying Agent, Note Registrar, Authenticating Agent, Deposit Agent, Remarketing
Agent, Depositary, Auction Agent and Broker-Dealer shall be entitled to payment
and/or reimbursement for reasonable fees for services rendered hereunder and all
advances, legal fees and other expenses reasonably and necessarily made or
incurred by it in and about the execution of the trusts created by this
Indenture and in and about the exercise and performance of the powers and duties
of the Trustee and each Paying Agent, Note Registrar, Authenticating Agent,
Deposit Agent, Remarketing Agent, Depositary, Auction Agent and Broker-Dealer
hereunder and for the reasonable and necessary costs and expenses incurred in
defending any liability in the premises of any character whatsoever (unless such
liability is adjudicated to have resulted from the negligence or willful
misconduct of the Trustee, the Paying Agent, the Note Registrar, the
Authenticating Agent, the Deposit Agent, the Remarketing Agent, the Depositary,
the Auction Agent or the Broker-Dealer); provided that any moneys or Investment
Securities held pursuant to Section 11.1 hereof with respect to Notes no longer
deemed Outstanding hereunder, shall not be available for, nor be applied to, the
payment of any such fees, advances, costs or expenses.
Section 7.3. Notice to Beneficiaries if Default Occurs. The Trustee
-----------------------------------------
shall give to all Beneficiaries, in the manner provided in Section 13.4 hereof,
notice of all Events of Default, and of all events which, with the passage of
time or the giving of notice, or both, would become an Event of Default, known
to the Trustee, within ninety (90) days after the occurrence of such Event of
Default or other event unless such Event of Default or other event shall have
been cured before the giving of such notice; provided that, except in the case
of Events of Default in the payment of the principal of, premium, if any, or
interest on any of the Notes, the Trustee shall be protected in withholding such
notice if and so long as a trust committee of the
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Trustee in good faith determines that the withholding of such notice is in the
interest of the Beneficiaries.
Section 7.4. Intervention by Trustee. In any judicial proceeding to
-----------------------
which the Corporation is a party and which in the opinion of the Trustee and its
Counsel has a substantial bearing on the interest of the Beneficiaries, the
Trustee may intervene on behalf of Beneficiaries and shall do so if requested in
writing by the Holders of at least twenty-five percent (25%) of the aggregate
Principal Amount of the Outstanding Notes or any Other Beneficiary. The rights
and obligations of the Trustee under this Section 7.4 are subject to the
approval of a court of competent jurisdiction in the premises.
Section 7.5. Successor Trustee, Paying Agents, Authenticating Agents,
--------------------------------------------------------
Deposit Agents and Depositaries. Any corporation, association or agency into
- -------------------------------
which the Trustee and any Paying Agent, any Authenticating Agent, any Deposit
Agent or any Depositary may be converted or merged, or with which it may be
consolidated, or to which it may sell or transfer its trust business and assets
as a whole or substantially as a whole, or any corporation or association
resulting from any such conversion, sale, merger, consolidation or transfer to
which it is a party, ipso facto, shall be and become successor trustee, paying
agent, note registrar, authenticating agent, deposit agent or depositary
hereunder and vested with all of the trusts, powers, discretions, immunities,
privileges and all other matters as was its predecessor, without the execution
or filing of any instrument or any further act, deed or conveyance on the part
of any of the parties hereto, anything herein to the contrary notwithstanding;
provided that no such merger, conversion or consolidation shall relieve the
Trustee of its obligation to comply with Section 7.13 hereof.
Section 7.6. Resignation by Trustee, Paying Agents, Authenticating
-----------------------------------------------------
Agents, Deposit Agents and Depositaries. The Trustee, any Paying Agent, any
- ---------------------------------------
Authenticating Agent, any Deposit Agent and any Depositary may at any time
resign from the trusts and be discharged of the duties and obligations hereby
created by giving sixty (60) days' written notice to the Corporation and, in the
case of the Trustee, a Paying Agent, an Authenticating Agent or a Depositary, by
first-class mail to all Noteholders and Other Beneficiaries and such resignation
shall take effect upon the appointment of a successor trustee, paying agent,
authenticating agent or depositary. No such resignation of the Trustee shall
become effective until the acceptance of appointment by a successor trustee
under Section 7.8 hereof. Upon the appointment and acceptance of a successor
trustee, authenticating agent, paying agent, deposit agent or depositary, the
Trustee shall promptly cause written notice of such appointment to be given to
all Noteholders and Other Beneficiaries in the manner provided in Section 13.4
hereof, which notice shall include the address of the Principal Office of such
successor. If an instrument of acceptance by a successor trustee, paying agent,
authenticating agent, deposit agent or depositary shall not have been delivered
to the resigning Trustee, Paying Agent, Authenticating Agent, Deposit Agent or
Depositary within sixty (60) days after the giving of such notice of
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resignation, the resigning Trustee, Paying Agent, Authenticating Agent, Deposit
Agent or Depositary may petition any court of competent jurisdiction for the
appointment of a successor and any attorneys' fees incurred in connection with
any such petition shall be payable by the Corporation.
Section 7.7. Removal of Trustee. The Trustee shall be removed by the
------------------
Corporation if at any time so requested by an instrument or concurrent
instruments in writing, filed with the Trustee and the Corporation, and signed
by the Holders of a majority in Principal Amount of the Notes then Outstanding
or their attorneys- in-fact duly authorized, excluding any Notes held by or for
the account of the Corporation. Notwithstanding the foregoing, the Trustee may
not be removed during the existence of an Event of Default. No such removal of
the Trustee shall become effective until the acceptance of appointment by a
successor trustee under Section 7.8 hereof.
Section 7.8. Appointment of Successor Trustee. In case the Trustee
--------------------------------
shall be dissolved, fail to comply with Section 7.13 hereof or otherwise become
incapable of acting hereunder, or in case it shall be taken under the control of
any public officer or officers, or of a receiver appointed by a court, the
Corporation, by a Board Resolution, may remove the Trustee. If the Trustee
fails to comply with Section 7.13 hereof, any Noteholder may petition any court
of competent jurisdiction for the removal of the Trustee and the appointment of
a successor Trustee. No resignation or removal of the Trustee, and no
appointment of a successor trustee, pursuant to the provisions of this Article
Seven shall become effective until the acceptance of appointment by the
successor trustee under Section 7.9 hereof. If the Trustee shall resign, be
removed or become incapable of acting, or if a vacancy shall occur in the office
of Trustee for any cause, the Corporation, by a Board Resolution, shall promptly
appoint a successor trustee. If, within one (1) year of such resignation,
removal or incapability, or the occurrence of such vacancy, the Holders of a
majority in aggregate Principal Amount of the then Outstanding Notes, by an
instrument or concurrent instruments in writing signed by such Holders, or by
their attorney-in-fact duly authorized, appoint a successor, such successor
shall, upon its acceptance of such appointment, supersede the successor
appointed by the Corporation. If no successor trustee has been appointed and
accepted appointment as herein provided after sixty (60) days from the mailing
of notice of resignation by the Trustee under Section 7.6 hereof, or from the
date the Trustee is removed or otherwise incapable of acting hereunder, any
Beneficiary may petition a court of competent jurisdiction to appoint a
successor trustee. No appointment of a successor Trustee shall be effective
without the written consent of all Other Beneficiaries, which consent shall not
be unreasonably withheld.
The Corporation shall promptly notify any Paying Agent, Authenticating
Agent, Deposit Agent, Remarketing Agent and Depositary as to the appointment of
any successor trustee and shall promptly cause written notice of such
appointment to be given to all Noteholders and Other Beneficiaries in the
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manner provided in Section 13.4 hereof, which notice shall include the address
of the Principal Office of the successor trustee.
Section 7.9. Concerning any Successor Trustee. Every successor
--------------------------------
trustee appointed hereunder shall execute, acknowledge and deliver to its
predecessor, and to the Corporation, an instrument in writing accepting such
appointment hereunder, and thereupon such successor, without any further act,
assignment or conveyance, shall become fully vested with all the estates,
properties, rights, powers, trusts, duties and obligations of its predecessor as
trustee; but such predecessor shall, nevertheless, on the written request of the
Corporation, or of its successor trustee, execute and deliver an instrument
transferring to such successor trustee all the estates, properties, rights,
powers and trusts of such predecessor hereunder, and every predecessor trustee
shall deliver all securities and moneys and Balances held by it as trustee
hereunder to its successor together with an accounting of the Balances held by
it hereunder. Should any instrument in writing from the Corporation be required
by any successor trustee for more fully and certainly vesting in such successor
the estates, rights, powers and duties hereby vested or intended to be vested in
the predecessor trustee, any and all such instruments in writing shall, on
request, be executed, acknowledged and delivered by the Corporation. The
resignation of any trustee and the instrument or instruments removing any
trustee and appointing a successor hereunder, together with all other
instruments provided for in this Article shall be forthwith filed and/or
recorded by the successor trustee in each recording office where this Indenture
shall have been filed and/or recorded.
Section 7.10. Trustee Protected in Relying Upon Resolutions, Etc.
--------------------------------------------------
The resolutions, orders, requisitions, opinions, certificates and other
instruments conforming to the requirements of this Indenture may be accepted by
the Trustee as conclusive evidence of the facts and conclusions stated therein
and shall be full warrant, protection and authority to the Trustee for the
withdrawal of cash hereunder.
Section 7.11. Successor Trustee as Custodian of Funds. In the event
---------------------------------------
of a change in the office of trustee the predecessor trustee which has resigned
or been removed shall cease to be custodian of the Funds and Accounts, and the
successor trustee shall be and become such custodian.
Section 7.12. Co-Trustee. At any time or times, for the purpose of
----------
(a) meeting any legal requirements of any state in which the Trustee determines
it necessary to take any action hereunder or (b) establishing the eligibility of
any Financed Student Loans for receipt of federal payments with respect thereto,
the Trustee shall have power to appoint, and, upon the request of the Trustee or
of the Holders of at least twenty-five percent (25%) in aggregate Principal
Amount of Notes Outstanding or of any Other Beneficiary, the Corporation shall
for such purpose join with the Trustee in the execution, delivery and
performance of all instruments and agreements necessary or proper to appoint one
or more Persons approved by the Trustee either to act as co-trustee or co-
trustees, jointly with the Trustee of all or any
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part of the trust estate, or to act as separate trustee or separate trustees of
all or any part of the trust estate, and to vest in such person or persons, in
such capacity, such title to the trust estate or any part thereof, and such
rights, powers, duties, trusts or obligations as the Trustee may consider
necessary or desirable, subject to the remaining provisions of this Section
7.12. No co-trustee or separate trustee hereunder shall be required to meet the
terms of eligibility as a successor Trustee under Section 7.13 hereof and no
notice to Noteholders of the appointment of any co-trustee or separate trustee
shall be required under Section 7.8 hereof.
If the Corporation shall not have joined in such appointment within
fifteen (15) days after the receipt by it of a request so to do, or in case an
Event of Default shall have occurred and be continuing, the Trustee alone shall
have power to make such appointment.
The Corporation shall execute, acknowledge and deliver all such
instruments as may be required by any such co-trustee or separate trustee.
Every co-trustee or separate trustee shall, to the extent permitted by
law but to such extent only, be appointed subject to the following terms,
namely:
(A) The Notes shall be authenticated and delivered, and all rights,
powers, trusts, duties and obligations by this Indenture conferred upon the
Trustee in respect of the custody, control and management of moneys,
papers, securities and other personal property shall be exercised solely by
the Trustee.
(B) All rights, powers, trusts, duties and obligations conferred or
imposed upon the trustees shall be conferred or imposed upon and exercised
or performed by the Trustee, or by the Trustee and such co-trustee or co-
trustees or separate trustee or separate trustees jointly, as shall be
provided in the instrument appointing such co-trustee or co-trustees or
separate trustee or separate trustees, except to the extent that, under the
law of any jurisdiction in which any particular act or acts are to be
performed, the Trustee shall be incompetent or unqualified to perform such
act or acts, in which event such act or acts shall be performed by such co-
trustee or co-trustees or separate trustee or separate trustees.
(C) Any request in writing by the Trustee to any co-trustee or
separate trustee to take or to refrain from taking any action hereunder
shall be sufficient warrant for the taking, or the refraining from taking,
of such action by such co-trustee or separate trustee.
(D) Any co-trustee or separate trustee may delegate to the Trustee
the exercise of any right, power, trust, duty or obligations, discretionary
or otherwise.
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(E) The Trustee at any time, by any instrument in writing, may accept
the resignation of or remove any co-trustee or separate trustee appointed
under this Section 7.12. Upon the request of the Trustee, the Corporation
shall join with the Trustee in the execution, delivery and performance of
all instruments and agreements necessary or proper to effectuate such
resignation or removal.
(F) No trustee hereunder shall be personally liable by reason of any
act or omission of any other trustee hereunder.
(G) Any demand, request, direction, appointment, removal, notice,
consent, waiver or other action in writing delivered to the Trustee shall
be deemed to have been delivered to each such co-trustee or separate
trustee.
(H) Any moneys, papers, securities or other items of personal
property received by any such co-trustee or separate trustee hereunder
shall forthwith, so far as may be permitted by law, be turned over to the
Trustee.
Upon the acceptance in writing of such appointment by any such co-
trustee or separate trustee, it or he or she shall be vested with such title to
the trust estate or any part thereof, and with such rights, powers, duties or
obligations, as shall be specified in the instrument of appointment jointly with
the Trustee (except insofar as local law makes it necessary for any such co-
trustee or separate trustee to act alone) subject to all the terms of this
Indenture. Every such acceptance shall be filed with the Trustee. Any co-
trustee or separate trustee may, at any time by an instrument in writing,
constitute the Trustee, its or his attorney-in-fact and agent, with full power
and authority to do all acts and things and to exercise all discretion on its or
his behalf and in its or his name.
In case any co-trustee or separate trustee shall die, become incapable
of acting, resign or be removed, the title to the trust estate, and all rights,
powers, trusts, duties and obligations of said co-trustee or separate trustee
shall, so far as permitted by law, vest in and be exercised by the Trustee
unless and until a successor co-trustee or separate trustee shall be appointed
in the manner herein provided.
Section 7.13. Corporate Trustee Required; Eligibility;
----------------------------------------
Disqualification. There shall at all times be a Trustee hereunder which shall
- ----------------
be a corporation organized and doing business under the laws of the United
States of America or of any state, authorized under such laws to exercise
corporate trust powers, and shall be an "eligible lender" under the Higher
Education Act, having a combined capital stock, capital surplus and undivided
profits of at least $25,000,000, subject to supervision or examination by a
federal or state authority. If such corporation publishes reports of condition
at least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purposes of this Section 7.13,
the combined capital stock, capital surplus and undivided profits of such
corporation shall be deemed to be its combined capital
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stock, capital surplus and undivided profits as set forth in its most recent
report of condition so published.
The Trustee shall at all times satisfy the requirements of TIA (S)
310(a). The Trustee shall comply with TIA (S) 310(b), including the optional
provision permitted by the second sentence of TIA (S) 310(b)(9); provided,
however, that there shall be excluded from the operation of TIA (S) 310(b)(1)
any indenture or indentures under which other securities of the Corporation are
outstanding if the requirements for such exclusion set forth in TIA (S)
310(b)(1) are met.
Section 7.14. Preferential Collection of Claims Against Corporation.
-----------------------------------------------------
The Trustee shall comply with TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated.
Section 7.15. Statement by Trustee of Funds and Accounts and Other
----------------------------------------------------
Matters. Not more than thirty (30) days after the close of each Fiscal Year the
- -------
Trustee shall furnish the Corporation and any Noteholder or Other Beneficiary
filing with the Trustee a written request for a copy, a statement setting forth
(to the extent applicable) in respect to such Fiscal Year, (a) all transactions
relating to the receipt, disbursement and application of all moneys received by
the Trustee pursuant to all terms of this Indenture, (b) the Balances held by
the Trustee and any Deposit Agent at the end of such Fiscal Year to the credit
of each Fund and Account, (c) a brief description of all moneys, Student Loans
and Investment Securities held by the Trustee and any Deposit Agent as part of
the Balance of each Fund and Account as of the end of such Fiscal Year, (d) the
Principal Amount of Notes of each series purchased by the Trustee during such
Fiscal Year from moneys available therefor in any Fund pursuant to the
provisions of this Indenture and the respective purchase price of such Notes,
(e) the Principal Amount of Notes of each series retired, at their Stated
Maturity or by redemption, during such Fiscal Year and the Redemption Prices
thereof, if any, and (f) any other information which the Corporation may
reasonably request.
In addition, the Trustee shall furnish the Corporation on the fifth
day of each calendar month a brief description of all moneys, Student Loans and
Investment Securities to the credit of each Fund and Account as of the last
Monthly Payment Date prior thereto.
Section 7.16. Trustee, Authenticating Agent, Note Registrar, Paying
-----------------------------------------------------
Agents, Deposit Agents, Remarketing Agents, Depositaries, Auction Agents and
- ----------------------------------------------------------------------------
Broker-Dealers May Buy, Hold, Sell or Deal in Notes. The Trustee, the
- ---------------------------------------------------
Authenticating Agent, any Note Registrar, any Paying Agent, any Deposit Agent,
any Remarketing Agent, any Depositary, any Auction Agent or any Broker-Dealer
and its directors, officers, employees or agents may, in good faith, buy, sell,
own, hold and deal in any of the Notes and may join in any action which any
Holder of a Note may be entitled to take, with like effect as if such Trustee,
Authenticating
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Agent, Note Registrar, Paying Agent, Deposit Agent, Remarketing Agent,
Depositary, Auction Agent or Broker-Dealer were not the Trustee, the
Authenticating Agent, a Note Registrar, a Paying Agent, a Deposit Agent, a
Remarketing Agent, a Depositary, an Auction Agent or a Broker-Dealer, as the
case may be, under this Indenture. However, the Trustee is required to comply
with Sections 7.13 and 7.14.
Section 7.17. Authenticating Agent and Paying Agents; Paying Agents
-----------------------------------------------------
To Hold Moneys in Trust. Any Paying Agent shall be appointed by or pursuant to
- -----------------------
a Supplemental Indenture providing for the issuance of such series of Notes.
Each Paying Agent shall hold in trust for the benefit of the Holders of the
Notes and the Trustee any sums held by such Paying Agent for the payment of the
principal of, premium, if any, and interest on and any Carry-Over Amounts (and
accrued interest thereon) with respect to the Notes. Anything in this paragraph
to the contrary notwithstanding, the Corporation may, at any time, for the
purpose of obtaining a satisfaction and discharge of this Indenture, or for any
other reason, cause to be paid to the Trustee all sums held in trust by any
Paying Agent hereunder as required by this paragraph, such sums to be held by
the Trustee upon the trusts herein contained, and such Paying Agent shall
thereupon be released from all further liability with respect to such sums.
Any Authenticating Agent shall be appointed by or pursuant to a
Supplemental Indenture providing for the issuance of such series of Notes. The
Authenticating Agent shall have the power to act in the receipt, authentication
and delivery of Notes in connection with transfers, exchanges and registrations
hereunder.
Each Authenticating Agent and Paying Agent other than the Trustee
shall designate its Principal Office and signify its acceptance of the duties
and obligations imposed upon it by this Indenture by executing and delivering to
the Corporation a written acceptance thereof under which, in the case of the
Paying Agent, the Paying Agent will agree particularly:
(1) to hold all sums held by it pursuant to this Indenture in trust
for the benefit of the Holders of the Notes until such sums shall be paid
to such Holders or otherwise disposed of as herein provided;
(2) at any time during the continuance of any Event of Default, upon
the written request of the Trustee, to forthwith pay to the Trustee all
sums so held in trust by such Paying Agent; and
(3) in the event of the resignation or removal of such Paying Agent,
pay over, assign and deliver any moneys, records or securities held by it
as Paying Agent to its successor or, if there be no successor, to the
Trustee.
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No Paying Agent shall be obligated to expend its own funds in paying
Debt Service on, or Carry-Over Amounts (including accrued interest thereon) with
respect to, the Notes.
Section 7.18. Removal of Authenticating Agent and Paying Agents;
--------------------------------------------------
Successors. Any Authenticating Agent and any Paying Agent may be removed at any
- ----------
time by an instrument filed with such Authenticating Agent or Paying Agent, as
the case may be, and the Trustee and signed by the Corporation. Any successor
authenticating agent or paying agent shall be appointed by the Corporation and
shall be a bank having trust powers or trust company duly organized under the
laws of any state of the United States or a national banking association having
trust powers, having, in the case of a successor paying agent, a capital stock
and surplus aggregating at least $25,000,000, and, in the case of a successor
authenticating agent, its Principal Office for the performance of its functions
as Authenticating Agent under this Indenture in the City of New York, New York,
and willing and able to accept the office on reasonable and customary terms and
authorized by law to perform all the duties imposed upon it by this Indenture
and any Supplemental Indenture. Upon the appointment and acceptance of a
successor authenticating agent or paying agent, the Corporation shall promptly
give written notice of such appointment to the Trustee and the Trustee shall
promptly cause written notice thereof to be given to all Beneficiaries in the
manner provided in Section 13.4 hereof, which notice shall include the address
of the Principal Office of such successor.
In the event of the resignation or removal of any Authenticating Agent
or any Paying Agent, such Authenticating Agent or Paying Agent shall pay over,
assign and deliver any moneys, records or securities held by it as
Authenticating Agent (and Note Registrar, if appropriate) or Paying Agent, as
the case may be, to its successors or, if there be no successor, to the Trustee.
Section 7.19. Appointment and Qualifications of Deposit Agents. A.
------------------------------------------------
The Corporation may, in a Supplemental Indenture, appoint one or more Deposit
Agents for any part or all of one or more of the following Funds: the Revenue
Fund, the Acquisition Fund or the Administration Fund. Each Deposit Agent shall
signify its acceptance of the duties imposed upon it hereunder by written
acceptance filed with the Corporation and the Trustee. Any Deposit Agent may be
removed at any time by the Corporation by Board Resolution and by instrument
signed by an Authorized Officer of the Corporation filed with such Deposit
Agent.
B. Each Deposit Agent appointed by the Corporation shall be an
incorporated bank having trust powers or trust company organized under the laws
of the State, or a national banking association having trust powers, having its
principal office in the State of South Dakota and having a combined capital and
surplus of at least $5,000,000.
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C. The Corporation will cause each Deposit Agent to execute and
deliver to the Trustee an instrument in which such Deposit Agent shall agree
with the Trustee that such Deposit Agent will
(1) hold all sums held by it pursuant to this Indenture in trust for
the benefit of the Beneficiaries until such sums shall be paid to such
Beneficiaries or otherwise disposed of as herein provided;
(2) at any time during the continuance of any Event of Default, upon
the written request of the Trustee, forthwith pay to the Trustee all sums
so held in trust by such Deposit Agent; and
(3) in the event of the resignation or removal of such Deposit Agent,
pay over, assign and deliver any moneys or securities held by it as Deposit
Agent to its successor or, if there be no successor, to the Trustee.
D. The Corporation may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by
Corporation Order direct any Deposit Agent to pay to the Trustee all sums held
in trust by such Deposit Agent such sums to be held by the Trustee upon the same
trusts as those upon which such sums were held by such Deposit Agent, and, upon
such payment by any Deposit Agent to the Trustee, such Deposit Agent shall be
released from all further liability with respect to such sums.
Section 7.20. Appointment and Qualifications of Depositaries. The
----------------------------------------------
Corporation may, in a Supplemental Indenture, appoint a Depositary with respect
to one or more series of Notes. The Depositary shall, by entering into a
Depositary Agreement, designate to the Trustee its Principal Offices for the
purposes of its functions as Depositary and, if applicable, Authenticating Agent
and Note Registrar hereunder and signify its acceptance of the duties and
obligations imposed upon it hereunder (including, if applicable, those of
Authenticating Agent and Note Registrar) and under the Depositary Agreement, and
under which the Depositary will agree, particularly:
(a) to hold all Notes delivered to it hereunder in trust for the
benefit of the respective Noteholders which shall have so delivered such
Notes until moneys representing the purchase price of such Notes shall have
been delivered to or for the a ccount of or to the order of such
Noteholders;
(b) to hold all moneys delivered to it hereunder for the purchase of
Notes in trust for the benefit of the person or entity which shall have so
delivered such moneys until the Notes purchased with such moneys shall have
been delivered to or for the account of such person or entity; and
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(c) to keep such books and records as shall be consistent with
prudent industry practice and to make such books and records available for
inspection by the Corporation and the Trustee at all reasonable times.
The Corporation shall cooperate with the Depositary and the Trustee to
cause the necessary arrangements to be made and to be thereafter continued
whereby funds from the sources specified herein will be made available for the
purchase of the Notes which are Deemed Tendered and whereby Notes, executed by
the Corporation and authenticated by the Trustee or the Authenticating Agent,
shall be made available to the Remarketing Agent, the Trustee or the Depositary
to the extent necessary for delivery pursuant the applicable provisions of the
related Supplemental Indenture.
The Depositary shall be a commercial bank or trust company duly
organized under the laws of the United States or any state or territory thereof,
having its Principal Office for the performance of its functions as Depositary
hereunder located in New York, New York, having a combined capital stock,
surplus and undivided profits of at least $100,000,000 and authorized by law to
perform all the duties imposed upon it by this Indenture (including, if
applicable, those of Authenticating Agent and Note Registrar) and the Depositary
Agreement. The Depositary may at any time resign and be discharged of the
duties and obligations created by this Indenture and the Depositary Agreement
(including such duties and obligations as Note Registrar and Authenticating
Agent hereunder) by giving at least sixty (60) days' notice to the Corporation,
the Trustee and any related Credit Facility Provider, provided that such
resignation shall not be effective until the appointment of a successor
depositary by the Corporation. The Depositary may be replaced at any time, at
the direction of the Corporation, by an instrument, signed by an Authorized
Officer of the Corporation, filed with the Remarketing Agent, the Depositary,
the Trustee and any related Credit Facility Provider at least sixty (60) days
prior to the effective date of such replacement, provided that such replacement
shall not be effective until the appointment of a successor depositary by the
Corporation. Upon the appointment and acceptance of a successor depositary, the
Corporation shall promptly give written notice of such appointment to the
Trustee and the Trustee shall promptly cause written notice thereof to be given
to all Noteholders in the manner provided in Section 13.4 hereof, which notice
shall include the address of the Principal Office of such successor.
In the event of the resignation or removal of the Depositary, the
Depositary shall pay over, assign and deliver any moneys, Notes and records held
by it in such capacity (including any such moneys, Notes and records held by it
as Authenticating Agent and Note Registrar) to its successor or, if there be no
successor, to the Trustee.
In the event that the Depositary shall be removed or be dissolved, or
if the property or affairs of the Depositary shall be taken under the control of
any state or federal court or administrative body because of bankruptcy or
insolvency, or for
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any other reason, and the Corporation shall not have appointed its successor as
Depositary, the Trustee, notwithstanding the foregoing provisions of this
Section 7.20, shall ipso facto be deemed to be the Depositary for all purposes
of this Indenture until the appointment by the Corporation of the successor
depositary, and the Trustee shall be required to perform the functions of the
Depositary (and, if applicable, of Note Registrar and Authenticating Agent) as
set forth in this Indenture and the Depositary Agreement.
Section 7.21. Remarketing Agents. The Corporation may, in a
------------------
Supplemental Indenture, appoint a Remarketing Agent with respect to one or more
series of Notes. The Remarketing Agent shall designate its Principal Office and
signify its acceptance of the duties and obligations imposed upon it hereunder
by entering into a Remarketing Agreement under which the Remarketing Agent will
agree, particularly:
(a) to determine any variable interest rate in accordance with the
applicable provisions of the related Supplemental Indenture;
(b) to determine any fixed interest rate in accordance with the
applicable provisions of the related Supplemental Indenture;
(c) to hold all Notes delivered to it hereunder in trust for the
benefit of the respective Noteholders which shall have so delivered such
Notes until moneys representing the purchase price of such Notes shall have
been delivered to or for the account of or to the order of such
Noteholders;
(d) to hold all moneys delivered to it hereunder for the purchase of
Notes in trust for the benefit of the person or entity which shall have so
delivered such moneys until the Notes purchased with such moneys shall have
been delivered to or for the account of such person or entity; and
(e) to keep such books and records as shall be consistent with
prudent industry practice and to make such books and records available for
inspection by the Corporation and the Trustee at all reasonable times.
Section 7.22. Qualifications of Remarketing Agents. The Remarketing
------------------------------------
Agent shall be a member of the National Association of Securities Dealers, Inc.,
have a capitalization of at least $50,000,000 and be authorized by law to
perform all the duties imposed upon it by this Indenture and the Remarketing
Agreement. The Remarketing Agent may at any time resign and be discharged of
the duties and obligations created by this Indenture and the Remarketing
Agreement (i) by giving at least sixty (60) days' notice to the Corporation, the
Trustee, the Depositary and any related Credit Facility Provider, provided that
such resignation shall not be effective until a successor Remarketing Agent has
been appointed by the Corporation and any related Credit Facility Provider has
consented in writing thereto, which consent shall not be unreasonably withheld,
or (ii) by giving notice to the Corporation, the
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Trustee and the Depositary under the circumstances set forth in the Remarketing
Agreement. The Remarketing Agent may be replaced at any time, at the direction
of the Corporation, by an instrument signed by an Authorized Officer of the
Corporation, filed with the Remarketing Agent, the Trustee, the Depositary and
any related Credit Facility Provider, at least sixty (60) days prior to the
effective date of such replacement, provided that such replacement shall not be
effective until a successor Remarketing Agent has been appointed by the
Corporation and any related Credit Facility Provider has consented in writing
thereto, which consent shall not be unreasonably withheld.
In the event of the resignation or removal of the Remarketing Agent,
the Remarketing Agent shall pay over, assign and deliver any moneys and Notes
held by it in such capacity to its successor or, if there be no successor, to
the Trustee.
In the event that the Remarketing Agent shall resign, be removed or be
dissolved, or if the property or affairs of the Remarketing Agent shall be taken
under the control of any state or federal court or administrative body because
of bankruptcy or insolvency, or for any other reason, and the Corporation shall
not have appointed its successor as Remarketing Agent, the Trustee,
notwithstanding the provisions of the first paragraph of this Section 7.22,
shall ipso facto be deemed to be the Remarketing Agent for all purposes of this
Indenture until the appointment by the Corporation of the successor Remarketing
Agent; provided, however, that the Trustee, in its capacity as Remarketing
Agent, shall not be required to sell Notes or to determine the interest rate on
the Notes. Nothing in this Section shall be construed as conferring on the
Trustee additional duties other than as set forth herein.
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ARTICLE EIGHT
SUPPLEMENTAL INDENTURES
Section 8.1. Supplemental Indentures Not Requiring Consent of
------------------------------------------------
Beneficiaries. The Corporation and the Trustee may, from time to time and at
- -------------
any time, without the consent of, or notice to, any of the Noteholders or any
Other Beneficiary (except to the extent, if any, required pursuant to a
Supplemental Indenture authorizing the issuance of a series of Notes), and when
so required by this Indenture shall, enter into an indenture or indentures
supplemental to this Indenture as shall not be inconsistent with the terms and
provisions hereof (which Supplemental Indenture or Indentures shall thereafter
form a part hereof), so as to thereby (a) cure any ambiguity or formal defect or
omission in this Indenture or in any Supplemental Indenture, (b) grant to or
confer upon the Trustee for the benefit of the Beneficiaries any additional
rights, remedies, powers, authority or security that may lawfully be granted to
or conferred upon the Beneficiaries or the Trustee, (c) describe or identify
more precisely any part of the Trust Estate or subject additional revenues,
properties or collateral to the lien and pledge of this Indenture, (d) evidence
the appointment of a separate trustee or a co-trustee or the succession of a new
Trustee hereunder, (e) authorize issuance of a series of Notes, subject to the
requirements of Article Three hereof, (f) modify, eliminate and/or add to the
provisions of this Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the Trust Indenture Act of 1939, as then
amended, or under any similar Federal statute enacted after July 1, 1997, and to
add to this Indenture such other provisions as may be expressly permitted by
said Trust Indenture Act of 1939, excluding, however, the provisions referred to
in Section 316(a)(2) of said Trust Indenture Act of 1939, (g) modify, eliminate
and/or add to the provisions of this Indenture to such extent as shall be
necessary or advisable in order to comply with the requirements of Section 148
or any other provision of the Code and the Treasury Regulations pertaining
thereto with respect to the exclusion of interest on any Tax Exempt Notes from
gross income for purposes of federal income taxation, (h) amend the assumptions
contained in the definition of "Cash Flow Projection" in Section 1.1 hereof
(upon receipt by the Trustee from each Rating Agency of written confirmation
that the outstanding ratings on any of the Unenhanced Outstanding Notes will not
be reduced or withdrawn as a result of such amendment or, if no Unenhanced Notes
are then Outstanding, but Other Obligations are Outstanding, the Other
Beneficiaries holding such Outstanding Other Obligations consent to the
amendment of such assumptions, as evidenced in writing to the Trustee by each
such Other Beneficiary), (i) modify this Indenture (including deletions of or
changes to provisions of this Indenture or additions to this Indenture or any
combination of deletions, changes and additions) as required by any Credit
Facility Provider or Swap Counterparty, or otherwise necessary to give effect to
any Credit Enhancement Facility, Demand Purchase Agreement, Swap Agreement or
Swap Counterparty Guarantee authorized to be issued under Section 5.2 hereof, at
the time of issuance of a series of Notes to which such agreements relate, if
the Trustee shall have received written confirmation from each Rating
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Agency that such modifications will not cause the outstanding rating assigned by
such Rating Agency to any of the Notes to be lowered, withdrawn or otherwise
impaired; provided that no such modifications shall be effective (1) if the
consent of any Noteholders would be required therefor under the proviso
contained in Section 8.2 hereof and such consent has not been obtained, or (2)
the Trustee shall determine that such modifications are to the prejudice of any
Class C Noteholder or to any Other Beneficiary, or (j) make any other change in
this Indenture which, in the judgment of the Trustee, is not to the prejudice of
the Trustee or the Holders of any Notes or any Other Beneficiary.
Section 8.2. Supplemental Indentures Requiring Consent of
--------------------------------------------
Beneficiaries. Exclusive of Supplemental Indentures covered by Section 8.1
- -------------
hereof and subject to the terms and provisions contained in this Section 8.2,
and not otherwise, the Trustee (upon receipt of an instrument evidencing the
consent to the below-mentioned Supplemental Indenture by: (i) if they are
affected thereby, the Holders of not less than two-thirds of the aggregate
Principal Amount of the Outstanding Class A Notes not held by the Corporation or
a related person, (ii) if they are affected thereby, the Holders of not less
than two-thirds of the aggregate Principal Amount of the Outstanding Class B
Notes not held by the Corporation or a related person, and (iii) each other
Person which must consent to such Supplemental Indenture as provided in any then
outstanding Supplemental Indenture authorizing the issuance of a series of
Notes) shall join with the Corporation in the execution of such other indenture
or indentures supplemental hereto as shall be deemed necessary and desirable for
the purpose of modifying, altering, amending, adding to or rescinding, in any
particular, any of the terms or provisions contained in this Indenture;
provided, however, that nothing contained in this Article Eight shall permit or
be construed as permitting without the consent of the Holder of each Note and
each Other Beneficiary which would be affected thereby (a) an extension of the
maturity of the principal of or the interest on any Note, whether at the Stated
Maturity thereof, on a Sinking Fund Payment Date or otherwise, or (b) a
reduction in the Principal Amount, Redemption Price or purchase price of any
Note or the rate of interest thereon, or (c) a privilege or priority of any
Senior Obligation over any other Senior Obligation, (d) a privilege or priority
of any Subordinate Obligation over any other Subordinate Obligation, or (e) a
privilege or priority of any Class C Note or Class C Notes over any other Class
C Note or Class C Notes, or (f) a privilege of any Class A Notes over any Class
B Notes or Class C Notes, or of any Class B Notes over any Class C Notes, other
than as provided herein, or (g) the surrendering of a privilege or a priority
granted hereby if, in the judgment of the Trustee, to the detriment of another
Beneficiary hereunder, or (h) a reduction or an increase in the aggregate
Principal Amount of the Notes required for consent to such Supplemental
Indenture, or (i) the creation of any lien ranking prior to or on a parity with
the lien of this Indenture on the Trust Estate or any part thereof, except as
hereinbefore expressly permitted, or (j) any Beneficiary to be deprived of the
lien hereby created on the rights, title, interest, privileges, revenues, moneys
and securities pledged hereunder, or (k) the modification of any of the
provisions of this Section 8.2, or (l) the modification of any provision of a
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Supplemental Indenture which states that it may not be modified without the
consent of the Holders of Notes issued pursuant thereto or any Notes of the same
class or any Beneficiary that has provided a Credit Enhancement Facility, Demand
Purchase Agreement or Swap Agreement of such class.
For purposes of this Indenture, Notes are deemed "affected" by an
amendment if such amendment adversely affects or diminishes the rights of the
Holders thereof to be assured of the payment of principal of, premium, if any,
and interest on and any Carry-Over Amount (and accrued interest thereon) with
respect to such Notes, taking into account the priorities between classes of
Notes theretofore prescribed hereby. The Trustee may in its discretion
determine whether any Notes would be affected by any amendment and any such
determination shall be conclusive upon the Holders of all Notes, whether
theretofore or thereafter authenticated and delivered under this Indenture. The
Trustee shall not be liable for any such determination made in good faith.
If at any time the Corporation shall request the Trustee to enter into
any such Supplemental Indenture for any of the purposes of this Section, the
Trustee shall, upon being satisfactorily indemnified with respect to expenses,
cause notice of the proposed execution of such Supplemental Indenture to be
mailed to each Holder of an Outstanding Note in accordance with the provisions
of Section 13.4 hereof and to each Other Beneficiary. Such notice shall briefly
set forth the nature of the proposed Supplemental Indenture and shall state that
copies thereof are on file at the Principal Office of the Trustee for inspection
by all Beneficiaries. The Trustee shall not, however, be subject to any
liability to any Noteholder or any Other Beneficiary by reason of its failure to
mail such notice, and any such failure shall not affect the validity of such
Supplemental Indenture when consented to and approved as provided in this
Section 8.2. If, at the time of the execution of any such Supplemental
Indenture, the Holders of Notes and each other Beneficiary shall have consented
to and approved the execution thereof as herein provided, no Beneficiary shall
have any right to object to any of the terms and provisions contained therein,
or the operation thereof, or in any manner to question the propriety of the
execution thereof, or to enjoin or restrain the Trustee or the Corporation from
executing the same or from taking any action pursuant to the provisions thereof.
Upon the execution of any such Supplemental Indenture as in this Section 8.2
permitted and provided this Indenture shall be and be deemed to be modified and
amended in accordance therewith.
Section 8.3. Rights of Trustee. If, in the opinion of the Trustee,
-----------------
any Supplemental Indenture provided for in this Article Eight adversely affects
the rights, duties or immunities of the Trustee under this Indenture or
otherwise, the Trustee may, in its discretion, decline to execute such
Supplemental Indenture, except to the extent that this may be required in the
case of a Supplemental Indenture entered into under Section 8.1 hereof. The
Trustee shall be entitled to receive, and shall be fully protected in relying
upon, an opinion of its Counsel as
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conclusive evidence that any such Supplemental Indenture conforms to the
requirements of this Indenture.
Section 8.4. Opinion and Rating Agency Approval Required Prior to
----------------------------------------------------
Execution of Supplemental Indenture. No Supplemental Indenture shall be
- -----------------------------------
executed unless, prior to the execution thereof: (1) if any Tax Exempt Notes
have previously been issued, the Corporation shall have provided to the Trustee
an opinion of Bond Counsel to the effect that the execution and delivery of such
Supplemental Indenture will not adversely affect the exclusion from the gross
income of the owners thereof for federal income tax purposes pursuant to Section
103 of the Code of interest on any of such Tax Exempt Notes; and (2) the Trustee
shall have received written evidence from each Rating Agency that execution and
delivery of such Supplemental Indenture will not adversely affect any rating or
ratings then applicable to any of the Outstanding Notes.
Section 8.5. Consent of Depositaries. So long as any Depositary
-----------------------
Agreement is in effect, (i) no Supplemental Indenture which materially adversely
affects the rights, duties or immunities of the Depositary created by this
Indenture or the Depositary Agreement (including, if applicable, such duties and
obligations as Note Registrar and Authenticating Agent hereunder) shall become
effective unless and until delivery to the Trustee of a written consent of the
Depositary to such Supplemental Indenture, and (ii) the Trustee shall promptly
furnish to the Depositary a copy of each Supplemental Indenture.
Section 8.6. Consent of Remarketing Agents. So long as any
-----------------------------
Remarketing Agreement is in effect, (i) no Supplemental Indenture which
materially adversely affects the rights, duties or immunities of the Remarketing
Agent created by this Indenture or the Remarketing Agreement shall become
effective unless and until delivery to the Trustee of a written consent of the
Remarketing Agent to such Supplemental Indenture, and (ii) the Trustee shall
promptly furnish to the Remarketing Agent a copy of each Supplemental Indenture.
Section 8.7. Consent of Auction Agents. So long as any Auction Agent
-------------------------
Agreement is in effect, (i) no Supplemental Indenture which materially adversely
affects the rights, duties or immunities of the Auction Agent created by this
Indenture or the Auction Agent Agreement shall become effective unless and until
delivery to the Trustee of a written consent of the Auction Agent to such
Supplemental Indenture, and (ii) the Trustee shall promptly furnish to the
Auction Agent a copy of each Supplemental Indenture.
Section 8.8. Consent of Broker-Dealers. So long as any Broker-Dealer
-------------------------
Agreement is in effect, (i) no Supplemental Indenture which materially adversely
affects the rights, duties or immunities of the Broker-Dealer created by this
Indenture or the Broker-Dealer Agreement shall become effective unless and until
delivery to the Trustee of a written consent of the Broker-Dealer to such
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Supplemental Indenture, and (ii) the Trustee shall promptly furnish to the
Broker-Dealer a copy of each Supplemental Indenture.
Section 8.9. Conformity With Trust Indenture Act. Every amendment of
------------------------------------
this Indenture and every supplemental indenture executed pursuant to this
Article VIII 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.
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ARTICLE NINE
NOTEHOLDERS' MEETINGS
Section 9.1. Purposes for Which Noteholders' Meetings May Be Called.
------------------------------------------------------
A meeting of Noteholders may be called at any time and from time to time
pursuant to this Article Nine for any of the following purposes:
A. to give any notice to the Trustee or the Corporation, or to give
any directions to the Trustee, or to consent to the waiving of any default
hereunder and its consequences, or to take any other action authorized to
be taken by Noteholders pursuant to Article Six hereof;
B. to remove the Trustee and appoint a successor trustee pursuant to
Article Seven hereof;
C. to consent to the execution of any Supplemental Indenture pursuant
to Article Eight hereof; or
D. to take any other action authorized to be taken by or on behalf of
the Holders of any specified aggregate Principal Amount of the Notes under
any other provision of this Indenture or under applicable law.
Section 9.2. Place of Meetings of Noteholders. Meetings of
--------------------------------
Noteholders may be held at such place or places as the Trustee or, in case of
its failure to act, the Corporation or the Noteholders calling the meeting,
shall from time to time determine.
Section 9.3. Call and Notice of Noteholders' Meetings.
----------------------------------------
A. The Trustee may at any time call a meeting of Noteholders to be
held at such time and at such place as the Trustee shall determine. Notice of
every meeting of Noteholders, setting forth the time and the place of such
meeting and in general terms the action proposed to be taken at such meeting,
shall be mailed to each Noteholder in accordance with the provisions of Section
13.4 hereof and to each Other Beneficiary not less than twenty (20) nor more
than one hundred eighty (180) days prior to the date fixed for the meeting. Any
failure of the Trustee to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such meeting.
B. In case at any time the Corporation, pursuant to a Corporation
Request, the Holders of at least ten percent (10%) in aggregate Principal Amount
of the Notes then Outstanding or any Other Beneficiary, shall have requested the
Trustee to call a meeting of the Noteholders, by written request setting forth
in reasonable detail the action proposed to be taken at the meeting, and the
Trustee shall not have mailed the first notice of such meeting within twenty
days after
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receipt of such request, then the Corporation, the Holders of Notes in the
amount above specified or such Other Beneficiary may determine the time, place
and location for such meeting and may call such meeting to take any action
authorized in Section 9.1 hereof by giving notice thereof as provided in
subsection A of this Section 9.3.
Section 9.4. Persons Entitled To Vote at Noteholders' Meetings. To
-------------------------------------------------
be entitled to vote at any meeting of Noteholders, a person shall be (i) a
Holder of one or more Notes, or (ii) a person appointed by an instrument in
writing as proxy for a Holder or Holders of Notes by such Holder or Holders.
The only persons who shall be entitled to be present or to speak at any meeting
of Noteholders shall be the persons entitled to vote at such meeting and their
counsel, any representatives of the Trustee and its counsel, any representatives
of any Other Beneficiary and their counsel and any representatives of the
Corporation and its counsel.
Section 9.5. Determination of Voting Rights; Conduct and Adjournment
-------------------------------------------------------
of Meetings.
- -----------
A. Notwithstanding any other provisions of this Indenture, the
Trustee may make such reasonable regulations as it may deem advisable for any
meeting of Noteholders in regard to proof of the ownership of Notes and of the
appointment of proxies and in regard to the appointment and duties of inspectors
of votes, the submission and examination of proxies, certificates and other
evidence of the right to vote, and such other matters concerning the conduct of
the meeting as it shall deem appropriate. Except as otherwise permitted or
required by any such regulations, the holding of Notes shall be proved in the
manner specified in Section 13.1 hereof and the appointment of any proxy shall
be proved in the manner specified in Section 13.1 hereof or by having the
signature of the person executing the proxy witnessed or guaranteed by any bank,
banker or trust company. Such regulations may provide that written instruments
appointing proxies, regular on their face, may be presumed valid and genuine
without the proof specified in Section 13.1 hereof or other proof.
B. The Trustee shall, by an instrument in writing, appoint a
temporary chairman of the meeting, unless the meeting shall have been called by
the Noteholders or the Corporation as provided in subsection B of Section 9.3
hereof, in which case the Noteholders calling the meeting or the Corporation
shall in like manner appoint a temporary chairman. A permanent chairman and a
permanent secretary of the meeting shall be elected by vote of the Holders of a
majority in aggregate Principal Amount of the Notes represented at the meeting
and entitled to vote.
C. At any meeting each Noteholder or proxy shall be entitled to one
vote for each $1.00 Principal Amount of Outstanding Notes held or represented by
him; provided, however, that no vote shall be cast or counted at any meeting in
respect of any Note challenged as not Outstanding and ruled by the chairman of
the
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meeting to be not Outstanding. The chairman of the meeting shall have no
right to vote, except as a Noteholder or proxy.
D. At any meeting of Noteholders, the presence of persons holding or
representing Notes in an aggregate Principal Amount sufficient under the
appropriate provision of this Indenture to take action upon the business for the
transaction of which such meeting was called shall constitute a quorum. Any
meeting of Noteholders duly called pursuant to Section 9.3 hereof may be
adjourned from time to time by vote of the Holders (or proxies for the Holders)
of a majority in aggregate Principal Amount of the Notes represented at the
meeting and entitled to vote, whether or not a quorum shall be present; and the
meeting may be held as so adjourned without further notice.
Section 9.6. Counting Votes and Recording Action of Meetings. The
-----------------------------------------------
vote upon any resolution submitted to any meeting of Noteholders shall be by
written ballots on which shall be subscribed the signatures of the Holders of
Notes or of their representatives by proxy and the serial number or numbers of
the Notes held or represented by them. The permanent chairman of the meeting
shall appoint two inspectors of votes who shall count all votes cast at the
meeting for or against any resolution and who shall make and file with the
secretary of the meeting their verified written reports in duplicate of all
votes cast at the meeting. A record, at least in duplicate, of the proceedings
of each meeting of Noteholders shall be prepared by the secretary of the meeting
and there shall be attached to said record the original reports of the
inspectors of votes on any vote by ballot taken thereat and affidavits by one or
more persons having knowledge of the facts setting forth a copy of the notice of
the meeting and showing that said notice was published or mailed as provided in
Section 9.3 hereof. Each copy shall be signed and verified by the affidavits of
the permanent chairman and secretary of the meeting and one such copy shall be
delivered to the Corporation and another to the Trustee to be preserved by the
Trustee, the latter to have attached thereto the ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the matters
therein stated.
Section 9.7. Revocation by Noteholders. At any time prior to (but
-------------------------
not after) the evidencing to the Trustee, in the manner provided in Section 13.1
hereof, of the taking of any action by the Holders of the percentage in
aggregate Principal Amount of the Notes specified in this Indenture in
connection with such action, any Holder of a Note, the serial number of which is
included in the Note, the Holders of which have consented to such action may, by
filing written notice with the Trustee at its Principal Office and upon proof of
holding as provided in Section 13.1 hereof, revoke such consent so far as
concerns such Note. Except as aforesaid any such consent given by the Holder of
any Note shall be conclusive and binding upon such Holder and upon all future
Holders and owners of such Note and of any Note issued in exchange therefor or
in lieu thereof, irrespective of whether or not any notation in regard thereto
is made upon such Note. Any action taken by the Holders of the percentage in
aggregate Principal Amount of the Notes specified in
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this Indenture in connection with such action shall be conclusively binding upon
the Corporation, the Trustee and the Holders of all the Notes.
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ARTICLE TEN
REDEMPTION AND PREPAYMENT
Section 10.1. Right of Redemption and Prepayment. The Notes of any
----------------------------------
series are subject to redemption and prepayment as provided in this Article Ten
and in the Supplemental Indenture creating such series.
Notes which are redeemable or may be prepaid before their Stated
Maturity shall be redeemed or prepaid in accordance with their terms, this
Indenture and (except as otherwise provided with respect to the Notes of any
particular series by the provisions of the Supplemental Indenture creating such
series) in accordance with this Article Ten.
Section 10.2. Election To Redeem, Prepay or Purchase; Notice to
-------------------------------------------------
Trustee; Senior Asset Requirement. The election of the Corporation to redeem or
- ---------------------------------
prepay any Notes or cause any Notes then subject to redemption to be purchased
by the Trustee (other than on a Purchase Date or Mandatory Tender Date) shall be
evidenced by a Corporation Order, received by the Trustee no later than the
sixtieth (60th) day prior to the applicable Redemption Date, Prepayment Date or
such other date prior to the applicable Redemption Date or Prepayment Date
established with respect to a series of Notes in the Supplemental Indenture
authorizing the issuance of the Notes of such series, stating the Redemption
Date or Prepayment Date, as the case may be, the Principal Amount, the series of
Notes, and, if applicable, the Stated Maturity within a series, to be redeemed
or prepaid.
Notwithstanding any provision hereof to the contrary but apart from
the redemption of Notes which are no longer Outstanding by reason of Section
11.1 hereof or the redemption of Class A Notes on a Sinking Fund Payment Date,
no redemption, prepayment or purchase (other than on a Purchase Date or
Mandatory Tender Date) of Notes by the Trustee shall be effected hereunder
unless prior to the Trustee giving notice of redemption, transferring moneys to
the Retirement Account to make such prepayment or soliciting such purchase, the
Corporation furnishes the Trustee a Corporation Certificate to the effect that,
as of the date Notes are to be selected for redemption or purchase or such
determination to prepay is made, (1) if Class A Notes are to be redeemed,
prepaid or purchased, either (A) after giving effect to such redemption,
prepayment or purchase, the Senior Asset Requirement will be met, or (B) (i)
prior to such redemption, prepayment or purchase, the Senior Asset Requirement
was not being met, (ii) no Class B Notes or Class C Notes will be redeemed on
the Redemption Date, prepaid on the Prepayment Date or purchased on the purchase
date for the Class A Notes then proposed to be redeemed, prepaid or purchased,
and (iii) after giving effect to such redemption, prepayment or purchase, the
Senior Percentage will be greater than it would have been without such
redemption, prepayment or purchase; (2) if Class B Notes are to be redeemed,
prepaid or purchased, after giving effect to such redemption, prepayment or
purchase, the Senior Asset Requirement will be met;
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and (3) if Class C Notes are to be redeemed, prepaid or purchased, after giving
effect to such redemption, prepayment or purchase, the Senior Asset Requirement
will be met and there shall be no deficiency then existing in the Note Fund, the
Reserve Fund or the Rebate Fund. Such Notes may be redeemed on the Redemption
Date, prepaid on the Prepayment Date or purchased on the purchase date therefor
if the foregoing conditions are met on the date such Notes are selected for
redemption or purchase or as of the date on which moneys are transferred to the
Retirement Account to make any prepayment, whether or not such conditions are
met on the Redemption Date, the Prepayment Date or the date of purchase. Any
election to redeem Notes of a series may also be conditioned upon such
additional requirements as may be set forth in the Supplemental Indenture
authorizing the issuance of such Notes.
Section 10.3. Selection by Trustee of Notes To Be Redeemed. Except
--------------------------------------------
as may be otherwise specified in a Supplemental Indenture with respect to a
series of Notes thereby created, if less than all of the Outstanding Notes of
any series are to be redeemed, the particular Notes to be redeemed shall be
selected by the Trustee from the Outstanding Notes of that series not previously
called for redemption so that, to the maximum extent possible taking into
account redemption of Notes in $5,000 increments approximately equal percentages
of each Stated Maturity of Notes of such series will be redeemed.
If less than all Notes of a series and a Stated Maturity are to be
redeemed, the Trustee shall select by lot or in such other manner as the Trustee
shall deem fair and appropriate the particular Notes of such Stated Maturity and
series to be redeemed. The Trustee may provide for the selection for redemption
of portions of the principal of Notes in the denomination larger than $5,000 or
the smallest authorized denomination of the Notes of that series or an integral
multiple thereof.
The Trustee shall promptly notify the Corporation and any Paying Agent
in writing of the Notes selected for redemption and, in the case of any Note
selected for partial redemption, the Principal Amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Notes shall relate, in
the case of any Note redeemed or to be redeemed only in part, to the portion of
the principal of such Note which has been or is to be redeemed.
Section 10.4. Notice of Redemption. Except as otherwise provided
--------------------
with respect to the Notes of any particular series by the provisions of the
Supplemental Indenture creating such series, notice of redemption shall be given
by first-class mail, postage prepaid, mailed not more than sixty (60) days nor
less than thirty (30) days prior to the Redemption Date to each Holder of Notes
to be redeemed at the address of such Holder appearing in the Note Register; but
neither failure to give such notice nor any defect in any notice so given shall
affect the
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validity of the proceedings for redemption of any Note not affected by such
failure or defect.
In addition to the notice prescribed by the foregoing paragraph, the
Trustee shall also give notice of the redemption of any Note or Notes or
portions thereof at least thirty (30) days before the Redemption Date by
certified mail or telecopy to all registered securities depositories then in the
business of holding substantial amounts of obligations of the character of the
Notes (such depositories now being The Depository Trust Company, of New York,
New York; Midwest Securities Trust Company, of Chicago, Illinois; and
Philadelphia Depository Trust Company, of Philadelphia, Pennsylvania) and to two
(2) or more national information services that disseminate information regarding
municipal bond redemptions; provided that any defect in or any failure to give
any notice of redemption prescribed by this paragraph shall not affect the
validity of the proceedings for the redemption of any Note.
All notices of redemption shall state:
a. the Redemption Date,
b. the Redemption Price,
c. the name (including series designation), Stated Maturity and CUSIP
numbers of the Notes to be redeemed, the Principal Amount of Notes of each
series to be redeemed, and, if less than all outstanding Notes of a series
are to be redeemed, the identification (and, in the case of partial
redemption, the respective Principal Amounts) of the Notes of each series
to be redeemed,
d. that, on the Redemption Date, the Redemption Price of and accrued
interest on each such Note will become due and payable and that interest on
each such Note shall cease to accrue on and after such date,
e. the place or places where such Notes are to be surrendered for
payment of the Redemption Price thereof and accrued interest thereon, and
f. if it be the case, that such Notes are to be redeemed by the
application of certain specified trust moneys and for certain specified
reasons.
Within sixty (60) days after any Redemption Date, a second notice of
redemption shall be given, in the manner described above, to the Holder of any
Note that was not presented for redemption within thirty (30) days after the
Redemption Date.
Section 10.5. Notes Payable on Redemption Date and Sinking Fund
-------------------------------------------------
Payment Date. Notice of redemption having been given as aforesaid, the Notes so
- ------------
to be redeemed shall, on the Redemption Date, become due and payable at the
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Redemption Price specified plus accrued interest thereon to the Redemption Date
and on and after such date (unless the Corporation shall default in the payment
of the Redemption Price and accrued interest) such Notes shall cease to bear
interest. Upon surrender of any such Note for redemption in accordance with
such notice, such Note shall be paid at the Redemption Price thereof plus
(unless the Redemption Date is a regularly scheduled Interest Payment Date)
accrued interest to the Redemption Date. Installments of interest whose Stated
Maturity is on or prior to the Redemption Date shall continue to be payable to
the applicable Noteholder.
If any Note called for redemption shall not be so paid upon surrender
thereof for redemption, the Redemption Price and, to the extent lawful, interest
thereon shall, until paid, bear interest from the Redemption Date at the rate
borne by the Note.
Section 10.6. Notes Redeemed or Prepaid in Part. Any Note which is
---------------------------------
to be redeemed only in part shall be surrendered to the Paying Agent (with, if
the Paying Agent so requires, due endorsement by, or a written instrument of
transfer in form satisfactory to the Paying Agent duly executed by, the Holder
thereof or his attorney duly authorized in writing) and the appropriate officers
of the Corporation shall execute and the Trustee or an Authenticating Agent
shall authenticate and deliver to the Holder of such Note, without service
charge, a new Note or Notes of the same series, of any authorized denomination
or denominations, having the same Stated Maturity and interest rate as requested
by such Holder, in aggregate Principal Amount equal to and in exchange for the
unredeemed portion of the principal of the Note so surrendered.
Any Note which is to be prepaid only in part shall remain Outstanding
in the then current Principal Amount. The Trustee shall retain a record of the
Principal Amount of each Note any portion of the principal of which has been
prepaid in part and shall give the Note Registrar (if other than the Trustee)
prompt written notice of the current Principal Amount of each such Note as of
the end of each calendar month.
Section 10.7. Purchase of Notes. The Corporation may at any time,
-----------------
but subject to Section 10.2 hereof, authorize and direct the Trustee to purchase
Notes in the open market out of any funds available for such purpose, such
purchases to be made at a price not in excess of the amount specified in this
Indenture or, if no amount is specified, the Principal Amount thereof plus
accrued interest and any applicable redemption premium. In addition, the
Corporation may, from time to time, direct the Trustee to request the submission
of tenders following published notice requesting such submission prior to making
the purchases authorized pursuant to this Section 10.7. The Corporation may
specify the maximum and minimum period of time which shall transpire between the
date upon which such notice is to be given and the date upon which such tenders
are to be accepted or may authorize the Trustee to determine the same in its
discretion. No tenders shall be considered or accepted at any price exceeding
the maximum price specified by the
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Corporation for the purchase of Notes. The Trustee shall accept bids with the
lowest price and, in the event the moneys available for purchase pursuant to
such tenders are not sufficient to permit acceptance of all tenders and if there
shall be tenders at an equal price above the amounts of moneys available for
purchase, then the Trustee shall, determine in its discretion, the Notes
tendered which shall be purchased. All Notes purchased by the Trustee pursuant
to this Section 10.7 shall be canceled and not reissued.
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ARTICLE ELEVEN
DEFEASANCE; MONEYS HELD FOR
PAYMENT OF DEFEASED NOTES
Section 11.1. Discharge of Liens and Pledges; Notes No Longer
-----------------------------------------------
Outstanding and Deemed To Be Paid Hereunder. The obligations of the Corporation
- -------------------------------------------
under this Indenture, and the liens, pledges, charges, trusts, covenants and
agreements of the Corporation herein made or provided for, shall be fully
discharged and satisfied as to any Note and such Note shall no longer be deemed
to be Outstanding hereunder:
(i) when such Note shall have been canceled, or shall have been
purchased by the Trustee from moneys held by it under this Indenture; or
(ii) as to any Note not canceled or so purchased, when payment of the
principal of and the applicable redemption premium, if any, on such Note,
plus interest on such principal to the due date thereof (whether such due
date be by reason of Stated Maturity or upon redemption or prepayment, or
otherwise), either (a) shall have been made or caused to be made in
accordance with the terms hereof, or (b) shall have been provided for by
irrevocably depositing with the Trustee and irrevocably appropriating and
setting aside exclusively for such payment, (1) moneys sufficient to make
such payment or (2) Government Obligations maturing as to principal and
interest in such amount and at such times as will ensure the availability
of sufficient moneys to make such payment and, if payment of all then
Outstanding Notes of an issue (as defined in the Arbitrage Regulations) is
to be so provided for, all payments required to be made to the United
States Treasury or otherwise with respect to Rebate Amounts and Excess
Earnings under Section 4.5 hereof, and all necessary and proper fees,
compensation and expenses of the Trustee, any Deposit Agents, any
Remarketing Agents, any Depositaries, any Auction Agents, any Broker-
Dealers, any Authenticating Agents, the Note Registrar and any Paying
Agents pertaining to the Note with respect to which such deposit is made
shall have been paid or the payment thereof provided for to the
satisfaction of the Trustee, said Deposit Agents, said Remarketing Agents,
said Depositaries, said Auction Agents, said Broker-Dealers, said
Authenticating Agents, said Note Registrar and said Paying Agents.
Any deposit under the preceding clause (b) shall be accompanied by a Corporation
Certificate certifying that the moneys and Government Obligations so
appropriated and set aside are sufficient, and will mature as needed, to pay the
principal, premium, if any, and interest due on the Note with respect to which
such deposit has been made on the Stated Maturity or Redemption Date thereof and
on each Interest Payment Date on and prior to such Stated Maturity or Redemption
Date. At such time as a Note shall be deemed to be no longer Outstanding
hereunder, as aforesaid, such Note shall cease to draw interest from the due
date thereof (whether
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<PAGE>
such due date be by reason of maturity, or upon redemption or prepayment or by
declaration as aforesaid, or otherwise) and, except for the purposes of any such
payment from such moneys or Investment Securities, shall no longer be secured by
or entitled to the benefits of this Indenture.
Notwithstanding the foregoing, (A) in the case of Notes which by their
terms may be redeemed or otherwise prepaid prior to their Stated Maturities, no
deposit under clause (b) of subparagraph (ii) above shall constitute such
payment, discharge and satisfaction as aforesaid, as to all such Notes which are
to be redeemed prior to their respective Stated Maturities, until proper notice
of such redemption shall have been previously given in accordance with Section
10.4 hereof or provision satisfactory to the Trustee shall have been irrevocably
made for the giving of such notice, and (B) in the case of Notes which may be
required to be purchased on a Purchase Date, no deposit under clause (b)(2) of
subparagraph (ii) above shall constitute such payment, discharge and
satisfaction as aforesaid.
Any such moneys so deposited with the Trustee as provided in this
Section 11.1 may at the direction of the Corporation also be invested and
reinvested in Government Obligations maturing in the amounts and time as
hereinbefore set forth, and all income from all Government Obligations in the
hands of the Trustee pursuant to this Section 11.1 which is not required for the
payment of the Notes and interest and premium thereon with respect to which such
moneys shall have been so deposited shall be deposited in the Rebate Fund, to
the extent required by Section 4.5 hereof, and thereafter (A) if any Notes are
then Outstanding, be deposited in the Revenue Fund as and when realized and
collected, for use and application as are other moneys credited to such Fund,
and (B) if no Notes are then Outstanding and no amounts are owed to any Other
Beneficiaries hereunder, be paid to the Corporation.
Notwithstanding the satisfaction and discharge of this Indenture with
respect to any Note, the right to transfer and exchange such Note pursuant to
Section 3.7 shall survive.
Notwithstanding any provision of any other Section of this Indenture
which may be contrary to the provisions of this Section 11.1, all moneys or
Investment Securities set aside and held in trust pursuant to the provisions of
this Section 11.1 for the payment of the principal of, premium, if any, and
interest on Notes shall be applied to and used solely for the payment of the
principal of, premium, if any, and interest on the particular Note with respect
to which such moneys and Investment Securities have been so set aside in trust.
Anything in Article Eight hereof to the contrary notwithstanding, if
moneys or Government Obligations have been deposited or set aside with the
Trustee pursuant to this Section 11.1 for the payment of Notes and such Notes
shall be deemed to have been paid and to be no longer Outstanding hereunder as
provided in this Section 11.1, but such Notes shall not have in fact been
actually
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<PAGE>
paid in full, no amendment to the provisions of this Article Eleven shall be
made without the consent of the Holder of each Note affected thereby.
The Corporation may at any time cause to be canceled any Notes
previously executed and delivered, which the Corporation may have acquired in
any manner whatever, and such Notes upon such surrender for cancellation shall
be deemed to be paid and no longer Outstanding hereunder.
The obligations of the Corporation under this Indenture, and the
liens, pledges, charges, trusts, covenants and agreements of the Corporation
herein made or provided for, shall be fully discharged and satisfied as to any
Demand Purchase Agreement, Credit Enhancement Facility or Swap Agreement in the
manner and with the effect provided in the Supplemental Indenture providing for
such Demand Purchase Agreement, Credit Enhancement Facility or Swap Agreement.
Notwithstanding the foregoing provisions of this Section 11.1, no Note
shall be defeased hereunder if, after giving effect to the defeasance, the
requirements in Section 10.2 hereof are not met on the date such Note is to be
defeased, treating, for purposes of said Section 10.2, any Note that is to be
defeased as being redeemed on the date it is to be defeased at an assumed
redemption price equal to the Principal Amount thereof with interest accrued
thereon to the date of defeasance, plus, if the Note is to be redeemed under
this Section 11.1 at a Redemption Price greater than the Principal Amount
thereof, a premium equal to the amount by which the Redemption Price exceeds
such Principal Amount.
Section 11.2. Notes Not Presented for Payment When Due; Moneys Held
-----------------------------------------------------
for the Notes after Due Date of Notes. Subject to the provisions of the next
- -------------------------------------
sentence of this paragraph, if any Note shall not be presented for payment when
the principal thereof shall become due, whether at Stated Maturity, at the date
fixed for redemption or otherwise, and if moneys or Investment Securities
described in subdivision 1 of the definition thereof in Section 1.1 hereof shall
at such due date be held by the Trustee, or a Paying Agent therefor, in trust
for that purpose sufficient and available to pay the principal of and premium,
if any, on such Note, together with all interest due on such principal to the
due date thereof or to the date fixed for redemption thereof, all liability of
the Corporation for such payment shall forthwith cease, determine and be
completely discharged, and thereupon it shall be the duty of the Trustee, or
such Paying Agent, to hold said moneys 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 or Investment Securities for any claim of whatever
nature on his part on or with respect to said Note, including any claim for the
payment thereof. In the event any such moneys or Investment Securities, or any
other moneys or Investment Securities with respect to interest due and payable
on any Note prior to the Maturity thereof, held by the Trustee or any Paying
Agent for the Holders of such Notes remain unclaimed as of (a) fifty-five (55)
days after the principal of or interest on the respective Notes with respect to
which such moneys or Investment
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<PAGE>
Securities have been so set aside has become due and payable (whether at Stated
Maturity, upon call for redemption or otherwise), the Trustee shall, within five
(5) days thereafter, give notice thereof to the Holders of such Notes in the
same manner as a notice of redemption given in accordance with Section 10.4
hereof, and (b) two (2) years after the principal of or interest on such Notes
has become due and payable as aforesaid, the Trustee or such Paying Agent, as
the case may be, shall, without further request by the Corporation, pay such
moneys and Investment Securities, to the extent permitted by law, to the
Corporation against a written receipt therefor, and otherwise hold or dispose of
such moneys and Investment Securities as required by law; provided that, if
applicable law requires the Trustee or any Paying Agent to dispose of any such
moneys or Investment Securities prior to the end of the period described in the
preceding clause (b), disposition of such moneys and Investment Securities shall
be made at the time and otherwise in accordance with such law.
11-4
<PAGE>
ARTICLE TWELVE
NOTEHOLDERS' LISTS AND REPORTS
Section 12.1. Note Registrar To Furnish Trustee Names and Addresses
-----------------------------------------------------
to Noteholders. The Note Registrar will furnish or cause to be furnished to the
- --------------
Trustee (a) not more than five (5) days after the earlier of (i) each Record
Date and (ii)three months after the last Record Date, a list, in such form as
the Trustee may reasonably require, of the names and addresses of the Holders of
Notes as of such Record Date, (b) at such other times as the Trustee may request
in writing, within thirty (30) days after receipt by the Note Registrar of any
such request, a list of similar form and content as of a date not more than ten
(10) days prior to the time such list is furnished; provided, however, that so
-------- --------
long as the Trustee is the Note Registrar, no such list shall be required to be
furnished.
Section 12.2. Preservation of Information; Communications to
----------------------------------------------
Noteholders.
- -----------
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of the Holders of Notes contained in the
most recent list furnished to the Trustee as provided in Section 12.1 and the
names and addresses of Holders of Notes received by the Trustee in its capacity
as Note Registrar. The Trustee may destroy any list furnished to it as provided
in such Section 12.1 upon receipt of a new list so furnished.
(b) Noteholders may communicate pursuant to TIA (S) 312(b) with other
Noteholders with respect to their rights under this Indenture or under the
Notes.
(c) The Corporation, the Trustee and the Note Registrar shall have
the protection of TIA (S) 312(c).
Section 12.3. Reports by Corporation.
----------------------
(a) The Corporation shall:
(i) file with the Trustee, within fifteen (15) days after the
Corporation 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 Corporation may
be required to file with the Commission pursuant to Section 13 or 15(d) of
the Exchange Act;
(ii) file with the Trustee and the Commission in accordance with rules
and regulations prescribed from time to time by the Commission such
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<PAGE>
additional information, documents and reports with respect to compliance by
the Corporation 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 Trustee a sufficient number of copies (and the
Trustee shall transmit by mail to all Noteholders described in TIA (S)
313(c)) of such summaries of any information, documents and reports
required to be filed by the Corporation pursuant to clauses (i) and (ii) of
this paragraph as may be required by rules and regulations prescribed from
time to time by the Commission.
(b) Unless the Corporation otherwise determines, the Fiscal Year of
the Corporation shall end on June 30 of each year. In the event the Corporation
changes its Fiscal Year, it shall promptly notify the Trustee.
Section 12.4. Reports by Trustee. If required by TIA (S) 313(a),
------------------
within sixty (60) days after each June 30 beginning with June 30, 1998, the
Trustee shall mail to each Noteholder as required by TIA (S) 313(c) a brief
report dated as of such date that complies with TIA (S) 313(a). The Trustee
also shall comply with TIA (S) 313(b).
A copy of each report at the time of its mailing to Noteholders shall
be filed by the Trustee with the Commission and each other stock exchange, if
any, on which the Notes are listed. The Corporation shall notify the Trustee if
and when the Notes are listed on any stock exchange.
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<PAGE>
ARTICLE THIRTEEN
MISCELLANEOUS
Section 13.1. Consent, Etc., of Noteholders. Any consent, request,
-----------------------------
direction, approval, objection or other instrument required by this Indenture to
be signed and executed by Noteholders may be in any number of writings of
similar tenor and may be signed or executed by such Noteholders in person or by
agent appointed in writing. Proof of the execution of any such consent,
request, direction, approval, objection or other instrument or of the writing
appointing any such agent and of the ownership of Notes, if made in the
following manner, shall be sufficient for any of the purposes of this Indenture,
and shall be conclusive in favor of the Corporation, any Paying Agent, any
Deposit Agent, any Remarketing Agent, any Depositary, any Auction Agent, any
Broker-Dealer or the Trustee with regard to any action taken by it under such
consent, request, direction, approval, objection or other instrument, namely:
(A) The fact and date of the execution by any person of any such
writing may be proved by the certificate of any officer in any jurisdiction
who by law has power to take acknowledgements within such jurisdiction that
the person signing such writing acknowledged before him the execution
thereof, or by an affidavit of any witness to such execution.
(B) The fact of ownership of Notes, the numbers and other
identification of such Notes, and the date of holding the same shall be
proved by the Note Register.
Section 13.2. Limitation of Rights. With the exception of rights
--------------------
herein conferred, nothing expressed or mentioned in or to be implied from this
Indenture or the Notes is intended or shall be construed to give to any Person
other than the parties hereto, any Authenticating Agent, each Paying Agent, each
Deposit Agent, each Remarketing Agent, each Depositary, each Auction Agent, each
Broker-Dealer and the Beneficiaries, any legal or equitable right, remedy, or
claim under or in respect to this Indenture or any covenants, conditions and
provisions herein contained; this Indenture and all of the covenants, conditions
and provisions hereof being intended to be and being for the sole and exclusive
benefit of the parties hereto, any Authenticating Agent, each Paying Agent, each
Deposit Agent, each Remarketing Agent, each Depositary, each Auction Agent, each
Broker-Dealer and the Beneficiaries as herein provided.
Section 13.3. Severability. If any provision of this Indenture shall
------------
be held or deemed to be or shall, in fact, be inoperative or unenforceable as
applied in any particular case in any jurisdiction or jurisdictions or in all
jurisdictions or in all cases because it conflicts with any provisions of any
constitution or statute or rule of public policy, or for any other reason, such
circumstances shall not have the effect of rendering the provision in question
inoperative or unenforceable in any other case
13-1
<PAGE>
or circumstance, or of rendering any other provision or provisions herein
contained invalid, inoperative, or unenforceable to any extent whatever.
The invalidity of any one or more phrases, sentences, clauses or
paragraphs in this Indenture contained shall not affect the remaining portions
of this Indenture or part thereof.
Section 13.4. Notices. A. All notices, certificates or other
-------
communications hereunder shall be sufficiently given and shall be deemed given
when mailed by certified mail, postage prepaid, with proper address as indicated
below or, as to Other Beneficiaries, to a proper address specified in or
pursuant to a Supplemental Indenture. The Corporation, the Trustee and any
Rating Agency may, by written notice given by each to the others, designate any
other address or addresses to which notices, certificates or other
communications to them shall be sent when required as contemplated by this
Indenture. Until otherwise provided by the respective parties, all notices,
certificates and communications to each of them shall be addressed as follows:
To the Corporation: Education Loans Incorporated
105 First Avenue Southwest
Aberdeen, South Dakota 57401
Attn: President
To the Trustee: First Bank National Association
141 North Main Avenue
Sioux Falls, South Dakota 57117
Attn: Corporate Trust Department
To Fitch: Fitch Investors Service, Inc.
One State Street Plaza
New York, New York 10004
Attn: Asset-Backed Group
To Moody's: Moody's Investors Service
99 Church Street
New York, New York 10007
Attn: Public Finance Department--
Structured Finance Group
B. Except as is otherwise provided in this Indenture, any provision
in this Indenture for the mailing of notice or other instrument to Holders of
Notes shall be fully complied with if it is mailed by first-class mail, postage
prepaid, to each Holder of Notes outstanding at the address appearing on the
Note Register. In addition, whenever notice is to be mailed under this
Indenture to the Holders of Notes, the Trustee shall also, upon request, mail a
copy of such notice to (1) any Holder of at least $1,000,000 in aggregate
Principal Amount of the Notes (or, in the
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<PAGE>
event less than $1,000,000 in aggregate Principal Amount of Notes is
outstanding, the Holder of all outstanding Notes), in addition to the copy
mailed to such Holder's address appearing on the Note Register, at such other
address as such Holder shall specify in writing to the Trustee, and (2) any
Person that is the beneficial owner of a Note, as evidenced to the satisfaction
of the Trustee, at such address as such beneficial owner shall specify in
writing to the Trustee; provided that any defect in or failure to mail any such
notice prescribed by this sentence shall not affect the validity of any
proceedings to be taken (including, without limitation, for the redemption of
Notes) pursuant to such notice.
Section 13.5. Counterparts. This Indenture 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 13.6. Indenture Constitutes a Security Agreement. An
------------------------------------------
executed counterpart or certified copy of this Indenture delivered to and
accepted by the Trustee shall constitute a security agreement pursuant to and
for all purposes of the Uniform Commercial Code of the State of South Dakota and
of any other state or jurisdiction.
Section 13.7. Payments Due on Non-Business Days. Except as may be
---------------------------------
otherwise provided in a Supplemental Indenture, in any case where the principal
of, premium, if any, or interest on the Notes or amounts due to any Beneficiary
shall be due on a day other than a Business Day, then payment of such principal,
premium and interest may be made on the next succeeding Business Day with the
same force and effect as if made on the date due and no interest shall accrue
for the intervening period.
Section 13.8. Notices to Rating Agencies. So long as any Outstanding
--------------------------
Notes are rated by a Rating Agency, the Trustee agrees to give the Rating Agency
prompt written notice of the appointment of any successor Trustee.
Section 13.9. Governing Law. This Indenture shall be governed by and
-------------
be construed in accordance with the laws of the State of South Dakota without
giving effect to the conflicts-of-laws principles thereof.
Section 13.10. Rights of Other Beneficiaries. All rights of any
-----------------------------
Other Beneficiary under this Indenture to consent to or direct certain remedies,
waivers, actions and amendments hereunder shall cease for so long as such Other
Beneficiary is in default of any of its obligations or agreements under the Swap
Agreement, the Credit Enhancement Facility or the Demand Purchase Agreement by
reason of which such Person is an Other Beneficiary.
Section 13.11. Conflict with Trust Indenture Act. If any provision
---------------------------------
of hereof limits, qualifies or conflicts with another provision hereof that is
required to
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<PAGE>
be included in this Indenture by any of the provisions of the Trust Indenture
Act, such required provision shall control.
The provisions of TIA (S)(S) 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 13.12. Opinions as to Trust Estate.
---------------------------
(a) On the date of issuance and delivery of the Initial Notes, the
Corporation shall furnish to the Trustee an opinion of Counsel either stating
that, in the opinion of such Counsel, such action has been taken with respect to
the recording and filing of this Indenture, any indentures supplemental hereto,
and any other requisite documents, and with respect to the execution and filing
of any financing statements and continuation statements, as are necessary to
perfect and make effective the security interest in favor of the Trustee, for
the benefit of the Trustee, 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 make such lien and security interest effective.
(b) On or before June 30 in each calendar year, beginning in 1998,
the Corporation shall furnish to the Trustee an opinion of Counsel with respect
to each jurisdiction in which the Financed Student Loans are located or a
Uniform Commercial Code financing statement has been filed by the Corporation
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 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 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 13.13. Recording of Indenture. If this Indenture is subject
----------------------
to recording in any appropriate public recording offices, such recording is to
be effected by the Corporation and at its expense accompanied by an opinion of
Counsel (which may be counsel to the Trustee or any other Counsel reasonably
acceptable to the 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 Trustee under this
Indenture.
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<PAGE>
Section 13.14. No Petition. The 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 Corporation or join in any
institution against the Corporation of, any bankruptcy, reorganization,
arrangement, insolvency 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 the Servicing
Agreement.
Section 13.15. Income Tax Characterization. The Corporation has
---------------------------
structured this Indenture and the Notes with the intention that the Notes will
qualify under applicable federal, state, local and foreign tax law as
indebtedness of the Corporation secured by the Trust Estate. The Corporation,
the Trustee, the Servicer and each Noteholder agree to treat and to take no
action inconsistent with the treatment of the Notes as such indebtedness for
purposes of federal, state, local and foreign income or franchise taxes and any
other tax imposed on or measured by income. Each Noteholder, by acceptance of
its Note, agrees to be bound by the provisions of this Section. Each Noteholder
agrees that it will cause any Person acquiring an interest in a Note through it
to comply with this Indenture as to treatment as indebtedness under applicable
tax law, as described in this Section.
13-5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
EDUCATION LOANS INCORPORATED
(SEAL)
By______________________________
President
Attest:
____________________________________
Secretary
FIRST BANK NATIONAL ASSOCIATION,
as Trustee
(SEAL)
By______________________________
Its_________________________
Attest:
____________________________
Its ________________________
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<PAGE>
EXHIBIT A
---------
Addressed to Trustee
ELIGIBLE LOAN ACQUISITION CERTIFICATE
-------------------------------------
This Eligible Loan Acquisition Certificate is submitted pursuant to
the provisions of Section 4.2 of the Indenture of Trust, dated as of July 1,
1997 (as amended and supplemented from time to time in accordance with its
terms, the "Indenture"), between the Education Loans Incorporated (the
"Corporation") and First Bank National Association, Minneapolis, Minnesota, as
Trustee. All capitalized terms used in this Certificate and not otherwise
defined herein shall have the respective meanings given to such terms in the
Indenture. In your capacity as Trustee, you are hereby authorized and requested
to disburse to the Lenders identified in the schedule attached hereto the
amounts specified in such schedule from the Series ________ Acquisition Account
(or, in the case of an exchange pursuant to Section 4.2 of the Indenture, the
Student Loans listed in Annex 1 hereto) for the acquisition of Eligible Loans.
With respect to the Eligible Loans so to be acquired, the Corporation hereby
certifies as follows:
1. The Eligible Loans to be acquired (the "Acquired Eligible Loans")
will be further described in an updating certificate as required by Section 4.2
of the Indenture.
2. The amount to be disbursed pursuant to this Certificate does not
exceed the purchase price of the Acquired Eligible Loans specified in the
applicable Supplemental Indenture (or, if a Financed Student Loan is being sold
in exchange for an Acquired Eligible Loan under the provisions of Section 4.2 of
the Indenture, the aggregate Principal Balance of, and accrued noncapitalized
borrower interest on, such Financed Student Loan does not exceed the aggregate
Principal Balance of, and accrued noncapitalized borrower interest on, such
Acquired Eligible Loan plus any moneys deposited with the Trustee under the
Indenture as part of the sale price of such Financed Student Loan).
3. Each Acquired Eligible Loan is an Eligible Loan authorized so to
be acquired by the Indenture.
4. You have been previously, or are herewith, provided with the
following items:
(a) with respect to each Acquired Eligible Loan, a copy of the
Student Loan Purchase Agreement between the Corporation and the Lender
relating thereto;
(b) with respect to each Insured Loan included among the Acquired
Eligible Loans, the Certificate of Insurance relating thereto;
A-1
<PAGE>
(c) with respect to each Guaranteed Loan included among the Acquired
Eligible Loans, a certified copy of the Guarantee Agreement relating
thereto;
(d) a copy of the opinion of counsel for the Lender referred to in
paragraph 6E of the related Student Loan Purchase Agreement;
(e) an opinion of Counsel to the Corporation specifying each action
necessary to perfect a security interest in all Eligible Loans to be
acquired by the Corporation pursuant to the Student Loan Purchase
Agreements in favor of the Trustee in the manner provided for by the
provisions of 20 U.S.C. (S) 1087-2(d)(3);
(f) evidence that the promissory notes evidencing each Acquired
Eligible Loan have had stamped thereon or affixed thereto a notice
specifying that they have been assigned to the Trustee and that Uniform
Commercial Code Financing Statements with respect thereto have been filed
in such place or places specified by the opinion of the counsel for the
Corporation pursuant to paragraph 4(e) hereof;
(g) evidence in form satisfactory to the Trustee that each action
necessary to perfect a first security interest in each of the Acquired
Eligible Loans in favor of the Trustee has been accomplished; and
(h) instruments duly assigning the Acquired Eligible Loans to the
Trustee.
5. The Corporation is not, on the date hereof, in default under the
Indenture or any Student Loan Purchase Agreement relating to the Acquired
Eligible Loans, and, to the best knowledge of the Corporation, no Lender is in
default under any Student Loan Purchase Agreement relating to the Acquired
Eligible Loans. The Corporation is not aware of any default existing on the
date hereof under any of the other documents referred to in paragraph 4 hereof,
nor of any circumstances which would reasonably prevent reliance upon the
opinions of counsel referred to in paragraphs 4(d) and 4(e) hereof.
6. All of the conditions specified in the Student Loan Purchase
Agreements relating to the Acquired Eligible Loans and the Indenture for the
acquisition of the Acquired Eligible Loans and the disbursement hereby
authorized and requested have been satisfied.
7. The undersigned is authorized to sign and submit this Certificate
on behalf of the Corporation.
A-2
<PAGE>
WITNESS my hand this _________ day of ______________________, _____.
EDUCATION LOANS INCORPORATED
By ___________________
Its ___________________
A-3
<PAGE>
EXHIBIT B
---------
Addressed to Trustee
ELIGIBLE LOAN ORIGINATION CERTIFICATE
-------------------------------------
This Eligible Loan Origination Certificate is submitted pursuant to
the provisions of Section 4.2 of the Indenture of Trust, dated as of July 1,
1997 (as amended and supplemented from time to time in accordance with its
terms, the "Indenture"), between the Education Loans Incorporated (the
"Corporation") and First Bank National Association, Minneapolis, Minnesota, as
Trustee. All capitalized terms used in this Certificate and not otherwise
defined herein shall have the respective meanings given to such terms in the
Indenture. In your capacity as Trustee, you are hereby authorized and requested
to disburse to __________________ the sums set forth in the schedule attached
hereto (the "Eligible Loan Origination Schedule") from the Series _________
Acquisition Account for the origination of Eligible Loans. With respect to the
Eligible Loans so to be originated, the Corporation hereby certifies as follows:
1. The Eligible Loans to be originated are those specified in the
Eligible Loan Origination Schedule (the "Originated Eligible Loans"). The
original principal amount of each Originated Eligible Loan is as shown on the
Eligible Loan Origination Schedule.
2. The amount to be disbursed pursuant to this Certificate does not
exceed the aggregate Principal Balance of, and accrued noncapitalized borrower
interest on, the Originated Eligible Loans.
3. Each Originated Eligible Loan is an Eligible Loan authorized so to
be originated by the Indenture.
4. You have been previously, or are herewith, provided with the
following items:
(a) with respect to each Insured Loan included among the Originated
Eligible Loans, the Certificate of Insurance relating thereto;
(b) with respect to each Guaranteed Loan included among the
Originated Eligible Loans, a certified copy of the Guarantee Agreement
relating thereto;
(c) an opinion of Counsel to the Corporation specifying each action
necessary to perfect a security interest in all Eligible Loans to be
originated by the Corporation in favor of the Trustee in the manner
provided for by the provisions of 20 U.S.C. (S) 1087-2(d)(3);
B-1
<PAGE>
(d) evidence that the promissory notes evidencing each Originated
Eligible Loan have had stamped thereon or affixed thereto a notice
specifying that they have been assigned to the Trustee and that Uniform
Commercial Code Financing Statements with respect thereto have been filed
in such place or places specified by the opinion of the counsel for the
Corporation pursuant to paragraph 4(c) hereof;
(e) evidence in form satisfactory to the Trustee that each action
necessary to perfect a first security interest in each of the Originated
Eligible Loans in favor of the Trustee has been accomplished; and
(f) instruments duly assigning the Originated Eligible Loans to the
Trustee.
5. The Corporation is not, on the date hereof, in default under the
Indenture. The Corporation is not aware of any default existing on the date
hereof under any of the other documents referred to in paragraph 4 hereof, nor
of any circumstances which would reasonably prevent reliance upon the opinions
of counsel referred to in paragraph 4(c) hereof.
6. All of the conditions specified in the Indenture for the
origination of the Originated Eligible Loans and the disbursement hereby
authorized and requested have been satisfied.
7. The undersigned is authorized to sign and submit this Certificate
on behalf of the Corporation.
WITNESS my hand this _________ day of ______________________, _____.
EDUCATION LOANS INCORPORATED
By _________________________
Its _______________________
B-2
<PAGE>
EXHIBIT C
---------
Addressed to Trustee
STUDENT LOAN ACQUISITION CERTIFICATE
------------------------------------
This Student Loan Acquisition Certificate is submitted pursuant to the
provisions of Section 4.8 of the Indenture of Trust, dated as of July 1, 1997
(as amended or supplemented from time to time in accordance with its terms, the
"Indenture"), between the Education Loans Incorporated (the "Corporation") and
First Bank National Association, Minneapolis, Minnesota, as Trustee. All
capitalized terms used in this Certificate and not otherwise defined herein
shall have the respective meanings given to such terms in the Indenture. In
your capacity as Trustee, you are hereby authorized and requested to disburse to
the Lenders identified in the schedule attached hereto (the "Student Loan
Acquisition Schedule") the amounts specified in such Schedule from the Series
________ Surplus Account for the acquisition of Student Loans meeting the
requirements of clauses (A)(1) and (2) or (B) of the definition of "Eligible
Loans" in Section 1.1 of the Indenture. With respect to the Student Loans so to
be acquired, the Corporation hereby certifies as follows:
1. The Student Loans to be acquired are those specified in the
Student Loan Acquisition Schedule (the "Acquired Student Loans").
2. The amount to be disbursed pursuant to this Certificate does not
exceed the aggregate of the remaining Principal Balance of the Acquired Student
Loans plus accrued noncapitalized interest thereon payable by the Eligible
Borrower.
3. Each Acquired Student Loan is a Student Loan (and, except as
permitted by the provisions of Section 4.8 of the Indenture, is an Eligible
Loan) authorized so to be acquired by the Indenture.
4. You have been previously, or are herewith, provided with the
following items:
(a) with respect to each Acquired Student Loan, a copy of the Student
Loan Purchase Agreement between the Corporation and the Lender relating
thereto;
(b) with respect to each Insured Loan included among the Acquired
Student Loans, the Certificate of Insurance relating thereto;
(c) with respect to each Guaranteed Loan included among the Acquired
Student Loans, a certified copy of the Guarantee Agreement relating
thereto;
C-1
<PAGE>
(d) a copy of the opinion of counsel for the Lender referred to in
paragraph 6E of the related Student Loan Purchase Agreement;
(e) an opinion of Counsel to the Corporation specifying each action
necessary to perfect a security interest in all Student Loans to be
acquired by the Corporation pursuant to the Student Loan Purchase
Agreements in favor of the Trustee in the manner provided for by the
provisions of 20 U.S.C. (S) 1087-2(d)(3);
(f) evidence that the promissory notes evidencing each Acquired
Student Loan have had stamped thereon or affixed thereto a notice
specifying that they have been assigned to the Trustee and that Uniform
Commercial Code Financing Statements with respect thereto have been filed
in such place or places specified by the opinion of the counsel for the
Corporation pursuant to paragraph 4(e) hereof;
(g) evidence in form satisfactory to the Trustee that each action
necessary to perfect a first security interest in each of the Acquired
Student Loans in favor of the Trustee has been accomplished;
(h) instruments duly assigning the Acquired Student Loans to the
Trustee; and
(i) the certifications required by Section 4.8 of the Indenture.
5. The Corporation is not, on the date hereof, in default under the
Indenture or any Student Loan Purchase Agreement relating to the Acquired
Student Loans, and, to the best knowledge of the Corporation, no Lender is in
default under any Student Loan Purchase Agreement relating to the Acquired
Student Loans. The Corporation is not aware of any default existing on the date
hereof under any of the other documents referred to in paragraph 4 hereof, nor
of any circumstances which would reasonably prevent reliance upon the opinions
of counsel referred to in paragraphs 4(d) and 4(e) hereof.
6. All of the conditions specified in the Student Loan Purchase
Agreements relating to the Acquired Student Loans and the Indenture for the
acquisition of the Acquired Student Loans and the disbursement hereby authorized
and requested have been satisfied.
7. The undersigned is authorized to sign and submit this Certificate
on behalf of the Corporation.
C-2
<PAGE>
WITNESS my hand this ________ day of _________________, ______.
EDUCATION LOANS INCORPORATED
By _________________________
Its _______________________
C-3
<PAGE>
EXHIBIT D
---------
Addressed to Trustee
UPDATING ELIGIBLE LOAN ACQUISITION CERTIFICATE
----------------------------------------------
This Updating Eligible Loan Acquisition Certificate is submitted
pursuant to the provisions of Section 4.2 of the Indenture of Trust, dated as of
July 1, 1997 (as amended and supplemented from time to time in accordance with
its terms, the "Indenture"), between the Education Loans Incorporated (the
"Corporation") and First Bank National Association, Minneapolis, Minnesota, as
Trustee. All capitalized terms used in this Certificate and not otherwise
defined herein shall have the respective meanings given to such terms in the
Indenture. In your capacity as Trustee, you have, pursuant to an Eligible Loan
Acquisition Certificate, dated ______________________________, been previously
authorized and requested to disburse to _______________________________________
the sum of $___________________________ from the Series ________ Acquisition
Account (or, in the case of an exchange pursuant to Section 4.2 of the
Indenture, the Student Loans listed in Annex 1 hereto) for the acquisition of
Eligible Loans. With respect to the Eligible Loans so acquired, the Corporation
hereby certifies as follows:
1. The Eligible Loans acquired with such moneys or upon such exchange
are those specified in Schedule A attached hereto (the "Acquired Eligible
Loans").
2. The remaining Principal Balance of each Acquired Eligible Loan is
as shown on such Schedule A.
3. The undersigned is authorized to sign and submit this Certificate
on behalf of the Corporation.
WITNESS my hand this ________ day of ________________________, ______.
EDUCATION LOANS INCORPORATED
By __________________________
Its ________________________
D-1
<PAGE>
EXHIBIT 4.2
Draft of 7/15/97
----------------
================================================================================
FIRST SUPPLEMENTAL INDENTURE OF TRUST
between
EDUCATION LOANS INCORPORATED
AND
FIRST BANK NATIONAL ASSOCIATION
as Trustee
------------------------
DATED AS OF JULY 1, 1997
------------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
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<S> <C>
PARTIES......................................................................................................... 1
RECITALS........................................................................................................ 1
Section 1. Definitions....................................................................................... 1
Section 2. Authorization and Terms of Series 1997-1 Notes.................................................... 19
Section 3. Interest Payable on Auction Rate Series 1997-1 Notes and
LIBOR Rate Series 1997-1 Notes................................................................. 23
Section 4. Determining the Auction Rate Series 1997-1 Note Interest Rate..................................... 30
Section 5. Determination of Payment Defaults and Payment of
Auction Agent and Broker-Dealer Fees........................................................... 41
Section 6. Calculation of Maximum Auction Rate, All Hold
Rate, Net Loan Rate, One-Month LIBOR, Three-Month
LIBOR, Non-Payment Rate, After-Tax Equivalent,
"AA" Composite Commercial Paper Rate, Index
and Applicable Percentage...................................................................... 41
Section 7. Notification of Rates, Amounts and Payment Dates.................................................. 42
Section 8. Auction Agent..................................................................................... 43
Section 9. Broker-Dealers.................................................................................... 44
Section 10. Changes in Auction Period or Periods and
Certain Percentages............................................................................ 45
Section 11. Changes in the Auction Date....................................................................... 47
Section 12. Additional Provisions Regarding the Auction Rate
Series 1997-1 Note Interest Rate............................................................... 48
Section 13. Qualifications of Market Agent.................................................................... 49
Section 14. Purposes of Issuance of Series 1997-1 Notes....................................................... 50
Section 15. Deposit of Series 1997-1 Note Proceeds............................................................ 50
Section 16. Redemption and Prepayment of Series 1997-1 Notes.................................................. 52
Section 17. Book-Entry Series 1997-1 Notes.................................................................... 58
Section 18. Series 1997-1 Accounts and Subaccounts............................................................ 60
Section 19. Deposits to Series 1997-1 Excess Earnings Subaccount.............................................. 63
Section 20. Obligors Not To Make Certain Purchases of Tax Exempt
Series 1997-1 Notes............................................................................ 64
Section 21. Arbitrage Provisions.............................................................................. 64
Section 22. Purchase of Eligible Loans From Series 1997-1 Tax Exempt
and Taxable Acquisition Accounts and Series 1997-1
Tax Exempt and Taxable Surplus Subaccounts..................................................... 65
Section 23. Limitation on Costs of Issuance, Administrative Expenses
and Note Fees.................................................................................. 66
Section 24. Proceeds of Sales of Certain Student Loans To Be
Deposited in the Acquisition Fund.............................................................. 66
Section 25. Limitation on Acquisition of Consolidation Loans and
Special Program Loans............................................................................. 66
Section 26. Certain Findings, Determinations and Designations................................................. 67
</TABLE>
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<TABLE>
<S> <C>
Section 27. Governing Law..................................................................................... 68
Section 28. Section Headings; Table of Contents............................................................... 68
Section 29. Severability...................................................................................... 68
Section 30. Counterparts...................................................................................... 68
Section 31. Effect of First Supplemental Indenture............................................................ 68
SIGNATURES...................................................................................................... 69
Exhibit A-1 -- Form of Tax Exempt Auction Rate
Series 1997-1 Notes......................................................................... A-1-1
Exhibit A-2 -- Form of Series 1997-1F Notes................................................................ A-2-1
Exhibit A-3 -- Form of Taxable Auction Rate Series 1997-1 Notes............................................ A-3-1
Exhibit A-4 -- Form of LIBOR Rate Series 1997-1 Senior Notes............................................... A-4-1
Exhibit B-1 -- Form of Series 1997-1K Notes................................................................ B-1-1
Exhibit B-2 -- Form of Series 1997-1L Notes................................................................ B-2-1
Exhibit C -- Form of Notice of A Payment Default......................................................... C-1
Exhibit D -- Form of Notice of Cure of Payment Default................................................... D-1
Exhibit E -- Form of Notice of Proposed Auction Period
Adjustment.................................................................................. E-1
Exhibit F -- Form of Notice Establishing Auction Period
Adjustment.................................................................................. F-1
Exhibit G -- Form of Notice of Change in Auction Date.................................................... G-1
Exhibit H-1 -- List of Student Loan Purchase Agreements relating to
Eligible Loans acquired from the Series 1979 Trustee........................................ H-1-1
Exhibit H-2 -- List of Student Loan Purchase Agreements relating to
Eligible Loans acquired from Series 1989 Trustee............................................ H-2-1
Exhibit H-3 -- List of Student Loan Purchase Agreements relating to
Eligible Loans acquired from Series 1994 Trustee
and financed from proceeds of Series 1996-1 Notes........................................... H-3-1
Exhibit H-4 -- List of Student Loan Purchase Agreements relating to
Eligible Loans to be financed from proceeds of Tax
Exempt Series 1997-1 Notes, Series 1989, 1991 and
1994 Bonds and Series 1996-1 Notes.......................................................... H-4-1
Exhibit H-5 -- List of Student Loan Purchase Agreements relating to
Eligible Loans acquired from Series 1994 Trustee and
financed from proceeds of Series 1994-1, 1995-1 and
1995-2 Notes................................................................................ H-5-1
Exhibit H-6 -- List of Student Loan Purchase Agreements relating to
Eligible Loans to be financed from proceeds of Taxable
Series 1997-1 Notes......................................................................... H-6-1
Exhibit I -- Form of Notice of Proposed Adjustment
to Certain Percentages...................................................................... I-1
Exhibit J -- Form of Notice Establishing Adjustment
to Certain Percentages...................................................................... J-1
</TABLE>
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<PAGE>
THIS FIRST SUPPLEMENTAL INDENTURE OF TRUST, dated as of July 1, 1997,
between EDUCATION LOANS INCORPORATED, a nonprofit corporation duly organized and
existing under the laws of the State of South Dakota (the "Corporation"), and
FIRST BANK NATIONAL ASSOCIATION, a national banking association duly
established, existing and authorized to accept and execute trusts of the
character herein set out under and by virtue of the laws of the United States
(the "Trustee");
W I T N E S S E T H:
WHEREAS, the Corporation and the Trustee, as trustee, have heretofore
executed and delivered an Indenture of Trust, dated as July 1, 1997 (the
"Original Indenture"); and
WHEREAS, the Original Indenture prescribes the terms and conditions
upon which the Corporation may from time to time authorize and issue series of
Notes (as defined in the Original Indenture); and
WHEREAS, the Corporation has, by proper action of its Board,
authorized and determined to issue twelve series of Notes in the respective
aggregate principal amounts of $___________________ (the "Series 1997-1A
Notes"), $___________________ (the "Series 1997-1B Notes"), $___________________
(the "Series 1997-1C Notes"), $___________________ (the "Series 1997-1D Notes"),
$___________________ (the "Series 1997-1E Notes"), $__________________ (the
"Series 1997-1F Notes"), $___________________ (the "Series 1997-1G Notes"),
$___________________ (the "Series 1997-1H Notes"), $___________________ (the
"Series 1997-1I Notes") and $___________________ (the "Series 1997-1J Notes"),
each of which will be a series of Class A Notes, and $___________________ (the
"Series 1997-1K Notes") and $___________________ (the "Series 1997-1L Notes,"
and, together with the Series 1997-1A Notes, the Series 1997-1B Notes, the
Series 1997-1C Notes, the Series 1997-1D Notes, the Series 1997-1E Notes, the
Series 1997-1F Notes, the Series 1997-1G Notes, the Series 1997-1H Notes, the
Series 1997-1I Notes, the Series 1997-1J Notes and the Series 1997-1K Notes, the
"Series 1997-1 Notes"), each of which will be a series of Class B Notes; and
WHEREAS, the Corporation desires by this First Supplemental Indenture
to prescribe the terms and provisions of the Series 1997-1 Notes, all as more
fully set forth herein; and
WHEREAS, the execution and delivery of this First Supplemental
Indenture and the issuance of the Series 1997-1 Notes have been in all respects
duly and validly authorized by the Corporation;
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:
SECTION 1. DEFINITIONS. In this First Supplemental Indenture, the
-----------
terms defined in the Original Indenture shall, except as otherwise provided in
this Section 1, have the same meaning when used herein unless the context or use
<PAGE>
thereof indicates another or different meaning or intent. In addition, the
following terms shall have the following respective meanings unless the context
hereof clearly requires otherwise:
"'AA' Composite Commercial Paper Rate" shall mean, with respect to a
series of Tax Exempt Auction Rate Series 1997-1 Notes, (i) the interest
equivalent of the 30-day rate on commercial paper placed on behalf of issuers
whose corporate bonds are rated "AA" by S&P, or the equivalent of such rating by
S&P, as such 30-day rate is made available on a discount basis or otherwise by
the Federal Reserve Bank of New York for the Business Day immediately preceding
such date of determination, or (ii) if the Federal Reserve Bank of New York does
not make available any such rate, then the arithmetic average of the interest
equivalent of the 30-day rate on commercial paper placed on behalf of such
issuers, as quoted to the Auction Agent on a discount basis or otherwise by the
Commercial Paper Dealers, as of the close of business on the Business Day
immediately preceding the date of determination. If, at the time quotations are
required, any Commercial Paper Dealer does not quote a commercial paper rate
required to determine the "'AA' Composite Commercial Paper Rate," or if less
than three Commercial Paper Dealers are then serving as such for any reason, the
"'AA' Composite Commercial Paper Rate" shall be determined on the basis of such
quotation or quotations furnished by the Commercial Paper Dealer or Commercial
Paper Dealers then serving as such and providing a quotation. For purposes of
this definition, the "interest equivalent" of a rate stated on a discount basis
(a "discount rate") for commercial paper of a given day's maturity shall be
equal to the product of (a) 100, times (b) the quotient (rounded upward to the
next higher .00001) of (1) the discount rate (expressed in decimals) divided by
(2) the difference between (A) 1.00, and (B) a fraction, the numerator of which
shall be the product of the discount rate (expressed in decimals) times the
number of days from (and including) the date of determination to, but excluding,
the date on which such commercial paper matures, and the denominator of which
shall be 360.
"Administrative Cost and Note Fee Rate" shall mean a rate per annum
equal to the sum of (i) .______%, (ii) the Auction Agent Fee Rate and (iii) the
Broker-Dealer Fee Rate.
"After-Tax Equivalent" shall mean, with respect to a series of Tax
Exempt Auction Rate Series 1997-1 Notes, the interest rate per annum equal to
the product of (i) 1.00 minus the Statutory Corporate Tax Rate and (ii) the "AA"
Composite Commercial Paper Rate.
"All Hold Rate" shall mean (i) with respect to a series of Tax Exempt
Auction Rate Series 1997-1 Notes, the interest rate per annum equal to 85% (as
such percentage may be adjusted pursuant to Section 10 hereof) of the lesser of
(a) the After-Tax Equivalent and (b) the Index; provided that in no event shall
the All Hold Rate be greater than the Maximum Auction Rate, and (ii) with
respect to a series of Taxable Auction Rate Series 1997-1 Notes, One-Month LIBOR
less .20%.
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<PAGE>
"Applicable Percentage" shall mean, with respect to a series of Tax
Exempt Auction Rate Series 1997-1 Notes, the percentage determined (as such
percentage may be adjusted pursuant to Section 10 hereof) based on the ratings
of Moody's and Fitch of the Tax Exempt Auction Rate Series 1997-1 Notes as set
forth below:
<TABLE>
<CAPTION>
Moody 's Fitch's
Credit Rating Credit Rating Applicable Percentage
------------- ------------- ---------------------
<S> <C> <C>
"Aaa" "AAA" 175%
"Aa" "AA" 175%
"A" "A" 175%
"Baa" "BBB" 200%
Below "Baa" Below "BBB" 265%
</TABLE>
provided that if the Tax Exempt Auction Rate Series 1997-1 Notes are not then
rated by both Moody's and Fitch, the "Applicable Percentage" shall be 265%. In
the event that one such Rating Agency has assigned a lower credit rating to the
Tax Exempt Auction Rate Series 1997-1 Notes than the other Rating Agency, the
"Applicable Percentage" shall be based upon such lower credit rating. All
ratings referred to above shall be without regard to the gradations within each
rating category. For purposes of the Auction Agent and the Auction Procedures,
the ratings referred to in this definition shall be the last ratings of which
the Auction Agent shall have been given notice pursuant to the Auction Agent
Agreement.
"Auction" shall mean the implementation of the Auction Procedures on
an Auction Date.
"Auction Agent" shall mean the Initial Auction Agent under the Initial
Auction Agent Agreement unless and until a Substitute Auction Agent Agreement
becomes effective, after which "Auction Agent" shall mean the Substitute Auction
Agent.
"Auction Agent Agreement" shall mean the applicable Initial Auction
Agent Agreement unless and until a Substitute Auction Agent Agreement is entered
into, after which "Auction Agent Agreement" shall mean such Substitute Auction
Agent Agreement.
"Auction Agent Fee" shall have the meaning ascribed to such term in
the Auction Agent Agreement.
"Auction Agent Fee Rate" shall have the meaning ascribed to such term
in the Auction Agent Agreement.
"Auction Date" shall mean, initially, with respect to the Series 1997-
1A Notes, ______________, 1997, with respect to the Series 1997-1B Notes,
______________, 1997, with
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<PAGE>
respect to the Series 1997-1C Notes, ______________, 1997, with respect to the
Series 1997-1D Notes, ______________, 1997, with respect to the Series 1997-1E
Notes, ______________, 1997, with respect to the Series 1997-1G Notes,
______________, 1997, and with respect to the Series 1997-1H Notes,
______________, 1997, and, thereafter, with respect to each such series of
Auction Rate Series 1997-1 Notes, the Business Day immediately preceding the
first day of each Auction Period for such series, other than:
(A) an Auction Period commencing after the ownership of such series is no
longer maintained in Book-Entry Form by the Securities Depository;
(B) an Auction Period commencing after and during the continuance of a
Payment Default; or
(C) an Auction Period commencing less than two (2) Business Days after the
cure of a Payment Default.
Notwithstanding the foregoing, the Auction Date for one or more Auction Periods
may be changed pursuant to Section 11 of this First Supplemental Indenture.
"Auction Period" shall mean the Interest Period applicable to each
series of the Auction Rate Series 1997-1 Notes, which Auction Period (after the
Initial Interest Period for each such series) initially shall consist generally
of (i) in the case of the Tax Exempt Auction Rate Series 1997-1 Notes, thirty-
five (35) days, as the same may be adjusted pursuant to Section 3(A) or Section
10 hereof, and (ii) in the case of the Taxable Exempt Auction Rate Series 1997-1
Senior Notes, twenty-eight (28) days, as the same may be adjusted pursuant to
Section 3(A) or Section 10 hereof.
"Auction Period Adjustment" shall mean an adjustment to the Auction
Period as provided in Section 10 hereof.
"Auction Procedures" shall mean the procedures set forth in Sections 4
through 11 hereof by which the Auction Rate is determined.
"Auction Rate" shall mean the rate of interest per annum that results
from implementation of the Auction Procedures and is determined as described in
Section 4(c)(ii) hereof.
"Auction Rate Series 1997-1 Note Initial Interest Rate" shall mean
________% per annum for the Series 1997-1A Notes, ________% per annum for the
Series 1997-1B Notes, ________% per annum for the Series 1997-1C Notes,
________% per annum for the Series 1997-1D Notes, ________% per annum for the
Series 1997-1E Notes, ________% per annum for the Series 1997-1G Notes and
________% per annum for the Series 1997-1H Notes.
-4-
<PAGE>
"Auction Rate Series 1997-1 Note Interest Rate" shall mean the rate of
interest per annum borne from time to time by a series of the Auction Rate
Series 1997-1 Notes, which shall be (i) during the Initial Interest Period for
such series, the Auction Rate Series 1997-1 Note Initial Interest Rate, and (ii)
during each Interest Period thereafter, the rate of interest determined in
accordance with the provisions of Sections 4 through 12 hereof; provided,
however, that in the event of a Payment Default with respect to a series, the
Auction Rate Series 1997-1 Note Interest Rate for such series shall equal the
Non-Payment Rate; and provided, further, that such Auction Rate Series 1997-1
Note Interest Rate shall in no event exceed the Auction Rate Series 1997-1 Note
Interest Rate Limitation.
"Auction Rate Series 1997-1 Note Interest Rate Limitation" shall mean
(i) with respect to a series of Tax Exempt Auction Rate Series 1997-1 Notes, a
rate per annum equal to 14% or, if less than such rate, the highest rate the
Corporation may legally pay, from time to time, as interest on the Tax Exempt
Auction Rate Series 1997-1 Notes, and (ii) with respect to a series of Taxable
Auction Rate Series 1997-1 Notes, a rate per annum equal to 18% or, if less than
such rate, the highest rate the Corporation may legally pay, from time to time,
as interest on the Taxable Auction Rate Series 1997-1 Notes.
"Auction Rate Series 1997-1 Notes" shall mean the Tax Exempt Auction
Rate Series 1997-1 Notes and the Taxable Auction Rate Series 1997-1 Notes.
"Authorized Denominations" shall mean (i) with respect to the Auction
Rate Series 1997-1 Notes and the LIBOR Rate Series 1997-1 Notes, $100,000 in
original Principal Amount and any integral multiple thereof, and (ii) with
respect to the Series 1997-1F Notes and the Series 1997-1K Notes, $5,000 in
original Principal Amount and any integral multiple thereof.
"Available Auction Rate Series 1997-1 Notes" shall have the meaning
ascribed to such term in Section 4(c)(i)(A) hereof.
"Bid" shall have the meaning ascribed to such term in Section 4(a)(i)
hereof.
"Bid Auction Rate" shall have the meaning ascribed to such term in
Section 4(c)(i)(C) hereof.
"Bidder" shall have the meaning ascribed to such term in Section
4(a)(i) hereof.
"Book-Entry Form" or "Book-Entry System" shall mean a form or system
under which (i) the beneficial right to principal and interest may be
transferred only through a book entry, (ii) physical securities in registered
form are issued only to a Securities Depository or its nominee as registered
holder, with the securities "immobilized" to the custody of the Securities
Depository, and (iii) the
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<PAGE>
book entry is the record that identifies the owners of beneficial interests in
that principal and interest.
"Broker-Dealer" shall mean Smith Barney Inc. or any other broker or
dealer (each as defined in the Securities Exchange Act of 1934, as amended),
commercial bank or other entity permitted by law to perform the functions
required of a Broker-Dealer set forth in the Auction Procedures that (a) is a
Participant (or an affiliate of a Participant), (b) has been appointed as such
by the Corporation pursuant to Section 9 hereof and (c) has entered into a
Broker-Dealer Agreement that is in effect on the date of reference.
"Broker-Dealer Agreement" shall mean each agreement between the
Auction Agent and a Broker-Dealer, and approved by the Corporation, pursuant to
which the Broker-Dealer agrees to participate in Auctions as set forth in the
Auction Procedures, as from time to time amended or supplemented. Each Broker-
Dealer Agreement relating to the Tax Exempt Auction Rate Series 1997-1 Notes
shall be in substantially the form of the Broker-Dealer Agreement (Tax Exempt
Auction Rate Series 1997-1 Notes), dated as of July 1, 1997, between Bankers
Trust Company, as Auction Agent, and Smith Barney Inc., as Broker-Dealer. Each
Broker-Dealer Agreement relating to the Taxable Auction Rate Series 1997-1 Notes
shall be in substantially the form of the Broker-Dealer Agreement (Taxable
Auction Rate Series 1997-1 Notes), dated as of July 1, 1997, between Bankers
Trust Company, as Auction Agent, and Smith Barney Inc., as Broker-Dealer.
"Broker-Dealer Fee" shall have the meaning ascribed to such term in
the Auction Agent Agreement.
"Broker-Dealer Fee Rate" shall have the meaning ascribed to such term
in the Auction Agent Agreement.
"Business Day" shall mean a day of the year on which (i) banks located
in the city in which the Principal Office of the Trustee is located are not
required or authorized to remain closed, (ii) banks located in the city in which
the Principal Office of the Auction Agent, as set forth in and for purposes of
the Auction Agent Agreement, is located are not required or authorized to remain
closed, (iii) banks located in the city in which the Principal Office of each
Broker-Dealer, as set forth in and for purposes of the applicable Broker-Dealer
Agreement, is located are not required or authorized to remain closed and (iv)
The New York Stock Exchange is not closed. The Trustee shall provide to the
Auction Agent on the Closing Date, and on each July 1 thereafter, a list of all
legal holidays in the state in which the Principal Office of the Trustee is
located during the ensuing twelve-month period.
"Carry-Over Amount" shall mean (i) with respect to a Taxable Auction
Rate Series 1997-1 Note, the excess, if any, of (a) the amount of interest on
such Note that would have accrued with respect to the related Interest Period at
the Auction Rate over (b) the amount of interest on such Note actually accrued
with respect to
-6-
<PAGE>
such Interest Period based on the Net Loan Rate, together with the unpaid
portion of any such excess from prior Interest Periods, and (ii) with respect to
a LIBOR Rate Series 1997-1 Note, the excess, if any, of (a) the amount of
interest on such Note that would have accrued with respect to the related
Interest Period at the LIBOR Rate Series 1997-1 Note LIBOR-Based Rate over (b)
the amount of interest on such Note actually accrued with respect to such
Interest Period based on the Net Loan Rate, together with the unpaid portion of
any such excess from prior Interest Periods; provided that any reference to
"principal" or "interest" in this First Supplemental Indenture, in the
Indenture, in the Taxable Auction Rate Series 1997-1 Notes and in the LIBOR Rate
Series 1997-1 Notes shall not include, within the meanings of such words, any
Carry-Over Amount or any interest accrued on any Carry-Over Amount.
"Change of Tax Law" shall mean, with respect to the Tax Exempt Auction
Rate Series 1997-1 Notes, any amendment to the Code or other statute enacted by
the Congress of the United States, or any temporary, proposed or final
regulation promulgated by the United States Treasury, after the Closing Date,
which (i) changes or would change any deduction, credit or other allowance
allowable in computing liability for any federal tax with respect to, or (ii)
imposes or would impose or reduces or would reduce or increases or would
increase any federal tax (including, but not limited to, preference or excise
taxes) upon, any interest earned by the owner of a Tax Exempt Auction Rate
Series 1997-1 Note the interest on which is excludable from gross income for
federal income tax purposes under Section 103 of the Code.
"Closing Cash Flow Projection" shall mean the Cash Flow Projection
delivered in conjunction with the issuance of the Series 1997-1 Notes.
"Closing Date" shall mean, with respect to the Auction Rate Series
1997-1 Notes and the LIBOR Rate Series 1997-1 Notes, July ______, 1997, the date
of initial issuance and delivery of such Notes hereunder.
"Commercial Paper Dealer" shall mean Smith Barney Inc., its successors
and assigns, and any other commercial paper dealer appointed as provided in
Section 6 hereof.
"Deposit Agent" shall mean, with respect to the Revenue Fund, Norwest
Bank South Dakota, N.A., Aberdeen, South Dakota, and its successor or successors
and any other bank or banking association having trust powers or trust company
at any time substituted in its place pursuant to the Indenture.
"Eligible Carry-Over Make-Up Amount" shall mean, (i) with respect to
each Interest Period relating to a series of Taxable Auction Rate Series 1997-1
Notes as to which, as of the first day of such Interest Period, there is any
unpaid Carry-Over Amount, an amount equal to the lesser of (a) interest computed
on the principal balance of such series in respect of such Interest Period at a
per annum rate equal to the excess, if any, of the Net Loan Rate over the
Auction Rate Series 1997-1 Note
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Interest Rate, and (b) the aggregate Carry-Over Amount remaining unpaid as of
the first day of such Interest Period together with interest accrued and unpaid
thereon through the end of such Interest Period, and (ii) with respect to each
Interest Period relating to a series of LIBOR Rate Series 1997-1 Notes as to
which, as of the first day of such Interest Period, there is any unpaid Carry-
Over Amount, an amount equal to the lesser of (a) interest computed on the
principal balance of such series in respect of such Interest Period at a per
annum rate equal to the excess, if any, of the Net Loan Rate over the LIBOR Rate
Series 1997-1 Note LIBOR-Based Rate, and (b) the aggregate Carry-Over Amount
remaining unpaid as of the first day of such Interest Period together with
interest accrued and unpaid thereon through the end of such Interest Period. The
Eligible Carry-Over Make-Up Amount shall be $0.00 for any Interest Period with
respect to which the Net Loan Rate equals or exceeds (1) the Taxable Auction
Rate Series 1997-1 Note Auction Rate, in the case of a series of Taxable Auction
Rate Series 1997-1 Notes, or (2) the LIBOR Rate Series 1997-1 Note Interest
Rate, in the case of a series of LIBOR Rate Series 1997-1 Notes.
"Existing Holder" shall mean (i) with respect to and for the purpose
of dealing with the Auction Agent in connection with an Auction, a Person who is
a Broker-Dealer listed in the Existing Holder Registry at the close of business
on the Business Day immediately preceding such Auction and (ii) with respect to
and for the purpose of dealing with the Broker-Dealer in connection with an
Auction, a Person who is a beneficial owner of Auction Rate Series 1997-1 Notes.
"Existing Holder Registry" shall mean the registry of Persons who are
owners of the Auction Rate Series 1997-1 Notes, maintained by the Auction Agent
as provided in the Auction Agent Agreement.
"First Supplemental Indenture" shall mean this First Supplemental
Indenture of Trust, as amended or supplemented in accordance with the terms
hereof and of the Indenture.
"Hold Order" shall have the meaning ascribed to such term in Section
4(a)(i) hereof.
"Index" shall mean, with respect to a series of Tax Exempt Auction
Rate Series 1997-1 Notes on any Interest Rate Determination Date, (i) for
Auction Periods of sixty (60) days or less, the PSA Index, or, if such rate is
not published by PSA, the Index so determined by the Market Agent, which shall
equal the prevailing rate for bonds rated in the highest short-term rating
category by Moody's and Fitch in respect of issuers most closely resembling the
"high grade" component issuers selected by PSA that are subject to tender by the
holders thereof for purchase on not more than seven (7) days' notice and the
interest on which is (a) variable on a weekly basis, (b) excludable from gross
income for federal income tax purposes, and (c) not subject to an "alternative
minimum tax" or similar tax under the Code, unless all tax exempt bonds are
subject to such tax, and (ii) for Auction Periods of more than sixty (60) days,
the Index so determined by the Market Agent, which shall
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equal the average yield on no less than three publicly offered securities
selected by the Market Agent which are offered at par, have substantially the
same underlying security, bear interest determined for approximately the same
period as the relevant Interest Period on the Tax Exempt Auction Rate Series
1997-1 Notes, bear interest not subject to the alternative minimum tax, and are
rated no lower than "Aa" by Moody's or "AA" by Fitch. If the Index cannot be
determined as provided above, a comparable substitute index selected by the
Market Agent with the approval of an Authorized Officer of the Corporation may
be used.
"Initial Auction Agent" shall mean (i) with respect to the Tax Exempt
Auction Rate Series 1997-1 Notes, Bankers Trust Company, a New York banking
corporation, its successors and assigns, in its capacity as auction agent under
the Initial Auction Agent Agreement relating to the Tax Exempt Auction Rate
Series 1997-1 Notes, and (ii) with respect to the Taxable Auction Rate Series
1997-1 Notes, Bankers Trust Company, a New York banking corporation, its
successors and assigns, in its capacity as auction agent under the Initial
Auction Agent Agreement relating to the Taxable Auction Rate Series 1997-1
Notes.
"Initial Auction Agent Agreement" shall mean (i) with respect to the
Tax Exempt Auction Rate Series 1997-1 Notes, the Auction Agent Agreement (Tax
Exempt Auction Rate Series 1997-1 Notes), dated as of July 1, 1997, by and among
the Corporation, the Trustee and the Initial Auction Agent, including any
amendment thereof or supplement thereto, and (ii) with respect to the Taxable
Auction Rate Series 1997-1 Notes, the Auction Agent Agreement (Taxable Auction
Rate Series 1997-1 Notes), dated as of July 1, 1997, by and among the
Corporation, the Trustee and the Initial Auction Agent, including any amendment
thereof or supplement thereto.
"Initial Interest Period" shall mean, as to a series of Auction Rate
Series 1997-1 Notes or LIBOR Rate Series 1997-1 Notes, the period commencing on
the Closing Date and continuing through the day immediately preceding the
Initial Interest Rate Adjustment Date for such series.
"Initial Interest Rate Adjustment Date" shall mean (i) with respect to
the Series 1997-1A Notes, ____________, 1997, (ii) with respect to the Series
1997-1B Notes, ____________, 1997, (iii) with respect to the Series 1997-1C
Notes, ____________, 1997, (iv) with respect to the Series 1997-1D
Notes,____________, 1997, (v) with respect to the Series 1997-1E Notes,
____________, 1997, (vi) with respect to the Series 1997-1G Notes, ____________,
1997, (vii) with respect to the Series 1997-1H Notes, ____________, 1997, (viii)
with respect to the Series 1997-1I Notes, ____________, 1997, (ix) with respect
to the Series 1997-1J Notes, ____________, 1997, and (x) with respect to the
Series 1997-1L Notes, ____________, 1997.
"Interest Payment Date" shall mean (i) each regularly scheduled
interest payment date on the Series 1997-1 Notes, which shall be (a) with
respect to a series of Taxable Auction Rate Series 1997-1 Notes, the Business
Day immediately following the expiration of the Initial Interest Period for such
series and each related
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Auction Period thereafter, (b) with respect to a series of LIBOR Rate Series
1997-1 Notes, the first day of each calendar month, commencing ________________,
(c) with respect to all other Series 1997-1 Notes, June 1 and December 1 of each
year, commencing December 1, 1997; or (ii) with respect to the payment of
interest upon redemption or acceleration of a Series 1997-1 Note or the payment
of Defaulted Interest, such date on which such interest is payable under the
Indenture.
"Interest Period" shall mean, with respect to a series of Auction Rate
Series 1997-1 Notes or LIBOR Rate Series 1997-1 Notes, the Initial Interest
Period and each period commencing on an Interest Rate Adjustment Date for such
series and ending on the last day before (i) the next Interest Rate Adjustment
Date for such series or (ii) the Stated Maturity of such series, as applicable.
"Interest Rate Adjustment Date" shall mean the date on which the
interest rate on a series of Auction Rate Series 1997-1 Notes or LIBOR Rate
Series 1997-1 Notes is effective, which shall be (i) with respect to a series of
Auction Rate Series 1997-1 Notes, the date of commencement of each Auction
Period, and (ii) with respect to a series of LIBOR Rate Series 1997-1 Notes,
each Interest Payment Date.
"Interest Rate Determination Date" shall mean (i) with respect to a
series of Auction Rate Series 1997-1 Notes, the Auction Date, or, if no Auction
Date is applicable to such series, the Business Day immediately preceding the
date of commencement of an Auction Period, and (ii) with respect to a series of
LIBOR Rate Series 1997-1 Notes, the second Business Day immediately preceding
the date of commencement of an Interest Period (other than the Initial Interest
Period).
"LIBOR Rate Series 1997-1 Note Initial Interest Rate" shall mean
________% per annum for the Series 1997-1I Notes, ________% per annum for the
Series 1997-1J Notes and ________% per annum for the Series 1997-1L Notes.
"LIBOR Rate Series 1997-1 Note Interest Rate" shall mean the rate of
interest per annum borne from time to time by a series of the LIBOR Rate Series
1997-1 Notes, which shall be (i) during the Initial Interest Period for such
series, the LIBOR Rate Series 1997-1 Note Initial Interest Rate, and (ii) during
each Interest Period thereafter, the rate of interest determined in accordance
with the provisions of Section 3(B) hereof.
"LIBOR Rate Series 1997-1 Note LIBOR-Based Rate" shall mean, with
respect to a series of LIBOR Rate Series 1997-1 Notes, the variable rate of
interest per annum determined with respect to such series on the basis of One-
Month LIBOR plus the LIBOR Rate Series 1997-1 Note Spread, as such rate of
interest is determined in accordance with the provisions of Section 3(B) hereof.
"LIBOR Rate Series 1997-1 Note Spread" shall mean (i) with respect to
a series of LIBOR Rate Series 1997-1I Notes, ________% per annum, (ii) with
respect to a
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series of LIBOR Rate Series 1997-1J Notes, ________% per annum, and (iii) with
respect to the Series 1997-1L Notes, ________% per annum,
"LIBOR Rate Series 1997-1 Notes" shall mean the LIBOR Rate Series
1997-1 Senior Notes and the Series 1997-1L Notes.
"LIBOR Rate Series 1997-1 Senior Notes" shall mean the Series 1997-1I
Notes and the Series 1997-1J Notes.
"Market Agent" shall mean Smith Barney Inc., New York, New York, in
such capacity hereunder, or any successor to it in such capacity hereunder.
"Maximum Auction Rate" shall mean (i) with respect to a series of Tax
Exempt Auction Rate Series 1997-1 Notes, the interest rate per annum equal to
the lesser of (a) the product of the Applicable Percentage and the greater of
(1) the After-Tax Equivalent and (2) the Index, and (b) 14%, and (ii) with
respect to a series of Taxable Auction Rate Series 1997-1 Notes: (a) for Auction
Periods of thirty-five (35) days or less, either (1) One-Month LIBOR plus 1.50%
(if the ratings assigned by Moody's and Fitch to the Taxable Auction Rate Series
1997-1 Notes are at least "Aa3" and "AA-," respectively), (2) One-Month LIBOR
plus 2.50% (if any one of the ratings assigned by Moody's and Fitch to the
Taxable Auction Rate Series 1997-1 Notes is less than "Aa3" or "AA-,"
respectively, but is at least "A") or (c) One-Month LIBOR plus 3.50% (if any one
of the ratings assigned by Moody's and Fitch to the Taxable Auction Rate Series
1997-1 Notes is less than "A"); or (b) for Auction Periods of greater than
thirty-five (35) days, either (1) the greater of One-Month LIBOR or Three-Month
LIBOR, plus, in either case, 1.50% (if the ratings assigned by Moody's and Fitch
to the Taxable Auction Rate Series 1997-1 Notes are at least "Aa3" and "AA-,"
respectively), (2) the greater of One-Month LIBOR or Three-Month LIBOR, plus, in
either case, 2.50% (if any one of the ratings assigned by Moody's and Fitch to
the Taxable Auction Rate Series 1997-1 Notes is less than "Aa3" or "AA-,"
respectively, but is at least "A") or (3) the greater of One-Month LIBOR or
Three-Month LIBOR, plus, in either case, 3.50% (if any one of the ratings
assigned by Moody's and Fitch to the Taxable Auction Rate Series 1997-1 Notes is
less than "A"). For purposes of the Auction Agent and the Auction Procedures,
the ratings referred to in this definition shall be the last ratings of which
the Auction Agent shall have been given notice pursuant to the Auction Agent
Agreement.
"Net Loan Rate" shall mean, with respect to a series of Taxable
Auction Rate Series 1997-1 Notes or LIBOR Rate Series 1997-1 Notes, the rate of
interest per annum (rounded to the next highest .01%) equal to (i) the Ninety-
one Day United States Treasury Bill Rate plus ______ [1.85%] less (ii) the
Administrative Cost and Note Fee Rate.
"Ninety-one Day United States Treasury Bill Rate" shall mean, for
purposes of computing the Net Loan Rate with respect to a series of Taxable
Auction Rate Series 1997-1 Notes or LIBOR Rate Series 1997-1 Notes, that rate of
interest per
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annum equal to the average of the Bond Equivalent Yields--91-Day T-Bill on the
91-day United States Treasury Bills sold at auction thereof during the four
week-period that immediately preceded the Interest Rate Adjustment Date with
respect to which such Net Loan Rate is being computing.
"Non-Payment Rate" shall mean (i) with respect to a series of Tax
Exempt Auction Rate Series 1997-1 Notes, the interest rate per annum equal to
the lesser of (a) 265% (as such percentage may be adjusted pursuant to Section
10 hereof) of the Index and (b) 14%, and (ii) with respect to a series of
Taxable Auction Rate Series 1997-1 Notes, the interest rate per annum equal to
the lesser of (a) One-Month LIBOR plus ______ [1.50%] and (b) 18%.
"Note Registrar" shall mean, with respect to the Series 1997-1 Notes,
the Trustee.
"Note Year," when used with respect to the Series 1997-1 Notes, shall
mean the period beginning on July _____, 1997, and ending on the next succeeding
May 31, and each subsequent one-year period, commencing on June 1 and ending on
the next succeeding May 31, or shorter period ending on the date all Series
1997-1 Notes are paid or become payable; provided that the Corporation may,
prior to July _____, 2002, select a different one-year period as "Note Year"
that is consistent with the definition of "Note Year" in Section 1.148-1 of the
Arbitrage Regulations.
"Notice of Fee Rate Change" shall mean a notice of a change in the
Auction Agent Fee Rate or the Broker-Dealer Fee Rate substantially in the form
of Exhibit E to the Auction Agent Agreement.
"One-Month LIBOR" shall mean, with respect to a series of Taxable
Auction Rate Series 1997-1 Notes or LIBOR Rate Series 1997-1 Notes, the rate of
interest per annum equal to the rate per annum at which United States dollar
deposits having a maturity of one month are offered to prime banks in the London
interbank market which appear on the Reuters Screen LIBOR Page as of
approximately 11:00 a.m., London time, on the applicable Interest Rate
Determination Date. If at least two such quotations appear, One-Month LIBOR
will be the arithmetic mean (rounded upwards, if necessary, to the nearest .01%)
of such offered rates. If fewer than two such quotes appear, One-Month LIBOR
will be determined at approximately 11:00 a.m., London time, on the applicable
Interest Rate Determination Date on the basis of the rate at which deposits in
United States dollars having a maturity of one month are offered to prime banks
in the London interbank market by four major banks in the London interbank
market selected by (i) the Auction Agent after consultation with the Trustee or
(ii) the Trustee, as applicable, and in a principal amount of not less than U.S.
$1,000,000 and that is representative for a single transaction in such market at
such time. The Auction Agent or the Trustee, as applicable, will request the
principal London office of each such bank to provide a quotation of its rate.
If at least two quotations are provided, One-Month LIBOR will be the arithmetic
mean (rounded upwards, if necessary, to the nearest .01%) of such offered rates.
If fewer than two quotations are provided, One-Month LIBOR will be the
arithmetic mean (rounded upwards, if necessary, to
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the nearest .01%) of the rates quoted at approximately 11:00 a.m., New York City
time, on the applicable Interest Rate Determination Date by three major banks in
New York, New York, selected by (x) the Auction Agent after consultation with
the Trustee or (y) the Trustee, as applicable, for loans in United States
dollars to leading European banks having a maturity of one month and in a
principal amount equal to an amount of not less than U.S. $1,000,000 and that is
representative for a single transaction in such market at such time; provided,
however, that if the banks selected as aforesaid are not quoting as mentioned in
this sentence, One-Month LIBOR will be the One-Month LIBOR in effect for the
immediately preceding Interest Period.
"Order" shall have the meaning ascribed to such term in Section
4(a)(i) hereof.
"Original Indenture" shall mean the Indenture of Trust, dated as of
July 1, 1997, between the Corporation and the Trustee, as originally executed.
"Participant" shall mean a member of, or participant in, the
Securities Depository.
"Paying Agent" shall mean, with respect to the Series 1997-1 Notes,
the Trustee and its successor or successors or any other commercial bank
designated in accordance herewith as a place at which principal of, premium, if
any, or interest on the Series 1997-1 Notes is payable.
"Payment Default" shall mean, with respect to a series of Auction Rate
Series 1997-1 Notes, (i) a default in the due and punctual payment of any
installment of interest on such series, or (ii) a default in the due and
punctual payment of any interest on and principal of such series at Maturity.
"Potential Holder" shall mean any Person (including an Existing Holder
that is (i) a Broker-Dealer when dealing with the Auction Agent and (ii) a
potential beneficial owner when dealing with a Broker-Dealer) who may be
interested in acquiring Auction Rate Series 1997-1 Notes (or, in the case of an
Existing Holder thereof, an additional Principal Amount of Auction Rate Series
1997-1 Notes).
"PSA" shall mean the Public Securities Association, its successors and
assigns.
"PSA Index" shall mean, with respect to a series of the Tax Exempt
Auction Rate Series 1997-1 Notes, a rate determined on the basis of the seven-
day high grade market index of tax exempt variable rate demand obligations, as
produced by Municipal Market Data and published or made available by the PSA or
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any Person acting in cooperation with or under the sponsorship of PSA and
acceptable to the Market Agent.
"Refunded Obligations" shall mean the Series 1989 Bonds, the Series
1991-A Bonds, the Series 1994-A Bonds, the Series 1994-1 Notes, the Series 1995-
1 Notes, the Series 1995-2 Notes and the Series 1996-1 Notes.
"Regular Record Date" shall mean (i) with respect to any regularly
scheduled Interest Payment Date occurring with respect to a series of the
Auction Rate Series 1997-1 Notes or the LIBOR Rate Series 1997-1 Notes, the last
Business Day preceding such Interest Payment Date, and (ii) with respect to any
regularly scheduled Interest Payment Date occurring with respect to the Series
1997-1F Notes or the Series 1997-1K Notes, the fifteenth day (whether or not a
Business Day) of the calendar month immediately preceding such Interest Payment
Date.
"Reuters Screen LIBOR Page" shall mean the display designated as page
"LIBOR" on the Reuters Monitor Money Rates Service (or such other page as may
replace the LIBOR page for the purposes of displaying London interbank offered
rates of major banks).
"S&P" shall mean Standard & Poor's, a division of McGraw-Hill Inc.,
its successors and assigns.
"Securities Depository" shall mean The Depository Trust Company, New
York, New York, and its successors and assigns, or, if (i) the then-existing
Securities Depository resigns from its functions as depository of the Series
1997-1 Notes or (ii) the Corporation discontinues use of the Securities
Depository pursuant to Section 17(c) hereof, then any other securities
depository which agrees to follow the procedures required to be followed by a
securities depository in connection with the Series 1997-1 Notes and which is
selected by the Corporation with the consent of the Trustee.
"Sell Order" shall have the meaning ascribed to such term in Section
4(a)(i) hereof.
"Series 1979 Trustee" shall mean First Bank National Association
(successor by merger to First Bank of South Dakota (National Association)), in
its capacity as trustee under the Series 1979 Indenture.
"Series 1979 Indenture" shall mean the Indenture of Trust, dated as of
August 1, 1979, between the Corporation and the Series 1979 Trustee, as amended
and supplemented.
"Series 1989 Bonds" shall mean the Student Loan Revenue Bonds, Series
1989-B and 1989-C, issued under the Series 1989 Indenture.
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"Series 1989 Trustee" shall mean First Bank National Association
(successor by merger to First Bank of South Dakota (National Association)), in
its capacity as trustee under the Series 1989 Indenture.
"Series 1989 Indenture" shall mean the Series 1989-B and C Student
Loan Revenue Bond Indenture of Trust, dated as of August 1, 1989, between the
Corporation and the Series 1989 Trustee, as amended and supplemented.
"Series 1991-A Bonds" shall mean the Student Loan Revenue Bonds,
Series 1991-A, issued under the Series 1979 Indenture.
"Series 1994-A Bonds" shall mean the Student Loan Revenue Bonds,
Series 1994-A, issued under the Series 1979 Indenture.
"Series 1994 Trustee" shall mean First Bank National Association
(successor by merger to First Bank of South Dakota (National Association)), in
its capacity as trustee under the Series 1994 Indenture.
"Series 1994 Indenture" shall mean the Indenture of Trust, dated as of
March 1, 1994, between the Corporation and the Series 1994 Trustee, as amended
and supplemented.
"Series 1995-1 Notes" shall mean the Student Loan Asset-Backed Notes,
Series 1995-1, issued under the Series 1994 Indenture.
"Series 1995-2 Notes" shall mean the Student Loan Asset-Backed Notes,
Series 1995-2, issued under the Series 1994 Indenture.
"Series 1996-1 Notes" shall mean the Tax Exempt Student Loan Asset-
Backed Notes, Series 1996-1, issued under the Series 1994 Indenture.
"Series 1997-1 Notes" shall mean the Series 1997-1 Senior Notes and
the Series 1997-1 Subordinate Notes.
"Series 1997-1 Senior Notes" shall mean the Auction Rate Series 1997-1
Notes, the LIBOR Rate Series 1997-1 Senior Notes and the Series 1997-1F Notes.
"Series 1997-1 Subordinate Notes" shall mean the Series 1997-1K Notes
and the Series 1997-1L Notes.
"Series 1997-1A Notes" shall mean the Notes created and to be issued
under this First Supplemental Indenture in the original Principal Amount of
$___________________________ and designated as the "Tax Exempt Auction Rate
Student Loan Asset-Backed Notes, Senior Series 1997-1A."
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"Series 1997-1B Notes" shall mean the Notes created and to be issued
under this First Supplemental Indenture in the original Principal Amount of
$___________________________ and designated as the "Tax Exempt Auction Rate
Student Loan Asset-Backed Notes, Senior Series 1997-1B."
"Series 1997-1C Notes" shall mean the Notes created and to be issued
under this First Supplemental Indenture in the original Principal Amount of
$___________________________ and designated as the "Tax Exempt Auction Rate
Student Loan Asset-Backed Notes, Senior Series 1997-1C."
"Series 1997-1D Notes" shall mean the Notes created and to be issued
under this First Supplemental Indenture in the original Principal Amount of
$___________________________ and designated as the "Tax Exempt Auction Rate
Student Loan Asset-Backed Notes, Senior Series 1997-1D."
"Series 1997-1E Notes" shall mean the Notes created and to be issued
under this First Supplemental Indenture in the original Principal Amount of
$___________________________ and designated as the "Tax Exempt Auction Rate
Student Loan Asset-Backed Notes, Senior Series 1997-1E."
"Series 1997-1F Notes" shall mean the Notes created and to be issued
under this First Supplemental Indenture in the original Principal Amount of
$___________________________ and designated as the "Tax Exempt Fixed Rate
Student Loan Asset-Backed Notes, Senior Series 1997-1F."
"Series 1997-1G Notes" shall mean the Notes created and to be issued
under this First Supplemental Indenture in the original Principal Amount of
$___________________________ and designated as the "Taxable Auction Rate Student
Loan Asset-Backed Notes, Senior Series 1997-1G."
"Series 1997-1H Notes" shall mean the Notes created and to be issued
under this First Supplemental Indenture in the original Principal Amount of
$___________________________ and designated as the "Taxable Auction Rate Student
Loan Asset-Backed Notes, Senior Series 1997-1H."
"Series 1997-1I Notes" shall mean the Notes created and to be issued
under this First Supplemental Indenture in the original Principal Amount of
$___________________________ and designated as the "Taxable LIBOR Rate Student
Loan Asset-Backed Notes, Senior Series 1997-1I."
"Series 1997-1J Notes" shall mean the Notes created and to be issued
under this First Supplemental Indenture in the original Principal Amount of
$___________________________ and designated as the "Taxable LIBOR Rate Student
Loan Asset-Backed Notes, Senior Series 1997-1J."
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"Series 1997-1K Notes" shall mean the Notes created and to be issued
under this First Supplemental Indenture in the original Principal Amount of
$___________________________ and designated as the "Tax Exempt Fixed Rate
Student Loan Asset-Backed Notes, Subordinate Series 1997-1K."
"Series 1997-1L Notes" shall mean the Notes created and to be issued
under this First Supplemental Indenture in the original Principal Amount of
$___________________________ and designated as the "Taxable LIBOR Rate Student
Loan Asset-Backed Notes, Subordinate Series 1997-1L."
"Special Prepayment Determination Date" shall mean, with respect to
the LIBOR Rate Series 1997-1 Notes, the _______________ day of each month (or,
if such _______________ day is not a Business Day, the next succeeding Business
Day).
"Special Redemption and Prepayment Account Requirement" shall mean,
(A) with respect to the LIBOR Rate Series 1997-1 Notes and any Special
Prepayment Determination Date, an amount, as of the last day of the preceding
month, equal to the excess, if any, of (i) the sum of (a) all payments received
as of such last day with respect to principal of Financed Student Loans credited
to the Series 1997-1 Taxable Acquisition Account, plus (b) the amount of any
Balances theretofore transferred from the Series 1997-1 Taxable Acquisition
Account to the Retirement Account to redeem Taxable Auction Rate Series 1997-1
Notes pursuant to Section 16(B) hereof, less (c) the principal component of the
repurchase price of Student Loans originally Financed from Balances in Series
1997-1 Taxable Acquisition Account which have been repurchased from a Guarantee
Agency upon rehabilitation of such Student Loans pursuant to the Higher
Education Act, over (ii) the sum of (a) the aggregate of the amounts previously
applied to the reduction of the Principal Amount of all LIBOR Rate Series 1997-1
Notes, plus (b) the aggregate Principal Amount of LIBOR Rate Series 1997-1 Notes
to be prepaid on the next regularly scheduled Interest Payment Date from
Balances then on hand in the Retirement Account. Payments described in clause
(i)(a) of the preceding sentence include, without limitation, any prepayments by
borrowers from the proceeds of a consolidation loan made or acquired by the
Trustee on behalf of the Corporation or from any other sources, but exclude, for
this purpose, proceeds of the sale or other disposition of Financed Student
Loans to any Person other than a Guarantee Agency, with respect to Guarantee
payments, or a Lender, with respect to the repurchase of Financed Student Loans
by such Lender pursuant to its repurchase obligation under a Student Loan
Purchase Agreement, and (B) with respect to all other series of Series 1997-1
Notes, $0.
"Statutory Corporate Tax Rate" shall mean, with respect to a series of
Tax Exempt Auction Rate Series 1997-1 Notes, the highest tax bracket (expressed
in decimals) applicable at the time of determination of the After-Tax Equivalent
on the income tax of any corporation, as set forth in Section 11 of the Code or
any successor section, without regard to any minimum additional tax provision.
The "Statutory Corporate Tax Rate," as of July 1, 1997, is .35.
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"Submission Deadline" shall mean 12:30 p.m., New York City time, on
any Auction Date or such other time on any Auction Date by which Broker-Dealers
are required to submit Orders to the Auction Agent as specified by the Auction
Agent from time to time.
"Submitted Bid" shall have the meaning ascribed to such term in
Section 4(c)(i) hereof.
"Submitted Hold Order" shall have the meaning ascribed to such term in
Section 4(c)(i) hereof.
"Submitted Order" shall have the meaning ascribed to such term in
Section 4(c)(i) hereof.
"Submitted Sell Order" shall have the meaning ascribed to such term in
Section 4(c)(i) hereof.
"Substitute Auction Agent" shall mean the Person with whom the Trustee
enters into a Substitute Auction Agent Agreement.
"Substitute Auction Agent Agreement" shall mean an auction agent
agreement containing terms substantially similar to the terms of the applicable
Initial Auction Agent Agreement, whereby a Person having the qualifications
required by Section 8 of this First Supplemental Indenture agrees with the
Trustee and the Corporation to perform the duties of the Auction Agent under
this First Supplemental Indenture.
"Sufficient Bids" shall have the meaning ascribed to such term in
Section 4(c)(i) hereof.
"Tax Exempt Auction Rate Series 1997-1 Notes" shall mean the Series
1997-1A Notes, the Series 1997-1B Notes, the Series 1997-1C Notes, the Series
1997-1D Notes and the Series 1997-1E Notes.
"Tax Exempt Series 1997-1 Notes" shall mean the Tax Exempt Auction
Rate Series 1997-1 Notes, the Series 1997-1F Notes and the Series 1997-1K Notes.
"Taxable Auction Rate Series 1997-1 Notes" shall mean the Series 1997-
1G Notes and the Series 1997-1H Notes.
"Taxable Series 1997-1 Notes" shall mean the Taxable Auction Rate
Series 1997-1 Notes and the LIBOR Rate Series 1997-1 Notes.
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SECTION 2. AUTHORIZATION AND TERMS OF SERIES 1997-1 NOTES.
----------------------------------------------
There is hereby created and there shall be (1) a series of Class A
Notes entitled "Tax Exempt Auction Rate Student Loan Asset-Backed Notes, Senior
Series 1997-1A," (2) a series of Class A Notes entitled "Tax Exempt Auction Rate
Student Loan Asset-Backed Notes, Senior Series 1997-1B," (3) a series of Class A
Notes entitled "Tax Exempt Auction Rate Student Loan Asset-Backed Notes, Senior
Series 1997-1C," (4) a series of Class A Notes entitled "Tax Exempt Auction Rate
Student Loan Asset-Backed Notes, Senior Series 1997-1D," (5) a series of Class A
Notes entitled "Tax Exempt Auction Rate Student Loan Asset-Backed Notes, Senior
Series 1997-1E," (6) a series of Class A Notes entitled "Tax Exempt Fixed Rate
Student Loan Asset-Backed Notes, Senior Series 1997-1F," (7) a series of Class A
Notes entitled "Taxable Auction Rate Student Loan Asset-Backed Notes, Senior
Series 1997-1G," (8) a series of Class A Notes entitled "Taxable Auction Rate
Student Loan Asset-Backed Notes, Senior Series 1997-1H," (9) a series of Class A
Notes entitled "Taxable LIBOR Rate Student Loan Asset-Backed Notes, Senior
Series 1997-1I," (10) a series of Class A Notes entitled "Taxable LIBOR Rate
Student Loan Asset-Backed Notes, Senior Series 1997-1J," (11) a series of Class
B Notes entitled "Tax Exempt Fixed Rate Student Loan Asset-Backed Notes,
Subordinate Series 1997-1K," and (12) a series of Class B Notes entitled
"Taxable LIBOR Rate Student Loan Asset-Backed Notes, Subordinate Series 1997-
1L." The aggregate Principal Amount of the Series 1997-1A Notes that may be
authenticated and delivered and Outstanding under the Indenture is limited to
and shall not exceed $_______________________. The aggregate Principal Amount
of the Series 1997-1B Notes that may be authenticated and delivered and
Outstanding under the Indenture is limited to and shall not exceed
$_______________________. The aggregate Principal Amount of the Series 1997-1C
Notes that may be authenticated and delivered and Outstanding under the
Indenture is limited to and shall not exceed $_______________________. The
aggregate Principal Amount of the Series 1997-1D Notes that may be authenticated
and delivered and Outstanding under the Indenture is limited to and shall not
exceed $_______________________. The aggregate Principal Amount of the Series
1997-1E Notes that may be authenticated and delivered and Outstanding under the
Indenture is limited to and shall not exceed $_______________________. The
aggregate Principal Amount of the Series 1997-1F Notes that may be authenticated
and delivered and Outstanding under the Indenture is limited to and shall not
exceed $_______________________. The aggregate Principal Amount of the Series
1997-1G Notes that may be authenticated and delivered and Outstanding under the
Indenture is limited to and shall not exceed $_______________________. The
aggregate Principal Amount of the Series 1997-1H Notes that may be authenticated
and delivered and Outstanding under the Indenture is limited to and shall not
exceed $_______________________. The aggregate Principal Amount of the Series
1997-1I Notes that may be authenticated and delivered and Outstanding under the
Indenture is limited to and shall not exceed $_______________________. The
aggregate Principal Amount of the Series 1997-1J Notes that may be authenticated
and delivered and Outstanding under the Indenture is limited to and shall not
exceed $_______________________. The aggregate Principal
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Amount of the Series 1997-1L Notes that may be authenticated and delivered and
Outstanding under the Indenture is limited to and shall not exceed $__________.
Each series of Series 1997-1 Notes (other than the Series 1997-1F
Notes) shall consist of Term Notes with a Stated Maturity on June 1, 2020.
The Series 1997-1F Notes shall consist of two Term Notes, $___________
Principal Amount of which with a Stated Maturity on June 1, 2010 and $__________
Principal Amount of which with a Stated Maturity on June 1, 2020.
Each series of Auction Rate Series 1997-1 Notes shall bear interest at
the applicable Auction Rate Series 1997-1 Note Interest Rate, and at the same
rate per annum (to the extent that the payment of such interest shall be legally
enforceable) on overdue installments of interest.
Each series of LIBOR Rate Series 1997-1 Notes shall bear interest at a
rate per annum equal to the LIBOR Rate Series 1997-1 Note Interest Rate, and at
the same rate per annum (to the extent that the payment of such interest shall
be legally enforceable) on overdue installments of interest.
The Series 1997-1F Notes shall bear interest at the rates of ______%
per annum (as to such Notes maturing on June 1, 2010) and ______% per annum (as
to such Notes maturing on June 1, 2020), respectively, and at the same
respective rate per annum (to the extent that the payment of such interest shall
be legally enforceable) on overdue installments of interest.
The Series 1997-1K Notes shall bear interest at the rate of ______%
per annum, and at the same rate per annum (to the extent that the payment of
such interest shall be legally enforceable) on overdue installments of interest.
The Series 1997-1 Notes shall be issued as fully registered Notes
without coupons in Authorized Denominations.
The Series 1997-1 Notes shall be dated as provided in Section 3.9 of
the Indenture and shall bear interest from their date of original issue until
payment of principal has been made or duly provided for. The date of original
issue of the Auction Rate Series 1997-1 Notes and the LIBOR Rate Series 1997-1
Notes shall be the Closing Date. The date of original issue of the Series 1997-
1F Notes and the Series 1997-1K Notes shall be July 1, 1997. The Series 1997-1
Notes of each series shall be numbered in such manner as the Note Registrar
shall determine.
Interest on each series of Auction Rate Series 1997-1 Notes and LIBOR
Rate Series 1997-1 Notes shall be computed on the basis of actual days elapsed
and accrue daily from the date thereof (on the basis of a 360-day year), and
shall be payable on each regularly scheduled Interest Payment Date with respect
to such
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series prior to the Maturity thereof and at the Maturity thereof. The interest
payable on each Interest Payment Date for each series of Auction Rate Series
1997-1 Notes and LIBOR Rate Series 1997-1 Notes shall be [calculated on a per
unit basis, based on a unit of $100,000, and shall be] that interest which has
accrued through the last day preceding such Interest Payment Date or, in the
case of the Maturity of an Auction Rate Series 1997-1 Note or a LIBOR Rate
Series 1997-1 Note, the last day preceding the date of such Maturity. The
applicable Auction Rate Series 1997-1 Note Interest Rate or LIBOR Rate Series
1997-1 Note Interest Rate shall be effective as of and on the first day (whether
or not a Business Day) of the applicable Interest Period and be in effect
thereafter through the end of such Interest Period.
Interest on the Series 1997-1F Notes and the Series 1997-1K Notes
shall be computed on the assumption that each year contains 360 days and is
composed of twelve (12) thirty-day months, and shall be payable on each
regularly scheduled Interest Payment Date with respect to the Series 1997-1F
Notes and the Series 1997-1K Notes prior to the Maturity thereof and at the
Maturity thereof.
The principal of and premium, if any, on the Series 1997-1 Notes,
together with interest payable on the Series 1997-1 Notes at the Maturity
thereof if the date of such Maturity is not a regularly scheduled Interest
Payment Date, shall be payable in lawful money of the United States of America
upon, except as otherwise provided in Section 17 hereof, presentation and
surrender of such Series 1997-1 Notes at the Principal Office of the Trustee, as
Paying Agent with respect to the Series 1997-1 Notes, or a duly appointed
successor Paying Agent. Interest on the Series 1997-1 Notes shall be payable on
each regularly scheduled Interest Payment Date, except as otherwise provided in
Section 17 hereof, by check or draft drawn upon the Paying Agent and mailed to
the person who is the Holder thereof as of 5:00 p.m. in the city in which the
Principal Office of the Note Registrar is located on the Regular Record Date for
such Interest Payment Date at the address of such Holder as it appears on the
Note Register, or, in the case of any Series 1997-1 Note the Holder of which is
the Holder of Series 1997-1 Notes in the aggregate Principal Amount of
$1,000,000 or more (or, if less than $1,000,000 in Principal Amount of Series
1997-1 Notes is outstanding, the Holder of all outstanding Series 1997-1 Notes),
at the direction of such Holder received by the Paying Agent by 5:00 p.m. in the
city in which the Principal Office of the Paying Agent is located on the last
Business Day preceding the applicable Regular Record Date, by electronic
transfer by the Paying Agent in immediately available funds to an account
designated by such Holder. Any interest not so timely paid or duly provided for
(herein referred to as "Defaulted Interest") shall cease to be payable to the
person who is the Holder thereof at the close of business on the Regular Record
Date and shall be payable to the person who is the Holder thereof at the close
of business on a Special Record Date for the payment of any such Defaulted
Interest. Such Special Record Date shall be fixed by the Trustee whenever
moneys become available for payment of the Defaulted Interest, and notice of the
Special Record Date shall be given to the Holders of the Series 1997-1 Notes not
less than ten (10) days prior thereto by first-class mail to each such Holder as
shown on the Note Register on a date selected
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by the Trustee, stating the date of the Special Record Date and the date fixed
for the payment of such Defaulted Interest. All payments of principal of,
premium, if any, and interest on the Series 1997-1 Notes shall be made in lawful
money of the United States of America.
The Series 1997-1 Notes are subject to redemption and prepayment prior
to their Stated Maturities upon the terms and conditions and, in the case of
redemption, at the Redemption Prices specified in Section 16 hereof.
Subject to the provisions of the Indenture, the Tax Exempt Auction
Rate Series 1997-1 Notes shall be in substantially the form set forth in Exhibit
A-1 hereto, with such variations, omissions and insertions as may be required by
the circumstances, be required or permitted by the Indenture, or be consistent
with the Indenture 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.
Subject to the provisions of the Indenture, the Series 1997-1F Notes
shall be in substantially the form set forth in Exhibit A-2 hereto, with such
variations, omissions and insertions as may be required by the circumstances, be
required or permitted by the Indenture, or be consistent with the Indenture 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.
Subject to the provisions of the Indenture, the Taxable Auction Rate
Series 1997-1 Notes shall be in substantially the form set forth in Exhibit A-3
hereto, with such variations, omissions and insertions as may be required by the
circumstances, be required or permitted by the Indenture, or be consistent with
the Indenture 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.
Subject to the provisions of the Indenture, the LIBOR Rate Series
1997-1 Senior Notes shall be in substantially the form set forth in Exhibit A-4
hereto, with such variations, omissions and insertions as may be required by the
circumstances, be required or permitted by the Indenture, or be consistent with
the Indenture 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.
Subject to the provisions of the Indenture, the Series 1997-1K Notes
shall be in substantially the form set forth in Exhibit B-1 hereto, with such
variations, omissions and insertions as may be required by the circumstances, be
required or permitted by the Indenture, or be consistent with the Indenture 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.
Subject to the provisions of the Indenture, the Series 1997-1L Notes
shall be in substantially the form set forth in Exhibit B-2 hereto, with such
variations, omissions and insertions as may be required by the circumstances, be
required or permitted by the Indenture, or be consistent with the Indenture 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.
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Subject to the provisions of the Indenture, the Series 1997-1L Notes
shall be in substantially the form set forth in Exhibit B-2 hereto, with such
variations, omissions and insertions as may be required by the circumstances, be
required or permitted by the Indenture, or be consistent with the Indenture and
necessary or appropriate to conform to the rules and requirements of the law
with respect thereto.
SECTION 3. INTEREST PAYABLE ON AUCTION RATE SERIES 1997-1 NOTES AND
--------------------------------------------------------
LIBOR RATE SERIES 1997-1 NOTES. (A) The Initial Interest Rate Adjustment Dates
- ------------------------------
for the Series 1997-1A Notes, the Series 1997-1B Notes, the Series 1997-1C
Notes, the Series 1997-1D Notes, the Series 1997-1E Notes, the Series 1997-1G
Notes and the Series 1997-1H Notes shall be _____________, 1997, _____________,
1997, _____________, 1997, _____________, 1997, _____________, 1997,
_____________, 1997, and _____________, 1997, respectively.
During the Initial Interest Period, each series of Auction Rate Series
1997-1 Notes shall bear interest at the Auction Rate Series 1997-1 Note Initial
Interest Rate for such series. Thereafter, except with respect to an Auction
Period Adjustment, the Auction Rate Series 1997-1 Notes shall bear interest at
an Auction Rate Series 1997-1 Note Interest Rate based on a 35-day Auction
Period (in the case of Tax Exempt Auction Rate Series 1997-1 Notes) or a 28-day
Auction Period (in the case of Taxable Auction Rate Series 1997-1 Notes), as
determined pursuant to this Section 3(A) and Sections 4 through 12 hereof.
The Auction Rate Series 1997-1 Note Interest Rate to be borne by each
series of Auction Rate Series 1997-1 Notes after such Initial Interest Period
for each Auction Period until an Auction Period Adjustment, if any, shall be
determined as hereinbelow described. Each such Auction Period (1) with respect
to the Tax Exempt Auction Rate Series 1997-1 Notes, shall commence on and
include the Thursday following the expiration of the immediately preceding
Auction Period and terminate on and include the Wednesday immediately preceding
the Thursday of the fifth following week, and (2) with respect to the Taxable
Auction Rate Series 1997-1 Notes, shall commence on and include the first day
following the expiration of the immediately preceding Auction Period and
terminate on and include the day immediately preceding the first Business Day of
the fourth following week; provided, however, that in the case of the Auction
Period that immediately follows the Initial Interest Period for a series of
Auction Rate Series 1997-1 Notes, such Auction Period shall commence on the
Initial Interest Rate Adjustment Date for such series. The Auction Rate Series
1997-1 Note Interest Rate on each series of Auction Rate Series 1997-1 Notes for
each Auction Period shall be the Auction Rate in effect for such Auction Period
as determined in accordance with Section 4 hereof; provided that if, on any
Interest Rate Determination Date, an Auction is not held for any reason, then
the Auction Rate Series 1997-1 Note Interest Rate on such series for the next
succeeding Auction Period shall be the Maximum Auction Rate.
Notwithstanding the foregoing:
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(a) if the ownership of a series of Auction Rate Series 1997-1 Notes
is no longer maintained in Book-Entry Form, the Auction Rate Series 1997-1
Note Interest Rate on such series for any Interest Period commencing after
the delivery of definitive notes representing such series pursuant to
Section 17 hereof shall equal the Maximum Auction Rate on the Business Day
immediately preceding the first day of such subsequent Interest Period; or
(b) if a Payment Default shall have occurred with respect to a series
of Auction Rate Series 1997-1 Notes, the Auction Rate Series 1997-1 Note
Interest Rate on such series for the Interest Period commencing on or
immediately after such Payment Default, and for each Interest Period
thereafter, to and including the Interest Period, if any, during which, or
commencing less than two (2) Business Days after, such Payment Default is
cured, shall equal the Non-Payment Rate on the first day of each such
Interest Period.
In accordance with Section 4(c)(ii) hereof, the Auction Agent shall
promptly give written notice to the Trustee and the Corporation of each Auction
Rate Series 1997-1 Note Interest Rate (unless the Auction Rate Series 1997-1
Note Interest Rate is the Non-Payment Rate or the ownership of such series is no
longer maintained in Book-Entry Form) applicable to each series of the Auction
Rate Series 1997-1 Notes. The Trustee shall notify the Holders of Auction Rate
Series 1997-1 Notes of the Auction Rate Series 1997-1 Note Interest Rate
applicable to each such series for each Auction Period on the second Business
Day of such Auction Period.
In the event that the last Business Day immediately preceding what
would otherwise be the commencement date of an Auction Period for a series of
Auction Rate Series 1997-1 Notes is more than five days prior to such date, the
Interest Rate Determination Date and commencement date for such Auction Period,
as well as the expiration date for the preceding Auction Period, may be adjusted
to fall on such dates as the Market Agent, with the consent of the Corporation,
may determine to be appropriate under such circumstances. The Market Agent
shall promptly notify the Trustee and the Auction Agent in writing of any such
determination. The Trustee, upon receipt of such notice, shall immediately give
written notification of such determination to the Holders of such series of
Auction Rate Series 1997-1 Notes.
In the event that the Auction Agent no longer determines, or fails to
determine, when required, the Auction Rate Series 1997-1 Note Interest Rate with
respect to a series of Auction Rate Series 1997-1 Notes, or, if for any reason,
such manner of determination shall be held to be invalid or unenforceable, the
Auction Rate Series 1997-1 Note Interest Rate for the next succeeding Interest
Period (which Interest Period shall be an Auction Period for such series of
Auction Rate Series 1997-1 Notes) shall be (1) with respect to the Tax Exempt
Auction Rate Series 1997-1 Notes, the Maximum Auction Rate, and (2) with respect
to the Taxable Auction Rate Series 1997-1 Notes, the Net Loan Rate, and if the
Auction Agent shall fail or refuse
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to determine the Maximum Auction Rate or the Net Loan Rate, the Maximum Auction
Rate or the Net Loan Rate shall be determined by a securities dealer appointed
by the Corporation capable of making such a determination in accordance with the
provisions hereof and written notice of such determination shall be given by
such securities dealer to the Trustee.
If the Auction Rate for a series of Taxable Auction Rate Series 1997-1
Notes is greater than the Net Loan Rate, then the Auction Rate Series 1997-1
Note Interest Rate applicable to such series for the related Interest Period
will be the Net Loan Rate. If the Auction Rate Series 1997-1 Note Interest Rate
for a series of Taxable Auction Rate Series 1997-1 Notes for any Interest Period
is the Net Loan Rate, the Trustee shall determine the Carry-Over Amount, if any,
with respect to such series for such Interest Period. Such determination of the
Carry-Over Amount shall be made separately for each series of Taxable Auction
Rate Series 1997-1 Notes. Each Carry-Over Amount shall bear interest calculated
at a rate equal to One-Month LIBOR (as determined by the Auction Agent, provided
the Trustee has received notice of One-Month LIBOR from the Auction Agent, and,
if the Trustee shall not have received such notice from the Auction Agent, then
as determined by the Trustee) from the Interest Payment Date for the Interest
Period with respect to which such Carry-Over Amount was calculated, until paid.
Any payment in respect of Carry-Over Amount shall be applied, first, to any
accrued interest payable thereon and, thereafter, in reduction of such Carry-
Over Amount. For purposes of this First Supplemental Indenture, the Indenture
and the Taxable Auction Rate Series 1997-1 Notes, any reference to "principal"
or "interest" herein and therein shall not include, within the meaning of such
words, Carry-Over Amount or any interest accrued on any such Carry-Over Amount.
Such Carry-Over Amount shall be separately calculated for each Taxable Auction
Rate Series 1997-1 Note of such series by the Trustee during such Interest
Period in sufficient time for the Trustee to give notice to each Holder of such
Carry-Over Amount as required in the next succeeding sentence. On the Interest
Payment Date for an Interest Period with respect to which such Carry-Over Amount
has been calculated by the Trustee, the Trustee shall give written notice to
each Holder of the Carry-Over Amount applicable to such Holder's Taxable Auction
Rate Series 1997-1 Note, which written notice may accompany the payment of
interest by check made to each such Holder on such Interest Payment Date or
otherwise shall be mailed on such Interest Payment Date by first-class mail,
postage prepaid, to each such Holder at such Holder's address as it appears on
the registration books maintained by the Note Registrar. Such notice shall
state, in addition to such Carry-Over Amount, that, unless and until a Taxable
Auction Rate Series 1997-1 Note has been redeemed or has been deemed no longer
Outstanding under the Indenture (after which all accrued Carry-Over Amount with
respect to such Taxable Auction Rate Series 1997-1 Note (and all accrued
interest thereon) that remains unpaid shall be canceled and no Carry-Over Amount
(or interest accrued thereon) shall be paid with respect to such Taxable Auction
Rate Series 1997-1 Note), (i) the Carry-Over Amount (and interest accrued
thereon) shall be paid by the Trustee on such Taxable Auction Rate Series 1997-1
Note on the first occurring Interest Payment Date for a subsequent Interest
Period if and to the extent that (a)
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the Eligible Carry-Over Make-Up Amount with respect to such Interest Period is
greater than zero, and (b) moneys are available pursuant to the terms of this
First Supplemental Indenture to pay such Carry-Over Amount (and interest accrued
thereon), and (ii) interest shall accrue on the Carry-Over Amount at a per annum
rate equal to One-Month LIBOR until such Carry-Over Amount is paid in full or is
canceled.
The Carry-Over Amount (and interest accrued thereon) for a series of
Taxable Auction Rate Series 1997-1 Notes shall be paid by the Trustee on
Outstanding Taxable Auction Rate Series 1997-1 Notes of such series on the first
occurring Interest Payment Date for a subsequent Interest Period if and to the
extent that (i) the Eligible Carry-Over Make-Up Amount with respect to such
Interest Period is greater than zero, and (ii) moneys in the Surplus Account are
available on such Interest Payment Date for transfer to the Interest Account for
such purpose in accordance with the second paragraph of Section 4.8 of the
Indenture, after taking into account all other amounts payable from the Surplus
Fund in accordance with such paragraph on such Interest Payment Date. Any
Carry-Over Amount (and any interest accrued thereon) with respect to any Taxable
Auction Rate Series 1997-1 Note which is unpaid as of an Interest Payment Date,
which Taxable Auction Rate Series 1997-1 Note is to be redeemed or deemed no
longer Outstanding under this First Supplemental Indenture on such Interest
Payment Date, shall be paid to the Holder thereof on such Interest Payment Date
to the extent that moneys are available therefor in accordance with the
provisions of the preceding clause (ii); provided, however, that any Carry-Over
Amount (and any interest accrued thereon) which is not so paid on such Interest
Payment Date shall be canceled with respect to such Taxable Auction Rate Series
1997-1 Note on such Interest Payment Date and shall not be paid on any
succeeding Interest Payment Date. To the extent that any portion of the Carry-
Over Amount (and any interest accrued thereon) remains unpaid after payment of a
portion thereof, such unpaid portion shall be paid in whole or in part as
required hereunder until fully paid by the Trustee on the next occurring
Interest Payment Date or Dates, as necessary, for a subsequent Interest Period
or Periods, if and to the extent that the conditions in the first sentence of
this paragraph are satisfied. On any Interest Payment Date on which the Trustee
pays less than all of the Carry-Over Amount (and any interest accrued thereon)
with respect to a Taxable Auction Rate Series 1997-1 Note, the Trustee shall
give written notice in the manner set forth in the immediately preceding
paragraph to the Holder of such Taxable Auction Rate Series 1997-1 Note of the
Carry-Over Amount remaining unpaid on such Taxable Auction Rate Series 1997-1
Note.
The Interest Payment Date on which any Carry-Over Amount (or any
interest accrued thereon) for a series of Taxable Auction Rate Series 1997-1
Notes shall be paid shall be determined by the Trustee in accordance with the
provisions of the immediately preceding paragraph, and the Trustee shall make
payment of the Carry-Over Amount (and any interest accrued thereon) in the same
manner as, and from the same Account from which, it pays interest on the Taxable
Auction Rate Series 1997-1 Notes on an Interest Payment Date.
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(B) The Initial Interest Rate Adjustment Dates for the Series 1997-1I
Notes, the Series 1997-1J Notes and the Series 1997-1L Notes shall be
_____________, 1997, _____________, 1997, and _____________, 1997, respectively.
During the Initial Interest Period, each series of LIBOR Rate Series
1997-1 Notes shall bear interest at the LIBOR Rate Series 1997-1 Note Initial
Interest Rate for such series. The interest rate to be borne by each series of
LIBOR Rate Series 1997-1 Notes during each Interest Period thereafter shall be
determined on the related Interest Rate Determination Date and shall be equal to
the lesser of (i) the sum of One-Month LIBOR determined with respect to such
Interest Rate Determination Date plus the applicable LIBOR Rate Series 1997-1
Note Spread (which is herein referred to as the "LIBOR Rate Series 1997-1 Note
LIBOR-Based Rate"), and (ii) the Net Loan Rate determined with respect to such
Interest Rate Determination Date. The Trustee shall determine such interest
rate on each Interest Rate Determination Date and shall give the Corporation
written notice thereof prior to 2:00 p.m., New York City time, on such Interest
Rate Determination Date. The Net Loan Rate with respect to each Interest Rate
Determination Date shall be determined by or on behalf of the Corporation and
written notice thereof given to the Trustee prior to 10:00 a.m., New York City
time, on such Interest Rate Determination Date.
Notwithstanding any other provision of the LIBOR Rate Series 1997-1
Notes or this First Supplemental Indenture, interest payable on a series of
LIBOR Rate Series 1997-1 Notes for an Interest Period shall never exceed for
such Interest Period the amount of interest payable at the Net Loan Rate in
effect for such Interest Period.
If the LIBOR Rate Series 1997-1 Note LIBOR-Based Rate for a series of
LIBOR Rate Series 1997-1 Notes is greater than the Net Loan Rate, then the LIBOR
Rate Series 1997-1 Note Interest Rate applicable to such series for the related
Interest Period will be the Net Loan Rate. If the LIBOR Rate Series 1997-1 Note
Interest Rate for a series of LIBOR Rate Series 1997-1 Notes for any Interest
Period is the Net Loan Rate, the Trustee shall determine the Carry-Over Amount,
if any, with respect to such series for such Interest Period. Such
determination of the Carry-Over Amount shall be made separately for each series
of LIBOR Rate Series 1997-1 Notes. Each Carry-Over Amount shall bear interest
calculated at a rate equal to the LIBOR Rate Series 1997-1 Note LIBOR-Based Rate
(as determined by the Trustee) from the Interest Payment Date for the Interest
Period with respect to which such Carry-Over Amount was calculated, until paid.
Any payment in respect of Carry-Over Amount shall be applied, first, to any
accrued interest payable thereon and, thereafter, in reduction of such Carry-
Over Amount. For purposes of this First Supplemental Indenture, the Indenture
and the LIBOR Rate Series 1997-1 Notes, any reference to "principal" or
"interest" herein and therein shall not include, within the meaning of such
words, Carry-Over Amount or any interest accrued on any such Carry-Over Amount.
Such Carry-Over Amount shall be separately calculated for each LIBOR Rate Series
1997-1 Note of such series by the Trustee during such Interest Period in
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sufficient time for the Trustee to give notice to each Holder of such Carry-Over
Amount as required in the next succeeding sentence. On the Interest Payment
Date for an Interest Period with respect to which such Carry-Over Amount has
been calculated by the Trustee, the Trustee shall give written notice to each
Holder of the Carry-Over Amount applicable to such Holder's LIBOR Rate Series
1997-1 Note, which written notice may accompany the payment of interest by check
made to each such Holder on such Interest Payment Date or otherwise shall be
mailed on such Interest Payment Date by first-class mail, postage prepaid, to
each such Holder at such Holder's address as it appears on the registration
books maintained by the Note Registrar. Such notice shall state, in addition to
such Carry-Over Amount, that, unless and until a LIBOR Rate Series 1997-1 Note
has been redeemed or has been deemed no longer Outstanding under the Indenture
(after which all accrued Carry-Over Amount with respect to such LIBOR Rate
Series 1997-1 Note (and all accrued interest thereon) that remains unpaid shall
be canceled and no Carry-Over Amount (or interest accrued thereon) shall be paid
with respect to such LIBOR Rate Series 1997-1 Note), (i) the Carry-Over Amount
(and interest accrued thereon) shall be paid by the Trustee on such LIBOR Rate
Series 1997-1 Note on the first occurring Interest Payment Date for a subsequent
Interest Period if and to the extent that (a) the Eligible Carry-Over Make-Up
Amount with respect to such Interest Period is greater than zero, and (b) moneys
are available pursuant to the terms of this First Supplemental Indenture to pay
such Carry-Over Amount (and interest accrued thereon), and (ii) interest shall
accrue on the Carry-Over Amount at a per annum rate equal to the LIBOR Rate
Series 1997-1 Note LIBOR-Based Rate until such Carry-Over Amount is paid in full
or is canceled.
The Carry-Over Amount (and interest accrued thereon) for a series of
LIBOR Rate Series 1997-1 Notes shall be paid by the Trustee on Outstanding LIBOR
Rate Series 1997-1 Notes of such series on the first occurring Interest Payment
Date for a subsequent Interest Period if and to the extent that (i) the Eligible
Carry-Over Make-Up Amount with respect to such Interest Period is greater than
zero, and (ii) moneys in the Surplus Account are available on such Interest
Payment Date for transfer to the Interest Account for such purpose in accordance
with the second paragraph of Section 4.8 of the Indenture, after taking into
account all other amounts payable from the Surplus Fund in accordance with such
paragraph on such Interest Payment Date. Any Carry-Over Amount (and any
interest accrued thereon) with respect to any LIBOR Rate Series 1997-1 Note
which is unpaid as of an Interest Payment Date, which LIBOR Rate Series 1997-1
Note is to be redeemed or deemed no longer Outstanding under this First
Supplemental Indenture on such Interest Payment Date, shall be paid to the
Holder thereof on such Interest Payment Date to the extent that moneys are
available therefor in accordance with the provisions of the preceding clause
(ii); provided, however, that any Carry-Over Amount (and any interest accrued
thereon) which is not so paid on such Interest Payment Date shall be canceled
with respect to such LIBOR Rate Series 1997-1 Note on such Interest Payment Date
and shall not be paid on any succeeding Interest Payment Date. To the extent
that any portion of the Carry-Over Amount (and any interest accrued thereon)
remains unpaid after payment of a portion thereof, such unpaid portion
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shall be paid in whole or in part as required hereunder until fully paid by the
Trustee on the next occurring Interest Payment Date or Dates, as necessary, for
a subsequent Interest Period or Periods, if and to the extent that the
conditions in the first sentence of this paragraph are satisfied. On any
Interest Payment Date on which the Trustee pays less than all of the Carry-Over
Amount (and any interest accrued thereon) with respect to a LIBOR Rate Series
1997-1 Note, the Trustee shall give written notice in the manner set forth in
the immediately preceding paragraph to the Holder of such LIBOR Rate Series
1997-1 Note of the Carry-Over Amount remaining unpaid on such LIBOR Rate Series
1997-1 Note.
The Interest Payment Date on which any Carry-Over Amount (or any
interest accrued thereon) for a series of LIBOR Rate Series 1997-1 Notes shall
be paid shall be determined by the Trustee in accordance with the provisions of
the immediately preceding paragraph, and the Trustee shall make payment of the
Carry-Over Amount (and any interest accrued thereon) in the same manner as, and
from the same Account from which, it pays interest on the LIBOR Rate Series
1997-1 Notes on an Interest Payment Date.
In the event that the Trustee no longer determines, or fails to
determine, when required, the LIBOR Rate Series 1997-1 Note LIBOR-Based Rate
with respect to a series of LIBOR Rate Series 1997-1 Notes, or if, for any
reason, such manner of determination shall be held to be invalid or
unenforceable, the LIBOR Rate Series 1997-1 Note LIBOR-Based Rate for each
succeeding Interest Period shall be the Net Loan Rate as determined by or on
behalf of the Corporation with respect to the related Interest Rate
Determination Date, and if the Corporation shall fail or refuse to determine
such Net Loan Rate, the Net Loan Rate shall be determined by a securities dealer
appointed by the Trustee capable of making such a determination in accordance
with the provisions hereof and written notice of such determination shall be
given by such securities dealer to the Trustee.
The determination of a LIBOR Rate Series 1997-1 Note Interest Rate by
the Trustee or any other authorized Person pursuant to the provisions of this
Section 3(B) shall be conclusive and binding on the Holders of the LIBOR Rate
Series 1997-1 Notes to which such LIBOR Rate Series 1997-1 Note Interest Rate
applies, and the Corporation and the Trustee may rely thereon for all purposes.
In no event shall the cumulative amount of interest paid or payable on
a series of LIBOR Rate Series 1997-1 Notes (including interest calculated as
provided herein, plus any other amounts that constitute interest on the LIBOR
Rate Series 1997-1 Notes of such series under applicable law, which are
contracted for, charged, reserved, taken or received pursuant to the LIBOR Rate
Series 1997-1 Notes of such series or related documents) calculated from the
date of issuance of such series through any subsequent day during the term of
such series or otherwise prior to payment in full of the LIBOR Rate
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Series 1997-1 Notes of such series exceed the amount permitted by applicable
law. If the applicable law is ever judicially interpreted so as to render
usurious any amount called for under the LIBOR Rate Series 1997-1 Notes of a
series or related documents or otherwise contracted for, charged, reserved,
taken or received in connection with the LIBOR Rate Series 1997-1 Notes of such
series, or if the redemption, prepayment or acceleration of the Maturity of the
LIBOR Rate Series 1997-1 Notes of a series results in payment to or receipt by
the Holder or any former Holder of the LIBOR Rate Series 1997-1 Notes of such
series of any interest in excess of that permitted by applicable law, then,
notwithstanding any provision of the LIBOR Rate Series 1997-1 Notes of such
series or related documents to the contrary, all excess amounts theretofore paid
or received with respect to the LIBOR Rate Series 1997-1 Notes of such series
shall be credited on the Principal Amount of the LIBOR Rate Series 1997-1 Notes
of such series (or, if the LIBOR Rate Series 1997-1 Notes of such series have
been paid or would thereby be paid in full, refunded by the recipient thereof),
and the provisions of the LIBOR Rate Series 1997-1 Notes of such series and
related documents shall automatically and immediately be deemed reformed and the
amounts thereafter collectible hereunder and thereunder reduced, without the
necessity of the execution of any new document, so as to comply with the
applicable law, but so as to permit the recovery of the fullest amount otherwise
called for under the LIBOR Rate Series 1997-1 Notes of such series and under the
related documents.
SECTION 4. DETERMINING THE AUCTION RATE SERIES 1997-1 NOTE INTEREST
--------------------------------------------------------
RATE. By purchasing Auction Rate Series 1997-1 Notes, whether in an Auction or
- ----
otherwise, each purchaser of the Auction Rate Series 1997-1 Notes, or its
Broker-Dealer, must agree and shall be deemed by such purchase to have agreed
(i) to participate in Auctions on the terms described herein, (ii) to have its
beneficial ownership of the Auction Rate Series 1997-1 Notes maintained at all
times in Book-Entry Form for the account of its Participant, which in turn will
maintain records of such beneficial ownership, and (iii) to authorize such
Participant to disclose to the Auction Agent such information with respect to
such beneficial ownership as the Auction Agent may request.
So long as the ownership of a series of Auction Rate Series 1997-1
Notes is maintained in Book-Entry Form by the Securities Depository, an Existing
Holder may sell, transfer or otherwise dispose of Auction Rate Series 1997-1
Notes of such series only pursuant to a Bid or Sell Order placed in an Auction
or otherwise sell, transfer or dispose of Auction Rate Series 1997-1 Notes
through a Broker-Dealer, provided that, in the case of all transfers other than
pursuant to Auctions, such Existing Holder, its Broker-Dealer or its Participant
advises the Auction Agent of such transfer. Auctions shall be conducted on each
Auction Date, if there is an Auction Agent on such Auction Date, in the
following manner (such procedures to be applicable separately to each series of
the Auction Rate Series 1997-1 Notes):
(a) (i) Prior to the Submission Deadline on each Auction Date;
(A) each Existing Holder of Auction Rate Series 1997-1 Notes may
submit to a Broker-Dealer by telephone or otherwise any information as
to:
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(1) the Principal Amount of Outstanding Auction Rate Series
1997-1 Notes, if any, owned by such Existing Holder which such
Existing Holder desires to continue to own without regard to the
Auction Rate Series 1997-1 Note Interest Rate for the next
succeeding Auction Period;
(2) the Principal Amount of Outstanding Auction Rate Series
1997-1 Notes, if any, which such Existing Holder offers to sell
if the Auction Rate Series 1997-1 Note Interest Rate for the next
succeeding Auction Period shall be less than the rate per annum
specified by such Existing Holder; and/or
(3) the Principal Amount of Outstanding Auction Rate Series
1997-1 Notes, if any, owned by such Existing Holder which such
Existing Holder offers to sell without regard to the Auction Rate
Series 1997-1 Note Interest Rate for the next succeeding Auction
Period; and
(B) one or more Broker-Dealers may contact Potential Holders to
determine the Principal Amount of Auction Rate Series 1997-1 Notes
which each Potential Holder offers to purchase, if the Auction Rate
Series 1997-1 Note Interest Rate for the next succeeding Auction
Period shall not be less than the rate per annum specified by such
Potential Holder.
The statement of an Existing Holder or a Potential Holder referred to
in (A) or (B) of this paragraph (i) is herein referred to as an "Order," and
each Existing Holder and each Potential Holder placing an Order is herein
referred to as a "Bidder"; an Order described in clause (A)(1) is herein
referred to as a "Hold Order"; an Order described in clauses (A)(2) and (B) is
herein referred to as a "Bid"; and an Order described in clause (A)(3) is herein
referred to as a "Sell Order."
(ii) (A) Subject to the provisions of Section 4(b) hereof, a Bid by an
Existing Holder shall constitute an irrevocable offer to sell:
(1) the Principal Amount of Outstanding Auction Rate Series
1997-1 Notes specified in such Bid if the Auction Rate Series
1997-1 Note Interest Rate determined as provided in this Section
4 shall be less than the rate specified therein; or
(2) such Principal Amount, or a lesser Principal Amount of
Outstanding Auction Rate Series 1997-1 Notes to be determined as
set forth in Section 4(d)(i)(D) hereof, if the Auction Rate
Series 1997-1 Note Interest Rate determined as
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provided in this Section 4 shall be equal to the rate specified
therein; or
(3) such Principal Amount, or a lesser Principal Amount of
Outstanding Auction Rate Series 1997-1 Notes to be determined as set
forth in Section 4(d)(ii)(C) hereof, if the rate specified therein
shall be higher than the Auction Rate Series 1997-1 Note Interest Rate
and Sufficient Bids have not been made.
(B) Subject to the provisions of Section 4(b) hereof, a Sell Order by
an Existing Holder shall constitute an irrevocable offer to sell:
(l) the Principal Amount of Outstanding Auction Rate Series
1997-1 Notes specified in such Sell Order; or
(2) such Principal Amount, or a lesser Principal Amount, of
Outstanding Auction Rate Series 1997-1 Notes set forth in Section
4(d)(ii)(C) hereof, if Sufficient Bids have not been made.
(C) Subject to the provisions of Section 4(b) hereof, a Bid
by a Potential Holder shall constitute an irrevocable offer to
purchase:
(1) the Principal Amount of Outstanding Auction Rate Series
1997-1 Notes specified in such Bid if the Auction Rate Series 1997-1
Note Interest Rate determined as provided in this Section 4 shall be
higher than the rate specified in such Bid; or
(2) such Principal Amount, or a lesser Principal Amount of
Outstanding Auction Rate Series 1997-1 Notes set forth in Section
4(d)(i)(E) hereof, if the Auction Rate Series 1997-1 Note Interest
Rate determined as provided in this Section 4 shall be equal to the
rate specified in such Bid.
(b) (i) Each Broker-Dealer shall submit in writing to the Auction Agent prior
to the Submission Deadline on each Auction Date all Orders obtained by such
Broker-Dealer and shall specify with respect to each such Order:
(A) the name of the Bidder placing such Order;
(B) the aggregate Principal Amount of Auction Rate Series 1997-1 Notes
that are the subject of such Order;
(C) to the extent that such Bidder is an Existing Holder:
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(1) the Principal Amount of Auction Rate Series 1997-1 Notes, if
any, subject to any Hold Order placed by such Existing Holder;
(2) the Principal Amount of Auction Rate Series 1997-1 Notes, if
any, subject to any Bid placed by such Existing Holder and the rate
specified in such Bid; and
(3) the Principal Amount of Auction Rate Series 1997-1 Notes, if
any, subject to any Sell Order placed by such Existing Holder; and
(D) to the extent such Bidder is a Potential Holder, the rate
specified in such Potential Holder's Bid.
(ii) If any rate specified in any Bid contains more than three figures to
the right of the decimal point, the Auction Agent shall round such rate up to
the next higher .001%.
(iii) If an Order or Orders covering all Outstanding Auction Rate Series
1997-1 Notes owned by an Existing Holder is not submitted to the Auction Agent
prior to the Submission Deadline, the Auction Agent shall deem a Hold Order to
have been submitted on behalf of such Existing Holder covering the Principal
Amount of Outstanding Auction Rate Series 1997-1 Notes owned by such Existing
Holder and not subject to an Order submitted to the Auction Agent.
(iv) Neither the Corporation, the Trustee nor the Auction Agent shall be
responsible for any failure of a Broker-Dealer to submit an Order to the Auction
Agent on behalf of any Existing Holder or Potential Holder.
(v) If any Existing Holder submits through a Broker-Dealer to the Auction
Agent one or more Orders covering in the aggregate more than the Principal
Amount of Outstanding Auction Rate Series 1997-1 Notes owned by such Existing
Holder, such Orders shall be considered valid as follows and in the following
order of priority:
(A) All Hold Orders shall be considered valid, but only up to the
aggregate Principal Amount of Outstanding Auction Rate Series 1997-1 Notes
owned by such Existing Holder, and if the aggregate Principal Amount of
Auction Rate Series 1997-1 Notes subject to such Hold Orders exceeds the
aggregate Principal Amount of Auction Rate Series 1997-1 Notes owned by
such Existing Holder, the aggregate Principal Amount of Auction Rate Series
1997-1 Notes subject to each such Hold Order shall be reduced pro rata so
that the aggregate Principal Amount of Auction Rate Series 1997-1 Notes
subject to such Hold Order equals
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the aggregate Principal Amount of Outstanding Auction Rate Series 1997-1
Notes owned by such Existing Holder.
(B) (1) any Bid shall be considered valid up to an amount equal to the
excess of the Principal Amount of Outstanding Auction Rate Series
1997-1 Notes owned by such Existing Holder over the aggregate
Principal Amount of Auction Rate Series 1997-1 Notes subject to any
Hold Order referred to in clause (A) of this paragraph (v);
(2) subject to subclause (1) of this clause (B), if more than one
Bid with the same rate is submitted on behalf of such Existing Holder
and the aggregate Principal Amount of Outstanding Auction Rate Series
1997-1 Notes subject to such Bids is greater than such excess, such
Bids shall be considered valid up to an amount equal to such excess;
(3) subject to subclauses (1) and (2) of this clause (B), if more
than one Bid with different rates are submitted on behalf of such
Existing Holder, such Bids shall be considered valid first in the
ascending order of their respective rates until the highest rate is
reached at which such excess exists and then at such rate up to the
amount of such excess; and
(4) in any such event, the amount of Outstanding Auction Rate
Series 1997-1 Notes, if any, subject to Bids not valid under this
clause (B) shall be treated as the subject of a Bid by a Potential
Holder at the rate therein specified; and
(C) All Sell Orders shall be considered valid up to an amount equal to
the excess of the Principal Amount of Outstanding Auction Rate Series 1997-
1 Notes owned by such Existing Holder over the aggregate Principal Amount
of Auction Rate Series 1997-1 Notes subject to Hold Orders referred to in
clause (A) of this paragraph (v) and valid Bids referred to in clause (B)
of this paragraph (v).
(vi) If more than one Bid for Auction Rate Series 1997-1 Notes is
submitted on behalf of any Potential Holder, each Bid submitted shall be a
separate Bid with the rate and Principal Amount therein specified.
(vii) An Existing Holder that offers to purchase additional Auction Rate
Series 1997-1 Notes is, for purposes of such offer, treated as a Potential
Holder.
(viii) Any Bid or Sell Order submitted by an Existing Holder covering
an aggregate Principal Amount of Auction Rate Series 1997-1 Notes not equal
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to an Authorized Denomination shall be rejected and shall be deemed a Hold
Order. Any Bid submitted by a Potential Holder covering an aggregate Principal
Amount of Auction Rate Series 1997-1 Notes not equal to an Authorized
Denomination shall be rejected.
(ix) Any Bid specifying a rate higher than the Maximum Auction Rate will
(a) be treated as a Sell Order if submitted by an Existing Holder and (b) not be
accepted if submitted by a Potential Holder.
(x) Any Order submitted in an Auction by a Broker-Dealer to the Auction
Agent prior to the Submission Deadline on any Auction Date shall be irrevocable.
(c) (i) Not earlier than the Submission Deadline on each Auction Date, the
Auction Agent shall assemble all valid Orders submitted or deemed submitted to
it by the Broker-Dealers (each such Order as submitted or deemed submitted by a
Broker-Dealer being herein referred to individually as a "Submitted Hold Order,"
a "Submitted Bid" or a "Submitted Sell Order," as the case may be, or as a
"Submitted Order," and collectively as "Submitted Hold Orders," "Submitted Bids"
or "Submitted Sell Orders," as the case may be, or as "Submitted Orders") and
shall determine:
(A) the excess of the total Principal Amount of Outstanding Auction
Rate Series 1997-1 Notes over the sum of the aggregate Principal Amount of
Outstanding Auction Rate Series 1997-1 Notes subject to Submitted Hold
Orders (such excess being herein referred to as the "Available Auction
Rate Series 1997-1 Notes"), and
(B) from the Submitted Orders whether:
(1) the aggregate Principal Amount of Outstanding Auction Rate
Series 1997-1 Notes subject to Submitted Bids by Potential Holders
specifying one or more rates equal to or lower than the Maximum
Auction Rate;
exceeds or is equal to the sum of:
(2) the aggregate Principal Amount of Outstanding Auction Rate
Series 1997-1 Notes subject to Submitted Bids by Existing Holders
specifying one or more rates higher than the Maximum Auction Rate; and
(3) the aggregate Principal Amount of Outstanding Auction Rate
Series 1997-1 Notes subject to Submitted Sell Orders;
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(in the event such excess or such equality exists, other than because
all of the Outstanding Auction Rate Series 1997-1 Notes are subject to
Submitted Hold Orders, such Submitted Bids described in subclause (1)
above shall be referred to collectively as "Sufficient Bids"); and
(C) if Sufficient Bids exist, the Bid Auction Rate, which shall
be the lowest rate specified in such Submitted Bids such that if:
(l) (x) each such Submitted Bid from Existing Holders
specifying such lowest rate and (y) all other Submitted Bids from
Existing Holders specifying lower rates were rejected, thus
entitling such Existing Holders to continue to own the Principal
Amount of Auction Rate Series 1997-1 Notes subject to such
Submitted Bids; and
(2) (x) each such Submitted Bid from Potential Holders
specifying such lowest rate and (y) all other Submitted Bids from
Potential Holders specifying lower rates were accepted;
the result would be that such Existing Holders described in subclause
(1) above would continue to own an aggregate Principal Amount of
Outstanding Auction Rate Series 1997-1 Notes which, when added to the
aggregate Principal Amount of Outstanding Auction Rate Series 1997-1
Notes to be purchased by such Potential Holders described in subclause
(2) above, would equal not less than the Available Auction Rate Series
1997-1 Notes.
(ii) Promptly after the Auction Agent has made the determinations
pursuant to Section 4(c)(i) hereof, the Auction Agent shall advise the Trustee,
the Broker-Dealers and the Corporation of the Net Loan Rate (in the case of a
series of Taxable Auction Rate Series 1997-1 Notes), the Maximum Auction Rate
and the All Hold Rate and the components thereof on the Auction Date and, based
on such determinations, the Auction Rate for the next succeeding Interest Period
as follows:
(A) if Sufficient Bids exist, that the Auction Rate for the next
succeeding Interest Period shall be equal to the Bid Auction Rate so
determined;
(B) if Sufficient Bids do not exist (other than because all of
the Outstanding Auction Rate Series 1997-1 Notes are subject to
Submitted Hold Orders), that the Auction Rate for the next succeeding
Interest Period shall be equal to the Maximum Auction Rate; or
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(C) if all Outstanding Auction Rate Series 1997-1 Notes are
subject to Submitted Hold Orders, that the Auction Rate for the next
succeeding Interest Period shall be equal to the All Hold Rate.
(iii) Promptly after the Auction Agent has determined the Auction
Rate, the Auction Agent shall determine and advise the Trustee of the
Auction Rate Series 1997-1 Note Interest Rate, which rate shall be (A) in
the case of a series of Tax Exempt Auction Rate Series 1997-1 Notes, the
Auction Rate, or (B) in the case of a series of Taxable Auction Rate Series
1997-1 Notes, the lesser of the Auction Rate and the Net Loan Rate;
provided, however, that in no event shall the Auction Rate Series 1997-1
Note Interest Rate exceed the Auction Rate Series 1997-1 Note Interest Rate
Limitation.
(d) Existing Holders shall continue to own the Principal Amount of Auction
Rate Series 1997-1 Notes that are subject to Submitted Hold Orders. If
Sufficient Bids have been received by the Auction Agent (and if, in the case of
a series of Taxable Auction Rate Series 1997-1 Notes, the Net Loan Rate is equal
to or greater than the Bid Auction Rate), the Bid Auction Rate will be the
Auction Rate Series 1997-1 Note Interest Rate, and Submitted Bids and Submitted
Sell Orders will be accepted or rejected and the Auction Agent will take such
other action as described below in subparagraph (i).
If, in the case of a series of Taxable Auction Rate Series 1997-1 Notes,
the Net Loan Rate is less than the Auction Rate, the Net Loan Rate will be the
Auction Rate Series 1997-1 Note Interest Rate for such series. If the Auction
Rate is greater than the Auction Rate Series 1997-1 Note Interest Rate
Limitation (in the case of a series of Tax Exempt Auction Rate Series 1997-1
Notes), or the Auction Rate and the Net Loan Rate are both greater than the
Auction Rate Series 1997-1 Note Interest Rate Limitation (in the case of a
series of Tax Exempt Auction Rate Series 1997-1 Notes), the Auction Rate Series
1997-1 Note Interest Rate for such series shall be equal to the Auction Rate
Series 1997-1 Note Interest Rate Limitation. If the Auction Agent has not
received Sufficient Bids (other than because all of the Outstanding Auction Rate
Series 1997-1 Notes are subject to Submitted Hold Orders), the Auction Rate
Series 1997-1 Note Interest Rate will be (1) in the case of a series of Tax
Exempt Auction Rate Series 1997-1 Notes, the Maximum Auction Rate, or (2) in the
case of a series of Taxable Auction Rate Series 1997-1 Notes, the lesser of the
Maximum Auction Rate and the Net Loan Rate. In any of the cases described
above, Submitted Orders will be accepted or rejected and the Auction Agent will
take such other action as described below in subparagraph (ii).
(i) if Sufficient Bids have been made (and if, in the case of a series
of Taxable Auction Rate Series 1997-1 Notes, the Net Loan Rate is equal to
or greater than the Bid Auction Rate), in which event the Auction Rate
Series 1997-1 Note Interest Rate shall be the Bid Auction Rate, all
Submitted Sell Orders shall be accepted and, subject to the provisions of
paragraphs (iv) and (v) of this Section 4(d), Submitted Bids shall be
accepted or rejected as follows
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in the following order of priority, and all other Submitted Bids shall be
rejected:
(A) Existing Holders' Submitted Bids specifying any rate that is
higher than the Auction Rate Series 1997-1 Note Interest Rate shall be
accepted, thus requiring each such Existing Holder to sell the
aggregate Principal Amount of Auction Rate Series 1997-1 Notes subject
to such Submitted Bids;
(B) Existing Holders' Submitted Bids specifying any rate that is
lower than the Auction Rate Series 1997-1 Note Interest Rate shall be
rejected, thus entitling each such Existing Holder to continue to own
the aggregate Principal Amount of Auction Rate Series 1997-1 Notes
subject to such Submitted Bids;
(C) Potential Holders' Submitted Bids specifying any rate that is
lower than the Auction Rate Series 1997-1 Note Interest Rate shall be
accepted;
(D) Each Existing Holders' Submitted Bid specifying a rate that
is equal to the Auction Rate Series 1997-1 Note Interest Rate shall be
rejected, thus entitling such Existing Holder to continue to own the
aggregate Principal Amount of Auction Rate Series 1997-1 Notes subject
to such Submitted Bid, unless the aggregate Principal Amount of
Outstanding Auction Rate Series 1997-1 Notes subject to all such
Submitted Bids shall be greater than the Principal Amount of Auction
Rate Series 1997-1 Notes (the "Remaining Principal Amount") equal to
the excess of the Available Auction Rate Series 1997-1 Notes over the
aggregate Principal Amount of Auction Rate Series 1997-1 Notes subject
to Submitted Bids described in clauses (B) and (C) of this Section
4(d)(i), in which event such Submitted Bid of such Existing Holder
shall be rejected in part, and such Existing Holder shall be entitled
to continue to own the Principal Amount of Auction Rate Series 1997-1
Notes subject to such Submitted Bid, but only in an amount equal to
the aggregate Principal Amount of Auction Rate Series 1997-1 Notes
obtained by multiplying the Remaining Principal Amount by a fraction,
the numerator of which shall be the Principal Amount of Outstanding
Auction Rate Series 1997-1 Notes owned by such Existing Holder subject
to such Submitted Bid and the denominator of which shall be the sum of
the Principal Amount of Outstanding Auction Rate Series 1997-1 Notes
subject to such Submitted Bids made by all such Existing Holders that
specified a rate equal to the Auction Rate Series 1997-1 Note Interest
Rate; and
(E) Each Potential Holder's Submitted Bid specifying a rate that
is equal to the Auction Rate Series 1997-1 Note Interest Rate shall be
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accepted, but only in an amount equal to the Principal Amount of
Auction Rate Series 1997-1 Notes obtained by multiplying the excess of
the aggregate Principal Amount of Available Auction Rate Series 1997-1
Notes over the aggregate Principal Amount of Auction Rate Series 1997-
1 Notes subject to Submitted Bids described in clauses (B), (C) and
(D) of this Section 4(d)(i) by a fraction the numerator of which shall
be the aggregate Principal Amount of Outstanding Auction Rate Series
1997-1 Notes subject to such Submitted Bid and the denominator of
which shall be the sum of the Principal Amount of Outstanding Auction
Rate Series 1997-1 Notes subject to Submitted Bids made by all such
Potential Holders that specified a rate equal to the Auction Rate
Series 1997-1 Note Interest Rate.
(ii) If Sufficient Bids have not been made (other than because all of
the Outstanding Auction Rate Series 1997-1 Notes are subject to Submitted
Hold Orders), if the Auction Rate Series 1997-1 Note Interest Rate
Limitation applies or if, in the case of a series of Taxable Auction Rate
Series 1997-1 Notes, the Net Loan Rate is less than the Bid Auction Rate
(in which event the Auction Rate Series 1997-1 Note Interest Rate for such
series shall be the Net Loan Rate), subject to the provisions of Section
4(d)(iv) hereof, Submitted Orders shall be accepted or rejected as follows
in the following order of priority and all other Submitted Bids shall be
rejected:
(A) Existing Holders' Submitted Bids specifying any rate that is
equal to or lower than the Auction Rate Series 1997-1 Note Interest
Rate shall be rejected, thus entitling such Existing Holders to
continue to own the aggregate Principal Amount of Auction Rate Series
1997-1 Notes subject to such Submitted Bids;
(B) Potential Holders' Submitted Bids specifying (1) any rate
that is equal to or lower than the Auction Rate Series 1997-1 Note
Interest Rate shall be accepted and (2) any rate that is higher than
the Auction Rate Series 1997-1 Note Interest Rate shall be rejected;
and
(C) each Existing Holder's Submitted Bid specifying any rate that
is higher than the Auction Rate Series 1997-1 Note Interest Rate and
the Submitted Sell Order of each Existing Holder shall be accepted,
thus entitling each Existing Holder that submitted any such Submitted
Bid or Submitted Sell Order to sell the Auction Rate Series 1997-1
Notes subject to such Submitted Bid or Submitted Sell Order, but in
both cases only in an amount equal to the aggregate Principal Amount
of Auction Rate Series 1997-1 Notes obtained by multiplying the
aggregate Principal Amount of Auction Rate Series 1997-1 Notes subject
to Submitted Bids described in clause (B) of this Section 4(d)(ii) by
a fraction the numerator of which shall be the aggregate Principal
Amount of Outstanding Auction Rate Series 1997-1 Notes owned by
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such Existing Holder subject to such Submitted Bid or Submitted Sell
Order and the denominator of which shall be the aggregate Principal
Amount of Outstanding Auction Rate Series 1997-1 Notes subject to all
such Submitted Bids and Submitted Sell Orders.
(iii) If all Outstanding Auction Rate Series 1997-1 Notes are subject
to Submitted Hold Orders, all Submitted Bids shall be rejected.
(iv) If, as a result of the procedures described in paragraph (i) or
(ii) of this Section 4(d), any Existing Holder would be entitled or
required to sell, or any Potential Holder would be entitled or required to
purchase, a Principal Amount of Auction Rate Series 1997-1 Notes that is
not equal to an Authorized Denomination, the Auction Agent shall, in such
manner as in its sole discretion it shall determine, round up or down the
Principal Amount of Auction Rate Series 1997-1 Notes to be purchased or
sold by any Existing Holder or Potential Holder so that the Principal
Amount of Auction Rate Series 1997-1 Notes purchased or sold by each
Existing Holder or Potential Holder shall be equal to an Authorized
Denomination.
(v) If, as a result of the procedures described in paragraph (i) of
this Section 4(d), any Potential Holder would be entitled or required to
purchase less than an Authorized Denomination of Auction Rate Series 1997-1
Notes, the Auction Agent shall, in such manner as in its sole discretion it
shall determine, allocate Auction Rate Series 1997-1 Notes for purchase
among Potential Holders so that only Auction Rate Series 1997-1 Notes in
Authorized Denominations are purchased by any Potential Holder, even if
such allocation results in one or more of such Potential Holders not
purchasing any Auction Rate Series 1997-1 Notes.
(e) Based on the result of each Auction, the Auction Agent shall determine
the aggregate Principal Amount of Auction Rate Series 1997-1 Notes to be
purchased and the aggregate Principal Amount of Auction Rate Series 1997-1 Notes
to be sold by Potential Holders and Existing Holders on whose behalf each
Broker-Dealer submitted Bids or Sell Orders and, with respect to each Broker-
Dealer, to the extent that such aggregate Principal Amount of Auction Rate
Series 1997-1 Notes to be sold differs from such aggregate Principal Amount of
Auction Rate Series 1997-1 Notes to be purchased, determine to which other
Broker-Dealer or Broker-Dealers acting for one or more purchasers such Broker-
Dealer shall deliver, or from which other Broker-Dealer or Broker-Dealers acting
for one or more sellers such Broker-Dealer shall receive, as the case may be,
Auction Rate Series 1997-1 Notes.
(f) Any calculation by the Auction Agent or the Trustee, as applicable, of
the Auction Rate Series 1997-1 Note Interest Rate, One-Month LIBOR, Three-Month
LIBOR, Maximum Auction Rate, All Hold Rate, Net Loan Rate and Non-Payment Rate
shall, in the absence of manifest error, be binding on all other parties.
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(g) Notwithstanding anything in this First Supplemental Indenture to the
contrary notwithstanding, no Auction will be held on any Auction Date hereunder
during the continuance of a Payment Default.
SECTION 5. DETERMINATION OF PAYMENT DEFAULTS AND PAYMENT OF AUCTION
--------------------------------------------------------
AGENT AND BROKER-DEALER FEES.
- ----------------------------
(a) The Trustee shall determine, not later than 2:00 p.m., New York
City time, on the Business Day next succeeding each Interest Payment Date,
whether a Payment Default has occurred. If a Payment Default has occurred, the
Trustee shall, not later than 2:15 p.m., New York City time, on such Business
Day, send a notice thereof in substantially the form of Exhibit C attached
hereto to the Auction Agent by telecopy or similar means and, if such Payment
Default is cured, the Trustee shall immediately send a notice in substantially
the form of Exhibit D attached hereto to the Auction Agent by telecopy or
similar means.
(b) Not later than 12:00 noon, New York City time, on each Interest
Payment Date, the Corporation shall pay to the Auction Agent, in immediately
available funds out of amounts available therefor in the Administration Fund, an
amount equal to the Auction Agent Fee and the Broker-Dealer Fee as calculated in
accordance with the Auction Agent Agreement. The Corporation shall, from time
to time at the request of the Auction Agent, reimburse the Auction Agent for its
reasonable expenses as provided in the Auction Agent Agreement, such expenses to
be paid out of amounts available therefor in the Administration Fund.
SECTION 6. CALCULATION OF MAXIMUM AUCTION RATE, ALL HOLD RATE, NET
-------------------------------------------------------
LOAN RATE, ONE-MONTH LIBOR, THREE-MONTH LIBOR, NON-PAYMENT RATE, AFTER-TAX
- --------------------------------------------------------------------------
EQUIVALENT, "AA" COMPOSITE COMMERCIAL PAPER RATE, INDEX AND APPLICABLE
- ----------------------------------------------------------------------
PERCENTAGE. The Auction Agent shall calculate the Maximum Auction Rate, the All
- ----------
Hold Rate, the After-Tax Equivalent, the "AA" Composite Commercial Paper Rate,
the Index (unless the Index is to be determined by the Market Agent), the
Applicable Percentage, the Net Loan Rate and One-Month LIBOR or Three-Month
LIBOR, as the case may be, on each Auction Date and shall notify the Trustee and
the Broker-Dealers of the Maximum Auction Rate, the All Hold Rate, the Net Loan
Rate and One-Month LIBOR or Three-Month LIBOR, as the case may be, all as
provided in the Auction Agent Agreement. The Market Agent shall calculate the
Index (if the Index is other than the PSA Index) on each Interest Rate
Determination Date and shall notify the Trustee and the Auction Agent of the
Index prior to 9:30 a.m., New York City time, on each Interest Rate
Determination Date. If the ownership of the Auction Rate Series 1997-1 Notes is
no longer maintained in Book-Entry Form by the Securities Depository, the
Trustee shall calculate the Maximum Auction Rate and the Net Loan Rate on the
Business Day immediately preceding each Interest Period after the delivery of
definitive Auction Rate Series 1997-1 Notes pursuant to Section 17 hereof. If a
Payment Default shall have occurred, the Trustee shall calculate the Non-Payment
Rate on the Interest Rate Determination Date for (i) each Interest Period
commencing after the occurrence and during the continuance of
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such Payment Default and (ii) any Interest Period commencing less than two (2)
Business Days after the cure of any Payment Default. The Auction Agent shall
determine the After-Tax Equivalent, the "AA" Composite Commercial Paper Rate,
the Applicable Percentage and One-Month LIBOR or Three-Month LIBOR, as the case
may be, for each Interest Period other than the first Interest Period; provided
that if the ownership of the Auction Rate Series 1997-1 Notes is no longer
maintained in Book-Entry Form, or if a Payment Default has occurred, then the
Trustee shall determine the After-Tax Equivalent, the "AA" Composite Commercial
Paper Rate, the Applicable Percentage and One-Month LIBOR or Three-Month LIBOR,
as the case may be, for each such Interest Period. The determination by the
Trustee or the Auction Agent, as the case may be, of the After-Tax Equivalent,
the "AA" Composite Commercial Paper Rate, the Applicable Percentage and One-
Month LIBOR or Three-Month LIBOR, as the case may be, shall (in the absence of
manifest error) be final and binding upon all parties. If calculated or
determined by the Auction Agent, the Auction Agent shall promptly advise the
Trustee of the After-Tax Equivalent, the "AA" Composite Commercial Paper Rate,
the Applicable Percentage and One-Month LIBOR or Three-Month LIBOR, as the case
may be. The determination by the Market Agent of the Index shall (in the absence
of manifest error) be final and binding upon all parties.
If the Federal Reserve Bank of New York does not make available its
30-day commercial paper rate for purposes of determining the "AA" Composite
Commercial Paper Rate, the Auction Agent shall notify the Trustee of such fact
and the Trustee shall thereupon request that an Authorized Officer of the
Corporation promptly appoint at least two (2) Commercial Paper Dealers (in
addition to Smith Barney Inc.) to provide commercial paper quotes for purposes
of determining the "AA" Composite Commercial Paper Rate. Pending appointment of
both such additional Commercial Paper Dealers, Smith Barney Inc. and any other
Commercial Paper Dealer appointed and serving as such shall provide the required
quotations and such quotations shall be used for purposes of this First
Supplemental Indenture. Smith Barney Inc. is hereby appointed as a Commercial
Paper Dealer to provide commercial paper quotes for purposes of determining the
"AA" Composite Commercial Paper Rate as aforesaid.
SECTION 7. NOTIFICATION OF RATES, AMOUNTS AND PAYMENT DATES.
------------------------------------------------
(a) By 10:00 a.m., New York City time, on each Regular Record Date
with respect to the Auction Rate Series 1997-1 Notes, the Trustee shall
determine the aggregate amounts of interest distributable on the next succeeding
Interest Payment Date to the beneficial owners of each series thereof.
(b) As soon as practicable prior to each Interest Payment Date with
respect to the Auction Rate Series 1997-1 Notes, the Trustee shall:
(i) confirm with the Auction Agent, so long as no Payment Default has
occurred and is continuing and the ownership of the Auction Rate Series
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1997-1 Notes is maintained in Book-Entry Form by the Securities Depository,
(1) the date of such next Interest Payment Date and (2) the amount payable
to the Auction Agent on such Interest Payment Date pursuant to Section 5(b)
hereof;
(ii) advise the Securities Depository, so long as the ownership of
the Auction Rate Series 1997-1 Notes is maintained in Book-Entry Form by
the Securities Depository, upon request, of the aggregate amount of
interest distributable on the next succeeding Interest Payment Date to the
beneficial owners of each series thereof; and
(iii) pursuant to Section 3(A) hereof, advise the Holders of each
series of Taxable Auction Rate Series 1997-1 Notes of any Carry-Over Amount
accruing on such series.
SECTION 8. AUCTION AGENT.
--------------
(a) Bankers Trust Company is hereby appointed as Initial Auction Agent
to serve as agent for the Corporation in connection with Auctions. The Trustee
and the Corporation will, and the Trustee is hereby directed to, enter into the
Initial Auction Agent Agreement with Bankers Trust Company, as the Initial
Auction Agent. Any Substitute Auction Agent shall be (i) a bank, national
banking association or trust company duly organized under the laws of the United
States of America or any state or territory thereof having its principal place
of business in the Borough of Manhattan, New York, or such other location as
approved by the Trustee in writing and having a combined capital stock or
surplus of at least $50,000,000, or (ii) a member of the National Association of
Securities Dealers, Inc., having a capitalization of at least $50,000,000, and,
in either case, authorized by law to perform all the duties imposed upon it
hereunder and under the Auction Agent Agreement. The Auction Agent may at any
time resign and be discharged of the duties and obligations created by this
First Supplemental Indenture by giving at least ninety (90) days' notice to the
Trustee, the Market Agent and the Corporation. The Auction Agent with respect
to the Tax Exempt Auction Rate Series 1997-1 Notes may be removed at any time by
the Trustee upon the written direction of an Authorized Officer of the
Corporation or the Holders of 66-2/3% of the aggregate Principal Amount of the
Tax Exempt Auction Rate Series 1997-1 Notes then Outstanding, and, if by such
Holders, by an instrument signed by such Holders or their attorneys and filed
with the Auction Agent, the Corporation and the Trustee upon at least ninety
(90) days' notice. The Auction Agent with respect to the Taxable Auction Rate
Series 1997-1 Notes may be removed at any time by the Trustee upon the written
direction of an Authorized Officer of the Corporation or the Holders of 66-2/3%
of the aggregate Principal Amount of the Taxable Auction Rate Series 1997-1
Notes then Outstanding, and, if by such Holders, by an instrument signed by such
Holders or their attorneys and filed with the Auction Agent, the Corporation and
the Trustee upon at least ninety (90) days' notice. Neither resignation nor
removal of the Auction Agent pursuant to the preceding two sentences shall be
effective
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unless and until a Substitute Auction Agent has been appointed and has accepted
such appointment. However, if a successor Auction Agent shall not have been
appointed within sixty (60) days from the date of a notice of resignation, the
resigning Auction Agent may petition any court of competent jurisdiction for the
appointment of a successor Auction Agent. If required by the Corporation, a
Substitute Auction Agent Agreement shall be entered into with a Substitute
Auction Agent. Notwithstanding the foregoing, the Auction Agent may terminate
the Auction Agent Agreement if, within twenty-five (25) days after notifying the
Trustee, the Market Agent and the Corporation in writing that it has not
received payment of any Auction Agent Fee due it in accordance with the terms of
the Auction Agent Agreement, the Auction Agent does not receive such payment.
(b) If the Auction Agent shall resign or be removed or be dissolved,
or if the property or affairs of the Auction Agent shall be taken under the
control of any state or federal court or administrative body because of
bankruptcy or insolvency, or for any other reason, the Trustee at the direction
of an Authorized Officer of the Corporation, shall use its best efforts to
appoint a Substitute Auction Agent.
(c) The Auction Agent is acting as agent for the Corporation in
connection with Auctions. In the absence of bad faith, negligent failure to act
or negligence on its part, the Auction Agent shall not be liable for any action
taken, suffered or omitted or any error of judgment made by it in the
performance of its duties under the Auction Agent Agreement and shall not be
liable for any error of judgment made in good faith unless the Auction Agent
shall have been negligent in ascertaining (or failing to ascertain) the
pertinent facts.
(d) In the event of a change in the Auction Agent Fee Rate pursuant to
Section 6.4(b) of the Auction Agent Agreement, the Auction Agent shall give a
Notice of Fee Rate Change to the Trustee in accordance with the Auction Agent
Agreement.
SECTION 9. BROKER-DEALERS.
--------------
(a) The Auction Agent will enter into a Broker-Dealer Agreement with
Smith Barney Inc., as the sole initial Broker-Dealer with respect to the Tax
Exempt Auction Rate Series 1997-1 Notes. The Auction Agent will also enter into
a Broker-Dealer Agreement with Smith Barney Inc., as the sole initial Broker-
Dealer with respect to the Taxable Auction Rate Series 1997-1 Notes. An
Authorized Officer of the Corporation may, from time to time, approve one or
more additional persons to serve as Broker-Dealers under Broker-Dealer
Agreements and shall be responsible for providing such Broker-Dealer Agreements
to the Trustee and the Auction Agent; provided, however that while Smith Barney
Inc. is serving as a Broker-Dealer, Smith Barney Inc. shall have the right to
consent to the approval of any additional Broker-Dealers, which consent will not
be unreasonably withheld.
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(b) Any Broker-Dealer may be removed at any time, at the request of an
Authorized Officer of the Corporation, but there shall, at all times, be at
least one Broker-Dealer with respect to each of the Tax Exempt Auction Rate
Series 1997-1 Notes and the Taxable Auction Rate Series 1997-1 Notes appointed
and acting as such.
SECTION 10. CHANGES IN AUCTION PERIOD OR PERIODS AND CERTAIN
------------------------------------------------
PERCENTAGES.
- -----------
(a) While any of the Auction Rate Series 1997-1 Notes are Outstanding,
the Corporation may, from time to time, convert the length of one or more
Auction Periods (an "Auction Period Adjustment"), in order to conform with then
current market practice with respect to similar securities or to accommodate
economic and financial factors that may affect or be relevant to the length of
the Auction Period and the Auction Rate Series 1997-1 Note Interest Rate borne
by the Auction Rate Series 1997-1 Notes. The Corporation shall not initiate an
Auction Period Adjustment unless it shall have received, not less than three (3)
days nor more than twenty (20) days prior to the Auction Period Adjustment, (i)
in the case of an Auction Period Adjustment relating to Tax Exempt Auction Rate
Series 1997-1 Notes, a written opinion of Bond Counsel to the effect that such
Auction Period Adjustment will not adversely affect the exclusion of interest on
any of the Series 1997-1 Notes from income for federal income tax purposes, (ii)
the written consent of the Market Agent, which consent shall not be unreasonably
withheld, and (iii) written confirmation from each of the Rating Agencies then
rating the Series 1997-1 Notes that such Auction Period Adjustment will not
adversely affect its ratings then applicable to any of the Series 1997-1 Notes.
The Corporation shall initiate the Auction Period Adjustment by giving written
notice by Corporation Order to the Trustee, the Auction Agent, the Market Agent
and the Securities Depository in substantially the form of, or containing
substantially the information contained in, Exhibit E to this First Supplemental
Indenture at least ten (10) days prior to the Auction Date for such Auction
Period.
Any such adjusted Auction Period shall not be less than seven (7) days
nor more than ninety-one (91) days. If any such adjusted Auction Period will be
less than thirty-five (35) days (in the case of the Tax Exempt Auction Rate
Series 1997-1 Notes) or twenty-eight (28) days (in the case of the Taxable
Auction Rate Series 1997-1 Notes), the notice described above will be effective
only if it is accompanied by a written statement of the Trustee, the Auction
Agent and the Securities Depository to the effect that they are capable of
performing their duties, if any, under this First Supplemental Indenture, the
Auction Agent Agreement and any Broker-Dealer Agreement with respect to such
changed Auction Period.
An Auction Period Adjustment shall take effect only (A) if the Trustee
and the Auction Agent receive, by 11:00 a.m., New York City time, on the
Business Day before the Auction Date for the first such Auction Period, a
Corporation Certificate in substantially the form attached as, or containing
substantially the same
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<PAGE>
information contained in, Exhibit F to this First Supplemental Indenture,
authorizing the Auction Period Adjustment specified in such certificate along
with a copy of the opinion of Bond Counsel, the written consent of the Market
Agent and the Rating Agency confirmations described in the first paragraph of
this subsection (a) and, if applicable, the written statement of the Trustee,
the Auction Agent and the Securities Depository described in the second
paragraph of this subsection (a), and (B) Sufficient Bids exist as of the
Auction on the Auction Date for such first Auction Period. If the condition
referred to in (A) above is not met, the Auction Rate Series 1997-1 Note
Interest Rate for the next Auction Period shall be determined pursuant to the
provisions of Sections 4 through 9 hereof and the Auction Period shall be the
Auction Period determined without reference to the proposed change. If the
condition referred to in (A) is met but the condition referred to in (B) above
is not met, the Auction Rate Series 1997-1 Note Interest Rate for the next
Auction Period shall be (1) in the case of the Tax Exempt Auction Rate Series
1997-1 Notes, the Maximum Auction Rate, or (2) in the case of the Taxable
Auction Rate Series 1997-1 Notes, the lesser of the Maximum Auction Rate and the
Net Loan Rate, and in either case the Auction Period shall be the Auction Period
determined without reference to the proposed change.
In connection with any Auction Period Adjustment, the Auction Agent
shall provide such further notice to such parties as is specified in Section 2.5
of the Auction Agent Agreement.
(b) The Market Agent may adjust the percentage used in determining the
All Hold Rate, the Applicable Percentage used in determining the Maximum Auction
Rate and the percentage of the Index used in determining the Non-Payment Rate,
if any such adjustment is necessary, in the judgment of the Market Agent, to
reflect any Change of Tax Law such that a Tax Exempt Auction Rate Series 1997-1
Note bearing interest at the All Hold Rate, a Tax Exempt Auction Rate Series
1997-1 Note bearing interest at the Maximum Auction Rate and a Tax Exempt
Auction Rate Series 1997-1 Note bearing interest at the Non-Payment Rate shall
have substantially the same market values after such Change of Tax Law as before
such Change of Tax Law. In making any such adjustment, the Market Agent shall
take the following factors in existence both before and after such Change of Tax
Law into account:
(i) short-term taxable and tax exempt market rates and indices of
such short-term rates;
(ii) the market supply and demand for short-term tax exempt
securities;
(iii) yield curves for short-term and long-term tax exempt securities
or obligations having a credit rating that is comparable to the Tax Exempt
Auction Rate Series 1997-1 Notes;
(iv) general economic conditions; and
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(v) economic and financial factors present in the securities industry
that may affect or that may be relevant to the Tax Exempt Auction Rate
Series 1997-1 Notes.
The Market Agent shall communicate its determination to adjust the
percentage used in determining the All Hold Rate, the Applicable Percentage used
in determining the Maximum Auction Rate and the percentage of the Index used in
determining the Non-Payment Rate pursuant to the first paragraph of this
subsection (b) by means of a written notice delivered at least ten (10) days
prior to the Interest Rate Determination Date on which the Market Agent desires
to effect the change, to the Corporation, the Trustee and the Auction Agent in
substantially the form attached hereto as, or containing substantially the
information contained in, Exhibit I to this First Supplemental Indenture. Such
notice shall not be given unless the Market Agent has received a Corporation
Consent thereto and a written opinion of Bond Counsel to the effect that such
adjustment will not adversely affect the exclusion of interest on any of the
Series 1997-1 Notes from income for federal income tax purposes.
Any such adjustment in the percentages used to determine the All Hold
Rate, the Maximum Auction Rate and the Non-Payment Rate shall take effect on an
Interest Rate Determination Date only if (A) the Trustee, the Auction Agent and
the Corporation receive, by 11:00 a.m., New York City time, on the Business Day
immediately preceding such Interest Rate Determination Date, a certificate of an
authorized officer of the Market Agent in substantially the form attached hereto
as, or containing substantially the information contained in, Exhibit J to this
First Supplemental Indenture, authorizing the adjustment of such percentage as
specified in such certificate, together with a copy of the Corporation Consent
thereto and the opinion of Bond Counsel described in the second paragraph of
this subsection (b); and (B) the Trustee and the Corporation have received
written confirmation from each of the Rating Agencies then rating the Series
1997-1 Notes that such proposed adjustment will not adversely affect its ratings
then applicable to any of the Series 1997-1 Notes. If any of the conditions
referred to in (A) and (B) above are not met, the existing percentage used to
determine the All Hold Rate, Applicable Percentage used to determine the Maximum
Auction Rate and percentage of the Index used to determine the Non-Payment Rate
shall remain in effect, and the rate of interest on Tax Exempt Auction Rate
Series 1997-1 Notes for the next succeeding Interest Period shall be determined
in accordance with the Auction Procedures.
In connection with any such adjustment in the percentages used to
determine the All Hold Rate, the Maximum Auction Rate and the Non-Payment Rate,
the Auction Agent shall provide such further notice to such parties as is
specified in Section 2.5 of the Auction Agent Agreement.
SECTION 11. CHANGES IN THE AUCTION DATE. The Market Agent, with the
---------------------------
written consent of an Authorized Officer of the Corporation and upon receipt of
the opinion of Bond Counsel as hereinafter required, may specify an earlier
Auction
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Date (but in no event more than five (5) Business Days earlier) than the Auction
Date that would otherwise be determined in accordance with the definition of
"Auction Date" in Section 1 of this First Supplemental Indenture with respect to
one or more specified Auction Periods in order to conform with then current
market practice with respect to similar securities or to accommodate economic
and financial factors that may affect or be relevant to the day of the week
constituting an Auction Date and the Auction Rate Series 1997-1 Note Interest
Rate borne by the Auction Rate Series 1997-1 Notes. No such change in the
Auction Date shall be effective unless the Corporation and the Trustee, prior to
the proposed effective date of such change, have received a written opinion of
Bond Counsel to the effect that such change will not adversely affect the
exclusion of interest on any of the Series 1997-1 Notes from income for federal
income tax purposes. The Market Agent shall deliver a written request for
consent to such change in the Auction Date to the Corporation not less than
three days nor more than twenty (20) days prior to the effective date of such
change. The Market Agent shall provide notice of its determination to specify an
earlier Auction Date for one or more Auction Periods by means of a written
notice delivered at least ten (10) days prior to the proposed changed Auction
Date to the Trustee, the Auction Agent, the Corporation and the Securities
Depository. Such notice shall be substantially in the form of, or contain
substantially the information contained in, Exhibit G to this First Supplemental
Indenture.
In connection with any change described in this Section 11, the
Auction Agent shall provide such further notice to such parties as is specified
in Section 2.5 of the Auction Agent Agreement.
SECTION 12. ADDITIONAL PROVISIONS REGARDING THE AUCTION RATE SERIES
-------------------------------------------------------
1997-1 NOTE INTEREST RATE. The determination of an Auction Rate Series 1997-1
- -------------------------
Note Interest Rate by the Auction Agent or any other Person pursuant to the
provisions of the applicable Section of this First Supplemental Indenture shall
be conclusive and binding on the Holders of the series of Auction Rate Series
1997-1 Notes to which such Auction Rate Series 1997-1 Note Interest Rate
applies, and the Corporation and the Trustee may rely thereon for all purposes.
In no event shall the cumulative amount of interest paid or payable on
a series of Auction Rate Series 1997-1 Notes (including interest calculated as
provided herein, plus any other amounts that constitute interest on the Auction
Rate Series 1997-1 Notes of such series under applicable law, which are
contracted for, charged, reserved, taken or received pursuant to the Auction
Rate Series 1997-1 Notes of such series or related documents) calculated from
the date of issuance of such series through any subsequent day during the term
of such series or otherwise prior to payment in full of the Auction Rate Series
1997-1 Notes of such series exceed the amount permitted by applicable law. If
the applicable law is ever judicially interpreted so as to render usurious any
amount called for under the Auction Rate Series 1997-1 Notes of a series or
related documents or otherwise contracted for, charged, reserved, taken or
received in connection with the Auction
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<PAGE>
Rate Series 1997-1 Notes of such series, or if the redemption, prepayment or
acceleration of the maturity of the Auction Rate Series 1997-1 Notes of such
series results in payment to or receipt by the Holder or any former Holder of
the Auction Rate Series 1997-1 Notes of such series of any interest in excess of
that permitted by applicable law, then, notwithstanding any provision of the
Auction Rate Series 1997-1 Notes of such series or related documents to the
contrary, all excess amounts theretofore paid or received with respect to the
Auction Rate Series 1997-1 Notes of such series shall be credited on the
Principal Amount of the Auction Rate Series 1997-1 Notes of such series (or, if
the Auction Rate Series 1997-1 Notes of such series have been paid or would
thereby be paid in full, refunded by the recipient thereof), and the provisions
of the Auction Rate Series 1997-1 Notes of such series and related documents
shall automatically and immediately be deemed reformed and the amounts
thereafter collectible hereunder and thereunder reduced, without the necessity
of the execution of any new document, so as to comply with the applicable law,
but so as to permit the recovery of the fullest amount otherwise called for
under the Auction Rate Series 1997-1 Notes of such series and under the related
documents.
SECTION 13. QUALIFICATIONS OF MARKET AGENT. The Market Agent shall
------------------------------
be a member of the National Association of Securities Dealers, Inc., have a
capitalization of at least $50,000,000 and be authorized by law to perform all
the duties imposed upon it by this First Supplemental Indenture. The Market
Agent may resign and be discharged of the duties and obligations created by this
First Supplemental Indenture by giving at least thirty (30) days notice to the
Corporation and the Trustee, provided that such resignation shall not be
effective until the appointment of a successor market agent by the Corporation
and the acceptance of such appointment by such successor market agent. The
Market Agent may be replaced at the direction of the Corporation, by an
instrument signed by an Authorized Officer of the Corporation filed with the
Market Agent and the Trustee at least thirty (30) days before the effective date
of such replacement, provided that such replacement shall not be effective until
the appointment of a successor market agent by the Corporation and the
acceptance of such appointment by such successor market agent.
In the event that the Market Agent shall be removed or be dissolved,
or if the property or affairs of the Market Agent shall be taken under the
control of any state or federal court or administrative body because of
bankruptcy or insolvency, or for any other reason, and there is no Market Agent,
and the Corporation shall not have appointed its successor as Market Agent, the
Trustee, notwithstanding the provisions of the first paragraph of this Section
13, shall be deemed to be the Market Agent for all purposes of this First
Supplemental Indenture until the appointment by the Corporation of the successor
Market Agent. Nothing in this Section 13 shall be construed as conferring on
the Trustee additional duties other than as set forth herein.
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SECTION 14. PURPOSES OF ISSUANCE OF SERIES 1997-1 NOTES. The Series
-------------------------------------------
1997-1 Notes are being issued to provide funds to be used to (a) refund the
Refunded Obligations and, in so doing, acquire student loan notes incurred under
the Higher Education Act financed with the proceeds thereof, as well as other
available moneys under the applicable indentures, which will be applied to the
purposes described in the following clauses (b) and (c), (b) acquire additional
student loan notes incurred under the Higher Education Act, and (c) fund the
Reserve Fund.
SECTION 15. DEPOSIT OF SERIES 1997-1 NOTE PROCEEDS. From the
--------------------------------------
proceeds derived from the sale of the Series 1997-1 Notes, including the accrued
interest paid as part of the purchase price thereof, there shall be deposited
with the Trustee:
(1) for credit to the Series 1997-1 Interest Subaccount, an amount
equal to any accrued interest on the Series 1997-1 Notes paid as part of
the purchase price thereof;
(2) for credit to the Series 1997-1 Tax Exempt Reserve Account, an
amount from the proceeds of the Tax Exempt Series 1997-1 Notes equal to
$____________________, from which sum (A) $____________________ shall be
immediately transferred to the Series 1979 Trustee contemporaneously with
receipt by the Trustee from the Series 1979 Trustee of a like amount of
cash transferred from the reserve fund under the Series 1979 Indenture for
credit to the Series 1997-1 Tax Exempt Reserve Account, (B)
$____________________ shall be immediately transferred to the Series 1989
Trustee contemporaneously with receipt by the Trustee from the Series 1989
Trustee of a like amount of cash transferred from the reserve fund under
the Series 1989 Indenture for credit to the Series 1997-1 Tax Exempt
Reserve Account, and (C) $____________________ shall be immediately
transferred to the Series 1994 Trustee contemporaneously with receipt by
the Trustee from the Series 1994 Trustee of a like amount of cash
(consisting of proceeds of the Series 1996-1 Notes) transferred from the
reserve fund under the Series 1994 Indenture for credit to the Series 1997-
1 Tax Exempt Reserve Account;
(3) for credit to the Series 1997-1 Taxable Reserve Account, an
amount from the proceeds of the Taxable Series 1997-1 Notes equal to
$____________________;
(4) an amount from the proceeds of the Tax Exempt Series 1997-1 Notes
equal to $____________________, from which sum (A) $____________________
shall be immediately transferred to the Series 1979 Trustee
contemporaneously with receipt by the Trustee from the Series 1979 Trustee
of a like amount of cash transferred from the surplus fund [and the
acquisition fund] under the Series 1979 Indenture for credit to the Series
1997-1 Tax Exempt Acquisition Account, (B) $____________________ shall be
immediately transferred to the Series 1989 Trustee contemporaneously with
receipt by the Trustee from the Series 1989 Trustee of a like amount of
cash transferred from the surplus fund under the Series 1989 Indenture for
credit to the Series 1997-1 Tax Exempt Acquisition
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Account, and (C) $____________________ shall be immediately transferred to
the Series 1994 Trustee contemporaneously with receipt by the Trustee from
the Series 1994 Trustee of a like amount of cash (consisting of proceeds of
the Series 1996-1 Notes) transferred from the acquisition fund under the
Series 1994 Indenture for credit to the Series 1997-1 Tax Exempt
Acquisition Account, all of such amounts to remain in such Account until
applied for the acquisition or origination of Eligible Loans, including the
acquisition of Eligible Loans pursuant to the Student Loan Purchase
Agreements identified in Exhibit H-4 hereto (as such Exhibit H-4 may be
amended or supplemented from time to time);
(5) for credit to the Series 1997-1 Tax Exempt Acquisition Account,
the remainder of the proceeds of the Tax Exempt Series 1997-1 Notes, to
remain in such Account until applied for (A) the acquisition of Eligible
Loans from:
(i) the Series 1979 Trustee, which Eligible Loans were
previously acquired by the Corporation, or by the Series 1979 Trustee
on behalf of the Corporation, pursuant to the Student Loan Purchase
Agreements identified in Exhibit H-1 hereto;
(ii) the Series 1989 Trustee, which Eligible Loans were
previously acquired by the Corporation, or by the Series 1989 Trustee
on behalf of the Corporation, pursuant to the Student Loan Purchase
Agreements identified in Exhibit H-2 hereto; and
(iii) the Series 1994 Trustee, which Eligible Loans were
previously acquired by the Corporation, or by the Series 1994 Trustee
on behalf of the Corporation, pursuant to the Student Loan Purchase
Agreements identified in Exhibit H-3 hereto with proceeds of the
Series 1996-1 Notes; or
(B) the acquisition or origination of other Eligible Loans, including the
acquisition of Eligible Loans pursuant to the Student Loan Purchase
Agreements identified in Exhibit H-4 hereto (as such Exhibit H-4 may be
amended or supplemented from time to time); and
(6) for credit to the Series 1997-1 Taxable Acquisition Account, the
remainder of the proceeds of the Taxable Series 1997-1 Notes, to remain in
such Account until applied for (A) the acquisition of Eligible Loans from
the Series 1994 Trustee, which Eligible Loans were previously acquired by
the Corporation, or by the Series 1994 Trustee on behalf of the
Corporation, pursuant to the Student Loan Purchase Agreements identified in
Exhibit H-5 hereto with proceeds of the Series 1994-1 Notes, the Series
1995-1 Notes and the Series 1995-2 Notes, or (B) the acquisition or
origination of other Eligible Loans, including the acquisition of Eligible
Loans pursuant to the Student
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Loan Purchase Agreements identified in Exhibit H-6 hereto (as such Exhibit
H-6 may be amended or supplemented from time to time).
All amounts deposited in the Series 1997-1 Tax Exempt Reserve Account, the
Series 1997-1 Taxable Reserve Account and the Series 1997-1 Tax Exempt
Acquisition Account pursuant to clauses (2), (3) and (4) above shall be deemed
to be proceeds of the Series 1997-1 Notes for purposes of this First
Supplemental Indenture. With respect to the Eligible Loans Financed as
described in clauses (5)(A) and (6)(A), there shall be credited to the Revenue
Fund any federal interest subsidy payments and Special Allowance Payments that
accrued on such Eligible Loans prior to the date on which they were Financed.
SECTION 16. REDEMPTION AND PREPAYMENT OF SERIES 1997-1 NOTES. The
------------------------------------------------
Series 1997-1 Notes are subject to redemption and prepayment as provided in this
Section 16.
(A) Redemption From Unexpended Tax Exempt Series 1997-1 Note
--------------------------------------------------------
Proceeds. Subject to compliance with Section 10.2 of the Indenture, Outstanding
Tax Exempt Auction Rate Series 1997-1 Notes of any series or (to the extent no
Tax Exempt Auction Rate Series 1997-1 Notes are Outstanding) Series 1997-F Notes
or Series 1997-K Notes may, at the option of the Corporation, and, under the
circumstances described in the next succeeding sentence, shall be redeemed, in
whole or in part, on any Interest Rate Adjustment Date for such series or any
regularly scheduled Interest Payment Date (in the case of a series of Tax Exempt
Auction Rate Series 1997-1 Notes) or on any date (in the case of Series 1997-1F
Notes or Series 1997-1K Notes), at a Redemption Price equal to 100% of the
Principal Amount of Tax Exempt Series 1997-1 Notes so redeemed plus accrued
interest thereon to the Redemption Date, from proceeds of the Tax Exempt Series
1997-1 Notes constituting a portion of the Balance of the Series 1997-1 Tax
Exempt Acquisition Account that have not been used to acquire Eligible Loans and
from that portion of the Series 1997-1 Tax Exempt Reserve Account which, if left
in the Reserve Fund upon such redemption, would cause the Balance in the Reserve
Fund to exceed the Reserve Fund Requirement, calculated after giving effect to
such redemption. Such redemption shall be required on June 1, 2001 (to the
extent the proceeds in the Series 1997-1 Tax Exempt Acquisition Account not so
used as of April 15, 2001, exceed $________________) and on June 1, 2002 (from
such proceeds not so used as of April 15, 2002), in each case unless the
Corporation delivers to the Trustee: (i) an opinion of Bond Counsel stating in
effect that such redemption is not required pursuant to the Code and that
failure to so redeem Tax Exempt Series 1997-1 Notes will not adversely affect
the tax exempt status of interest on any Tax Exempt Series 1997-1 Notes for
federal income tax purposes, (ii) a Corporation Certificate certifying that,
based on a Cash Flow Projection, the failure to redeem such Tax Exempt Series
1997-1 Notes will not materially adversely affect the Corporation's ability to
pay Debt Service on the Outstanding Notes and the Outstanding Other Obligations,
Carry-Over Amounts (including accrued interest thereon) with respect to
Outstanding Notes, Administrative Expenses or Note Fees or to make required
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deposits to the Rebate Fund, and (iii) written confirmation from each of the
Rating Agencies then rating the Series 1997-1 Notes to the effect that the
failure to redeem such Tax Exempt Series 1997-1 Notes will not result in a
reduction or withdrawal of the rating of the Series 1997-1 Notes. The Trustee
shall transfer any such moneys to the credit of the Series 1997-1 Tax Exempt
Retirement Subaccount for such purpose without any further authorization or
direction.
(B) Redemption From Unexpended Taxable Series 1997-1 Note Proceeds.
--------------------------------------------------------------
Subject to compliance with Section 10.2 of the Indenture, Outstanding Taxable
Auction Rate Series 1997-1 Notes of any series may, at the option of the
Corporation, and, under the circumstances described in the next succeeding
sentence, shall be redeemed, in whole or in part, on any regularly scheduled
Interest Payment Date for such series, at a Redemption Price equal to 100% of
the Principal Amount of Taxable Auction Rate Series 1997-1 Notes so redeemed
plus accrued interest thereon to the Redemption Date, from proceeds of the
Taxable Series 1997-1 Notes constituting a portion of the Balance of the Series
1997-1 Taxable Acquisition Account that have not been used to acquire Eligible
Loans and from that portion of the Series 1997-1 Taxable Reserve Account which,
if left in the Reserve Fund upon such redemption, would cause the Balance in the
Reserve Fund to exceed the Reserve Fund Requirement, calculated after giving
effect to such redemption. Such redemption shall be required on the regularly
scheduled Interest Payment Date occuring in September, 1998 (from such proceeds
not so used as of August 1, 1998), unless the Corporation delivers to the
Trustee: (i) a Corporation Certificate certifying that, based on a Cash Flow
Projection, the failure to redeem such Taxable Auction Rate Series 1997-1 Notes
will not materially adversely affect the Corporation's ability to pay Debt
Service on the Outstanding Notes and the Outstanding Other Obligations, Carry-
Over Amounts (including accrued interest thereon) with respect to Outstanding
Notes, Administrative Expenses or Note Fees or to make required deposits to the
Rebate Fund, and (ii) written confirmation from each of the Rating Agencies then
rating the Series 1997-1 Notes to the effect that the failure to redeem such
Taxable Auction Rate Series 1997-1 Notes will not result in a reduction or
withdrawal of the rating of the Series 1997-1 Notes. The Trustee shall transfer
any such moneys to the credit of the Series 1997-1 Taxable Retirement Subaccount
for such purpose without any further authorization or direction.
(C) Redemption from Series 1997-1 Tax Exempt Surplus Subaccount.
-----------------------------------------------------------
Subject to compliance with Section 10.2 of the Indenture, Outstanding Tax Exempt
Auction Rate Series 1997-1 Notes of any series may, at the option of the
Corporation, be redeemed on any Interest Rate Adjustment Date for such series or
any regularly scheduled Interest Payment Date occurring on or after
____________________, in whole or in part, from amounts available therefor as
hereinafter described. Subject to compliance with Section 10.2 of the
Indenture, Outstanding Series 1997-1F Notes and Series 1997-1K Notes may, at the
option of the Corporation, be redeemed on ____________________, and on any date
thereafter, in whole or in part, from amounts available therefor as hereinafter
described. Any such redemption of Tax Exempt Auction Rate Series 1997-1 Notes,
Series 1997-1F Notes or Series 1997-1K Notes shall be at a
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Redemption Price equal to 100% of the Principal Amount thereof to be redeemed
plus accrued interest thereon to the Redemption Date, and shall be made from
amounts credited to the Series 1997-1 Tax Exempt Retirement Subaccount from the
Series 1997-1 Tax Exempt Surplus Subaccount for such purpose in accordance with
Section 4.8 of the Indenture and from that portion of the Series 1997-1 Tax
Exempt Reserve Account which exceeds the Reserve Fund Requirement (calculated
after giving effect to such redemption) in accordance with Section 4.4 of the
Indenture. If the Trustee shall have first certified that no deficiencies exist
in any of the Rebate Fund, the Note Fund, the Reserve Fund or the Special
Redemption and Prepayment Account, the Trustee shall, upon Corporation Order,
transfer to the Series 1997-1 Tax Exempt Retirement Account any Balances in the
Series 1997-1 Tax Exempt Surplus Subaccount (other than those consisting of
Student Loans) which a Corporation Certificate states are not reasonably
expected to be needed for the payment of scheduled Debt Service on the
Outstanding Notes and Outstanding Other Obligations, Carry-Over Amounts
(including accrued interest thereon) with respect to Outstanding Notes,
Administrative Expenses or Note Fees, or for transfer to the Rebate Fund.
(D) Redemption from Series 1997-1 Taxable Surplus Subaccount.
--------------------------------------------------------
Subject to compliance with Section 10.2 of the Indenture, Outstanding Taxable
Auction Rate Series 1997-1 Notes of any series may, at the option of the
Corporation, be redeemed on any Interest Rate Adjustment Date for such series or
any regularly scheduled Interest Payment Date for such series occurring on or
after ____________________, in whole or in part, from amounts available therefor
as hereinafter described. Any such redemption of Taxable Auction Rate Series
1997-1 Notes shall be at a Redemption Price equal to 100% of the Principal
Amount thereof to be redeemed plus accrued interest thereon to the Redemption
Date, and shall be made from amounts credited to the Series 1997-1 Taxable
Retirement Subaccount from the Series 1997-1 Taxable Surplus Subaccount for such
purpose in accordance with Section 4.8 of the Indenture and from that portion of
the Series 1997-1 Taxable Reserve Account which exceeds the Reserve Fund
Requirement (calculated after giving effect to such redemption) in accordance
with Section 4.4 of the Indenture. If the Trustee shall have first certified
that no deficiencies exist in any of the Rebate Fund, the Note Fund, the Reserve
Fund or the Special Redemption and Prepayment Account, the Trustee shall, upon
Corporation Order, transfer to the Series 1997-1 Taxable Retirement Account any
Balances in the Series 1997-1 Taxable Surplus Subaccount (other than those
consisting of Student Loans) which a Corporation Certificate states are not
reasonably expected to be needed for the payment of scheduled Debt Service on
the Outstanding Notes and Outstanding Other Obligations, Carry-Over Amounts
(including accrued interest thereon) with respect to Outstanding Notes,
Administrative Expenses or Note Fees, or for transfer to the Rebate Fund.
(E) Optional Redemption. Subject to compliance with Section 10.2 of
-------------------
the Indenture, Outstanding Auction Rate Series 1997-1 Notes of any series may,
at the option of the Corporation and from amounts credited to the Retirement
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<PAGE>
Account for such purpose, be redeemed on any Interest Rate Adjustment Date for
such series or any regularly scheduled Interest Payment Date for such series, in
whole or in part, at a Redemption Price equal to 100% of the Principal Amount of
Auction Rate Series 1997-1 Notes to be so redeemed plus accrued interest thereon
to the Redemption Date. Subject to compliance with Section 10.2 of the
Indenture, Outstanding Series 1997-1F Notes and Series 1997-1K Notes may, at the
option of the Corporation and from amounts credited to the Retirement Account
for such purpose, be redeemed on ____________________, and on any date
thereafter, in whole or in part, at the Redemption Prices (expressed as a
percentage of Principal Amount) set forth below plus accrued interest to the
Redemption Date:
<TABLE>
<CAPTION>
Redemption
Redemption Period Price
----------------- -----
<S> <C>
December 1, 2007, through November 30, 2008 102%
December 1, 2008, through November 30, 2009 101%
December 1, 209, and thereafter 100%
</TABLE>
Notwithstanding the foregoing, no Series 1997-1 Notes shall be
redeemed pursuant to this subsection (E) unless the Trustee receives, at least
forty-five (45) days prior to the proposed Redemption Date (unless a shorter
notice is satisfactory to the Trustee), a Corporation Certificate certifying
that, based on a Cash Flow Projection, such redemption of such Series 1997-1
Notes will not materially adversely affect the Corporation's ability to pay Debt
Service on the Outstanding Notes and Outstanding Other Obligations, Carry-Over
Amounts (including accrued interest thereon) with respect to Outstanding Notes,
Administrative Expenses or Note Fees or to make required deposits to the Rebate
Fund.
(F) Prepayment of Taxable LIBOR Rate Series 1997-1 Notes. Subject to
----------------------------------------------------
compliance with Section 10.2 of the Indenture, Outstanding LIBOR Rate Series
1997-1 Notes shall receive prepayments of principal on any Interest Payment Date
from moneys credited to the Series 1997-1 Taxable Special Redemption and
Prepayment Subaccount as hereinafter described.
On each Special Prepayment Determination Date, the Corporation shall
determine to what extent the Balance in the Series 1997-1 Taxable Special
Redemption and Prepayment Subaccount exceeds the amount reasonably expected to
otherwise be required to be transferred to the Note Fund, the Rebate Fund or the
Reserve Fund prior to the next succeeding regularly scheduled Interest Payment
Date (the "Special Prepayment Excess"). If the Corporation determines that
there is any Special Prepayment Excess, it shall, within two (2) Business Days
after the Special Prepayment Determination Date, deliver to the Trustee a
Corporation Certificate to that effect, and the Trustee shall, provided no
deficiencies exist at the time in the Note Fund, the Rebate Fund or the Reserve
Fund, immediately and without further authorization or direction transfer to the
credit of the Series 1997-1 Taxable Retirement Subaccount that portion of the
Balance of the Series 1997-1
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<PAGE>
Taxable Special Redemption and Prepayment Subaccount equal to the Special
Prepayment Excess so certified.
All prepayments of principal in accordance with this subsection (F)
shall, subject to Section 10.2 of the Indenture, be allocated between the LIBOR
Rate Series 1997-1 Senior Notes and the Series 1997-1L Notes pro rata based upon
their respective aggregate Principal Amounts. All such prepayments of principal
allocated to the LIBOR Rate Series 1997-1 Senior Notes shall be applied to the
Series 1997-1I Notes so long as any such Notes remain Outstanding, and
thereafter to the Series 1997-1J Notes. All such prepayments of principal
applied to a given series of LIBOR Rate Series 1997-1 Notes shall be allocated
pro rata, based upon their respective Principal Amounts, to the reduction of the
Principal Amount of all Notes of such series.
(G) Redemption Upon Reduction of Student Loan Balance. Subject to
-------------------------------------------------
compliance with Section 10.2 of the Indenture, the Outstanding Series 1997-1
Notes may, at the option of the Corporation, be redeemed, in whole but not in
part, at a Redemption Price equal to 100% of the Principal Amount of Series
1997-1 Notes to be so redeemed plus accrued interest thereon to the Redemption
Date, on any date after the remaining aggregate Principal Balance of Student
Loans Financed with proceeds of the Series 1997-1 Notes is less than 10% of the
aggregate amount of proceeds described in subsections (4), (5) and (6) of
Section 15 hereof.
(H) Selection of Series 1997-1 Notes for Redemption. If less than
-----------------------------------------------
all Outstanding Series 1997-1 Notes subject to redemption are to be redeemed
pursuant to subsections (C) or (E) of this Section 16, the Principal Amounts of
each series of Series 1997-1 Notes to be redeemed shall be selected as follows:
to the extent that the provisions of Section 10.2 of the Indenture will not be
violated thereby, either (i) to the extent Series 1997-1 Subordinate Notes are
subject to such redemption, that Principal Amount thereof shall be redeemed
which bears, as nearly as practicable, the same (but no greater) proportion to
the aggregate Principal Amount of all Outstanding Series 1997-1 Notes to be
redeemed as the aggregate Principal Amount of Outstanding Series 1997-1
Subordinate Notes bears to the aggregate Principal Amount of all Outstanding
Series 1997-1 Notes or (ii) if the Trustee receives, at least forty-five (45)
days prior to the Redemption Date (unless a shorter notice is satisfactory to
the Trustee), a Corporation Certificate certifying that, based on a Cash Flow
Projection, a different proportion of Series 1997-1 Subordinate Notes to be
redeemed will not materially adversely affect the Corporation's ability to pay
Debt Service on the Outstanding Notes and on Outstanding Other Obligations,
Carry-Over Amounts (including accrued interest thereon) with respect to
Outstanding Notes, Administrative Expenses or Note Fees or to make required
deposits to the Rebate Fund, Series 1997-1 Subordinate Notes shall be redeemed
in such Principal Amount as is designated by the Corporation in such
certificate. The remaining Series 1997-1 Notes to be redeemed pursuant to
subsections (C) or (E) of this Section 16 shall be selected from the Series
1997-1 Senior Notes subject to such redemption,
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<PAGE>
and, if more than one series of Series 1997-1 Senior Notes is so subject, from
each such series in the manner described in the following paragraph.
If less than all Outstanding Series 1997-1 Senior Notes subject to
redemption are to be redeemed pursuant to subsections (A), (C) or (E) of this
Section 16, and more than one series of Series 1997-1 Senior Notes is so
subject, the Principal Amounts of each series of Series 1997-1 Notes to be
redeemed shall be selected from each such series in such Principal Amounts as
the Corporation may designate in a Corporation Certificate delivered to the
Trustee at least forty-five (45) days prior to the Redemption Date (unless a
shorter notice is satisfactory to the Trustee), or, in the absence of such
designation, from each such series in, as nearly as practicable, the same
proportion to the aggregate Principal Amount of all Outstanding Series 1997-1
Senior Notes to be redeemed as the aggregate Principal Amount of Outstanding
Series 1997-1 Senior Notes of such series bears to the aggregate Principal
Amount of all Outstanding Series 1997-1 Senior Notes subject to such redemption.
Notwithstanding the foregoing provisions of this Section 16, to the
extent Series 1997-1 Subordinate Notes cannot be redeemed due to the application
of Section 10.2 of the Indenture, but Series 1997-1 Senior Notes may be redeemed
without violating the provisions of said Section 10.2, the particular Series
1997-1 Notes to be redeemed shall be selected from the Series 1997-1 Senior
Notes as described above.
If less than all of the Outstanding Series 1997-1 Notes of a given
series are to be redeemed pursuant to this Section 16, the particular Series
1997-1 Notes to be redeemed shall be selected by the Trustee by lot in such
manner as the Trustee shall deem fair and appropriate and which may provide for
the selection for redemption of portions of the principal of Series 1997-1 Notes
in an Authorized Denomination.
The Trustee shall promptly notify the Note Registrar and any Paying
Agent for the Series 1997-1 Notes (in each case, if other than the Trustee) in
writing of the Series 1997-1 Notes selected for redemption and, in the case of
any Series 1997-1 Note selected for partial redemption, the Principal Amount
thereof to be redeemed.
For all purposes of the Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Series 1997-1 Notes shall
relate, in the case of any Series 1997-1 Note redeemed or to be redeemed only in
part, to the portion of the principal of such Series 1997-1 Note which has been
or is to be redeemed.
(I) Notice of Redemption. Notice of redemption of Series 1997-1
--------------------
Notes pursuant to this Section 16 shall be given not less than fifteen (15) days
(in the case of Auction Rate Series 1997-1 Notes) or thirty (30) days (in the
case of LIBOR Rate Series 1997-1 Notes, Series 1997-1F Notes and Series 1997-1K
Notes), as the case may
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be, prior to the Redemption Date in accordance with the provisions of Section
10.4 of the Indenture.
SECTION 17. BOOK-ENTRY SERIES 1997-1 NOTES. (a) Subject to
------------------------------
subsection (c) below, the registered Holder of all Series 1997-1 Notes shall be
the Securities Depository and the Series 1997-1 Notes shall be registered in the
name of the nominee for the Securities Depository. The "Series 1997-1 Notes"
referred to in this subsection (a) shall refer to the Series 1997-1 Notes
registered in the name of the Securities Depository.
(b) The Series 1997-1 Notes shall be initially issued in the form of
one or more separate, authenticated fully-registered Series 1997-1 Notes for
each series thereof in the aggregate Principal Amount of such series. Upon
initial issuance, the ownership of each such Series 1997-1 Note shall be
registered in the registration books kept by the Note Registrar in the name of
the nominee of the Securities Depository. The Trustee and the Corporation may
treat the Securities Depository (or its nominee) as the sole and exclusive owner
of the Series 1997-1 Notes registered in its name for the purposes of (1)
payment of the principal or Redemption Price of and interest on the Series 1997-
1 Notes, (2) selecting the Series 1997-1 Notes or portions thereof to be
redeemed, (3) giving any notice permitted or required to be given to Holders
under the Indenture, (4) registering the transfer of Series 1997-1 Notes, and
(5) obtaining any consent or other action to be taken by Holders and for all
other purposes whatsoever, and neither the Trustee nor the Corporation shall be
affected by any notice to the contrary (except as provided in subsection (c)
below). Neither the Trustee nor the Corporation shall have any responsibility
or obligation to any Participant, any Beneficial Owner or any other Person
claiming a beneficial ownership interest in the Series 1997-1 Notes under or
through the Securities Depository or any Participant, or any other Person which
is not shown on the registration books of the Note Registrar as being a Holder,
with respect to the accuracy of any records maintained by the Securities
Depository or any Participant, the payment to the Securities Depository of any
amount in respect of the principal or Redemption Price of or interest on the
Series 1997-1 Notes; any notice which is permitted or required to be given to
Holders under the Indenture; the selection by the Securities Depository or any
Participant of any Person to receive payment in the event of a partial
redemption of the Series 1997-1 Notes; or any consent given or other action
taken by the Securities Depository as Holder. The Trustee shall pay all
principal and Redemption Price of and interest on the Series 1997-1 Notes only
"to or upon the order of" the Securities Depository (as that phrase is used in
the Uniform Commercial Code as adopted in the State of South Dakota), and all
such payments shall be valid and effective to fully satisfy and discharge the
Corporation's obligations with respect to the principal, purchase price or
Redemption Price of and interest on the Series 1997-1 Notes to the extent of the
sum or sums so paid. Except as provided in subsection (c) below, no Person
other than the Securities Depository shall receive an authenticated Series 1997-
1 Note evidencing the obligation of the Corporation to make payments of
principal or Redemption Price and interest pursuant to this Indenture. Upon
delivery by the Securities Depository to the
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Trustee of written notice to the effect that the Securities Depository has
determined to substitute a new nominee in place of the preceding nominee, the
Series 1997-1 Notes will be transferable to such new nominee in accordance with
subsection (f) below.
(c) Except with respect to any Auction Rate Series 1997-1 Notes
during such time as they bear interest at the Auction Rate, in the event the
Corporation determines that it is in the best interest of the Corporation not to
continue the Book-Entry System of transfer or that the interest of the Holders
might be adversely affected if the Book-Entry System of transfer is continued,
the Corporation may so notify the Securities Depository and the Trustee,
whereupon the Securities Depository will notify the Participants of the
availability through the Securities Depository of definitive Series 1997-1
Notes. In such event, the Trustee shall authenticate, transfer and exchange
definitive Series 1997-1 Notes as requested by the Securities Depository in
appropriate amounts in accordance with subsection (f) below. The Securities
Depository may determine to discontinue providing its services with respect to
the Series 1997-1 Notes at any time by giving notice to the Corporation and the
Trustee and discharging its responsibilities with respect thereto under
applicable law, or the Corporation may determine that the Securities Depository
is incapable of discharging its responsibilities and may so advise the
Securities Depository. In either such event, the Corporation shall either
establish its own Book-Entry System or use reasonable efforts to locate another
securities depository. Under such circumstances (if there is no successor
Securities Depository), the Corporation and the Trustee shall be obligated to
deliver definitive Series 1997-1 Notes as described in this Indenture and in
accordance with subsection (f) below. In the event definitive Series 1997-1
Notes are issued, the provisions of this Indenture shall apply to such
definitive Series 1997-1 Notes in all respects, including, among other things,
the transfer and exchange of such Series 1997-1 Notes and the method of payment
of principal or Redemption Price of and interest on such Series 1997-1 Notes.
Whenever the Securities Depository requests the Corporation and the Trustee to
do so, the Trustee and the Corporation will cooperate with the Securities
Depository in taking appropriate action after reasonable notice (A) to make
available one or more separate definitive Series 1997-1 Notes to any Participant
having Series 1997-1 Notes credited to its account with the Securities
Depository or (B) to arrange for another securities depository to maintain
custody of definitive Series 1997-1 Notes.
(d) Notwithstanding any other provision of the Indenture to the
contrary, so long as any Series 1997-1 Note is registered in the name of the
nominee of the Securities Depository, all payments with respect to the principal
or Redemption Price of and interest on such Series 1997-1 Note and all notices
with respect to such Series 1997-1 Note shall be made and given, respectively,
to the Securities Depository as provided in its letter of representations.
(e) In connection with any notice or other communication to be
provided to Holders pursuant to the Indenture by the Corporation or the Trustee
or
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with respect to any consent or other action to be taken by Holders, the
Corporation or the Trustee, as the case may be, shall establish a record date
for such consent or other action and give the Securities Depository notice of
such record date not less than fifteen (15) calendar days in advance of such
record date to the extent possible. Such notice to the Securities Depository
shall be given only when the Securities Depository is the sole Holder.
(f) In the event that any transfer or exchange of Series 1997-1 Notes
is permitted under subsection (b) or (c) of this Section 17, such transfer or
exchange shall be accomplished upon receipt by the Trustee from the registered
Holder thereof of the Series 1997-1 Notes to be transferred or exchanged and
appropriate instruments of transfer to the permitted transferee, all in
accordance with the applicable provisions of the Indenture. In the event
definitive Series 1997-1 Notes are issued to Holders other than the nominee of
the Securities Depository, or another securities depository as Holder of all the
Series 1997-1 Notes, the provisions of the Indenture shall also apply to, among
other things, the printing of such definitive Series 1997-1 Notes and the
methods of payment of principal or Redemption Price of and interest on such
Series 1997-1 Notes.
(g) Notwithstanding any provision of Article Ten of the Indenture to
the contrary, in connection with any redemption of Series 1997-1 Notes while The
Depository Trust Company, New York, New York ("DTC"), is the sole Holder, the
Corporation shall give notice of such redemption to the Trustee at least thirty
(30) days prior to the date fixed for redemption with respect to Auction Rate
Series 1997-1 Notes or LIBOR Rate Series 1997-1 Notes or at least forty-five
(45) days prior to the date fixed for redemption with respect to Series 1997-1F
Notes or Series 1997-1K Notes, and the Trustee shall give notice of redemption
to DTC as Holder of such Series 1997-1 Notes pursuant to Section 10.4 of the
Indenture at least fifteen (15) days and not more than thirty (30) days prior to
the date fixed for redemption of Auction Rate Series 1997-1 Notes or LIBOR Rate
Series 1997-1 Notes or at least thirty (30) days and not more than sixty (60)
days prior to the date fixed for redemption of Series 1997-1F Notes or Series
1997-1K Notes.
SECTION 18. SERIES 1997-1 ACCOUNTS AND SUBACCOUNTS. So long as any
--------------------------------------
Series 1997-1 Notes are Outstanding, the following Accounts and Subaccounts (the
"Series 1997-1 Accounts" and "Series 1997-1 Subaccounts," respectively), which
are hereby established, shall be maintained by the Trustee or the Deposit Agent,
as the case may be:
(A) With respect to the Tax Exempt Series 1997-1 Notes and the
proceeds thereof, in the Acquisition Fund, an Account to be known as the
"Series 1997-1 Tax Exempt Acquisition Account"; in the Administration Fund,
an Account to be known as the "Series 1997-1 Tax Exempt Administration
Account"; in the Reserve Fund, an Account to be known as the "Series 1997-1
Tax Exempt Reserve Account"; in the Rebate Account, a Subaccount to be
known as the "Series 1997-1 Rebate Subaccount"; in the
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<PAGE>
Excess Earnings Account, a Subaccount to be known as the "Series 1997-1
Excess Earnings Subaccount"; in the Interest Account, a Subaccount to be
known as the "Series 1997-1 Tax Exempt Interest Subaccount"; in the
Principal Account, a Subaccount to be known as the "Series 1997-1 Tax
Exempt Principal Subaccount"; in the Retirement Account, a Subaccount to be
known as the "Series 1997-1 Tax Exempt Retirement Subaccount"; and in the
Surplus Account, a Subaccount to be known as the "Series 1997-1 Tax Exempt
Surplus Subaccount" (each a "Series 1997-1 Tax Exempt Account" or a "Series
1997-1 Tax Exempt Subaccount," as appropriate).
All amounts transferred to the Acquisition Fund, the Administration
Fund, the Reserve Fund, the Rebate Account, the Excess Earnings Account,
the Interest Account, the Principal Account, the Retirement Account and the
Surplus Account from any other Fund or Account pursuant to the requirements
of the Indenture with respect to the Tax Exempt Series 1997-1 Notes or the
Student Loans Financed with the proceeds thereof shall be deposited to the
credit of the Series 1997-1 Tax Exempt Acquisition Account, the Series 1991
Tax Exempt Administration Account, the Series 1997-1 Tax Exempt Reserve
Account, the Series 1997-1 Rebate Subaccount, the Series 1997-1 Excess
Earnings Subaccount, the Series 1997-1 Tax Exempt Interest Subaccount, the
Series 1997-1 Tax Exempt Principal Subaccount, the Series 1997-1 Tax Exempt
Retirement Subaccount or the Series 1997-1 Tax Exempt Surplus Subaccount,
respectively, and as appropriate.
(B) With respect to the Taxable Series 1997-1 Notes and the proceeds
thereof, in the Acquisition Fund, an Account to be known as the "Series
1997-1 Taxable Acquisition Account"; in the Administration Fund, an Account
to be known as the "Series 1997-1 Taxable Administration Account"; in the
Reserve Fund, an Account to be known as the "Series 1997-1 Taxable Reserve
Account"; in the Interest Account, a Subaccount to be known as the "Series
1997-1 Taxable Interest Subaccount"; in the Principal Account, a Subaccount
to be known as the "Series 1997-1 Taxable Principal Subaccount"; in the
Retirement Account, a Subaccount to be known as the "Series 1997-1 Taxable
Retirement Subaccount"; in the Special Redemption and Prepayment Account, a
Subaccount to be known as the "Series 1997-1 Taxable Special Redemption and
Prepayment Subaccount"; and in the Surplus Account, a Subaccount to be
known as the "Series 1997-1 Taxable Surplus Subaccount."
All amounts transferred to the Acquisition Fund, the Administration
Fund, the Reserve Fund, the Interest Account, the Principal Account, the
Retirement Account and the Surplus Account from any other Fund or Account
pursuant to the requirements of the Indenture with respect to the Taxable
Series 1997-1 Notes or the Student Loans Financed with the proceeds thereof
shall be deposited to the credit of the Series 1997-1 Taxable Acquisition
Account, the Series 1997-1 Taxable Administration Account, the Series 1997-
1 Taxable Reserve Account, the Series 1997-1 Taxable Interest Subaccount,
the
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<PAGE>
Series 1997-1 Taxable Principal Subaccount, the Series 1997-1 Taxable
Retirement Subaccount, the Series 1997-1 Taxable Special Redemption and
Prepayment Subaccount or the Series 1997-1 Taxable Surplus Subaccount,
respectively, and as appropriate.
Notwithstanding any other provision of the Indenture or this First
Supplemental Indenture to the contrary, in no event shall (i) any portion of the
Balances in the Administration Fund or the Surplus Fund (including, without
limitation, the Series 1997-1 Tax Exempt Administration Account and the Series
1997-1 Tax Exempt Surplus Subaccount) be paid out for, or applied to the
reimbursement of, Costs of Issuance, Note Fees, Administrative Expenses or other
uses otherwise permitted under the Indenture if, and to the extent, as a result
of such payment, reimbursement or use, less than 90% of the net proceeds of the
Tax Exempt Series 1997-1 Notes will, at the time of such payment, have been used
directly or indirectly to make or finance student loans described in Section
144(b)(1)(A) of the Code, all within the meaning of such Section 144(b) of the
Code, or (ii) any portion of the Balances in any Series 1997-1 Tax Exempt
Account or Series 1997-1 Tax Exempt Subaccount be applied to (a) the payment of
any amounts payable from the Fund or Account in which such Account or Subaccount
is established in respect of any series of Notes other than the Tax Exempt
Series 1997-1 Notes until all amounts available therefor in the Account or
Subaccount, as the case may be, relating to such series, as well as in all other
Accounts or Subaccounts comprising such Fund or Account (other than those
Accounts or Subaccounts relating to other series of Tax Exempt Notes), have been
exhausted, or (b) in any event, to the redemption at the option of the
Corporation of Notes of any series other than the Tax Exempt Series 1997-1
Notes, unless, prior to any such application pursuant to this clause (ii), the
Corporation has delivered to the Trustee an opinion of Bond Counsel to the
effect that such application will not adversely affect the tax exempt status of
interest on any Series Tax Exempt 1997-1 Notes for federal income tax purposes.
Except as heretofore provided in this Section 18, nothing herein shall
be deemed to prohibit (1) the Trustee from using Balances of any Series 1997-1
Account or Series 1997-1 Subaccount to remedy deficiencies for which Balances of
the Fund or Account in which such Account or Subaccount is established are
subject to use under the Indenture, or (2) the application of Balances of any
Series 1997-1 Account or Series 1997-1 Subaccount for any purpose for which
Balances of the Fund or Account in which such Account or Subaccount is
established are authorized to be applied by the Indenture.
When there shall be no Tax Exempt Series 1997-1 Notes Outstanding, the
Series 1997-1 Tax Exempt Acquisition Account shall terminate and any Balance
thereof at such time shall be used as other Balances of the Acquisition Fund.
At such time as all Tax Exempt Series 1997-1 Notes have been retired and all
requirements of Section 148 of the Code with respect to the Tax Exempt Series
1997-1 Notes have been satisfied, including without limitation the payment to
the United
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<PAGE>
States or otherwise of all Excess Earnings (including such Excess Earnings
computed in respect of the Refunded Obligations and the Eligible Loans financed
with the proceeds thereof, as provided in Section 19 hereof) and Rebate Amounts
required by such section, the Series 1997-1 Excess Earnings Subaccount and the
Series 1997-1 Rebate Subaccount shall each terminate and any Balance thereof
shall be used as other Balances of the Excess Earnings Account or the Rebate
Account, as applicable. When there shall be no Tax Exempt Series 1997-1 Notes
Outstanding, the Series 1997-1 Tax Exempt Interest Account shall terminate and
any Balance thereof at such time shall be used as other Balances of the Interest
Account, the Series 1997-1 Tax Exempt Principal Account shall terminate and any
Balance thereof at such time shall be used as other Balances of the Principal
Account, the Series 1997-1 Tax Exempt Retirement Account shall terminate and any
Balance thereof at such time shall be used as other Balances of the Retirement
Account, the Series 1997-1 Tax Exempt Reserve Account shall terminate and any
Balance thereof at such time shall be used as other Balances of the Reserve
Fund, the Series 1997-1 Tax Exempt Administration Account shall terminate and
any Balance thereof at such time shall be used as other Balances of the
Administration Fund and the Series 1997-1 Tax Exempt Surplus Subaccount shall
terminate and any Balance thereof at such time shall be used as other Balances
of the Surplus Account.
When there shall be no Taxable Series 1997-1 Notes Outstanding, the
Series 1997-1 Taxable Acquisition Account shall terminate and any Balance
thereof at such time shall be used as other Balances of the Acquisition Fund.
When there shall be no Taxable Series 1997-1 Notes Outstanding, the Series 1997-
1 Taxable Interest Account shall terminate and any Balance thereof at such time
shall be used as other Balances of the Interest Account, the Series 1997-1
Taxable Principal Account shall terminate and any Balance thereof at such time
shall be used as other Balances of the Principal Account, the Series 1997-1
Taxable Retirement Account shall terminate and any Balance thereof at such time
shall be used as other Balances of the Retirement Account, the Series 1997-1
Taxable Reserve Account shall terminate and any Balance thereof at such time
shall be used as other Balances of the Reserve Fund, the Series 1997-1 Taxable
Administration Account shall terminate and any Balance thereof at such time
shall be used as other Balances of the Administration Fund, the Series 1997-1
Taxable Special Redemption and Prepayment Subaccount shall terminate and any
Balance thereof at such time shall be used as other Balances of the Special
Redemption and Prepayment Account and the Series 1997-1 Taxable Surplus
Subaccount shall terminate and any Balance thereof at such time shall be used as
other Balances of the Surplus Account.
SECTION 19. DEPOSITS TO SERIES 1997-1 EXCESS EARNINGS SUBACCOUNT. On
----------------------------------------------------
or prior to the second Monthly Payment Date following the end of each Note Year
with respect to the Tax Exempt Series 1997-1 Notes, and within forty-five (45)
days following the final Maturity of the Tax Exempt Series 1997-1 Notes (each an
"Excess Earnings Computation Date"), the Trustee and the Corporation shall
determine whether, as of the end of such Note Year or final Maturity, as the
case may be, any Excess Earnings have resulted with respect to the Tax Exempt
Series 1997-1 Notes. In
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<PAGE>
the event any Excess Earnings with respect to the Tax Exempt Series 1997-1 Notes
have resulted as of the end of such Note Year or final Maturity, the Trustee
shall, on or prior to the related Excess Earnings Computation Date, transfer to
the Series 1997-1 Excess Earnings Subaccount the amount, if any, which is
necessary to increase the Balance in such Subaccount to an amount equal to such
Excess Earnings. Any such transfer shall be made from the Funds and Accounts as
specified in Section 4.5(B) of the Indenture. In the event, as of the end of any
Note Year or final Maturity, the Balance of the Series 1997-1 Excess Earnings
Subaccount exceeds the amount of Excess Earnings computed with respect to such
date, such excess shall be transferred or applied in accordance with the
provisions of Section 4.5(B) of the Indenture.
Notwithstanding any provision of the Indenture or this First
Supplemental Indenture to the contrary, (i) Excess Earnings on Eligible Loans
Financed with proceeds of the Tax Exempt Series 1997-1 Notes as described in
clauses (4) and (5)(A) of Section 15 hereof shall be the "Excess Earnings"
computed with respect to the related series of Refunded Obligations in
accordance with the requirements of the indenture relating to such series, (ii)
all deposits to the Series 1997-1 Excess Earnings Subaccount in respect of
Excess Earnings for each such series of Refunded Obligations shall be applied to
reduce the yield on the applicable Eligible Loans in accordance with the
requirements of the related indenture, and (iii) amounts described in the
preceding clause (i) shall be deposited in, and amounts described in the
preceding clause (ii) shall be applied from, the Series 1997-1 Excess Earnings
Subaccount prior to any other deposits in, or applications from, the Excess
Earnings Account. The foregoing provisions shall apply to each series of
Refunded Obligations until such series has been retired, after which time Excess
Earnings on the applicable Eligible Loans will be computed with respect to the
Tax Exempt Series 1997-1 Notes.
SECTION 20. OBLIGORS NOT TO MAKE CERTAIN PURCHASES OF TAX EXEMPT
----------------------------------------------------
SERIES 1997-1 NOTES. No obligor on a Student Loan financed, in whole or in
- -------------------
part, with proceeds of the Tax Exempt Series 1997-1 Notes, or any related party
to such obligor, shall purchase any Tax Exempt Series 1997-1 Notes in an amount
related to the amount of such Student Loan.
SECTION 21. ARBITRAGE PROVISIONS. The Corporation covenants with the
--------------------
Holders of Series 1997-1 Notes that it will use the proceeds of the Tax Exempt
Series 1997-1 Notes and any other funds of the Corporation in such a manner that
the use thereof, as reasonably expected by the Corporation at the time of
issuance thereof, would not cause any of the Tax Exempt Series 1997-1 Notes to
be "arbitrage bonds" under Section 148 of the Code and the Regulations. The
president, the secretary and other officers and employees of the Corporation
shall execute and deliver from time to time, on behalf of the Corporation, such
certificates, instruments and documents as shall be deemed necessary or
advisable to evidence compliance by the Corporation with said Section 148 and
the Regulations with respect to the use of the proceeds of the Tax Exempt Series
1997-1 Notes and any other funds of the Corporation. Such certificates,
instruments and documents may contain such
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<PAGE>
stipulations as shall be necessary or advisable in connection with the stated
purpose of this Section and the foregoing provisions hereof, and the Corporation
and Trustee hereby covenant and agree to comply with the provisions of any such
stipulation throughout the term of the Tax Exempt Series 1997-1 Notes.
SECTION 22. PURCHASE OF ELIGIBLE LOANS FROM SERIES 1997-1 TAX EXEMPT
--------------------------------------------------------
AND TAXABLE ACQUISITION ACCOUNTS AND SERIES 1997-1 TAX EXEMPT AND TAXABLE
- -------------------------------------------------------------------------
SURPLUS SUBACCOUNTS. Each Student Loan Financed from Balances in the Series
- -------------------
1997-1 Tax Exempt Acquisition Account or the Series 1997-1 Tax Exempt Surplus
Subaccount shall have been made to an Eligible Borrower for the post-secondary
education of (a) a resident of the State attending a post-secondary school
located within or without the State, or (b) a resident of a state other than the
State attending a post-secondary school located within the State.
The price paid to purchase an Eligible Loan from the Balance in the
Series 1997-1 Tax Exempt Acquisition Account shall not exceed 100% of the
remaining unpaid principal amount of such Eligible Loan, plus accrued Special
Allowance Payments and noncapitalized borrower interest thereon, if any, to the
date of purchase, reasonable transfer, origination and assignment fees, if
applicable, and a premium not to exceed the lesser of (i) 1% (or such greater
percentage as shall be permitted under the Higher Education Act), and (ii) that
assumed in the Closing Cash Flow Projection (or such greater premium the payment
of which will not materially adversely affect the Corporation's ability to pay
Debt Service on the Outstanding Notes, Other Indenture Obligations, Carry-Over
Amounts (including accrued interest thereon) with respect to Outstanding Notes,
Administrative Expenses or Note Fees or to make required transfers to the Rebate
Fund, as shown in a subsequent Cash Flow Projection received by the Trustee, and
which will not result in the lowering or withdrawal of the outstanding rating
assigned by any Rating Agency to any of the Unenhanced Senior or Subordinate
Notes Outstanding, as evidenced in writing to the Trustee by each such Rating
Agency), and as otherwise authorized by Section 4.2 of the Indenture.
The price paid to purchase an Eligible Loan from the Balance in the
Series 1997-1 Taxable Acquisition Account shall not exceed 100% of the remaining
unpaid principal amount of such Eligible Loan, plus accrued Special Allowance
Payments and noncapitalized borrower interest thereon, if any, to the date of
purchase, reasonable transfer, origination and assignment fees, if applicable,
and a premium not to exceed that assumed in the Closing Cash Flow Projection (or
such greater premium the payment of which will not materially adversely affect
the Corporation's ability to pay Debt Service on the Outstanding Notes, Other
Indenture Obligations, Carry-Over Amounts (including accrued interest thereon)
with respect to Outstanding Notes, Administrative Expenses or Note Fees or to
make required transfers to the Rebate Fund, as shown in a subsequent Cash Flow
Projection received by the Trustee, and which will not result in the lowering or
withdrawal of the outstanding rating assigned by any Rating Agency to any of the
Unenhanced Senior or Subordinate Notes Outstanding, as evidenced in writing to
the Trustee by
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<PAGE>
each such Rating Agency), and as otherwise authorized by Section 4.2 of the
Indenture.
Any Student Loans Financed from Balances in the Series 1997-1 Tax
Exempt Surplus Subaccount or the Series 1997-1 Taxable Surplus Subaccount prior
to __________________________, and constituting Eligible Loans shall, upon the
financing thereof, be credited to, and included in the Balance of, the Series
1997-1 Tax Exempt Acquisition Account or the Series 1997-1 Taxable Acquisition
Account, as appropriate, and shall thereafter not be deemed to have been
Financed with moneys in the Surplus Account but to have been Financed with
moneys in the Acquisition Fund.
SECTION 23. LIMITATION ON COSTS OF ISSUANCE, ADMINISTRATIVE EXPENSES
---------------------------------------------------------
AND NOTE FEES. The Corporation covenants and agrees that the Costs of Issuance,
- -------------
Administrative Expenses and Note Fees to be paid, or reimbursed to the
Corporation, from the Administration Fund shall not exceed the aggregate amount
thereof specified in the Closing Cash Flow Projection, unless the Corporation
delivers to the Trustee (i) a Corporation Certificate certifying that, based on
a Cash Flow Projection, the payment or reimbursement of a greater amount of
Costs of Issuance, Administrative Expenses and Note Fees from the Administration
Fund will not materially adversely affect the Corporation's ability to pay Debt
Service on the Outstanding Notes and on Outstanding Other Obligations, to pay
Carry-Over Amounts (including accrued interest thereon) with respect to
Outstanding Notes or to make required deposits to the Rebate Fund and (ii)
written confirmation from each of the Rating Agencies then rating the Series
1997-1 Notes to the effect that payment or reimbursement of such additional
Costs of Issuance, Administrative Expenses or Note Fees will not result in a
reduction or withdrawal of the rating of the Series 1997-1 Notes.
SECTION 24. PROCEEDS OF SALES OF CERTAIN STUDENT LOANS TO BE
-------------------------------------------------
DEPOSITED IN THE ACQUISITION FUND. The Trustee shall deposit in the Acquisition
- ---------------------------------
Fund the proceeds of the resale to a Lender of any Student Loans Financed with
proceeds of the Series 1997-1 Notes pursuant to such Lender's repurchase
obligation under the applicable Student Loan Purchase Agreement upon receipt
thereof from the Corporation, to the extent directed in a Corporation Order and
received by the Trustee prior to __________________________. Any such proceeds
received by the Trustee after such date shall be deposited in the Revenue Fund.
SECTION 25. LIMITATION ON ACQUISITION OF CONSOLIDATION LOANS AND
----------------------------------------------------
SPECIAL PROGRAM LOANS. The Corporation shall not acquire or originate any
- ---------------------
Consolidation Loan from Balances in the Series 1997-1 Taxable Acquisition
Account, the Series 1997-1 Taxable Acquisition Account, the Series 1997-1
Taxable Surplus Subaccount or the Series 1997-1 Taxable Surplus Subaccount if,
as a result of such acquisition or origination, either: (i) the aggregate of
the amounts applied from such Balances to the acquisition or origination of
Consolidation Loans would exceed the greater of (a) $______________________, or
(b) 15% of the aggregate of the amounts applied
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<PAGE>
from such Balances to the acquisition or origination of all Student Loans; or
(ii) at such time as the aggregate of the amounts applied from such Balances to
the acquisition or origination of Consolidation Loans equals or exceeds
$________________________ and thereafter, the weighted average final maturity of
all Consolidation Loans Financed from such Account and Subaccount would exceed
______years, unless the Corporation delivers to the Trustee a Corporation
Certificate certifying that, based on a Cash Flow Projection, the acquisition or
origination of such Consolidation Loan will not materially adversely affect the
Corporation's ability to pay Debt Service on the Outstanding Notes and on
Outstanding Other Obligations, to pay Carry-Over Amounts (including accrued
interest thereon) with respect to Outstanding Notes or to make required deposits
to the Rebate Fund.
[INSERT LIMITATIONS ON SPECIAL PROGRAM LOANS (INCLUDING LOANS FOR
WHICH THE BORROWER RECEIVES A REDUCTION IN PAYMENTS FOR USING ACH)]
SECTION 26. CERTAIN FINDINGS, DETERMINATIONS AND DESIGNATIONS. The
-------------------------------------------------
Corporation hereby finds and determines as follows:
(A) The Original Indenture has not been amended, supplemented or
repealed since the execution thereof. This First Supplemental Indenture
amends and supplements the Indenture, constitutes and is a "Supplemental
Indenture" within the meaning of such term as defined and used in the
Indenture and is executed under and pursuant to the Indenture.
(B) No Notes have heretofore been issued under the Indenture. The
Series 1997-1 Senior Notes constitute, and are hereby designated as, "Class
A Notes" within the meaning of the term as defined and used in the
Indenture, and the Series 1997-1 Subordinate Notes constitute, and are
hereby designated as, "Class B Notes" within the meaning of the term as
defined and used in the Indenture.
(C) Upon receipt of the proceeds of the sale of the Series 1997-1
Notes: (1) the revenues and other moneys and property pledged under the
Indenture will not be encumbered by any lien or charge thereon or pledge
thereof, other than the lien and charge thereon and pledge thereof created
by the Indenture for the payment and security of the Notes; and (2) there
will not be outstanding any bonds, notes or other evidences of indebtedness
payable from and secured by a lien on or pledge or charge upon the revenues
and other moneys and property pledged under the Indenture.
(D) There does not exist an "Event of Default," within the meaning of
such term as defined in the Indenture, which is continuing, nor does there
exist any condition which, after the passage of time, would constitute such
an "Event of Default."
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<PAGE>
SECTION 27. GOVERNING LAW. This First Supplemental Indenture shall be
-------------
governed by and be construed in accordance with the laws of the State without
giving effect to the conflicts-of-laws principles thereof; provided that those
provisions of this First Supplemental Indenture relating to the rights and
duties of the Auction Agent shall be governed by and be construed in accordance
with the laws of the State of New York.
SECTION 28. SECTION HEADINGS; TABLE OF CONTENTS. The headings or
-----------------------------------
titles of the several sections hereof shall be solely for convenience of
reference and shall not affect the meaning or construction, interpretation or
effect of this First Supplemental Indenture.
SECTION 29. SEVERABILITY. If any provision of this First
------------
Supplemental Indenture shall be held or deemed to be or shall, in fact, be
inoperative or unenforceable as applied in any particular case in any
jurisdiction or jurisdictions or in all jurisdictions or in all cases because it
conflicts with any provisions of any constitution or statute or rule of public
policy, or for any other reason, such circumstances shall not have the effect of
rendering the provision in question inoperative or unenforceable in any other
case or circumstance, or of rendering any other provision or provisions herein
contained invalid, inoperative or unenforceable to any extent whatever.
The invalidity of any one or more phrases, sentences, clauses or
paragraphs in this First Supplemental Indenture contained shall not affect the
remaining portions of this First Supplemental Indenture or part thereof.
SECTION 30. COUNTERPARTS. This First Supplemental Indenture 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 31. EFFECT OF FIRST SUPPLEMENTAL INDENTURE. Upon the
--------------------------------------
execution and delivery of this First Supplemental Indenture, the Indenture shall
be supplemented in accordance herewith, and this First Supplemental Indenture
shall form a part of the Indenture for all purposes and every Holder of Notes
hereafter authenticated and delivered and Other Beneficiary under the Indenture
shall be bound hereby.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed, and their respective corporate seals
to be hereunto affixed and attested, all as of the day and year first above
written.
EDUCATION LOANS INCORPORATED
(SEAL)
By ___________________
President
Attest:
_____________________________________
Secretary
FIRST BANK NATIONAL ASSOCIATION,
as Trustee
(SEAL)
By ___________________________
Vice President
Attest:
__________________________
Trust Officer
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<PAGE>
EXHIBIT A-1
-----------
FORM OF TAX EXEMPT AUCTION RATE SERIES 1997-1 NOTES
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER 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.
EDUCATION LOANS INCORPORATED
TAX EXEMPT AUCTION RATE STUDENT LOAN ASSET-BACKED NOTE
SENIOR SERIES 1997-1A [B][C][D][E]
CLASS A
No. R______ $_________
<TABLE>
<CAPTION>
Stated Date of Original Interest
Maturity Date Issue Rate CUSIP
------------- ---------------- -------- -----
<S> <C> <C> <C>
June 1, 2020 July ___, 1997 Variable 83756E ___
</TABLE>
REGISTERED HOLDER: CEDE & CO.
PRINCIPAL AMOUNT:
FOR VALUE RECEIVED, EDUCATION LOANS INCORPORATED, a nonprofit
corporation organized under the laws of the State of South Dakota (the
"Corporation," which term includes any successor corporation under the Indenture
hereinafter referred to, including, upon completion of the Section 150(d)(3)
Transfer, EdLinc), acknowledges itself indebted and hereby promises to pay to
the registered holder specified above, or registered assigns (the "Registered
Holder"), but solely from the revenues and receipts hereinafter specified and
not otherwise, the Principal Amount specified above on the Stated Maturity Date
specified above (subject to the right of prior redemption hereinafter
mentioned), upon presentation and surrender of this Note at the Principal Office
of the Trustee (as hereinafter defined), as Paying Agent for the Series 1997-1
Notes (as hereinafter defined), or a duly appointed successor Paying Agent, and
to pay interest on said Principal
A-1-1
<PAGE>
Amount, but solely from the revenues and receipts hereinafter specified and not
otherwise, to the Registered Holder hereof from the date hereof until the
payment of said Principal Amount has been made or duly provided for, payable
semiannually on the first day of June and December in each year, commencing
December1, 1997, at the Auction Rate Series 1997-1 Note Interest Rate (as
hereinafter described), and at the same rate per annum (to the extent that the
payment of such interest shall be legally enforceable) on overdue installments
of interest. Payment of interest on this Note on each regularly scheduled
Interest Payment Date shall be made by check or draft drawn upon the Paying
Agent and mailed to the Person who is the Registered Holder hereof as of 5:00
p.m. in the city in which the Principal Office of the Note Registrar is located
on the applicable Regular Record Date at the address of such Registered Holder
as it appears on the Note Register maintained by the Note Registrar, or, if the
Registered Holder of this Note is the Registered Holder of Series 1997-1 Notes
in the aggregate Principal Amount of $1,000,000 or more (or, if less than
$1,000,000 in Principal Amount of Series 1997-1 Notes is outstanding, the
Registered Holder of all outstanding Series 1997-1 Notes), at the direction of
such Registered Holder received by the Paying Agent by 5:00 p.m. in the city in
which the Principal Office of the Paying Agent is located on the last Business
Day preceding the applicable Regular Record Date, by electronic transfer by the
Paying Agent in immediately available funds to an account designated by such
Registered Holder. In addition, interest on this Note is payable at the Maturity
hereof in the same manner as the principal hereof, unless the date of such
Maturity is a regularly scheduled Interest Payment Date, in which event interest
is payable in the manner set forth in the preceding sentence. Any interest not
so timely paid or duly provided for shall cease to be payable to the Person who
is the Registered Holder hereof at the close of business on the Regular Record
Date and shall be payable to the Person who is the Registered Holder hereof at
the close of business on a special record date for the payment of any such
defaulted interest. Such special record date shall be fixed by the Trustee
whenever moneys become available for payment of the defaulted interest, and
notice of the special record date shall be given to the Registered Holder hereof
not less than ten days prior thereto by first-class mail to such Registered
Holder as shown on the Note Register on a date selected by the Trustee, stating
the date of the special record date and the date fixed for the payment of such
defaulted interest. The principal of and interest on this Note are payable in
lawful money of the United States of America.
This Note is one of an authorized issue of Notes (the "Notes"), issued
and to be issued by the Corporation in one or more series pursuant to an
Indenture of Trust, dated as of July 1, 1997 (as supplemented and amended, the
"Indenture"), as supplemented by a First Supplemental Indenture of Trust, dated
as of July 1, 1997 (the "First Supplemental Indenture"), each between the
Corporation and First Bank National Association, Minneapolis, Minnesota, as
Trustee (the "Trustee," which term includes any successor trustee under the
Indenture). As provided in the Indenture, the Notes are issuable in series
which may vary as in the Indenture provided or permitted. This Note is one of a
series issued in an aggregate Principal Amount of $_________________(the
"Series 1997-1A [B][C][D][E] Notes"). The Series 1997-1A
A-1-2
<PAGE>
[B][C][D][E] Notes are issued simultaneously with nine other series of Class A
Notes issued in the aggregate Principal Amount of $_______________(together with
the Series 1997-1A [B][C][D][E] Notes, collectively referred to herein as the
"Series 1997-1 Senior Notes"), and two series of Class B Notes issued in the
aggregate Principal Amount of $_____________________(the "Series 1997-1
Subordinate Notes" and, together with the Series 1997-1 Senior Notes,
collectively referred to herein as the "Series 1997-1 Notes"). The proceeds of
the Series 1997-1 Notes will be used by the Corporation to (a) acquire student
loan notes incurred under the Higher Education Act and (b) fund the Reserve
Fund.
Reference is hereby made to the Indenture, copies of which are on file
in the principal corporate trust office of the Trustee, and to all of the
provisions of which any Registered Holder of this Note by his acceptance hereof
hereby assents, for definitions of terms; the description of and the nature and
extent of the security for the various classes of Notes and Other Obligations
secured thereunder; the student loan acquisition program being financed by the
issuance of the Notes; the revenues and other moneys pledged to the payment of
the principal of, premium, if any, and interest on the Notes and the Other
Obligations; the nature and extent and manner of enforcement of the pledge; the
conditions upon which Notes may be issued or Other Obligations may be incurred
by the Corporation thereunder, payable from such revenues and other moneys
thereunder as Senior Obligations, Subordinate Obligations or Class C Notes; the
conditions upon which the Indenture may be amended or supplemented with or
without the consent of the Holders of the Notes; the rights and remedies of the
Registered Holder hereof with respect hereto and thereto, including the
limitations upon the right of a Registered Holder hereof to institute any suit,
action or proceeding in equity or at law with respect hereto and thereto; the
rights, duties and obligations of the Corporation and the Trustee thereunder;
the terms and provisions upon which the liens, pledges, charges, trusts and
covenants made therein may be discharged at or prior to the Maturity or
redemption of this Note, and this Note thereafter no longer be secured by the
Indenture, or be deemed to be Outstanding thereunder; and for the other terms
and provisions thereof. Terms used with initial capital letters but not defined
in this Note have the respective meanings given such terms in the Indenture.
The Series 1997-1A [B][C][D][E] Notes are being issued as, and will constitute,
Tax Exempt Class A Notes under the Indenture. Four other series of the Series
1997-1 Senior Notes also are Tax Exempt Class A Notes which, like the Series
1997-1A [B][C][D][E] Notes, bear interest at an Auction Rate Series 1997-1 Note
Interest Rate, and, together with the Series 1997-1A [B][C][D][E] Notes, are
collectively referred to herein as the "Tax Exempt Auction Rate Series 1997-1
Notes."
The Notes and Other Obligations are limited obligations of the
Corporation, payable solely from the revenues and assets of the Corporation
pledged therefor under the Indenture, including certain notes evidencing Student
Loans and the proceeds of the Corporation's bonds, notes or other evidences of
indebtedness, if any, issued with respect to the Notes.
A-1-3
<PAGE>
Each Noteholder, by acceptance of a Note, covenants and agrees that by
accepting the benefits of the Indenture and such Note that such Noteholder will
not at any time institute against the Corporation, or join in any institution
against the Corporation, any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceedings under any United States Federal or state bankruptcy
or similar law in connection with any obligations relating to the Notes, the
Indenture or the Servicing Agreement.
The Corporation has structured the Indenture and the Notes with the
intention that the Notes will qualify under applicable federal, state, local and
foreign tax law as indebtedness of the Corporation secured by the Trust Estate.
The Corporation, the Trustee, the Servicer and each Noteholder agree to treat
and to take no action inconsistent with the treatment of the Notes as such
indebtedness for purposes of federal, state, local and foreign income or
franchise taxes and any other tax imposed on or measured by income. Each
Noteholder, by acceptance of its Note, agrees to be bound by the provisions of
this paragraph. Each Noteholder agrees that it will cause any Person acquiring
an interest in a Note through it to comply with the Indenture as to treatment as
indebtedness under applicable tax law, as described in this paragraph.
Interest payable on this Note shall be computed on the basis of actual
days elapsed and accrue daily from the date hereof (on the basis of a 360-day
year), and is payable on each regularly scheduled Interest Payment Date prior to
the Maturity of this Note and at the Maturity of this Note. The interest
payable on each Interest Payment Date for this Note shall be [calculated on a
per unit basis, based on a unit of $100,000, and shall be] that interest which
has accrued through the last day preceding such Interest Payment Date or, in the
case of the Maturity of this Note, the last day preceding the date of such
Maturity. The Auction Rate Series 1997-1 Note Interest Rate shall be effective
as of and on the first day (whether or not a Business Day) of the applicable
Interest Period and be in effect thereafter through the end of such Interest
Period.
The unpaid Principal Amount hereof from time to time outstanding shall
bear interest at an Auction Rate Series 1997-1 Note Interest Rate, as described
below, payable on each Interest Payment Date and at the Maturity hereof, such
interest to accrue from the later of the date hereof or the date through which
interest has been paid or duly provided for.
During the Initial Interest Period, this Note shall bear interest at
the Auction Rate Series 1997-1 Note Initial Interest Rate for the Series 1997-1A
[B][C][D][E] Notes. Thereafter, until an Auction Period Adjustment, if any,
this Note shall bear interest at an Auction Rate Series 1997-1 Note Interest
Rate based on an Auction Period that shall generally consist of 35 days, all as
determined in accordance with the applicable provisions of the First
Supplemental Indenture.
A-1-4
<PAGE>
In no event shall the Auction Rate Series 1997-1 Note Interest Rate on
this Note exceed 14% per annum (the "Auction Rate Series 1997-1 Note Interest
Rate Limitation").
The Auction Period (which shall be the Interest Period), the
applicable Auction Rate Series 1997-1 Note Interest Rate, the method of
determining the applicable Auction Rate Series 1997-1 Note Interest Rate on each
of the Series 1997-1A [B][C][D][E] Notes and the Auction Procedures related
thereto, including, without limitation, required notices thereof and any changes
therein to the Holders or Existing Holders of the Auction Rate Series 1997-1
Notes, will be determined in accordance with the terms, conditions and
provisions of the First Supplemental Indenture and the Auction Agent Agreement
(Tax Exempt Auction Rate Series 1997-1 Notes), dated as of July 1, 1997 (which,
together with any substitute therefor, is herein referred to as the "Auction
Agent Agreement"), between the Trustee and Bankers Trust Company (which,
together with any substitute therefor, is herein referred to as the "Auction
Agent"), to which terms, conditions and provisions specific reference is hereby
made, and all of which terms, conditions and provisions are hereby specifically
incorporated herein by reference.
By purchasing Series 1997-1A [B][C][D][E] Notes, whether in an Auction
or otherwise, each purchaser of the Series 1997-1A [B][C][D][E] Notes, or its
Broker-Dealer, must agree and shall be deemed by such purchase to have agreed
(i) to participate in Auctions on the terms described in the First Supplemental
Indenture, (ii) to have its beneficial ownership of the Series 1997-1A
[B][C][D][E] Notes maintained at all times in Book-Entry Form for the account of
its Participant, which in turn will maintain records of such beneficial
ownership, and (iii) to authorize such Participant to disclose to the Auction
Agent such information with respect to such beneficial ownership as the Auction
Agent may request. So long as the ownership of Series 1997-1A [B][C][D][E]
Notes is maintained in Book-Entry Form by the Securities Depository, an Existing
Holder may sell, transfer or otherwise dispose of Series 1997-1A [B][C][D][E]
Notes only pursuant to a Bid or Sell Order placed in an Auction or otherwise
sell, transfer or dispose of Series 1997-1A [B][C][D][E] Notes through a Broker-
Dealer, provided that, in the case of all transfers other than pursuant to
Auctions, such Existing Holder, its Broker-Dealer or its Participant advises the
Auction Agent of such transfer.
The determination of an Auction Rate Series 1997-1 Note Interest Rate
by the Auction Agent or any other authorized Person pursuant to the provisions
of the First Supplemental Indenture shall be conclusive and binding on the
Holders of the Series 1997-1A [B][C][D][E] Notes to which such Auction Rate
Series 1997-1 Note Interest Rate applies, and the Corporation and the Trustee
may rely thereon for all purposes.
Notwithstanding any provision of this Note to the contrary, in no
event shall the cumulative amount of interest paid or payable on this Note
(including interest calculated as provided herein, plus any other amounts that
A-1-5
<PAGE>
constitute interest on this Note under applicable law, which are contracted for,
charged, reserved, taken or received pursuant to this Note or related documents)
calculated from the date of issuance of this Note through any subsequent day
during the term of this Note or otherwise prior to payment in full of this Note
exceed the amount permitted by applicable law. If the applicable law is ever
judicially interpreted so as to render usurious any amount called for under this
Note or related documents or otherwise contracted for, charged, reserved, taken
or received in connection with this Note, or if the redemption or acceleration
of the Maturity of this Note results in payment to or receipt by the Registered
Holder or any former Registered Holder hereof of any interest in excess of that
permitted by applicable law, then notwithstanding any provision of this Note or
related documents to the contrary all excess amounts theretofore paid or
received with respect to this Note shall be credited on the Principal Amount of
this Note (or, if this Note has been paid or would thereby be paid in full,
refunded by the recipient thereof), and the provisions of this Note and related
documents shall immediately be deemed reformed and the amounts thereafter
collectible hereunder and thereunder reduced, without the necessity of the
execution of any new document, so as to comply with the applicable law, but so
as to permit the recovery of the fullest amount otherwise called for under this
Note and under the related documents.
Subject to compliance with the provisions of the Indenture relating to
certain asset requirements, Series 1997-1 Notes may, at the option of the
Corporation, be redeemed, in whole but not in part, at a Redemption Price equal
to 100% of the Principal Amount of Series 1997-1 Notes to be so redeemed plus
accrued interest thereon to the Redemption Date, on any date after the remaining
aggregate Principal Balance of Student Loans Financed with proceeds of the
Series 1997-1 Notes is less than 10% of the amounts initially deposited to the
credit of the Acquisition Fund.
Subject to compliance with the provisions of the Indenture relating to
certain asset requirements, Outstanding Tax Exempt Auction Rate Series 1997-1
Notes of any series may be redeemed, in whole or in part, on any Interest Rate
Adjustment Date for such series or any regularly scheduled Interest Payment
Date, at a Redemption Price equal to 100% of the Principal Amount thereof so
redeemed, from proceeds of the Tax Exempt Series 1997-1 Notes constituting a
portion of the Balance of the Series 1997-1 Tax Exempt Acquisition Account that
have not been used to acquire Eligible Loans and from that portion of the Series
1997-1 Tax Exempt Reserve Account would cause the Balance in the Reserve Fund to
exceed the Reserve Fund Requirement, calculated giving effect to such
redemption. Such redemption shall be required on June 1, 2001 (to the extent
the proceeds in the Series 1997-1 Tax Exempt Acquisition Account not so used as
of April 15, 2001, exceed $________________) and on June 1, 2002 (from such
proceeds not so used as of April 15, 2002), unless the Corporation delivers to
the Trustee: (i) an opinion of Bond Counsel stating in effect that such
redemption is not required pursuant to the Code and that failure to so redeem
Tax Exempt Series 1997-1 Notes will not adversely affect the tax exempt status
of interest on any Tax Exempt Series 1997-1 Notes for federal income
A-1-6
<PAGE>
tax purposes, (ii) a Corporation Certificate certifying that, based on a Cash
Flow Projection, the failure to so redeem Tax Exempt Series 1997-1 Notes will
not materially adversely affect the Corporation's ability to pay Debt Service on
the Outstanding Notes and the Outstanding Other Obligations, Carry-Over Amounts
(including accrued interest thereon) with respect to Outstanding Notes,
Administrative Expenses or Note Fees or to make required deposits to the Rebate
Fund, and (iii) written confirmation from each of the Rating Agencies then
rating the Series 1997-1 Notes to the effect that the failure to so redeem Tax
Exempt Series 1997-1 Notes will not result in a reduction or withdrawal of the
rating of the Series 1997-1 Notes.
Subject to compliance with the provisions of the Indenture relating to
certain asset requirements, Outstanding Tax Exempt Auction Rate Series 1997-1
Notes of any series may, at the option of the Corporation, be redeemed on any
Interest Rate Adjustment Date for such series or any regularly scheduled
Interest Payment Date occurring on or after __________________, in whole or in
part, at a Redemption Price equal to 100% of the Principal Amount thereof to be
redeemed, from amounts credited to the Series 1997-1 Tax Exempt Retirement
Subaccount from the Series 1997-1 Tax Exempt Surplus Subaccount for such purpose
in accordance with the Indenture and from that portion of the Series 1997-1 Tax
Exempt Reserve Account which exceeds the Reserve Fund Requirement (calculated
after giving effect to such redemption). If the Trustee shall have first
certified that no deficiencies exist in any of the Rebate Fund, the Note Fund,
the Reserve Fund or the Special Redemption and Prepayment Account, the Trustee
shall, upon Corporation Order, transfer to the Series 1997-1 Tax Exempt
Retirement Account any Balances in the Series 1997-1 Tax Exempt Surplus
Subaccount (other than those consisting of Student Loans) which a Corporation
Certificate states are not reasonably expected to be needed for the payment of
scheduled Debt Service on the Outstanding Notes and Outstanding Other
Obligations, Carry-Over Amounts (including accrued interest thereon) with
respect to Outstanding Notes, Administrative Expenses or Note Fees, or for
transfer to the Rebate Fund.
Subject to compliance with the provisions of the Indenture relating to
certain asset requirements and certain other requirements, Outstanding Tax
Exempt Auction Rate Series 1997-1 Notes of any series may, at the option of the
Corporation, be redeemed on any Interest Rate Adjustment Date for such series or
any regularly scheduled Interest Payment Date, in whole or in part, at a
Redemption Price equal to 100% of the Principal Amount thereof to be redeemed,
from amounts credited to the Retirement Account for such purpose.
If not all Series 1997-1 Notes subject to redemption are to be
redeemed, the particular Series 1997-1 Notes to be redeemed are to be selected
as provided in the Indenture.
Notice of redemption shall be given by first-class mail mailed at
least 15 days before the Redemption Date to each Holder of Series 1997-1A
[B][C][D][E] Notes
A-1-7
<PAGE>
to be redeemed at his last address appearing on the Note Register; but no defect
in or failure to give such notice of redemption shall affect the validity of
proceedings for redemption of any Series 1997-1A [B][C][D][E] Notes not affected
by such defect or failure. All Series 1997-1A [B][C][D][E] Notes so called for
redemption will cease to bear interest on such Redemption Date, provided funds
for their redemption have been duly deposited, and, except for the purpose of
payment, shall no longer be protected by the Indenture and shall not be deemed
Outstanding thereunder.
It is provided in the Indenture that Series 1997-1A [B][C][D][E] Notes
of a denomination larger than $100,000 may be redeemed in part ($100,000 or an
integral multiple thereof) and that upon any partial redemption of any such
Series 1997-1A [B][C][D][E] Note the same shall be surrendered in exchange for
one or more new Notes of the same series in authorized form for the unredeemed
portion of principal.
If provision is made for the payment of principal of and interest on
this Note in accordance with the Indenture, this Note shall no longer be deemed
Outstanding under the Indenture, shall cease to be entitled to the benefits of
the Indenture and shall thereafter be payable solely from the funds provided for
such payment.
If an Event of Default shall occur, the principal of all the
Outstanding Notes may and, under certain circumstances, shall be declared due
and payable in the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Corporation and the rights of the Holders of the Notes and Other Beneficiaries
under the Indenture at any time by the Corporation with, among other things, the
consent of the Holders of two-thirds of the aggregate Principal Amount of Class
A Notes at the time Outstanding, if affected thereby, and the consent of the
Holders of two-thirds of the aggregate Principal Amount of Class B Notes at the
time Outstanding, if affected thereby. The Indenture also contains provisions
permitting the Holders of specified percentages in aggregate Principal Amount of
the Class A Notes at the time Outstanding or Other Senior Beneficiaries or, if
no Senior Obligations are Outstanding, the Holders of specified percentages in
aggregate Principal Amount of the Class B Notes at the time Outstanding or Other
Subordinate Beneficiaries, on behalf of the Holders of all the Notes, to waive
certain past defaults under the Indenture and their consequences. Any such
consent or waiver shall be conclusive and binding upon the Registered Holder of
this Note and upon all future Registered Holders hereof and of any Note issued
in exchange herefor or in lieu hereof, whether or not notation of such consent
or waiver is made upon this Note.
This Note is transferable by the Registered Holder hereof upon
surrender of this Note for transfer at the Principal Office of the Note
Registrar
A-1-8
<PAGE>
(which shall be the Trustee unless and until an Authenticating Agent becomes the
Note Registrar under the Indenture) or at the Principal Office of a duly
appointed Authenticating Agent (the "Authenticating Agent," which term includes
any successor Authenticating Agent under the Indenture), duly endorsed or
accompanied by a written instrument of transfer in form satisfactory to the Note
Registrar or such Authenticating Agent, as the case may be, and executed by the
Registered Holder hereof or his attorney duly authorized in writing, with
signature guarantees satisfactory to the Note Registrar or such Authenticating
Agent, as the case may be. This Note may also be exchanged for one or more other
Notes of the same series upon surrender hereof at the Principal Office of the
Note Registrar or the Principal Office of an Authenticating Agent. Thereupon the
Corporation shall execute and the Trustee or the Authenticating Agent, as the
case may be, shall authenticate and deliver, in exchange for this Note, one or
more new fully registered Notes in the name of the transferee, of an authorized
denomination, in aggregate Principal Amount equal to the Principal Amount of
this Note, of the same series and bearing interest at the same rate. No
Authenticating Agent will be initially appointed with respect to the Series
1997-1A [B][C][D][E] Notes. Notwithstanding the foregoing provisions of this
paragraph, no Series 1997-1A [B][C][D][E] Note shall be required to be
transferred, (i) during a period beginning at the opening of business fifteen
days before any selection of Series 1997-1A [B][C][D][E] Notes for redemption
and ending at the close of business on the day of such selection, or (ii) if
such Series 1997-1A [B][C][D][E] Note has been selected for redemption in whole
or in part.
The Corporation may require payment by the Registered Holder hereof of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any transfer or exchange of this Note, other than
certain exchanges specifically exempted under the Indenture and not involving
any transfer.
The Corporation, the Trustee, each Paying Agent, any Authenticating
Agent, the Note Registrar and any other agent of the Corporation may treat the
Person in whose name this Note is registered on the Note Register as the
absolute owner hereof for all purposes, whether or not this Note is overdue, and
neither the Corporation, the Trustee, any Paying Agent, any Authenticating
Agent, the Note Registrar nor any other such agent shall be affected by notice
to the contrary.
IT IS HEREBY CERTIFIED, RECITED, COVENANTED 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 Note have happened, do exist,
and have been performed in regular and due time, form and manner as so required.
This Note shall not be valid or become obligatory for any purpose or
be entitled to any security or benefit under the Indenture until the Certificate
of Authentication hereon shall have been signed by the Trustee or by the
A-1-9
<PAGE>
Authenticating Agent by the manual signature of one of its authorized
representatives.
A-1-10
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Note to be
executed in its name by the manual signatures of its President and Secretary,
and its corporate seal to be impressed hereon.
Dated:__________________ EDUCATION LOANS INCORPORATED
__________________________
President
(SEAL)
__________________________
Secretary
_____________________________
CERTIFICATE OF AUTHENTICATION
This Note is one of the Notes of the series designated therein and
issued under the provisions of the within-mentioned Indenture.
FIRST BANK NATIONAL
ASSOCIATION, as Trustee
By___________________________
Authorized Representative
A-1-11
<PAGE>
______________________________
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto ________________________ the within Note and irrevocably appoints
____________________________, attorney-in-fact, to transfer the within Note on
the books kept for registration thereof, with full power of substitution in the
premises.
Dated _______________________
PLEASE INSERT SOCIAL SECURITY ___________________________
OR OTHER IDENTIFYING NUMBER NOTICE: The signature to this
OF ASSIGNEE assignment must correspond with the
name as it appears upon the face of the
within Note in every particular,
______________________________ without any alteration whatsoever.
SIGNATURE GUARANTEED:
______________________________
A-1-12
<PAGE>
EXHIBIT A-2
-----------
FORM OF SERIES 1997-1F NOTES
-----------------------------
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER 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.
EDUCATION LOANS INCORPORATED
TAX EXEMPT FIXED RATE STUDENT LOAN ASSET-BACKED NOTE
SENIOR SERIES 1997-1F
CLASS A
No. R____ $___________
Stated Date of Original Interest
Maturity Date Issue Rate CUSIP
------------- ---------------- -------- -----
July 1, 1997 83756E __
REGISTERED HOLDER: CEDE & CO.
PRINCIPAL AMOUNT:
FOR VALUE RECEIVED, EDUCATION LOANS INCORPORATED, a nonprofit
corporation organized under the laws of the State of South Dakota (the
"Corporation," which term includes any successor corporation under the Indenture
hereinafter referred to, including, upon completion of the Section 150(d)(3)
Transfer, EdLinc), acknowledges itself indebted and hereby promises to pay to
the registered holder specified above, or registered assigns (the "Registered
Holder"), but solely from the revenues and receipts hereinafter specified and
not otherwise, the Principal Amount specified above on the Stated Maturity Date
specified above (subject to the right of prior redemption hereinafter
mentioned), upon presentation and surrender of this Note at the Principal Office
of the Trustee (as hereinafter defined), as Paying Agent for the Series 1997-1
Notes (as hereinafter defined), or a duly appointed successor Paying Agent, and
to pay interest on said Principal
A-2-1
<PAGE>
Amount, but solely from the revenues and receipts hereinafter specified and not
otherwise, to the Registered Holder hereof from the date hereof until the
payment of said Principal Amount has been made or duly provided for, at the rate
per annum specified above, payable semiannually on the first day of June and
December in each year, commencing December 1, 1997, and at the same rate per
annum (to the extent that the payment of such interest shall be legally
enforceable) on overdue installments of interest. Payment of interest on this
Note on each regularly scheduled Interest Payment Date shall be made by check or
draft drawn upon the Paying Agent and mailed to the Person who is the Registered
Holder hereof as of 5:00 p.m. in the city in which the Principal Office of the
Note Registrar is located on the applicable Regular Record Date at the address
of such Registered Holder as it appears on the Note Register maintained by the
Note Registrar, or, if the Registered Holder of this Note is the Registered
Holder of Series 1997-1 Notes in the aggregate Principal Amount of $1,000,000 or
more (or, if less than $1,000,000 in Principal Amount of Series 1997-1 Notes is
outstanding, the Registered Holder of all outstanding Series 1997-1 Notes), at
the direction of such Registered Holder received by the Paying Agent by 5:00
p.m. in the city in which the Principal Office of the Paying Agent is located on
the last Business Day preceding the applicable Regular Record Date, by
electronic transfer by the Paying Agent in immediately available funds to an
account designated by such Registered Holder. In addition, premium, if any, and
interest on this Note are payable at the Maturity hereof in the same manner as
the principal hereof, unless the date of such Maturity is a regularly scheduled
Interest Payment Date, in which event interest is payable in the manner set
forth in the preceding sentence. Any interest not so timely paid or duly
provided for shall cease to be payable to the Person who is the Registered
Holder hereof at the close of business on the Regular Record Date and shall be
payable to the Person who is the Registered Holder hereof at the close of
business on a special record date for the payment of any such defaulted
interest. Such special record date shall be fixed by the Trustee whenever moneys
become available for payment of the defaulted interest, and notice of the
special record date shall be given to the Registered Holder hereof not less than
ten days prior thereto by first-class mail to such Registered Holder as shown on
the Note Register on a date selected by the Trustee, stating the date of the
special record date and the date fixed for the payment of such defaulted
interest. The principal of, premium, if any, and interest on this Note are
payable in lawful money of the United States of America.
This Note is one of an authorized issue of Notes (the "Notes"), issued
and to be issued by the Corporation in one or more series pursuant to an
Indenture of Trust, dated as of July 1, 1997 (as supplemented and amended, the
"Indenture"), as supplemented by a First Supplemental Indenture of Trust, dated
as of July 1, 1997 (the "First Supplemental Indenture"), each between the
Corporation and First Bank National Association, Minneapolis, Minnesota, as
Trustee (the "Trustee," which term includes any successor trustee under the
Indenture). As provided in the Indenture, the Notes are issuable in series
which may vary as in the Indenture provided or permitted. This Note is one of a
series of Class A Notes issued in an aggregate Principal Amount of $___________
(the "Series 1997-1F Notes"). The
A-2-2
<PAGE>
Series 1997-1F Notes are issued simultaneously with nine other series of Class A
Notes issued in the aggregate Principal Amount of $_______________ (together
with the Series 1997-1F Notes, collectively referred to herein as the "Series
1997-1 Senior Notes"), and two series of Class B Notes issued in the aggregate
Principal Amount of $______________ (the "Series 1997-1 Subordinate Notes" and,
together with the Series 1997-1 Senior Notes, collectively referred to herein as
the "Series 1997-1 Notes"). The proceeds of the Series 1997-1 Notes will be used
by the Corporation to (a) acquire student loan notes incurred under the Higher
Education Act and (b) fund the Reserve Fund.
Reference is hereby made to the Indenture, copies of which are on file
in the principal corporate trust office of the Trustee, and to all of the
provisions of which any Registered Holder of this Note by his acceptance hereof
hereby assents, for definitions of terms; the description of and the nature and
extent of the security for the various classes of Notes and Other Obligations
secured thereunder; the student loan acquisition program being financed by the
issuance of the Notes; the revenues and other moneys pledged to the payment of
the principal of, premium, if any, and interest on the Notes and the Other
Obligations; the nature and extent and manner of enforcement of the pledge; the
conditions upon which Notes may be issued or Other Obligations may be incurred
by the Corporation thereunder, payable from such revenues and other moneys
thereunder as Senior Obligations, Subordinate Obligations or Class C Notes; the
conditions upon which the Indenture may be amended or supplemented with or
without the consent of the Holders of the Notes; the rights and remedies of the
Registered Holder hereof with respect hereto and thereto, including the
limitations upon the right of a Registered Holder hereof to institute any suit,
action or proceeding in equity or at law with respect hereto and thereto; the
rights, duties and obligations of the Corporation and the Trustee thereunder;
the terms and provisions upon which the liens, pledges, charges, trusts and
covenants made therein may be discharged at or prior to the Maturity or
redemption of this Note, and this Note thereafter no longer be secured by the
Indenture, or be deemed to be Outstanding thereunder; and for the other terms
and provisions thereof. Terms used with initial capital letters but not defined
in this Note have the respective meanings given such terms in the Indenture.
The Series 1997-1F Notes are being issued as, and will constitute, Tax Exempt
Class A Notes under the Indenture.
The Notes and Other Obligations are limited obligations of the
Corporation, payable solely from the revenues and assets of the Corporation
pledged therefor under the Indenture, including certain notes evidencing Student
Loans and the proceeds of the Corporation's bonds, notes or other evidences of
indebtedness, if any, issued with respect to the Notes.
Each Noteholder, by acceptance of a Note, covenants and agrees that by
accepting the benefits of the Indenture and such Note that such Noteholder will
not at any time institute against the Corporation, or join in any institution
against the Corporation, any bankruptcy, reorganization, arrangement, insolvency
or
A-2-3
<PAGE>
liquidation proceedings under any United States Federal or state bankruptcy or
similar law in connection with any obligations relating to the Notes, the
Indenture or the Servicing Agreement.
The Corporation has structured the Indenture and the Notes with the
intention that the Notes will qualify under applicable federal, state, local and
foreign tax law as indebtedness of the Corporation secured by the Trust Estate.
The Corporation, the Trustee, the Servicer and each Noteholder agree to treat
and to take no action inconsistent with the treatment of the Notes as such
indebtedness for purposes of federal, state, local and foreign income or
franchise taxes and any other tax imposed on or measured by income. Each
Noteholder, by acceptance of its Note, agrees to be bound by the provisions of
this paragraph. Each Noteholder agrees that it will cause any Person acquiring
an interest in a Note through it to comply with the Indenture as to treatment as
indebtedness under applicable tax law, as described in this paragraph.
Subject to compliance with the provisions of the Indenture relating to
certain asset requirements, Outstanding Series 1997-1F Notes may, at the option
of the Corporation (and at such time as no Tax Exempt Auction Rate Series 1997-1
Notes are Outstanding), be redeemed, in whole or in part, on any date, at a
Redemption Price equal to 100% of the Principal Amount thereof so redeemed, from
proceeds of the Tax Exempt Series 1997-1 Notes constituting a portion of the
Balance of the Series 1997-1 Tax Exempt Acquisition Account that have not been
used to acquire Eligible Loans and from that portion of the Series 1997-1 Tax
Exempt Reserve Account which, if left in the Reserve Fund upon such redemption,
would cause the Balance in the Reserve Fund to exceed the Reserve Fund
Requirement, calculated giving effect to such redemption. Such redemption shall
be required on on June 1, 2001 (to the extent the proceeds in the Series 1997-1
Tax Exempt Acquisition Account not so used as of April 15, 2001, exceed
$__________) and on June 1, 2002 (from such proceeds not so used as of April 15,
2002), unless the Corporation delivers to the Trustee: (i) an opinion of Bond
Counsel stating in effect that such redemption is not required pursuant to the
Code and that failure to so redeem Tax Exempt Series 1997-1 Notes will not
adversely affect the tax exempt status of interest on any Tax Exempt Series
1997-1 Notes for federal income tax purposes, (ii) a Corporation Certificate
certifying that, based on a Cash Flow Projection, the failure to so redeem Tax
Exempt Series 1997-1 Notes will not materially adversely affect the
Corporation's ability to pay Debt Service on the Outstanding Notes and the
Outstanding Other Obligations, Carry-Over Amounts (including accrued interest
thereon) with respect to Outstanding Notes, Administrative Expenses or Note Fees
or to make required deposits to the Rebate Fund, and (iii) written confirmation
from each of the Rating Agencies then rating the Series 1997-1 Notes to the
effect that the failure to so redeem Tax Exempt Series 1997-1 Notes will not
result in a reduction or withdrawal of the rating of the Series 1997-1 Notes.
Subject to compliance with the provisions of the Indenture relating to
certain asset requirements, Outstanding Series 1997-1F Notes may, at the option
of
A-2-4
<PAGE>
the Corporation, be redeemed on ________________, and on any date thereafter, in
whole or in part, at a Redemption Price equal to 100% of the Principal Amount
thereof to be redeemed, from amounts credited to the Series 1997-1 Tax Exempt
Retirement Subaccount from the Series 1997-1 Tax Exempt Surplus Subaccount for
such purpose in accordance with the Indenture and from that portion of the
Series 1997-1 Tax Exempt Reserve Account which exceeds the Reserve Fund
Requirement (calculated after giving effect to such redemption). If the Trustee
shall have first certified that no deficiencies exist in any of the Rebate Fund,
the Note Fund, the Reserve Fund or the Special Redemption and Prepayment
Account, the Trustee shall, upon Corporation Order, transfer to the Series 1997-
1 Tax Exempt Retirement Account any Balances in the Series 1997-1 Tax Exempt
Surplus Subaccount (other than those consisting of Student Loans) which a
Corporation Certificate states are not reasonably expected to be needed for the
payment of scheduled Debt Service on the Outstanding Notes and Outstanding Other
Obligations, Carry-Over Amounts (including accrued interest thereon) with
respect to Outstanding Notes, Administrative Expenses or Note Fees, or for
transfer to the Rebate Fund.
Subject to compliance with the provisions of the Indenture relating to
certain asset requirements and certain other requirements, Outstanding Series
1997-1F Notes may, at the option of the Corporation and from amounts credited to
the Retirement Account for such purpose, be redeemed on June 1, ______, and on
any date thereafter, in whole or in part, at the Redemption Prices (expressed as
a percentage of Principal Amount) set forth below plus accrued interest to the
Redemption Date:
<TABLE>
<CAPTION>
Redemption
Redemption Period Price
----------------- ------
<S> <C>
December 1, 2007, through November 30, 2008 102%
December 1, 2008, through November 30, 2009 101%
December 1, 209, and thereafter 100%
</TABLE>
Series 1997-1 Notes may, at the option of the Corporation, be
redeemed, in whole but not in part, at a Redemption Price equal to 100% of the
Principal Amount of Series 1997-1 Notes to be so redeemed plus accrued interest
thereon to the Redemption Date, on any date after the remaining aggregate
Principal Balance of Student Loans Financed with proceeds of the Series 1997-1
Notes is less than 10% of the amounts initially deposited to the credit of the
Acquisition Fund.
If not all Series 1997-1 Notes subject to redemption are to be
redeemed, the particular Series 1997-1 Notes to be redeemed are to be selected
as provided in the Indenture.
Notice of redemption shall be given by first-class mail mailed at
least 30 days before the Redemption Date to each Holder of Series 1997-1F Notes
to be redeemed at his last address appearing on the Note Register; but no defect
in or failure to give such notice of redemption shall affect the validity of
proceedings for
A-2-5
<PAGE>
redemption of any Note not affected by such defect or failure. All Series 1997-
1F Notes so called for redemption will cease to bear interest on such Redemption
Date, provided funds for their redemption have been duly deposited, and, except
for the purpose of payment, shall no longer be protected by the Indenture and
shall not be deemed Outstanding thereunder.
It is provided in the Indenture that Series 1997-1F Notes of a
denomination larger than $5,000 may be redeemed in part ($5,000 or an integral
multiple thereof) and that upon any partial redemption of any such Series 1997-
1F Note the same shall be surrendered in exchange for one or more new Notes of
the same series in authorized form for the unredeemed portion of principal.
If provision is made for the payment of principal of, premium, if any,
and interest on this Note in accordance with the Indenture, this Note shall no
longer be deemed Outstanding under the Indenture, shall cease to be entitled to
the benefits of the Indenture and shall thereafter be payable solely from the
funds provided for such payment.
If an Event of Default shall occur, the principal of all the
Outstanding Notes may and, under certain circumstances, shall be declared due
and payable in the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Corporation and the rights of the Holders of the Notes and Other Beneficiaries
under the Indenture at any time by the Corporation with, among other things, the
consent of the Holders of two-thirds of the aggregate Principal Amount of Class
A Notes at the time Outstanding, if affected thereby, and with the consent of
the Holders of two-thirds of the aggregate Principal Amount of Class B Notes at
the time Outstanding, if affected thereby. The Indenture also contains
provisions permitting the Holders of specified percentages in aggregate
Principal Amount of the Class A Notes at the time Outstanding or Other Senior
Beneficiaries or, if no Senior Obligations are Outstanding, the Holders of
specified percentages in aggregate Principal Amount of the Class B Notes at the
time Outstanding or Other Subordinate Beneficiaries, on behalf of the Holders of
all the Notes, to waive certain past defaults under the Indenture and their
consequences. Any such consent or waiver shall be conclusive and binding upon
the Registered Holder of this Note and upon all future Registered Holders hereof
and of any Note issued in exchange herefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Note.
This Note is transferable by the Registered Holder hereof upon
surrender of this Note for transfer at the Principal Office of the Note
Registrar (which shall be the Trustee unless and until an Authenticating Agent
becomes the Note Registrar under the Indenture) or at the Principal Office of a
duly appointed Authenticating Agent (the "Authenticating Agent," which term
includes any
A-2-6
<PAGE>
successor Authenticating Agent under the Indenture), duly endorsed or
accompanied by a written instrument of transfer in form satisfactory to the Note
Registrar or the Authenticating Agent, as the case may be, and executed by the
Registered Holder hereof or his attorney duly authorized in writing, with
signature guarantees satisfactory to the Note Registrar or the Authenticating
Agent, as the case may be. This Note may also be exchanged for one or more other
Notes of the same series upon surrender hereof at the Principal Office of the
Note Registrar or the Principal Office of an Authenticating Agent. Thereupon the
Corporation shall execute and the Trustee or the Authenticating Agent, as the
case may be, shall authenticate and deliver, in exchange for this Note, one or
more new fully registered Notes in the name of the transferee, of an authorized
denomination, in aggregate Principal Amount equal to the Principal Amount of
this Note, of the same series and bearing interest at the same rate. Thereupon
the Corporation shall execute and the Trustee or the Authenticating Agent, as
the case may be, shall authenticate and deliver, in exchange for this Note, one
or more new fully registered Notes in the name of the transferee, of an
authorized denomination, in aggregate Principal Amount equal to the Principal
Amount of this Note, of the same series and bearing interest at the same rate.
No Authenticating Agent will be initially appointed with respect to the Series
1997-1F Notes. Notwithstanding the foregoing provisions of this paragraph, no
Series 1997-1F Note shall be required to be transferred, (i) during a period
beginning at the opening of business fifteen days before any selection of Series
1997-1F Notes for redemption and ending at the close of business on the day of
such selection, or (ii) if such Series 1997-1F Note has been selected for
redemption in whole or in part.
The Corporation may require payment by the Registered Holder hereof of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any transfer or exchange of this Note, other than
certain exchanges specifically exempted under the Indenture and not involving
any transfer.
The Corporation, the Trustee, each Paying Agent, any Authenticating
Agent, the Note Registrar and any other agent of the Corporation may treat the
Person in whose name this Note is registered on the Note Register as the
absolute owner hereof for all purposes, whether or not this Note is overdue, and
neither the Corporation, the Trustee, any Paying Agent, any Authenticating
Agent, the Note Registrar nor any other such agent shall be affected by notice
to the contrary.
IT IS HEREBY CERTIFIED, RECITED, COVENANTED 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 Note have happened, do exist,
and have been performed in regular and due time, form and manner as so required.
This Note shall not be valid or become obligatory for any purpose or
be entitled to any security or benefit under the Indenture until the Certificate
of
A-2-7
<PAGE>
Authentication hereon shall have been signed by the Trustee or by the
Authenticating Agent by the manual signature of one of its authorized
representatives.
IN WITNESS WHEREOF, the Corporation has caused this Note to be
executed in its name by the manual signatures of its President and Secretary,
and its corporate seal to be impressed hereon.
Dated: _______________ EDUCATION LOANS INCORPORATED
__________________________
President
(SEAL)
__________________________
Secretary
_____________________________
CERTIFICATE OF AUTHENTICATION
This Note is one of the Notes of the series designated therein and
issued under the provisions of the within-mentioned Indenture.
FIRST BANK NATIONAL
ASSOCIATION, as Trustee
By_____________________________
Authorized Representative
A-2-8
<PAGE>
__________________________
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto ________________________ the within Note and irrevocably appoints
____________________________, attorney-in-fact, to transfer the within Note on
the books kept for registration thereof, with full power of substitution in the
premises.
Dated _______________________
PLEASE INSERT SOCIAL SECURITY
__________________________________________
OR OTHER IDENTIFYING NUMBER NOTICE: The signature to this assignment
OF ASSIGNEE must correspond with the name as it appears
upon the face of the within Note in every
______________________________
particular, without any alteration
whatsoever.
SIGNATURE GUARANTEED:
______________________________
A-2-9
<PAGE>
EXHIBIT A-3
-----------
FORM OF TAXABLE AUCTION RATE SERIES 1997-1 NOTES
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER 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.
EDUCATION LOANS INCORPORATED
TAXABLE AUCTION RATE STUDENT LOAN ASSET-BACKED NOTE
SENIOR SERIES 1997-G [H]
CLASS A
No. R___ $________
Stated Date of Original Interest
Maturity Date Issue Rate CUSIP
------------- ---------------- -------- -----
June 1, 2020 July ___, 1997 Variable 83756E ___
REGISTERED HOLDER: CEDE & CO.
PRINCIPAL AMOUNT:
FOR VALUE RECEIVED, EDUCATION LOANS INCORPORATED, a nonprofit
corporation organized under the laws of the State of South Dakota (the
"Corporation," which term includes any successor corporation under the Indenture
hereinafter referred to, including, upon completion of the Section 150(d)(3)
Transfer, EdLinc), acknowledges itself indebted and hereby promises to pay to
the registered holder specified above, or registered assigns (the "Registered
Holder"), but solely from the revenues and receipts hereinafter specified and
not otherwise, the Principal Amount specified above on the Stated Maturity Date
specified above (subject to the right of prior redemption hereinafter
mentioned), upon presentation and surrender of this Note at the Principal Office
of the Trustee (as hereinafter defined), as Paying Agent for the Series 1997-1
Notes (as hereinafter defined), or a duly appointed successor Paying Agent, and
to pay interest on said Principal
A-3-1
<PAGE>
Amount, but solely from the revenues and receipts hereinafter specified and not
otherwise, to the Registered Holder hereof from the date hereof until the
payment of said Principal Amount has been made or duly provided for, payable on
each Interest Payment Date, commencing _______, 1997, at the Auction Rate Series
1997-1 Note Interest Rate (as hereinafter described), and at the same rate per
annum (to the extent that the payment of such interest shall be legally
enforceable) on overdue installments of interest. Payment of interest on this
Note on each regularly scheduled Interest Payment Date shall be made by check or
draft drawn upon the Paying Agent and mailed to the Person who is the Registered
Holder hereof as of 5:00 p.m. in the city in which the Principal Office of the
Note Registrar is located on the applicable Regular Record Date at the address
of such Registered Holder as it appears on the Note Register maintained by the
Note Registrar, or, if the Registered Holder of this Note is the Registered
Holder of Series 1997-1 Notes in the aggregate Principal Amount of $1,000,000 or
more (or, if less than $1,000,000 in Principal Amount of Series 1997-1 Notes is
outstanding, the Registered Holder of all outstanding Series 1997-1 Notes), at
the direction of such Registered Holder received by the Paying Agent by 5:00
p.m. in the city in which the Principal Office of the Paying Agent is located on
the last Business Day preceding the applicable Regular Record Date, by
electronic transfer by the Paying Agent in immediately available funds to an
account designated by such Registered Holder. In addition, interest on this Note
is payable at the Maturity hereof in the same manner as the principal hereof,
unless the date of such Maturity is a regularly scheduled Interest Payment Date,
in which event interest is payable in the manner set forth in the preceding
sentence. Any interest not so timely paid or duly provided for shall cease to be
payable to the Person who is the Registered Holder hereof at the close of
business on the Regular Record Date and shall be payable to the Person who is
the Registered Holder hereof at the close of business on a special record date
for the payment of any such defaulted interest. Such special record date shall
be fixed by the Trustee whenever moneys become available for payment of the
defaulted interest, and notice of the special record date shall be given to the
Registered Holder hereof not less than ten days prior thereto by first-class
mail to such Registered Holder as shown on the Note Register on a date selected
by the Trustee, stating the date of the special record date and the date fixed
for the payment of such defaulted interest. The principal of and interest on
this Note are payable in lawful money of the United States of America.
INTEREST ON THIS NOTE IS SUBJECT TO FEDERAL INCOME TAXATION PURSUANT
TO AN ELECTION MADE BY THE CORPORATION UNDER SECTION 625(c) OF THE TAX REFORM
ACT OF 1984 AND 26 CFR (S)301.9100-6T(d).
This Note is one of an authorized issue of Notes (the "Notes"), issued
and to be issued by the Corporation in one or more series pursuant to an
Indenture of Trust, dated as of July 1, 1997 (as supplemented and amended, the
"Indenture"), as supplemented by a First Supplemental Indenture of Trust, dated
as of July 1, 1997 (the "First Supplemental Indenture"), each between the
Corporation and First Bank
A-3-2
<PAGE>
National Association, Minneapolis, Minnesota, as Trustee (the "Trustee," which
term includes any successor trustee under the Indenture). As provided in the
Indenture, the Notes are issuable in series which may vary as in the Indenture
provided or permitted. This Note is one of a series issued in an aggregate
Principal Amount of $__________ (the "Series 1997-G [H] Notes"). The Series
1997-G [H] Notes are issued simultaneously with nine other series of Class A
Notes issued in the aggregate Principal Amount of $__________ (together with the
Series 1997-G [H] Notes, collectively referred to herein as the "Series 1997-1
Senior Notes"), and two series of Class B Notes issued in the aggregate
Principal Amount of $__________ (the "Series 1997-1 Subordinate Notes" and,
together with the Series 1997-1 Senior Notes, collectively referred to herein as
the "Series 1997-1 Notes"). The proceeds of the Series 1997-1 Notes will be used
by the Corporation to (a) acquire student loan notes incurred under the Higher
Education Act and (b) fund the Reserve Fund.
Reference is hereby made to the Indenture, copies of which are on file
in the principal corporate trust office of the Trustee, and to all of the
provisions of which any Registered Holder of this Note by his acceptance hereof
hereby assents, for definitions of terms; the description of and the nature and
extent of the security for the various classes of Notes and Other Obligations
secured thereunder; the student loan acquisition program being financed by the
issuance of the Notes; the revenues and other moneys pledged to the payment of
the principal of, premium, if any, and interest on the Notes and the Other
Obligations; the nature and extent and manner of enforcement of the pledge; the
conditions upon which Notes may be issued or Other Obligations may be incurred
by the Corporation thereunder, payable from such revenues and other moneys
thereunder as Senior Obligations, Subordinate Obligations or Class C Notes; the
conditions upon which the Indenture may be amended or supplemented with or
without the consent of the Holders of the Notes; the rights and remedies of the
Registered Holder hereof with respect hereto and thereto, including the
limitations upon the right of a Registered Holder hereof to institute any suit,
action or proceeding in equity or at law with respect hereto and thereto; the
rights, duties and obligations of the Corporation and the Trustee thereunder;
the terms and provisions upon which the liens, pledges, charges, trusts and
covenants made therein may be discharged at or prior to the Maturity or
redemption of this Note, and this Note thereafter no longer be secured by the
Indenture, or be deemed to be Outstanding thereunder; and for the other terms
and provisions thereof. Terms used with initial capital letters but not defined
in this Note have the respective meanings given such terms in the Indenture.
The Series 1997-G [H] Notes are being issued as, and will constitute, taxable
Class A Notes under the Indenture. One other series of the Series 1997-1 Senior
Notes also is a series of taxable Class A Notes which, like the Series 1997-G
[H] Notes, bears interest at an Auction Rate Series 1997-1 Note Interest Rate,
and, together with the Series 1997-G [H] Notes, are collectively referred to
herein as the "Taxable Auction Rate Series 1997-1 Notes."
The Notes and Other Obligations are limited obligations of the
Corporation, payable solely from the revenues and assets of the Corporation
pledged
A-3-3
<PAGE>
therefor under the Indenture, including certain notes evidencing Student Loans
and the proceeds of the Corporation's bonds, notes or other evidences of
indebtedness, if any, issued with respect to the Notes.
Each Noteholder, by acceptance of a Note, covenants and agrees that by
accepting the benefits of the Indenture and such Note that such Noteholder will
not at any time institute against the Corporation, or join in any institution
against the Corporation, any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceedings under any United States Federal or state bankruptcy
or similar law in connection with any obligations relating to the Notes, the
Indenture or the Servicing Agreement.
The Corporation has structured the Indenture and the Notes with the
intention that the Notes will qualify under applicable federal, state, local and
foreign tax law as indebtedness of the Corporation secured by the Trust Estate.
The Corporation, the Trustee, the Servicer and each Noteholder agree to treat
and to take no action inconsistent with the treatment of the Notes as such
indebtedness for purposes of federal, state, local and foreign income or
franchise taxes and any other tax imposed on or measured by income. Each
Noteholder, by acceptance of its Note, agrees to be bound by the provisions of
this paragraph. Each Noteholder agrees that it will cause any Person acquiring
an interest in a Note through it to comply with the Indenture as to treatment as
indebtedness under applicable tax law, as described in this paragraph.
Interest payable on this Note shall be computed on the basis of actual
days elapsed and accrue daily from the date hereof (on the basis of a 360-day
year), and is payable on each regularly scheduled Interest Payment Date prior to
the Maturity of this Note and at the Maturity of this Note. The interest
payable on each Interest Payment Date for this Note shall be [calculated on a
per unit basis, based on a unit of $100,000, and shall be] that interest which
has accrued through the last day preceding such Interest Payment Date or, in the
case of the Maturity of this Note, the last day preceding the date of such
Maturity. The Auction Rate Series 1997-1 Note Interest Rate shall be effective
as of and on the first day (whether or not a Business Day) of the applicable
Interest Period and be in effect thereafter through the end of such Interest
Period.
The unpaid Principal Amount hereof from time to time outstanding shall
bear interest at an Auction Rate Series 1997-1 Note Interest Rate, as described
below, payable on each Interest Payment Date and at the Maturity hereof, such
interest to accrue from the later of the date hereof or the date through which
interest has been paid or duly provided for.
During the Initial Interest Period, this Note shall bear interest at
the Auction Rate Series 1997-1 Note Initial Interest Rate for the Series 1997-G
[H] Notes. Thereafter, until an Auction Period Adjustment, if any, this Note
shall bear interest at an Auction Rate Series 1997-1 Note Interest Rate based on
an Auction Period that
A-3-4
<PAGE>
shall generally consist of 28 days, all as determined in accordance with the
applicable provisions of the First Supplemental Indenture.
In no event shall the Auction Rate Series 1997-1 Note Interest Rate on
this Note exceed 18% per annum (the "Auction Rate Series 1997-1 Note Interest
Rate Limitation").
The Auction Period (which shall be the Interest Period), the
applicable Auction Rate Series 1997-1 Note Interest Rate, the method of
determining the applicable Auction Rate Series 1997-1 Note Interest Rate on each
of the Series 1997-G [H] Notes and the Auction Procedures related thereto,
including, without limitation, required notices thereof and any changes therein
to the Holders or Existing Holders of the Auction Rate Series 1997-1 Notes, will
be determined in accordance with the terms, conditions and provisions of the
First Supplemental Indenture and the Auction Agent Agreement (Taxable Auction
Rate Series 1997-1 Notes), dated as of July 1, 1997 (which, together with any
substitute therefor, is herein referred to as the "Auction Agent Agreement"),
between the Trustee and Bankers Trust Company (which, together with any
substitute therefor, is herein referred to as the "Auction Agent"), to which
terms, conditions and provisions specific reference is hereby made, and all of
which terms, conditions and provisions are hereby specifically incorporated
herein by reference.
If the Auction Rate for the Series 1997-1G [H] Notes is greater than
the Net Loan Rate, then the Auction Rate Series 1997-1 Note Interest Rate
applicable to the Taxable Auction Rate Series 1997-1 Notes for that Interest
Period will be the Net Loan Rate. If the Auction Rate Series 1997-1 Note
Interest Rate applicable to the Series 1997-1G [H] Notes for any Interest Period
is the Net Loan Rate, the Trustee shall determine the Carry-Over Amount, if any,
with respect to the Series 1997-1G [H] Notes for such Interest Period. Such
Carryover Amount shall bear interest calculated at a rate equal to One-Month
LIBOR from the Interest Payment Date for the Interest Period with respect to
which such Carry-Over Amount was calculated until paid. For purposes of this
Note, any reference to "principal" or "interest" herein shall not include within
the meaning of such words Carry-Over Amount or any interest accrued on any such
Carry-Over Amount. Such Carry-Over Amount shall be separately calculated for
each Series 1997-1G [H] Note by the Trustee during such Interest Period in
sufficient time for the Trustee to give notice to each Holder of such Carry-Over
Amount as required in the next succeeding sentence. On the Interest Payment
Date for an Interest Period with respect to which such Carry-Over Amount has
been calculated by the Trustee, the Trustee shall give written notice to each
Holder of the Carry-Over Amount applicable to each Holder's Series 1997-1G [H]
Note, which written notice may accompany the payment of interest by check made
to each such Holder on such Interest Payment Date or otherwise shall be mailed
on such Interest Payment Date by first class mail, postage prepaid, to each such
Holder at such Holder's address as it appears on the registration books
maintained by the Note Registrar. Such notice shall state, in addition to such
Carry-Over Amount, that, unless and until a Series 1997-1G [H] Note has been
redeemed
A-3-5
<PAGE>
or has been deemed no longer Outstanding under the First Supplemental Indenture
(after which no Carry-Over Amount shall be paid with respect to a Series 1997-1G
[H] Note), (i) the Carry-Over Amount (and interest accrued thereon) shall be
paid by the Trustee on such Series 1997-1G [H] Note on the first occurring
Interest Payment Date for a subsequent Interest Period if and to the extent that
(l) the Eligible Carry-Over Make-Up Amount with respect to such Interest Period
is greater than zero, and (2) moneys are available pursuant to the terms of the
First Supplemental Indenture to pay such Carry-Over Amount (and interest accrued
thereon), and (ii) interest shall accrue on the Carry-Over Amount at a per annum
rate equal to One-Month LIBOR until such Carry-Over Amount is paid in full or is
canceled.
The Carry-Over Amount for the Series 1997-1G [H] Notes shall be paid
by the Trustee on Outstanding Series 1997-1G [H] Notes on the first occurring
Interest Payment Date for a subsequent Interest Period if and to the extent that
(i) the Eligible Carry-Over Make-Up Amount with respect to such Interest Period
is greater than zero, and (ii) moneys in the Surplus Account are available on
such Interest Payment Date for transfer to the Interest Account for such purpose
in accordance with the applicable provisions of the Indenture, after taking into
account all other amounts payable from the Surplus Fund on such Interest Payment
Date. Any Carry-Over Amount (and any interest accrued thereon) which is unpaid
as of an Interest Payment Date with respect to any Series 1997-1G [H] Note,
which Series 1997-1G [H] Note is to be redeemed or deemed no longer Outstanding
under the First Supplemental Indenture on such Interest Payment Date, shall be
paid to the Holder thereof on such Interest Payment Date to the extent that
moneys are available therefor in accordance with the provisions of the preceding
clause (b); provided, however, that any Carry-Over Amount (and any interest
accrued thereon) which is not so paid on such Interest Payment Date shall be
canceled with respect to such Series 1997-1G [H] Note on such Interest Payment
Date and shall not be paid on any succeeding Interest Payment Date. To the
extent that any portion of the Carry-Over Amount (and any interest accrued
thereon) remains unpaid after payment of a portion thereof, such unpaid portion
shall be paid in whole or in part as required hereunder until fully paid by the
Trustee on the next occurring Interest Payment Date or Dates, as necessary, for
a subsequent Interest Period or Periods, if and to the extent that the
conditions in the first sentence of this paragraph are satisfied. On any
Interest Payment Date on which the Trustee pays less than all of the Carry-Over
Amount (and any interest accrued thereon) with respect to a Series 1997-1G [H]
Note, the Trustee shall give written notice in the manner set forth in the
immediately preceding paragraph to the Holder of such Series 1997-1G [H] Note of
the Carry-Over Amount remaining unpaid on such Series 1997-1G [H] Note.
The Interest Payment Date in such subsequent Interest Period on which
such Carry-Over Amount for the Series 1997-1G [H] Notes shall be paid shall be
determined by the Trustee in accordance with the provisions of the immediately
preceding paragraph, and the Trustee shall make payment of the Carry-Over Amount
in the same manner as, and from the same Account from which, it pays interest on
the Series 1997-1G [H] Notes on an Interest Payment Date.
A-3-6
<PAGE>
By purchasing Series 1997-G [H] Notes, whether in an Auction or
otherwise, each purchaser of the Series 1997-G [H] Notes, or its Broker-Dealer,
must agree and shall be deemed by such purchase to have agreed (i) to
participate in Auctions on the terms described in the First Supplemental
Indenture, (ii) to have its beneficial ownership of the Series 1997-G [H] Notes
maintained at all times in Book-Entry Form for the account of its Participant,
which in turn will maintain records of such beneficial ownership, and (iii) to
authorize such Participant to disclose to the Auction Agent such information
with respect to such beneficial ownership as the Auction Agent may request. So
long as the ownership of Series 1997-G [H] Notes is maintained in Book-Entry
Form by the Securities Depository, an Existing Holder may sell, transfer or
otherwise dispose of Series 1997-G [H] Notes only pursuant to a Bid or Sell
Order placed in an Auction or otherwise sell, transfer or dispose of Series
1997-G [H] Notes through a Broker-Dealer, provided that, in the case of all
transfers other than pursuant to Auctions, such Existing Holder, its Broker-
Dealer or its Participant advises the Auction Agent of such transfer.
The determination of an Auction Rate Series 1997-1 Note Interest Rate
by the Auction Agent or any other authorized Person pursuant to the provisions
of the First Supplemental Indenture shall be conclusive and binding on the
Holders of the Series 1997-G [H] Notes to which such Auction Rate Series 1997-1
Note Interest Rate applies, and the Corporation and the Trustee may rely thereon
for all purposes.
Notwithstanding any provision of this Note to the contrary, in no
event shall the cumulative amount of interest paid or payable on this Note
(including interest calculated as provided herein, plus any other amounts that
constitute interest on this Note under applicable law, which are contracted for,
charged, reserved, taken or received pursuant to this Note or related documents)
calculated from the date of issuance of this Note through any subsequent day
during the term of this Note or otherwise prior to payment in full of this Note
exceed the amount permitted by applicable law. If the applicable law is ever
judicially interpreted so as to render usurious any amount called for under this
Note or related documents or otherwise contracted for, charged, reserved, taken
or received in connection with this Note, or if the redemption or acceleration
of the Maturity of this Note results in payment to or receipt by the Registered
Holder or any former Registered Holder hereof of any interest in excess of that
permitted by applicable law, then notwithstanding any provision of this Note or
related documents to the contrary all excess amounts theretofore paid or
received with respect to this Note shall be credited on the Principal Amount of
this Note (or, if this Note has been paid or would thereby be paid in full,
refunded by the recipient thereof), and the provisions of this Note and related
documents shall immediately be deemed reformed and the amounts thereafter
collectible hereunder and thereunder reduced, without the necessity of the
execution of any new document, so as to comply with the applicable law, but so
as to permit the recovery of the fullest amount otherwise called for under this
Note and under the related documents.
A-3-7
<PAGE>
Subject to compliance with the provisions of the Indenture relating to
certain asset requirements, Series 1997-1 Notes may, at the option of the
Corporation, be redeemed, in whole but not in part, at a Redemption Price equal
to 100% of the Principal Amount of Series 1997-1 Notes to be so redeemed plus
accrued interest thereon to the Redemption Date, on any date after the remaining
aggregate Principal Balance of Student Loans Financed with proceeds of the
Series 1997-1 Notes is less than 10% of the amounts initially deposited to the
credit of the Acquisition Fund.
Subject to compliance with the provisions of the Indenture relating to
certain asset requirements, Outstanding Taxable Auction Rate Series 1997-1 Notes
of any series may be redeemed, in whole or in part, on any any regularly
scheduled Interest Payment Date, at a Redemption Price equal to 100% of the
Principal Amount thereof so redeemed, from proceeds of the Taxable Series 1997-1
Notes constituting a portion of the Balance of the Series 1997-1 Taxable
Acquisition Account that have not been used to acquire Eligible Loans and from
that portion of the Series 1997-1 Taxable Reserve Account which, if left in the
Reserve Fund upon such redemption, would cause the Balance in the Reserve Fund
to exceed the Reserve Fund Requirement, calculated giving effect to such
redemption. Such redemption shall be required on the regularly scheduled
Interest Payment Date occuring in September, 1998 (from such proceeds not so
used as of August 1, 1998), unless the Corporation delivers to the Trustee: (i)
a Corporation Certificate certifying that, based on a Cash Flow Projection, the
failure to redeem such Taxable Auction Rate Series 1997-1 Notes will not
materially adversely affect the Corporation's ability to pay Debt Service on the
Outstanding Notes and the Outstanding Other Obligations, Carry-Over Amounts
(including accrued interest thereon) with respect to Outstanding Notes,
Administrative Expenses or Note Fees or to make required deposits to the Rebate
Fund, and (ii) written confirmation from each of the Rating Agencies then rating
the Series 1997-1 Notes to the effect that the failure to redeem such Taxable
Auction Rate Series 1997-1 Notes will not result in a reduction or withdrawal of
the rating of the Series 1997-1 Notes.
Subject to compliance with the provisions of the Indenture relating to
certain asset requirements, Outstanding Taxable Auction Rate Series 1997-1 Notes
of any series may, at the option of the Corporation, be redeemed on any Interest
Rate Adjustment Date for such series or any regularly scheduled Interest Payment
Date occurring on or after ___________, in whole or in part, at a Redemption
Price equal to 100% of the Principal Amount thereof to be redeemed, from amounts
credited to the Series 1997-1 Taxable Retirement Subaccount from the Series
1997-1 Taxable Surplus Subaccount for such purpose in accordance with the
Indenture and from that portion of the Series 1997-1 Taxable Reserve Account
which exceeds the Reserve Fund Requirement (calculated after giving effect to
such redemption). If the Trustee shall have first certified that no deficiencies
exist in any of the Rebate Fund, the Note Fund, the Reserve Fund or the Special
Redemption and Prepayment Account, the Trustee shall, upon Corporation Order,
transfer to the Series 1997-1 Taxable Retirement Account any Balances in the
Series 1997-1 Taxable Surplus Subaccount
A-3-8
<PAGE>
(other than those consisting of Student Loans) which a Corporation Certificate
states are not reasonably expected to be needed for the payment of scheduled
Debt Service on the Outstanding Notes and Outstanding Other Obligations, Carry-
Over Amounts (including accrued interest thereon) with respect to Outstanding
Notes, Administrative Expenses or Note Fees, or for transfer to the Rebate Fund.
Subject to compliance with the provisions of the Indenture relating to
certain asset requirements and certain other requirements, Outstanding Taxable
Auction Rate Series 1997-1 Notes of any series may, at the option of the
Corporation, be redeemed on any Interest Rate Adjustment Date for such series or
any regularly scheduled Interest Payment Date, in whole or in part, at a
Redemption Price equal to 100% of the Principal Amount thereof to be redeemed,
from amounts credited to the Retirement Account for such purpose.
If not all Series 1997-1 Notes subject to redemption are to be
redeemed, the particular Series 1997-1 Notes to be redeemed are to be selected
as provided in the Indenture.
Notice of redemption shall be given by first-class mail mailed at
least 15 days before the Redemption Date to each Holder of Series 1997-G [H]
Notes to be redeemed at his last address appearing on the Note Register; but no
defect in or failure to give such notice of redemption shall affect the validity
of proceedings for redemption of any Series 1997-G [H] Notes not affected by
such defect or failure. All Series 1997-G [H] Notes so called for redemption
will cease to bear interest on such Redemption Date, provided funds for their
redemption have been duly deposited, and, except for the purpose of payment,
shall no longer be protected by the Indenture and shall not be deemed
Outstanding thereunder.
It is provided in the Indenture that Series 1997-G [H] Notes of a
denomination larger than $100,000 may be redeemed in part ($100,000 or an
integral multiple thereof) and that upon any partial redemption of any such
Series 1997-G [H] Note the same shall be surrendered in exchange for one or more
new Notes of the same series in authorized form for the unredeemed portion of
principal.
If provision is made for the payment of principal of and interest on
this Note in accordance with the Indenture, this Note shall no longer be deemed
Outstanding under the Indenture, shall cease to be entitled to the benefits of
the Indenture and shall thereafter be payable solely from the funds provided for
such payment.
If an Event of Default shall occur, the principal of all the
Outstanding Notes may and, under certain circumstances, shall be declared due
and payable in the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
A-3-9
<PAGE>
Corporation and the rights of the Holders of the Notes and Other Beneficiaries
under the Indenture at any time by the Corporation with, among other things, the
consent of the Holders of two-thirds of the aggregate Principal Amount of Class
A Notes at the time Outstanding, if affected thereby, and the consent of the
Holders of two-thirds of the aggregate Principal Amount of Class B Notes at the
time Outstanding, if affected thereby. The Indenture also contains provisions
permitting the Holders of specified percentages in aggregate Principal Amount of
the Class A Notes at the time Outstanding or Other Senior Beneficiaries or, if
no Senior Obligations are Outstanding, the Holders of specified percentages in
aggregate Principal Amount of the Class B Notes at the time Outstanding or Other
Subordinate Beneficiaries, on behalf of the Holders of all the Notes, to waive
certain past defaults under the Indenture and their consequences. Any such
consent or waiver shall be conclusive and binding upon the Registered Holder of
this Note and upon all future Registered Holders hereof and of any Note issued
in exchange herefor or in lieu hereof, whether or not notation of such consent
or waiver is made upon this Note.
This Note is transferable by the Registered Holder hereof upon
surrender of this Note for transfer at the Principal Office of the Note
Registrar (which shall be the Trustee unless and until an Authenticating Agent
becomes the Note Registrar under the Indenture) or at the Principal Office of a
duly appointed Authenticating Agent (the "Authenticating Agent," which term
includes any successor Authenticating Agent under the Indenture), duly endorsed
or accompanied by a written instrument of transfer in form satisfactory to the
Note Registrar or such Authenticating Agent, as the case may be, and executed by
the Registered Holder hereof or his attorney duly authorized in writing, with
signature guarantees satisfactory to the Note Registrar or such Authenticating
Agent, as the case may be. This Note may also be exchanged for one or more
other Notes of the same series upon surrender hereof at the Principal Office of
the Note Registrar or the Principal Office of an Authenticating Agent.
Thereupon the Corporation shall execute and the Trustee or the Authenticating
Agent, as the case may be, shall authenticate and deliver, in exchange for this
Note, one or more new fully registered Notes in the name of the transferee, of
an authorized denomination, in aggregate Principal Amount equal to the Principal
Amount of this Note, of the same series and bearing interest at the same rate.
No Authenticating Agent will be initially appointed with respect to the Series
1997-G [H] Notes. Notwithstanding the foregoing provisions of this paragraph,
no Series 1997-G [H] Note shall be required to be transferred, (i) during a
period beginning at the opening of business fifteen days before any selection of
Series 1997-G [H] Notes for redemption and ending at the close of business on
the day of such selection, or (ii) if such Series 1997-G [H] Note has been
selected for redemption in whole or in part.
The Corporation may require payment by the Registered Holder hereof of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any transfer or exchange of this Note, other than
A-3-10
<PAGE>
certain exchanges specifically exempted under the Indenture and not involving
any transfer.
The Corporation, the Trustee, each Paying Agent, any Authenticating
Agent, the Note Registrar and any other agent of the Corporation may treat the
Person in whose name this Note is registered on the Note Register as the
absolute owner hereof for all purposes, whether or not this Note is overdue, and
neither the Corporation, the Trustee, any Paying Agent, any Authenticating
Agent, the Note Registrar nor any other such agent shall be affected by notice
to the contrary.
IT IS HEREBY CERTIFIED, RECITED, COVENANTED 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 Note have happened, do exist,
and have been performed in regular and due time, form and manner as so required.
This Note shall not be valid or become obligatory for any purpose or
be entitled to any security or benefit under the Indenture until the Certificate
of Authentication hereon shall have been signed by the Trustee or by the
Authenticating Agent by the manual signature of one of its authorized
representatives.
A-3-11
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Note to be
executed in its name by the manual signatures of its President and Secretary,
and its corporate seal to be impressed hereon.
Dated: _______________ EDUCATION LOANS INCORPORATED
__________________________
President
(SEAL)
__________________________
Secretary
_____________________________
CERTIFICATE OF AUTHENTICATION
This Note is one of the Notes of the series designated therein and
issued under the provisions of the within-mentioned Indenture.
FIRST BANK NATIONAL
ASSOCIATION, as Trustee
By____________________________
Authorized Representative
A-3-12
<PAGE>
________________________________
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto ________________________ the within Note and irrevocably appoints
____________________________, attorney-in-fact, to transfer the within Note on
the books kept for registration thereof, with full power of substitution in the
premises.
Dated _______________________
PLEASE INSERT SOCIAL SECURITY
___________________________________________
OR OTHER IDENTIFYING NUMBER NOTICE: The signature to this assignment
OF ASSIGNEE must correspond with the name as it appears
upon the face of the within Note in every
particular, without any alteration
______________________________
whatsoever.
SIGNATURE GUARANTEED:
______________________________
A-3-13
<PAGE>
EXHIBIT A-4
-----------
FORM OF LIBOR RATE SERIES 1997-1 SENIOR NOTES
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER 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.
EDUCATION LOANS INCORPORATED
TAXABLE LIBOR RATE STUDENT LOAN ASSET-BACKED NOTE
SENIOR SERIES 1997-I [J]
CLASS A
No. R______ $________________
Stated Date of Original Interest
Maturity Date Issue Rate CUSIP
------------- ---------------- -------- -----
June 1, 2020 July ___, 1997 Variable 83756E ___
REGISTERED HOLDER: CEDE & CO.
PRINCIPAL AMOUNT:
FOR VALUE RECEIVED, EDUCATION LOANS INCORPORATED, a nonprofit
corporation organized under the laws of the State of South Dakota (the
"Corporation," which term includes any successor corporation under the Indenture
hereinafter referred to, including, upon completion of the Section 150(d)(3)
Transfer, EdLinc), acknowledges itself indebted and hereby promises to pay to
the registered holder specified above, or registered assigns (the "Registered
Holder"), but solely from the revenues and receipts hereinafter specified and
not otherwise, the Principal Amount specified above on the Stated Maturity Date
specified above (subject to the right of prior redemption hereinafter
mentioned), upon presentation and surrender of this Note at the Principal Office
of the Trustee (as hereinafter defined), as Paying Agent for the Series 1997-1
Notes (as hereinafter defined), or a duly appointed successor Paying Agent, and
to pay interest on said Principal
A-4-1
<PAGE>
Amount, but solely from the revenues and receipts hereinafter specified and not
otherwise, to the Registered Holder hereof from the date hereof until the
payment of said Principal Amount has been made or duly provided for, payable on
each Interest Payment Date, commencing ___________, 1997, at the LIBOR Rate
Series 1997-1 Note Interest Rate (as hereinafter described), and at the same
rate per annum (to the extent that the payment of such interest shall be legally
enforceable) on overdue installments of interest. Payment of interest on this
Note on each regularly scheduled Interest Payment Date shall be made by check or
draft drawn upon the Paying Agent and mailed to the Person who is the Registered
Holder hereof as of 5:00 p.m. in the city in which the Principal Office of the
Note Registrar is located on the applicable Regular Record Date at the address
of such Registered Holder as it appears on the Note Register maintained by the
Note Registrar, or, if the Registered Holder of this Note is the Registered
Holder of Series 1997-1 Notes in the aggregate Principal Amount of $1,000,000 or
more (or, if less than $1,000,000 in Principal Amount of Series 1997-1 Notes is
outstanding, the Registered Holder of all outstanding Series 1997-1 Notes), at
the direction of such Registered Holder received by the Paying Agent by 5:00
p.m. in the city in which the Principal Office of the Paying Agent is located on
the last Business Day preceding the applicable Regular Record Date, by
electronic transfer by the Paying Agent in immediately available funds to an
account designated by such Registered Holder. In addition, interest on this Note
is payable at the Maturity hereof in the same manner as the principal hereof,
unless the date of such Maturity is a regularly scheduled Interest Payment Date,
in which event interest is payable in the manner set forth in the preceding
sentence. Any interest not so timely paid or duly provided for shall cease to be
payable to the Person who is the Registered Holder hereof at the close of
business on the Regular Record Date and shall be payable to the Person who is
the Registered Holder hereof at the close of business on a special record date
for the payment of any such defaulted interest. Such special record date shall
be fixed by the Trustee whenever moneys become available for payment of the
defaulted interest, and notice of the special record date shall be given to the
Registered Holder hereof not less than ten days prior thereto by first-class
mail to such Registered Holder as shown on the Note Register on a date selected
by the Trustee, stating the date of the special record date and the date fixed
for the payment of such defaulted interest. The principal of and interest on
this Note are payable in lawful money of the United States of America.
INTEREST ON THIS NOTE IS SUBJECT TO FEDERAL INCOME TAXATION PURSUANT
TO AN ELECTION MADE BY THE CORPORATION UNDER SECTION 625(c) OF THE TAX REFORM
ACT OF 1984 AND 26 CFR (S)301.9100-6T(d).
This Note is one of an authorized issue of Notes (the "Notes"), issued
and to be issued by the Corporation in one or more series pursuant to an
Indenture of Trust, dated as of July 1, 1997 (as supplemented and amended, the
"Indenture"), as supplemented by a First Supplemental Indenture of Trust, dated
as of July 1, 1997 (the "First Supplemental Indenture"), each between the
Corporation and First Bank
A-4-2
<PAGE>
National Association, Minneapolis, Minnesota, as Trustee (the "Trustee," which
term includes any successor trustee under the Indenture). As provided in the
Indenture, the Notes are issuable in series which may vary as in the Indenture
provided or permitted. This Note is one of a series issued in an aggregate
Principal Amount of $_________________(the "Series 1997-I [J] Notes"). The
Series 1997-I [J] Notes are issued simultaneously with nine other series of
Class A Notes issued in the aggregate Principal Amount of $_______________
(together with the Series 1997-I [J] Notes, collectively referred to herein as
the "Series 1997-1 Senior Notes"), and two series of Class B Notes issued in the
aggregate Principal Amount of $_____________________(the "Series 1997-1
Subordinate Notes" and, together with the Series 1997-1 Senior Notes,
collectively referred to herein as the "Series 1997-1 Notes"). The proceeds of
the Series 1997-1 Notes will be used by the Corporation to (a) acquire student
loan notes incurred under the Higher Education Act and (b) fund the Reserve
Fund.
Reference is hereby made to the Indenture, copies of which are on file
in the principal corporate trust office of the Trustee, and to all of the
provisions of which any Registered Holder of this Note by his acceptance hereof
hereby assents, for definitions of terms; the description of and the nature and
extent of the security for the various classes of Notes and Other Obligations
secured thereunder; the student loan acquisition program being financed by the
issuance of the Notes; the revenues and other moneys pledged to the payment of
the principal of, premium, if any, and interest on the Notes and the Other
Obligations; the nature and extent and manner of enforcement of the pledge; the
conditions upon which Notes may be issued or Other Obligations may be incurred
by the Corporation thereunder, payable from such revenues and other moneys
thereunder as Senior Obligations, Subordinate Obligations or Class C Notes; the
conditions upon which the Indenture may be amended or supplemented with or
without the consent of the Holders of the Notes; the rights and remedies of the
Registered Holder hereof with respect hereto and thereto, including the
limitations upon the right of a Registered Holder hereof to institute any suit,
action or proceeding in equity or at law with respect hereto and thereto; the
rights, duties and obligations of the Corporation and the Trustee thereunder;
the terms and provisions upon which the liens, pledges, charges, trusts and
covenants made therein may be discharged at or prior to the Maturity or
redemption of this Note, and this Note thereafter no longer be secured by the
Indenture, or be deemed to be Outstanding thereunder; and for the other terms
and provisions thereof. Terms used with initial capital letters but not defined
in this Note have the respective meanings given such terms in the Indenture.
The Series 1997-I [J] Notes are being issued as, and will constitute, taxable
Class A Notes under the Indenture. One other series of the Series 1997-1 Senior
Notes also is a series of taxable Class A Notes which, like the Series 1997-I
[J] Notes, bears interest at a LIBOR Rate Series 1997-1 Note Interest Rate, and,
together with the Series 1997-I [J] Notes, are collectively referred to herein
as the "LIBOR Rate Series 1997-1 Senior Notes."
The Notes and Other Obligations are limited obligations of the
Corporation, payable solely from the revenues and assets of the Corporation
pledged therefor under the Indenture, including certain notes evidencing Student
Loans and
A-4-3
<PAGE>
the proceeds of the Corporation's bonds, notes or other evidences of
indebtedness, if any, issued with respect to the Notes.
Each Noteholder, by acceptance of a Note, covenants and agrees that by
accepting the benefits of the Indenture and such Note that such Noteholder will
not at any time institute against the Corporation, or join in any institution
against the Corporation, any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceedings under any United States Federal or state bankruptcy
or similar law in connection with any obligations relating to the Notes, the
Indenture or the Servicing Agreement.
The Corporation has structured the Indenture and the Notes with the
intention that the Notes will qualify under applicable federal, state, local and
foreign tax law as indebtedness of the Corporation secured by the Trust Estate.
The Corporation, the Trustee, the Servicer and each Noteholder agree to treat
and to take no action inconsistent with the treatment of the Notes as such
indebtedness for purposes of federal, state, local and foreign income or
franchise taxes and any other tax imposed on or measured by income. Each
Noteholder, by acceptance of its Note, agrees to be bound by the provisions of
this paragraph. Each Noteholder agrees that it will cause any Person acquiring
an interest in a Note through it to comply with the Indenture as to treatment as
indebtedness under applicable tax law, as described in this paragraph.
Interest payable on this Note shall be computed on the basis of actual
days elapsed and accrue daily from the date hereof (on the basis of a 360-day
year), and is payable on each regularly scheduled Interest Payment Date prior to
the Maturity of this Note and at the Maturity of this Note. The interest
payable on each Interest Payment Date for this Note shall be [calculated on a
per unit basis, based on a unit of $100,000, and shall be] that interest which
has accrued through the last day preceding such Interest Payment Date or, in the
case of the Maturity of this Note, the last day preceding the date of such
Maturity. The LIBOR Rate Series 1997-1 Note Interest Rate shall be effective as
of and on the first day (whether or not a Business Day) of the applicable
Interest Period and be in effect thereafter through the end of such Interest
Period.
The unpaid Principal Amount hereof from time to time outstanding shall
bear interest at a LIBOR Rate Series 1997-1 Note Interest Rate, as described
below, payable on each Interest Payment Date and at the Maturity hereof, such
interest to accrue from the later of the date hereof or the date through which
interest has been paid or duly provided for.
During the Initial Interest Period, this Note shall bear interest at
the LIBOR Rate Series 1997-1 Note Initial Interest Rate for the Series 1997-I
[J] Notes. The interest rate to be borne by this Note during each Interest
Period thereafter shall be determined on the related Interest Rate Determination
Date and shall be equal to the lesser of (i) the sum of One-Month LIBOR
determined with respect to such
A-4-4
<PAGE>
Interest Rate Determination Date plus _____% (which is herein referred to as the
"LIBOR Rate Series 1997-1 Note LIBOR-Based Rate"), and (ii) the Net Loan Rate
determined with respect to such Interest Rate Determination Date. The Trustee
shall determine such interest rate on each Interest Rate Determination Date.
Notwithstanding any other provision of this Note or the First
Supplemental Indenture, interest payable on this Note for an Interest Period
shall never exceed for such Interest Period the amount of interest payable at
the Net Loan Rate in effect for such Interest Period.
If the LIBOR Rate Series 1997-1 Note LIBOR-Based Rate for the Series
1997-1I [J] Notes is greater than the Net Loan Rate, then the LIBOR Rate Series
1997-1 Note Interest Rate applicable to the Series 1997-1I [J] Notes for that
Interest Period will be the Net Loan Rate. If the LIBOR Rate Series 1997-1 Note
Interest Rate applicable to the Series 1997-1I [J] Notes for any Interest Period
is the Net Loan Rate, the Trustee shall determine the Carry-Over Amount, if any,
with respect to the Series 1997-1I [J] Notes for such Interest Period. Such
Carryover Amount shall bear interest calculated at a rate equal to the LIBOR
Rate Series 1997-1 Note LIBOR-Based Rate (as determined by the Trustee) from the
Interest Payment Date for the Interest Period with respect to which such Carry-
Over Amount was calculated until paid. For purposes of this Note, any reference
to "principal" or "interest" herein shall not include within the meaning of such
words Carry-Over Amount or any interest accrued on any such Carry-Over Amount.
Such Carry-Over Amount shall be separately calculated for each Series 1997-1I
[J] Note by the Trustee during such Interest Period in sufficient time for the
Trustee to give notice to each Holder of such Carry-Over Amount as required in
the next succeeding sentence. On the Interest Payment Date for an Interest
Period with respect to which such Carry-Over Amount has been calculated by the
Trustee, the Trustee shall give written notice to each Holder of the Carry-Over
Amount applicable to each Holder's Series 1997-1I [J] Note, which written notice
may accompany the payment of interest by check made to each such Holder on such
Interest Payment Date or otherwise shall be mailed on such Interest Payment Date
by first class mail, postage prepaid, to each such Holder at such Holder's
address as it appears on the registration books maintained by the Note
Registrar. Such notice shall state, in addition to such Carry-Over Amount,
that, unless and until a Series 1997-1I [J] Note has been redeemed or has been
deemed no longer Outstanding under the First Supplemental Indenture (after which
no Carry-Over Amount shall be paid with respect to a Series 1997-1I [J] Note),
(i) the Carry-Over Amount (and interest accrued thereon) shall be paid by the
Trustee on such Series 1997-1I [J] Note on the first occurring Interest Payment
Date for a subsequent Interest Period if and to the extent that (l) the Eligible
Carry-Over Make-Up Amount with respect to such Interest Period is greater than
zero, and (2) moneys are available pursuant to the terms of the First
Supplemental Indenture to pay such Carry-Over Amount (and interest accrued
thereon), and (ii) interest shall accrue on the Carry-Over Amount at a per annum
rate equal to the LIBOR Rate Series 1997-1 Note LIBOR-Based Rate until such
Carry-Over Amount is paid in full or is canceled.
A-4-5
<PAGE>
The Carry-Over Amount for the Series 1997-1I [J] Notes shall be paid
by the Trustee on Outstanding Series 1997-1I [J] Notes on the first occurring
Interest Payment Date for a subsequent Interest Period if and to the extent that
(i) the Eligible Carry-Over Make-Up Amount with respect to such Interest Period
is greater than zero, and (ii) moneys in the Surplus Account are available on
such Interest Payment Date for transfer to the Interest Account for such purpose
in accordance with the applicable provisions of the Indenture, after taking into
account all other amounts payable from the Surplus Fund on such Interest Payment
Date. Any Carry-Over Amount (and any interest accrued thereon) which is unpaid
as of an Interest Payment Date with respect to any Series 1997-1I [J] Note,
which Series 1997-1I [J] Note is to be redeemed or deemed no longer Outstanding
under the First Supplemental Indenture on such Interest Payment Date, shall be
paid to the Holder thereof on such Interest Payment Date to the extent that
moneys are available therefor in accordance with the provisions of the preceding
clause (b); provided, however, that any Carry-Over Amount (and any interest
accrued thereon) which is not so paid on such Interest Payment Date shall be
canceled with respect to such Series 1997-1I [J] Note on such Interest Payment
Date and shall not be paid on any succeeding Interest Payment Date. To the
extent that any portion of the Carry-Over Amount (and any interest accrued
thereon) remains unpaid after payment of a portion thereof, such unpaid portion
shall be paid in whole or in part as required hereunder until fully paid by the
Trustee on the next occurring Interest Payment Date or Dates, as necessary, for
a subsequent Interest Period or Periods, if and to the extent that the
conditions in the first sentence of this paragraph are satisfied. On any
Interest Payment Date on which the Trustee pays less than all of the Carry-Over
Amount (and any interest accrued thereon) with respect to a Series 1997-1I [J]
Note, the Trustee shall give written notice in the manner set forth in the
immediately preceding paragraph to the Holder of such Series 1997-1I [J] Note of
the Carry-Over Amount remaining unpaid on such Series 1997-1I [J] Note.
The Interest Payment Date in such subsequent Interest Period on which
such Carry-Over Amount for the Series 1997-1I [J] Notes shall be paid shall be
determined by the Trustee in accordance with the provisions of the immediately
preceding paragraph, and the Trustee shall make payment of the Carry-Over Amount
in the same manner as, and from the same Account from which, it pays interest on
the Series 1997-1I [J] Notes on an Interest Payment Date.
In the event that the Trustee no longer determines, or fails to
determine, when required, the LIBOR Rate Series 1997-1 Note LIBOR-Based Rate
with respect to the Series 1997-1I [J] Notes, or if, for any reason, such manner
of determination shall be held to be invalid or unenforceable, the LIBOR Rate
Series 1997-1 Note LIBOR-Based Rate for each succeeding Interest Period shall be
the Net Loan Rate as determined by or on behalf of the Corporation with respect
to the related Interest Rate Determination Date, and if the Corporation shall
fail or refuse to determine such Net Loan Rate, the Net Loan Rate shall be
determined by a securities dealer appointed by the Trustee capable of making
such a determination
A-4-6
<PAGE>
in accordance with the provisions hereof and written notice of such
determination shall be given by such securities dealer to the Trustee.
The determination of a LIBOR Rate Series 1997-1 Note Interest Rate by
the Trustee or any other authorized Person pursuant to the provisions of the
First Supplemental Indenture shall be conclusive and binding on the Holders of
the Series 1997-I [J] Notes to which such LIBOR Rate Series 1997-1 Note Interest
Rate applies, and the Corporation and the Trustee may rely thereon for all
purposes.
Notwithstanding any provision of this Note to the contrary, in no
event shall the cumulative amount of interest paid or payable on this Note
(including interest calculated as provided herein, plus any other amounts that
constitute interest on this Note under applicable law, which are contracted for,
charged, reserved, taken or received pursuant to this Note or related documents)
calculated from the date of issuance of this Note through any subsequent day
during the term of this Note or otherwise prior to payment in full of this Note
exceed the amount permitted by applicable law. If the applicable law is ever
judicially interpreted so as to render usurious any amount called for under this
Note or related documents or otherwise contracted for, charged, reserved, taken
or received in connection with this Note, or if the redemption or acceleration
of the Maturity of this Note results in payment to or receipt by the Registered
Holder or any former Registered Holder hereof of any interest in excess of that
permitted by applicable law, then notwithstanding any provision of this Note or
related documents to the contrary all excess amounts theretofore paid or
received with respect to this Note shall be credited on the Principal Amount of
this Note (or, if this Note has been paid or would thereby be paid in full,
refunded by the recipient thereof), and the provisions of this Note and related
documents shall immediately be deemed reformed and the amounts thereafter
collectible hereunder and thereunder reduced, without the necessity of the
execution of any new document, so as to comply with the applicable law, but so
as to permit the recovery of the fullest amount otherwise called for under this
Note and under the related documents.
Subject to compliance with the provisions of the Indenture relating to
certain asset requirements, Outstanding LIBOR Rate Series 1997-1 Notes shall
receive prepayments of principal on any Interest Payment Date from moneys
available therefor in the Series 1997-1 Taxable Special Redemption and
Prepayment Subaccount in accordance with the provisions of the First
Supplemental Indenture. All prepayments of principal in accordance with the
preceding sentence shall, subject to satisfying the asset requirements of the
Indenture, be allocated between the LIBOR Rate Series 1997-1 Senior Notes and
the Series 1997-1L Notes pro rata based upon their respective aggregate
Principal Amounts. All such prepayments of principal allocated to the LIBOR
Rate Series 1997-1 Senior Notes shall be applied to the Series 1997-1I Notes so
long as any such Notes remain Outstanding, and thereafter to the Series 1997-1J
Notes. All such prepayments of principal applied to the Series 1997-I [J] Notes
shall be allocated pro rata, based upon their respective
A-4-7
<PAGE>
Principal Amounts, to the reduction of the Principal Amount of all Series 1997-I
[J] Notes.
Subject to compliance with the provisions of the Indenture relating to
certain asset requirements, Series 1997-1 Notesmay, at the option of the
Corporation, be redeemed, in whole but not in part, at a Redemption Price equal
to 100% of the Principal Amount of Series 1997-1 Notes to be so redeemed plus
accrued interest thereon to the Redemption Date, on any date after the remaining
aggregate Principal Balance of Student Loans Financed with proceeds of the
Series 1997-1 Notes is less than 10% of the amounts initially deposited to the
credit of the Acquisition Fund.
Notice of redemption shall be given by first-class mail mailed at
least 30 days before the Redemption Date to each Holder of Series 1997-I [J]
Notes to be redeemed at his last address appearing on the Note Register; but no
defect in or failure to give such notice of redemption shall affect the validity
of proceedings for redemption of any Series 1997-I [J] Notes not affected by
such defect or failure. All Series 1997-I [J] Notes so called for redemption
will cease to bear interest on such Redemption Date, provided funds for their
redemption have been duly deposited, and, except for the purpose of payment,
shall no longer be protected by the Indenture and shall not be deemed
Outstanding thereunder.
It is provided in the Indenture that Series 1997-I [J] Notes of an
Authorized Denomination larger than $100,000 may be redeemed in part ($100,000
in original Principal Amount or an integral multiple thereof) and that upon any
partial redemption of any such Series 1997-I [J] Note the same shall be
surrendered in exchange for one or more new Notes of the same series in
authorized form for the unredeemed portion of principal.
If provision is made for the payment of principal of and interest on
this Note in accordance with the Indenture, this Note shall no longer be deemed
Outstanding under the Indenture, shall cease to be entitled to the benefits of
the Indenture and shall thereafter be payable solely from the funds provided for
such payment.
If an Event of Default shall occur, the principal of all the
Outstanding Notes may and, under certain circumstances, shall be declared due
and payable in the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Corporation and the rights of the Holders of the Notes and Other Beneficiaries
under the Indenture at any time by the Corporation with, among other things, the
consent of the Holders of two-thirds of the aggregate Principal Amount of Class
A Notes at the time Outstanding, if affected thereby, and the consent of the
Holders of two-thirds of the aggregate Principal Amount of Class B Notes at the
time
A-4-8
<PAGE>
Outstanding, if affected thereby. The Indenture also contains provisions
permitting the Holders of specified percentages in aggregate Principal Amount of
the Class A Notes at the time Outstanding or Other Senior Beneficiaries or, if
no Senior Obligations are Outstanding, the Holders of specified percentages in
aggregate Principal Amount of the Class B Notes at the time Outstanding or Other
Subordinate Beneficiaries, on behalf of the Holders of all the Notes, to waive
certain past defaults under the Indenture and their consequences. Any such
consent or waiver shall be conclusive and binding upon the Registered Holder of
this Note and upon all future Registered Holders hereof and of any Note issued
in exchange herefor or in lieu hereof, whether or not notation of such consent
or waiver is made upon this Note.
This Note is transferable by the Registered Holder hereof upon
surrender of this Note for transfer at the Principal Office of the Note
Registrar (which shall be the Trustee unless and until an Authenticating Agent
becomes the Note Registrar under the Indenture) or at the Principal Office of a
duly appointed Authenticating Agent (the "Authenticating Agent," which term
includes any successor Authenticating Agent under the Indenture), duly endorsed
or accompanied by a written instrument of transfer in form satisfactory to the
Note Registrar or such Authenticating Agent, as the case may be, and executed by
the Registered Holder hereof or his attorney duly authorized in writing, with
signature guarantees satisfactory to the Note Registrar or such Authenticating
Agent, as the case may be. This Note may also be exchanged for one or more
other Notes of the same series upon surrender hereof at the Principal Office of
the Note Registrar or the Principal Office of an Authenticating Agent.
Thereupon the Corporation shall execute and the Trustee or the Authenticating
Agent, as the case may be, shall authenticate and deliver, in exchange for this
Note, one or more new fully registered Notes in the name of the transferee, of
an authorized denomination, in aggregate Principal Amount equal to the Principal
Amount of this Note, of the same series and bearing interest at the same rate.
No Authenticating Agent will be initially appointed with respect to the Series
1997-I [J] Notes. Notwithstanding the foregoing provisions of this paragraph,
no Series 1997-I [J] Note shall be required to be transferred, (i) during a
period beginning at the opening of business fifteen days before any selection of
Series 1997-I [J] Notes for redemption and ending at the close of business on
the day of such selection, or (ii) if such Series 1997-I [J] Note has been
selected for redemption in whole or in part.
The Corporation may require payment by the Registered Holder hereof of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any transfer or exchange of this Note, other than
certain exchanges specifically exempted under the Indenture and not involving
any transfer.
The Corporation, the Trustee, each Paying Agent, any Authenticating
Agent, the Note Registrar and any other agent of the Corporation may treat the
Person in whose name this Note is registered on the Note Register as the
absolute
A-4-9
<PAGE>
owner hereof for all purposes, whether or not this Note is overdue, and neither
the Corporation, the Trustee, any Paying Agent, any Authenticating Agent, the
Note Registrar nor any other such agent shall be affected by notice to the
contrary.
IT IS HEREBY CERTIFIED, RECITED, COVENANTED 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 Note have happened, do exist,
and have been performed in regular and due time, form and manner as so required.
This Note shall not be valid or become obligatory for any purpose or
be entitled to any security or benefit under the Indenture until the Certificate
of Authentication hereon shall have been signed by the Trustee or by the
Authenticating Agent by the manual signature of one of its authorized
representatives.
IN WITNESS WHEREOF, the Corporation has caused this Note to be
executed in its name by the manual signatures of its President and Secretary,
and its corporate seal to be impressed hereon.
Dated: ___________________ EDUCATION LOANS INCORPORATED
____________________________
President
(SEAL)
____________________________
Secretary
_____________________________
CERTIFICATE OF AUTHENTICATION
This Note is one of the Notes of the series designated therein and
issued under the provisions of the within-mentioned Indenture.
FIRST BANK NATIONAL
ASSOCIATION, as Trustee
By____________________________
Authorized Representative
A-4-10
<PAGE>
_____________________________
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto ________________________ the within Note and irrevocably appoints
____________________________, attorney-in-fact, to transfer the within Note on
the books kept for registration thereof, with full power of substitution in the
premises.
Dated _______________________
PLEASE INSERT SOCIAL SECURITY ______________________________________
OR OTHER IDENTIFYING NUMBER NOTICE: The signature to this
OF ASSIGNEE assignment must correspond with the
name as it appears upon the face of
______________________________ the within Note in every particular,
without any alteration whatsoever.
SIGNATURE GUARANTEED:
_____________________________
A-4-11
<PAGE>
EXHIBIT B-1
-----------
FORM OF SERIES 1997-1K NOTES
-----------------------------
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER 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.
EDUCATION LOANS INCORPORATED
TAX EXEMPT FIXED RATE STUDENT LOAN ASSET-BACKED NOTE
SUBORDINATE SERIES 1997-1K
CLASS B
No. R_____ $__________
Stated Date of Original Interest
Maturity Date Issue Rate CUSIP
------------- ---------------- --------- -----
June 1, 2020 July 1, 1997 83756E___
REGISTERED HOLDER: CEDE & CO.
PRINCIPAL AMOUNT:
FOR VALUE RECEIVED, EDUCATION LOANS INCORPORATED, a nonprofit
corporation organized under the laws of the State of South Dakota (the
"Corporation," which term includes any successor corporation under the Indenture
hereinafter referred to, including, upon completion of the Section 150(d)(3)
Transfer, EdLinc), acknowledges itself indebted and hereby promises to pay to
the registered holder specified above, or registered assigns (the "Registered
Holder"), but solely from the revenues and receipts hereinafter specified and
not otherwise, the Principal Amount specified above on the Stated Maturity Date
specified above (subject to the right of prior redemption hereinafter
mentioned), upon presentation and surrender of this Note at the Principal Office
of the Trustee (as hereinafter defined), as Paying Agent for the Series 1997-1
Notes (as hereinafter defined), or a duly appointed successor Paying Agent, and
to pay interest on said Principal
B-1-1
<PAGE>
Amount, but solely from the revenues and receipts hereinafter specified and not
otherwise, to the Registered Holder hereof from the date hereof until the
payment of said Principal Amount has been made or duly provided for, at the rate
per annum specified above, payable semiannually on the first day of June and
December in each year, commencing December 1, 1997, and at the same rate per
annum (to the extent that the payment of such interest shall be legally
enforceable) on overdue installments of interest. Payment of interest on this
Note on each regularly scheduled Interest Payment Date shall be made by check or
draft drawn upon the Paying Agent and mailed to the Person who is the Registered
Holder hereof as of 5:00 p.m. in the city in which the Principal Office of the
Note Registrar is located on the applicable Regular Record Date at the address
of such Registered Holder as it appears on the Note Register maintained by the
Note Registrar, or, if the Registered Holder of this Note is the Registered
Holder of Series 1997-1 Notes in the aggregate Principal Amount of $1,000,000 or
more (or, if less than $1,000,000 in Principal Amount of Series 1997-1 Notes is
outstanding, the Registered Holder of all outstanding Series 1997-1 Notes), at
the direction of such Registered Holder received by the Paying Agent by 5:00
p.m. in the city in which the Principal Office of the Paying Agent is located on
the last Business Day preceding the applicable Regular Record Date, by
electronic transfer by the Paying Agent in immediately available funds to an
account designated by such Registered Holder. In addition, premium, if any, and
interest on this Note are payable at the Maturity hereof in the same manner as
the principal hereof, unless the date of such Maturity is a regularly scheduled
Interest Payment Date, in which event interest is payable in the manner set
forth in the preceding sentence. Any interest not so timely paid or duly
provided for shall cease to be payable to the Person who is the Registered
Holder hereof at the close of business on the Regular Record Date and shall be
payable to the Person who is the Registered Holder hereof at the close of
business on a special record date for the payment of any such defaulted
interest. Such special record date shall be fixed by the Trustee whenever moneys
become available for payment of the defaulted interest, and notice of the
special record date shall be given to the Registered Holder hereof not less than
ten days prior thereto by first-class mail to such Registered Holder as shown on
the Note Register on a date selected by the Trustee, stating the date of the
special record date and the date fixed for the payment of such defaulted
interest. The principal of, premium, if any, and interest on this Note are
payable in lawful money of the United States of America.
This Note is one of an authorized issue of Notes (the "Notes"), issued
and to be issued by the Corporation in one or more series pursuant to an
Indenture of Trust, dated as of July 1, 1997 (as supplemented and amended, the
"Indenture"), as supplemented by a First Supplemental Indenture of Trust, dated
as of July 1, 1997 (the "First Supplemental Indenture"), each between the
Corporation and First Bank National Association, Minneapolis, Minnesota, as
Trustee (the "Trustee," which term includes any successor trustee under the
Indenture). As provided in the Indenture, the Notes are issuable in series
which may vary as in the Indenture provided or permitted. This Note is one of a
series of Class B Notes issued in an aggregate Principal Amount of
$_______________ (the "Series 1997-1K Notes"). The
B-1-2
<PAGE>
Series 1997-1K Notes are issued simultaneously with one other series of Class B
Notes issued in the aggregate Principal Amount of $_______________ (together
with the Series 1997-1K Notes, collectively referred to herein as the "Series
1997-1 Subordinate Notes") and ten series of Class A Notes issued in the
aggregate Principal Amount of $_______________ (the "Series 1997-1 Senior Notes"
and, together with the Series 1997-1 Subordinate Notes, collectively referred to
herein as the "Series 1997-1 Notes"). The proceeds of the Series 1997-1 Notes
will be used by the Corporation to (a) acquire student loan notes incurred under
the Higher Education Act and (b) fund the Reserve Fund.
Reference is hereby made to the Indenture, copies of which are on file
in the principal corporate trust office of the Trustee, and to all of the
provisions of which any Registered Holder of this Note by his acceptance hereof
hereby assents, for definitions of terms; the description of and the nature and
extent of the security for the various classes of Notes and Other Obligations
secured thereunder; the student loan acquisition program being financed by the
issuance of the Notes; the revenues and other moneys pledged to the payment of
the principal of, premium, if any, and interest on the Notes and the Other
Obligations; the nature and extent and manner of enforcement of the pledge; the
conditions upon which Notes may be issued or Other Obligations may be incurred
by the Corporation thereunder, payable from such revenues and other moneys
thereunder as Senior Obligations, Subordinate Obligations or Class C Notes; the
conditions upon which the Indenture may be amended or supplemented with or
without the consent of the Holders of the Notes; the rights and remedies of the
Registered Holder hereof with respect hereto and thereto, including the
limitations upon the right of a Registered Holder hereof to institute any suit,
action or proceeding in equity or at law with respect hereto and thereto; the
rights, duties and obligations of the Corporation and the Trustee thereunder;
the terms and provisions upon which the liens, pledges, charges, trusts and
covenants made therein may be discharged at or prior to the Maturity or
redemption of this Note, and this Note thereafter no longer be secured by the
Indenture, or be deemed to be Outstanding thereunder; and for the other terms
and provisions thereof. Terms used with initial capital letters but not defined
in this Note have the respective meanings given such terms in the Indenture.
The Series 1997-1K Notes are being issued as, and will constitute, Tax Exempt
Class B Notes under the Indenture.
The Notes and Other Obligations are limited obligations of the
Corporation, payable solely from the revenues and assets of the Corporation
pledged therefor under the Indenture, including certain notes evidencing Student
Loans and the proceeds of the Corporation's bonds, notes or other evidences of
indebtedness, if any, issued with respect to the Notes.
Each Noteholder, by acceptance of a Note, covenants and agrees that by
accepting the benefits of the Indenture and such Note that such Noteholder will
not at any time institute against the Corporation, or join in any institution
against the Corporation, any bankruptcy, reorganization, arrangement, insolvency
or
B-1-3
<PAGE>
liquidation proceedings under any United States Federal or state bankruptcy or
similar law in connection with any obligations relating to the Notes, the
Indenture or the Servicing Agreement.
The Corporation has structured the Indenture and the Notes with the
intention that the Notes will qualify under applicable federal, state, local and
foreign tax law as indebtedness of the Corporation secured by the Trust Estate.
The Corporation, the Trustee, the Servicer and each Noteholder agree to treat
and to take no action inconsistent with the treatment of the Notes as such
indebtedness for purposes of federal, state, local and foreign income or
franchise taxes and any other tax imposed on or measured by income. Each
Noteholder, by acceptance of its Note, agrees to be bound by the provisions of
this paragraph. Each Noteholder agrees that it will cause any Person acquiring
an interest in a Note through it to comply with the Indenture as to treatment as
indebtedness under applicable tax law, as described in this paragraph.
The Series 1997-1K Notes constitute Class B Notes under the Indenture
which are subordinated in right of payment, the direction of remedies and
certain other matters in accordance with the terms of the Indenture to the
rights of the Holders of Class A Notes issued from time to time under the
Indenture (including, without limitation the Series 1997-1 Senior Notes) and
Other Senior Beneficiaries thereunder. A failure to pay principal of, premium,
if any, or interest on this Class B Note will not constitute an Event of Default
under the Indenture if any Senior Obligation is Outstanding.
Subject to compliance with the provisions of the Indenture relating to
certain asset requirements, Outstanding Series 1997-1K Notes may, at the option
of the Corporation (and at such time as no Tax Exempt Auction Rate Series 1997-1
Notes are Outstanding), be redeemed, in whole or in part, on any date, at a
Redemption Price equal to 100% of the Principal Amount thereof so redeemed, from
proceeds of the Tax Exempt Series 1997-1 Notes constituting a portion of the
Balance of the Series 1997-1 Tax Exempt Acquisition Account that have not been
used to acquire Eligible Loans and from that portion of the Series 1997-1 Tax
Exempt Reserve Account which, if left in the Reserve Fund upon such redemption,
would cause the Balance in the Reserve Fund to exceed the Reserve Fund
Requirement, calculated giving effect to such redemption. Such redemption shall
be required on June 1, 2001 (to the extent the proceeds in the Series 1997-1
Tax Exempt Acquisition Account not so used as of April 15, 2001, exceed
$________________) and on June 1, 2002 (from such proceeds not so used as of
April 15, 2002), unless the Corporation delivers to the Trustee: (i) an opinion
of Bond Counsel stating in effect that such redemption is not required pursuant
to the Code and that failure to so redeem Tax Exempt Series 1997-1 Notes will
not adversely affect the tax exempt status of interest on any Tax Exempt Series
1997-1 Notes for federal income tax purposes, (ii) a Corporation Certificate
certifying that, based on a Cash Flow Projection, the failure to so redeem Tax
Exempt Series 1997-1 Notes will not materially adversely affect the
Corporation's ability to pay Debt Service on the Outstanding Notes and the
B-1-4
<PAGE>
Outstanding Other Obligations, Carry-Over Amounts (including accrued interest
thereon) with respect to Outstanding Notes, Administrative Expenses or Note Fees
or to make required deposits to the Rebate Fund, and (iii) written confirmation
from each of the Rating Agencies then rating the Series 1997-1 Notes to the
effect that the failure to so redeem Tax Exempt Series 1997-1 Notes will not
result in a reduction or withdrawal of the rating of the Series 1997-1 Notes.
Subject to compliance with the provisions of the Indenture relating to
certain asset requirements, Outstanding Series 1997-1K Notes may, at the option
of the Corporation, be redeemed on ________________, and on any date thereafter,
in whole or in part, at a Redemption Price equal to 100% of the Principal Amount
thereof to be redeemed, from amounts credited to the Series 1997-1 Tax Exempt
Retirement Subaccount from the Series 1997-1 Tax Exempt Surplus Subaccount for
such purpose in accordance with the Indenture and from that portion of the
Series 1997-1 Tax Exempt Reserve Account which exceeds the Reserve Fund
Requirement (calculated after giving effect to such redemption). If the Trustee
shall have first certified that no deficiencies exist in any of the Rebate Fund,
the Note Fund, the Reserve Fund or the Special Redemption and Prepayment
Account, the Trustee shall, upon Corporation Order, transfer to the Series 1997-
1 Tax Exempt Retirement Account any Balances in the Series 1997-1 Tax Exempt
Surplus Subaccount (other than those consisting of Student Loans) which a
Corporation Certificate states are not reasonably expected to be needed for the
payment of scheduled Debt Service on the Outstanding Notes and Outstanding Other
Obligations, Carry-Over Amounts (including accrued interest thereon) with
respect to Outstanding Notes, Administrative Expenses or Note Fees, or for
transfer to the Rebate Fund.
Subject to compliance with the provisions of the Indenture relating to
certain asset requirements and certain other requirements, Outstanding Series
1997-1K Notes may, at the option of the Corporation and from amounts credited to
the Retirement Account for such purpose, be redeemed on June 1, ______, and on
any date thereafter, in whole or in part, at the Redemption Prices (expressed as
a percentage of Principal Amount) set forth below plus accrued interest to the
Redemption Date:
<TABLE>
<CAPTION>
Redemption
Redemption Period Price
----------------- -----
<S> <C>
December 1, 2007, through November 30, 2008 102%
December 1, 2008, through November 30, 2009 101%
December 1, 209, and thereafter 100%
</TABLE>
Subject to compliance with the provisions of the Indenture relating to
certain asset requirements, Series 1997-1 Notes may, at the option of the
Corporation, be redeemed, in whole but not in part, at a Redemption Price equal
to 100% of the Principal Amount of Series 1997-1 Notes to be so redeemed plus
accrued interest thereon to the Redemption Date, on any date after the remaining
aggregate Principal Balance of Student Loans Financed with proceeds of the
Series 1997-1
B-1-5
<PAGE>
Notes is less than 10% of the amounts initially deposited to the credit of the
Acquisition Fund.
If not all Series 1997-1 Notes subject to redemption are to be
redeemed, the particular Series 1997-1 Notes to be redeemed are to be selected
as provided in the Indenture.
Notice of redemption shall be given by first-class mail mailed at
least 30 days before the Redemption Date to each Holder of Series 1997-1K Notes
to be redeemed at his last address appearing on the Note Register; but no defect
in or failure to give such notice of redemption shall affect the validity of
proceedings for redemption of any Note not affected by such defect or failure.
All Series 1997-1K Notes so called for redemption will cease to bear interest on
such Redemption Date, provided funds for their redemption have been duly
deposited, and, except for the purpose of payment, shall no longer be protected
by the Indenture and shall not be deemed Outstanding thereunder.
It is provided in the Indenture that Series 1997-1K Notes of a
denomination larger than $5,000 may be redeemed in part ($5,000 or an integral
multiple thereof) and that upon any partial redemption of any such Series 1997-
1K Note the same shall be surrendered in exchange for one or more new Notes of
the same series in authorized form for the unredeemed portion of principal.
If provision is made for the payment of principal of, premium, if any,
and interest on this Note in accordance with the Indenture, this Note shall no
longer be deemed Outstanding under the Indenture, shall cease to be entitled to
the benefits of the Indenture and shall thereafter be payable solely from the
funds provided for such payment.
If an Event of Default shall occur, the principal of all the
Outstanding Notes may and, under certain circumstances, shall be declared due
and payable in the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Corporation and the rights of the Holders of the Notes and Other Beneficiaries
under the Indenture at any time by the Corporation with, among other things, the
consent of the Holders of two-thirds of the aggregate Principal Amount of Class
A Notes at the time Outstanding, if affected thereby, and with the consent of
the Holders of two-thirds of the aggregate Principal Amount of Class B Notes at
the time Outstanding, if affected thereby. The Indenture also contains
provisions permitting the Holders of specified percentages in aggregate
Principal Amount of the Class A Notes at the time Outstanding or Other Senior
Beneficiaries or, if no Senior Obligations are Outstanding, the Holders of
specified percentages in aggregate Principal Amount of the Class B Notes at the
time Outstanding or Other Subordinate Beneficiaries, on behalf of the Holders of
all the Notes, to waive certain
B-1-6
<PAGE>
past defaults under the Indenture and their consequences. Any such consent or
waiver shall be conclusive and binding upon the Registered Holder of this Note
and upon all future Registered Holders hereof and of any Note issued in exchange
herefor or in lieu hereof, whether or not notation of such consent or waiver is
made upon this Note.
This Note is transferable by the Registered Holder hereof upon
surrender of this Note for transfer at the Principal Office of the Note
Registrar (which shall be the Trustee unless and until an Authenticating Agent
becomes the Note Registrar under the Indenture) or at the Principal Office of a
duly appointed Authenticating Agent (the "Authenticating Agent," which term
includes any successor Authenticating Agent under the Indenture), duly endorsed
or accompanied by a written instrument of transfer in form satisfactory to the
Note Registrar or the Authenticating Agent, as the case may be, and executed by
the Registered Holder hereof or his attorney duly authorized in writing, with
signature guarantees satisfactory to the Note Registrar or the Authenticating
Agent, as the case may be. This Note may also be exchanged for one or more other
Notes of the same series upon surrender hereof at the Principal Office of the
Note Registrar or the Principal Office of an Authenticating Agent. Thereupon the
Corporation shall execute and the Trustee or the Authenticating Agent, as the
case may be, shall authenticate and deliver, in exchange for this Note, one or
more new fully registered Notes in the name of the transferee, of an authorized
denomination, in aggregate Principal Amount equal to the Principal Amount of
this Note, of the same series and bearing interest at the same rate. Thereupon
the Corporation shall execute and the Trustee or the Authenticating Agent, as
the case may be, shall authenticate and deliver, in exchange for this Note, one
or more new fully registered Notes in the name of the transferee, of an
authorized denomination, in aggregate Principal Amount equal to the Principal
Amount of this Note, of the same series and bearing interest at the same rate.
No Authenticating Agent will be initially appointed with respect to the Series
1997-1K Notes. Notwithstanding the foregoing provisions of this paragraph, no
Series 1997-1K Note shall be required to be transferred, (i) during a period
beginning at the opening of business fifteen days before any selection of Series
1997-1K Notes for redemption and ending at the close of business on the day of
such selection, or (ii) if such Series 1997-1K Note has been selected for
redemption in whole or in part.
The Corporation may require payment by the Registered Holder hereof of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any transfer or exchange of this Note, other than
certain exchanges specifically exempted under the Indenture and not involving
any transfer.
The Corporation, the Trustee, each Paying Agent, any Authenticating
Agent, the Note Registrar and any other agent of the Corporation may treat the
Person in whose name this Note is registered on the Note Register as the
absolute owner hereof for all purposes, whether or not this Note is overdue, and
neither the
B-1-7
<PAGE>
Corporation, the Trustee, any Paying Agent, any Authenticating Agent, the Note
Registrar nor any other such agent shall be affected by notice to the contrary.
IT IS HEREBY CERTIFIED, RECITED, COVENANTED 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 Note have happened, do exist,
and have been performed in regular and due time, form and manner as so required.
This Note shall not be valid or become obligatory for any purpose or
be entitled to any security or benefit under the Indenture until the Certificate
of Authentication hereon shall have been signed by the Trustee or by the
Authenticating Agent by the manual signature of one of its authorized
representatives.
IN WITNESS WHEREOF, the Corporation has caused this Note to be
executed in its name by the manual signatures of its President and Secretary,
and its corporate seal to be impressed hereon.
Dated: _____________ EDUCATION LOANS INCORPORATED
__________________________
President
(SEAL)
__________________________
Secretary
_____________________________
CERTIFICATE OF AUTHENTICATION
This Note is one of the Notes of the series designated therein and
issued under the provisions of the within-mentioned Indenture.
FIRST BANK NATIONAL
ASSOCIATION, as Trustee
By____________________________
Authorized Representative
B-1-8
<PAGE>
___________________________________
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto ________________________ the within Note and irrevocably appoints
____________________________, attorney-in-fact, to transfer the within Note on
the books kept for registration thereof, with full power of substitution in the
premises.
Dated _______________________
PLEASE INSERT SOCIAL SECURITY ___________________________
OR OTHER IDENTIFYING NUMBER NOTICE: The signature to this
OF ASSIGNEE assignment must correspond with the
name as it appears upon the face of
______________________________ the within Note in every particular,
without any alteration whatsoever.
SIGNATURE GUARANTEED:
______________________________
B-1-9
<PAGE>
EXHIBIT B-2
-----------
FORM OF SERIES 1997-1L NOTES
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER 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.
EDUCATION LOANS INCORPORATED
TAXABLE LIBOR RATE STUDENT LOAN ASSET-BACKED NOTE
SUBORDINATE SERIES 1997-L
CLASS B
No. R_____ $__________
Stated Date of Original Interest
Maturity Date Issue Rate CUSIP
------------- ---------------- -------- -----
June 1, 2020 July___, 1997 Variable 83756E ___
REGISTERED HOLDER: CEDE & CO.
PRINCIPAL AMOUNT:
FOR VALUE RECEIVED, EDUCATION LOANS INCORPORATED, a nonprofit
corporation organized under the laws of the State of South Dakota (the
"Corporation," which term includes any successor corporation under the Indenture
hereinafter referred to, including, upon completion of the Section 150(d)(3)
Transfer, EdLinc), acknowledges itself indebted and hereby promises to pay to
the registered holder specified above, or registered assigns (the "Registered
Holder"), but solely from the revenues and receipts hereinafter specified and
not otherwise, the Principal Amount specified above on the Stated Maturity Date
specified above (subject to the right of prior redemption hereinafter
mentioned), upon presentation and surrender of this Note at the Principal Office
of the Trustee (as hereinafter defined), as Paying Agent for the Series 1997-1
Notes (as hereinafter defined), or a duly appointed successor Paying Agent, and
to pay interest on said Principal
B-2-1
<PAGE>
Amount, but solely from the revenues and receipts hereinafter specified and not
otherwise, to the Registered Holder hereof from the date hereof until the
payment of said Principal Amount has been made or duly provided for, payable on
each Interest Payment Date, commencing ____________, 1997, at the LIBOR Rate
Series 1997-1 Note Interest Rate (as hereinafter described), and at the same
rate per annum (to the extent that the payment of such interest shall be legally
enforceable) on overdue installments of interest. Payment of interest on this
Note on each regularly scheduled Interest Payment Date shall be made by check or
draft drawn upon the Paying Agent and mailed to the Person who is the Registered
Holder hereof as of 5:00 p.m. in the city in which the Principal Office of the
Note Registrar is located on the applicable Regular Record Date at the address
of such Registered Holder as it appears on the Note Register maintained by the
Note Registrar, or, if the Registered Holder of this Note is the Registered
Holder of Series 1997-1 Notes in the aggregate Principal Amount of $1,000,000 or
more (or, if less than $1,000,000 in Principal Amount of Series 1997-1 Notes is
outstanding, the Registered Holder of all outstanding Series 1997-1 Notes), at
the direction of such Registered Holder received by the Paying Agent by 5:00
p.m. in the city in which the Principal Office of the Paying Agent is located on
the last Business Day preceding the applicable Regular Record Date, by
electronic transfer by the Paying Agent in immediately available funds to an
account designated by such Registered Holder. In addition, interest on this Note
is payable at the Maturity hereof in the same manner as the principal hereof,
unless the date of such Maturity is a regularly scheduled Interest Payment Date,
in which event interest is payable in the manner set forth in the preceding
sentence. Any interest not so timely paid or duly provided for shall cease to be
payable to the Person who is the Registered Holder hereof at the close of
business on the Regular Record Date and shall be payable to the Person who is
the Registered Holder hereof at the close of business on a special record date
for the payment of any such defaulted interest. Such special record date shall
be fixed by the Trustee whenever moneys become available for payment of the
defaulted interest, and notice of the special record date shall be given to the
Registered Holder hereof not less than ten days prior thereto by first-class
mail to such Registered Holder as shown on the Note Register on a date selected
by the Trustee, stating the date of the special record date and the date fixed
for the payment of such defaulted interest. The principal of and interest on
this Note are payable in lawful money of the United States of America.
INTEREST ON THIS NOTE IS SUBJECT TO FEDERAL INCOME TAXATION PURSUANT
TO AN ELECTION MADE BY THE CORPORATION UNDER SECTION 625(c) OF THE TAX REFORM
ACT OF 1984 AND 26 CFR (S)301.9100-6T(d).
This Note is one of an authorized issue of Notes (the "Notes"), issued
and to be issued by the Corporation in one or more series pursuant to an
Indenture of Trust, dated as of July 1, 1997 (as supplemented and amended, the
"Indenture"), as supplemented by a First Supplemental Indenture of Trust, dated
as of July 1, 1997 (the "First Supplemental Indenture"), each between the
Corporation and First Bank
B-2-2
<PAGE>
National Association, Minneapolis, Minnesota, as Trustee (the "Trustee," which
term includes any successor trustee under the Indenture). As provided in the
Indenture, the Notes are issuable in series which may vary as in the Indenture
provided or permitted. This Note is one of a series of Class B Notes issued in
an aggregate Principal Amount of $_________________ (the "Series 1997-1L
Notes"). The Series 1997-1L Notes are issued simultaneously with one other
series of Class B Notes issued in the aggregate Principal Amount of
$_________________ (together with the Series 1997-1L Notes, collectively
referred to herein as the "Series 1997-1 Subordinate Notes") and ten series of
Class A Notes issued in the aggregate Principal Amount of $_________________(the
"Series 1997-1 Senior Notes" and, together with the Series 1997-1 Subordinate
Notes, collectively referred to herein as the "Series 1997-1 Notes"). The
proceeds of the Series 1997-1 Notes will be used by the Corporation to (a)
acquire student loan notes incurred under the Higher Education Act and (b) fund
the Reserve Fund.
Reference is hereby made to the Indenture, copies of which are on file
in the principal corporate trust office of the Trustee, and to all of the
provisions of which any Registered Holder of this Note by his acceptance hereof
hereby assents, for definitions of terms; the description of and the nature and
extent of the security for the various classes of Notes and Other Obligations
secured thereunder; the student loan acquisition program being financed by the
issuance of the Notes; the revenues and other moneys pledged to the payment of
the principal of, premium, if any, and interest on the Notes and the Other
Obligations; the nature and extent and manner of enforcement of the pledge; the
conditions upon which Notes may be issued or Other Obligations may be incurred
by the Corporation thereunder, payable from such revenues and other moneys
thereunder as Senior Obligations, Subordinate Obligations or Class C Notes; the
conditions upon which the Indenture may be amended or supplemented with or
without the consent of the Holders of the Notes; the rights and remedies of the
Registered Holder hereof with respect hereto and thereto, including the
limitations upon the right of a Registered Holder hereof to institute any suit,
action or proceeding in equity or at law with respect hereto and thereto; the
rights, duties and obligations of the Corporation and the Trustee thereunder;
the terms and provisions upon which the liens, pledges, charges, trusts and
covenants made therein may be discharged at or prior to the Maturity or
redemption of this Note, and this Note thereafter no longer be secured by the
Indenture, or be deemed to be Outstanding thereunder; and for the other terms
and provisions thereof. Terms used with initial capital letters but not defined
in this Note have the respective meanings given such terms in the Indenture.
The Series 1997-L Notes are being issued as, and will constitute, taxable Class
B Notes under the Indenture.
The Notes and Other Obligations are limited obligations of the
Corporation, payable solely from the revenues and assets of the Corporation
pledged therefor under the Indenture, including certain notes evidencing Student
Loans and the proceeds of the Corporation's bonds, notes or other evidences of
indebtedness, if any, issued with respect to the Notes.
B-2-3
<PAGE>
Each Noteholder, by acceptance of a Note, covenants and agrees that by
accepting the benefits of the Indenture and such Note that such Noteholder will
not at any time institute against the Corporation, or join in any institution
against the Corporation, any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceedings under any United States Federal or state bankruptcy
or similar law in connection with any obligations relating to the Notes, the
Indenture or the Servicing Agreement.
The Corporation has structured the Indenture and the Notes with the
intention that the Notes will qualify under applicable federal, state, local and
foreign tax law as indebtedness of the Corporation secured by the Trust Estate.
The Corporation, the Trustee, the Servicer and each Noteholder agree to treat
and to take no action inconsistent with the treatment of the Notes as such
indebtedness for purposes of federal, state, local and foreign income or
franchise taxes and any other tax imposed on or measured by income. Each
Noteholder, by acceptance of its Note, agrees to be bound by the provisions of
this paragraph. Each Noteholder agrees that it will cause any Person acquiring
an interest in a Note through it to comply with the Indenture as to treatment as
indebtedness under applicable tax law, as described in this paragraph.
The Series 1997-1L Notes constitute Class B Notes under the Indenture
which are subordinated in right of payment, the direction of remedies and
certain other matters in accordance with the terms of the Indenture to the
rights of the Holders of Class A Notes issued from time to time under the
Indenture (including, without limitation the Series 1997-1 Senior Notes) and
Other Senior Beneficiaries thereunder. A failure to pay principal of, premium,
if any, or interest on this Class B Note will not constitute an Event of Default
under the Indenture if any Senior Obligation is Outstanding.
Interest payable on this Note shall be computed on the basis of actual
days elapsed and accrue daily from the date hereof (on the basis of a 360-day
year), and is payable on each regularly scheduled Interest Payment Date prior to
the Maturity of this Note and at the Maturity of this Note. The interest
payable on each Interest Payment Date for this Note shall be [calculated on a
per unit basis, based on a unit of $100,000, and shall be] that interest which
has accrued through the last day preceding such Interest Payment Date or, in the
case of the Maturity of this Note, the last day preceding the date of such
Maturity. The LIBOR Rate Series 1997-1 Note Interest Rate shall be effective as
of and on the first day (whether or not a Business Day) of the applicable
Interest Period and be in effect thereafter through the end of such Interest
Period.
The unpaid Principal Amount hereof from time to time outstanding shall
bear interest at a LIBOR Rate Series 1997-1 Note Interest Rate, as described
below, payable on each Interest Payment Date and at the Maturity hereof, such
interest to accrue from the later of the date hereof or the date through which
interest has been paid or duly provided for.
B-2-4
<PAGE>
During the Initial Interest Period, this Note shall bear interest at
the LIBOR Rate Series 1997-1 Note Initial Interest Rate for the Series 1997-L
Notes. The interest rate to be borne by this Note during each Interest Period
thereafter shall be determined on the related Interest Rate Determination Date
and shall be equal to the lesser of (i) the sum of One-Month LIBOR determined
with respect to such Interest Rate Determination Date plus _____% (which is
herein referred to as the "LIBOR Rate Series 1997-1 Note LIBOR-Based Rate"), and
(ii) the Net Loan Rate determined with respect to such Interest Rate
Determination Date. The Trustee shall determine such interest rate on each
Interest Rate Determination Date.
Notwithstanding any other provision of this Note or the First
Supplemental Indenture, interest payable on this Note for an Interest Period
shall never exceed for such Interest Period the amount of interest payable at
the Net Loan Rate in effect for such Interest Period.
If the LIBOR Rate Series 1997-1 Note LIBOR-Based Rate for the Series
1997-1L Notes is greater than the Net Loan Rate, then the LIBOR Rate Series
1997-1 Note Interest Rate applicable to the Series 1997-1L Notes for that
Interest Period will be the Net Loan Rate. If the LIBOR Rate Series 1997-1 Note
Interest Rate applicable to the Series 1997-1L Notes for any Interest Period is
the Net Loan Rate, the Trustee shall determine the Carry-Over Amount, if any,
with respect to the Series 1997-1L Notes for such Interest Period. Such
Carryover Amount shall bear interest calculated at a rate equal to the LIBOR
Rate Series 1997-1 Note LIBOR-Based Rate (as determined by the Trustee) from the
Interest Payment Date for the Interest Period with respect to which such Carry-
Over Amount was calculated until paid. For purposes of this Note, any reference
to "principal" or "interest" herein shall not include within the meaning of such
words Carry-Over Amount or any interest accrued on any such Carry-Over Amount.
Such Carry-Over Amount shall be separately calculated for each Series 1997-1L
Note by the Trustee during such Interest Period in sufficient time for the
Trustee to give notice to each Holder of such Carry-Over Amount as required in
the next succeeding sentence. On the Interest Payment Date for an Interest
Period with respect to which such Carry-Over Amount has been calculated by the
Trustee, the Trustee shall give written notice to each Holder of the Carry-Over
Amount applicable to each Holder's Series 1997-1L Note, which written notice may
accompany the payment of interest by check made to each such Holder on such
Interest Payment Date or otherwise shall be mailed on such Interest Payment Date
by first class mail, postage prepaid, to each such Holder at such Holder's
address as it appears on the registration books maintained by the Note
Registrar. Such notice shall state, in addition to such Carry-Over Amount,
that, unless and until a Series 1997-1L Note has been redeemed or has been
deemed no longer Outstanding under the First Supplemental Indenture (after which
no Carry-Over Amount shall be paid with respect to a Series 1997-1L Note), (i)
the Carry-Over Amount (and interest accrued thereon) shall be paid by the
Trustee on such Series 1997-1L Note on the first occurring Interest Payment Date
for a subsequent Interest Period if and to the extent that (l) the Eligible
Carry-Over Make-Up Amount with respect to such Interest Period is greater than
zero, and (2) moneys are available
B-2-5
<PAGE>
pursuant to the terms of the First Supplemental Indenture to pay such Carry-Over
Amount (and interest accrued thereon), and (ii) interest shall accrue on the
Carry-Over Amount at a per annum rate equal to the LIBOR Rate Series 1997-1 Note
LIBOR-Based Rate until such Carry-Over Amount is paid in full or is canceled.
The Carry-Over Amount for the Series 1997-1L Notes shall be paid by
the Trustee on Outstanding Series 1997-1L Notes on the first occurring Interest
Payment Date for a subsequent Interest Period if and to the extent that (i) the
Eligible Carry-Over Make-Up Amount with respect to such Interest Period is
greater than zero, and (ii) moneys in the Surplus Account are available on such
Interest Payment Date for transfer to the Interest Account for such purpose in
accordance with the applicable provisions of the Indenture, after taking into
account all other amounts payable from the Surplus Fund on such Interest Payment
Date. Any Carry-Over Amount (and any interest accrued thereon) which is unpaid
as of an Interest Payment Date with respect to any Series 1997-1L Note, which
Series 1997-1L Note is to be redeemed or deemed no longer Outstanding under the
First Supplemental Indenture on such Interest Payment Date, shall be paid to the
Holder thereof on such Interest Payment Date to the extent that moneys are
available therefor in accordance with the provisions of the preceding clause
(b); provided, however, that any Carry-Over Amount (and any interest accrued
thereon) which is not so paid on such Interest Payment Date shall be canceled
with respect to such Series 1997-1L Note on such Interest Payment Date and shall
not be paid on any succeeding Interest Payment Date. To the extent that any
portion of the Carry-Over Amount (and any interest accrued thereon) remains
unpaid after payment of a portion thereof, such unpaid portion shall be paid in
whole or in part as required hereunder until fully paid by the Trustee on the
next occurring Interest Payment Date or Dates, as necessary, for a subsequent
Interest Period or Periods, if and to the extent that the conditions in the
first sentence of this paragraph are satisfied. On any Interest Payment Date on
which the Trustee pays less than all of the Carry-Over Amount (and any interest
accrued thereon) with respect to a Series 1997-1L Note, the Trustee shall give
written notice in the manner set forth in the immediately preceding paragraph to
the Holder of such Series 1997-1L Note of the Carry-Over Amount remaining unpaid
on such Series 1997-1L Note.
The Interest Payment Date in such subsequent Interest Period on which
such Carry-Over Amount for the Series 1997-1L Notes shall be paid shall be
determined by the Trustee in accordance with the provisions of the immediately
preceding paragraph, and the Trustee shall make payment of the Carry-Over Amount
in the same manner as, and from the same Account from which, it pays interest on
the Series 1997-1L Notes on an Interest Payment Date.
In the event that the Trustee no longer determines, or fails to
determine, when required, the LIBOR Rate Series 1997-1 Note LIBOR-Based Rate
with respect to the Series 1997-1L Notes, or if, for any reason, such manner of
determination shall be held to be invalid or unenforceable, the LIBOR Rate
Series 1997-1 Note LIBOR-Based Rate for each succeeding Interest Period shall be
the Net
B-2-6
<PAGE>
Loan Rate as determined by or on behalf of the Corporation with respect to the
related Interest Rate Determination Date, and if the Corporation shall fail or
refuse to determine such Net Loan Rate, the Net Loan Rate shall be determined by
a securities dealer appointed by the Trustee capable of making such a
determination in accordance with the provisions hereof and written notice of
such determination shall be given by such securities dealer to the Trustee.
The determination of a LIBOR Rate Series 1997-1 Note Interest Rate by
the Trustee or any other authorized Person pursuant to the provisions of the
First Supplemental Indenture shall be conclusive and binding on the Holders of
the Series 1997-L Notes to which such LIBOR Rate Series 1997-1 Note Interest
Rate applies, and the Corporation and the Trustee may rely thereon for all
purposes.
Notwithstanding any provision of this Note to the contrary, in no
event shall the cumulative amount of interest paid or payable on this Note
(including interest calculated as provided herein, plus any other amounts that
constitute interest on this Note under applicable law, which are contracted for,
charged, reserved, taken or received pursuant to this Note or related documents)
calculated from the date of issuance of this Note through any subsequent day
during the term of this Note or otherwise prior to payment in full of this Note
exceed the amount permitted by applicable law. If the applicable law is ever
judicially interpreted so as to render usurious any amount called for under this
Note or related documents or otherwise contracted for, charged, reserved, taken
or received in connection with this Note, or if the redemption or acceleration
of the Maturity of this Note results in payment to or receipt by the Registered
Holder or any former Registered Holder hereof of any interest in excess of that
permitted by applicable law, then notwithstanding any provision of this Note or
related documents to the contrary all excess amounts theretofore paid or
received with respect to this Note shall be credited on the Principal Amount of
this Note (or, if this Note has been paid or would thereby be paid in full,
refunded by the recipient thereof), and the provisions of this Note and related
documents shall immediately be deemed reformed and the amounts thereafter
collectible hereunder and thereunder reduced, without the necessity of the
execution of any new document, so as to comply with the applicable law, but so
as to permit the recovery of the fullest amount otherwise called for under this
Note and under the related documents.
Subject to compliance with the provisions of the Indenture relating to
certain asset requirements, Outstanding LIBOR Rate Series 1997-1 Notes shall
receive prepayments of principal on any Interest Payment Date from moneys
available therefor in the Series 1997-1 Taxable Special Redemption and
Prepayment Subaccount in accordance with the provisions of the First
Supplemental Indenture. All prepayments of principal in accordance with the
preceding sentence shall, subject to satisfying the asset requirements of the
Indenture, be allocated between the LIBOR Rate Series 1997-1 Senior Notes and
the Series 1997-1L Notes pro rata, based upon
B-2-7
<PAGE>
their respective aggregate Principal Amounts. All such prepayments of principal
applied to the Series 1997-L Notes shall be allocated pro rata, based upon their
respective Principal Amounts, to the reduction of the Principal Amount of all
Series 1997-L Notes.
Subject to compliance with the provisions of the Indenture relating to
certain asset requirements, Series 1997-1 Notes may, at the option of the
Corporation, be redeemed, in whole but not in part, at a Redemption Price equal
to 100% of the Principal Amount of Series 1997-1 Notes to be so redeemed plus
accrued interest thereon to the Redemption Date, on any date after the remaining
aggregate Principal Balance of Student Loans Financed with proceeds of the
Series 1997-1 Notes is less than 10% of the amounts initially deposited to the
credit of the Acquisition Fund.
Notice of redemption shall be given by first-class mail mailed at
least 30 days before the Redemption Date to each Holder of Series 1997-L Notes
to be redeemed at his last address appearing on the Note Register; but no defect
in or failure to give such notice of redemption shall affect the validity of
proceedings for redemption of any Series 1997-L Notes not affected by such
defect or failure. All Series 1997-L Notes so called for redemption will cease
to bear interest on such Redemption Date, provided funds for their redemption
have been duly deposited, and, except for the purpose of payment, shall no
longer be protected by the Indenture and shall not be deemed Outstanding
thereunder.
It is provided in the Indenture that Series 1997-L Notes of an
Authorized Denomination larger than $100,000 may be redeemed in part ($100,000
in original Principal Amount or an integral multiple thereof) and that upon any
partial redemption of any such Series 1997-L Note the same shall be surrendered
in exchange for one or more new Notes of the same series in authorized form for
the unredeemed portion of principal.
If provision is made for the payment of principal of and interest on
this Note in accordance with the Indenture, this Note shall no longer be deemed
Outstanding under the Indenture, shall cease to be entitled to the benefits of
the Indenture and shall thereafter be payable solely from the funds provided for
such payment.
If an Event of Default shall occur, the principal of all the
Outstanding Notes may and, under certain circumstances, shall be declared due
and payable in the manner and with the effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Corporation and the rights of the Holders of the Notes and Other Beneficiaries
under the Indenture at any time by the Corporation with, among other things, the
consent of the Holders of two-thirds of the aggregate Principal Amount of Class
A Notes at the time Outstanding, if affected thereby, and the consent of the
Holders of two-thirds of the aggregate Principal Amount of Class B Notes at the
time
B-2-8
<PAGE>
Outstanding, if affected thereby. The Indenture also contains provisions
permitting the Holders of specified percentages in aggregate Principal Amount of
the Class A Notes at the time Outstanding or Other Senior Beneficiaries or, if
no Senior Obligations are Outstanding, the Holders of specified percentages in
aggregate Principal Amount of the Class B Notes at the time Outstanding or Other
Subordinate Beneficiaries, on behalf of the Holders of all the Notes, to waive
certain past defaults under the Indenture and their consequences. Any such
consent or waiver shall be conclusive and binding upon the Registered Holder of
this Note and upon all future Registered Holders hereof and of any Note issued
in exchange herefor or in lieu hereof, whether or not notation of such consent
or waiver is made upon this Note.
This Note is transferable by the Registered Holder hereof upon
surrender of this Note for transfer at the Principal Office of the Note
Registrar (which shall be the Trustee unless and until an Authenticating Agent
becomes the Note Registrar under the Indenture) or at the Principal Office of a
duly appointed Authenticating Agent (the "Authenticating Agent," which term
includes any successor Authenticating Agent under the Indenture), duly endorsed
or accompanied by a written instrument of transfer in form satisfactory to the
Note Registrar or such Authenticating Agent, as the case may be, and executed by
the Registered Holder hereof or his attorney duly authorized in writing, with
signature guarantees satisfactory to the Note Registrar or such Authenticating
Agent, as the case may be. This Note may also be exchanged for one or more
other Notes of the same series upon surrender hereof at the Principal Office of
the Note Registrar or the Principal Office of an Authenticating Agent.
Thereupon the Corporation shall execute and the Trustee or the Authenticating
Agent, as the case may be, shall authenticate and deliver, in exchange for this
Note, one or more new fully registered Notes in the name of the transferee, of
an authorized denomination, in aggregate Principal Amount equal to the Principal
Amount of this Note, of the same series and bearing interest at the same rate.
No Authenticating Agent will be initially appointed with respect to the Series
1997-L Notes. Notwithstanding the foregoing provisions of this paragraph, no
Series 1997-L Note shall be required to be transferred, (i) during a period
beginning at the opening of business fifteen days before any selection of Series
1997-L Notes for redemption and ending at the close of business on the day of
such selection, or (ii) if such Series 1997-L Note has been selected for
redemption in whole or in part.
The Corporation may require payment by the Registered Holder hereof of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any transfer or exchange of this Note, other than
certain exchanges specifically exempted under the Indenture and not involving
any transfer.
The Corporation, the Trustee, each Paying Agent, any Authenticating
Agent, the Note Registrar and any other agent of the Corporation may treat the
Person in whose name this Note is registered on the Note Register as the
absolute
B-2-9
<PAGE>
owner hereof for all purposes, whether or not this Note is overdue, and neither
the Corporation, the Trustee, any Paying Agent, any Authenticating Agent, the
Note Registrar nor any other such agent shall be affected by notice to the
contrary.
IT IS HEREBY CERTIFIED, RECITED, COVENANTED 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 Note have happened, do exist,
and have been performed in regular and due time, form and manner as so required.
This Note shall not be valid or become obligatory for any purpose or
be entitled to any security or benefit under the Indenture until the Certificate
of Authentication hereon shall have been signed by the Trustee or by the
Authenticating Agent by the manual signature of one of its authorized
representatives.
B-2-10
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Note to be
executed in its name by the manual signatures of its President and Secretary,
and its corporate seal to be impressed hereon.
Dated: ____________ EDUCATION LOANS INCORPORATED
__________________________
President
(SEAL)
__________________________
Secretary
_______________________________
CERTIFICATE OF AUTHENTICATION
This Note is one of the Notes of the series designated therein and
issued under the provisions of the within-mentioned Indenture.
FIRST BANK NATIONAL
ASSOCIATION, as Trustee
By_____________________________
Authorized Representative
B-2-11
<PAGE>
_____________________________
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto _____________________ the within Note and irrevocably appoints
_________________________, attorney-in-fact, to transfer the within Note on the
books kept for registration thereof, with full power of substitution in the
premises.
Dated ________________________
PLEASE INSERT SOCIAL SECURITY __________________________________
OR OTHER IDENTIFYING NUMBER NOTICE: The signature to this
OF ASSIGNEE assignment must correspond with the
name as it appears upon the face of
_______________________________ the within Note in every particular,
without any alteration whatsoever.
SIGNATURE GUARANTEED:
_______________________________
B-2-12
<PAGE>
EXHIBIT C
---------
NOTICE OF A PAYMENT DEFAULT
---------------------------
EDUCATION LOANS INCORPORATED
TAX EXEMPT [TAXABLE] AUCTION RATE STUDENT LOAN ASSET-BACKED NOTES
SENIOR SERIES 1997-1
NOTICE IS HEREBY GIVEN that a Payment Default has occurred and not
been cured with respect to the Series 1997-1_____ Notes. Determination of the
Auction Rate Series 1997-1 Note Interest Rate on the Tax Exempt [Taxable]
Auction Rate Series 1997-1 Notes pursuant to the Auction Procedures will be
suspended. The Auction Rate Series 1997-1 Note Interest Rate on each series of
the Tax Exempt [Taxable] Auction Rate Series 1997-1 Notes for each Auction
Period commencing after the date of Payment Default will equal the Non-Payment
Rate (as to each such series with respect to which a Payment Default exists) or
the Maximum Auction Rate [Net Loan Rate] (as to all other series), as the case
may be, as it is determined by the Trustee on the first day of such Auction
Period.
Terms used herein have the meanings set forth in the First
Supplemental Indenture of Trust relating to the above-referenced Notes.
Dated:______________________ FIRST BANK NATIONAL
ASSOCIATION, as Trustee
By:______________________
C-1
<PAGE>
EXHIBIT D
---------
NOTICE OF CURE OF PAYMENT DEFAULT
---------------------------------
EDUCATION LOANS INCORPORATED
TAX EXEMPT [TAXABLE] AUCTION RATE STUDENT LOAN ASSET-BACKED NOTES
SENIOR SERIES 1997-1
NOTICE IS HEREBY GIVEN that a Payment Default with respect to the
Auction Rate Series 1997-1 Notes has been waived or cured. The next Auction Date
is ______________ with respect to the Series 1997-1A Notes, ______________ with
respect to the Series 1997-1B Notes, ______________ with respect to the Series
1997-1C Notes, ______________ with respect to the Series 1997-1D Notes, and
______________ with respect to the Series 1997-1E Notes [_____________ with
respect to the Series 1997-1G Notes, and ______________ with respect to the
Series 1997-1H Notes].
Terms used herein have the meanings set forth in the First
Supplemental Indenture of Trust relating to the above-referenced Notes.
Dated:___________________ FIRST BANK NATIONAL
ASSOCIATION, as Trustee
By:__________________________
D-1
<PAGE>
EXHIBIT E
---------
NOTICE OF PROPOSED AUCTION PERIOD ADJUSTMENT
---------------------------------------------
EDUCATION LOANS INCORPORATED
TAX EXEMPT [TAXABLE] AUCTION RATE STUDENT LOAN ASSET-BACKED NOTES
SENIOR SERIES 1997-1_____
Notice is hereby given that Education Loans Incorporated proposes to
change the length of one or more Auction Periods with respect to the Notes
identified above, pursuant to the First Supplemental Indenture of Trust relating
to such Notes (the "First Supplemental Indenture"), as follows:
1. The change will take effect on the Interest Rate Adjustment Date
for the next Auction Period (the "Effective Date").
2. For Auction Periods occurring after the Auction Period commencing
on the Effective Date, the Interest Rate Adjustment Dates will be
[______________].
3. The Auction Period Adjustment in Paragraph 2 shall take place only
if (A) the Trustee and the Auction Agent receive, by 11:00 a.m., New York City
time, on the Business Day before the Auction Date for the Auction Period
commencing on the Effective Date, a Corporation Certificate authorizing the
Auction Period Adjustment, along with [a copy of the opinion of Bond Counsel,]
the written consent of the Market Agent and the Rating Agency confirmations and,
if applicable, the written statement of the Trustee, the Auction Agent and the
Securities Depository, all as required by the First Supplemental Indenture, and
(B) Sufficient Bids exist on the Auction Date for the Auction Period commencing
on the Effective Date.
4. If the condition referred to in (A) above is not met, the Auction
Rate for the Auction Period commencing on the Effective Date will be determined
pursuant to the Auction Procedures and the Auction Period shall be the Auction
Period determined without reference to the proposed change. If the condition
referred to in (A) is met but the condition referred to in (B) above is not met,
the Auction Rate for the Auction Period commencing on the Effective Date shall
be the Maximum Auction Rate [lesser of the Maximum Auction Rate and the Net Loan
Rate] and the Auction Period shall be the Auction Period determined without
reference to the proposed change.
5. It is hereby represented, upon advice of the Auction Agent for the
Notes described herein, that there were Sufficient Bids for such Notes at the
Auction immediately preceding the date of this Notice.
E-1
<PAGE>
Terms used herein have the meanings set forth in the First
Supplemental Indenture.
Dated:___________________________ EDUCATION LOANS INCORPORATED
By:_____________________________
E-2
<PAGE>
EXHIBIT F
---------
NOTICE ESTABLISHING AUCTION PERIOD ADJUSTMENT
---------------------------------------------
EDUCATION LOANS INCORPORATED
TAX EXEMPT [TAXABLE] AUCTION RATE STUDENT LOAN ASSET-BACKED NOTES
SENIOR SERIES 1997-1____
Notice is hereby given that Education Loans Incorporated hereby
establishes new lengths for one or more Auction Periods with respect to the
Notes identified above pursuant to the First Supplemental Indenture of Trust
relating to such Notes (the "First Supplemental Indenture"):
1. The change shall take effect on _______________ , the Interest
Rate Adjustment Date for the next Auction Period (the "Effective Date").
2. For Auction Periods occurring after the Auction Period commencing
on the Effective Date, the Interest Rate Adjustment Dates shall be [___________]
provided, however, that the length of subsequent Auction Periods shall be
subject to further change hereafter as provided in Sections 3 and 10 of the
First Supplemental Indenture.
3. The changes described in Paragraph 2 shall take place only upon
delivery of this Notice and the satisfaction of other conditions set forth in
the First Supplemental Indenture and our prior notice dated
___________ regarding the proposed change.
Terms used herein have the meanings set forth in the First
Supplemental Indenture.
Dated:_____________________________ EDUCATION LOANS INCORPORATED
By:______________________________
F-1
<PAGE>
EXHIBIT G
---------
NOTICE OF CHANGE IN AUCTION DATE
--------------------------------
EDUCATION LOANS INCORPORATED
TAX EXEMPT [TAXABLE] AUCTION RATE STUDENT LOAN ASSET-BACKED NOTES
SENIOR SERIES 1997-1____
Notice is hereby given by Smith Barney Inc., as Market Agent for the
Notes identified above, that, with respect to such Notes, the Auction Date is
hereby changed as follows:
1. With respect to such Notes, the definition of "Auction Date" shall
be deemed amended by substituting "______________ (number) Business Day" in the
seventh line thereof and by substituting "________________ (number) Business
Days" for "two (2) Business Days" in subsection (C) thereof.
2. This change shall take effect on ___________ which shall be the
Auction Date for the Auction Period commencing on ________________.
3. The Auction Date for such Notes shall be subject to further change
hereafter as provided in the First Supplemental Indenture of Trust relating to
such Notes (the "First Supplemental Indenture").
Terms used herein have the meanings set forth in the First
Supplemental Indenture.
Dated:_____________________________ SMITH BARNEY INC., as
Market Agent
By:___________________________
G-1
<PAGE>
EXHIBIT H-1
-----------
[List of Student Loan Purchase Agreements relating to
Eligible Loans acquired from the Series 1979 Trustee]
H-1-1
<PAGE>
EXHIBIT H-2
-----------
[List of Student Loan Purchase Agreements relating to
Eligible Loans acquired from Series 1989 Trustee]
H-2-1
<PAGE>
EXHIBIT H-3
-----------
[List of Student Loan Purchase Agreements relating to
Eligible Loans acquired from Series 1994 Trustee
and financed from proceeds of Series 1996-1 Notes]
H-3-1
<PAGE>
EXHIBIT H-4
-----------
[List of Student Loan Purchase Agreements relating to
Eligible Loans to be financed from proceeds of Tax
Exempt Series 1997-1 Notes, Series 1989, 1991 and
1994 Bonds and Series 1996-1 Notes]
H-4-1
<PAGE>
EXHIBIT H-5
-----------
[List of Student Loan Purchase Agreements relating to
Eligible Loans acquired from Series 1994 Trustee and
financed from proceeds of Series 1994-1, 1995-1 and 1995-2 Notes]
H-5-1
<PAGE>
EXHIBIT H-6
-----------
[List of Student Loan Purchase Agreements relating to
Eligible Loans to be financed from proceeds of Taxable
Series 1997-1 Notes]
H-6-1
<PAGE>
EXHIBIT I
---------
NOTICE OF PROPOSED ADJUSTMENT TO PERCENTAGE USED IN
DETERMINING [MAXIMUM AUCTION RATE]
[ALL HOLD RATE] [NON-PAYMENT RATE]
-----------------------------------
EDUCATION LOANS INCORPORATED
TAX EXEMPT AUCTION RATE STUDENT LOAN ASSET-BACKED NOTES
SENIOR SERIES 1997-1____
Notice is hereby given that Smith Barney Inc., as Market Agent for the
Notes identified above, proposes to change the percentage used in determining
the [Maximum Auction Rate] [All Hold Rate] [Non-Payment Rate] with respect to
such Notes, pursuant to the First Supplemental Indenture of Trust relating to
such Notes (the "First Supplemental Indenture"), as follows:
1. The change shall take effect on the date of commencement of the
next Auction Period (the "Effective Date").
2. For the Auction Period commencing on the Effective Date, and each
Auction Period thereafter, it is proposed that the percentage used in
determining the [Maximum Auction Rate] [All Hold Rate] [Non-Payment Rate] shall
be _____________.
3. The adjustment to the percentage used in determining the [Maximum
Auction Rate] [All Hold Rate] [Non-Payment Rate] in Paragraph 2 shall take place
only if (A) the Trustee, the Auction Agent and the Corporation receive, by 11:00
a.m., New York City time, on the Business Day immediately preceding the
Effective Date, a Corporation Certificate authorizing the adjustment of such
percentage as specified in such certificate, together with a copy of the
Corporation Consent thereto and the opinion of Bond Counsel as required by the
First Supplemental Indenture; and (B) the Trustee and the Corporation have
received written confirmation from each of the Rating Agencies then rating the
Series 1997-1 Notes that such proposed adjustment will not adversely affect its
ratings then applicable to any of the Series 1997-1 Notes.
4. If any of the conditions referred to in Paragraph 3(A) and (B)
above are not met, the existing percentage used to determine the [Maximum
Auction Rate] [All Hold Rate] [Non-Payment Rate] shall remain in effect, and the
rate of interest on the above Notes for the next succeeding Interest Period
shall be determined in accordance with the Auction Procedures.
Terms used herein have the meanings set forth in the First
Supplemental Indenture.
Dated:____________________________ SMITH BARNEY INC.
By:______________________________
I-1
<PAGE>
EXHIBIT J
---------
NOTICE ESTABLISHING NEW PERCENTAGE USED IN DETERMINING
[MAXIMUM AUCTION RATE] [ALL HOLD RATE] [NON-PAYMENT RATE]
-------------------------------------------------------
EDUCATION LOANS INCORPORATED
TAX EXEMPT AUCTION RATE STUDENT LOAN ASSET-BACKED NOTES
SENIOR SERIES 1997-1____
Notice is hereby given that Smith Barney Inc., as Market Agent for the
Notes identified above, hereby establishes a new percentage to be used in
determining the [Maximum Auction Rate] [All Hold Rate] [Non-Payment Rate] with
respect to such Notes pursuant to the First Supplemental Indenture of Trust
relating to such Notes (the "First Supplemental Indenture"):
1. The change shall take effect on __________________ the
commencement of the next Auction Period (the "Effective Date").
2. For the Auction Period commencing on the Effective Date, and each
Auction Period thereafter, the percentage used in determining the [Maximum
Auction Rate] [All Hold Rate] [Non-Payment Rate] shall be _____________.
3. The change described in Paragraph 2 above shall take place only
upon delivery of this Notice and the satisfaction of other conditions set forth
in the First Supplemental Indenture and our prior notice dated
___________ regarding the proposed change.
Terms used herein have the meanings set forth in the First
Supplemental Indenture.
Dated:_________________________ SMITH BARNEY INC.
By:_____________________________
J-1
<PAGE>
EXHIBIT 4.3
Draft of 7/15/97
----------------
================================================================================
AUCTION AGENT AGREEMENT
(TAXABLE AUCTION RATE SERIES 1997-1 NOTES)
by and among
EDUCATION LOANS INCORPORATED,
as Issuer,
FIRST BANK NATIONAL ASSOCIATION,
as Trustee,
and
BANKERS TRUST COMPANY,
as Auction Agent
_______________________________________
Dated as of July 1, 1997
_______________________________________
Relating to
$_______________
EDUCATION LOANS INCORPORATED
TAXABLE AUCTION RATE STUDENT LOAN ASSET-BACKED NOTES
SENIOR SERIES 1997-1G and H
================================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
Page
----
Section 1. Definitions and Rules of Construction........................... 2
1.1 Terms Defined by Reference to First Supplemental Indenture...... 2
1.2 Terms Defined Herein............................................ 2
1.3 Rules of Construction........................................... 4
Section 2. The Auction..................................................... 4
2.1 Interest Rate on Taxable Auction Rate Series 1997-1 Notes;
Incorporation by Reference of Auction Procedures and
Settlement Procedures......................................... 4
2.2 Preparation of Each Auction; Maintenance of Existing Holder
Registry...................................................... 5
2.3 All Hold Rates, Maximum Auction Rates, Net
Loan Rate, One-Month LIBOR and Three-Month LIBOR.............. 7
2.4 Auction Schedule................................................ 9
2.5 Changes in Auction Periods or Auction Date...................... 10
2.6 Notice of Fee Rate Change....................................... 10
2.7 Notices to Existing Holders..................................... 11
2.8 Payment Default................................................. 11
2.9 Broker-Dealers.................................................. 11
2.10 Access to and Maintenance of Auction Records.................... 11
Section 3. Term of Agreement............................................... 12
Section 4. Trustee......................................................... 13
Section 5. Representations and Warranties of the Trustee................... 13
Section 6. The Auction Agent............................................... 14
6.1 Duties and Responsibilities..................................... 14
6.2 Rights of the Auction Agent..................................... 14
6.3 Auction Agent's Disclaimer...................................... 15
6.4 Compensation, Remedies and Indemnification...................... 15
6.5 Compensation of the Broker-Dealers.............................. 16
Section 7. Miscellaneous................................................... 18
7.1 Governing Law................................................... 18
7.2 Communications.................................................. 18
7.3 Entire Agreement................................................ 19
7.4 Benefits........................................................ 19
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C> <C>
7.5 Amendment; Waiver................................................. 19
7.6 Successors and Assigns............................................ 20
7.7 Severability...................................................... 20
7.8 Execution in Counterparts......................................... 20
</TABLE>
Exhibits
- --------
Exhibit A -- List of Initial Broker-Dealers
Exhibit B -- Broker-Dealer Agreement
Exhibit C -- Notice of Ratings
Exhibit D -- Notice of Taxable Auction Rate Series 1997-1 Notes
Outstanding
Exhibit E -- Notice of Fee Rate Change
Exhibit F -- Notice of a Payment Default
Exhibit G -- Settlement Procedures
Exhibit H -- Notice of Continuation of Auction Period
Exhibit I -- Notice of Auction Rate Series 1997-1 Note Interest Rate
-ii-
<PAGE>
THIS AUCTION AGENT AGREEMENT (TAXABLE AUCTION RATE SERIES 1997-1 NOTES),
dated as of July 1, 1997 (this "Auction Agent Agreement"), is being entered into
by and among EDUCATION LOANS INCORPORATED, a South Dakota corporation (together
with any successors or assigns, the "Issuer"), FIRST BANK NATIONAL ASSOCIATION,
Minneapolis, Minnesota, a national banking association duly established and
existing under the laws of the United States of America, as Trustee (together
with any successors or assigns, the "Trustee") under a certain First
Supplemental Indenture of Trust, as hereinafter defined and described, and
BANKERS TRUST COMPANY, a New York banking corporation (together with its
successors and assigns, the "Auction Agent"), acting not in its individual
capacity but solely as agent for the Issuer.
W I T N E S S E T H:
WHEREAS, the Issuer proposes to cause the Trustee to authenticate and
deliver $_____________ aggregate principal amount of its Student Loan
Asset-Backed Notes, Series 1997-1, including therein two series designated
Taxable Auction Rate Student Loan Asset-Backed Notes, Senior Series 1997-1G (the
"Series 1997-1G Notes"), and Taxable Auction Rate Student Loan Asset-Backed
Notes, Senior Series 1997-1H (the "Series 1997-1H Notes" and, together with the
Series 1997-1G Notes, the "Taxable Auction Rate Series 1997-1 Notes"). The
Taxable Auction Rate Series 1997-1 Notes are being issued under the First
Supplemental Indenture of Trust, dated as of July 1, 1997 (the "First
Supplemental Indenture"), by and between the Issuer and the Trustee and executed
pursuant to an Indenture of Trust, dated as of July 1, 1997 (the "Original
Indenture"), by and between the Trustee and the Issuer ; and
WHEREAS, pursuant to Section 8 of the First Supplemental Indenture, the
Auction Agent has been appointed to act in the capacities set forth in this
Auction Agent Agreement; and
WHEREAS, the Trustee is entering into this Auction Agent Agreement at the
direction of the Issuer pursuant to the terms of the First Supplemental
Indenture;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the Issuer, the Trustee and the Auction Agent agree as
follows:
-1-
<PAGE>
Section 1. Definitions and Rules of Construction.
1.1 Terms Defined by Reference to First Supplemental Indenture.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings given such terms in the First Supplemental Indenture.
1.2 Terms Defined Herein. As used herein and in the Settlement
Procedures (as defined below), the following terms shall have the following
meanings, unless the context otherwise requires:
"Auction" shall have the meaning specified in Section 2.1 hereof.
"Auction Agent Fee" shall have meaning specified in Section 6.4(b)
hereof.
"Auction Agent Fee Rate" shall mean the rate per annum determined
pursuant to Section 6.4(b) hereof, as the same may be changed from time to time
in accordance with Section 6.4(b) hereof, at which the fee to be paid to the
Auction Agent for services rendered by it hereunder and under the Broker-Dealer
Agreements accrues pursuant to Section 6.4(b) hereof.
"Auction Procedures" shall mean the provisions that are set forth in
Sections 4 through 11, inclusive, of the First Supplemental Indenture.
"Authorized Auction Agent Officer" shall mean, with respect to the
Auction Agent, each Managing Director, Vice President, Assistant Vice President
and Assistant Treasurer of the Auction Agent and every other officer of the
Auction Agent assigned to its Corporate Trust and Agency Group and every other
officer or employee of the Auction Agent designated as an "Authorized Auction
Agent Officer" for purposes hereof in a communication to the Trustee and the
Issuer.
"Authorized Issuer Officer" shall mean, with respect to the Issuer,
the Chairman of the Board of Directors, the President, any Vice President or the
Secretary of the Issuer or any other person designated in writing by the Board
of Directors of the Issuer to the Auction Agent from time to time, which writing
may limit the functions which such other person may undertake as an Authorized
Issuer Officer hereunder.
"Authorized Trustee Representative" shall mean each Vice President,
Assistant Vice President or Trust Officer in the Corporate Trust Department of
the Trustee and every other officer or employee of the Trustee designated as an
"Authorized Trustee Representative" for purposes hereof in a written
communication to the Auction Agent and the Issuer.
-2-
<PAGE>
"Broker-Dealer" shall mean a person listed on Exhibit A hereto, as
such Exhibit A may be amended from time to time.
"Broker-Dealer Agreement" shall mean each agreement between the
Auction Agent and a Broker-Dealer substantially in the form attached hereto as
Exhibit B.
"Broker-Dealer Fee" shall have the meaning specified in Section 6.5(a)
hereof.
"Broker-Dealer Fee Rate" shall have the meaning specified in Section
6.5(b) hereof.
"Business Day" shall mean a day of the year on which (i) banks located
in the city in which the Principal Office of the Trustee is located are not
required or authorized to remain closed, (ii) banks located in the city in which
the Principal Office of the Auction Agent, as set forth in Section 7.2 hereof,
is located are not required or authorized to remain closed, (iii) banks located
in the city in which the Principal Office of each Broker-Dealer, as set forth in
and for purposes of the applicable Broker-Dealer Agreement, is located are not
required or authorized to remain closed and (iv) The New York Stock Exchange is
not closed.
"Existing Holder Registry" shall mean the register maintained by the
Auction Agent pursuant to Section 2.2 hereof.
"Notice of Failure to Deliver or Make Payment" shall mean a notice
substantially in the form of Exhibit D to the Broker-Dealer Agreement.
"Notice of Fee Rate Change" shall mean a notice substantially in the
form of Exhibit E hereof.
"Notice of Payment Default" shall mean a notice substantially in the
form of Exhibit F hereto.
"Notice of Ratings" shall mean a notice substantially in the form of
Exhibit C hereto.
"Notice of Taxable Auction Rate Series 1997-1 Notes Outstanding" shall
mean a notice substantially in the form of Exhibit D hereto.
"Notice of Transfer" shall mean a notice substantially in the form of
Exhibit C to the Broker-Dealer Agreement.
-3-
<PAGE>
"Participant" shall mean a member of, or participant in, the
Securities Depository.
"Settlement Procedures" shall mean the Settlement Procedures attached
as Exhibit G hereto.
1.3 Rules of Construction. Unless the context or use indicates
another or different meaning or intent, the following rules shall apply to the
construction of this Auction Agent Agreement:
(a) Words importing the singular number shall include the plural
number and vice versa.
(b) The captions and headings herein are solely for convenience of
reference and shall not constitute a part of this Auction Agent Agreement
nor shall they affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto" and other words of similar
import refer to this Auction Agent Agreement as a whole.
(d) All references herein to a particular time of day shall be to New
York City time.
(e) The rights and duties of the Trustee, the Auction Agent and the
Issuer under this Auction Agent Agreement shall apply to the Series 1997-1G
Notes and the Series 1997-1H Notes, but separately in each case.
References to "Taxable Auction Rate Series 1997-1 Notes" shall, unless the
context clearly contemplates a reference to all the Taxable Auction Rate
Series 1997-1 Notes, be deemed to refer only to a particular series of
Taxable Auction Rate Series 1997-1 Notes.
Section 2. The Auction.
2.1 Interest Rate on Taxable Auction Rate Series 1997-1 Notes;
Incorporation by Reference of Auction Procedures and Settlement Procedures.
(a) During the Initial Interest Period, each of the Series 1997-1G
Notes and the Series 1997-1H Notes shall bear interest at the Taxable
Auction Rate Series 1997-1 Note Initial Interest Rate for such series.
Thereafter, the Taxable Auction Rate Series 1997-1 Notes shall bear
interest at the Auction Rate Series 1997-1 Note Interest Rate based on an
Interest Period that shall be an Auction Period. The Auction Rate Series
1997-1 Note Interest Rate on each series of the Taxable Auction Rate Series
1997-1 Notes for each Auction Period shall be the lesser of (i) the Net
Loan Rate and (ii) the Auction Rate determined in
-4-
<PAGE>
accordance with Sections 3 through 12 of the First Supplemental Indenture
(not to exceed 18% per annum). Pursuant to Section 8 of the First
Supplemental Indenture, the Issuer has duly appointed Bankers Trust
Company as Auction Agent for purposes of the Auction Procedures and to
perform such other obligations and duties as are herein set forth. Bankers
Trust Company hereby accepts such appointment and agrees that, on each
Auction Date, it shall follow the procedures set forth in this Section 2
and the Auction Procedures for the purpose of, among other things,
determining the Auction Rate, and ultimately the Auction Rate Series 1997-1
Note Interest Rate for each series of the Taxable Auction Rate Series 1997-
1 Notes for each Auction Period other than the Initial Interest Period.
Each periodic operation of such procedures is hereinafter referred to as an
"Auction."
(b) All of the provisions contained in the Auction Procedures and the
Settlement Procedures are incorporated herein by reference in their
entirety and shall be deemed to be a part hereof to the same extent as if
such provisions were fully set forth herein.
2.2 Preparation of Each Auction; Maintenance of Existing Holder
Registry.
(a) A list of Broker-Dealers (showing Smith Barney Inc. as the sole
initial Broker-Dealer) is attached as Exhibit A to this Auction Agent
Agreement. Not later than seven days prior to any Auction Date for which
any change in such list of Broker-Dealers is to be effective, the Trustee,
at the direction of an Authorized Issuer Officer, will notify the Auction
Agent in writing of such change and, if any such change is the addition of
a Broker-Dealer to such list, shall cause to be delivered to the Auction
Agent for execution by the Auction Agent a Broker-Dealer Agreement manually
signed by such Broker-Dealer. The Auction Agent shall have entered into a
Broker-Dealer Agreement with each Broker-Dealer prior to the participation
of any such Broker-Dealer in any Auction.
(b) In the event that any day that is scheduled to be an Auction Date
shall be changed after the Auction Agent shall have given the notice of
such Auction Date pursuant to clause (vii) of paragraph (a) of the
Settlement Procedures, the Auction Agent, by such means as the Auction
Agent deems practicable, shall give notice of such change to the Broker-
Dealers not later than the earlier of 9:15 a.m., New York City time, on the
new Auction Date and 9:15 a.m., New York City time, on the old Auction
Date.
(c) (i) The Auction Agent shall maintain a current registry of
Persons that are Broker-Dealers, compiled initially on the Closing
Date as described below, and that hold Taxable Auction Rate Series
1997-1
-5-
<PAGE>
Notes, for purposes of dealing with the Auction Agent in
connection with an Auction (such registry being herein called the
"Existing Holder Registry"). Such Persons shall constitute the
"Existing Holders" for purposes of dealing with the Auction Agent in
connection with an Auction. The Auction Agent shall indicate in the
Existing Holder Registry for each Existing Holder the identity of the
Broker-Dealer which submitted the most recent Order in any Auction
which resulted in such Existing Holder continuing to hold or
purchasing the Taxable Auction Rate Series 1997-1 Notes. Pursuant to
the Broker-Dealer Agreement, Smith Barney Inc., as the sole initial
Broker-Dealer, has agreed to provide to the Auction Agent on the
Closing Date the names and addresses of the Persons who are to be
initially listed on the Existing Holder Registry as constituting the
initial Existing Holders of Taxable Auction Rate Series 1997-1 Notes
for purposes of dealing with the Auction Agent in connection with an
Auction. The Auction Agent may rely upon, as evidence of the
identities of the Existing Holders, such list, the results of each
Auction and notices from any Existing Holder, Participant of any
Existing Holder or Broker-Dealer of any Existing Holder as described
in Section 2.2(c)(iii) hereof.
(ii) The Trustee shall notify the Auction Agent when any notice
of redemption of Taxable Auction Rate Series 1997-1 Notes is sent to
the Securities Depository as the Holder of Taxable Auction Rate Series
1997-1 Notes not later than 11:00 a.m., New York City time, on the
date such notice is sent. Such notice with respect to a redemption
shall be substantially in the form of Exhibit D hereto, Notice of
Taxable Auction Rate Series 1997-1 Notes Outstanding. In the event
the Auction Agent receives from the Trustee written notice of any
partial redemption of any Taxable Auction Rate Series 1997-1 Notes,
the Auction Agent shall, at least two Business Days prior to the next
Auction, request each Participant to disclose to the Auction Agent
(upon selection by such Participant of the Existing Holders whose
Taxable Auction Rate Series 1997-1 Notes are to be redeemed) the
aggregate principal amount of such Taxable Auction Rate Series 1997-1
Notes of each such Existing Holder, if any, which are to be redeemed;
provided the Auction Agent has been furnished with the name and
telephone number of a person or department at such Participant from
which it is to request such information. In the absence of receiving
any such information with respect to any Existing Holder, from such
Existing Holder's Participant or otherwise, the Auction Agent may
continue to treat such Existing Holder as the beneficial owner of the
principal amount of Taxable Auction Rate Series 1997-1 Notes shown in
the Existing Holder Registry.
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(iii) The Auction Agent shall be required to register in the
Existing Holder Registry a transfer of Taxable Auction Rate Series
1997-1 Notes from an Existing Holder to another Person only if such
transfer is made to a Person through a Broker-Dealer and if (A) such
transfer is pursuant to an Auction or (B) the Auction Agent has been
notified in writing (1) in a notice substantially in the form of a
Notice of Transfer by such Existing Holder, by the Participant of such
Existing Holder or by the Broker-Dealer of such Existing Holder of
such transfer, or (2) in a notice substantially in the form of a
Notice of Failure to Deliver or Make Payment by the Broker-Dealer of
any Person that purchased or sold Taxable Auction Rate Series 1997-1
Notes in an Auction of the failure of such Taxable Auction Rate Series
1997-1 Notes to be transferred as a result of the Auction. The
Auction Agent is not required to accept any Notice of Transfer or
Notice of Failure to Deliver or Make Payment delivered prior to an
Auction unless it is received by the Auction Agent by 3:00 p.m., New
York City time, on the Business Day next preceding the applicable
Auction Date.
(d) The Auction Agent may request that the Broker-Dealers, as set
forth in the Broker-Dealer Agreements, provide the Auction Agent with the
aggregate principal amount of Taxable Auction Rate Series 1997-1 Notes held
by such Broker-Dealers for purposes of the Existing Holder Registry, as
well as with a list of their respective customers that such Broker-Dealers
believe are Existing Holders of the Taxable Auction Rate Series 1997-1
Notes and the aggregate principal amount of Taxable Auction Rate Series
1997-1 Notes beneficially owned by each such customer. Except as permitted
by Section 2.10 hereof, the Auction Agent shall keep confidential any such
information and shall not disclose any such information so provided to any
person other than the relevant Broker-Dealer, the Issuer and the Trustee,
provided that the Auction Agent reserves the right to disclose any such
information if it is advised by its counsel that its failure to do so would
be unlawful.
(e) The Auction Agent shall send by telecopy or other means a copy of
any Notice of Taxable Auction Rate Series 1997-1 Notes Outstanding received
from the Trustee to each Broker-Dealer in accordance with Section 4.3 of
the applicable Broker-Dealer Agreement.
2.3 All Hold Rates, Maximum Auction Rates, Net Loan Rate, One-Month
LIBOR and Three-Month LIBOR.
(a) On each Auction Date, the Auction Agent shall determine the All
Hold Rate, the Maximum Auction Rate, the Net Loan Rate and One-Month LIBOR
or Three-Month LIBOR, as the case may be. Not later than 9:30 a.m., New
York City time, on each Auction Date, the Auction Agent shall notify
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the Trustee and the Broker-Dealers of the All Hold Rate, the Maximum
Auction Rate, the Net Loan Rate and One-Month LIBOR or Three-Month LIBOR,
as the case may be, so determined. On or within three Business Days after
the Closing Date, the Issuer shall give written notice to the Auction Agent
of the initial ratings on the Taxable Auction Rate Series 1997-1 Notes by
Moody's and Fitch substantially in the form of the Notice of Ratings.
Thereafter, if there is a change in one of both of such ratings, the Issuer
shall give written notice to the Auction Agent substantially in the form of
the Notice of Ratings within three Business Days of its receipt of notice
of such change, but not later than the close of business on the Business
Day immediately preceding an Auction Date if the Issuer has received
written notice of such change in a rating or ratings prior to 12:00 noon,
New York City time, on such Business Day, and the Auction Agent shall take
into account such change in rating or ratings for purposes hereof and any
Auction so long as such Notice of Ratings is received by the Auction Agent
no later than the close of business on such Business Day.
(b) (i) If, on any Auction Date for an Auction Period, an Auction is
not held for any reason, then the Auction Rate Series 1997-1 Note
Interest Rate for the next succeeding Auction Period shall be the Net
Loan Rate.
(ii) If the ownership of the Taxable Auction Rate Series 1997-1
Notes is no longer maintained in Book-Entry Form by the Securities
Depository, no further Auctions shall be held and the Auction Rate
Series 1997-1 Note Interest Rate for each Interest Period commencing
after the delivery of certificated Taxable Auction Rate Series 1997-1
Notes pursuant to Section 17 of the First Supplemental Indenture shall
equal the lesser of the Net Loan Rate and the Maximum Auction Rate as
determined by the Trustee on the Business Day immediately preceding
the first day of such subsequent Interest Period as provided in
Section 3(A) of the First Supplemental Indenture.
(iii) If a Payment Default shall have occurred with respect to a
series of Taxable Auction Rate Series 1997-1 Notes, the Auction Rate
Series 1997-1 Note Interest Rate with respect to such series for each
Interest Period commencing on or immediately after the occurrence of
such Payment Default, and for each Interest Period thereafter, to and
including the Interest Period, if any, during which, or commencing
less than two Business Days after, such Payment Default is cured,
shall equal the Non-Payment Rate, as determined by the Trustee on the
first day of such Interest Period as provided in Section 3(A) of the
First Supplemental Indenture. The Auction Rate Series 1997-1 Note
Interest Rate for each Interest Period commencing at least two
Business Days
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after any cure of a Payment Default shall be determined
through implementation of the Auction Procedures.
2.4 Auction Schedule. The Auction Agent shall conduct Auctions on
the Auction Date in accordance with the schedule set forth below. Such schedule
may be changed by the Auction Agent with the consent of the Trustee and the
Market Agent, which consent shall not be unreasonably withheld or delayed. The
Auction Agent shall give notice pursuant to Section 4.3 of the applicable
Broker-Dealer Agreement of any such change to each Broker-Dealer. Such notice
shall be given prior to the first Auction Date on which any such change shall be
effective.
<TABLE>
<CAPTION>
<S> <C>
By 9:30 a.m. The Auction Agent advises the Trustee and the
Broker-Dealers of the Maximum Auction Rate, the All
Hold Rate, the Net Loan Rate and One-Month LIBOR or
Three-Month LIBOR, as the case may be, to be used
in determining the Auction Rate under the Auction
Procedures, the First Supplemental Indenture and
this Auction Agent Agreement.
9:30 a.m. - 12:30 p.m. The Auction Agent assembles information
communicated to it by Broker-Dealers as provided in
Section 4(c)(i) of the First Supplemental
Indenture. The Submission Deadline is 12:30 p.m.,
New York City time.
Not earlier than The Auction Agent makes the determination
12:30 p.m. pursuant to Section 4(c)(i) of the
First Supplemental Indenture. Submitted Bids and
Submitted Sell Orders are accepted and rejected in
whole or in part and principal amount of Taxable
Auction Rate Series 1997-1 Notes is allocated as
provided in Section 4(d) of the First Supplemental
Indenture.
By approximately The Auction Agent advises the Trustee and
3:00 p.m. 1/ or the Broker-Dealers of the results of
4:00 p.m. 2/ the Auction as provided in Section 4(c)(ii)
of the First Supplemental Indenture.
- ----------------
1/ If the Auction Rate Series 1997-1 Note Interest Rate is the Auction Rate.
2/ If the Auction Rate Series 1997-1 Note Interest Rate is the Net Loan Rate.
</TABLE>
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The Auction Agent shall follow the notification procedures set forth
in paragraph (a) of the Settlement Procedures.
2.5 Changes in Auction Periods or Auction Date.
(a) Changes in Auction Period or Periods.
(i) The Auction Agent shall mail any notice delivered to it
pursuant to the first paragraph of Section 10(a) of the First
Supplemental Indenture to the Existing Holders within two Business
Days of its receipt thereof.
(ii) The Auction Agent shall deliver any certificate delivered
to it pursuant to the third paragraph of Section 10(a) of the First
Supplemental Indenture to the Broker-Dealers not later than 3:00 p.m.,
New York City time, on the last Business Day preceding the next
Auction Date by telecopy or similar means.
(iii) If, after delivery to the Auction Agent of the notice
referred to in the first paragraph of Section 10(a) of the First
Supplemental Indenture, the Auction Agent fails to receive the
certificate referred to in the third paragraph of Section 10(a) of the
First Supplemental Indenture by 11:00 a.m., New York City time, on the
last Business Day preceding the next Auction Date, the Auction Agent
shall deliver a notice of such failure in substantially the form of
Exhibit H hereto to the Broker-Dealers not later than 3:00 p.m., New
York City time, on such Business Day by telecopy or other similar
means.
(iv) If, after delivery to the Auction Agent of the notice
referred to in the first paragraph of Section 10(a) and the
certificate referred to in third paragraph of Section 10(a) of the
First Supplemental Indenture, Sufficient Bids are not received by the
Auction Agent by the Submission Deadline, the Auction Agent shall
notify the Broker-Dealers not later than 3:00 p.m., New York City
time, on such Auction Date by telephone confirmed in writing in
substantially the form of Exhibit I hereto the next Business Day.
(b) Changes in Auction Date. The Auction Agent shall mail any notice
delivered to it pursuant to Section 11 of the First Supplemental Indenture
to the Broker-Dealers within three Business Days of its receipt thereof.
2.6 Notice of Fee Rate Change. If the Auction Agent Fee Rate is
changed pursuant to the provisions of Section 6.4(b) hereof or the Broker-Dealer
Fee Rate is changed pursuant to the provisions of 6.5(b) hereof, the Auction
Agent shall
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mail a Notice of Fee Rate Change (i) to the Trustee with respect to a change in
the Auction Agent Fee Rate and the Broker-Dealer Fee Rate and (ii) to the
Broker-Dealers with respect to a change in the Broker-Dealer Fee Rate, in each
case within two Business Days of such change.
2.7 Notices to Existing Holders. The Auction Agent shall be entitled
to rely upon the address of each Broker-Dealer as provided in Section 4.3 of the
applicable Broker-Dealer Agreement in connection with any notice to each Broker-
Dealer, as an Existing Holder, required to be given by the Auction Agent.
2.8 Payment Default.
(a) After delivery by the Trustee to the Auction Agent of a notice
that a Payment Default shall have occurred, the Auction Agent shall, on the
Business Day following its receipt of the same, deliver a Notice of Payment
Default to the Broker-Dealers by telecopy or other similar means.
(b) The Auction Agent shall deliver a copy of any notice received by
it from the Trustee to the effect that a Payment Default has been cured to
the Broker-Dealers on the Business Day following its receipt of the same by
telecopy or other similar means.
2.9 Broker-Dealers.
(a) If the Auction Agent is provided with a copy of a Broker-Dealer
Agreement, which has been manually signed, with any person listed on
Exhibit A hereto to which the Trustee, at the direction of an Authorized
Issuer Officer, shall have consented, it shall enter into such Broker-
Dealer Agreement with such person. The Issuer hereby directs the Trustee
to consent to Smith Barney Inc. as the sole initial Broker-Dealer.
(b) The Auction Agent may, at the written direction of an Authorized
Issuer Officer, and with the approval of Smith Barney Inc., so long as
Smith Barney Inc. is acting as a Broker-Dealer, enter into a Broker-Dealer
Agreement with any other person who requests to be selected to act as a
Broker-Dealer. The Auction Agent shall have entered into a Broker-Dealer
Agreement with each Broker-Dealer prior to the participation of any such
Broker-Dealer in any Auction.
(c) The Auction Agent shall terminate any Broker-Dealer Agreement as
set forth therein at the direction of an Authorized Issuer Officer.
2.10 Access to and Maintenance of Auction
Records. The Auction Agent shall afford to the Trustee, the Issuer and their
respective agents, independent
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public accountants and counsel access, at reasonable times during normal
business hours, to review and make extracts or copies (at no cost to the Auction
Agent) of all books, records, documents and other information concerning the
conduct and results of Auctions, provided that any such agent, accountant or
counsel shall furnish the Auction Agent with a letter from the Trustee or the
Issuer requesting that the Auction Agent afford such person access. The Auction
Agent shall maintain records relating to any Auction for a period of two years
after such Auction (or for such longer period requested by the Trustee or the
Issuer, not to exceed four years after each Auction), and such records shall, in
reasonable detail, accurately and fairly reflect the actions taken by the
Auction Agent hereunder. At the end of such period, the Auction Agent shall
deliver such records to the Trustee. The Trustee and the Issuer agree to keep
any information regarding the conduct and results of the Auctions, including,
without limitation, information regarding customers of any Broker-Dealer,
received from the Auction Agent in connection with this Auction Agent Agreement
confidential and shall not disclose such information or permit the disclosure of
such information without the prior written consent of the applicable Broker-
Dealer to anyone except such agent, accountant or counsel engaged to audit or
review the results of Auctions as permitted by this Section 2.10. Any such
agent, accountant or counsel, before having access to such information, shall
agree to keep such information confidential and not to disclose such information
or permit disclosure of such information without the prior written consent of
the applicable Broker-Dealer, except as may otherwise be required by law.
Section 3. Term of Agreement.
(a) This Auction Agent Agreement shall terminate on the earlier to
occur of (i) the satisfaction and discharge of the First Supplemental
Indenture with respect to the Taxable Auction Rate Series 1997-1 Notes or
this Auction Agent Agreement and (ii) the date on which this Auction Agent
Agreement is terminated in accordance with this Section 3. The Trustee may
terminate this Auction Agent Agreement in accordance with Section 8(a) of
the First Supplemental Indenture. The Auction Agent may terminate this
Auction Agent Agreement upon written notice to the Trustee, the Issuer and
the Market Agent on the date specified in such notice, which date shall be
no earlier than 90 days after the date of delivery of such notice.
Notwithstanding the foregoing, the provisions of Section 2 hereof shall
terminate upon the delivery of certificates representing Taxable Auction
Rate Series 1997-1 Notes pursuant to Section 17 of the First Supplemental
Indenture. Notwithstanding the foregoing, the Auction Agent may terminate
this Agreement without further notice if, within 25 days after notifying in
writing the Trustee, the Issuer and the Market Agent that it has not
received payment of any Auction Agent Fee due it in accordance with the
terms hereof, the Auction Agent does not receive such payment. Any
resignation of the
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Auction Agent or termination of this Auction Agent Agreement, other than as
described in the preceding sentence of this paragraph, shall not become
effective until a successor Auction Agent has been appointed and acceptance
of such appointment by such successor Auction Agent. The Issuer and the
Trustee agree to diligently proceed to appoint a successor Auction Agent.
However, if a successor Auction Agent shall not have been appointed within
60 days from the date of such notice of resignation, the resigning Auction
Agent may petition any court of competent jurisdiction for the appointment
of a successor Auction Agent.
(b) Except as otherwise provided in this Section 3(b), the respective
rights and duties of the Trustee, the Issuer and the Auction Agent under
this Auction Agent Agreement shall cease upon termination of this Auction
Agent Agreement. The Trustee's representations and warranties to the
Auction Agent under Section 5 hereof, and the Issuer's obligations to the
Auction Agent under Section 6.4 hereof and to the Broker-Dealers under
Section 6.5 hereof, shall survive the termination of this Auction Agent
Agreement subject to Section 4 hereof. Upon termination of this Auction
Agent Agreement, the Auction Agent shall, upon request, promptly deliver to
the Trustee copies of all books and records maintained by it with respect
to Taxable Auction Rate Series 1997-1 Notes in connection with its duties
hereunder.
Section 4. Trustee. All privileges, rights and immunities given to
the Trustee in the First Supplemental Indenture are hereby extended to and
applicable to the Trustee's obligations hereunder.
Section 5. Representations and Warranties of the Trustee.
The Trustee hereby represents and warrants to the Auction Agent and
the Issuer as follows:
5.1 The Trustee (i) has been duly incorporated and is validly
existing and in good standing as a national banking association under the laws
of the United States, and (ii) has all necessary authority, approvals, consents
(whether from the Issuer or otherwise) to enter into and perform its obligations
under this Auction Agent Agreement. This Auction Agent Agreement has been duly
and validly authorized, executed and delivered by the Trustee and constitutes
the legal, valid, binding and enforceable obligation of the Trustee.
5.2 Neither the execution, delivery and performance of this Auction
Agent Agreement, the consummation of the transactions contemplated hereby nor
the fulfillment of or compliance with the terms and conditions of this Auction
Agent Agreement will conflict with, violate or result in a breach of, the terms,
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<PAGE>
conditions or provisions of, or constitute a default under, any law or
regulation, any order or decree of any court or public authority having
jurisdiction over the Trustee, or any mortgage, indenture, contract, agreement
or undertaking to which the Trustee is a party or by which it is bound, or the
organizational documents pursuant to which the Trustee has been created and
under which it is operating.
5.3 All approvals, consents and orders of any governmental authority,
legislative body, board, agency or commission having jurisdiction over the
Trustee which would constitute a condition precedent to or the absence of which
would materially adversely affect the due performance by the Trustee of its
obligations under this Auction Agent Agreement have been obtained.
Section 6. The Auction Agent.
6.1 Duties and Responsibilities.
(a) The Auction Agent is acting solely as agent of the Issuer and
owes no fiduciary duties to any person (other than the Issuer) by reason of
this Auction Agent Agreement. The Auction Agent undertakes to perform such
duties and only such duties as are specifically set forth in this Auction
Agent Agreement, and no implied covenants or obligations shall be read into
this Auction Agent Agreement by means of the provisions of the First
Supplemental Indenture or otherwise against the Auction Agent.
(b) In the absence of bad faith or negligence on its part, the
Auction Agent shall not be liable for any action taken, suffered or omitted
or for any error of judgment made by it in the performance of its duties
under this Auction Agent Agreement. The Auction Agent shall not be liable
for any error of judgment made in good faith unless the Auction Agent shall
have been negligent in ascertaining the pertinent facts.
(c) The Auction Agent shall not agree to any amendment to a Broker-
Dealer Agreement without the prior written consent of the Issuer, which
consent shall not be unreasonably withheld.
6.2 Rights of the Auction Agent.
(a) The Auction Agent may rely and shall be protected in acting or
refraining from acting upon any communication authorized hereby and upon
any written instruction, notice, request, direction, consent, report,
certificate, form of bond certificate or other instrument, paper or
document believed by it to be genuine. The Auction Agent shall not be
liable for acting upon any telephone communication authorized hereby which
the Auction Agent believes in good faith to have been given by the Trustee
or by a Broker-
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Dealer. The Auction Agent may record telephone communications with the
Trustee or with Broker-Dealers or both.
(b) The Auction Agent may consult with counsel of its choice, and the
advice of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or
risk its own funds or otherwise incur or become exposed to financial
liability in the performance of its duties hereunder.
(d) The Auction Agent may perform its duties and exercise its rights
hereunder either directly or by or through agents or attorneys and shall
not be responsible for any misconduct or negligence on the part of any
agent or attorney appointed by it with due care hereunder.
6.3 Auction Agent's Disclaimer. The Auction Agent makes no
representation as to the correctness of the recitals in this Auction Agent
Agreement or the Broker-Dealer Agreement or the validity or adequacy of the
Taxable Auction Rate Series 1997-1 Notes.
6.4 Compensation, Remedies and Indemnification.
(a) With respect to each series of Taxable Auction Rate Series 1997-1
Notes, not later than 12:00 noon, New York City time, on the first Interest
Payment Date relating to such series, the Issuer, pursuant to Section 5(b)
of the First Supplemental Indenture, shall pay in arrears to the Auction
Agent, solely from moneys available therefor in the Administration Fund, an
amount in cash equal to the product of (i) the Auction Agent Fee Rate times
(ii) a fraction, the numerator of which is the number of days from the
Closing Date to such Interest Payment Date (or, if such series of Taxable
Auction Rate Series 1997-1 Notes ceased to be outstanding prior to such
Interest Payment Date, the date on which such series ceased to be
outstanding) and the denominator of which is 360, times (iii) the aggregate
principal amount of Taxable Auction Rate Series 1997-1 Notes of such series
on the date of original issuance of the Series 1997-1 Notes.
(b) With respect to each series of Taxable Auction Rate Series 1997-1
Notes any of which were outstanding at any time during the related period,
not later than 12:00 noon, New York City time, on each Interest Payment
Date thereafter relating to such series, the Issuer, pursuant to Section
5(b) of the First Supplemental Indenture, shall pay in arrears to the
Auction Agent, solely from moneys available therefor in the Administration
Fund, an
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amount in cash equal to the product of (i) the Auction Agent Fee Rate times
(ii) a fraction, the numerator of which is the number of days from the
preceding Interest Payment Date to the current Interest Payment Date (or,
if such series of Taxable Auction Rate Series 1997-1 Notes ceased to be
outstanding prior to such current Interest Payment Date, the date on which
such series ceased to be outstanding) and the denominator of which is 360,
times (iii) the average principal amount of Taxable Auction Rate Series
1997-1 Notes of such series outstanding during the period between such
preceding Interest Payment Date (or the Closing Date, in the case of the
first Interest Payment Date) and the current Interest Payment Date (or, if
such series of Taxable Auction Rate Series 1997-1 Notes ceased to be
outstanding prior to such current Interest Payment Date, the date on which
such series ceased to be outstanding) (together with the fee described in
Section 6.4(a), the "Auction Agent Fee"). The Auction Agent Fee Rate may be
adjusted from time to time with the approval of an Authorized Issuer
Officer upon a written request of the Auction Agent delivered to the
Trustee and the Issuer. The Initial Auction Agent Fee Rate shall be
.________%. Any change in the Auction Agent Fee Rate shall be effective on
the Auction Date next succeeding such change.
(c) The Issuer shall reimburse the Auction Agent, upon its request,
for all reasonable expenses, disbursements and advances, if any, incurred
or made by the Auction Agent in accordance with any provision of this
Auction Agent Agreement or the Broker-Dealer Agreements (including the
reasonable compensation, expenses and disbursements of its agents and
counsel) from amounts available therefor in the Administration Fund. The
Issuer shall indemnify and hold harmless the Auction Agent for and against
any loss, liability or expense incurred without negligence or bad faith on
the Auction Agent's part, arising out of or in connection with the
acceptance or administration of its agency under this Auction Agent
Agreement and the Broker-Dealer Agreements, including the reasonable costs
and expenses (including the reasonable fees and expenses of its counsel) of
defending itself against any such claim or liability in connection with its
exercise or performance of any of its duties hereunder and thereunder and
of enforcing this indemnification provision; provided that the Issuer shall
not indemnify the Auction Agent pursuant to this Section 6.4(c) for any
fees and expenses incurred by the Auction Agent in the normal course of
performing its duties hereunder and under the Broker-Dealer Agreements,
such fees and expenses being payable as provided in Section 6.4(a) and (b)
above.
6.5 Compensation of the Broker-Dealers.
(a) With respect to each series of Taxable Auction Rate Series 1997-1
Notes, not later than 12:00 noon, New York City time, on each Interest
Payment Date relating to such series, the Issuer, pursuant to Section 5(b)
of
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the First Supplemental Indenture, shall pay to the Auction Agent, solely
from moneys available therefor in the Administration Fund, an amount in
cash equal to the product of (i) the Broker-Dealer Fee Rate times (ii) a
fraction, the numerator of which is the number of days from the preceding
Interest Payment Date (or from the Closing Date, in the case of the first
Interest Payment Date) to the current Interest Payment Date (or, if such
series of Taxable Auction Rate Series 1997-1 Notes ceased to be outstanding
prior to such current Interest Payment Date, the date on which such series
ceased to be outstanding) and the denominator of which is 360, times (iii)
the aggregate principal amount of Taxable Auction Rate Series 1997-1 Notes
of such series outstanding at the close of business on the date of original
issuance of the Taxable Auction Rate Series 1997-1 Notes (in the case of
the initial Interest Payment Date) or at the close of business on the
preceding Interest Payment Date (in the case of all succeeding Interest
Payment Dates), as the case may be (the "Broker-Dealer Fee"). The Auction
Agent shall advise the Issuer of the amount referred to in the preceding
sentence not later than 4:00 p.m., New York City time, at least two
Business Days preceding such Interest Payment Date. The Auction Agent
shall apply such monies as set forth in Section 2.5 of the Broker-Dealer
Agreements.
(b) After retaining an amount equal to the Auction Agent Fee as
provided in Section 6.4 above, the Auction Agent shall pay the Broker-
Dealer Fee as provided in Section 6.5(a) above solely out of amounts
received by the Auction Agent pursuant to Section 5(b) of the First
Supplemental Indenture. The Auction Agent shall advise the Issuer at least
annually, at the request of an Authorized Issuer Officer, of the prevailing
rate. The Broker-Dealer Fee Rate may be adjusted from time to time with
the approval of an Authorized Issuer Officer upon a written request of the
Auction Agent or Smith Barney Inc., as the initial Broker-Dealer, delivered
to the Trustee and the Issuer. The initial Broker-Dealer Fee Rate shall be
._______% per annum. If the Broker-Dealer Fee Rate is changed pursuant to
the terms hereof, the Trustee shall notify the Auction Agent thereof. Any
changes in the Broker-Dealer Fee Rate shall be effective on the Auction
Date next succeeding such change.
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Section 7. Miscellaneous.
7.1 Governing Law. This Auction Agent Agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed in such state, it being understood that the
corporate powers and legal capacity of the Issuer shall be construed and
interpreted in accordance with the laws of the State of South Dakota.
7.2 Communications. Except for (i) communications authorized to be
made by telephone pursuant to this Auction Agent Agreement or the Auction
Procedures and (ii) communications in connection with Auctions (other than those
expressly required to be in writing), all notices, requests and other
communications to any party hereunder shall be in writing (including facsimile
or similar writing) and shall be given to such party addressed to it at its
address, or facsimile number set below:
If to the Trustee,
addressed: First Bank National Association
141 North Main Avenue
Sioux Falls, South Dakota 57117
Attn: Corporate Trust Department
Telephone: (605) 339-8725
Facsimile: (605) 333-3813
If to the Issuer,
addressed: Education Loans Incorporated
105 First Avenue Southwest
Aberdeen, South Dakota 57401
Attn: President
Telephone: (605) 622-4590
Facsimile: (605) 622-4547
If to the Auction Agent,
addressed: Bankers Trust Company
Corporate Trust and Agency Group
4 Albany Street
New York, New York 10006
Attn: Auction Rate Securities
Telephone: (212) 250-6850
Facsimile: (212) 250-6215
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If to the Market Agent,
addressed: Smith Barney Inc.
390 Greenwich Street
2nd Floor
New York, New York 10013
Attn: Public Finance
Division
Telephone: (212) 723-5564
Facsimile: (212) 723-8939
or such other address, telephone or facsimile number as such party may hereafter
specify for such purpose by notice in writing to the other parties. Each such
notice, request or communication shall be effective when delivered at the
address specified herein. Communications shall be given on behalf of the
Trustee by an Authorized Trustee Representative, on behalf of the Auction Agent
by an Authorized Auction Agent Officer and on behalf of the Issuer by an
Authorized Issuer Officer.
7.3 Entire Agreement. This Auction Agent Agreement contains the
entire agreement between the parties relating to the subject matter hereof, and
there are no other representations, endorsements, promises, agreements or
understandings, oral, written or inferred, between the parties relating to the
subject matter hereof.
7.4 Benefits. Nothing herein, express or implied, shall give to any
person, other than the Trustee, acting on behalf of the beneficial owners of the
Taxable Auction Rate Series 1997-1 Notes, the Auction Agent, the Issuer and
their respective successors and assigns, any benefit of any legal or equitable
right, remedy or claim hereunder.
7.5 Amendment; Waiver.
(a) This Auction Agent Agreement shall not be deemed or construed to
be modified, amended, rescinded, canceled or waived, in whole or in part,
except by a written instrument signed by duly authorized representatives of
the parties hereto.
(b) The Trustee and the Issuer shall not enter into or approve any
amendment of or supplement to the First Supplemental Indenture which
materially affects the Auction Agent's duties or obligations under the
First Supplemental Indenture without obtaining the prior written consent of
the Auction Agent. The Trustee shall promptly notify the Auction Agent of
any amendment of or supplement to the First Supplemental Indenture, and
shall provide a copy thereof to the Auction Agent upon request.
-19-
<PAGE>
(c) Failure of a party hereto to exercise any right or remedy
hereunder in the event of a breach hereof by any other party shall not
constitute a waiver of any such right or remedy with respect to any
subsequent breach.
7.6 Successors and Assigns. This Auction Agent Agreement shall be
binding upon, inure to the benefit of and be enforceable by the respective
successors and assigns of each of the Trustee, the Issuer and the Auction Agent.
This Auction Agent Agreement may not be assigned by any party hereto absent the
prior written consent of the other parties hereto, which consents shall not be
unreasonably withheld.
7.7 Severability. If any clause, provision or section hereof shall
be ruled invalid or unenforceable by any court of competent jurisdiction, the
invalidity or unenforceability of such clause, provision or section shall not
affect any of the remaining clauses, provisions or sections hereof.
7.8 Execution in Counterparts. This Auction Agent Agreement may be
executed in several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument.
-20-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Auction Agent
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the date first above written.
EDUCATION LOANS INCORPORATED,
as Issuer
By: _______________________
Title: President
FIRST BANK NATIONAL
ASSOCIATION, as Trustee
By: _______________________
Title: Trust Officer
BANKERS TRUST COMPANY, as
Auction Agent
By: _______________________
Title: _____________________
-21-
<PAGE>
EXHIBIT A
TO AUCTION AGENT AGREEMENT
--------------------------
LIST OF INITIAL BROKER-DEALERS
------------------------------
Smith Barney Inc.
A-1
<PAGE>
EXHIBIT B
TO AUCTION AGENT AGREEMENT
--------------------------
BROKER-DEALER AGREEMENT
-----------------------
B-1
<PAGE>
EXHIBIT C
TO AUCTION AGENT AGREEMENT
--------------------------
NOTICE OF RATINGS
-----------------
EDUCATION LOANS INCORPORATED
TAXABLE AUCTION RATE STUDENT LOAN ASSET-BACKED NOTES
SENIOR SERIES 1997-1G AND H
NOTICE IS HEREBY GIVEN to the Auction Agent by the Issuer pursuant to
Section 2.3(a) of the Auction Agent Agreement that:
1. as of the date of this notice the rating by Moody's on the
captioned Taxable Auction Rate Series 1997-1 Notes is ______ [and
such rating is [*"Aa3"or higher/lower than "Aa3"]]**; and
2. as of the date of this notice the rating by Fitch on the
captioned Taxable Auction Rate Series 1997-1 Notes is _____ [and
such rating is [*"AA-" or higher] [lower than "AA-"]]**.
The Auction Agent may rely on such ratings for all purposes of the
First Supplemental Indenture, including determination of the Maximum Auction
Rate thereunder, from the date hereof until further notice from the undersigned
Education Loans Incorporated.
EDUCATION LOANS INCORPORATED
By:
------------------------
Title:
------------------
Date:
------------------
* Choose one.
** The information in the outer brackets will be used as applicable whenever
the Moody's rating is not equal to "Aa3" and/or the Fitch rating is not
equal to "AA-."
C-1
<PAGE>
EXHIBIT D
TO AUCTION AGENT AGREEMENT
--------------------------
NOTICE OF TAXABLE AUCTION RATE SERIES 1997-1 NOTES OUTSTANDING
--------------------------------------------------------------
EDUCATION LOANS INCORPORATED
TAXABLE AUCTION RATE STUDENT LOAN ASSET-BACKED NOTES
SENIOR SERIES 1997-1G[H]
NOTICE IS HEREBY GIVEN that $_________ aggregate principal amount of
Series 1997-1G[H] Notes were outstanding at the close of business on the
immediately preceding Regular Record Date. Such aggregate principal amount of
Series 1997-1G[H] Notes, less $_________ aggregate principal amount of Series
1997-1G[H] Notes to be redeemed by the Issuer pursuant to the First Supplemental
Indenture, for a net aggregate principal amount of Series 1997-1G[H] Notes of
$_____________, will be available on the next Auction scheduled to be held on
_______________.
Terms used herein have the meanings set forth in the First
Supplemental Indenture relating to the above-referenced issue.
FIRST BANK NATIONAL
ASSOCIATION, as Trustee
By:
-----------------------
Title:
--------------------
Date:
-------------------
D-1
<PAGE>
EXHIBIT E
TO AUCTION AGENT AGREEMENT
--------------------------
NOTICE OF FEE RATE CHANGE
-------------------------
EDUCATION LOANS INCORPORATED
TAXABLE AUCTION RATE STUDENT LOAN ASSET-BACKED NOTES
SENIOR SERIES 1997-1G AND H
NOTICE IS HEREBY GIVEN that the [Auction Agent Fee Rate] [Broker-
Dealer Fee Rate] has been changed in accordance with Section [6.4(b)] [6.5(b)]
of the Auction Agent Agreement. The new [Auction Agent Fee Rate] [Broker-Dealer
Fee Rate] shall be ______% per annum.
Terms used herein have the meanings set forth in the First
Supplemental Indenture relating to the above-referenced issue.
BANKERS TRUST COMPANY, as
Auction Agent
By:
----------------------------
Title:
----------------------
Date:
-----------------------
APPROVED:
EDUCATION LOANS INCORPORATED
By:
---------------------------
Title:
----------------------
Date:
-----------------------
E-1
<PAGE>
EXHIBIT F
TO AUCTION AGENT AGREEMENT
--------------------------
NOTICE OF A PAYMENT DEFAULT
---------------------------
EDUCATION LOANS INCORPORATED
TAXABLE AUCTION RATE STUDENT LOAN ASSET-BACKED NOTES
SENIOR SERIES 1997-1G[H]
NOTICE IS HEREBY GIVEN that a Payment Default has occurred and not
been cured with respect to the Series 1997-1_____ Notes. Determination of the
Auction Rate Series 1997-1 Note Interest Rate on the Taxable Auction Rate Series
1997-1 Notes pursuant to the Auction Procedures will be suspended. The Auction
Rate Series 1997-1 Note Interest Rate on each series of the Taxable Auction Rate
Series 1997-1 Notes for each Auction Period commencing after the date of Payment
Default will equal the Non-Payment Rate (as to each such series with respect to
which a Payment Default exists) or the Net Loan Rate (as to all other series),
as the case may be, as it is determined by the Trustee on the first day of such
Auction Period.
Terms used herein have the meanings set forth in the First
Supplemental Indenture relating to the above-referenced issue.
BANKERS TRUST COMPANY, as
Auction Agent
By:
---------------------------
Title:
----------------------
Date:
----------------------
F-1
<PAGE>
EXHIBIT G
TO AUCTION AGENT AGREEMENT
--------------------------
SETTLEMENT PROCEDURES
---------------------
If not otherwise defined below, capitalized terms used herein shall
have the meanings given such terms in the First Supplemental Indenture. These
Settlement Procedures apply separately to each series of Taxable Auction Rate
Series 1997-1 Notes.
(a) Not later than (1) 3:00 p.m., if the Auction Rate Series 1997-1
Note Interest Rate is the Auction Rate, or (2) 4:00 p.m., if the Auction
Rate Series 1997-1 Note Interest Rate is the Net Loan Rate, on each Auction
Date, the Auction Agent shall notify by telephone each Broker-Dealer that
participated in the Auction held on such Auction Date and submitted an
Order on behalf of an Existing Holder or Potential Holder of:
(i) the Auction Rate Series 1997-1 Note Interest Rate fixed for
the next Interest Period;
(ii) whether there were Sufficient Bids in such Auction;
(iii) if such Broker-Dealer (a "Seller's Broker-Dealer")
submitted Bids or Sell Orders on behalf of an Existing Holder, whether
such Bid or Sell Order was accepted or rejected, in whole or in part,
and the principal amount of Taxable Auction Rate Series 1997-1 Notes,
if any, to be sold by such Existing Holder;
(iv) if such Broker-Dealer (a "Buyer's Broker-Dealer") submitted
a Bid on behalf of a Potential Holder, whether such Bid was accepted
or rejected, in whole or in part, and the principal amount of Taxable
Auction Rate Series 1997-1 Notes, if any, to be purchased by such
Potential Holder;
(v) If the aggregate amount of Taxable Auction Rate Series 1997-1
Notes to be sold by all Existing Holders on whose behalf such Seller's
Broker-Dealer submitted Bids or Sell Orders exceeds the aggregate
principal amount of Taxable Auction Rate Series 1997-1 Notes to be
purchased by all Potential Holders on whose behalf such Buyer's
Broker-Dealer submitted a Bid, the name or names of one or more
Buyer's Broker-Dealers (and the name of the Participant, if any, of
each such Buyer's Broker-Dealer) acting for one or more purchasers of
such
G-1
<PAGE>
excess principal amount of Taxable Auction Rate Series 1997-1
Notes and the principal amount of Taxable Auction Rate Series 1997-1
Notes to be purchased from one or more Existing Holders on whose
behalf such Seller's Broker-Dealer acted by one or more Potential
Holders on whose behalf each of such Buyer's Broker-Dealers acted;
(vi) if the principal amount of Taxable Auction Rate Series 1997-
1 Notes to be purchased by all Potential Holders on whose behalf such
Buyer's Broker-Dealer submitted a Bid exceeds the amount of Taxable
Auction Rate Series 1997-1 Notes to be sold by all Existing Holders on
whose behalf such Seller's Broker-Dealer submitted a Bid or a Sell
Order, the name or names of one or more Seller's Broker-Dealers (and
the name of the Participant, if any, of each such Seller's Broker-
Dealer) acting for one or more sellers of such excess principal amount
of Taxable Auction Rate Series 1997-1 Notes and the principal amount
of Taxable Auction Rate Series 1997-1 Notes to be sold to one or more
Potential Holders on whose behalf such Buyer's Broker-Dealer acted by
one or more Existing Holders on whose behalf each of such Seller's
Broker-Dealers acted; and
(vii) the Auction Date for the next succeeding Auction.
(b) On each Auction Date, each Broker-Dealer that submitted an Order
on behalf of any Existing Holder or Potential Holder shall:
(i) advise each Existing Holder and Potential Holder on whose
behalf such Broker-Dealer submitted a Bid or Sell Order in the Auction
on such Auction Date whether such Bid or Sell Order was accepted or
rejected, in whole or in part;
(ii) in the case of a Broker-Dealer that is a Buyer's Broker-
Dealer, advise each Potential Holder on whose behalf such Buyer's
Broker-Dealer submitted a Bid that was accepted, in whole or in part,
to instruct such Potential Holder's Participant to pay such Buyer's
Broker-Dealer (or its Participant) through the Securities Depository
the amount necessary to purchase the principal amount of Taxable
Auction Rate Series 1997-1 Notes to be purchased pursuant to such Bid
against receipt of such Taxable Auction Rate Series 1997-1 Notes;
(iii) in the case of a Broker-Dealer that is a Seller's Broker-
Dealer, instruct each Existing Holder on whose behalf such Seller's
Broker-Dealer submitted a Sell Order that was accepted, in whole or in
part, or a Bid that was accepted, in whole or in part, to instruct
such Existing Holder's Participant to deliver to such Seller's Broker-
Dealer (or its
G-2
<PAGE>
Participant) through the Securities Depository the principal amount of
Taxable Auction Rate Series 1997-1 Notes to be sold pursuant to such
Order against payment therefor;
(iv) advise each Existing Holder on whose behalf such Broker-
Dealer submitted an Order and each Potential Holder on whose behalf
such Broker-Dealer submitted a Bid of the Auction Rate for the next
Interest Period;
(v) advise each Existing Holder on whose behalf such Broker-
Dealer submitted an Order of the next Auction Date; and
(vi) advise each Potential Holder on whose behalf such Broker-
Dealer submitted a Bid that was accepted, in whole or in part, of the
next Auction Date.
(c) On the basis of the information provided to it pursuant to
paragraph (a) above, each Broker-Dealer that submitted a Bid or Sell Order
in an Auction is required to allocate any funds received by it in
connection with such Auction pursuant to paragraph (b)(ii) above, and any
Taxable Auction Rate Series 1997-1 Notes received by it in connection with
such Auction pursuant to paragraph (b)(iii) above among the Potential
Holders, if any, on whose behalf such Broker-Dealer submitted Bids, the
Existing Holders, if any, on whose behalf such Broker-Dealer submitted Bids
or Sell Orders in such Auction, and any Broker-Dealers identified to it by
the Auction Agent following such Auction pursuant to paragraph (a)(v) or
(a)(vi) above.
(d) On each Auction Date:
(i) each Potential Holder and Existing Holder with an Order in
the Auction on such Auction Date shall instruct its Participant as
provided in paragraph (b)(ii) or (b)(iii) above, as the case may be;
(ii) each Seller's Broker-Dealer that is not a Participant of
the Securities Depository shall instruct its Participant to deliver
such Taxable Auction Rate Series 1997-1 Notes through the Securities
Depository to a Buyer's Broker-Dealer (or its Participant) identified
to such Seller's Broker-Dealer pursuant to paragraph (a)(v) above
against payment therefor; and
(iii) each Buyer's Broker-Dealer that is not a Participant in the
Securities Depository shall instruct its Participant to pay through
the Securities Depository to Seller's Broker-Dealer (or its
Participant) identified following such Auction pursuant to (a)(vi)
above in the
G-3
<PAGE>
amount necessary to purchase Taxable Auction Rate Series
1997-1 Notes to be purchased pursuant to paragraph (b)(ii) above
against receipt of such Taxable Auction Rate Series 1997-1 Notes.
(e) On the Business Date following each Auction Date:
(i) each Participant for a Bidder in the Auction on such
Auction Date referred to in paragraph (d)(i) above shall instruct the
Securities Depository to execute the transactions described under
paragraph (b)(ii) or (b)(iii) above for such Auction, and the
Securities Depository shall execute such transactions;
(ii) each Seller's Broker-Dealer or its Participant shall
instruct the Securities Depository to execute the transactions
described in paragraph (d)(ii) above for such Auction, and the
Securities Depository shall execute such transactions; and
(iii) each Buyer's Broker-Dealer or its Participant shall
instruct the Securities Depository to execute the transactions
described in paragraph (d)(iii) above for such Auction, and the
Securities Depository shall execute such transactions.
(f) If an Existing Holder selling Taxable Auction Rate Series 1997-1
Notes in an Auction fails to deliver such Taxable Auction Rate Series 1997-
1 Notes (by authorized book-entry), a Broker-Dealer may deliver to the
Potential Holder on behalf of which it submitted a Bid that was accepted a
principal amount of Taxable Auction Rate Series 1997-1 Notes that is less
than the principal amount of Taxable Auction Rate Series 1997-1 Notes that
otherwise was to be purchased by such Potential Holder. In such event, the
principal amount of Taxable Auction Rate Series 1997-1 Notes to be so
delivered shall be determined solely by such Broker-Dealer (but only in
Authorized Denominations). Delivery of such lesser principal amount of
Taxable Auction Rate Series 1997-1 Notes shall constitute good delivery.
Notwithstanding the foregoing terms of this paragraph (f), any delivery or
nondelivery of Taxable Auction Rate Series 1997-1 Notes which shall
represent any departure from the results of an Auction, as determined by
the Auction Agent, shall be of no effect unless and until the Auction Agent
shall have been notified of such delivery or nondelivery in accordance with
the provisions of the Auction Agent Agreement and the Broker-Dealer
Agreements. Neither the Trustee nor the Auction Agent will have any
responsibility or liability with respect to the failure of a Potential
Holder, Existing Holder or their respective Broker-Dealer or Participant to
take delivery of or deliver, as the case may be, the principal amount of
Taxable
G-4
<PAGE>
Auction Rate Series 1997-1 Notes purchased or sold pursuant to an Auction
or otherwise.
G-5
<PAGE>
EXHIBIT H
TO AUCTION AGENT AGREEMENT
--------------------------
NOTICE OF CONTINUATION OF AUCTION PERIOD
----------------------------------------
EDUCATION LOANS INCORPORATED
TAXABLE AUCTION RATE STUDENT LOAN ASSET-BACKED NOTES
SENIOR SERIES 1997-1G[H]
NOTICE IS HEREBY GIVEN that a condition for the establishment of a
change in the length of one or more Auction Periods for the captioned Taxable
Auction Rate Series 1997-1 Notes has not been met. An Auction will therefor be
held on the next Auction Date (___________________) and the length of such
Auction Period shall remain an Auction Period of _______ days.
BANKERS TRUST COMPANY, as
Auction Agent
By: _____________________
Title: ___________________
Date: ___________________
H-1
<PAGE>
EXHIBIT I
TO AUCTION AGENT AGREEMENT
--------------------------
NOTICE OF AUCTION RATE SERIES 1997-1 NOTE INTEREST RATE
-------------------------------------------------------
EDUCATION LOANS INCORPORATED
TAXABLE AUCTION RATE STUDENT LOAN ASSET-BACKED NOTES
SENIOR SERIES 1997-1G[H]
NOTICE IS HEREBY GIVEN that [the Corporation Certificate and the
Trustee written statements, if any,] [Sufficient Bids] necessary for the
establishment of a change in the length of one or more Auction Periods for the
captioned Taxable Auction Rate Series 1997-1 Notes have not been provided. The
Auction Rate Series 1997-1 Note Interest Rate for the Auction Period commencing
on ______________ shall be the [Maximum Auction Rate] [Net Loan Rate] and such
Auction Period shall remain an Auction Period of _____ days.
BANKERS TRUST COMPANY, as
Auction Agent
By: _____________________
Title: ___________________
Date: ___________________
I-1
<PAGE>
EXHIBIT 4.4
Draft of 7/15/97
----------------
================================================================================
AUCTION AGENT AGREEMENT
(TAX EXEMPT AUCTION RATE SERIES 1997-1 NOTES)
by and among
EDUCATION LOANS INCORPORATED,
as Issuer,
FIRST BANK NATIONAL ASSOCIATION,
as Trustee,
and
BANKERS TRUST COMPANY,
as Auction Agent
________________________
Dated as of July 1, 1997
________________________
Relating to
$___________________________
EDUCATION LOANS INCORPORATED
TAX EXEMPT AUCTION RATE STUDENT LOAN ASSET-BACKED NOTES
SENIOR SERIES 1997-1A, B, C, D AND E
================================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
Page
----
Section 1. Definitions and Rules of Construction........................... 2
1.1 Terms Defined by Reference to First Supplemental Indenture...... 2
1.2 Terms Defined Herein............................................ 2
1.3 Rules of Construction........................................... 4
Section 2. The Auction..................................................... 4
2.1 Interest Rate on Tax Exempt Auction Rate Series 1997-1 Notes;
Incorporation by Reference of Auction Procedures
and Settlement Procedures..................................... 4
2.2 Preparation of Each Auction; Maintenance of
Existing Holder Registry...................................... 5
2.3 Maximum Auction Rates, All Hold Rates, After-Tax
Equivalents, "AA" Composite Commercial Paper Rates,
Indexes and Applicable Percentages............................ 8
2.4 Auction Schedule................................................ 9
2.5 Changes in Auction Periods, Auction Date or Percentages
Used in Determining Maximum Auction Rate, All Hold
Rate and Non-Payment Rate..................................... 10
2.6 Notice of Fee Rate Change....................................... 11
2.7 Notices to Existing Holders..................................... 11
2.8 Payment Default................................................. 12
2.9 Broker-Dealers.................................................. 12
2.10 Access to and Maintenance of Auction Records.................... 12
Section 3. Term of Agreement............................................... 13
Section 4. Trustee......................................................... 14
Section 5. Representations and Warranties of the Trustee................... 14
Section 6. The Auction Agent............................................... 15
6.1 Duties and Responsibilities..................................... 15
6.2 Rights of the Auction Agent..................................... 15
6.3 Auction Agent's Disclaimer...................................... 16
6.4 Compensation, Remedies and Indemnification...................... 16
6.5 Compensation of the Broker-Dealers.............................. 17
Section 7. Miscellaneous................................................... 18
7.1 Governing Law................................................... 18
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C> <C>
7.2 Communications................................................ 18
7.3 Entire Agreement.............................................. 20
7.4 Benefits...................................................... 20
7.5 Amendment; Waiver............................................. 20
7.6 Successor and Assigns......................................... 20
7.7 Severability.................................................. 20
7.8 Execution in Counterparts..................................... 21
</TABLE>
Exhibits
- --------
Exhibit A -- List of Initial Broker-Dealers
Exhibit B -- Broker-Dealer Agreement
Exhibit C -- Notice of Continuation of Percentage Used in Determining Maximum
Auction Rate, All Hold Rate or Non-Payment Rate
Exhibit D -- Notice of Tax Exempt Auction Rate Series 1997-1 Notes Outstanding
Exhibit E -- Notice of Fee Rate Change
Exhibit F -- Notice of a Payment Default
Exhibit G -- Settlement Procedures
Exhibit H -- Notice of Continuation of Auction Period
Exhibit I -- Notice of Auction Rate Series 1997-1 Note Interest Rate
Exhibit J -- Notice of Ratings
-ii-
<PAGE>
THIS AUCTION AGENT AGREEMENT (TAX EXEMPT AUCTION RATE SERIES 1997-1
NOTES), dated as of July 1, 1997 (this "Auction Agent Agreement"), is being
entered into by and among EDUCATION LOANS INCORPORATED, a South Dakota
corporation (together with any successors or assigns, the "Issuer"), FIRST BANK
NATIONAL ASSOCIATION, Minneapolis, Minnesota, a national banking association
duly established and existing under the laws of the United States of America, as
Trustee (together with any successors or assigns, the "Trustee") under a certain
First Supplemental Indenture of Trust, as hereinafter defined and described, and
BANKERS TRUST COMPANY, a New York banking corporation (together with its
successors and assigns, the "Auction Agent"), acting not in its individual
capacity but solely as agent for the Issuer.
W I T N E S S E T H:
WHEREAS, the Issuer proposes to cause the Trustee to authenticate and
deliver $_______________________ aggregate principal amount of its Student Loan
Asset-Backed Notes, Series 1997-1, including therein five series designated Tax
Exempt Auction Rate Student Loan Asset-Backed Notes, Senior Series 1997-1A (the
"Series 1997-1A Notes"), Tax Exempt Auction Rate Student Loan Asset-Backed
Notes, Senior Series 1997-1B (the "Series 1997-1B Notes"), Tax Exempt Auction
Rate Student Loan Asset-Backed Notes, Senior Series 1997-1C (the "Series 1997-1C
Notes"), Tax Exempt Auction Rate Student Loan Asset-Backed Notes, Senior Series
1997-1D (the "Series 1997-1D Notes") and Tax Exempt Auction Rate Student Loan
Asset-Backed Notes, Senior Series 1997-1E (the "Series 1997-1E Notes" and,
together with the Series 1997-1A Notes, the Series 1997-1B Notes, the Series
1997-1C Notes and the Series 1997-1D Notes, the "Tax Exempt Auction Rate Series
1997-1 Notes"). The Tax Exempt Auction Rate Series 1997-1 Notes are being
issued under the First Supplemental Indenture of Trust, dated as of July 1, 1997
(the "First Supplemental Indenture"), by and between the Issuer and the Trustee
and executed pursuant to an Indenture of Trust, dated as of July 1, 1997 (the
"Original Indenture"), by and between the Trustee and the Issuer; and
WHEREAS, pursuant to Section 8 of the First Supplemental Indenture, the
Auction Agent has been appointed to act in the capacities set forth in this
Auction Agent Agreement; and
WHEREAS, the Trustee is entering into this Auction Agent Agreement at the
direction of the Issuer pursuant to the terms of the First Supplemental
Indenture;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the Issuer, the Trustee and the Auction Agent agree as
follows:
-1-
<PAGE>
Section 1. Definitions and Rules of Construction.
1.1 Terms Defined by Reference to First Supplemental Indenture.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings given such terms in the First Supplemental Indenture.
1.2 Terms Defined Herein. As used herein and in the Settlement
Procedures (as defined below), the following terms shall have the following
meanings, unless the context otherwise requires:
"Auction" shall have the meaning specified in Section 2.1 hereof.
"Auction Agent Fee" shall have meaning specified in Section 6.4(b)
hereof.
"Auction Agent Fee Rate" shall mean the rate per annum determined
pursuant to Section 6.4(b) hereof, as the same may be changed from time to time
in accordance with Section 6.4(b) hereof, at which the fee to be paid to the
Auction Agent for services rendered by it hereunder and under the Broker-Dealer
Agreements accrues pursuant to Section 6.4(b) hereof.
"Auction Procedures" shall mean the provisions that are set forth in
Sections 4 through 11, inclusive, of the First Supplemental Indenture.
"Authorized Auction Agent Officer" shall mean, with respect to the
Auction Agent, each Managing Director, Vice President, Assistant Vice President
and Assistant Treasurer of the Auction Agent and every other officer of the
Auction Agent assigned to its Corporate Trust and Agency Group and every other
officer or employee of the Auction Agent designated as an "Authorized Auction
Agent Officer" for purposes hereof in a communication to the Trustee and the
Issuer.
"Authorized Issuer Officer" shall mean, with respect to the
Issuer, the Chairman of the Board of Directors, the President, any Vice
President or the Secretary of the Issuer or any other person designated in
writing by the Board of Directors of the Issuer to the Auction Agent from time
to time, which writing may limit the functions which such other person may
undertake as an Authorized Issuer Officer hereunder.
"Authorized Trustee Representative" shall mean each Vice President,
Assistant Vice President or Trust Officer in the Corporate Trust Department of
the Trustee and every other officer or employee of the Trustee designated as an
"Authorized Trustee Representative" for purposes hereof in a written
communication to the Auction Agent and the Issuer.
-2-
<PAGE>
"Broker-Dealer" shall mean a person listed on Exhibit A hereto, as
such Exhibit A may be amended from time to time.
"Broker-Dealer Agreement" shall mean each agreement between the
Auction Agent and a Broker-Dealer substantially in the form attached hereto as
Exhibit B.
"Broker-Dealer Fee" shall have the meaning specified in Section 6.5(a)
hereof.
"Broker-Dealer Fee Rate" shall have the meaning specified in Section
6.5(b) hereof.
"Business Day" shall mean a day of the year on which (i) banks located
in the city in which the Principal Office of the Trustee is located are not
required or authorized to remain closed, (ii) banks located in the city in which
the Principal Office of the Auction Agent, as set forth in Section 7.2 hereof,
is located are not required or authorized to remain closed, (iii) banks located
in the city in which the Principal Office of each Broker-Dealer, as set forth in
and for purposes of the applicable Broker-Dealer Agreement, is located are not
required or authorized to remain closed and (iv) The New York Stock Exchange is
not closed.
"Existing Holder Registry" shall mean the register maintained by the
Auction Agent pursuant to Section 2.2 hereof.
"Notice of Failure to Deliver or Make Payment" shall mean a notice
substantially in the form of Exhibit D to the Broker-Dealer Agreement.
"Notice of Fee Rate Change" shall mean a notice substantially in the
form of Exhibit E hereof.
"Notice of Payment Default" shall mean a notice substantially in the
form of Exhibit F hereto.
"Notice of Ratings" shall mean a notice substantially in the form of
Exhibit J hereto.
"Notice of Tax Exempt Auction Rate Series 1997-1 Notes Outstanding"
shall mean a notice substantially in the form of Exhibit D hereto.
"Notice of Transfer" shall mean a notice substantially in the form of
Exhibit C to the Broker-Dealer Agreement.
-3-
<PAGE>
"Participant" shall mean a member of, or participant in, the
Securities Depository.
"Settlement Procedures" shall mean the Settlement Procedures attached
as Exhibit G hereto.
1.3 Rules of Construction. Unless the context or use indicates
another or different meaning or intent, the following rules shall apply to the
construction of this Auction Agent Agreement:
(a) Words importing the singular number shall include the plural
number and vice versa.
(b) The captions and headings herein are solely for convenience of
reference and shall not constitute a part of this Auction Agent Agreement
nor shall they affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto" and other words of similar
import refer to this Auction Agent Agreement as a whole.
(d) All references herein to a particular time of day shall be to New
York City time.
(e) The rights and duties of the Trustee, the Auction Agent and the
Issuer under this Auction Agent Agreement shall apply to the Series 1997-1A
Notes, the Series 1997-1B Notes, the Series 1997-1C Notes, the Series 1997-
1D Notes and the Series 1997-1E Notes, but separately in each case.
References to "Tax Exempt Auction Rate Series 1997-1 Notes" shall, unless
the context clearly contemplates a reference to all the Tax Exempt Auction
Rate Series 1997-1 Notes, be deemed to refer only to a particular series of
Tax Exempt Auction Rate Series 1997-1 Notes.
Section 2. The Auction.
2.1 Interest Rate on Tax Exempt Auction Rate Series 1997-1 Notes;
Incorporation by Reference of Auction Procedures and Settlement Procedures.
(a) During the Initial Interest Period, each of the Series 1997-1A
Notes, the Series 1997-1B Notes, the Series 1997-1C Notes, the Series 1997-
1D Notes and the Series 1997-1E Notes shall bear interest at the Tax Exempt
Auction Rate Series 1997-1 Note Initial Interest Rate for such series.
Thereafter, the Tax Exempt Auction Rate Series 1997-1 Notes shall bear
interest at the Auction Rate Series 1997-1 Note Interest Rate based on an
Interest Period that shall be an Auction Period. The Auction Rate Series
1997-1 Note Interest Rate
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on each series of the Tax Exempt Auction Rate Series 1997-1 Notes for each
Auction Period shall be the Auction Rate determined in accordance with
Sections 3 through 12 of the First Supplemental Indenture (not to exceed
14% per annum). Pursuant to Section 8 of the First Supplemental Indenture,
the Issuer has duly appointed Bankers Trust Company as Auction Agent for
purposes of the Auction Procedures and to perform such other obligations
and duties as are herein set forth. Bankers Trust Company hereby accepts
such appointment and agrees that, on each Auction Date, it shall follow the
procedures set forth in this Section 2 and the Auction Procedures for the
purpose of, among other things, determining the Auction Rate, and
ultimately the Auction Rate Series 1997-1 Note Interest Rate for each
series of the Tax Exempt Auction Rate Series 1997-1 Notes for each Auction
Period other than the Initial Interest Period. Each periodic operation of
such procedures is hereinafter referred to as an "Auction."
(b) All of the provisions contained in the Auction Procedures and the
Settlement Procedures are incorporated herein by reference in their
entirety and shall be deemed to be a part hereof to the same extent as if
such provisions were fully set forth herein.
2.2 Preparation of Each Auction; Maintenance of Existing Holder
Registry.
(a) A list of Broker-Dealers (showing Smith Barney Inc. as the sole
initial Broker-Dealer) is attached as Exhibit A to this Auction Agent
Agreement. Not later than seven days prior to any Auction Date for which
any change in such list of Broker-Dealers is to be effective, the Trustee,
at the direction of an Authorized Issuer Officer, will notify the Auction
Agent in writing of such change and, if any such change is the addition of
a Broker-Dealer to such list, shall cause to be delivered to the Auction
Agent for execution by the Auction Agent a Broker-Dealer Agreement manually
signed by such Broker-Dealer. The Auction Agent shall have entered into a
Broker-Dealer Agreement with each Broker-Dealer prior to the participation
of any such Broker-Dealer in any Auction.
(b) In the event that any day that is scheduled to be an Auction Date
shall be changed after the Auction Agent shall have given the notice of
such Auction Date pursuant to clause (vii) of paragraph (a) of the
Settlement Procedures, the Auction Agent, by such means as the Auction
Agent deems practicable, shall give notice of such change to the Broker-
Dealers not later than the earlier of 9:15 a.m., New York City time, on the
new Auction Date and 9:15 a.m., New York City time, on the old Auction
Date.
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(c) (i) The Auction Agent shall maintain a current registry of
Persons that are Broker-Dealers, compiled initially on the Closing
Date as described below, and that hold Tax Exempt Auction Rate Series
1997-1 Notes, for purposes of dealing with the Auction Agent in
connection with an Auction (such registry being herein called the
"Existing Holder Registry"). Such Persons shall constitute the
"Existing Holders" for purposes of dealing with the Auction Agent in
connection with an Auction. The Auction Agent shall indicate in the
Existing Holder Registry for each Existing Holder the identity of the
Broker-Dealer which submitted the most recent Order in any Auction
which resulted in such Existing Holder continuing to hold or
purchasing the Tax Exempt Auction Rate Series 1997-1 Notes. Pursuant
to the Broker-Dealer Agreement, Smith Barney Inc., as the sole initial
Broker-Dealer, has agreed to provide to the Auction Agent on the
Closing Date the names and addresses of the Persons who are to be
initially listed on the Existing Holder Registry as constituting the
initial Existing Holders of Tax Exempt Auction Rate Series 1997-1
Notes for purposes of dealing with the Auction Agent in connection
with an Auction. The Auction Agent may rely upon, as evidence of the
identities of the Existing Holders, such list, the results of each
Auction and notices from any Existing Holder, Participant of any
Existing Holder or Broker-Dealer of any Existing Holder as described
in Section 2.2(c)(iii) hereof.
(ii) The Trustee shall notify the Auction Agent when any notice
of redemption of Tax Exempt Auction Rate Series 1997-1 Notes is sent
to the Securities Depository as the Holder of Tax Exempt Auction Rate
Series 1997-1 Notes not later than 11:00 a.m., New York City time, on
the date such notice is sent. Such notice with respect to a
redemption shall be substantially in the form of Exhibit D hereto,
Notice of Tax Exempt Auction Rate Series 1997-1 Notes Outstanding. In
the event the Auction Agent receives from the Trustee written notice
of any partial redemption of any Tax Exempt Auction Rate Series 1997-1
Notes, the Auction Agent shall, at least two Business Days prior to
the next Auction, request each Participant to disclose to the Auction
Agent (upon selection by such Participant of the Existing Holders
whose Tax Exempt Auction Rate Series 1997-1 Notes are to be redeemed)
the aggregate principal amount of such Tax Exempt Auction Rate Series
1997-1 Notes of each such Existing Holder, if any, which are to be
redeemed; provided the Auction Agent has been furnished with the name
and telephone number of a person or department at such Participant
from which it is to request such information. In the absence of
receiving any such information with respect to any Existing Holder,
from such Existing Holder's Participant or otherwise, the Auction
Agent may continue to treat such Existing Holder as the
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beneficial owner of the principal amount of Tax Exempt Auction Rate
Series 1997-1 Notes shown in the Existing Holder Registry.
(iii) The Auction Agent shall be required to register in the
Existing Holder Registry a transfer of Tax Exempt Auction Rate Series
1997-1 Notes from an Existing Holder to another Person only if such
transfer is made to a Person through a Broker-Dealer and if (A) such
transfer is pursuant to an Auction or (B) the Auction Agent has been
notified in writing (1) in a notice substantially in the form of a
Notice of Transfer by such Existing Holder, by the Participant of such
Existing Holder or by the Broker-Dealer of such Existing Holder of
such transfer, or (2) in a notice substantially in the form of a
Notice of Failure to Deliver or Make Payment by the Broker-Dealer of
any Person that purchased or sold Tax Exempt Auction Rate Series 1997-
1 Notes in an Auction of the failure of such Tax Exempt Auction Rate
Series 1997-1 Notes to be transferred as a result of the Auction. The
Auction Agent is not required to accept any Notice of Transfer or
Notice of Failure to Deliver or Make Payment delivered prior to an
Auction unless it is received by the Auction Agent by 3:00 p.m., New
York City time, on the Business Day next preceding the applicable
Auction Date.
(d) The Auction Agent may request that the Broker-Dealers, as set
forth in the Broker-Dealer Agreements, provide the Auction Agent with the
aggregate principal amount of Tax Exempt Auction Rate Series 1997-1 Notes
held by such Broker-Dealers for purposes of the Existing Holder Registry,
as well as with a list of their respective customers that such Broker-
Dealers believe are Existing Holders of the Tax Exempt Auction Rate Series
1997-1 Notes and the aggregate principal amount of Tax Exempt Auction Rate
Series 1997-1 Notes beneficially owned by each such customer. Except as
permitted by Section 2.10 hereof, the Auction Agent shall keep confidential
any such information and shall not disclose any such information so
provided to any person other than the relevant Broker-Dealer, the Issuer
and the Trustee, provided that the Auction Agent reserves the right to
disclose any such information if it is advised by its counsel that its
failure to do so would be unlawful.
(e) The Auction Agent shall send by telecopy or other means a copy of
any Notice of Tax Exempt Auction Rate Series 1997-1 Notes Outstanding
received from the Trustee to each Broker-Dealer in accordance with Section
4.3 of the applicable Broker-Dealer Agreement.
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2.3 Maximum Auction Rates, All Hold Rates, After-Tax Equivalents,
"AA" Composite Commercial Paper Rates, Indexes and Applicable Percentages.
(a) On each Auction Date, the Auction Agent shall determine the
Maximum Auction Rate, the All Hold Rate, the After-Tax Equivalent, the "AA"
Composite Commercial Paper Rate, the Index (unless the Index is to be
determined by the Market Agent) and the Applicable Percentage. Not later
than 9:30 a.m., New York City time, on each Auction Date, the Auction Agent
shall notify the Trustee and the Broker-Dealers of the Maximum Auction
Rate, the All Hold Rate, the After-Tax Equivalent, the "AA" Composite
Commercial Paper Rate, the Index (unless the Index is to be determined by
the Market Agent) and the Applicable Percentage so determined. On or
within three Business Days after the Closing Date, the Issuer shall give
written notice to the Auction Agent of the initial ratings on the Tax
Exempt Auction Rate Series 1997-1 Notes by Moody's and Fitch substantially
in the form of the Notice of Ratings. Thereafter, if there is a change in
one of both of such ratings, the Issuer shall give written notice to the
Auction Agent substantially in the form of the Notice of Ratings within
three Business Days of its receipt of notice of such change, but not later
than the close of business on the Business Day immediately preceding an
Auction Date if the Issuer has received written notice of such change in a
rating or ratings prior to 12:00 noon, New York City time, on such Business
Day, and the Auction Agent shall take into account such change in rating or
ratings for purposes hereof and any Auction so long as such Notice of
Ratings is received by the Auction Agent no later than the close of
business on such Business Day.
(b) (i) If, on any Auction Date for an Auction Period, an Auction is
not held for any reason, then the Auction Rate Series 1997-1 Note
Interest Rate for the next succeeding Auction Period shall be the
Maximum Auction Rate.
(ii) If the ownership of the Tax Exempt Auction Rate Series
1997-1 Notes is no longer maintained in Book-Entry Form by the
Securities Depository, no further Auctions shall be held and the
Auction Rate Series 1997-1 Note Interest Rate for each Interest Period
commencing after the delivery of certificated Tax Exempt Auction Rate
Series 1997-1 Notes pursuant to Section 17 of the First Supplemental
Indenture shall equal the Maximum Auction Rate as determined by the
Trustee on the Business Day immediately preceding the first day of
such subsequent Interest Period as provided in Section 3(A) of the
First Supplemental Indenture.
(iii) If a Payment Default shall have occurred with respect to a
series of Tax Exempt Auction Rate Series 1997-1 Notes, the Auction
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Rate Series 1997-1 Note Interest Rate with respect to such series for
each Interest Period commencing on or immediately after the occurrence
of such Payment Default, and for each Interest Period thereafter, to
and including the Interest Period, if any, during which, or commencing
less than two Business Days after, such Payment Default is cured,
shall equal the Non-Payment Rate, as determined by the Trustee on the
first day of such Interest Period as provided in Section 3(A) of the
First Supplemental Indenture. The Auction Rate Series 1997-1 Note
Interest Rate for each Interest Period commencing at least two
Business Days after any cure of a Payment Default shall be determined
through implementation of the Auction Procedures.
2.4 Auction Schedule. The Auction Agent shall conduct Auctions on
the Auction Date in accordance with the schedule set forth below. Such schedule
may be changed by the Auction Agent with the consent of the Trustee and the
Market Agent, which consent shall not be unreasonably withheld or delayed. The
Auction Agent shall give notice pursuant to Section 4.3 of the applicable
Broker-Dealer Agreement of any such change to each Broker-Dealer. Such notice
shall be given prior to the first Auction Date on which any such change shall be
effective.
By 9:30 a.m. The Auction Agent advises the Trustee and the
Broker-Dealers of the Maximum Auction Rate, the All
Hold Rate, the After-Tax Equivalent, the "AA"
Composite Commercial Paper Rate, the Index and the
Applicable Percentage to be used in determining the
Auction Rate under the Auction Procedures, the
First Supplemental Indenture and this Auction Agent
Agreement.
9:30 a.m. - 12:30 p.m. The Auction Agent assembles information
communicated to it by Broker-Dealers as provided in
Section 4(c)(i) of the First Supplemental
Indenture. The Submission Deadline is 12:30 p.m.,
New York City time.
Not earlier than The Auction Agent makes the determination pursuant
12:30 p.m. to Section 4(c)(i) of the First Supplemental
Indenture. Submitted Bids and Submitted Sell Orders
are accepted and rejected in whole or in part and
principal amount of Tax Exempt Auction Rate Series
1997-1 Notes is allocated as provided in
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Section 4(d) of the
First Supplemental Indenture.
By approximately The Auction Agent advises the Trustee and
3:00 p.m./1/ or the Broker-Dealers of the results of
4:00 p.m./2/ the Auction as provided in Section 4(c)(ii)
of the First Supplemental Indenture.
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/1/ If the Auction Rate Series 1997-1 Note Interest Rate is the Auction Rate.
/2/ If the Auction Rate Series 1997-1 Note Interest Rate is the Maximum
Auction Rate.
The Auction Agent shall follow the notification procedures set forth
in paragraph (a) of the Settlement Procedures.
2.5 Changes in Auction Periods, Auction Date or Percentages Used in
Determining Maximum Auction Rate, All Hold Rate and Non-Payment Rate.
(a) Changes in Auction Period or Periods.
(i) The Auction Agent shall mail any notice delivered to it
pursuant to the first paragraph of Section 10(a) of the First
Supplemental Indenture to the Existing Holders within two Business
Days of its receipt thereof.
(ii) The Auction Agent shall deliver any certificate delivered
to it pursuant to the third paragraph of Section 10(a) of the First
Supplemental Indenture to the Broker-Dealers not later than 3:00 p.m.,
New York City time, on the last Business Day preceding the next
Auction Date by telecopy or similar means.
(iii) If, after delivery to the Auction Agent of the notice
referred to in the first paragraph of Section 10(a) of the First
Supplemental Indenture, the Auction Agent fails to receive the
certificate referred to in the third paragraph of Section 10(a) of the
First Supplemental Indenture by 11:00 a.m., New York City time, on the
last Business Day preceding the next Auction Date, the Auction Agent
shall deliver a notice of such failure in substantially the form of
Exhibit H hereto to the Broker-Dealers not later than 3:00 p.m., New
York City time, on such Business Day by telecopy or other similar
means.
(iv) If, after delivery to the Auction Agent of the notice
referred to in the third paragraph of Section 10(a) and the
certificate referred to in the third paragraph of Section 10(a) of the
First Supplemental
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Indenture, Sufficient Bids are not received by the Auction Agent by
the Submission Deadline, the Auction Agent shall notify the Broker-
Dealers not later than 3:00 p.m., New York City time, on such Auction
Date by telephone confirmed in writing in substantially the form of
Exhibit I hereto the next Business Day.
(b) Changes in Auction Date. The Auction Agent shall mail any notice
delivered to it pursuant to Section 11 of the First Supplemental Indenture
to the Broker-Dealers within three Business Days of its receipt thereof.
(c) Changes in Percentages Used in Determining Maximum Auction Rate,
All Hold Rate and Non-Payment Rate.
(i) The Auction Agent shall mail any notice delivered to it
pursuant to the second paragraph of Section 10(b) of the First
Supplemental Indenture to the Existing Holders within two Business
Days of its receipt thereof.
(ii) The Auction Agent shall deliver any certificate delivered
to it pursuant to the third paragraph of Section 10(b) of the First
Supplemental Indenture to the Broker-Dealers not later than 3:00 p.m.,
New York City time, on the last Business Day preceding the next
Auction Date by telecopy or similar means.
(iii) If, after delivery to the Auction Agent of the notice
referred to in the second paragraph of Section 10(b) of the First
Supplemental Indenture, the Auction Agent fails to receive the
certificate referred to in the third paragraph of Section 10(b) of the
First Supplemental Indenture by 11:00 a.m., New York City time, on the
last Business Day preceding the next Auction Date, the Auction Agent
shall deliver a notice of such failure in substantially the form of
Exhibit C hereto to the Broker-Dealers not later than 3:00 p.m., New
York City time, on such Business Day by telecopy or other similar
means.
2.6 Notice of Fee Rate Change. If the Auction Agent Fee Rate is
changed pursuant to the provisions of Section 6.4(b) hereof or the Broker-Dealer
Fee Rate is changed pursuant to the provisions of 6.5(b) hereof, the Auction
Agent shall mail a Notice of Fee Rate Change (i) to the Trustee with respect to
a change in the Auction Agent Fee Rate and the Broker-Dealer Fee Rate and (ii)
to the Broker-Dealers with respect to a change in the Broker-Dealer Fee Rate, in
each case within two Business Days of such change.
2.7 Notices to Existing Holders. The Auction Agent shall be entitled
to rely upon the address of each Broker-Dealer as provided in Section 4.3 of the
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applicable Broker-Dealer Agreement in connection with any notice to each Broker-
Dealer, as an Existing Holder, required to be given by the Auction Agent.
2.8 Payment Default.
(a) After delivery by the Trustee to the Auction Agent of a notice
that a Payment Default shall have occurred, the Auction Agent shall, on the
Business Day following its receipt of the same, deliver a Notice of Payment
Default to the Broker-Dealers by telecopy or other similar means.
(b) The Auction Agent shall deliver a copy of any notice received by
it from the Trustee to the effect that a Payment Default has been cured to
the Broker-Dealers on the Business Day following its receipt of the same by
telecopy or other similar means.
2.9 Broker-Dealers.
(a) If the Auction Agent is provided with a copy of a Broker-Dealer
Agreement, which has been manually signed, with any person listed on
Exhibit A hereto to which the Trustee, at the direction of an Authorized
Issuer Officer, shall have consented, it shall enter into such Broker-
Dealer Agreement with such person. The Issuer hereby directs the Trustee
to consent to Smith Barney Inc. as the sole initial Broker-Dealer.
(b) The Auction Agent may, at the written direction of an Authorized
Issuer Officer, and with the approval of Smith Barney Inc., so long as
Smith Barney Inc. is acting as a Broker-Dealer, enter into a Broker-Dealer
Agreement with any other person who requests to be selected to act as a
Broker-Dealer. The Auction Agent shall have entered into a Broker-Dealer
Agreement with each Broker-Dealer prior to the participation of any such
Broker-Dealer in any Auction.
(c) The Auction Agent shall terminate any Broker-Dealer Agreement as
set forth therein at the direction of an Authorized Issuer Officer.
2.10 Access to and Maintenance of Auction Records. The Auction
Agent shall afford to the Trustee, the Issuer and their respective agents,
independent public accountants and counsel access, at reasonable times during
normal business hours, to review and make extracts or copies (at no cost to the
Auction Agent) of all books, records, documents and other information concerning
the conduct and results of Auctions, provided that any such agent, accountant or
counsel shall furnish the Auction Agent with a letter from the Trustee or the
Issuer requesting that the Auction Agent afford such person access. The Auction
Agent shall maintain records relating to any Auction for a period of two years
after such
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Auction (or for such longer period requested by the Trustee or the Issuer, not
to exceed four years after each Auction), and such records shall, in reasonable
detail, accurately and fairly reflect the actions taken by the Auction Agent
hereunder. At the end of such period, the Auction Agent shall deliver such
records to the Trustee. The Trustee and the Issuer agree to keep any information
regarding the conduct and results of the Auctions, including, without
limitation, information regarding customers of any Broker-Dealer, received from
the Auction Agent in connection with this Auction Agent Agreement confidential
and shall not disclose such information or permit the disclosure of such
information without the prior written consent of the applicable Broker-Dealer to
anyone except such agent, accountant or counsel engaged to audit or review the
results of Auctions as permitted by this Section 2.10. Any such agent,
accountant or counsel, before having access to such information, shall agree to
keep such information confidential and not to disclose such information or
permit disclosure of such information without the prior written consent of the
applicable Broker-Dealer, except as may otherwise be required by law.
Section 3. Term of Agreement.
(a) This Auction Agent Agreement shall terminate on the earlier to
occur of (i) the satisfaction and discharge of the First Supplemental
Indenture with respect to the Tax Exempt Auction Rate Series 1997-1 Notes
or this Auction Agent Agreement and (ii) the date on which this Auction
Agent Agreement is terminated in accordance with this Section 3. The
Trustee may terminate this Auction Agent Agreement in accordance with
Section 8(a) of the First Supplemental Indenture. The Auction Agent may
terminate this Auction Agent Agreement upon written notice to the Trustee,
the Issuer and the Market Agent on the date specified in such notice, which
date shall be no earlier than 90 days after the date of delivery of such
notice. Notwithstanding the foregoing, the provisions of Section 2 hereof
shall terminate upon the delivery of certificates representing Tax Exempt
Auction Rate Series 1997-1 Notes pursuant to Section 17 of the First
Supplemental Indenture. Notwithstanding the foregoing, the Auction Agent
may terminate this Agreement without further notice if, within 25 days
after notifying in writing the Trustee, the Issuer and the Market Agent
that it has not received payment of any Auction Agent Fee due it in
accordance with the terms hereof, the Auction Agent does not receive such
payment. Any resignation of the Auction Agent or termination of this
Auction Agent Agreement, other than as described in the preceding sentence
of this paragraph, shall not become effective until a successor Auction
Agent has been appointed and acceptance of such appointment by such
successor Auction Agent. The Issuer and the Trustee agree to diligently
proceed to appoint a successor Auction Agent. However, if a successor
Auction Agent shall not have been appointed within 60 days from the date of
such notice of resignation, the resigning Auction
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Agent may petition any court of competent jurisdiction for the appointment
of a successor Auction Agent.
(b) Except as otherwise provided in this Section 3(b), the respective
rights and duties of the Trustee, the Issuer and the Auction Agent under
this Auction Agent Agreement shall cease upon termination of this Auction
Agent Agreement. The Trustee's representations and warranties to the
Auction Agent under Section 5 hereof, and the Issuer's obligations to the
Auction Agent under Section 6.4 hereof and to the Broker-Dealers under
Section 6.5 hereof, shall survive the termination of this Auction Agent
Agreement subject to Section 4 hereof. Upon termination of this Auction
Agent Agreement, the Auction Agent shall, upon request, promptly deliver to
the Trustee copies of all books and records maintained by it with respect
to Tax Exempt Auction Rate Series 1997-1 Notes in connection with its
duties hereunder.
Section 4. Trustee. All privileges, rights and immunities given to
the Trustee in the First Supplemental Indenture are hereby extended to and
applicable to the Trustee's obligations hereunder.
Section 5. Representations and Warranties of the Trustee.
The Trustee hereby represents and warrants to the Auction Agent and
the Issuer as follows:
5.1 The Trustee (i) has been duly incorporated and is validly
existing and in good standing as a national banking association under the laws
of the United States, and (ii) has all necessary authority, approvals, consents
(whether from the Issuer or otherwise) to enter into and perform its obligations
under this Auction Agent Agreement. This Auction Agent Agreement has been duly
and validly authorized, executed and delivered by the Trustee and constitutes
the legal, valid, binding and enforceable obligation of the Trustee.
5.2 Neither the execution, delivery and performance of this Auction
Agent Agreement, the consummation of the transactions contemplated hereby nor
the fulfillment of or compliance with the terms and conditions of this Auction
Agent Agreement will conflict with, violate or result in a breach of, the terms,
conditions or provisions of, or constitute a default under, any law or
regulation, any order or decree of any court or public authority having
jurisdiction over the Trustee, or any mortgage, indenture, contract, agreement
or undertaking to which the Trustee is a party or by which it is bound, or the
organizational documents pursuant to which the Trustee has been created and
under which it is operating.
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5.3 All approvals, consents and orders of any governmental authority,
legislative body, board, agency or commission having jurisdiction over the
Trustee which would constitute a condition precedent to or the absence of which
would materially adversely affect the due performance by the Trustee of its
obligations under this Auction Agent Agreement have been obtained.
Section 6. The Auction Agent.
6.1 Duties and Responsibilities.
(a) The Auction Agent is acting solely as agent of the Issuer and
owes no fiduciary duties to any person (other than the Issuer) by reason of
this Auction Agent Agreement. The Auction Agent undertakes to perform such
duties and only such duties as are specifically set forth in this Auction
Agent Agreement, and no implied covenants or obligations shall be read into
this Auction Agent Agreement by means of the provisions of the First
Supplemental Indenture or otherwise against the Auction Agent.
(b) In the absence of bad faith or negligence on its part, the
Auction Agent shall not be liable for any action taken, suffered or omitted
or for any error of judgment made by it in the performance of its duties
under this Auction Agent Agreement. The Auction Agent shall not be liable
for any error of judgment made in good faith unless the Auction Agent shall
have been negligent in ascertaining the pertinent facts.
(c) The Auction Agent shall not agree to any amendment to a Broker-
Dealer Agreement without the prior written consent of the Issuer, which
consent shall not be unreasonably withheld.
6.2 Rights of the Auction Agent.
(a) The Auction Agent may rely and shall be protected in acting or
refraining from acting upon any communication authorized hereby and upon
any written instruction, notice, request, direction, consent, report,
certificate, form of bond certificate or other instrument, paper or
document believed by it to be genuine. The Auction Agent shall not be
liable for acting upon any telephone communication authorized hereby which
the Auction Agent believes in good faith to have been given by the Trustee
or by a Broker-Dealer. The Auction Agent may record telephone
communications with the Trustee or with Broker-Dealers or both.
(b) The Auction Agent may consult with counsel of its choice, and the
advice of such counsel shall be full and complete authorization and
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protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or
risk its own funds or otherwise incur or become exposed to financial
liability in the performance of its duties hereunder.
(d) The Auction Agent may perform its duties and exercise its rights
hereunder either directly or by or through agents or attorneys and shall
not be responsible for any misconduct or negligence on the part of any
agent or attorney appointed by it with due care hereunder.
6.3 Auction Agent's Disclaimer. The Auction Agent makes no
representation as to the correctness of the recitals in this Auction Agent
Agreement or the Broker-Dealer Agreement or the validity or adequacy of the Tax
Exempt Auction Rate Series 1997-1 Notes.
6.4 Compensation, Remedies and Indemnification.
(a) With respect to each series of Tax Exempt Auction Rate Series
1997-1 Notes, not later than 12:00 noon, New York City time, on the first
Interest Payment Date relating to such series, the Issuer, pursuant to
Section 5(b) of the First Supplemental Indenture, shall pay in arrears to
the Auction Agent, solely from moneys available therefor in the
Administration Fund, an amount in cash equal to the product of (i) the
Auction Agent Fee Rate times (ii) a fraction, the numerator of which is the
number of days from the Closing Date to such Interest Payment Date (or, if
such series of Tax Exempt Auction Rate Series 1997-1 Notes ceased to be
outstanding prior to such Interest Payment Date, the date on which such
series ceased to be outstanding) and the denominator of which is 360, times
(iii) the aggregate principal amount of Tax Exempt Auction Rate Series
1997-1 Notes of such series on the date of original issuance of the Series
1997-1 Notes.
(b) With respect to each series of Tax Exempt Auction Rate Series
1997-1 Notes any of which were outstanding at any time during the related
period, not later than 12:00 noon, New York City time, on each Interest
Payment Date thereafter relating to such series, the Issuer, pursuant to
Section 5(b) of the First Supplemental Indenture, shall pay in arrears to
the Auction Agent, solely from moneys available therefor in the
Administration Fund, an amount in cash equal to the product of (i) the
Auction Agent Fee Rate times (ii) a fraction, the numerator of which is the
number of days from the preceding Interest Payment Date to the current
Interest Payment Date (or, if such series of Tax Exempt Auction Rate Series
1997-1 Notes ceased to be outstanding prior to such current Interest
Payment Date, the date on which
-16-
<PAGE>
such series ceased to be outstanding) and the denominator of which is 360,
times (iii) the average principal amount of Tax Exempt Auction Rate Series
1997-1 Notes of such series outstanding during the period between such
preceding Interest Payment Date (or the Closing Date, in the case of the
first Interest Payment Date) and the current Interest Payment Date (or, if
such series of Tax Exempt Auction Rate Series 1997-1 Notes ceased to be
outstanding prior to such current Interest Payment Date, the date on which
such series ceased to be outstanding) (together with the fee described in
Section 6.4(a), the "Auction Agent Fee"). The Auction Agent Fee Rate may be
adjusted from time to time with the approval of an Authorized Issuer
Officer upon a written request of the Auction Agent delivered to the
Trustee and the Issuer. The Initial Auction Agent Fee Rate shall be
._______%. Any change in the Auction Agent Fee Rate shall be effective on
the Auction Date next succeeding such change.
(c) The Issuer shall reimburse the Auction Agent, upon its request,
for all reasonable expenses, disbursements and advances, if any, incurred
or made by the Auction Agent in accordance with any provision of this
Auction Agent Agreement or the Broker-Dealer Agreements (including the
reasonable compensation, expenses and disbursements of its agents and
counsel) from amounts available therefor in the Administration Fund. The
Issuer shall indemnify and hold harmless the Auction Agent for and against
any loss, liability or expense incurred without negligence or bad faith on
the Auction Agent's part, arising out of or in connection with the
acceptance or administration of its agency under this Auction Agent
Agreement and the Broker-Dealer Agreements, including the reasonable costs
and expenses (including the reasonable fees and expenses of its counsel) of
defending itself against any such claim or liability in connection with its
exercise or performance of any of its duties hereunder and thereunder and
of enforcing this indemnification provision; provided that the Issuer shall
not indemnify the Auction Agent pursuant to this Section 6.4(c) for any
fees and expenses incurred by the Auction Agent in the normal course of
performing its duties hereunder and under the Broker-Dealer Agreements,
such fees and expenses being payable as provided in Section 6.4(a) and (b)
above.
6.5 Compensation of the Broker-Dealers.
(a) With respect to each series of Tax Exempt Auction Rate Series
1997-1 Notes, not later than 12:00 noon, New York City time, on each
Interest Payment Date relating to such series, the Issuer, pursuant to
Section 5(b) of the First Supplemental Indenture, shall pay to the Auction
Agent, solely from moneys available therefor in the Administration Fund, an
amount in cash equal to the product of (i) the Broker-Dealer Fee Rate times
(ii) a fraction, the numerator of which is the number of days from the
preceding Interest
-17-
<PAGE>
Payment Date (or from the Closing Date, in the case of the first Interest
Payment Date) to the current Interest Payment Date (or, if such series of
Tax Exempt Auction Rate Series 1997-1 Notes ceased to be outstanding prior
to such current Interest Payment Date, the date on which such series ceased
to be outstanding) and the denominator of which is 360, times (iii) the
average principal amount of Tax Exempt Auction Rate Series 1997-1 Notes of
such series outstanding during the period between such preceding Interest
Payment Date (or the Closing Date, in the case of the first Interest
Payment Date) and the current Interest Payment Date (or, if such series of
Tax Exempt Auction Rate Series 1997-1 Notes ceased to be outstanding prior
to such current Interest Payment Date, the date on which such series ceased
to be outstanding) (the "Broker-Dealer Fee"). The Auction Agent shall
advise the Issuer of the amount referred to in the preceding sentence not
later than 4:00 p.m., New York City time, at least two Business Days
preceding such Interest Payment Date. The Auction Agent shall apply such
monies as set forth in Section 2.5 of the Broker-Dealer Agreements.
(b) After retaining an amount equal to the Auction Agent Fee as
provided in Section 6.4 above, the Auction Agent shall pay the Broker-
Dealer Fee as provided in Section 6.5(a) above solely out of amounts
received by the Auction Agent pursuant to Section 5(b) of the First
Supplemental Indenture. The Auction Agent shall advise the Issuer at least
annually, at the request of an Authorized Issuer Officer, of the prevailing
rate. The Broker-Dealer Fee Rate may be adjusted from time to time with
the approval of an Authorized Issuer Officer upon a written request of the
Auction Agent or Smith Barney Inc., as the initial Broker-Dealer, delivered
to the Trustee and the Issuer. The initial Broker-Dealer Fee Rate shall be
._______% per annum. If the Broker-Dealer Fee Rate is changed pursuant to
the terms hereof, the Trustee shall notify the Auction Agent thereof. Any
changes in the Broker-Dealer Fee Rate shall be effective on the Auction
Date next succeeding such change.
Section 7. Miscellaneous.
7.1 Governing Law. This Auction Agent Agreement shall be governed
by and construed in accordance with the laws of the State of New York applicable
to agreements made and to be performed in such state, it being understood that
the corporate powers and legal capacity of the Issuer shall be construed and
interpreted in accordance with the laws of the State of South Dakota.
7.2 Communications. Except for (i) communications authorized to be
made by telephone pursuant to this Auction Agent Agreement or the Auction
Procedures and (ii) communications in connection with Auctions (other than those
expressly required to be in writing), all notices, requests and other
communications to any party hereunder shall be in writing (including facsimile
or similar writing)
-18-
<PAGE>
and shall be given to such party addressed to it at its address, or facsimile
number set below:
If to the Trustee,
addressed: First Bank National Association
141 North Main Avenue
Sioux Falls, South Dakota 57104
Attn: Corporate Trust Department
Telephone: (605) 339-8725
Facsimile: (605) 333-3813
If to the Issuer,
addressed: Education Loans Incorporated
105 First Avenue Southwest
Aberdeen, South Dakota 57401
Attn: President
Telephone: (605) 622-4590
Facsimile: (605) 622-4574
If to the Auction Agent,
addressed: Bankers Trust Company
Corporate Trust and Agency Group
4 Albany Street
New York, New York 10006
Attn: Auction Rate Securities
Telephone: (212) 250-6850
Facsimile: (212) 250-6215
If to the Market Agent,
addressed: Smith Barney Inc.
390 Greenwich Street
2nd Floor
New York, New York 10013
Attn: Public Finance
Division
Telephone: (212) 723-5564
Facsimile: (212) 723-8939
or such other address, telephone or facsimile number as such party may hereafter
specify for such purpose by notice in writing to the other parties. Each such
notice, request or communication shall be effective when delivered at the
address specified herein. Communications shall be given on behalf of the
Trustee by an Authorized Trustee Representative, on behalf of the Auction Agent
by an Authorized Auction Agent Officer and on behalf of the Issuer by an
Authorized Issuer Officer.
-19-
<PAGE>
7.3 Entire Agreement. This Auction Agent Agreement contains the
entire agreement between the parties relating to the subject matter hereof, and
there are no other representations, endorsements, promises, agreements or
understandings, oral, written or inferred, between the parties relating to the
subject matter hereof.
7.4 Benefits. Nothing herein, express or implied, shall give to any
person, other than the Trustee, acting on behalf of the beneficial owners of the
Tax Exempt Auction Rate Series 1997-1 Notes, the Auction Agent, the Issuer and
their respective successors and assigns, any benefit of any legal or equitable
right, remedy or claim hereunder.
7.5 Amendment; Waiver.
(a) This Auction Agent Agreement shall not be deemed or construed to
be modified, amended, rescinded, canceled or waived, in whole or in part,
except by a written instrument signed by duly authorized representatives of
the parties hereto.
(b) The Trustee and the Issuer shall not enter into or approve any
amendment of or supplement to the First Supplemental Indenture which
materially affects the Auction Agent's duties or obligations under the
First Supplemental Indenture without obtaining the prior written consent of
the Auction Agent. The Trustee shall promptly notify the Auction Agent of
any amendment of or supplement to the First Supplemental Indenture, and
shall provide a copy thereof to the Auction Agent upon request.
(c) Failure of a party hereto to exercise any right or remedy
hereunder in the event of a breach hereof by any other party shall not
constitute a waiver of any such right or remedy with respect to any
subsequent breach.
7.6 Successors and Assigns. This Auction Agent Agreement shall be
binding upon, inure to the benefit of and be enforceable by the respective
successors and assigns of each of the Trustee, the Issuer and the Auction Agent.
This Auction Agent Agreement may not be assigned by any party hereto absent the
prior written consent of the other parties hereto, which consents shall not be
unreasonably withheld.
7.7 Severability. If any clause, provision or section hereof shall
be ruled invalid or unenforceable by any court of competent jurisdiction, the
invalidity or unenforceability of such clause, provision or section shall not
affect any of the remaining clauses, provisions or sections hereof.
-20-
<PAGE>
7.8 Execution in Counterparts. This Auction Agent Agreement may be
executed in several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument.
-21-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Auction Agent
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the date first above written.
EDUCATION LOANS INCORPORATED,
as Issuer
By: _______________________
Title: President
FIRST BANK NATIONAL
ASSOCIATION, as Trustee
By: _______________________
Title: Trust Officer
BANKERS TRUST COMPANY, as
Auction Agent
By: _______________________
Title: _____________________
-22-
<PAGE>
EXHIBIT A
TO AUCTION AGENT AGREEMENT
--------------------------
LIST OF INITIAL BROKER-DEALERS
------------------------------
Smith Barney Inc.
A-1
<PAGE>
EXHIBIT B
TO AUCTION AGENT AGREEMENT
--------------------------
BROKER-DEALER AGREEMENT
-----------------------
B-1
<PAGE>
EXHIBIT C
TO AUCTION AGENT AGREEMENT
--------------------------
NOTICE OF CONTINUATION OF PERCENTAGE USED IN DETERMINING
[MAXIMUM AUCTION RATE] [ALL HOLD RATE] [NON-PAYMENT RATE]
---------------------------------------------------------
EDUCATION LOANS INCORPORATED
TAX EXEMPT AUCTION RATE STUDENT LOAN ASSET-BACKED NOTES
SENIOR SERIES 1997-1A[B][C][D][E]
NOTICE IS HEREBY GIVEN that a condition for the establishment of a
change in the percentage used in determining the [Maximum Auction Rate] [All
Hold Rate] [Non-Payment Rate] for the captioned Tax Exempt Auction Rate Series
1997-1 Notes has not been met. The existing such percentage will continue to be
used in all such determinations.
Terms used herein have the meanings set forth in the First
Supplemental Indenture relating to the above-referenced issue.
FIRST BANK NATIONAL
ASSOCIATION, as Trustee
By: _______________________
Title: ___________________
Date: ___________________
C-1
<PAGE>
EXHIBIT D
TO AUCTION AGENT AGREEMENT
--------------------------
NOTICE OF TAX EXEMPT AUCTION RATE SERIES 1997-1 NOTES OUTSTANDING
-----------------------------------------------------------------
EDUCATION LOANS INCORPORATED
TAX EXEMPT AUCTION RATE STUDENT LOAN ASSET-BACKED NOTES
SENIOR SERIES 1997-1A[B][C][D][E]
NOTICE IS HEREBY GIVEN that $_________ aggregate principal amount of
Series 1997-1A[B][C][D][E] Notes were outstanding at the close of business on
the immediately preceding Regular Record Date. Such aggregate principal amount
of Series 1997-1A[B][C][D][E] Notes, less $_________ aggregate principal amount
of Series 1997-1A[B][C][D][E] Notes to be redeemed by the Issuer pursuant to the
First Supplemental Indenture, for a net aggregate principal amount of Series
1997-1A[B][C][D][E] Notes of $_____________, will be available on the next
Auction scheduled to be held on _______________.
Terms used herein have the meanings set forth in the First
Supplemental Indenture relating to the above-referenced issue.
FIRST BANK NATIONAL
ASSOCIATION, as Trustee
By: ________________________
Title: ___________________
Date: ___________________
D-1
<PAGE>
EXHIBIT E
TO AUCTION AGENT AGREEMENT
--------------------------
NOTICE OF FEE RATE CHANGE
-------------------------
EDUCATION LOANS INCORPORATED
TAX EXEMPT AUCTION RATE STUDENT LOAN ASSET-BACKED NOTES
SENIOR SERIES 1997-1A, B, C, D AND E
NOTICE IS HEREBY GIVEN that the [Auction Agent Fee Rate] [Broker-
Dealer Fee Rate] has been changed in accordance with Section [6.4(b)] [6.5(b)]
of the Auction Agent Agreement. The new [Auction Agent Fee Rate] [Broker-Dealer
Fee Rate] shall be ______% per annum.
Terms used herein have the meanings set forth in the First
Supplemental Indenture relating to the above-referenced issue.
BANKERS TRUST COMPANY, as
Auction Agent
By: _________________________
Title: ___________________
Date: ___________________
APPROVED:
EDUCATION LOANS INCORPORATED
By: ________________________
Title: ___________________
Date: ___________________
E-1
<PAGE>
EXHIBIT F
TO AUCTION AGENT AGREEMENT
--------------------------
NOTICE OF A PAYMENT DEFAULT
---------------------------
EDUCATION LOANS INCORPORATED
TAX EXEMPT AUCTION RATE STUDENT LOAN ASSET-BACKED NOTES
SENIOR SERIES 1997-1
NOTICE IS HEREBY GIVEN that a Payment Default has occurred and not
been cured with respect to the Series 1997-1_____ Notes. Determination of the
Auction Rate Series 1997-1 Note Interest Rate on the Tax Exempt Auction Rate
Series 1997-1 Notes pursuant to the Auction Procedures will be suspended. The
Auction Rate Series 1997-1 Note Interest Rate on each series of the Tax Exempt
Auction Rate Series 1997-1 Notes for each Auction Period commencing after the
date of Payment Default will equal the Non-Payment Rate (as to each such series
with respect to which a Payment Default exists) or the Maximum Auction Rate (as
to all other series), as the case may be, as it is determined by the Trustee on
the first day of such Auction Period.
Terms used herein have the meanings set forth in the First
Supplemental Indenture relating to the above-referenced issue.
BANKERS TRUST COMPANY, as
Auction Agent
By: ________________________
Title: ___________________
Date: ___________________
F-1
<PAGE>
EXHIBIT G
TO AUCTION AGENT AGREEMENT
--------------------------
SETTLEMENT PROCEDURES
---------------------
If not otherwise defined below, capitalized terms used herein shall
have the meanings given such terms in the First Supplemental Indenture. These
Settlement Procedures apply separately to each series of Tax Exempt Auction Rate
Series 1997-1 Notes.
(a) Not later than (1) 3:00 p.m., if the Auction Rate Series 1997-1
Note Interest Rate is the Auction Rate, or (2) 4:00 p.m., if the Auction
Rate Series 1997-1 Note Interest Rate is the Maximum Auction Rate, on each
Auction Date, the Auction Agent shall notify by telephone each Broker-
Dealer that participated in the Auction held on such Auction Date and
submitted an Order on behalf of an Existing Holder or Potential Holder of:
(i) the Auction Rate Series 1997-1 Note Interest Rate fixed for
the next Interest Period;
(ii) whether there were Sufficient Bids in such Auction;
(iii) if such Broker-Dealer (a "Seller's Broker-Dealer")
submitted Bids or Sell Orders on behalf of an Existing Holder, whether
such Bid or Sell Order was accepted or rejected, in whole or in part,
and the principal amount of Tax Exempt Auction Rate Series 1997-1
Notes, if any, to be sold by such Existing Holder;
(iv) if such Broker-Dealer (a "Buyer's Broker-Dealer") submitted
a Bid on behalf of a Potential Holder, whether such Bid was accepted
or rejected, in whole or in part, and the principal amount of Tax
Exempt Auction Rate Series 1997-1 Notes, if any, to be purchased by
such Potential Holder;
(v) If the aggregate amount of Tax Exempt Auction Rate Series
1997-1 Notes to be sold by all Existing Holders on whose behalf such
Seller's Broker-Dealer submitted Bids or Sell Orders exceeds the
aggregate principal amount of Tax Exempt Auction Rate Series 1997-1
Notes to be purchased by all Potential Holders on whose behalf such
Buyer's Broker-Dealer submitted a Bid, the name or names of one or
more Buyer's Broker-Dealers (and the name of the Participant, if any,
of each such Buyer's Broker-Dealer) acting for one or more purchasers
of
G-1
<PAGE>
such excess principal amount of Tax Exempt Auction Rate Series
1997-1 Notes and the principal amount of Tax Exempt Auction Rate
Series 1997-1 Notes to be purchased from one or more Existing Holders
on whose behalf such Seller's Broker-Dealer acted by one or more
Potential Holders on whose behalf each of such Buyer's Broker-Dealers
acted;
(vi) if the principal amount of Tax Exempt Auction Rate Series
1997-1 Notes to be purchased by all Potential Holders on whose behalf
such Buyer's Broker-Dealer submitted a Bid exceeds the amount of Tax
Exempt Auction Rate Series 1997-1 Notes to be sold by all Existing
Holders on whose behalf such Seller's Broker-Dealer submitted a Bid or
a Sell Order, the name or names of one or more Seller's Broker-Dealers
(and the name of the Participant, if any, of each such Seller's
Broker-Dealer) acting for one or more sellers of such excess principal
amount of Tax Exempt Auction Rate Series 1997-1 Notes and the
principal amount of Tax Exempt Auction Rate Series 1997-1 Notes to be
sold to one or more Potential Holders on whose behalf such Buyer's
Broker-Dealer acted by one or more Existing Holders on whose behalf
each of such Seller's Broker-Dealers acted; and
(vii) the Auction Date for the next succeeding Auction.
(b) On each Auction Date, each Broker-Dealer that submitted an Order
on behalf of any Existing Holder or Potential Holder shall:
(i) advise each Existing Holder and Potential Holder on whose
behalf such Broker-Dealer submitted a Bid or Sell Order in the Auction
on such Auction Date whether such Bid or Sell Order was accepted or
rejected, in whole or in part;
(ii) in the case of a Broker-Dealer that is a Buyer's Broker-
Dealer, advise each Potential Holder on whose behalf such Buyer's
Broker-Dealer submitted a Bid that was accepted, in whole or in part,
to instruct such Potential Holder's Participant to pay such Buyer's
Broker-Dealer (or its Participant) through the Securities Depository
the amount necessary to purchase the principal amount of Tax Exempt
Auction Rate Series 1997-1 Notes to be purchased pursuant to such Bid
(which amount, unless the date of such purchase is an Interest Payment
Date, will include an amount equal to the interest accrued and unpaid
on such principal amount of Tax Exempt Auction Rate Series 1997-1
Notes) against receipt of such Tax Exempt Auction Rate Series 1997-1
Notes;
G-2
<PAGE>
(iii) in the case of a Broker-Dealer that is a Seller's Broker-
Dealer, instruct each Existing Holder on whose behalf such Seller's
Broker-Dealer submitted a Sell Order that was accepted, in whole or in
part, or a Bid that was accepted, in whole or in part, to instruct
such Existing Holder's Participant to deliver to such Seller's Broker-
Dealer (or its Participant) through the Securities Depository the
principal amount of Tax Exempt Auction Rate Series 1997-1 Notes to be
sold pursuant to such Order against payment therefor;
(iv) advise each Existing Holder on whose behalf such Broker-
Dealer submitted an Order and each Potential Holder on whose behalf
such Broker-Dealer submitted a Bid of the Auction Rate for the next
Interest Period;
(v) advise each Existing Holder on whose behalf such Broker-
Dealer submitted an Order of the next Auction Date; and
(vi) advise each Potential Holder on whose behalf such Broker-
Dealer submitted a Bid that was accepted, in whole or in part, of the
next Auction Date.
(c) On the basis of the information provided to it pursuant to
paragraph (a) above, each Broker-Dealer that submitted a Bid or Sell Order
in an Auction is required to allocate any funds received by it in
connection with such Auction pursuant to paragraph (b)(ii) above, and any
Tax Exempt Auction Rate Series 1997-1 Notes received by it in connection
with such Auction pursuant to paragraph (b)(iii) above among the Potential
Holders, if any, on whose behalf such Broker-Dealer submitted Bids, the
Existing Holders, if any, on whose behalf such Broker-Dealer submitted Bids
or Sell Orders in such Auction, and any Broker-Dealers identified to it by
the Auction Agent following such Auction pursuant to paragraph (a)(v) or
(a)(vi) above.
(d) On each Auction Date:
(i) each Potential Holder and Existing Holder with an Order in
the Auction on such Auction Date shall instruct its Participant as
provided in paragraph (b)(ii) or (b)(iii) above, as the case may be;
(ii) each Seller's Broker-Dealer that is not a Participant of the
Securities Depository shall instruct its Participant to deliver such
Tax Exempt Auction Rate Series 1997-1 Notes through the Securities
Depository to a Buyer's Broker-Dealer (or its Participant) identified
to
G-3
<PAGE>
such Seller's Broker-Dealer pursuant to paragraph (a)(v) above
against payment therefor; and
(iii) each Buyer's Broker-Dealer that is not a Participant in the
Securities Depository shall instruct its Participant to pay through
the Securities Depository to Seller's Broker-Dealer (or its
Participant) identified following such Auction pursuant to (a)(vi)
above in the amount necessary to purchase Tax Exempt Auction Rate
Series 1997-1 Notes to be purchased pursuant to paragraph (b)(ii)
above against receipt of such Tax Exempt Auction Rate Series 1997-1
Notes.
(e) On the Business Date following each Auction Date:
(i) each Participant for a Bidder in the Auction on such Auction
Date referred to in paragraph (d)(i) above shall instruct the
Securities Depository to execute the transactions described under
paragraph (b)(ii) or (b)(iii) above for such Auction, and the
Securities Depository shall execute such transactions;
(ii) each Seller's Broker-Dealer or its Participant shall
instruct the Securities Depository to execute the transactions
described in paragraph (d)(ii) above for such Auction, and the
Securities Depository shall execute such transactions; and
(iii) each Buyer's Broker-Dealer or its Participant shall
instruct the Securities Depository to execute the transactions
described in paragraph (d)(iii) above for such Auction, and the
Securities Depository shall execute such transactions.
(f) If an Existing Holder selling Tax Exempt Auction Rate Series
1997-1 Notes in an Auction fails to deliver such Tax Exempt Auction Rate
Series 1997-1 Notes (by authorized book-entry), a Broker-Dealer may deliver
to the Potential Holder on behalf of which it submitted a Bid that was
accepted a principal amount of Tax Exempt Auction Rate Series 1997-1 Notes
that is less than the principal amount of Tax Exempt Auction Rate Series
1997-1 Notes that otherwise was to be purchased by such Potential Holder.
In such event, the principal amount of Tax Exempt Auction Rate Series 1997-
1 Notes to be so delivered shall be determined solely by such Broker-Dealer
(but only in Authorized Denominations). Delivery of such lesser principal
amount of Tax Exempt Auction Rate Series 1997-1 Notes shall constitute good
delivery. Notwithstanding the foregoing terms of this paragraph (f), any
delivery or nondelivery of Tax Exempt Auction Rate Series 1997-1 Notes
which shall represent any departure from the results of an Auction, as
determined by the Auction Agent, shall be of no effect unless and until the
Auction Agent shall
G-4
<PAGE>
have been notified of such delivery or nondelivery in accordance with the
provisions of the Auction Agent Agreement and the Broker-Dealer Agreements.
Neither the Trustee nor the Auction Agent will have any responsibility or
liability with respect to the failure of a Potential Holder, Existing
Holder or their respective Broker-Dealer or Participant to take delivery of
or deliver, as the case may be, the principal amount of Tax Exempt Auction
Rate Series 1997-1 Notes purchased or sold pursuant to an Auction or
otherwise.
G-5
<PAGE>
EXHIBIT H
TO AUCTION AGENT AGREEMENT
--------------------------
NOTICE OF CONTINUATION OF AUCTION PERIOD
----------------------------------------
EDUCATION LOANS INCORPORATED
TAX EXEMPT AUCTION RATE STUDENT LOAN ASSET-BACKED NOTES
SENIOR SERIES 1997-1A[B][C][D][E]
NOTICE IS HEREBY GIVEN that a condition for the establishment of a
change in the length of one or more Auction Periods for the captioned Tax Exempt
Auction Rate Series 1997-1 Notes has not been met. An Auction will therefor be
held on the next Auction Date (___________________) and the length of such
Auction Period shall remain an Auction Period of _______ days.
BANKERS TRUST COMPANY, as
Auction Agent
By: ________________________
Title: ___________________
Date: ___________________
H-1
<PAGE>
EXHIBIT I
TO AUCTION AGENT AGREEMENT
--------------------------
NOTICE OF AUCTION RATE SERIES 1997-1 NOTE INTEREST RATE
-------------------------------------------------------
EDUCATION LOANS INCORPORATED
TAX EXEMPT AUCTION RATE STUDENT LOAN ASSET-BACKED NOTES
SENIOR SERIES 1997-1A[B][C][D][E]
NOTICE IS HEREBY GIVEN that [the Corporation Certificate and the
Trustee written statements, if any,] [Sufficient Bids] necessary for the
establishment of a change in the length of one or more Auction Periods for the
captioned Tax Exempt Auction Rate Series 1997-1 Notes have not been provided.
The Auction Rate Series 1997-1 Note Interest Rate for the Auction Period
commencing on ______________ shall be the Maximum Auction Rate and such Auction
Period shall remain an Auction Period of _____ days.
BANKERS TRUST COMPANY, as
Auction Agent
By: ________________________
Title: ___________________
Date: ___________________
I-1
<PAGE>
EXHIBIT J
TO AUCTION AGENT AGREEMENT
--------------------------
NOTICE OF RATINGS
-----------------
EDUCATION LOANS INCORPORATED
TAX EXEMPT AUCTION RATE STUDENT LOAN ASSET-BACKED NOTES
SENIOR SERIES 1997-1A, B, C, D AND E
NOTICE IS HEREBY GIVEN to the Auction Agent by the Issuer pursuant to
Section 2.3(a) of the Auction Agent Agreement that:
1. as of the date of this notice the rating by Moody's on the
captioned Tax Exempt Auction Rate Series 1997-1 Notes is ______;
and
2. as of the date of this notice the rating by Fitch on the
captioned Tax Exempt Auction Rate Series 1997-1 Notes is _____.
The Auction Agent may rely on such ratings for all purposes of the
First Supplemental Indenture, including determination of the Maximum Auction
Rate, the All Hold Rate and the Non-Payment Rate thereunder, from the date
hereof until further notice from the undersigned Education Loans Incorporated.
EDUCATION LOANS INCORPORATED
By: ________________________
Title: ___________________
Date: ___________________
J-1
<PAGE>
Exhibit 4.5
BROKER-DEALER AGREEMENT
(TAXABLE AUCTION RATE SERIES 1997-1 NOTES)
between
BANKERS TRUST COMPANY,
as Auction Agent
and
SMITH BARNEY INC.,
as Broker-Dealer
Dated as of July 1, 1997
Relating to
EDUCATION LOANS INCORPORATED
TAXABLE AUCTION RATE STUDENT LOAN ASSET-BACKED NOTES
SENIOR SERIES 1997-1G AND 1997-1H
<PAGE>
BROKER-DEALER AGREEMENT
This BROKER-DEALER AGREEMENT (TAXABLE AUCTION RATE SERIES 1997-1 NOTES)
(the "Broker Dealer Agreement"), dated as of July 1, 1997, is by and between
Bankers Trust Company, a New York banking corporation (together with its
successors and assigns, the "Auction Agent"), pursuant to authority granted to
it in the Auction Agent Agreement, defined below, acting not in its individual
capacity, but solely as agent for Education Loans Incorporated (the
"Corporation"), a South Dakota corporation and SMITH BARNEY INC. (together with
its respective successors and assigns, the "Broker-Dealer").
RECITALS
The Corporation proposes to cause the Trustee, defined below, to
authenticate and deliver [$________________] aggregate principal amount of its
Taxable Auction Rate Student Loan Asset-Backed Notes, Senior Series 1997-1G (the
"Series 1997-1G Notes") and its Taxable Auction Rate Student Loan Asset-Backed
Notes, Senior Series 1997-1H (the "Series 1997-1H Notes", and together with the
Series 1997-1G Notes, the "Taxable Auction Rate Series 1997-1 Notes"). The
Taxable Auction Rate Series 1997-1 Notes are being issued under the First
Supplemental Indenture of Trust, dated as of July 1, 1997 (the "First
Supplemental Indenture"), executed in accordance with the Indenture of Trust,
dated as of July 1, 1997 (the "Indenture"), each between the Corporation and
First Bank National Association, Minneapolis, Minnesota (together with its
successors and assigns, the "Trustee"). The Taxable Auction Rate Series 1997-1
Notes are being issued as adjustable rate securities.
The First Supplemental Indenture provides that the Auction Rate Series
1997-1 Note Interest Rate for each Interest Period after the Initial Interest
Period shall equal the lesser of the Net Loan Rate and the Auction Rate, but in
no event shall exceed 18% per annum with respect to the Taxable Auction Rate
Series 1997-1 Notes.
Pursuant to Section 2.9 (a) of the Auction Agent Agreement (Taxable Auction
Rate Series 1997-1 Notes), dated as of July 1, 1997, among the Trustee, the
Auction Agent and the Corporation (the "Auction Agent Agreement"), the Trustee
has directed the Auction Agent to execute and deliver this Broker-Dealer
Agreement.
The Auction Procedures require the participation of one or more Broker-
Dealers.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Auction Agent, as agent of the Corporation, and the
Broker-Dealer agree as follows:
<PAGE>
Section 1. Definitions and Rules of Construction
1.1. Terms Defined by Reference to the First Supplemental Indenture.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings given such terms in the First Supplemental Indenture.
1.2. Terms Defined Herein. As used herein and in the Settlement
Procedures, defined below, the following terms shall have the following
meanings, unless the context otherwise requires:
"Applicable Auction Rate Series 1997-1 Note Interest Rate" shall mean the
Auction Rate Series 1997-1 Note Interest Rate as defined in the First
Supplemental Indenture.
"Authorized Officer" shall mean, with respect to the Auction Agent, each
Managing Director, Vice President, Assistant Vice President and Assistant
Treasurer and every other officer of the Auction Agent assigned to its Corporate
Trust and Agency Group and every other officer or employee of the Auction Agent
designated as an "Authorized Officer" for purposes of this Agreement in a
communication to the Broker-Dealer.
"Broker-Dealer Officer" shall mean each officer or employee of the Broker-
Dealer designated as a "Broker-Dealer Officer" for purposes of this Broker-
Dealer Agreement in a communication to the Auction Agent.
"Beneficial Owner" shall mean a beneficial owner of any of the Taxable
Auction Rate Series 1997-1 Notes.
"Notice of Failure to Deliver or Make Payment" shall mean a notice
substantially in the form of Exhibit D hereto.
"Notice of Transfer" shall mean a notice substantially in the form of
Exhibit C hereto.
"Order Form" shall mean the form to be submitted by any Broker-Dealer on or
prior to any Auction Date substantially in the form of Exhibit B hereto.
"Settlement Procedures" shall mean the Settlement Procedures attached
hereto as Exhibit A.
1.3. Rules of Construction. Unless the context or use indicate another or
different meaning or intent, the following rules shall apply to the construction
of this Agreement;
(a) Words importing the singular number shall include the plural number and
vice versa.
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<PAGE>
(b) The captions and headings herein are solely for convenience of
reference and shall not constitute a part of this Agreement nor, shall they
affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto," and other words of similar
import refer to this Broker-Dealer Agreement as a whole.
(d) All references herein to a particular time of day shall be to New York
City time.
(e) The rights and duties of the Broker-Dealer and the Auction Agent under
this Broker-Dealer Agreement shall apply to all series of the Taxable Auction
Rate Series 1997-1 Notes, but separately. References to "Taxable Auction Rate
Series 1997-1 Notes," unless the context clearly contemplates a reference to all
Taxable Auction Rate Series 1997-1 Notes shall refer only to the Series 1997-1G
Notes as to rights and duties regarding Series 1997-1G Notes; and only to the
Series 1997-1H Notes as to rights and duties regarding Series 1997-1H Notes.
Section 2. The Auction
2.1. Incorporation by Reference of Auction Procedures and Settlement
Procedures.
(a) On each Auction Date, the provisions of the Auction Procedures will be
followed by the Auction Agent for the purpose of determining the Applicable
Auction Rate Series 1997-1 Note Interest Rate for each Auction Period after the
Initial Interest Period. Each periodic operation of such procedures is
hereinafter referred to as an "Auction".
(b) All of the provisions contained in the Auction Procedures and the
Settlement Procedures are incorporated herein by reference in their entirety and
shall be deemed to be a part of this Broker-Dealer Agreement to the same extent
as if such provisions were fully set forth herein.
(c) The Broker-Dealer and other Broker-Dealers may participate in Auctions
for their own accounts.
2.2. Preparation for Each Auction.
(a) Not later than 9:30 A.M. on each Auction Date for the Taxable Auction
Rate Series 1997-1 Notes, the Auction Agent shall advise the Broker-Dealer by
telephone of the All Hold Rate, the Maximum Auction Rate, the Net Loan Rate and
the One-month LIBOR or the Three-month LIBOR, as the case may be.
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(b) If the Auction Date for any Auction shall be changed after the Auction
Agent has given notice of such Auction Date pursuant to clause (vii) of
paragraph (a) of the Settlement Procedures, the Auction Agent, by telephone
(confirmed in writing), telecopy or such other means as the Auction Agent deems
practicable, shall give notice of such change to the Broker-Dealer not later
than the earlier of 9:15 A.M. on the new Auction Date and 9:15 A.M. on the old
Auction Date. Thereafter, the Broker-Dealer shall use its best efforts to
promptly notify its customers who are Existing Holders of such change in the
Auction Date.
(c) From time to time upon request of the Auction Agent pursuant to
Section 2.2(d) of the Auction Agent Agreement, the Broker-Dealer shall provide
the Auction Agent with a statement of the aggregate amount of each series of
Taxable Auction Rate Series 1997-1 Notes held by the Broker-Dealer as an
Existing Holder for its own account or otherwise, as well as with a list of the
Broker-Dealer's customers that the Broker-Dealer believes are Existing Holders
of either series of the Taxable Auction Rate Series 1997-1 Notes (listed by
series) and the aggregate principal amount of each series of Taxable Auction
Rate Series 1997-1 Notes beneficially owned by each such customer. Except as
permitted by Section 2.10 of the Auction Agent Agreement, the Auction Agent
shall keep confidential any such information and shall not disclose any such
information so provided to any person other than the Broker-Dealer, the Issuer
and the Trustee, provided that the Auction Agent reserves the right to disclose
any such information if it is advised by its counsel that its failure to do so
would be unlawful.
(d) The Auction Agent shall send by telecopy or other means a copy of any
Notice of Taxable Auction Rate Series 1997-1 Notes Outstanding received from the
Trustee to the Broker-Dealer in accordance with Section 4.3 hereof.
2.3. Auction Schedule: Method of Submission of Orders.
(a) The Auction Agent shall conduct Auctions for the Taxable Auction Rate
Series 1997-1 Notes in accordance with the schedule set forth below. Such
schedule may be changed by the Auction Agent with the consent of the Trustee and
the Market Agent, which consent shall not be unreasonably withheld or delayed.
The Auction Agent shall give written notice of any such change to the Broker-
Dealer. Such notice shall be given prior to the close of business on the
Business Day next preceding the first Auction Date on which any such change
shall be effective.
By 9:30 A.M. The Auction Agent advises the Trustee and the Broker-
Dealers of the Maximum Auction Rate, the All Hold Rate,
the Net Loan Rate and the One-month LIBOR or the Three-
month LIBOR, as the case may be, to be used in
determining the Auction Rate
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under the Auction Procedures, the First Supplemental
Indenture and the Auction Agent Agreement.
9:30 A.M.- The Auction Agent assembles information communicated
12:30 P.M. to it by Broker-Dealers as provided in Section
4(c)(i) of the First Supplemental Indenture.
The Submission Deadline is 12:30 P.M.
Not earlier than The Auction Agent makes determinations pursuant
12:30 P.M. to Section 4(c)(i) of the First Supplemental
Indenture. Submitted Bids and Submitted Sell Orders are
accepted and rejected in whole or in part and Taxable
Auction Rate Series 1997-1 Notes allocated as provided
in Section 4(d) of the First Supplemental Indenture.
By approximately The Auction Agent advises the Trustee and the
3:00 P.M.* Broker-Dealers of the results of the Auction as
4:00 P.M.** provided in Section 4(c) (ii) of the First
Supplemental Indenture. The Auction Agent gives notice
of Auction results as set forth in Section 2.4(a)
hereof.
* If the Auction Rate Series 1997-1 Note Interest Rate is the Auction Rate.
** If the Auction Rate Series 1997-1 Note Interest Rate is the Net Loan Rate.
(b) The Broker-Dealer agrees to maintain a list of Potential Holders and
to contact the Potential Holders on such list on or prior to each Auction Date
for the purposes of participating in the Auction on such Auction Date.
(c) The Broker-Dealer shall submit Orders to the Auction Agent in writing
by delivering an Order Form. The Broker-Dealer shall submit separate Orders to
the Auction Agent for each Potential Holder or Existing Holder on whose behalf
the Broker-Dealer is submitting an Order and shall not net or aggregate the
Orders of different Potential Holders or Existing Holders on whose behalf the
Broker-Dealer is submitting Orders.
(d) The Broker-Dealer shall deliver to the Auction Agent (i) a Notice of
Transfer with respect to any transfer of Taxable Auction Rate Series 1997-1
Notes made through the Broker-Dealer by an Existing Holder to another person
other than pursuant to an Auction, and (ii) a Notice of Failure to Deliver or
Make Payment with respect to the failure of any Auction Rate Series 1997-1 Note
Interest Rate to be transferred to or payment to be made by any
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<PAGE>
person that purchased or sold Taxable Auction Rate Series 1997-1 Notes through
the Broker-Dealer pursuant to a prior Auction. The Auction Agent is not required
to accept any notice delivered pursuant to clauses (i) or (ii) of this
subparagraph (d) with respect to an Auction unless it is received by the Auction
Agent by 3:00 P.M. on the Business Day next preceding such Auction Date.
(e) The Broker-Dealer agrees to handle its customers' Orders in accordance
with its duties under applicable securities laws and rules.
2.4. Notices.
(a) On each Auction Date, the Auction Agent shall notify the Broker-Dealer
by telephone of the results of the Auction as set forth in paragraph (a) of the
Settlement Procedures. The Auction Agent shall by 10:30 A.M. on the Business Day
next succeeding such Auction Date if previously requested by the Broker-Dealer
notify the Broker-Dealer in writing of the disposition of all Orders submitted
by the Broker-Dealer in the Auction held on such Auction Date.
(b) The Broker-Dealer shall notify each Existing Holder or Potential
Holder on whose behalf the Broker-Dealer has submitted an Order as set forth in
paragraph (b) of the Settlement Procedures and take such other action as is
required by the Broker-Dealer pursuant to the Settlement Procedures.
(c) The Auction Agent shall deliver to the Broker-Dealer all notices and
certificates that the Auction Agent is required to deliver to the Broker-Dealer
pursuant to Section 2 of the Auction Agent Agreement at the times and in the
manner set forth in the Auction Agent Agreement.
2.5. Service Charge to Be Paid to the Broker-Dealer. Not later than 2:00
P.M. on each Interest Payment Date with respect to each Interest Period that
immediately follows an Auction Date, the Auction Agent shall pay to the Broker-
Dealer a fee, from monies received from the Trustee, in an amount equal to the
product of (i) the Broker-Dealer Fee Rate times (ii) a fraction, the numerator
of which is the number of days in the Interest Period related to the Auction by
which the Applicable Auction Rate Series 1997-1 Note Interest Rate was
determined and the denominator of which is 360 times (iii) the sum of (A) the
aggregate principal amount of Taxable Auction Rate Series 1997-1 Notes placed by
the Broker-Dealer in such Auction that were (x) the subject of Submitted Bids of
Existing Holders submitted by the Broker-Dealer and continued to be held as a
result of such submission and (y) the subject of Submitted Bids of Potential
Holders submitted by the Broker-Dealer and purchased as a result of such
submission, plus (B) the aggregate principal amount of Taxable Auction Rate
Series 1997-1 Notes subject to valid Hold Orders submitted to the Auction Agent
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<PAGE>
by the Broker-Dealer plus (C) the aggregate principal amount of Taxable Auction
Rate Series 1997-1 Notes that were covered by Hold Orders deemed to have been
submitted by Existing Holders that were acquired by such Existing Holders
through the Broker-Dealer. For purposes of subclause (iii) (C) above, if any
Existing Holder who acquired Taxable Auction Rate Series 1997-1 Notes through
the Broker-Dealer transfers those Taxable Auction Rate Series 1997-1 Notes to
another person other than pursuant to an Auction, then the Broker-Dealer shall
continue to be the Broker-Dealer through which the Taxable Auction Rate Series
1997-1 Notes so transferred were acquired; provided, however, that if the
transfer was effected by, or if the transferee is a Broker-Dealer other than the
Broker-Dealer, then such other Broker-Dealer shall be the Broker-Dealer through
which such Taxable Auction Rate Series 1997-1 Notes were acquired.
2.6. Settlement.
(a) If any Existing Holder on whose behalf the Broker-Dealer has submitted
a Bid or Sell Order for Taxable Auction Rate Series 1997-1 Notes that was
accepted in whole or in part fails to instruct its Participant to deliver the
Taxable Auction Rate Series 1997-1 Notes subject to such Bid or Sell Order
against payment therefor, the Broker-Dealer shall instruct such Participant to
deliver such Taxable Auction Rate Series 1997-1 Notes against payment therefor
and the Broker-Dealer may deliver to the Potential Holder on whose behalf the
Broker-Dealer submitted a Bid that was accepted in whole or in part, a principal
amount of the Taxable Auction Rate Series 1997-1 Notes that is less than the
principal amount of the Taxable Auction Rate Series 1997-1 Notes specified in
such Bid to be purchased by such Potential Holder. Notwithstanding the foregoing
terms of this Section, any delivery or nondelivery of Taxable Auction Rate
Series 1997-1 Notes that represents any departure from the results of an
Auction, as determined by the Auction Agent, shall be of no effect unless and
until the Auction Agent shall have been notified of such delivery or non-
delivery in accordance with the terms of Section 2.3(d) hereof. The Auction
Agent shall have no duty or liability with respect to enforcement of this
Section 2.6(a).
(b) Neither the Auction Agent, the Trustee, nor the Corporation shall have
any responsibility or liability with respect to the failure of an Existing
Holder, a Potential Holder or its respective Participant to deliver Taxable
Auction Rate Series 1997-1 Notes or to pay for Taxable Auction Rate Series 1997-
1 Notes sold or purchased pursuant to the Auction Procedures or otherwise. The
Auction Agent shall have no responsibility for any adjustment to the fees paid
pursuant to Section 2.5 hereof as a result of any failure described in this
Section 2.6(b).
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<PAGE>
Section 3. The Auction Agent.
3.1. Duties and Responsibilities.
(a) The Auction Agent is acting hereunder solely as agent for the
Corporation and owes no fiduciary duties to any person by reason of this Broker-
Dealer Agreement.
(b) The Auction Agent undertakes to perform such duties and only such
duties as are specifically set forth in this Broker-Dealer Agreement, and no
implied covenants or obligations shall be read into this Broker-Dealer Agreement
against the Auction Agent.
(c) In the absence of bad faith or negligence on its part, the Auction
Agent shall not be liable for any action taken, suffered, or omitted or for any
error of judgment made by it in the performance of its duties under this Broker-
Dealer Agreement. The Auction Agent shall not be liable for any error of
judgment made in good faith unless the Auction Agent shall have been negligent
in ascertaining (or failing to ascertain) the pertinent facts.
3.2. Rights of the Auction Agent.
(a) The Auction Agent may rely and shall be protected in acting or
refraining from acting upon any communication authorized by this Broker-Dealer
Agreement and upon any written instruction, notice request, direction, consent
report, certificate, share certificate or other instrument, paper or document
reasonably believed by it to be genuine. The Auction Agent shall not be liable
for acting upon any telephone communication authorized by this Broker-Dealer
Agreement which the Auction Agent believes in good faith to have been given by
the Trustee, a Broker-Dealer or the Corporation. The Auction Agent may record
telephone communications with the Broker-Dealers.
(b) The Auction Agent may consult with counsel of its own choice, and the
advice of such counsel shall be full and complete authorization and protection
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or risk its
own funds or otherwise incur or become exposed to financial liability in the
performance of its duties hereunder.
(d) The Auction Agent may perform its duties and exercise its rights
hereunder either directly or by or through agents or attorneys and shall not be
responsible for any willful misconduct or negligence on the part of any agent or
attorney appointed by it with due care hereunder.
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<PAGE>
3.3. The Auction Agent's Disclaimer. The Auction Agent makes no
representation as to the correctness of the recitals in this Broker-Dealer
Agreement, the Auction Agent Agreement or the validity or adequacy of the Series
1995-2 Notes.
Section 4. Miscellaneous.
4.1. Termination. Any party may terminate this Broker-Dealer Agreement at
any time upon five days' prior notice to the other party; provided, however,
that if the Broker-Dealer is Smith Barney Inc., neither the Broker-Dealer nor
the Auction Agent may terminate this Broker-Dealer Agreement without first
obtaining the prior written consent of the Trustee and the Corporation of such
termination, which consent shall not be unreasonably withheld or delayed. For so
long as the Auction Agent Agreement is effective and if Smith Barney Inc. is the
sole Broker-Dealer, any termination of this Broker-Dealer Agreement shall not be
effective unless and until a successor, or substitute Broker-Dealer Agreement
becomes effective. This Broker-Dealer Agreement shall automatically terminate
upon the delivery of certificates representing the Taxable Auction Rate Series
1997-1 Notes pursuant to Section 17 of the First Supplemental Indenture or upon
termination of the Auction Agent Agreement.
4.2. Participant. The Broker-Dealer is, and shall remain for the term of
this Broker-Dealer Agreement, a member of, or Participant in, the Depository (or
an affiliate of such a member or Participant).
4.3. Communications. Except for (i) communications authorized to be made by
telephone pursuant to this Broker-Dealer Agreement or the Auction Procedures and
(ii) communications in connection with the Auctions (other than those expressly
required to be in writing), all notices, requests and other communications to
any party hereunder shall be in writing (including facsimile or similar writing)
and shall be given to such party, addressed to it, or its address or facsimile
number set forth below:
If to the Broker-Dealer,
addressed: SMITH BARNEY INC.
390 Greenwich Street
2nd Floor
New York, New York 10013
Attention: Public Finance Division
Telephone: (212) 723-5564
Facsimile: (212) 723-8939
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<PAGE>
If to the Auction Agent,
addressed: BANKERS TRUST COMPANY
Corporate Trust and Agency Group
4 Albany Street
New York, New York 10006
Attention: Auction Rate Securities
Telephone: (212) 250-6850
Facsimile: (212) 250-6215
If to the Trustee,
addressed: First Bank National Association
141 North Main Avenue
Sioux Falls, South Dakota 57117
Attention: Corporate Trust Department
Telephone: (605) 339-8725
Facsimile: (605) 335-3813
If to the Corporation,
addressed: Education Loans Incorporated
105 First Avenue Southwest
Aberdeen, South Dakota 57401
Attention: President
Telephone: (605) 622-4590
Facsimile: (605) 622-4547
or such other address or facsimile number as such party may hereafter specify
for such purpose by notice to the other party. Each such notice, request or
communication shall be effective when delivered at the address specified herein.
Communications shall be given on behalf of the Broker-Dealer by a Broker-Dealer
Officer and on behalf of the Auction Agent by an Authorized Officer of the
Auction Agent. The Broker-Dealer may record telephone communications with the
Auction Agent.
4.4. Entire Agreement. This Broker-Dealer Agreement contains the entire
agreement between the parties relating to the subject matter hereof, and there
are not other representations, endorsements, promises, agreements or
understandings, oral, written or inferred, between the parties relating to the
subject matter hereof, except for the fee letter dated as of July 1, 1997, from
the Auction Agent to the Corporation.
4.5. Benefits. Nothing in this Broker-Dealer Agreement, express or implied,
shall give to any person, other than the Auction Agent, the Corporation, the
Broker-Dealer and their respective successors and assigns, any benefit of any
legal or equitable right, remedy or claim under this Broker-Dealer Agreement.
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4.6. Amendment; Waiver.
(a) This Broker-Dealer Agreement shall not be deemed or construed to be
modified, amended, rescinded, canceled or waived, in whole or in part, except by
a written instrument signed by a duly authorized representative of the parties
hereto. This Broker-Dealer Agreement may not be amended without first obtaining
the prior written consent of the Corporation.
(b) Failure of either party to this Broker-Dealer Agreement to exercise
any right or remedy hereunder in the event of a breach of this Broker-Dealer
Agreement by the other party shall not constitute a waiver of any such right or
remedy with respect to any subsequent breach.
4.7. Successors and Assigns. This Broker-Dealer Agreement shall be binding
upon, inure to the benefit of, and be enforceable by, the parties hereto and
their respective successors and assigns.
4.8. Severability. If any clause, provision or section of this Broker-
Dealer Agreement shall be ruled invalid or unenforceable by any court of
competent jurisdiction, the invalidity or unenforceability of such clause,
provision or section shall not affect any remaining clause, provision or
sections hereof.
4.9. Execution in Counterparts. This Broker-Dealer Agreement may be
executed in several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument.
4.10. Governing Law. This Broker-Dealer Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
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In Witness Whereof, the parties hereto have caused this Broker-Dealer
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
BANKERS TRUST COMPANY
as Auction Agent
By:
----------------------------
Title:
----------------------
SMITH BARNEY INC.,
as Broker-Dealer
By:
----------------------------
Title:
----------------------
Pursuant to and in accordance with Section 9 of the First Supplemental Indenture
and Section 2.9 of the Auction Agent Agreement (defined above), the undersigned
consents to the execution of the above Broker-Dealer Agreement.
First Bank National Association, as Trustee
By:
-----------------------------------
Title:
--------------------------------
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EXHIBIT A TO BROKER-DEALER AGREEMENT
SETTLEMENT PROCEDURES
If not otherwise defined herein, capitalized terms used herein shall have
the meanings given such terms in Article 1 of the First Supplemental Indenture.
These Settlement Procedures shall apply separately for each series of Taxable
Auction Rate Series 1997-1 Notes.
(a) Not later than (1) 3:00 P.M., if the Auction Rate Series 1997-1 Note
Interest Rate is the Auction Rate or (2) 4:00 p.m. if the Auction Rate Series
1997-1 Note Interest Rate is the Net Loan Rate, on each Auction Date, the
Auction Agent shall notify by telephone each Broker-Dealer that participated in
the Auction held on such Auction Date and submitted an Order on behalf of an
Existing Holder or Potential Holder of:
(i) the Auction Rate Series 1997-1 Note Interest Rate fixed for the
next Interest Period;
(ii) whether there were Sufficient Bids in such Auction;
(iii) if such Broker-Dealer submitted Bids or Sell Orders on behalf of
an Existing Holder (a "Seller's Broker-Dealer"), whether such Bid
or Sell Order was accepted or rejected, in whole or in part, and
the principal amount of Taxable Auction Rate Series 1997-1 Notes,
if any, to be sold by such Existing Holder;
(iv) if such Broker-Dealer submitted a Bid on behalf of a Potential
Holder (a "Buyer's Broker-Dealer"), whether such Bid was accepted
or rejected, in whole or in part, and the principal amount of
Taxable Auction Rate Series 1997-1 Notes, if any, to be purchased
by such Potential Holder;
(v) if the aggregate amount of Taxable Auction Rate Series
1997-1 Notes to be sold by all Existing Holders on whose behalf
such Seller's Broker-Dealer submitted Bids or Sell Orders exceeds
the aggregate principal amount of Taxable Auction Rate Series
1997-1 Notes to be purchased by all Potential Holders on whose
behalf such Broker-Dealer submitted a Bid, the name or names of
one or more Buyer's Broker-Dealers (and the name of the
Participant, if any, of each such Buyer's Broker-Dealer)
A-1
<PAGE>
acting for one or more purchasers of such excess principal amount
of Taxable Auction Rate Series 1997-1 Notes and the principal
amount of Taxable Auction Rate Series 1997-1 Notes to be
purchased from one or more Existing Holders on whose behalf such
Seller's Broker-Dealer acted by one or more Potential Holders on
whose behalf each of such Buyer's Broker-Dealers acted;
(vi) if the principal amount of Taxable Auction Rate Series 1997-1
Notes to be purchased by all Potential Holders on whose behalf
such Buyer's Broker-Dealer submitted a Bid exceeds the amount of
Taxable Auction Rate Series 1997-1 Notes to be sold by all
Existing Holders on whose behalf such Broker-Dealer submitted a
Bid or a Sell Order, the name or names of one or more Seller's
Broker-Dealers (and the name of the Participant, if any, of each
such Seller's Broker-Dealer) acting for one or more sellers of
such excess principal amount of Taxable Auction Rate Series 1997-
1 Notes and the principal amount of Taxable Auction Rate Series
1997-1 Notes to be sold to one or more Potential Holders on whose
behalf such Buyer's Broker-Dealer acted by one or more Existing
Holders on whose behalf each of such Seller's Broker-Dealers
acted; and
(vii) the Auction Date for the next succeeding Auction.
(b) On each Auction Date, each Broker-Dealer that submitted an Order
on behalf of any Existing Holder or Potential Holder shall:
(i) advise each Existing Holder and Potential Holder on whose behalf
such Broker-Dealer submitted a Bid or Sell Order in the Auction
on such Auction Date whether such Bid or Sell Order was accepted
or rejected, in whole or in part;
(ii) in the case of a Broker-Dealer that is a Buyer's Broker-Dealer,
advise each Potential Holder on whose behalf such Buyer's Broker-
Dealer submitted a Bid that was accepted, in whole or in part, to
instruct such Potential Holder's Participant to pay such Buyer's
Broker-Dealer (or its Participant) through the Depository the
amount necessary to purchase
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<PAGE>
the principal amount of Taxable Auction Rate Series 1997-1 Notes
to be purchased pursuant to such Bid against receipt of such
Taxable Auction Rate Series 1997-1 Notes;
(iii) in the case of a Broker-Dealer that is a Seller's Broker-Dealer,
instruct each Existing Holder on whose behalf such Seller's
Broker-Dealer submitted a Sell Order that was accepted, in whole
or in part, to instruct such Existing Holder's Participant to
deliver to such Seller's Broker-Dealer (or its Participant)
through the Depository the principal amount of Taxable Auction
Rate Series 1997-1 Notes to be sold pursuant to such Order
against payment therefor;
(iv) advise each Existing Holder on whose behalf such Broker-Dealer
submitted an Order and each Potential Holder on whose behalf such
Broker-Dealer submitted a Bid of the Auction Rate Series 1997-1
Note Interest Rate for the next Taxable Auction Rate Series 1997-
1 Note Interest Period;
(v) advise each Existing Holder on whose behalf such Broker-Dealer
submitted an Order of the next Auction Date, including, without
limitation, Existing Holders deemed to have submitted Hold Orders
pursuant to Section 4(b)(iii) of the Second Supplemental
Indenture; and
(vi) advise each Potential Holder on whose behalf such Broker-Dealer
submitted a Bid that was accepted, in whole or in part, of the
next Auction Date.
(c) On the basis of the information provided to it pursuant to paragraph
(a) above, each Broker-Dealer that submitted a Bid or Sell Order in an Auction
is required to allocate any funds received by it in connection with such Auction
pursuant to paragraph (b) (ii) above, and any Taxable Auction Rate Series 1997-1
Notes received by it in connection with such Auction pursuant to paragraph (b)
(iii) above among the Potential Holders, if any, on whose behalf such Broker-
Dealer submitted Bids, the Existing Holders, if any, on whose behalf such
Broker-Dealer submitted Bids or Sell Orders in such Auction, and any Broker-
Dealers identified to it by the Auction Agent following such Auction pursuant to
paragraph (a) (v) or (a) (vi) above.
(d) On each Auction Date:
A-3
<PAGE>
(i) each Potential Holder and Existing Holder with an Order in the
Auction on such Auction Date shall instruct its Participant as
provided in (b) (ii) or (b)(iii) above, as the case may be;
(ii) each Seller's Broker-Dealer that is not a Participant of the
Depository shall instruct its Participant to deliver such Taxable
Auction Rate Series 1997-1 Notes through the Depository to a
Buyer's Broker-Dealer (or its Participant) identified to such
Seller's Broker-Dealer pursuant to (a) (v) above against payment
therefor; and
(iii) each Buyer's Broker-Dealer that is not a Participant in the
Depository shall instruct its Participant to pay through the
Depository to a Seller's Broker-Dealer (or its Participant)
identified following such Auction pursuant to (a) (vi) above the
amount necessary to purchase the Taxable Auction Rate Series
1997-1 Notes to be purchased pursuant to (b) (ii) above against
receipt of such Taxable Auction Rate Series 1997-1 Notes.
(e) On the Business Day following each Auction Date:
(i) each Participant for a Bidder in the Auction on such Auction Date
referred to in (d) (i) above shall instruct the Depository to
execute the transactions described under (b) (ii) or (b) (iii)
above for such Auction, and the Depository shall execute such
transactions;
(ii) each Seller's Broker-Dealer or its Participant shall instruct the
Depository to execute the transactions described in (d)(ii) above
for such Auction, and the Depository shall execute such
transactions; and
(iii) each Buyer's Broker-Dealer or its Participant shall instruct the
Depository to execute the transactions described in (d) (iii)
above for such Auction, and the Depository shall execute such
transactions.
(f) If an Existing Holder selling Taxable Auction Rate Series 1997-1 Notes
in an Auction fails to deliver such Taxable Auction Rate Series 1997-1 Notes (by
authorized book-entry), a Broker-Dealer may deliver to the Potential Holder on
behalf of which it submitted a Bid that was accepted a principal amount of
A-4
<PAGE>
Taxable Auction Rate Series 1997-1 Notes that is less than the principal amount
of Taxable Auction Rate Series 1997-1 Notes that otherwise was to be purchased
by such Potential Holder. In such event, the principal amount of Taxable
Auction Rate Series 1997-1 Notes to be so delivered shall be determined solely
by such Broker-Dealer, but only in Authorized Denominations. Delivery of such
lesser principal amount of Taxable Auction Rate Series 1997-1 Notes shall
constitute good delivery. Notwithstanding the foregoing terms of this paragraph
(f), any delivery or nondelivery of Taxable Auction Rate Series 1997-1 Notes
which shall represent any departure from the results of an Auction, as
determined by the Auction Agent, shall be of no effect unless and until the
Auction Agent shall have been notified of such delivery or nondelivery in
accordance with the provisions of the Auction Agent Agreement and the Broker-
Dealer Agreements. Neither the Trustee nor the Auction Agent will have any
responsibility or liability with respect to the failure of a Potential Holder,
Existing Holder or their respective Broker-Dealer or Participant to deliver the
principal amount of Taxable Auction Rate Series 1997-1 Notes or to pay for the
Taxable Auction Rate Series 1997-1 Notes purchased or sold pursuant to an
Auction or otherwise.
A-5
<PAGE>
EXHIBIT B TO BROKER-DEALER AGREEMENT
------------------------------------
EDUCATION LOANS INCORPORATED
TAXABLE AUCTION RATE STUDENT LOAN ASSET-BACKED NOTES
SENIOR SERIES [1997-1G] [1997-1H]
ORDER FORM
----------
AUCTION DATE _________
ISSUE ________________
SERIES _______________
The undersigned Broker-Dealer submits the following orders on behalf of the
Bidder(s) indicated below:
BIDS BY EXISTING HOLDERS
------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
OF NOTES ($100,000
EXISTING HOLDER OR MULTIPLES) BID RATE
--------------- ------------------ --------
<C> <S> <C> <C>
1. ________________ __________________ _______
2. ________________ __________________ _______
3. ________________ __________________ _______
4. ________________ __________________ _______
5. ________________ __________________ _______
6. ________________ __________________ _______
7. ________________ __________________ _______
8. ________________ __________________ _______
9. ________________ __________________ _______
10. ________________ __________________ _______
</TABLE>
*Existing Holders may be described by name or other reference as determined in
the sole discretion of the Broker-Dealer.
B-1
<PAGE>
EDUCATION LOANS INCORPORATED
TAXABLE AUCTION RATE STUDENT LOAN ASSET-BACKED NOTES
SENIOR SERIES [1997-1G] [1997-1H]
BIDS BY POTENTIAL HOLDERS
-------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
OF NOTES ($100,000
POTENTIAL HOLDER OR MULTIPLES) BID RATE
---------------- ------------------ --------
<C> <S> <C> <C>
1. _________________ __________________ _______
2. _________________ __________________ _______
3. _________________ __________________ _______
4. _________________ __________________ _______
5. _________________ __________________ _______
6. _________________ __________________ _______
7. _________________ __________________ _______
8. _________________ __________________ _______
9. _________________ __________________ _______
10. _________________ __________________ _______
11. _________________ __________________ _______
12. _________________ __________________ _______
13. _________________ __________________ _______
14. _________________ __________________ _______
15. _________________ __________________ _______
</TABLE>
NOTES:
1. If one or more Orders covering in the aggregate more than the outstanding
principal amount of Taxable Auction Rate Series 1997-1 Notes held by any
Existing Holder are submitted, such Orders shall be considered valid in the
order of priority set forth in the Auction Procedures.
2. A Hold or Sell Order may be placed only by an Existing Holder covering a
principal account of Taxable Auction Rate Series 1997-1 Notes not greater
than the principal amount currently held by such Existing Holder.
B-2
<PAGE>
3. Potential Holders may only make Bids, each of which must specify a rate.
If more than one Bid is submitted on behalf of any Potential Holder, each
Bid submitted shall be a separate Bid with the rate specified herein.
4. Bids may contain no more than three figures to the right of the decimal
point (.001 of 1%).
5. An order must be submitted in principal amounts of $100,000 or integral
multiples thereof.
*Potential Holders may be described by name or other reference as determined in
the sole discretion of the Broker-Dealer.
B-3
<PAGE>
NAME OF BROKER-DEALER: _______________________________
AUTHORIZED SIGNATURE: ________________________________
TOTAL NUMBER OF ORDERS ON THIS ORDER FORM: ___________
Submit to: BANKERS TRUST COMPANY
Corporate Trust and Agency Group
4 Albany Street
New York, New York 10006
Telephone: (212) 250-6850
Telecopier: (212) 250-6215
B-4
<PAGE>
EXHIBIT C TO BROKER-DEALER AGREEMENT
------------------------------------
EDUCATION LOANS INCORPORATED
TAXABLE AUCTION RATE STUDENT LOAN ASSET-BACKED NOTES
SENIOR SERIES [1997-1G] [1997-1H]
(To be used only for transfers made other
than pursuant to an Auction)
We are (check one)
_________ the Existing Holder indicated below*; or
_________ the Broker-Dealer for such Existing Holder; or
_________ the Participant for such Existing Holder.
We hereby notify you that such Existing Holder has transferred $________ (must
be in units of $100,000) of Senior Series 1997--1[G][H] Notes to________________
______________________________
(Existing Holder)
_______________________________
(Name of Broker-Dealer)
_______________________________
(Name of Participant)
By:____________________________
Printed Name:__________________
Title:_________________________
*Existing Holders may be described by name or other reference as determined in
the sole discretion of the Broker-Dealer.
C-1
<PAGE>
EXHIBIT D TO BROKER-DEALER AGREEMENT
------------------------------------
EDUCATION LOANS INCORPORATED
TAXABLE AUCTION RATE STUDENT LOAN ASSET-BACKED NOTES
SENIOR SERIES [1997-1G] [1997-1H]
NOTICE OF A FAIL TO DELIVER OR MAKE PAYMENT
-------------------------------------------
COMPLETE EITHER I OR II.
- ------------------------
I. We are a Broker-Dealer for _____* (the "Purchaser"), which purchased
$_________ (must be in units of $100,000) of the Senior Series 1997-
1[G][H] Notes in the Auction held on ___________________ from the
seller of such Series 1997-1[G][H] Notes.
II. We are a Broker-Dealer for ______* (the "Seller"), which sold
$__________ (must be in units of $100,000) of the Senior Series 1997-
1[G][H] Notes in the Auction held on __________________ to the
purchaser of such Senior Series 1997-1[G][H] Notes.
We hereby notify you that (check one)
___________ the Seller failed to deliver such Senior Series 1997-1[G][H]
Notes to the Purchaser.
___________ the Purchaser failed to make payment to the Seller upon delivery
of such Series 1997-1[G][H] Notes.
_____________________________
(Name of Broker-Dealer)
By:__________________________
Name:________________________
Title:_______________________
*may be described by name or other reference as determined in the sole
discretion of the Broker-Dealer.
D-1
<PAGE>
Exhibit 4.6
BROKER-DEALER AGREEMENT
(TAX EXEMPT AUCTION RATE SERIES 1997-1 NOTES)
between
BANKERS TRUST COMPANY,
as Auction Agent
and
SMITH BARNEY INC.,
as Broker-Dealer
Dated as of July 1, 1997
Relating to
EDUCATION LOANS INCORPORATED
TAX EXEMPT AUCTION RATE STUDENT LOAN ASSET-BACKED NOTES
SENIOR SERIES 1997-1A, 1997-1B, 1997-1C, 1997-1D and 1997-1E
<PAGE>
BROKER-DEALER AGREEMENT
This BROKER-DEALER AGREEMENT (TAX EXEMPT AUCTION RATE SERIES 1997-1
NOTES)(the "Broker Dealer Agreement"), dated as of July 1, 1997, is by and
between Bankers Trust Company, a New York banking corporation (together with its
successors and assigns, the "Auction Agent"), pursuant to authority granted to
it in the Auction Agent Agreement, defined below, acting not in its individual
capacity, but solely as agent for Education Loans Incorporated (the
"Corporation"), a South Dakota corporation and SMITH BARNEY INC. (together with
its respective successors and assigns, the "Broker-Dealer").
RECITALS
The Corporation proposes to cause the Trustee, defined below, to
authenticate and deliver [$____________] aggregate principal amount of its Tax
Exempt Auction Rate Student Loan Asset-Backed Notes, Senior Series 1997-1A (the
"Series 1997-1A Notes"), its Tax Exempt Auction Rate Student Loan Asset-Backed
Notes, Senior Series 1997-1B (the "Series 1997-1B Notes"), its Tax Exempt
Auction Rate Student Loan Asset-Backed Notes, Senior Series 1997-1C (the "Series
1997-1C Notes"), its Tax Exempt Auction Rate Student Loan Asset-Backed Notes,
Senior Series 1997-1D (the "Series 1997-1D Notes") and its Tax Exempt Auction
Rate Student Loan Asset-Backed Notes, Senior Series 1997-1E (the "Series 1997-1E
Notes", and together with the Series 1997-1A Notes, the Series 1997-1B Notes,
the Series 1997-1C Notes and the Series 1997-1D Notes, the "Tax Exempt Auction
Rate Series 1997-1 Senior Notes"). The Tax Exempt Auction Rate Series 1997-1
Notes are being issued under the First Supplemental Indenture of Trust, dated as
of July 1, 1997 (the "First Supplemental Indenture"), executed in accordance
with the Indenture of Trust, dated as of July 1, 1997 (the "Indenture"), each
between the Corporation and First Bank National Association, Minneapolis,
Minnesota (together with its successors and assigns, the "Trustee"). The Tax
Exempt Auction Rate Series 1997-1 Notes are being issued as adjustable rate
securities.
The First Supplemental Indenture provides that the Auction Rate Series
1997-1 Note Interest Rate for each Interest Period after the Initial Interest
Period shall equal the Auction Rate, but in no event shall exceed the Auction
Rate Series 1997-1 Note Interest Rate Limitation.
Pursuant to Section 2.9 (a) of the Auction Agent Agreement (Tax Exempt
Auction Rate Series 1997-1 Notes), dated as of July 1, 1997, among the Trustee,
the Auction Agent and the Corporation (the "Auction Agent Agreement"), the
Trustee has directed the Auction Agent to execute and deliver this Broker-Dealer
Agreement.
The Auction Procedures require the participation of one or more Broker-
Dealers.
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Auction Agent, as agent of the Corporation, and the
Broker-Dealer agree as follows:
Section 1. Definitions and Rules of Construction
1.1. Terms Defined by Reference to the First Supplemental Indenture.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings given such terms in the First Supplemental Indenture.
1.2. Terms Defined Herein. As used herein and in the Settlement
Procedures, defined below, the following terms shall have the following
meanings, unless the context otherwise requires:
"Applicable Auction Rate Series 1997-1 Note Interest Rate" shall mean the
Auction Rate Series 1997-1 Note Interest Rate as defined in the First
Supplemental Indenture.
"Authorized Officer" shall mean, with respect to the Auction Agent, each
Managing Director, Vice President, Assistant Vice President and Assistant
Treasurer and every other officer of the Auction Agent assigned to its Corporate
Trust and Agency Group and every other officer or employee of the Auction Agent
designated as an "Authorized Officer" for purposes of this Agreement in a
communication to the Broker-Dealer.
"Broker-Dealer Officer" shall mean each officer or employee of the Broker-
Dealer designated as a "Broker-Dealer Officer" for purposes of this Broker-
Dealer Agreement in a communication to the Auction Agent.
"Beneficial Owner" shall mean a beneficial owner of any of the Tax Exempt
Auction Rate Series 1997-1 Notes.
"Notice of Failure to Deliver or Make Payment" shall mean a notice
substantially in the form of Exhibit D hereto.
"Notice of Transfer" shall mean a notice substantially in the form of
Exhibit C hereto.
"Order Form" shall mean the form to be submitted by any Broker-Dealer on or
prior to any Auction Date substantially in the form of Exhibit B hereto.
"Settlement Procedures" shall mean the Settlement Procedures attached
hereto as Exhibit A.
-2-
<PAGE>
1.3. Rules of Construction. Unless the context or use indicate another or
different meaning or intent, the following rules shall apply to the construction
of this Agreement;
(a) Words importing the singular number shall include the plural number and
vice versa.
(b) The captions and headings herein are solely for convenience of
reference and shall not constitute a part of this Agreement nor, shall they
affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto," and other words of similar
import refer to this Broker-Dealer Agreement as a whole.
(d) All references herein to a particular time of day shall be to New York
City time.
(e) The rights and duties of the Broker-Dealer and the Auction Agent under
this Broker-Dealer Agreement shall apply to all series of the Tax Exempt Auction
Rate Series 1997-1 Notes, but separately. References to "Tax Exempt Auction
Rate Series 1997-1 Notes," unless the context clearly contemplates a reference
to all Tax Exempt Auction Rate Series 1997-1 Notes shall refer only to the
Series 1997-1A Notes as to rights and duties regarding Series 1997-1A Notes;
only to the Series 1997-1B Notes as to rights and duties regarding Series 1997-
1B Notes; only to the Series 1997-1C Notes as to rights and duties regarding
Series 1997-1C Notes; only to the Series 1997-1D Notes as to rights and duties
regarding Series 1997-1D Notes; and only to the Series 1997-1E Notes as to
rights and duties regarding Series 1997-1E Notes.
Section 2. The Auction
2.1. Incorporation by Reference of Auction Procedures and Settlement
Procedures.
(a) On each Auction Date, the provisions of the Auction Procedures will be
followed by the Auction Agent for the purpose of determining the Applicable
Auction Rate Series 1997-1 Note Interest Rate for each Auction Period after the
Initial Interest Period. Each periodic operation of such procedures is
hereinafter referred to as an "Auction".
(b) All of the provisions contained in the Auction Procedures and the
Settlement Procedures are incorporated herein by reference in their entirety and
shall be deemed to be a part of this Broker-Dealer Agreement to the same extent
as if such provisions were fully set forth herein.
-3-
<PAGE>
(c) The Broker-Dealer and other Broker-Dealers may participate in Auctions
for their own accounts.
2.2. Preparation for Each Auction.
(a) Not later than 9:30 A.M. on each Auction Date for the Tax Exempt
Auction Rate Series 1997-1 Notes, the Auction Agent shall advise the Broker-
Dealer by telephone of the All Hold Rate, the Maximum Auction Rate, the After-
Tax Equivalent, the "AA" Composite Commercial Paper Rate, the Index and the
Applicable Percentage.
(b) If the Auction Date for any Auction shall be changed after the Auction
Agent has given notice of such Auction Date pursuant to clause (vii) of
paragraph (a) of the Settlement Procedures, the Auction Agent, by telephone
(confirmed in writing), telecopy or such other means as the Auction Agent deems
practicable, shall give notice of such change to the Broker-Dealer not later
than the earlier of 9:15 A.M. on the new Auction Date and 9:15 A.M. on the old
Auction Date. Thereafter, the Broker-Dealer shall use its best efforts to
promptly notify its customers who are Existing Holders of such change in the
Auction Date.
(c) From time to time upon request of the Auction Agent pursuant to Section
2.2(d) of the Auction Agent Agreement, the Broker-Dealer shall provide the
Auction Agent with a statement of the aggregate amount of each series of Tax
Exempt Auction Rate Series 1997-1 Notes held by the Broker-Dealer as an Existing
Holder for its own account or otherwise, as well as with a list of the Broker-
Dealer's customers that the Broker-Dealer believes are Existing Holders of any
series of the Tax Exempt Auction Rate Series 1997-1 Notes (listed by series) and
the aggregate principal amount of each series of Tax Exempt Auction Rate Series
1997-1 Notes beneficially owned by each such customer. Except as permitted by
Section 2.10 of the Auction Agent Agreement, the Auction Agent shall keep
confidential any such information and shall not disclose any such information so
provided to any person other than the Broker-Dealer, the Issuer and the Trustee,
provided that the Auction Agent reserves the right to disclose any such
information if it is advised by its counsel that its failure to do so would be
unlawful.
(d) The Auction Agent shall send by telecopy or other means a copy of any
Notice of Tax Exempt Auction Rate Series 1997-1 Notes Outstanding received from
the Trustee to the Broker-Dealer in accordance with Section 4.3 hereof.
2.3. Auction Schedule: Method of Submission of Orders.
(a) The Auction Agent shall conduct Auctions for the Tax Exempt Auction
Rate Series 1997-1 Notes in accordance with the schedule set forth below. Such
schedule may be changed by the
-4-
<PAGE>
Auction Agent with the consent of the Trustee and the Market Agent, which
consent shall not be unreasonably withheld or delayed. The Auction Agent shall
give written notice of any such change to the Broker-Dealer. Such notice shall
be given prior to the close of business on the Business Day next preceding the
first Auction Date on which any such change shall be effective.
By 9:30 A.M. The Auction Agent advises the Trustee and the Broker-
Dealers of the Maximum Auction Rate, the All Hold Rate,
the After-Tax Equivalent, the "AA" Composite Commercial
Paper Rate, the Index and the Applicable Percentage to
be used in determining the Auction Rate under the
Auction Procedures, the First Supplemental Indenture
and the Auction Agent Agreement.
9:30 A.M.- The Auction Agent assembles information communicated
12:30 P.M. to it by Broker-Dealers as provided in Section 4(c)(i)
of the First Supplemental Indenture. The Submission
Deadline is 12:30 P.M.
Not earlier than The Auction Agent makes determinations pursuant
12:30 P.M. to Section 4(c)(i) of the First Supplemental Indenture.
Submitted Bids and Submitted Sell Orders are accepted
and rejected in whole or in part and Tax Exempt Auction
Rate Series 1997-1 Notes allocated as provided in
Section 4(d) of the First Supplemental Indenture.
By approximately The Auction Agent advises the Trustee and the Broker-
3:00 P.M.* Dealers of the results of the Auction as provided in
4:00 P.M.** Section 4(c) (ii) of the First Supplemental Indenture.
The Auction Agent gives notice of Auction results as
set forth in Section 2.4(a) hereof.
* If the Auction Rate Series 1997-1 Note Interest Rate is the Auction Rate.
** If the Auction Rate Series 1997-1 Note Interest Rate is the Maximum Auction
Rate.
(b) The Broker-Dealer agrees to maintain a list of Potential Holders
and to contact the Potential Holders on such list on or prior to each Auction
Date for the purposes of participating in the Auction on such Auction Date.
-5-
<PAGE>
(c) The Broker-Dealer shall submit Orders to the Auction Agent in
writing by delivering an Order Form. The Broker-Dealer shall submit separate
Orders to the Auction Agent for each Potential Holder or Existing Holder on
whose behalf the Broker-Dealer is submitting an Order and shall not net or
aggregate the Orders of different Potential Holders or Existing Holders on whose
behalf the Broker-Dealer is submitting Orders.
(d) The Broker-Dealer shall deliver to the Auction Agent (i) a Notice
of Transfer with respect to any transfer of Tax Exempt Auction Rate Series 1997-
1 Notes made through the Broker-Dealer by an Existing Holder to another person
other than pursuant to an Auction, and (ii) a Notice of Failure to Deliver or
Make Payment with respect to the failure of any Tax Exempt Auction Rate Series
1997-1 Notes to be transferred to or payment to be made by any person that
purchased or sold Tax Exempt Auction Rate Series 1997-1 Notes through the
Broker-Dealer pursuant to a prior Auction. The Auction Agent is not required to
accept any notice delivered pursuant to clauses (i) or (ii) of this subparagraph
(d) with respect to an Auction unless it is received by the Auction Agent by
3:00 P.M. on the Business Day next preceding such Auction Date.
(e) The Broker-Dealer agrees to handle its customers' Orders in
accordance with its duties under applicable securities laws and rules.
2.4. Notices.
(a) On each Auction Date, the Auction Agent shall notify the Broker-
Dealer by telephone of the results of the Auction as set forth in paragraph (a)
of the Settlement Procedures. The Auction Agent shall by 10:30 A.M. on the
Business Day next succeeding such Auction Date if previously requested by the
Broker-Dealer notify the Broker-Dealer in writing of the disposition of all
Orders submitted by the Broker-Dealer in the Auction held on such Auction Date.
(b) The Broker-Dealer shall notify each Existing Holder or Potential
Holder on whose behalf the Broker-Dealer has submitted an Order as set forth in
paragraph (b) of the Settlement Procedures and take such other action as is
required by the Broker-Dealer pursuant to the Settlement Procedures.
(c) The Auction Agent shall deliver to the Broker-Dealer all notices
and certificates that the Auction Agent is required to deliver to the Broker-
Dealer pursuant to Section 2 of the Auction Agent Agreement at the times and in
the manner set forth in the Auction Agent Agreement.
2.5. Service Charge to Be Paid to the Broker-Dealer. Not later than
2:00 P.M. on each Interest Payment Date with respect to the Tax Exempt Auction
Rate Series 1997-1 Notes, the Auction Agent
-6-
<PAGE>
shall pay to the Broker-Dealer a fee with respect to each series of Tax Exempt
Auction Rate Series 1997-1 Notes, from monies received from the Trustee, in an
amount equal to the product of (i) a fraction the numerator of which is the
number of days from the preceding Interest Payment Date (or since the Closing
Date, in the case of the first Interest Payment Date) to the current Interest
Payment Date (or, if such series ceased to be outstanding prior thereto, the
date on which such series ceased to be outstanding) and the denominator of which
is 360 times (ii) the Broker-Dealer Fee Rate times (iii) the average principal
amount of Tax Exempt Auction Rate Series 1997-1 Notes of such series outstanding
during the period from such preceding Interest Payment Date (or the Closing
Date, in the case of the first Interest Payment Date) to the current Interest
Payment Date (or, if such series ceased to be outstanding prior thereto, the
date on which such series ceased to be outstanding).
2.6. Settlement.
(a) If any Existing Holder on whose behalf the Broker-Dealer has
submitted a Bid or Sell Order for Tax Exempt Auction Rate Series 1997-1 Notes
that was accepted in whole or in part fails to instruct its Participant to
deliver the Tax Exempt Auction Rate Series 1997-1 Notes subject to such Bid or
Sell Order against payment therefor, the Broker-Dealer shall instruct such
Participant to deliver such Tax Exempt Auction Rate Series 1997-1 Notes against
payment therefor and the Broker-Dealer may deliver to the Potential Holder on
whose behalf the Broker-Dealer submitted a Bid that was accepted in whole or in
part, a principal amount of the Tax Exempt Auction Rate Series 1997-1 Notes that
is less than the principal amount of the Tax Exempt Auction Rate Series 1997-1
Notes specified in such Bid to be purchased by such Potential Holder.
Notwithstanding the foregoing terms of this Section, any delivery or nondelivery
of Tax Exempt Auction Rate Series 1997-1 Notes that represents any departure
from the results of an Auction, as determined by the Auction Agent, shall be of
no effect unless and until the Auction Agent shall have been notified of such
delivery or non-delivery in accordance with the terms of Section 2.3(d) hereof.
The Auction Agent shall have no duty or liability with respect to enforcement of
this Section 2.6(a).
(b) Neither the Auction Agent, the Trustee, nor the Corporation shall
have any responsibility or liability with respect to the failure of an Existing
Holder, a Potential Holder or its respective Participant to deliver Tax Exempt
Auction Rate Series 1997-1 Notes or to pay for Tax Exempt Auction Rate Series
1997-1 Notes sold or purchased pursuant to the Auction Procedures or otherwise.
The Auction Agent shall have no responsibility for any adjustment to the fees
paid pursuant to Section 2.5 hereof as a result of any failure described in this
Section 2.6(b).
-7-
<PAGE>
Section 3. The Auction Agent.
3.1. Duties and Responsibilities.
(a) The Auction Agent is acting hereunder solely as agent for the
Corporation and owes no fiduciary duties to any person by reason of this Broker-
Dealer Agreement.
(b) The Auction Agent undertakes to perform such duties and only such
duties as are specifically set forth in this Broker-Dealer Agreement, and no
implied covenants or obligations shall be read into this Broker-Dealer Agreement
against the Auction Agent.
(c) In the absence of bad faith or negligence on its part, the Auction
Agent shall not be liable for any action taken, suffered, or omitted or for any
error of judgment made by it in the performance of its duties under this Broker-
Dealer Agreement. The Auction Agent shall not be liable for any error of
judgment made in good faith unless the Auction Agent shall have been negligent
in ascertaining (or failing to ascertain) the pertinent facts.
3.2. Rights of the Auction Agent.
(a) The Auction Agent may rely and shall be protected in acting or
refraining from acting upon any communication authorized by this Broker-Dealer
Agreement and upon any written instruction, notice request, direction, consent
report, certificate, share certificate or other instrument, paper or document
reasonably believed by it to be genuine. The Auction Agent shall not be liable
for acting upon any telephone communication authorized by this Broker-Dealer
Agreement which the Auction Agent believes in good faith to have been given by
the Trustee, a Broker-Dealer or the Corporation. The Auction Agent may record
telephone communications with the Broker-Dealers.
(b) The Auction Agent may consult with counsel of its own choice, and
the advice of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or risk
its own funds or otherwise incur or become exposed to financial liability in the
performance of its duties hereunder.
(d) The Auction Agent may perform its duties and exercise its rights
hereunder either directly or by or through agents or attorneys and shall not be
responsible for any willful misconduct or negligence on the part of any agent or
attorney appointed by it with due care hereunder.
-8-
<PAGE>
3.3. The Auction Agent's Disclaimer. The Auction Agent makes no
representation as to the correctness of the recitals in this Broker-Dealer
Agreement, the Auction Agent Agreement or the validity or adequacy of the Series
1996-1 Notes.
Section 4. Miscellaneous.
4.1. Termination. Any party may terminate this Broker-Dealer
Agreement at any time upon five days' prior notice to the other party; provided,
however, that if the Broker-Dealer is Smith Barney Inc., neither the Broker-
Dealer nor the Auction Agent may terminate this Broker-Dealer Agreement without
first obtaining the prior written consent of the Trustee and the Corporation of
such termination, which consent shall not be unreasonably withheld or delayed.
For so long as the Auction Agent Agreement is effective and if Smith Barney Inc.
is the sole Broker-Dealer, any termination of this Broker-Dealer Agreement shall
not be effective unless and until a successor, or substitute Broker-Dealer
Agreement becomes effective. This Broker-Dealer Agreement shall automatically
terminate upon the delivery of certificates representing the Tax Exempt Auction
Rate Series 1997-1 Notes pursuant to Section 17 of the First Supplemental
Indenture or upon termination of the Auction Agent Agreement.
4.2. Participant. The Broker-Dealer is, and shall remain for the term
of this Broker-Dealer Agreement, a member of, or Participant in, the Depository
(or an affiliate of such a member or Participant).
4.3. Communications. Except for (i) communications authorized to be
made by telephone pursuant to this Broker-Dealer Agreement or the Auction
Procedures and (ii) communications in connection with the Auctions (other than
those expressly required to be in writing), all notices, requests and other
communications to any party hereunder shall be in writing (including facsimile
or similar writing) and shall be given to such party, addressed to it, or its
address or facsimile number set forth below:
If to the Broker-Dealer,
addressed: SMITH BARNEY INC.
390 Greenwich Street
2nd Floor
New York, New York 10013
Attention: Public Finance Division
Telephone: (212) 723-5564
Facsimile: (212) 723-8939
-9-
<PAGE>
If to the Auction Agent,
addressed: BANKERS TRUST COMPANY
Corporate Trust and Agency Group
4 Albany Street
New York, New York 10006
Attention: Auction Rate Securities
Telephone: (212) 250-6850
Facsimile: (212) 250-6215
If to the Trustee,
addressed: First Bank National Association
141 North Main Avenue
Sioux Falls, South Dakota 57117
Attention: Corporate Trust Department
Telephone: (605) 339-8725
Facsimile: (605) 333-3813
If to the Corporation,
addressed: Education Loans Incorporated
105 First Avenue Southwest
Aberdeen, South Dakota 57401
Attention: President
Telephone: (605) 622-4590
Facsimile: (605) 622-4547
or such other address or facsimile number as such party may hereafter specify
for such purpose by notice to the other party. Each such notice, request or
communication shall be effective when delivered at the address specified herein.
Communications shall be given on behalf of the Broker-Dealer by a Broker-Dealer
Officer and on behalf of the Auction Agent by an Authorized Officer of the
Auction Agent. The Broker-Dealer may record telephone communications with the
Auction Agent.
4.4. Entire Agreement. This Broker-Dealer Agreement contains the entire
agreement between the parties relating to the subject matter hereof, and there
are not other representations, endorsements, promises, agreements or
understandings, oral, written or inferred, between the parties relating to the
subject matter hereof, except for the fee letter dated as of July 1, 1997, from
the Auction Agent to the Corporation.
4.5. Benefits. Nothing in this Broker-Dealer Agreement, express or
implied, shall give to any person, other than the Auction Agent, the
Corporation, the Broker-Dealer and their respective successors and assigns, any
benefit of any legal or equitable right, remedy or claim under this Broker-
Dealer Agreement.
-10-
<PAGE>
4.6. Amendment; Waiver.
(a) This Broker-Dealer Agreement shall not be deemed or construed to be
modified, amended, rescinded, canceled or waived, in whole or in part, except by
a written instrument signed by a duly authorized representative of the parties
hereto. This Broker-Dealer Agreement may not be amended without first obtaining
the prior written consent of the Corporation.
(b) Failure of either party to this Broker-Dealer Agreement to exercise any
right or remedy hereunder in the event of a breach of this Broker-Dealer
Agreement by the other party shall not constitute a waiver of any such right or
remedy with respect to any subsequent breach.
4.7. Successors and Assigns. This Broker-Dealer Agreement shall be binding
upon, inure to the benefit of, and be enforceable by, the parties hereto and
their respective successors and assigns.
4.8. Severability. If any clause, provision or section of this
Broker-Dealer Agreement shall be ruled invalid or unenforceable by any court of
competent jurisdiction, the invalidity or unenforceability of such clause,
provision or section shall not affect any remaining clause, provision or
sections hereof.
4.9. Execution in Counterparts. This Broker-Dealer Agreement may be
executed in several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument.
4.10. Governing Law. This Broker-Dealer Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
-11-
<PAGE>
In Witness Whereof, the parties hereto have caused this Broker-Dealer
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
BANKERS TRUST COMPANY
as Auction Agent
By:____________________________
Title:______________________
SMITH BARNEY INC.,
as Broker-Dealer
By:____________________________
Title:______________________
Pursuant to and in accordance with Section 9 of the First Supplemental Indenture
and Section 2.9 of the Auction Agent Agreement (defined above), the undersigned
consents to the execution of the above Broker-Dealer Agreement.
First Bank National Association, as Trustee
By: ___________________________________
Title: ________________________________
-12-
<PAGE>
EXHIBIT A TO BROKER-DEALER AGREEMENT
SETTLEMENT PROCEDURES
If not otherwise defined herein, capitalized terms used herein shall have
the meanings given such terms in Article 1 of the First Supplemental Indenture.
These Settlement Procedures shall apply separately for each series of Tax Exempt
Auction Rate Series 1997-1 Notes.
(a) Not later than (1) 3:00 P.M., if the Auction Rate Series 1997-1 Note
Interest Rate is the Auction Rate or (2) 4:00 p.m. if the Auction Rate Series
1997-1 Note Interest Rate is the Maximum Auction Rate, on each Auction Date, the
Auction Agent shall notify by telephone each Broker-Dealer that participated in
the Auction held on such Auction Date and submitted an Order on behalf of an
Existing Holder or Potential Holder of:
(i) the Auction Rate Series 1997-1 Note Interest Rate fixed for
the next Interest Period;
(ii) whether there were Sufficient Bids in such Auction;
(iii) if such Broker-Dealer submitted Bids or Sell Orders on
behalf of an Existing Holder (a "Seller's Broker-Dealer"),
whether such Bid or Sell Order was accepted or rejected, in
whole or in part, and the principal amount of Tax Exempt
Auction Rate Series 1997-1 Notes, if any, to be sold by such
Existing Holder;
(iv) if such Broker-Dealer submitted a Bid on behalf of a
Potential Holder (a "Buyer's Broker-Dealer"), whether such
Bid was accepted or rejected, in whole or in part, and the
principal amount of Tax Exempt Auction Rate Series 1997-1
Notes, if any, to be purchased by such Potential Holder;
(v) if the aggregate amount of Tax Exempt Auction Rate Series
1997-1 Notes to be sold by all Existing Holders on whose
behalf such Seller's Broker-Dealer submitted Bids or Sell
Orders exceeds the aggregate principal amount of Tax Exempt
Auction Rate Series 1997-1 Notes to be purchased by all
Potential Holders on whose behalf such Broker-Dealer
submitted a Bid, the name or names of one or more Buyer's
Broker-Dealers (and the name of the Participant, if any, of
each such Buyer's Broker-Dealer)
A-1
<PAGE>
acting for one or more purchasers of such excess principal
amount of Tax Exempt Auction Rate Series 1997-1 Notes and
the principal amount of Tax Exempt Auction Rate Series 1997-
1 Notes to be purchased from one or more Existing Holders on
whose behalf such Seller's Broker-Dealer acted by one or
more Potential Holders on whose behalf each of such Buyer's
Broker-Dealers acted;
(vi) if the principal amount of Tax Exempt Auction Rate Series
1997-1 Notes to be purchased by all Potential Holders on
whose behalf such Buyer's Broker-Dealer submitted a Bid
exceeds the amount of Tax Exempt Auction Rate Series 1997-1
Notes to be sold by all Existing Holders on whose behalf
such Broker-Dealer submitted a Bid or a Sell Order, the name
or names of one or more Seller's Broker-Dealers (and the
name of the Participant, if any, of each such Seller's
Broker-Dealer) acting for one or more sellers of such excess
principal amount of Tax Exempt Auction Rate Series 1997-1
Notes and the principal amount of Tax Exempt Auction Rate
Series 1997-1 Notes to be sold to one or more Potential
Holders on whose behalf such Buyer's Broker-Dealer acted by
one or more Existing Holders on whose behalf each of such
Seller's Broker-Dealers acted; and
(vii) the Auction Date for the next succeeding Auction.
(b) On each Auction Date, each Broker-Dealer that submitted an Order
on behalf of any Existing Holder or Potential Holder shall:
(i) advise each Existing Holder and Potential Holder on whose
behalf such Broker-Dealer submitted a Bid or Sell Order in
the Auction on such Auction Date whether such Bid or Sell
Order was accepted or rejected, in whole or in part;
(ii) in the case of a Broker-Dealer that is a Buyer's Broker-
Dealer, advise each Potential Holder on whose behalf such
Buyer's Broker-Dealer submitted a Bid that was accepted, in
whole or in part, to instruct such Potential Holder's
Participant to pay such Buyer's Broker-Dealer (or its
Participant) through the Depository the amount necessary to
purchase
A-2
<PAGE>
the principal amount of Tax Exempt Auction Rate Series 1997-1
Notes to be purchased pursuant to such Bid (which amount, unless
the date of such purchase is an Interest Payment Date, will
include an amount equal to the interest accrued and unpaid on
such principal amount of Tax Exempt Auction Rate Series 1997-1
Notes) against receipt of such Tax Exempt Auction Rate Series
1997-1 Notes;
(iii) in the case of a Broker-Dealer that is a Seller's Broker-Dealer,
instruct each Existing Holder on whose behalf such Seller's
Broker-Dealer submitted a Sell Order that was accepted, in whole
or in part, to instruct such Existing Holder's Participant to
deliver to such Seller's Broker-Dealer (or its Participant)
through the Depository the principal amount of Tax Exempt Auction
Rate Series 1997-1 Notes to be sold pursuant to such Order
against payment therefor;
(iv) advise each Existing Holder on whose behalf such Broker-Dealer
submitted an Order and each Potential Holder on whose behalf such
Broker-Dealer submitted a Bid of the Auction Rate Series 1997-1
Note Interest Rate for the next Interest Period;
(v) advise each Existing Holder on whose behalf such Broker-Dealer
submitted an Order of the next Auction Date, including, without
limitation, Existing Holders deemed to have submitted Hold Orders
pursuant to Section 4(b)(iii) of the Second Supplemental
Indenture; and
(vi) advise each Potential Holder on whose behalf such Broker-Dealer
submitted a Bid that was accepted, in whole or in part, of the
next Auction Date.
(c) On the basis of the information provided to it pursuant to paragraph
(a) above, each Broker-Dealer that submitted a Bid or Sell Order in an Auction
is required to allocate any funds received by it in connection with such Auction
pursuant to paragraph (b) (ii) above, and any Tax Exempt Auction Rate Series
1997-1 Notes received by it in connection with such Auction pursuant to
paragraph (b) (iii) above among the Potential Holders, if any, on whose behalf
such Broker-Dealer submitted Bids, the Existing Holders, if any, on whose behalf
such Broker-Dealer submitted Bids or Sell Orders in such Auction, and any
Broker-
A-3
<PAGE>
Dealers identified to it by the Auction Agent following such Auction pursuant to
paragraph (a) (v) or (a) (vi) above.
(d) On each Auction Date:
(i) each Potential Holder and Existing Holder with an Order in the
Auction on such Auction Date shall instruct its Participant as
provided in (b) (ii) or (b)(iii) above, as the case may be;
(ii) each Seller's Broker-Dealer that is not a Participant of the
Depository shall instruct its Participant to deliver such Tax
Exempt Auction Rate Series 1997-1 Notes through the Depository to
a Buyer's Broker-Dealer (or its Participant) identified to such
Seller's Broker-Dealer pursuant to (a) (v) above against payment
therefor; and
(iii) each Buyer's Broker-Dealer that is not a Participant in the
Depository shall instruct its Participant to pay through the
Depository to a Seller's Broker-Dealer (or its Participant)
identified following such Auction pursuant to (a) (vi) above the
amount necessary to purchase the Tax Exempt Auction Rate Series
1997-1 Notes to be purchased pursuant to (b) (ii) above against
receipt of such Tax Exempt Auction Rate Series 1997-1 Notes.
(e) On the Business Day following each Auction Date:
(i) each Participant for a Bidder in the Auction on such Auction Date
referred to in (d) (i) above shall instruct the Depository to
execute the transactions described under (b) (ii) or (b) (iii)
above for such Auction, and the Depository shall execute such
transactions;
(ii) each Seller's Broker-Dealer or its Participant shall instruct the
Depository to execute the transactions described in (d)(ii) above
for such Auction, and the Depository shall execute such
transactions; and
(iii) each Buyer's Broker-Dealer or its Participant shall instruct the
Depository to execute the transactions described in (d) (iii)
above for such Auction, and the Depository shall execute such
transactions.
A-4
<PAGE>
(f) If an Existing Holder selling Tax Exempt Auction Rate Series 1997-1
Notes in an Auction fails to deliver such Tax Exempt Auction Rate Series 1997-1
Notes (by authorized book-entry), a Broker-Dealer may deliver to the Potential
Holder on behalf of which it submitted a Bid that was accepted a principal
amount of Tax Exempt Auction Rate Series 1997-1 Notes that is less than the
principal amount of Tax Exempt Auction Rate Series 1997-1 Notes that otherwise
was to be purchased by such Potential Holder. In such event, the principal
amount of Tax Exempt Auction Rate Series 1997-1 Notes to be so delivered shall
be determined solely by such Broker-Dealer, but only in Authorized
Denominations. Delivery of such lesser principal amount of Tax Exempt Auction
Rate Series 1997-1 Notes shall constitute good delivery. Notwithstanding the
foregoing terms of this paragraph (f), any delivery or nondelivery of Tax Exempt
Auction Rate Series 1997-1 Notes which shall represent any departure from the
results of an Auction, as determined by the Auction Agent, shall be of no effect
unless and until the Auction Agent shall have been notified of such delivery or
nondelivery in accordance with the provisions of the Auction Agent Agreement and
the Broker-Dealer Agreements. Neither the Trustee nor the Auction Agent will
have any responsibility or liability with respect to the failure of a Potential
Holder, Existing Holder or their respective Broker-Dealer or Participant to
deliver the principal amount of Tax Exempt Auction Rate Series 1997-1 Notes or
to pay for the Tax Exempt Auction Rate Series 1997-1 Notes purchased or sold
pursuant to an Auction or otherwise.
A-5
<PAGE>
EXHIBIT B TO BROKER-DEALER AGREEMENT
------------------------------------
EDUCATION LOANS INCORPORATED
TAX EXEMPT AUCTION RATE STUDENT LOAN ASSET-BACKED NOTES
SENIOR SERIES [1997-1A] [1997-1B] [1997-1C] [1997-1D] [1997-1E]
ORDER FORM
----------
AUCTION DATE _________
ISSUE ________________
SERIES _______________
The undersigned Broker-Dealer submits the following orders on behalf
of the Bidder(s) indicated below:
BIDS BY EXISTING HOLDERS
------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
OF NOTES ($100,000
EXISTING HOLDER OR MULTIPLES) BID RATE
--------------- ------------------- --------
<C> <S> <C> <C>
1. _______________________ ___________________ ___________
2. _______________________ ___________________ ___________
3. _______________________ ___________________ ___________
4. _______________________ ___________________ ___________
5. _______________________ ___________________ ___________
6. _______________________ ___________________ ___________
7. _______________________ ___________________ ___________
8. _______________________ ___________________ ___________
9. _______________________ ___________________ ___________
10. _______________________ ___________________ ___________
</TABLE>
*Existing Holders may be described by name or other reference as determined in
the sole discretion of the Broker-Dealer.
B-1
<PAGE>
EDUCATION LOANS INCORPORATED
TAX EXEMPT AUCTION RATE STUDENT LOAN ASSET-BACKED NOTES
SENIOR SERIES [1997-1A] [1997-1B] [1997-1C] [1997-1D] [1997-1E]
BIDS BY POTENTIAL HOLDERS
-------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
OF NOTES ($100,000
POTENTIAL HOLDER OR MULTIPLES) BID RATE
---------------- ------------------- --------
<C> <S> <C> <C>
1. _______________________ ___________________ ___________
2. _______________________ ___________________ ___________
3. _______________________ ___________________ ___________
4. _______________________ ___________________ ___________
5. _______________________ ___________________ ___________
6. _______________________ ___________________ ___________
7. _______________________ ___________________ ___________
8. _______________________ ___________________ ___________
9. _______________________ ___________________ ___________
10. _______________________ ___________________ ___________
11. _______________________ ___________________ ___________
12. _______________________ ___________________ ___________
13. _______________________ ___________________ ___________
14. _______________________ ___________________ ___________
15. _______________________ ___________________ ___________
</TABLE>
NOTES:
1. If one or more Orders covering in the aggregate more than the outstanding
principal amount of Tax Exempt Auction Rate Series 1997-1 Notes held by any
Existing Holder are submitted, such Orders shall be considered valid in the
order of priority set forth in the Auction Procedures.
2. A Hold or Sell Order may be placed only by an Existing Holder covering a
principal account of Tax Exempt Auction Rate Series 1997-1 Notes not
greater than the principal amount currently held by such Existing Holder.
B-2
<PAGE>
3. Potential Holders may only make Bids, each of which must specify a rate.
If more than one Bid is submitted on behalf of any Potential Holder, each
Bid submitted shall be a separate Bid with the rate specified herein.
4. Bids may contain no more than three figures to the right of the decimal
point (.001 of 1%).
5. An order must be submitted in principal amounts of $100,000 or integral
multiples thereof.
*Potential Holders may be described by name or other reference as determined in
the sole discretion of the Broker-Dealer.
B-3
<PAGE>
NAME OF BROKER-DEALER: _______________________________
AUTHORIZED SIGNATURE: ________________________________
TOTAL NUMBER OF ORDERS ON THIS ORDER FORM: ___________
Submit to: BANKERS TRUST COMPANY
Corporate Trust and Agency Group
4 Albany Street
New York, New York 10006
Telephone: (212) 250-6850
Telecopier: (212) 250-6215
B-4
<PAGE>
EXHIBIT C TO BROKER-DEALER AGREEMENT
------------------------------------
EDUCATION LOANS INCORPORATED
TAX EXEMPT AUCTION RATE STUDENT LOAN ASSET-BACKED NOTES
SENIOR SERIES [1997-1A] [1997-1B] [1997-1C] [1997-1D] [1997-1E]
(To be used only for transfers made other
than pursuant to an Auction)
We are (check one)
__________ the Existing Holder indicated below*; or
__________ the Broker-Dealer for such Existing Holder; or
__________ the Participant for such Existing Holder.
We hereby notify you that such Existing Holder has transferred $________ (must
be in units of $100,000) of Senior Series 1997-1[A][B][C][D][E] Notes to
_______________________
______________________________
(Existing Holder)
_______________________________
(Name of Broker-Dealer)
_______________________________
(Name of Participant)
By:____________________________
Printed Name:__________________
Title:_________________________
*Existing Holders may be described by name or other reference as determined in
the sole discretion of the Broker-Dealer.
C-1
<PAGE>
EXHIBIT D TO BROKER-DEALER AGREEMENT
------------------------------------
EDUCATION LOANS INCORPORATED
TAX EXEMPT AUCTION RATE STUDENT LOAN ASSET-BACKED NOTES
SENIOR SERIES [1997-1A] [1997-1B] [1997-1C] [1997-1D] [1997-1E]
NOTICE OF A FAILURE TO DELIVER OR MAKE PAYMENT
----------------------------------------------
COMPLETE EITHER I OR II.
- ------------------------
I. We are a Broker-Dealer for _____* (the "Purchaser"), which purchased
$_________ (must be in units of $100,000) of the Senior Series
1997-1[A][B][C][D][E] Notes in the Auction held on ___________________
from the seller of such Series 1997-1[A][B][C][D][E] Notes.
II. We are a Broker-Dealer for ______* (the "Seller"), which sold
$__________ (must be in units of $100,000) of the Senior Series
1997-1[A][B][C][D][E] Notes in the Auction held on __________________
to the purchaser of such Senior Series 1997-1[A][B][C][D][E] Notes.
We hereby notify you that (check one)
___________ the Seller failed to deliver such Senior Series
1997-1[A][B][C][D][E] Notes to the Purchaser.
___________ the Purchaser failed to make payment to the Seller upon delivery
of such Series 1997-1[A][B][C][D][E] Notes.
_____________________________
(Name of Broker-Dealer)
By:__________________________
Name:________________________
Title:_______________________
*may be described by name or other reference as determined in the sole
discretion of the Broker-Dealer.
D-1
<PAGE>
Exhibit 10.1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SERVICING AGREEMENT
among
EDUCATION LOANS INCORPORATED, as Issuer,
STUDENT LOAN FINANCE CORPORATION, as Servicer,
and
FIRST BANK NATIONAL ASSOCIATION, as Trustee
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated as of July 1, 1997
<PAGE>
SERVICING AGREEMENT
THIS SERVICING AGREEMENT (the "Servicing Agreement") entered into as
of the 1st day of July 1997 by and among Student Loan Finance Corporation, a
corporation organized under the laws of the State of South Dakota (the
"Servicer"), Education Loans Incorporated, a corporation organized under the
laws of the State of Delaware (the "Issuer"), and First Bank National
Association, a national banking association headquartered in Minneapolis,
Minnesota, as trustee (the "Trustee").
WITNESETH:
WHEREAS, the Servicer services student loans ("Student Loans") which
are guaranteed under a guaranty program established by a state or a private
nonprofit corporation pursuant to the requirements of the Higher Education Act
of 1965, as amended from time to time, and the rules and regulations promulgated
thereunder (the "Higher Education Act"); and
WHEREAS, the Servicer has established its Student Loan Purchase
Program pursuant to which it causes the acquisition of certain Student Loans
from lenders ("Lenders") eligible to originate or hold such Student Loans under
the Higher Education Act; and
WHEREAS, pursuant to the Servicer's Student Loan Purchase Program, the
Issuer has entered into or will enter into (including, without limitation, by
assignment and assumption) Student Loan Purchase Agreements ("Student Loan
Purchase Agreements") with certain Lenders pursuant to which it has agreed to
cause the purchase of or will cause the purchase of Student Loans by the Trustee
(for the account and on behalf of the Issuer) from such Lenders;
WHEREAS, under certain circumstances, the Issuer also will cause the
origination of Student Loans by the Trustee (for the account and on behalf of
the Issuer) (Student Loans purchased or originated under the Indenture
hereinafter described are hereinafter referred to as "Financed Student Loans");
and
WHEREAS, the Issuer initially will obtain funds necessary to originate
and purchase Student Loans through the issuance by Education Loans Incorporated
(formerly known as Student Loan Finance Corporation), a South Dakota nonprofit
corporation (the "Original Issuer"), of its Student Loan Asset-Backed Notes,
Series 1997-1 (the "Series 1997-1 Notes") and the immediate assumption by the
Issuer of all of the Original Issuer's liabilities and obligations with respect
to the Series 1997-1 Notes, and the subsequent issuance from time to time by the
Issuer of additional notes (together with the Series 1997-1 Notes, the "Notes"),
all pursuant to an Indenture of Trust, dated as of July 1, 1997 (as amended or
supplemented, the "Indenture") between the Original
<PAGE>
Issuer and the Trustee, as Trustee, and with respect to which the Original
Issuer has assigned all its rights to the Issuer and the Issuer has assumed all
the Original Issuer's obligations; and
WHEREAS, the principal of and interest on the Notes is to be paid from
repayment of Financed Student Loans and other trust assets pledged under the
Indenture; and
WHEREAS, the Issuer wishes to provide for the origination, acquisition
and servicing of the Financed Student Loans in the manner provided in the
Student Loan Purchase Agreements and the Indenture; and
WHEREAS, copies of (i) the executed Student Loan Purchase Agreements,
(ii) the Indenture and (iii) the Plan for Doing Business of the Original Issuer,
dated as of July 1, 1997 (the "Plan for Doing Business") have been furnished to
the Servicer, and the Servicer has read and reviewed each thereof in detail; and
WHEREAS, the Issuer wishes to retain the Servicer to provide services
in connection with the origination, acquisition, servicing and collection of the
Financed Student Loans in accordance with the requirements of the Higher
Education Act, the Guarantee Program, the Student Loan Purchase Agreements and
the Indenture, and the Servicer is willing to undertake such obligations on the
terms hereinafter specified; and,
WHEREAS, the Issuer also wishes to retain the Servicer to perform
other administrative requirements on behalf of the Issuer, including those
required to allow the Issuer to satisfy certain requirements under the
Indenture;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto agree as follows:
1. Term. The term of this Servicing Agreement shall commence as of
the date hereof and shall continue for so long as any of the Notes shall remain
Outstanding (as defined in the Indenture) unless this Servicing Agreement is
terminated in accordance with the terms hereof.
2. Definitions. In addition to terms elsewhere defined in this
Servicing Agreement, and except as otherwise provided herein or as the context
may otherwise require or suggest, initially capitalized terms used herein shall
have the meanings assigned thereto in the Indenture, or if not defined therein,
in the Student Loan Purchase Agreements.
3. Agreement to Provide Services with respect to Financed Student
Loans; Cooperation.
2
<PAGE>
a. The Servicer shall provide services to the Issuer in
connection with the origination and acquisition of Student
Loans to be Financed in accordance with this Servicing
Agreement. The Servicer shall commence servicing the
Financed Student Loans as of the day they are Financed and
shall service the Financed Student Loans in accordance with
this Servicing Agreement. The Servicer may perform all or
part of its origination, acquisition, and servicing
activities hereunder through a subcontractor. The Servicer
shall perform or shall cause its subcontractor to perform
all services hereunder in compliance with the Higher
Education Act, applicable requirements of the Guarantee
Agency and all other applicable federal, state and local
laws and regulations. The Servicer shall be responsible for
the performance of its obligations hereunder, whether such
obligations are performed by the Servicer or by its
subcontractor, and the Servicer shall be responsible for any
fees and payments required by the subcontractor. A
subcontractor shall be subject to the same obligations
relating to audits, examinations and inspections as to which
the Servicer is subject hereunder. The Servicer shall
provide the Issuer and the Trustee with prior written notice
of any subcontractor relationship.
b. The Issuer and the Trustee shall, in accordance with the
provisions of the Indenture, cooperate with the Servicer in
delivering or causing to be delivered Financed Student Loans
to the Servicer for origination, acquisition and servicing
in accordance with this Servicing Agreement.
4. Acquisition Process. The Issuer, the Trustee and the Servicer
agree that:
a. Unless and until otherwise directed in writing by the
Issuer, the Servicer shall provide to the Trustee all
certificates and directions required to be delivered by the
Issuer to the Trustee under the Indenture in connection with
the Financing through acquisition of Eligible Loans and
Student Loans thereunder.
b. Pursuant to the Student Loan Purchase Agreements, the
Servicer will, on behalf of the Issuer and the Trustee,
require that each
3
<PAGE>
Lender transfer to the Servicer (or the Servicer's bailee),
on or before each applicable Loan Purchase Date, physical
custody and possession of documentation and information
relating to Student Loans scheduled to be sold to the
Trustee on behalf of the Issuer on each such Loan Purchase
Date. Such documentation and information so transferred
will include (i) the documents described in Exhibit B
attached to the Student Loan Purchase Agreements (the "Loan
Documents"), and (ii) such additional documentation or
information relating to the Student Loans as the Servicer
shall reasonably require for the purpose of allowing the
Student Loans to be properly serviced by the Servicer.
c. Within a reasonable period after delivery to the Servicer
(but in no event longer than 10 Business Days unless
otherwise expressly agreed) of the documentation and
information relating to the Student Loans identified in
Section 4(b) above, the Servicer shall (i) establish and
maintain all records delivered to the Servicer with respect
to each Financed Student Loan, and complete records of the
Servicer's servicing of the Financed Student Loan from the
date such servicing commenced, (ii) maintain possession of
the loan documents described in Section 6(p) and (r) hereof
that it receives as required hereunder, and (iii) image,
microfilm or otherwise reproduce such documents and cause
such reproductions to be stored at a separate location.
d. In the course of establishing the records relating to each
Financed Student Loan as described in Section 4(c) hereof,
the Servicer shall make note of any item which comes to the
attention of the Servicer during the establishment process
(it being understood that the Servicer will not be
conducting a complete file and note examination of each
Student Loan to be Financed) which would make it appear that
any Student Loan has not been properly originated, disbursed
and documented or has not had due diligence exercised with
respect thereto, in the origination, disbursement,
administration, servicing and collection thereof, in
accordance with the requirements of the Higher Education
Act, the
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Guarantee Program and the applicable Student Loan Purchase
Agreement. The Servicer shall give Lenders a reasonable
opportunity to correct any exceptions or problems identified
by the Servicer and to provide such documentation and
information to the Servicer as shall be necessary to correct
such exceptions or problems. Except as otherwise permitted
under the Indenture, if such exceptions or problems are not
corrected, the Servicer shall return to the Lenders, in
accordance with procedures and under the conditions
specified in the sections of the Student Loan Purchase
Agreements relating to the rejection or repurchase of
Student Loans, any documents and information related to
Student Loans which have exceptions or problems resulting in
such loans not being Eligible Loans.
e. The Servicer shall (i) establish a course of communication
with each Lender sufficient to ensure that the Servicer
receives notice from each Lender of all transactions with
respect to each Student Loan prior to the required time of
delivery by the Servicer to the Trustee of the documents
required by Section 4(a) hereof, and (ii) load all
information necessary for servicing Financed Student Loans
into its servicing system so that servicing and collection
of Financed Student Loans on the basis of "simple interest"
can commence as of the Loan Purchase Date as required by
Section 3 hereof. If interest has been collected on any
Student Loan to be purchased by the Trustee (for the account
and on behalf of the Issuer) on the basis of the "rule of
78's", the Servicer shall cause the Lender wishing to sell
such loan to convert the remaining repayment schedule for
each such Student Loan so that it may be collected on the
basis of "simple interest".
f. The Issuer and the Trustee shall promptly after each Loan
Purchase Date, upon request by the Servicer, provide to the
Servicer any additional documentation or information related
to the Financed Student Loans which either of them may have
in their possession or may reasonably be able to obtain.
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g. The Servicer shall, promptly after each Loan Purchase Date,
notify the Borrower under each Financed Student Loan
purchased on such Loan Purchase Date of the assignment and
transfer to the Trustee (for the account and on behalf of
the Issuer) of the Lender's interest in each such Financed
Student Loan and shall direct each such Borrower thereafter
to make all payments on such Financed Student Loan directly
to the Servicer until otherwise notified by the Trustee. If
a Financed Student Loan has been converted from repayment
under the rule of 78's to repayment under the simple
interest method, as required by Section 4(e) hereof, the
Lender shall notify the Borrower and shall obtain the
written consent of the Borrower and take whatever additional
action may be necessary to effect such conversion of
repayment method in accordance with applicable legal
requirements. Each Borrower notification shall include all
information required to be included by the Higher Education
Act and the requirements of the Guarantee Agency.
h. The assignment of each Financed Student Loan to the Trustee
(for the account and on behalf of the Issuer) shall be
reported by the Servicer promptly after each applicable Loan
Purchase Date to the Secretary of Education and/or the
Guarantee Agency, as appropriate, and the Trustee, by a
properly completed Loan Transfer Report in the form required
by the Secretary of Education and/or the Guarantee Agency.
i. If the Servicer at any time becomes aware of an event which
would (i) allow the Issuer to reject a Student Loan under
the applicable Student Loan Purchase Agreement, or (ii)
allow the Issuer to require a Lender to repurchase a
Financed Eligible Loan or Financed Student Loan or to
substitute an Eligible Loan under the applicable Student
Loan Purchase Agreement, then the Servicer shall so notify
the Issuer. If the Servicer or the Issuer determine that
such a Student Loan should be rejected or repurchased, the
Trustee shall take such action as shall be necessary to
allow the Issuer and the Trustee to enforce their respective
rights under the applicable Student Loan Purchase Agreement.
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5. Origination Process. The Issuer, the Trustee and the Servicer
agree that:
a. Unless and until otherwise directed in writing by the
Issuer, the Servicer shall provide to the Trustee all
certificates and directions required to be delivered by the
Issuer to the Trustee under the Indenture in connection with
the Financing through origination of Eligible Loans and
Student Loans thereunder.
b. The Servicer shall provide disbursement and origination
services in connection with the origination and disbursement
of Eligible Loans under the Indenture. The Servicer shall
perform all services and duties customary to the origination
and disbursement of Student Loans in accordance with
generally accepted industry standards and practices and in
compliance with the Higher Education Act, applicable
requirements of the Guarantee Agency and all other
applicable federal, state and local laws and regulations.
6. Servicing. The Servicer agrees that each of the Financed Student
Loans, while held under the Indenture shall be serviced by it in accordance with
the procedures established in the Higher Education Act and the Guarantee Program
regulations. Additionally, the Servicer shall perform at least the following
minimum duties, obligations and functions in connection with its servicing of
such Financed Student Loans:
a. Maintain a complete and separate file concerning each
Financed Student Loan, which file (i) shall include, without
limitation, the documentation relating to each of the
Financed Student Loans listed and described in Exhibit B to
the applicable Student Loan Purchase Agreement, and at least
the following information relating to each of the Financed
Student Loans: name and social security number of Eligible
Borrower, actual or estimated graduation date of the
student, payment status, days delinquent, number of payments
made, next payment due date, date of last payment received,
total amount disbursed, beginning of deferments and
forbearances, and ending of deferments and forbearances; and
(ii) shall be maintained in a manner sufficient to allow
separate identification of the Financed Student Loans
securing the Notes from other loans serviced or owned by the
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Servicer (including those owned by or on behalf of the
Issuer).
b. Take all steps necessary to maintain the Insurance and
Guarantee coverage on each Financed Student Loan in full
force and effect at all times.
c. Exercise reasonable discretion in approving borrower
requests for forbearance (as permitted under the Higher
Education Act and the Guarantee Program regulations) where
such approval will not adversely affect the financial
viability of the Issuer and will not violate the covenants
set forth in the Indenture.
d. Exercise due diligence (within the meaning of the Higher
Education Act and the Guarantee Program regulations) in the
servicing, administration and collection of all Financed
Student Loans.
e. Attempt to collect or cause to be collected all payment of
principal and interest, Special Allowance Payments, and
Guarantee payments with respect to each Financed Student
Loan and, with respect thereto, (A)(i) cause all interest
subsidy payments and Special Allowance Payments to be
forwarded by the Secretary of Education directly to the
Trustee for immediate deposit into the appropriate fund or
account under the Indenture and (ii) deposit all other such
payments immediately upon receipt into a lock-box account
(which shall be part of the Revenue Fund) to be established
by the Trustee in the name of and for the account of the
Trustee under circumstances which provide for investment of
such payments in accordance with the requirements of the
Indenture applicable to moneys on deposit in the Revenue
Fund. Upon submission by the Servicer to the Secretary of
Education of a billing for interest subsidy payments or
Special Allowance Payments, the Servicer shall, upon
request, provide to the Trustee and the Issuer a written
statement indicating (a) the amount billed for interest
subsidy payments and (b) the principal amount in each
Special Allowance Payment category for which the billing is
submitted, for use by the Trustee and the Issuer in
verifying amounts
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billed for and received with respect thereto from the
Secretary of Education. In the event of discrepancies or
disputes with the Secretary of Education, the Servicer shall
be responsible for representing the interests of the Issuer
and the Trustee in effecting a settlement with the Secretary
of Education of such discrepancies or disputes. The
Servicer shall direct the transfer from time to time of the
Balances in the lock-box account to the Trustee for deposit
in the appropriate Fund or Account under the Indenture;
provided, however, that the Balances in the lock-box account
as of the last day of any calendar month shall, at a
minimum, be transferred on or before the 12th day of the
next succeeding month (or the next preceding Business Day if
such 12th day is not a Business Day), to the Trustee for
deposit in the appropriate Fund or Account under the
Indenture. On or before the date of any transfer, the
Servicer shall deliver by facsimile, hand or mail by U.S.
express mail (or other substantially equivalent means
acceptable to the Trustee) a statement to the Trustee
indicating the portion of the payments transferred on such
date which represents (x) principal payments from any source
with respect to Financed Student Loans, and (y) interest
payments from any source with respect to Financed Student
Loans.
f. Retain summary records of all contacts, follow-ups and
collection efforts (showing at least the date and subject of
each communication with the Borrower or endorser for
collection of each delinquent Financed Student Loan) and
records of all correspondence (including, without
limitation, changes for which records are required to be
maintained by the Higher Education Act and the Guarantee
Program regulations) relating to each Financed Student Loan.
g. Prepare and maintain all appropriate accounting records with
respect to all transactions related to each Financed Student
Loan, including, but not limited to, accounting for all
payments of principal, interest, and Guarantee payments with
respect to each Financed Student Loan and Special
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Allowance Payments relating to all Financed Student Loans.
h. Handle the processing of all adjustments including, without
limitation, forbearances, reinstatements, deferments,
refunds and loans paid in full.
i. Handle the processing of all address changes and the
updating of the address records accordingly.
j. In the case of defaulted Financed Student Loans, take all
steps necessary to file and prove a claim for loss with the
Secretary of Education or the Guarantee Agency, as the case
may be and as required, and assume responsibility for all
necessary communication and contact with the Secretary of
Education or the Guarantee Agency, as the case may be and as
required, to recover on such defaulted Financed Student
Loans within the time required by the Higher Education Act
and the requirements of the Guarantee Agency.
k. In the case of a claim for loss being denied by the
Secretary of Education or the Guarantee Agency, as the case
may be, under circumstances resulting in a Lender being
required by a Student Loan Purchase Agreement to repurchase
a Financed Student Loan, take such action as shall be
necessary to allow the Issuer or the Trustee to cause such
Lender to repurchase such Financed Student Loan or to
substitute a different Eligible Loan in accordance with the
requirements of the applicable Student Loan Purchase
Agreement.
l. Prepare and file with the Secretary of Education or the
Guarantee Agency, as the case may be and as required, a
Lender's manifest of Financed Student Loans on all new
accounts, accounts paid in full and accounts converted to a
repayment basis.
m. Prepare and furnish to the Issuer and the Trustee by the
10th day of each month the following reports with respect to
activity concerning each Financed Student Loan during the
preceding month:
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(1) upon request, computer generated reports showing, in
reasonable detail, all transactions during such
preceding month concerning each Financed Student Loan
serviced by the Servicer;
(2) upon request, a report showing the unpaid principal
balance of each Financed Student Loan as of the last
day of such preceding month;
(3) upon request, with respect to Financed Student Loans in
repayment, a delinquency report or reports showing all
accounts past due as of the last day of such preceding
month in categories of 0-30 days, 31-60 days, 61-90
days, 91-120 days, 121-150 days, 151-180 days, and over
180 days.
(4) upon request, a report of Financed Student Loans paid
in full during such preceding month;
(5) a report specifying the number of and the aggregate
unpaid principal amount of claims made during such
preceding month on defaulted Financed Student Loans and
during the then current fiscal year of the Issuer and
the number and aggregate amount of such claims which
were rejected by the Guarantee Agency, if any, during
such month and during the then current fiscal year of
the Issuer, the number and aggregate unpaid principal
amount of Financed Student Loans being serviced by the
Servicer as of the last day of such preceding month,
and the aggregate unpaid principal amount of defaulted
Financed Student Loans as of the last day of such
preceding month;
(6) copies of all formal reports filed by the Servicer with
respect to Financed Student Loans with any person or
entity and such other reports which are available to
the Servicer and which may be reasonably requested from
time to time by the Issuer or the Trustee;
n. With respect to Financed Student Loans in repayment, prepare
and furnish to the Issuer
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and the Trustee upon request, copies of all file updates and
transactions listings including, without limitation, credits
applied, Financed Student Loans paid and exceptions
listings.
o. Identify on the servicing system the Notes as the source of
financing for each such Financed Student Loan.
p. Maintain a duplicate or copy of the file or record (which
may be on microfilm or computer tape) pertaining to each
Financed Student Loan at a location separate and apart from
that at which the original of such file is maintained (such
duplicate file shall include, without limitation, a copy of
each loan application, interim and payout note(s) if
applicable, Certificate of Insurance, Contract of Insurance,
Guarantee Agreement, disclosure statement and Secretary of
Education Loan Transfer Statement, where applicable).
q. Maintain the original promissory note pertaining to each
Financed Student Loan to be maintained in secure storage
facilities to protect, to the extent reasonable and possible
under the circumstances, such original file concerning each
Financed Student Loan.
r. Obtain and maintain imaged or microfilm copies and/or back-
up computer tapes (but in any case a copy of the promissory
note relating to each Financed Student Loan) at a separate
location adequate to ensure against loss or damage to the
files pertaining to the Financed Student Loans by reason of
any casualty or theft; obtain and maintain in force adequate
insurance for loss or damage to the file pertaining to the
Financed Student Loans by reason of any casualty or theft;
and the Servicer shall be liable for any costs associated
with, or loss to the Issuer resulting from, the
reconstruction of data related to the Financed Student Loans
in the event of natural disaster or the malfunction of any
computer systems.
s. Maintain in force fidelity bonds upon all personnel of the
Servicer insuring against any loss of money or other
property which the Trustee, the Issuer or the Servicer might
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suffer as a consequence of any fraudulent or dishonest act
of such personnel, in an amount required by any supervisory
agency of federal or state government having jurisdiction,
but if not so required, then in an amount equal to at least
the Servicer's current coverage amounts and deductibles (as
evidenced by the insurance certificate delivered to the
Issuer herewith) or such lesser amount as shall be in
writing determined from time to time by the Issuer, with the
approval of the Trustee to be sufficient.
t. Answer all lawful inquiries received by the Servicer from
Lenders, Borrowers, Eligible Institutions, the Secretary of
Education, the Guarantee Agency, the Issuer or the Trustee
pertaining to Financed Student Loans, school status or
refunds, and cooperate to the extent necessary to gather the
information needed to answer such inquiries, provided,
however, that such inquiries may be referred to the Eligible
Institution which a student attended or is attending, if
necessary, and the Servicer shall have no responsibility
with respect to disputes between a Borrower and such
Eligible institution regarding tuition or registration.
u. Any communication received by the Servicer which is in the
nature of a complaint, shall be immediately answered by the
Servicer.
v. The Servicer shall file with the Secretary of Education in
an accurate, timely and complete manner "Lenders Request for
Payment of Interest and Special Allowance" (ED Form 799), or
such other form or request for payment directly to the
Trustee of interest subsidy payments and Special Allowance
Payments as the Secretary of Education may require, from
time to time but in no event later than fifteen (15)
Business Days after the end of each calendar quarter.
In addition, the Servicer agrees that it will, for the servicing fees specified
in Section 18 hereof, perform all servicing obligations relating to Financed
Student Loans required of the Issuer or the Trustee, or which the Issuer or the
Trustee is required to cause the Servicer to perform.
7. Due Diligence. The Servicer agrees that in discharging its
obligations hereunder it shall:
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a. Exercise due diligence in the origination, disbursement,
administration, servicing and collection of all Financed
Student Loans as the term "due diligence" is used in the
Higher Education Act and the Guarantee Program regulations;
b. Exercise reasonable care and diligence in the origination,
disbursement, acquisition, administration and collection of
all Financed Student Loans;
c. Attempt to collect or cause to be collected the Financed
Student Loans in a competent, diligent and orderly fashion,
and in a manner substantially in accordance with the
requirements of the Higher Education Act, the Secretary of
Education, the Guarantee Agency, the Indenture (including
specifically but without limitation the provisions of
Sections 5.5 through 5.8 of the Indenture), the Student Loan
Purchase Agreements and each applicable Federal
Reimbursement Contract and Guarantee Agreement; and
d. Exercise reasonable prudence in those aspects of the
administration of the Program which are within its area of
responsibility.
8. Liaison with Lenders, Eligible Institutions and Other Parties.
The Servicer shall maintain one or more toll-free WATS telephone lines to
provide telephone access to its Student Loan servicing office in Aberdeen, South
Dakota, by the Issuer, the Trustee, Lenders, Borrowers and Eligible
Institutions. The applicable numbers for such telephone lines shall be provided
in writing to the Issuer and the Trustee and to each Borrower. The Issuer, the
Trustee and each such Borrower shall be promptly advised in writing of each
change to such telephone number.
9. Right of Inspection; Availability of Records; Audits.
a. Subject to any restrictions of applicable law, the Issuer,
the Trustee, the Guarantee Agency, the Secretary or any
successor thereto, the Comptroller of the Currency and/or
any governmental agency having jurisdiction over the Issuer
or the Trustee (and, in each case, such entities'
representatives) (any such entity being referred to herein
as the "Examiner"), shall have the right, at any time and
from time to time, during normal business
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hours, and upon reasonable notice to the Servicer (which may
be less than 5 days), to examine and audit any and all of
the Servicer's records or accounts pertaining to any
Financed Student Loan. Under the preceding sentence, the
Examiner shall have the right to examine and make copies of
any documents related to Financed Student Loans and to
interview personnel involved in the servicing. Subject to
any access restrictions in any agreement for provision of
computer or data processing equipment or related services,
the Servicer shall make available to the Examiner without
charge all manuals, forms, files and descriptions of the
software necessary to enable the Examiner to interpret and
analyze the information and reports produced by the system,
it being understood that the Servicer shall retain all
title, rights and interest thereto and therein.
b. The Issuer and the Trustee shall each have the right to
require the Servicer to furnish such documents as it in its
sole discretion from time to time deems necessary to
determine that the Servicer has complied with the provisions
of this Servicing Agreement, the Student Loan Purchase
Agreements and the Indenture, including, without limitation,
Sections 5.5 through 5.8 of the Indenture.
c. If and to the extent required by the Higher Education Act
and the Guarantee Program regulations, the Servicer shall
cause to have prepared and shall submit to the Secretary of
Education and the Guarantee Agencies on or before the
respective due dates thereof:
(1) any third-party servicer compliance audits and audited
financial statements required under the Higher
Education Act and the Guarantee Program regulations
relating to the Servicer and its servicing of Financed
Student Loans; and,
(2) any lender compliance audits required under the Higher
Education Act and the Guarantee Program regulations
relating to the Trustee (as the holder of the Financed
Student Loans) and the Financed Student Loans.
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The Servicer shall provide to the Issuer and the Trustee
promptly after it becomes available (and in no event later
than 10 Business Days) a copy of each such audit and any
other audit or report required by the Secretary of
Education, any Guaranty Agency or other third party in
connection with the Servicer's activities in originating,
acquiring and servicing the Financed Student Loans.
d. The Servicer shall provide to the Issuer and the Trustee
copies of its annual third party (SAS70) audit reports, if
such reports are prepared, promptly following the Servicer's
receipt thereof.
e. The Servicer shall provide to the Issuer and the Trustee its
annual financial statements, audited by a firm of
independent certified public accountants, within one hundred
twenty (120) days of the end of each fiscal year of the
Servicer; and its quarterly unaudited financial statements,
within forty-five (45) days of the end of each fiscal
quarter of the Servicer.
f. If reports are not prepared and submitted under Section 9(c)
hereof or if the Trustee determines it is necessary as part
of a request under Section 9(b) hereof, upon the request of
the Trustee or the Issuer, the Servicer shall undergo an
annual audit, examination and review conducted by a firm of
independent public accountants with experience in auditing
student loan program operations under the Higher Education
Act, independently selected by the Issuer (or the Trustee if
the Issuer fails to make such selection), of its systems,
programs, procedures, services and operations to determine
the Servicer's compliance with this Agreement. If any such
audit, examination and review shall indicate to the Issuer
or the Trustee that the Servicer is not in material
compliance with its obligations under this Servicing
Agreement, this Servicing Agreement may be terminated by the
Issuer or the Trustee on the basis of Section 11(a)(3)
hereof (an audit, examination or review under this
subsection, however, is not required for a termination under
Section 11(a)(3)).
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g. The costs of audits and reports prepared under subsections
(c) through (f) above shall be paid by the Servicer.
10. Amendments; Benefits; Termination. The Servicing Agreement (a)
may be amended, supplemented or modified only by written instrument duly
executed by all parties hereto and only upon the receipt of a written
certificate from the Issuer and the Trustee that such amendment, supplement or
modification will not deprive any holder of the Notes in any material respect of
the security afforded by this Servicing Agreement, (b) shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns, and (c) except as provided in Section 11 hereof, may not be
terminated (except for cause) or assigned by any party hereto without the prior
written consent of the other parties hereto, provided, that the Trustee may make
an assignment to its successor as trustee under the Indenture if the Trustee
shall cease serving as trustee under the Indenture.
11. Termination.
a. The Servicing Agreement shall terminate:
(1) upon the expiration of the term stated in Section 1
hereof;
(2) If the Servicer shall:
(a) admit in writing its inability to pay its debts
generally as they become due;
(b) consent to the appointment of a custodian (as that
term is defined in the federal Bankruptcy Code) for or
assignment to a custodian of the whole or any
substantial part of the Servicer's property, or fail to
stay, set aside or vacate within sixty (60) days from
the date of entry thereof any order or decree entered
by a court of competent jurisdiction ordering such
appointment or assignment;
(c) commence any proceeding or file a petition under
the provisions of the federal Bankruptcy Code for
liquidation, reorganization or adjustment of debts, or
under any insolvency law or other statute or law
providing for the modification or adjustment of the
rights of creditors, or fail to stay, set aside or
vacate within
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sixty (60) days from the date of entry thereof any
order or decree entered by a court of competent
jurisdiction pursuant to an involuntary proceeding,
whether under federal or state law, providing for
liquidation or reorganization of the Servicer or
modification or adjustment of the rights of creditors;
or
(d) contest in writing the validity or enforceability
of this Agreement as a whole or deny in writing that
this Agreement as a whole is binding upon the Servicer;
(3) upon written notice by the Issuer or the Trustee to the
Servicer, if the Servicer materially breaches its
obligations, or any representation or warranty, under
this Servicing Agreement or upon written notice by the
Issuer or the Trustee to the Servicer on the basis of
Section 9(f) hereof; or,
(4) upon written notice by the Issuer or the Trustee to the
Servicer, if at any time the Guarantee Agency or the
Department of Education has issued a notice of
suspension or termination against the Servicer, or has
suspended or terminated the payment of all claims with
respect to Financed Student Loans or, in the case of
the Department of Education, all Special Allowance
Payments or interest benefit payments with respect to
Financed Student Loans as a result of actions or
omissions of the Servicer (it being understood that the
cessation of less than all such claims or payments may
constitute a breach under Section 11(a)(3) hereof).
Notwithstanding the foregoing, any termination pursuant to
clauses (3) or (4) of this subsection (a) will be subject to
the following conditions. If such breach under clause (3) or
suspension or termination under clause (4) is capable of
being cured within ninety (90) days without, in the judgment
of the Trustee, adversely affecting the security provided to
the Noteholders by the Financed Student Loans and the
related Guarantee payments, Special Allowance Payments and
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interest subsidy payments, the Servicer shall have the right
to cure such breach, within ninety (90) days of the date the
Servicer learns of such breach or receives notice of such
breach from the Issuer or the Trustee, prior to such
termination. If such breach is not capable of being cured in
the manner specified above, no termination pursuant to
clause (3) or (4) shall occur if, in the judgment of the
Trustee, such breach or suspension or termination will not
adversely affect the security provided the Noteholders by
the Financed Student Loans and the related Guarantee,
Special Allowance Payments and interest subsidy payments.
The Servicer agrees to promptly notify the Trustee and the
Issuer of any occurrence or condition which constitutes (or
which with the passage of time or the giving of notice or
both would constitute) an event permitting the termination
of this Agreement.
b. If this Servicing Agreement shall be terminated under
subsection (a) or if any Financed Student Loan is sold or
otherwise transferred by the Trustee (for the account and on
behalf of the Issuer) to another person, then any Financed
Student Loans then being serviced hereunder (or the
particular Financed Student Loans that are sold or otherwise
transferred, as the case may be) shall be transferred by the
Servicer to a servicing system of the Issuer, the Trustee or
their designee and (i) the Servicer shall promptly provide
the Issuer and the Trustee with every reasonable and
necessary assistance, including data processing support, to
timely transfer the Financed Student Loans and all
promissory notes and all records related to the Financed
Student Loans (including system records), together with all
necessary or proper assignments, transfers and documents of
authority, and (ii) the actual documented costs and expenses
of such transfer and of the conversion by the replacement
servicer of such Financed Student Loans to such replacement
servicing system shall be paid by the Servicer if such
termination is by the Issuer or the Trustee by reason of the
occurrence of an event described in Section 11 (a)(2),
(a)(3) or (a)(4). There shall be no
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additional charge to the Issuer or the Trustee for the
Servicer's handling of assignments and transfers of Financed
Student Loans in the ordinary course.
12. Disposition of Files on Termination. Upon termination of this
Servicing Agreement all files and information held by the Servicer in connection
herewith (including computer information) will be turned over to the Issuer or
its designee in such form (which may include microfilm) as the Issuer may
reasonably request, upon reimbursement by the Issuer for reasonable costs,
except as otherwise specified in Section 11(b) above.
13. Servicer Not Agent. The Servicer is not, and shall not hold
itself out to be, the agent of the Issuer or the Trustee except for the specific
limited purposes set forth in this Servicing Agreement. Except as set forth in
this Servicing Agreement, the Issuer and the Trustee may not direct the methods
or means by which the Servicer shall accomplish its duties under this Servicing
Agreement.
14. Maintenance of Records.
a. The Servicer shall retain information and documentation
pertaining to the Financed Student Loans (including, but not
limited to, the information and documentation to be
delivered to the Servicer in accordance with Section 3
hereof) which comes into the physical custody or possession
of the Servicer as a result of this Servicing Agreement or
by the servicing of the Financed Student Loans by the
Servicer, unless and until the Trustee shall notify the
Servicer in writing to the contrary, whereupon such physical
custody and possession shall be transferred in the manner
directed by the Trustee. The Trustee may nevertheless elect
to retain such original documentation as it may, upon the
advice of Counsel, consider necessary or advisable to
protect its first security interest in the Financed Student
Loans.
b. The Servicer shall maintain original documentation and
system records for each Financed Student Loan, segregated
from any other loans or assets of the Servicer or any other
party and clearly labeled so as to identify the Financed
Student Loans as property of the Trustee (for the account
and on behalf of the Issuer) and as security for the Notes,
provided that the Servicer may
20
<PAGE>
combine original documentation and system records for each
consolidated serial loan so long as the Servicer does so in
a manner which will ensure that each Financed Student Loan
comprising such a consolidated serial loan may be separately
identified and transferred or sold. The Servicer shall hold
such documentation and records subject to this Servicing
Agreement and the Indenture. From time to time the Servicer
shall, upon request by the Trustee or the Issuer and the
Trustee, submit such information and take such action as may
be reasonably required by the Trustee or the Issuer and the
Trustee, to assure that the Financed Student Loans are
maintained in a proper and secure condition.
c. Except as required by law and permitted by Section 6(t)
hereof, the Servicer shall maintain the confidentiality of
the information provided hereunder and shall not disclose or
in any way communicate such information to third parties
without the express written consent of the Issuer and the
Trustee. The Servicer shall provide a proper security
system for access to original documents and to its computer
system.
d. With respect to the original promissory note relating to
each Financed Student Loan, the obligations of the Servicer
shall be only to the Trustee during the time the Notes are
Outstanding (as defined in the Indenture) and the Issuer
shall have no authority during the time the Notes are
Outstanding to direct the Servicer in its activities with
respect to such original promissory notes.
15. Representations, Warranties and Agreements. The Servicer hereby
represents, warrants and agrees as follows:
a. The Servicer is duly organized and validly existing as a
corporation in good standing under the laws of the State of
South Dakota and is duly qualified to conduct its business
in good standing in the State of South Dakota and is
qualified to do business in all other States where action by
the Servicer is required to carry out the obligations of the
Servicer under this Servicing Agreement.
21
<PAGE>
b. The Servicer has the power and authority (corporate and
other) to own its assets and carry on its business as now
being conducted and to enter into, and perform in accordance
with the terms of, this Servicing Agreement.
c. The Servicer has, and its officers acting on its behalf
have, full legal authority to engage in the transactions
contemplated by this Servicing Agreement; the execution and
delivery of this Servicing Agreement, the consummation of
the transactions herein contemplated and compliance with the
terms, conditions and provisions of this Servicing Agreement
do not and will not conflict with or result in a breach of
any of the terms, conditions or provisions of the articles
of incorporation or bylaws of the Servicer or any agreement
or instrument to which the Servicer is a party or by which
it is bound, or constitute a default thereunder; the
Servicer is not a party to or bound by any agreement or
instrument or subject to any charter or other corporate
restriction or judgment, order, writ, injunction, decree,
law, rule or regulation which may materially and adversely
affect the ability of the Servicer to perform its
obligations under this Servicing Agreement, and this
Servicing Agreement constitutes a valid and binding
obligation of the Servicer enforceable against it in
accordance with its terms, and no consent, approval,
license, exemption or authorization of, or filing or
registration with, any government or governmental body (i)
which has not been made or obtained is required in
connection with the execution and delivery of this Servicing
Agreement, and (ii) which has not been or will not be made
or obtained is or will be required in connection with the
consummation of the transactions herein contemplated.
16. Notification to Borrowers. The parties hereto acknowledge and
agree that each Student Loan Purchase Agreement provides that the Lender which
is a party thereto shall notify each Borrower under each Financed Student Loan
of the assignment and transfer to the Trustee (but for the account and on behalf
of the Issuer) of the Lender's interest in such Financed Student Loan and shall
direct the Borrower to make all payments thereon directly to the Servicer until
otherwise notified by the Trustee. To the extent permitted by the Higher
Education Act and the Guarantee Program
22
<PAGE>
regulations, the Servicer may, on behalf of the Issuer, waive this requirement
of any Lender if the notice is sent by the Servicer on behalf of such Lender.
17. Obligations to Forward Payments. The parties hereto acknowledge
and agree that each Student Loan Purchase Agreement provides that if the Lender
which is a party thereto is, after any Loan Purchase Date (as defined in the
Student Loan Purchase Agreement), the recipient of any funds, from whatever
source received, which constitute payment of principal, interest or Special
Allowance Payments accrued with respect to any Financed Student Loan for any
period subsequent to such Loan Purchase Date, such Lender shall promptly remit,
or cause to be remitted, all such funds to the Servicer or in such manner as the
Trustee may otherwise direct. If any such funds shall he received by the
Trustee or by a person to whom the Trustee has directed such funds to be
remitted, the Trustee shall furnish the Servicer with prompt advice as to the
receipt of any such funds.
18. Servicing Fees; No Petition. The Issuer shall pay, or shall
cause the Trustee to pay, from funds available for such purpose under the
Indenture to the Servicer, for the performance of the Servicer's functions
(including, without limitation, management and administrative functions) under
this Servicing Agreement, a monthly fee in an amount each month equal to
0.104167% of the outstanding principal balance of all Financed Student Loans as
of the last day of the immediately preceding month. Such fee shall be paid to
the Servicer on a monthly basis within fifteen (15) days of receipt by the
Trustee, of an itemized written monthly billing statement from the Servicer. If
the Servicer believes that it is necessary to increase the monthly fee payable
hereunder, it shall provide a written request to the Issuer and the Trustee of
its need for an increase in such fee, together with all information required
under the Indenture for the Trustee to approve an increase in the fees payable
hereunder. The Servicer acknowledges that such fee shall not be increased
unless the conditions for increasing such fees under the Indenture have been
satisfied.
The Servicer acknowledges that the Issuer and the Trustee contemplate
paying all servicing fees payable under this Servicing Agreement solely from
funds available for such purpose in the Administration Fund created under the
Indenture, which funds are primarily dependent upon collection by the Servicer
and receipt by the Trustee of payments with respect to the Financed Student
Loans. The Servicer covenants and agrees to continue to be bound by the terms
and provisions of this Servicing Agreement relating to the Financed Student
Loans in all respects, and to perform for a period of 120 days its obligations
hereunder, regardless of the receipt or non-receipt on a timely basis by it of
any payments in respect of servicing fees.
23
<PAGE>
The Servicer, by entering into this Servicing Agreement, covenants and
agrees that it will not at any time institute against the Issuer, or join in any
institution against the Issuer of, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings under any United
States Federal or state bankruptcy or similar law in connection with any
obligation relating to this Servicing Agreement.
19. Cooperation. Each party covenants and agrees to fully cooperate
with the other parties hereto to facilitate the transactions contemplated
hereunder and by the Student Loan Purchase Agreements and the Indenture.
20. Payment of Expenses. Each party to this Servicing Agreement
shall pay its own expenses incurred in connection with the preparation,
execution and delivery of this Servicing Agreement, including, but not limited
to, the fees and expenses of legal counsel.
21. Administrative Functions of the Servicer. The Issuer, the
Trustee and the Servicer agree that the Servicer shall perform the following
administrative functions on behalf of the Issuer as part of its responsibilities
under this Agreement.
a. Provide all necessary personnel, facilities, equipment,
forms and supplies for operating the Program in accordance
with Section [[____]] of the Indenture;
b. Disseminate information on the Program to Lenders and to
student financial aid officers in Eligible Institutions and
to other persons as necessary;
c. Control and account for the receipt and expenditure of the
Issuer's funds in accordance with the resolutions of the
Issuer's board of directors and the Indenture and maintain
accurate and complete records on all aspects of the Program,
which records shall be available for inspection at any time
by any director or officer of the Issuer and by auditors
employed by the Issuer;
d. Review all statements and reports to the Issuer required of
the Trustee, the Servicer and the Lender in accordance with
the provisions of the Indenture, this Servicing Agreement
and the Student Loan Purchase Agreements; and
24
<PAGE>
e. Prepare and submit to the Trustee on or before the 25th day
of each month (and if such day is not a Business Day, on the
next succeeding Business Day), the monthly reports required
to be delivered to the Noteholders pursuant to Section 5.23
of the Indenture, the form of which is included as Exhibit A
hereto. The Servicer also shall prepare for filing, and
provide such other assistance as is required by the Issuer
to file, any other reports required to be filed by the
Issuer under the Indenture or under any applicable law,
including without limitation, the Higher Education Act and
any federal and state securities laws.
22. Servicer as Bailee
a. The Servicer, in holding Loan Documents relating to the
Financed Student Loans, holds such Loan Documents as bailee
for and on behalf of the Trustee.
b. No Loan Documents held by the Servicer on behalf of the
Trustee hereunder shall be released or delivered to the
Issuer or any other person (other than claim filings in the
ordinary course with the Guaranty Agencies and sales or
transfers permitted under Section 4.2 of the Indenture)
without the prior written consent of the Trustee.
c. The Servicer shall maintain all Loan Documents in a manner
which clearly identifies them as being held by the Servicer
as bailee for and on behalf of the Trustee and not for or on
behalf of the Issuer or any other person.
d. No assignment or purported assignment by the Issuer or any
other person (other than the Trustee) of any Loan Documents
held by the Servicer on behalf of the Trustee hereunder
shall be recognized by the Servicer, and the Servicer shall
provide immediate notice to the Trustee upon receiving
notice of any such assignment or purported assignment.
e. The Servicer hereby represents, warrants and acknowledges
that the Servicer, in serving as bailee under this Section,
is acting exclusively as the bailee and agent of the
25
<PAGE>
Trustee, and not of the Issuer or any other person, with
respect to the Loan Documents.
f. The Servicer hereby waives any lien which the Servicer might
have pursuant to statute or otherwise available at law or in
equity on the Financed Student Loans and the Loan Documents
held by the Servicer on behalf of the Trustee hereunder,
including all monies and proceeds derived therefrom or
relating thereto.
23. Plan for Doing Business of Original Issuer. In providing
administrative services on behalf of the Issuer hereunder, the Servicer agrees
to operate the Program in compliance with the Plan for Doing Business. The
Servicer shall comply with the Plan for Doing Business while the Plan for Doing
Business is required to be in effect, so that the receipt of Special Allowance
Payments by the Trustee with respect to Financed Student Loans will not be
adversely affected. Such compliance shall include, without limitation,
satisfying the assurances of the Original Issuer contained in Sections [[__]]
[[e.g., 438(e)(2)(A), (C), (D), (E) and (F), (3) ]] of the Plan for Doing
Business. The Servicer shall advise the Original Issuer if any amendments to
the Plan for Doing Business are required from time to time, and shall assist the
Original Issuer in preparing and filing any such amendments to the Plan for
Doing Business.
24. Indemnification. The Servicer shall indemnify and hold
harmless the Issuer and the Trustee from and against any loss, cost, damage or
expense, including reasonable attorney's fees, to the extent that such loss,
cost, damage or expense arises out of the Servicer's failure to perform its
obligations under this Agreement. In addition, and without limiting the
generality of the foregoing, the Servicer shall defend and indemnify the Issuer
and the Trustee against, and hold each harmless from, all claims, losses,
liabilities and expenses (including reasonable attorneys' fees) arising from or
in connection with:
a. any claim of infringement of any patent, trade secret,
copyright, trademark, service mark, trade name or other
proprietary right alleged to have occurred as a result of
the performance of services hereunder by the Servicer; or
b. any claim by an employee of the Servicer arising in
consequence of, or relating to, the employee's employment by
the Servicer.
26
<PAGE>
25. Miscellaneous.
-------------
a. Any material written communication received at any time by
the Issuer or the Trustee with respect to a Financed Student
Loan or the Borrower under such a Financed Student Loan
shall be immediately transmitted by the Issuer or the
Trustee, as the case may be, to the Servicer. Such
communications shall include but not be limited to letters,
notices of death or disability, adjudications of bankruptcy
and like documents, and forms requesting forbearance,
deferment of repayment or loan cancellations.
b. This Servicing Agreement shall be governed by the laws of
the State of South Dakota.
c. All covenants and agreements herein contained shall extend
to and be obligatory upon all successors and assigns of the
respective parties hereto.
d. This Servicing Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and
all of which shall be deemed to constitute but one and the
same instrument.
e. If any provisions of this Servicing Agreement shall be held,
or deemed to be, or shall, in fact, be inoperative or
unenforceable as applied in any particular situation, such
circumstance shall not have the effect of rendering any
other provision or provisions herein contained invalid,
inoperative or unenforceable to any extent whatsoever. The
invalidity of any one or more phrases, sentences, clauses or
paragraphs herein contained shall not affect the remaining
portions of this Servicing Agreement or any part hereof.
f. All notices, requests, demands or other instruments which
may or are required to be given by any party to another
party, shall be in writing, and each shall be deemed to have
been properly given when served personally on an officer of
the party to which such notice is to be given, or upon
expiration of a period of 48 hours (excluding weekends and
holidays) from and after the postmark thereof when
27
<PAGE>
mailed postage prepaid by registered or certified mail,
requesting return receipt, addressed as follows:
If intended for the Issuer:
Education Loans Incorporated
105 First Avenue Southwest
Aberdeen, South Dakota 57401
Attention: President
or, if intended for the Trustee:
First Bank National Association
P.O. Box 5308
141 North Main Avenue
Sioux Falls, South Dakota 57104-6429
Attention: Corporate Trust Department
or, if intended for the Servicer:
Student Loan Finance Corporation
105 First Avenue Southwest
Aberdeen, South Dakota 57401
Attention: President
Any party may change the address to which subsequent notices
are to be sent to it by notice to the others given as
aforesaid, but any such notice of change, if sent by mail,
shall not be effective until the fifth business day after it
is mailed.
g. This Servicing Agreement may not be terminated by any party
hereto except in the manner and with the effect herein
specifically provided.
h. Time is of the essence in this Servicing Agreement.
i. No remedy by the terms of this Servicing Agreement conferred
upon or reserved to the Trustee or the Issuer is intended to
be exclusive of any other remedy, but each and every such
remedy shall be cumulative and in addition to every other
remedy given under this Servicing Agreement or existing at
law or in equity or by statute on or after the date of this
Servicing Agreement including, without limitation, the right
to such equitable relief by way of injunction, mandatory or
28
<PAGE>
prohibitory, to prevent the breach or threatened breach of
any of the provisions of this Servicing Agreement or to
enforce the performance hereof.
j. This Servicing Agreement has been made and entered into not
only for the benefit of the Issuer, the Trustee and the
Servicer, but also for the benefit of all holders of
Outstanding Notes, and its provisions may be enforced not
only by the parties to this Servicing Agreement but also by
the holders of Outstanding Notes in the manner and to the
extent such holders may enforce provisions of the Indenture.
The Servicer specifically acknowledges the rights of the
Trustee pursuant to Section 6.3 of the Indenture.
k. Any information required by this Servicing Agreement to be
provided by the Servicer with respect to a Financed Student
Loan may in the case of Financed Student Loans that have
been consolidated be provided with respect to the
consolidated Financed Student Loan, provided that such
information at a minimum meets the requirements of the
Secretary of Education and the Guarantee Agency, as the case
may be, for the collection by the Trustee of interest
subsidy payments, Special Allowance Payments, and claim
payments, and provides sufficient information as requested
by the Issuer to enable the Issuer to comply with any
arbitrage requirements under the Internal Revenue Code of
1986, as amended, and the regulations thereunder.
l. The Servicer specifically acknowledges that the Issuer will
be making representations and warranties regarding the
Student Loans to be Financed as part of the proposed public
offering of the Notes based in part on the accuracy of the
Servicer's representations and warranties in this Servicing
Agreement. The Servicer agrees to cooperate with the Issuer
and to furnish all information in its possession appropriate
for inclusion in the Issuer's Prospectus. The Servicer
agrees to indemnify and save the Trustee, the Issuer and the
underwriters for the Notes harmless of, from and against any
and all loss, cost, damage or expense, including reasonable
attorneys' fees, incurred by reason of any
29
<PAGE>
breach of the Servicer's warranties or representations
hereunder or any false or misleading representations of the
Servicer or any failure to disclose any matter which makes
the warranties and representations herein misleading or any
inaccuracy in any information furnished by the Servicer in
connection herewith.
30
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto set their hands by their
officers thereunto duly authorized and executed this Servicing Agreement as of
the day and year first above written.
EDUCATION LOANS INCORPORATED
BY:
----------------------------------
Its
-------------
STUDENT LOAN FINANCE CORPORATION
BY:
----------------------------------
Its President
FIRST BANK NATIONAL ASSOCIATION
BY:
----------------------------------
Its:
---------------------------------
31
<PAGE>
EXHIBIT A
Student Loan Finance Corporation
Noteholders' Statement Pursuant to Section 5.23 of the Indenture and Section 21
of the Servicing Agreement (Unaudited)
Education Loans Incorporated
Student Loan Asset-Backed Notes, Series 1997-1
Report for the Month Ended __________, ____ [sample for July 31, 1997]
I. Noteholder Information
----------------------
A. Identification of Notes
-----------------------
<TABLE>
<CAPTION>
Series Description Cusip # Due Date
-------------------------------------------------------------------------------
<S> <C> <C> <C>
1997-1A Senior Tax Exempt Auction Rate Notes... #####___# June 1, 2020
1997-1B Senior Tax Exempt Auction Rate Notes... #####___# June 1, 2020
1997-1C Senior Tax Exempt Auction Rate Notes... #####___# June 1, 2020
1997-1D Senior Tax Exempt Auction Rate Notes... #####___# June 1, 2020
1997-1E Senior Tax Exempt Auction Rate Notes... #####___# June 1, 2020
1997-1F Senior Tax Exempt Fixed Rate Notes..... #####___# June 1, 2010
1997-1F Senior Tax Exempt Fixed Rate Notes..... #####___# June 1, 2020
1997-1G Senior Taxable Auction Rate Notes...... #####___# June 1, 2020
1997-1H Senior Taxable Auction Rate Notes...... #####___# June 1, 2020
1997-1I Senior Taxable LIBOR Rate Notes........ #####___# June 1, 2020
1997-1J Senior Taxable LIBOR Rate Notes........ #####___# June 1, 2020
1997-1K Subordinate Tax Exempt Fixed Rate Notes #####___# June 1, 2020
1997-1L Subordinate Taxable LIBOR Rate Notes... #####___# June 1, 2020
</TABLE>
B. Notification of Prepayments of LIBOR Rate Notes
-----------------------------------------------
<TABLE>
<CAPTION>
Determination Date - Aug. 12, 1997 Record Date - Aug. 31, 1997 Prepayment Date - Sept. 1, 1997
---------------------------------- --------------------------- -------------------------------
Aggregate Payments
-------------------------------------------------------------------- Principal Applicable
Interest on Carry-Carry-Over Amount After Interest Rate
Series Principal Interest Over Amounts Amounts Total Prepayment On Notes
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1997-1I $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 0.0000%
1997-1J 0.00 0.00 0.00 0.00 0.00 0.00 0.0000
1997-1L 0.00 0.00 0.00 0.00 0.00 0.00 0.0000
----------------------------------------------------------------------------------------------------
Total $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
====================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Payment Per $100,000 Unit
-------------------------------------------------------------------- Principal Principal
Interest on Carry-Carry-Over Amount After Factor After
Series Principal Interest Over Amounts Amounts Total Prepayment Prepayment
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1997-1I $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 0.0000000
1997-1J 0.00 0.00 0.00 0.00 0.00 0.00 0.0000000
1997-1L 0.00 0.00 0.00 0.00 0.00 0.00 0.0000000
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
C. Principal Outstanding - July, 1997
----------------------------------
Principal Principal Principal
Outstanding, Payments Outstanding
Series Start of Month During Month End of Month
-----------------------------------------------------------------------
<S> <C> <C> <C>
1997-1A $0.00 $0.00 $0.00
1997-1B 0.00 0.00 0.00
1997-1C 0.00 0.00 0.00
1997-1D 0.00 0.00 0.00
1997-1E 0.00 0.00 0.00
1997-1F:
6-1-10 0.00 0.00 0.00
6-1-20 0.00 0.00 0.00
1997-1G 0.00 0.00 0.00
1997-1H 0.00 0.00 0.00
1997-1I 0.00 0.00 0.00
1997-1J 0.00 0.00 0.00
1997-1K 0.00 0.00 0.00
1997-1L 0.00 0.00 0.00
-------------------------------------------------------
Totals $0.00 $0.00 $0.00
=======================================================
</TABLE>
<TABLE>
<CAPTION>
D. Accrued Interest Outstanding - July, 1997
-----------------------------------------
Accrued Interest Interest Interest Accrued Interest Interest
Outstanding, Accrued Payments Outstanding, Rate As Of
Series Start of Month During Month During Month Start of Month End of Month Net Loan Rate
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1997-1A $0.00 $0.00 $0.00 $0.00 0.0000%
1997-1B 0.00 0.00 0.00 0.00 0.0000
1997-1C 0.00 0.00 0.00 0.00 0.0000
1997-1D 0.00 0.00 0.00 0.00 0.0000
1997-1E 0.00 0.00 0.00 0.00 0.0000
1997-1F:
6-1-10 0.00 0.00 0.00 0.00 0.0000
6-1-20 0.00 0.00 0.00 0.00 0.0000
1997-1G 0.00 0.00 0.00 0.00 0.0000 0.0000%
1997-1H 0.00 0.00 0.00 0.00 0.0000 0.0000
1997-1I 0.00 0.00 0.00 0.00 0.0000 0.0000
1997-1J 0.00 0.00 0.00 0.00 0.0000 0.0000
1997-1K 0.00 0.00 0.00 0.00 0.0000
1997-1L 0.00 0.00 0.00 0.00 0.0000 0.0000
----------------------------------------------------------------------------
Totals $0.00 $0.00 $0.00 $0.00
============================================================================
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
E. Noteholders' Interest Carry-Over Amounts - July, 1997
-----------------------------------------------------
<S> <C> <C> <C> <C>
Carry-Over Carry-Over
Amounts, Additions Payments Amounts,
Series Start of Month During Month During Month End of Month
------------------------------------------------------------------------
1997-1G $0.00 $0.00 $0.00 $0.00
1997-1H 0.00 0.00 0.00 0.00
1997-1I 0.00 0.00 0.00 0.00
1997-1J 0.00 0.00 0.00 0.00
1997-1L 0.00 0.00 0.00 0.00
---------------------------------------------------------------
Totals $0.00 $0.00 $0.00 $0.00
===============================================================
F. Noteholders' Accrued Interest on Carry-Over Amounts - July, 1997
-----------------------------------------------------------------
Accrued Interest Interest Accrued
Interest, Accrued Payments Interest,
Series Start of Month During Month During Month End of Month
--------------------------------------------------------------------------
1997-1G $0.00 $0.00 $0.00 $0.00
1997-1H 0.00 0.00 0.00 0.00
1997-1I 0.00 0.00 0.00 0.00
1997-1J 0.00 0.00 0.00 0.00
1997-1L 0.00 0.00 0.00 0.00
---------------------------------------------------------------
Totals $0.00 $0.00 $0.00 $0.00
===============================================================
II. Fund Information
----------------
A. Reserve Fund - July, 1997
-------------------------
Tax Exempt Taxable Total
--------------------------------------
Balance, Start of Month......... $0.00 $0.00 $0.00
Additions During Month.......... 0.00 0.00 0.00
Withdrawals During Month........ 0.00 0.00 0.00
--------------------------------------
Balance, End of Month........... $0.00 $0.00 $0.00
======================================
B. Acquisition Fund (Unexpended Portion) - July, 1997
--------------------------------------------------
Tax Exempt Taxable Total
--------------------------
Balance, Start of Month.................... $0.00 $0.00 $0.00
Withdrawals for Acquisition of Eligible Loans:
Principal Acquired...................... 0.00 0.00 0.00
Premiums and Related Acquisition Costs.. 0.00 0.00 0.00
--------------------------
Balance, End of Month...................... $0.00 $0.00 $0.00
==========================
</TABLE>
34
<PAGE>
III. Student Loan Information
------------------------
<TABLE>
<CAPTION>
A. Student Loan Principal Outstanding - July, 1997
------------------------------------------------
Tax Exempt Taxable Total
------------------------------
<S> <C> <C> <C>
Balance, Start of Month............. $ 0.00 $ 0.00 $ 0.00
Loans Purchased/Originated.......... 0.00 0.00 0.00
Capitalized Interest................ 0.00 0.00 0.00
Less: Principal Payments Received.. (0.00) (0.00) (0.00)
------------------------------
Balance, End of Month............... $0.00 $ 0.00 $ 0.00
==============================
B. Composition of Student Loan Portfolio as of July 31, 1997
---------------------------------------------------------
Amount
--------
<S> <C>
Aggregate Outstanding Principal Balance............. $0.00
Number of Borrowers................................. 0
Average Outstanding Principal Balance per Borrower.. $ 0
Number of Loans (Promissory Notes).................. 0
Average Outstanding Principal Balance Per Loan...... $ 0
Repayment Status Loans:
Weighted Average Remaining Term (Months)......... 0
Weighted Average Payments Received (Months)...... 0
Weighted Average Interest Rate...................... 0.00%
C. Distribution of Student Loan Portfolio by Loan Type as of July 31, 1997
-----------------------------------------------------------------------
Outstanding Percent By
Number Principal Outstanding
Loan Types Of Loans Balance Balance
------------------------------------------------------------------------
<S> <C> <C> <C>
Stafford - Subsidized..... 0 $1.00 100.0%
Stafford - Unsubsidized... 0 0.00 0.0
Stafford - Nonsubsidized.. 0 0.00 0.0
PLUS...................... 0 0.00 0.0
SLS....................... 0 0.00 0.0
Consolidation............. 0 0.00 0.0
--------------------------------------------
Total..................... 0 $1.00 100.0%
============================================
D. Distribution of Student Loan Portfolio by Interest Rate as of July 31, 1997
---------------------------------------------------------------------------
Outstanding Percent By
Number Principal Outstanding
Interest Rate Of Loans Balance Balance
-------------------------- -------------------------------------
<S> <C> <C> <C>
Less Than 7.00%........... 0 $1.00 100.0%
7.00% to 7.49%............ 0 0.00 0.0
7.50% to 7.99%............ 0 0.00 0.0
8.00% to 8.49%............ 0 0.00 0.0
8.50% to 8.99%............ 0 0.00 0.0
9.00% to 9.49%............ 0 0.00 0.0
9.50% or Greater.......... 0 0.00 0.0
-------------------------------------
Total..................... 0 $1.00 100.0%
=====================================
</TABLE>
35
<PAGE>
E. Distribution of Student Loan Portfolio by School Type as of July 31, 1997
-------------------------------------------------------------------------
<TABLE>
<CAPTION>
Outstanding Percent By
Number Principal Outstanding
School Type Of Loans Balance Balance
- -------------------------------------------------------------
<S> <C> <C> <C>
Under 4 Year.............. 0 $1.00 100.0%
4 and 5 Year.............. 0 0.00 0.0
Proprietary............... 0 0.00 0.0
Consolidation............. 0 0.00 0.0
Other/Unknown............. 0 0.00 0.0
----------------------------------
Total..................... 0 $1.00 100.0%
==================================
</TABLE>
<TABLE>
<CAPTION>
F. Distribution of Student Loan Portfolio by Borrower Payment Status as of July 31, 1997
-------------------------------------------------------------------------------------
Outstanding Percent By
Number Principal Outstanding
Borrower Payment Status Of Loans Balance Balance
- -------------------------------------------------------------
<S> <C> <C> <C>
School.................... 0 $0.00 0.0%
Grace..................... 0 0.00 0.0
Repayment................. 0 1.00 100.0
Deferment................. 0 0.00 0.0
Forbearance............... 0 0.00 0.0
Claims.................... 0 0.00 0.0
----------------------------------
Total.................... 0 $1.00 100.0%
==================================
</TABLE>
<TABLE>
<CAPTION>
G. Distribution of Repayment Status Loans by Year of Repayment as of July 31, 1997
-------------------------------------------------------------------------------
Outstanding Percent By
Number Principal Outstanding
Year of Repayment Of Loans Balance Balance
- -------------------------------------------------------------
<S> <C> <C> <C>
First Year................ 0 $1.00 100.0%
Second Year............... 0 0.00 0.0
Third Year................ 0 0.00 0.0
Fourth Year and Greater... 0 0.00 0.0
----------------------------------
Total.................... 0 $1.00 100.0%
==================================
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
H. Distribution of Repayment Status Loans by Remaining Term as of July 31, 1997
----------------------------------------------------------------------------
Outstanding Percent By
Number Principal Outstanding
Remaining Term Of Loans Balance Balance
--------------------------------------------------------------
<S> <C> <C> <C>
1 to 12 Months...... 0 $1.00 100.0%
13 to 24 Months..... 0 0.00 0.0
25 to 36 Months..... 0 0.00 0.0
37 to 48 Months..... 0 0.00 0.0
49 to 60 Months..... 0 0.00 0.0
61 to 72 Months..... 0 0.00 0.0
73 to 84 Months..... 0 0.00 0.0
85 to 96 Months..... 0 0.00 0.0
97 to 108 Months.... 0 0.00 0.0
109 to 120 Months... 0 0.00 0.0
121 to 180 Months... 0 0.00 0.0
181 to 240 Months... 0 0.00 0.0
241 to 300 Months... 0 0.00 0.0
Over 300 Months..... 0 0.00 0.0
-------------------------------------
Total............... 0 $1.00 100.0%
=====================================
</TABLE>
<TABLE>
<CAPTION>
I. Distribution of Student Loan Portfolio by Delinquency Status as of July 31, 1997
-------------------------------------------------------------------------------
Percent by Outstanding Balance
-----------------------------------
Outstanding Repayment,
Number Principal Deferment, All Loans in
Delinquency Status Of Borrowers Balance Forbearance and Portfolio
Claims Status
Loans Only
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
31 - 60 Days................ 0 $1.00 100.0% 100.0%
61 to 90 Days............... 0 0.00 0.0% 0.0%
91 to 120 Days.............. 0 0.00 0.0% 0.0%
121 to 180 Days............. 0 0.00 0.0% 0.0%
181 to 270 Days............. 0 0.00 0.0% 0.0%
Over 270 Days............... 0 0.00 0.0% 0.0%
Claims Filed, Not Yet Paid.. 0 0.00 0.0% 0.0%
----------------------------------------------------------------
Total....................... 0 $1.00 100.0% 100.0%
================================================================
</TABLE>
<TABLE>
<CAPTION>
J. Distribution of Student Loan Portfolio by Guarantee Status as of July 31, 1997
------------------------------------------------------------------------------
Outstanding Percent By
Number Principal Outstanding
Guarantee Status Of Loans Balance Balance
------------------------------------------------------------------------------------
<S> <C> <C> <C>
Guaranteed 100%............. 0 $1.00 100.0%
Guaranteed 98%.............. 0 0.00 0.0%
Unguaranteed................ 0 0.00 0.0%
---------------------------------------------------
Total........................ 0 $1.00 100.0%
===================================================
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
K. Distribution of Student Loan Portfolio by Guarantee Agency as of July 31, 1997
------------------------------------------------------------------------------
Outstanding Percent By
Number Principal Outstanding
Guarantee Agency Of Loans Balance Balance
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
EAC.............................. 0 $1.00 100.0%
PHEAA............................ 0 0.00 0.0%
Other Guarantee Agencies......... 0 0.00 0.0%
Unguaranteed..................... 0 0.00 0.0%
--------------------------------------------------------
Total............................ 0 $1.00 100.0%
========================================================
</TABLE>
<TABLE>
<CAPTION>
L. Distribution of Student Loan Portfolio by Range of Principal Balance as of July 31, 1997
----------------------------------------------------------------------------------------
Outstanding Percent By
Number Principal Outstanding
Principal Balance Range Of Borrowers Balance Balance
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less Than $1,000................... 0 $1.00 100.0%
$1,000 to $1,999................... 0 0.00 0.0
$2,000 to $2,999................... 0 0.00 0.0
$3,000 to $3,999................... 0 0.00 0.0
$4,000 to $4,999................... 0 0.00 0.0
$5,000 to $5,999................... 0 0.00 0.0
$6,000 to $6,999................... 0 0.00 0.0
$7,000 to $7,999................... 0 0.00 0.0
$8,000 to $8,999................... 0 0.00 0.0
$9,000 to $9,999................... 0 0.00 0.0
$10,000 to $10,999................. 0 0.00 0.0
$11,000 to $11,999................. 0 0.00 0.0
$12,000 to $12,999................. 0 0.00 0.0
$13,000 to $13,999................. 0 0.00 0.0
$14,000 to $14,999................. 0 0.00 0.0
$15,000 or Greater................. 0 0.00 0.0
-------------------------------------------------------------
Total.............................. 0 $1.00 100.0%
=============================================================
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
M. Distribution of Student Loan Portfolio by Borrowers' Address as of July 31, 1997
--------------------------------------------------------------------------------
(Based on Address as of August 4, 1997)
---------------------------------------
Outstanding Percent By
Number Principal Outstanding
State of Borrowers' Address Of Loans Balance Balance
-----------------------------------------------------------------
<S> <C> <C> <C>
South Dakota................. 0 $1.00 100.0%
Minnesota.................... 0 0.00 0.0
North Dakota................. 0 0.00 0.0
Iowa......................... 0 0.00 0.0
Nebraska..................... 0 0.00 0.0
Colorado..................... 0 0.00 0.0
Washington................... 0 0.00 0.0
Oregon....................... 0 0.00 0.0
California................... 0 0.00 0.0
Texas........................ 0 0.00 0.0
Wisconsin.................... 0 0.00 0.0
Illinois..................... 0 0.00 0.0
Idaho........................ 0 0.00 0.0
Arizona...................... 0 0.00 0.0
Alaska....................... 0 0.00 0.0
Others Less Than 1% Each..... 0 0.00 0.0
------------------------------------
Total........................ 0 $1.00 100.0%
====================================
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
N. Fees and Expenses Accrued For/Through July, 1997
------------------------------------------------
<S> <C> <C>
For The 1
Month Ended
July, 1997 July 31, 1997
-------------------------------
Servicing Fees............ $0.00 $0.00
Indenture Trustee Fees.... 0.00 0.00
Broker/Dealer Fees........ 0.00 0.00
Auction Agent Fees........ 0.00 0.00
Other Permitted Expenses.. 0.00 0.00
-------------------------------
Total..................... $0.00 $0.00
===============================
O. Principal Write-Offs and Recoveries For/Through July, 1997
----------------------------------------------------------
For The 1
Month Ended
July, 1997 July 31, 1997
---------------------------
<S> <C> <C>
Principal Write-Offs:
2% Losses on 98% Claims.. $0.00 $0.00
Other Write-Offs......... 0.00 0.00
Recoveries.................. 0.00 0.00
---------------------------
Net Write-Offs.............. $0.00 $0.00
===========================
P. Ratio of Assets to Liabilities as of July 31, 1997
--------------------------------------------------
Amount
--------
<S> <C>
Total Indenture Assets....... $ 1.00
Total Indenture Liabilities.. 1.00
--------
Ratio........................ 100.0%
========
</TABLE>
40
<PAGE>
Exhibit 10.2
97-1 taxable
STUDENT LOAN FINANCE CORPORATION
STUDENT LOAN PURCHASE PROGRAM
STUDENT LOAN PURCHASE AGREEMENT
This Agreement made and entered into as of this 1st day of July, 1997,
by and between EDUCATION LOANS INCORPORATED, (hereinafter referred to as the
"Corporation"), and ________________________________________________________ a
____________________________________ organized and existing under the laws of
______________________________________________________ and having the principal
office at _________________________________ in the ___________ of
______________________________________________
County of ________________________________, State of ________________________
(hereinafter referred to as the "Lender").
WITNESSETH:
WHEREAS, pursuant to the Student Loan Purchase Program of Student Loan
Finance Corporation ("SLFC") the Corporation desires to cause the purchase from
the Lender of certain loans made pursuant to the Higher Education Act and the
Lender desires to originate such loans and to sell such loans to the
Corporation's Trustee (as hereinafter defined);
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties agree as follows:
1. Definitions.
In this Agreement, the following terms shall have the following
respective meanings unless the context clearly requires otherwise:
"Eligible Loan" shall mean a Student Loan to an Eligible Borrower
which: (1) is an "eligible loan" as defined in Section 438 of the
Higher Education Act for purposes of receiving Special Allowance
Payments; (2) is either Insured or Guaranteed; and (3) bears interest
at a rate per annum not less than or in excess of the applicable rate
of interest provided by the Higher Education Act except as otherwise
approved in writing by the Corporation with respect to a lower rate.
"Indenture" shall mean the Indenture of Trust, dated as of July 1,
1997, between the Corporation and First Bank National Association,
Minneapolis, Minnesota, or if the rights of First Bank National
Association, Minneapolis, Minnesota, hereunder are assigned to a
subsequent Trustee, the Indenture of Trust under which such subsequent
Trustee exercises its authority.
"Series 1997-1 Notes" means the Corporation's Student Loan Asset-
Backed Notes, Series 1997-1, issued in one or more series pursuant to
the Indenture.
"Servicer" shall mean SLFC, as servicer of the Eligible Loans to be
purchased pursuant to this Agreement, and any successor thereto in
such capacity as designated in writing by the Corporation.
"Trustee" means any trustee under an indenture of trust pursuant to
which Obligations are issued by the Corporation, the proceeds of which
are used to purchase loans hereunder, including First Bank National
Association, Minneapolis, Minnesota, or any successor or assignee of
such entity.
All capitalized terms used in this Agreement and not otherwise defined
herein, shall have the meaning set forth in Exhibit "A" hereto. The term
"Agreement" shall include Exhibits "A" through "G" attached hereto.
2. Commitment and Purchase.
A. Subject to the terms and conditions and in reliance on the
representations, warranties and agreements set forth in this
Agreement, the Lender agrees to sell to the Trustee on behalf of the
Corporation, and the Corporation agrees to cause the Trustee to buy
from the Lender, Eligible Loans the Lender may choose to sell from
time to time. The Eligible Loans sold to the Trustee on behalf of the
Corporation pursuant to this Agreement shall be Eligible Loans made
pursuant to the Higher Education Act, unless the Servicer on behalf of
the Corporation agrees to accept other Eligible Loans hereunder.
B. Anything herein to the contrary notwithstanding, the Trustee
on behalf of the Corporation is not obligated to purchase and the
Corporation is not obligated to cause the Trustee to purchase Eligible
Loans from the Lender (i) unless the gross rate of return on such
Eligible Loans to the Trustee on behalf of the Corporation or any
subsequent holder would be at least equal to the gross rate of return
on loans Guaranteed under the Higher Education Act, as currently in
effect on date of execution and delivery of this agreement, or (ii) if
such Eligible Loans are loans for which the first disbursement is made
on or after July 1, 1988 in either case except as otherwise approved
in writing by the Corporation with respect to a lower rate.
C. The delivery of, and payment for, the Eligible Loans shall
take place at the Servicer's offices on a date or dates not later than
12 months after the date of delivery of the Series 1997-1 Notes, to be
specified by the Servicer by not less than fifteen days' prior written
notice (the "Loan Purchase Date").
D. The Corporation agrees to cause the Trustee to purchase the
Eligible Loans at a price equal to 100% of the outstanding unpaid
principal amount thereof on the Loan Purchase Date, plus accrued
borrower interest; provided, however, that such purchase price shall
be reduced by the amount of any accrued rebate or other obligations to
the Secretary of Education or the borrower under the Higher Education
Act with respect to such Eligible Loans which are not otherwise
provided for in this Paragraph 2.D. Following any Loan Purchase Date,
the parties agree to adjust the purchase price based on the actual
payments required to be made, to the extent the amount of such
payments was not known as of the Loan Purchase Date. The Lender shall
be responsible for reporting to the Department of Education and
offsetting against interest subsidy payments and Special Allowance
Payments made to the Lender by the Secretary of Education or otherwise
paying to the Secretary of Education the entire amount of (1) any
lender origination fee which is required under the Higher Education
Act, (2) any borrower origination fees authorized to be charged by the
Higher Education Act, and (3) any other amounts due the Secretary of
Education which are offset against interest subsidy and special
allowance payments pursuant to the Higher Education Act.
E. Transfer of the Eligible Loans shall be by the means
specified in this Agreement.
F. Each Financed Eligible Loan shall have physically stamped
thereon a notice in one of the forms set forth in Exhibit "C" (as
directed by the Servicer ).
3. Representations, Warranties, Covenants and Agreements of the
Lender. The Lender hereby makes, and shall be deemed to again make as of
each Loan Purchase Date, each representation, warranty,covenant and
agreement set forth in Exhibit "D".
4. Survival of Representations and Warranties. Each representation,
warranty, certification and agreement contained in this Agreement shall
survive the Loan Purchase Date.
5. Conditions of Purchase.
The Corporation's obligation to cause the Trustee to purchase and pay
for the Eligible Loans to be Financed hereunder shall be subject to the
following conditions precedent:
<PAGE>
A. All representations, warranties and statements by or on
behalf of the Lender contained in this Agreement shall be true on the
Loan Purchase Date.
B. Any notification to or approval by the Secretary of Education
or a Guarantor required by the Higher Education Act or a Guarantee
Agreement as a condition to the assignment of the Eligible Loans to be
Financed shall have been made or received and evidence thereof
delivered to both the Servicer and the Trustee.
C. The entire interest of the Lender in each Eligible Loan to be
Financed shall have been duly assigned by endorsement in the form set
forth in Exhibit "C", such endorsement to be without recourse except
as provided in paragraph 8.
D. Physical custody and possession to the Financed Eligible
Loans (including all information and documentation which is described
in Exhibit "B") shall be transferred in the manner directed by the
Servicer.
E. The Servicer shall receive an opinion of Lender's counsel,
dated as of the date of this Agreement in substantially the form set
forth in Exhibit "G". The Servicer shall receive a Lender's Closing
Certificate, substantially in the form of Exhibit "B", when requested
by the Servicer.
F. If the promissory note evidences more than one loan all loans
covered thereby must be assigned hereunder and must qualify as
Eligible Loans.
6. Purchase Conditional.
The Corporation's obligation to cause the Trustee to purchase Eligible
Loans pursuant to this Agreement is subject to availability of funds therefor
under the Indenture.
7. Rejection of Loans.
A. If (i) the Lender is unable to make or furnish the
representations and warranties required to be made or furnished by it
pursuant to this Agreement as to a loan, or (ii) if the Lender is
unable to fulfill one or more covenants or conditions of this
Agreement as to a loan, or (iii) if the Servicer in its reasonable
judgment deems that a loan does not comply with the terms and
conditions of this Agreement or is not being delivered in compliance
with such terms and conditions, or (iv) the Servicer in its reasonable
judgment deems that a loan in repayment is for any reason unacceptable
to it, then the Servicer may, in its sole discretion, refuse to accept
and cause the Trustee to pay for such loan (or any substitute loan
offered by the Lender in lieu thereof).
B. If the Servicer rejects a loan, any such loan shall be
returned to the Lender by registered mail (for repurchase pursuant to
paragraph 8 if theretofore purchased by the Trustee on behalf of the
Corporation) together with a letter identifying each returned loan and
stating the basis for its return. Any such loan returned to the Lender
which has been endorsed to the Trustee shall be endorsed by the
Trustee to the Lender in the form set forth in Exhibit "E".
The liability of the Corporation, the Servicer and the Trustee in
connection with the loss of or damage to any loans to be returned to the Lender
hereunder shall be limited to such loss or damage occurring as a result of their
negligence or willful misconduct in handling or safekeeping such loans.
C. If the Servicer rejects a loan, the Lender may substitute a
different Eligible Loan for the rejected loan, provided, however, that
the terms and conditions of such Eligible Loan are acceptable to the
Servicer.
D. If at the Loan Purchase Date any Eligible Loan to be Financed
is more than 37 days delinquent with respect to any payment of
principal or interest, the Servicer may elect to cause the Trustee to
purchase such Eligible Loan and allow the Lender 15 days from the Loan
Purchase Date within which to cause such delinquency to be cured. If
the delinquency cannot be so cured, such Financed Eligible Loan shall
be subject to repurchase pursuant to Paragraph B.
8. Repurchase Obligation.
If:
(i) any representation or warranty made or furnished by the
Lender in or pursuant to this Agreement shall prove to have been
materially incorrect;
(ii) the Secretary of Education or a Guarantor, as the case may
be, refuses to honor all or part of a claim filed with respect to a
loan sold to the Trustee on behalf of the Corporation pursuant to this
Agreement (including any claim for Special Allowance Payments,
interest subsidy payments, reinsurance and guarantee payments) on
account of any circumstances or event that occurred prior to the sale
of such loan to the Trustee on behalf of the Corporation;
(iii) on account of any circumstances or event that occurred
prior to the sale of a loan to the Trustee on behalf of the
Corporation pursuant to this Agreement, a defense is asserted by a
maker (or endorser, if any) of such loan with respect to his
obligation to pay all or any part of such loan and the Servicer in
good faith believes that the facts reported, if true, raise a
reasonable doubt as to the legal enforceability of such loan; or
(iv) a Financed Student Loan is required to be repurchased
pursuant to paragraphs 7.B or 7.D,;
then the Lender shall repurchase such loan upon the Servicer's or Trustee's
request by paying to the Trustee, for the account of the Corporation, the then
outstanding principal balance of such loan (or such greater amount as may be
necessary to make the Corporation and the Trustee whole in light of the purchase
price originally paid by the Trustee for such loan), plus interest and Special
Allowance Payments accrued and unpaid with respect to such loan from the Loan
Purchase Date to and including the date of repurchase, plus any attorneys' fees,
legal expenses, court costs, servicing fees or other expenses incurred by the
Corporation, the Servicer and the Trustee in connection with such loan.
9. Notification to Borrowers.
The Lender and the Corporation agree that the Servicer and the Lender
shall either jointly or separately notify each borrower under the Financed
Eligible Loans of the assignment and transfer to the Trustee (but for the
account and on behalf of the Corporation) of the Lender's interest in such
Financed Eligible Loans and direct each borrower to make all payments thereon
directly to the Servicer until otherwise notified by the Trustee. Such notice
shall be in compliance with Section 428(b)(2)(F) of the Higher Education Act.
10. Obligations to Forward Payments and Communications.
A. The Lender shall promptly remit, or cause to be remitted, to
the Trustee as the Servicer may direct, all funds received by the
Lender after the Loan Purchase Date which constitute payments of
principal, or interest or Special Allowance Payments accrued after the
Loan Purchase Date with respect to any Financed Eligible Loan.
B. The Lender shall immediately transmit to the Servicer any
communication received by the Lender after the Loan Purchase Date with
respect to a Financed Eligible Loan or the borrower under such a
Financed Eligible Loan. Such communication shall include, but not be
limited to, letters, notices of death or disability, adjudications of
bankruptcy and similar documents, and forms requesting deferment of
repayment or loan cancellations.
11. Payment of Expenses and Taxes.
Except as specifically provided herein, each party to this Agreement
shall pay its own expenses incurred in connection with the preparation,
execution and delivery of this Agreement and the transactions herein
contemplated, including, but not limited to, the fees and disbursements of
counsel, provided, however, that the Lender shall pay any transfer or other
taxes and recording or filing fees payable in connection with the sale and
purchase of the Eligible Loans to be Financed.
12. Indemnification.
The Lender specifically acknowledges that the Corporation will be
making representations and warranties regarding the Eligible Loans to be
Financed as part of the proposed public offering of Obligations of the
Corporation (including without limitation Obligations to be issued under the
Indenture) based in part on the accuracy of the Lender's representations and
warranties in this Agreement. The Lender agrees to indemnify and save the
Trustee and the Corporation, the nonprofit corporation formerly known as Student
Loan Finance Corporation and the underwriters or dealers for said obligations
harmless of, from and against any and all loss, cost, damage or expense,
including reasonable attorneys' fees, incurred by reason of any breach of the
Lender's warranties or representations hereunder or any false or misleading
representations of the Lender or any failure to disclose any matter which makes
the warranties and representations herein misleading or any inaccuracy in any
information furnished by the Lender in connection herewith.
<PAGE>
97-1 tax
13. Other Provisions.
A. The Lender shall furnish to the Servicer such additional
information concerning the Lender's student loan portfolio as the
Servicer may reasonably request.
B. The Lender shall, at its expense, execute all other
documents and take all other steps as may be requested by the Servicer
or the Trustee from time to time to effect the sale hereunder of the
Eligible Loans to be purchased by the Trustee on behalf of the
Corporation.
C. The provisions of this Agreement cannot be waived or
modified unless such waiver or modification be in writing and signed
by the parties hereto and the Trustee. Inaction or failure to demand
strict performance shall not be deemed a waiver.
D. This Agreement shall be governed by the laws of the State.
E. All covenants and agreements herein contained shall extend
to and be obligatory upon all successors of the respective parties
hereto.
F. This Agreement 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.
G. If any provisions of this Agreement shall be held, or deemed
to be or shall, in fact, be inoperative or unenforceable as applied in
any particular situation, such circumstances shall not have the effect
of rendering the provision in question inoperative or unenforceable in
any other situation, or of rendering any other provision or provisions
herein contained invalid, inoperative or unenforceable to any extent
whatsoever. The invalidity of any one or more phrases, sentences,
clauses or paragraphs herein contained shall not affect the remaining
portions of this Agreement or any part hereof.
H. All notices, requests, demands or other instruments which may
or are required to be given by either party to the other or to the
Trustee or the Servicer, shall be in writing and each shall be deemed
to have been properly given when served personally on an officer of
the party to whom such notice is to be given, or upon expiration of a
period of 48 hours from and after the postmark thereof when mailed
postage prepaid by registered or certified mail, requesting return
receipt, addressed as follows:
If intended for the Corporation or the Servicer:
Student Loan Finance Corporation
105 First Avenue Southwest
Aberdeen, South Dakota 57401
If intended for the Lender:
If intended for the Trustee:
First Bank National Association.
Post Office Box 1308
141 North Main Avenue
Sioux Falls, South Dakota 57117-1308
Either party, the Servicer or the Trustee may change the address and
name of the addressee to which subsequent notices are to be sent to it, by
notice to the others given as aforesaid, but any such notice of change, if sent
by mail, shall not be effective until the fifth day after it is mailed.
I. This Agreement may not be terminated by either party hereto
except in the manner and with the effect herein specifically provided
for.
J. Time is of the essence is this Agreement.
K. This Agreement shall not be assignable by the Lender, in
whole or in part, without the prior written consent of the Corporation
and the Trustee.
L. No remedy by the terms of this Agreement conferred upon or
reserved to the Trustee or the Corporation is intended to be exclusive
of any other remedy, but each and every such remedy shall be
cumulative and in addition to every other remedy given under this
Agreement or existing at law or in equity (including, without
limitation, the right to such equitable relief by way of injunction),
or by statute on or after the date of this Agreement.
M. This Agreement has been made and entered into not only for
the benefit of the Lender and the Corporation but also for the benefit
of the Trustee and all holders of Obligations issued for the purpose
of Financing Eligible Loans and any other assignee of loans purchased
hereunder (including any trustee for holders of bonds, notes or other
evidences of indebtedness issued by the Corporation to refinance such
loans), and its provisions may be enforced not only by the parties to
this Agreement but also by the Trustee or such other assignee.
14. Non-Petition Covenant.
The Lender, by entering into this Agreement, covenants and agrees that
it shall not at any time petition or otherwise invoke the process of any court
or government authority for the purpose of commencing or sustaining a case
against the Corporation 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 Corporation or any substantial
part of its property, or ordering the winding up or liquidation of the affairs
of the Corporation, in connection with any obligation relating to this
Agreement.
IN WITNESS WHEREOF, The parties have hereunto set their hands and
seals as of the day and year first above written.
EDUCATION LOANS INCORPORATED ____________________________________
Name of Lender
By_________________________________ By__________________________________
Title:___________________ Title:___________________
ATTEST:
____________________________________
Title:______________________________
(Seal)
<PAGE>
Exhibit "A" to Student Loan Purchase Agreement
DEFINITIONS
1.00 Terms
1.01 "Certificate of Insurance" shall mean a certificate of federal loan
insurance issued with respect to an Insured Eligible Loan by the Secretary of
Education pursuant to the provisions of the Higher Education Act.
1.02 "Eligible Borrower" shall mean a borrower who is eligible under the
Higher Education Act to be the obligor of a loan for financing a program of
post-secondary education for an Eligible Student as described in Sections 1.31
and 1.32.
1.03 "Federal Reimbursement Contract" means an agreement between a
Guarantor and the Secretary of Education providing for the payment by the
Secretary of Education of amounts authorized to be paid pursuant to the Higher
Education Act, including reimbursement amounts paid or payable upon defaulted
Financed Eligible Loans and other student loans guaranteed or insured by the
Guarantor and providing for interest subsidy payments to holders of qualifying
student loans guaranteed or insured by the Guarantor.
1.04 "Financed" in the case of Eligible Loans and Student Loans generally,
shall mean those acquired by the Trustee on behalf of the Corporation with
moneys derived from any of the funds or accounts established by the Indenture;
and where the context so permits or requires such usage, shall mean those
specific Eligible Loans so acquired by the Trustee on behalf of the Corporation
from the Lender pursuant to this Agreement, inclusive of the promissory notes
evidencing such Eligible Loans or Student Loans and the related documentation in
connection with each thereof.
1.05 "Guarantee" or "Guaranteed" shall mean, with respect to a Student
Loan, the insurance or guarantee by a Guarantor, to the extent provided in the
Higher Education Act, of the principal of and accrued interest on such Student
Loan and the coverage of such Student Loan by (1) the Federal Reimbursement
Contracts providing, among other things, for reimbursement by the Secretary of
Education to such Guarantor for losses incurred by it on defaulted Financed
Eligible Loans insured or guaranteed by such Guarantor to the extent provided in
the Higher Education Act and (2) any guarantee fund established by the
Guarantor, prior to the termination of such guarantee fund.
1.06 "Guarantee Agreement" means an agreement between a Guarantor and
either the Trustee or the Lender providing for the insurance or guarantee by
such Guarantor, to the extent provided in the Higher Education Act, of the
principal of and accrued interest on loans to Eligible Borrowers made or
acquired by the Corporation or the Lender from time to time.
1.07 "Guarantee Program" means a Guarantor's loan insurance program
pursuant to which such Guarantor guarantees or insures loans to Eligible
Borrowers.
1.08 "Guaranteed Loans" means loans that are Guaranteed.
1.09 "Guarantor" shall mean Education Assistance Corporation, Great Lakes
Higher Education Corporation, Northstar Guarantee, Inc., Pennsylvania Higher
Education Assistance Agency, United Student Aid Funds, Inc., Student Loans of
North Dakota, Education Credit Management Corporation, Iowa College Student Aid
Commission, California Student Aid Commission, Missouri Coordinating Board for
Higher Education, or other guarantor permitted under the Indenture; provided,
however, that any such Guarantor must be a permitted guarantor under the
Indenture as of the Loan Purchase Date.
1.10 "Higher Education Act" shall mean the Higher Education Act of 1965,
as amended or supplemented from time to time, and all regulations promulgated
thereunder.
1.11 "Insurance" or "Insured" or "Insuring" means, with respect to a loan
to an Eligible Borrower the insuring by the Secretary of Education (as evidenced
by a Certificate of Insurance or other document or certification issued under
the provisions of the Higher Education Act) under the Higher Education Act, of
100% of the principal of and accrued interest on such loan.
1.12 "Insured Loans" means loans which are Insured.
1.13 "Lender" shall mean any "eligible lender", as defined in the Higher
Education Act and the Loan Purchase Regulations, permitted to participate as a
seller of Student Loans to the Corporation under the Program and which has
received an eligible lender designation from the Secretary of Education with
respect to Insured Loans or from the applicable Guarantor with respect to
Guaranteed Loans.
1.14 "Loan Purchase Date" has the meaning assigned thereto in Section 2.C.
of this Agreement.
1.15 "Obligations" shall mean all notes, bonds or other obligations of the
Corporation issued pursuant to the applicable indenture to finance or refinance
the purchase of student loans or for other purposes authorized by the applicable
Indenture.
1.16 "Program" shall mean SLFC's Eligible Loan acquisition program
with respect to Financed Eligible Loans under which the Corporation will cause
the Trustee to acquire Eligible Loans from Lenders in order to increase the
supply of moneys available for new loans to assist students in obtaining a post-
secondary education.
1.17 "Secretary of Education" shall mean the Commissioner of Education,
Department of Health, Education and Welfare of the United States, and the
Secretary of the United States Department of Education (who succeeded to the
functions of the Commissioner of Education pursuant to the Department of
Education Organization Act), or any other officer, board, body, commission or
agency succeeding to the functions thereof under the Higher Education Act.
1.18 "Servicing Agreement" means a separate agreement between the
Corporation and a Servicer under which such Servicer agrees to act as the
Corporation's agent in administering and collecting Financed Student Loans.
1.19 "Special Allowance Payments" shall mean special allowance payments
authorized to be made by the Secretary of Education pursuant to Section 438 of
the Higher Education Act, or similar allowances authorized from time to time by
federal law or regulation.
1.20 "Student Loan Purchase Agreement" or Loan Purchase Contract" means an
agreement between the Corporation and a lender providing for the sale by the
lender to the Trustee on behalf of the Corporation of Eligible Loans within the
time specified in such agreement.
1.21 "State" shall mean the State of South Dakota.
1.22 "Student Loans" shall mean loans to Borrowers for post-secondary
education.
1.23 "Trustee" shall mean the entity serving as trustee under the
Indenture.
1.30 Eligible Students
1.31 An Eligible Student is any student who
(a) is accepted for enrollment or is enrolled at least half-time at
an Eligible Institution and is in good standing and making
satisfactory progress in a prescribed course of study; and,
(b) is a U.S. citizen or permanent resident, except that aliens, even
with immigrant or permanent resident status, are not Eligible
Students if enrolled in institutions located abroad; and,
(c) does not, at the time of application for the loan, owe a refund
on a federally funded grant awarded by the institution, and has never
defaulted, and is not then in default on a national direct or
guaranteed loan.
1.32 A prescribed course of study shall be and include an academic
workload sufficient to secure a degree or certificate in the period normally
taken therefor as determined by the institution and approved by the Servicer;
provided, however, that in no event shall such approval be given for a workload
of less than one-half the normal requirement.
1.40 Eligible Institutions
1.41 Eligible lnstitutions shall mean those institutions which satisfy the
definition of an "eligible educational institution" under the Higher Education
Act and the regulations of the applicable Guarantor. In all cases, a basic
requirement is approval by the Secretary of Education as an eligible institution
under the Higher Education Act and approval by the Secretary of Education for
civil rights compliance.
<PAGE>
Exhibit "B" to Student Loan Purchase Agreement
LENDER'S CLOSING CERTIFICATE
_____________________________________________________ (the "Lender") does hereby
certify that all representations, warranties and statements by or on behalf of
the undersigned contained in a certain Student Loan Purchase Agreement by and
between the Lender and Education Loans Incorporated dated as of July 1, 1997,
(the "Agreement"), are true and correct on and as of the date hereof, without
exception or qualification whatsoever;
FURTHERMORE, the Lender does hereby certify that the following documents,
where applicable to each Eligible Loan Financed under the Agreement, have
heretofore been furnished to the Corporation pursuant to paragraph 5.D. of the
Agreement:
Department of Education or Guarantor application, as supplemented
Interim note(s), if applicable
Payout note(s), if applicable
Evidence of disbursement
Disclosure statement
Certificate of Insurance and contract of insurance (or a certified copy
thereof) with respect to each Insured Loan or notification of loan
approval by Guarantor, with respect to each Guaranteed Loan (or a
certified copy thereof)
Guarantee Agreement and Agreement for Participation in the Guaranteed Loan
Program (or a certified copy thereof) with respect to each Guaranteed Loan
Any other documentation held by the Lender relating to the history of such
Eligible Loan
Secretary of Education or Guarantor Loan Transfer Statement
Uniform Commercial Code financing statement, if any, securing any interest
in an Eligible Loan to be Financed, and an executed termination statement
related thereto
FURTHERMORE, the Lender does hereby certify that it has in its possession
evidence of loan disbursement for each Eligible Loan, and does hereby warrant
that it will maintain such evidence throughout the term of each such Eligible
Loan and will provide a copy thereof to the Servicer and the Trustee upon
request.
IN WITNESS WHEREOF, the undersigned has caused this Certificate to be executed
and delivered by its officers thereunto duly authorized this ______________, day
of __________________ 19____.
-----------------------------------
Name of Lender
By
---------------------------------
Title:
--------------------------
ATTEST:
- -------------------------------
Title:
_________________________
(Seal)
<PAGE>
Exhibit "C" to Student Loan Purchase Agreement
ENDORSEMENT
"All right, title and interest of the undersigned in and to the within
promissory note and related documents is hereby assigned to First Bank National
Association, Minneapolis, Minnesota as trustee (the "Trustee") under the
Indenture of Trust, dated as of July 1, 1997, by and between Education Loans
Incorporated and the Trustee (but for the account and on behalf of Education
Loans Incorporated), without recourse except as provided in paragraph 8 of the
Student Loan Purchase Agreement dated as of July 1, 1997 between Education Loans
Incorporated and _________________________________.
_________________________________ ____________________________________
Title and Signature of Name of Transferor
Trustee Officer
_________________________________ ____________________________________
Title and Signature of Title and Signature of
Corporation Officer Transferor Officer
Dated:_____________________________, 19____"
NOTICE
"The within note and related documentation is subject to a Uniform Commercial
Code Security Agreement between Education Loans Incorporated, and First Bank
National Association, Minneapolis, Minnesota, as Trustee, and Financing
Statements evidencing the Trustee's security interest therein have been filed of
record in the manner provided for by 20 U.S.C. (S)1087-2(d)(3)."
ENDORSEMENT
"All right, title and interest of the undersigned in and to the within
promissory note and related documents is hereby assigned to ___________________
________________________________________, as trustee (the "Trustee") under the
__________________, dated as of ____________, by and between Education Loans
Incorporated and the Trustee (but for the account and on behalf of Education
Loans Incorporated), without recourse except as provided in paragraph 8 of the
Student Loan Purchase Agreement dated as of July 1, 1997 between Education Loans
Incorporated and ________________________________________________.
_________________________________ ____________________________________
Title and Signature of Name of Transferor
Trustee Officer
_________________________________ ____________________________________
Title and Signature of Title and Signature of
Corporation Officer Transferor Officer
Dated:_____________________________, 19____"
NOTICE
"The within note and related documentation is subject to a Uniform Commercial
Code Security Agreement between Education Loans Incorporated, and _____________
_____________________________________________________________, as Trustee, and
Financing Statements evidencing the Trustee's security interest therein have
been filed of record in the manner provided for by 20 U.S.C. (S)1087-2(d)(3)."
<PAGE>
Exhibit "D" to Student Loan Purchase Agreement
Representations, warranties, covenants and agreements of Lender:
A. Any information furnished by the Lender to the Corporation or its
agents (including the Servicer) with respect to any Eligible Loan to be Financed
is true, complete and correct.
B. The amount of the unpaid principal balance of each Eligible Loan to be
Financed is due and owing, and no counterclaim, offset, defense or right of
rescission exists with respect to any Eligible Loan to be Financed which could
be asserted and maintained or which, with notice, lapse of time, or the
occurrence or failure to occur of any act or event, could be asserted and
maintained, by the borrower against the Trustee as assignee of such Eligible
Loan. The Lender shall take all reasonable actions to assure that no maker of an
Eligible Loan has or may acquire a defense to the payment thereof. No Eligible
Loan to be Financed carries a rate of interest less than or in excess of the
applicable rate provided by the provisions of the Higher Education Act, except
as previously approved in writing by the Corporation with respect to a lower
rate of interest.
C. Each Eligible Loan to be Financed has been duly executed and delivered
and constitutes the legal, valid and binding obligation of the maker (and the
endorser or co-maker) thereof, enforceable in accordance with its terms.
D. Each Eligible Loan to be Financed complies in all respects with the
requirements of the Higher Education Act and this Agreement and is an Eligible
Loan as that term is defined in this Agreement. If a promissory note relating to
an Eligible Loan to be Financed covers more than one loan, all loans covered
thereby are to be Financed and constitute an Eligible Loan.
E. The Lender has applied for and received the Guarantor's or Secretary's
designation, as the case may be, as an "eligible lender" under the Higher
Education Act. No payment of principal or of interest with respect to any
Eligible Loan sold hereunder shall be delinquent by more than 37 days on the
Loan Purchase Date unless waived by the Servicer pursuant to Section 7.D of this
Agreement.
F. The Lender is the sole owner and holder of each Eligible Loan to be
Financed and has full right and authority to sell and assign the same free and
clear of all liens, pledges or encumbrances, and no Eligible Loan to be Financed
has been pledged or assigned for any purpose.
G. Each Eligible Loan to be Financed is either insured by the Secretary
or guaranteed by a Guarantor as to 98% of the principal and interest on the
Eligible Loan, such Insurance or Guarantee,, as the case may be, is in full
force and effect, is freely transferable as an incident to the sale of each
Eligible Loan to be Financed; all premiums due and payable to the Guarantor,
have been or will be paid in full by the Lender and none of the Eligible Loans
to be Financed has at any time been tendered to the Secretary or the Guarantor
for payment and rejected unless the situation giving rise to such rejection has
been cured.
H. There are no circumstances or conditions with respect to any Eligible
Loan to be Financed, the borrower thereunder or the creditworthiness of said
borrower that would reasonably cause prudent private investors to regard any of
the Eligible Loans to be Financed as an unacceptable investment, or adversely
affect the value or marketability thereof or the guarantee thereof.
I. Each Eligible Loan to be Financed was made in compliance with all
applicable local, state and federal laws, rules and regulations, including
without limitation all applicable nondiscrimination, truth-in-lending, consumer
credit and usury laws.
J. The Lender has, and its officers acting on its behalf have, full legal
authority to engage in the transactions contemplated by this Agreement; the
execution and delivery of this Agreement, the consummation of the transactions
herein contemplated and compliance with the terms, conditions and provisions of
this Agreement do not and will not conflict with or result in a breach of any of
the terms, conditions or provisions of the charter, Articles or Bylaws of the
Lender or any agreement or instrument to which the Lender is a party or by which
it is bound, or constitute a default thereunder; the Lender is not a party to or
bound by any agreement or instrument or subject to any charter or other
corporate restriction or judgment, order, writ, injunction, decree, law, rule or
regulation which may materially and adversely affect the ability of the Lender
to perform its obligations under this Agreement and this Agreement constitutes a
valid and binding obligation of the Lender enforceable against it in accordance
with its terms, and no consent, approval or authorization of any government or
governmental body, including, without limitation, the Federal Deposit Insurance
Corporation, the Comptroller of the Currency, the Board of Governors of the
Federal Reserve System, the Office of Thrift Supervision or any state bank
regulatory agency, is required in connection with the consummation of the
transactions herein contemplated.
K. The Lender is duly organized, validly existing and in good standing
under the laws of its applicable jurisdiction and has the power and authority to
own its assets and carry on its business as now being conducted.
L. The Lender and each independent servicer has exercised and shall
continue to exercise due diligence and reasonable care in making, administering,
servicing and collecting the Eligible Loans to be Financed and the Lender has
conducted a reasonable investigation of sufficient scope and content to enable
it duly to make the representations and warranties contained in this Exhibit D.
The Lender shall be solely responsible for the payment of the costs and expenses
incident to origination of the Eligible Loans, without any right of
reimbursement therefor from the Corporation. With respect to all Guaranteed
Loans being acquired, a Guarantee Agreement is in effect with respect thereto
and is valid and binding upon the parties thereto in all respects material to
the security of the Obligations, and the Lender is not in default in the
performance of any of its covenants and agreements made in such Guarantee
Agreement.
M. The Lender shall notify the borrower of the sale in the manner
provided in the Higher Education Act.
N. In determining the need of the Eligible Borrowers for Eligible Loans,
no Eligible Loan may be made in an amount greater than the difference between
the cost of education for the relevant period and the other aid awarded for such
period, and the maximum amount of loans to any Eligible Borrower made pursuant
to the Higher Education Act shall not exceed the limits stated therein.
O. Each Eligible Loan made pursuant to Section 428B of the Higher
Education Act shall be subject to the credit requirements as determined by the
Lender and the Guarantor which may include but are not necessarily limited to
those described in Exhibit F to this Loan Purchase Agreement.
P. At the time a Lender makes an Eligible Loan to an Eligible Borrower,
the Lender shall provide thorough and accurate loan information to the Eligible
Borrower, which shall include all information required to be provided to an
Eligible Borrower pursuant to Section 433 of the Higher Education Act and any
other information that a lender is required to provide an Eligible Borrower by
the Guarantor or the Secretary of Education.
[Remainder of page Intentionally Left Blank]
<PAGE>
Exhibit "E" to Student Loan Purchase Agreement
The assignment of the within promissory note and related documents
to____________________________________, as trustee (the "Trustee") under the
_______________________________________________________, dated as of
__________________, between Education Loans Incorporated and the Trustee (but
for the account and on behalf of Education Loans Incorporated), affixed pursuant
to a Student Loan Purchase Agreement dated as of July 1, 1997 did not become
effective there under and no rights in the same have been conveyed thereby.
Dated: ____________________________
______________________________________________
Title and Signature of Trustee Officer
Exhibit "F" to Student Loan Purchase Agreement
ADVERSE CREDIT FOR DETERMINING FEDERAL PLUS LOAN ELIGIBILITY
The lender must obtain a credit history of the parent applicant from at least
one national credit bureau organization. This credit report must be secured
within a time frame that ensures the most accurate, current representation of
the applicant's credit history before the first day of the period of enrollment
for which the loan is intended. When reviewing the credit report, unless the
lender determines that an extenuating circumstance exists, the lender should
consider an applicant to have an adverse credit history if any of the following
conditions are evidenced by the credit report:
1. The applicant(s), on the date of the lender's examination of the credit
report, is considered 90 days or more delinquent on the repayment of any
debt; or
2. The applicant(s) have been the subject of a default determination (on any
debt), foreclosure, repossession, tax lien, wage garnishment or write-off
of a Title IV debt during the five years preceding the date of the credit
report; provided that the failure to pay a debt that has been discharged in
bankruptcy or that is dischargeable in a pending bankruptcy proceeding
shall not be deemed an adverse credit history.
If one of these conditions exists, the lender may still make the loan if the
lender determines, and documents in the file, that extenuating circumstances
exist. The documentation of extenuating circumstances may include, but is not
limited to:
1. an updated credit report that shows the applicant is no longer 90 or more
days delinquent on a debt or corrects other information found on the
original credit report examined by the lender that led to the determination
of adverse credit;
2. a statement from the creditor that the applicant has made satisfactory
arrangements to repay the debt(s) that is the basis of the adverse credit
determination;
3. in the case of a debt with an outstanding balance that is less than $500
but is 90 days or more delinquent, a satisfactory written explanation from
the applicant explaining the reason for the delinquency; or
4. evidence that the debt that is the basis of the adverse credit
determination has been discharged in bankruptcy or is dischargeable in
pending bankruptcy proceedings.
A lender may have stricter standards for determining adverse credit than those
outlined above.
<PAGE>
Exhibit "G" to Student Loan Purchase Agreement
(Opinion dated as of Date of Agreement)
Education Loans Incorporated
Student Loan Finance Corporation
105 First Avenue Southwest
Aberdeen, South Dakota 57401
Re: STUDENT LOAN PURCHASE AGREEMENT
Dated as of July 1, 1997
Gentlemen:
Pursuant to the above mentioned Student Loan Purchase Agreement (the
"Agreement") between Education Loans Incorporated and
_________________________________, (the "Lender"), we have reviewed the
Agreement and made such examinations and further investigations as we deemed
necessary as a basis for the opinions expressed herein. All capitalized terms
used in this opinion and not otherwise defined shall have the same meanings as
in the Agreement. Pursuant to Paragraph 5 of the Agreement, you have requested
our opinion on a number of matters. Opinions hereinafter expressed are qualified
to the extent the validity or enforceability of any provisions in the Agreement
or the Eligible Loans or of any rights granted to you pursuant to any of these
instruments, may be subject to or affected by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditor
generally or by general principles of equity.
Based upon the foregoing, and having regard to legal consideration which we
deem relevant, we are of the opinion that:
(i) The Lender is duly organized and existing and in good standing under
the laws of the jurisdiction of its organization.
(ii) The Agreement has been duly authorized, executed and delivered by
the Lender, is in full force and effect and constitutes the legal, valid,
binding and enforceable obligation of the Lender.
(iii) The Lender has all requisite power and authorization under the laws
of the jurisdiction of its organization, to sell, assign and transfer the
promissory notes evidencing the Eligible Loans to the Corporation or to the
Trustee on behalf of the Corporation, and to enter into and carry out its
obligations under the Agreement;
(iv) No authorization or approval of any governmental authority (other
than notice to the Secretary of Education and approval of the Guarantor for the
sale of the Eligible Loans) is required for the execution and delivery of the
Agreement, or the sale, transfer and assignment of the Eligible Loans;
(v) The officers of the Lender are authorized to execute the endorsement
required by the Agreement, transferring the Eligible Loans to be Financed;
(vi) With respect to all Financed Guaranteed Eligible Loans, the
applicable Guarantee Agreement has been duly authorized, executed and delivered
by the Lender and is in full force and effect, and with respect to all Financed
Insured Eligible Loans the applicable insurance is in full force and effect.
Very truly yours
(Lender's Counsel)
<PAGE>
EXHIBIT 10.3
97-1 tax-exempt
STUDENT LOAN FINANCE CORPORATION
STUDENT LOAN PURCHASE PROGRAM
STUDENT LOAN PURCHASE AGREEMENT
This Agreement made and entered into as of this 1st day of July, 1997, by
and between EDUCATION LOANS INCORPORATED (hereinafter referred to as the
"Corporation"), and ________________________________________________________, a
____________________________________ organized and existing under the laws of
______________________________________________________ and having its principal
office at _________________________________ in the ___________ of
______________________________________________, County of _____________________
___________, State of ________________________ (hereinafter referred to as the
"Lender").
WITNESSETH:
WHEREAS, pursuant to the Student Loan Purchase Program of Student Loan
Finance Corporation ("SLFC") the Corporation desires to cause the purchase from
the Lender of certain loans made pursuant to the Higher Education Act and the
Lender desires to originate such loans and to sell such loans to the
Corporation's Trustee (as hereinafter defined);
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties agree as follows:
1. Definitions.
In this Agreement, the following terms shall have the following respective
meanings unless the context clearly requires otherwise:
"Eligible Loan" shall mean a Student Loan to an Eligible Borrower which:
(1) is an "eligible loan" as defined in Section 438 of the Higher Education Act
for purposes of receiving Special Allowance Payments; (2) has been or will be
made to (a) a resident of the State attending an Eligible Institution located
within or without the State, or (b) an out of State resident attending an
Eligible Institution located within the State; (3) is either Insured or
Guaranteed; and (4) bears interest at a rate per annum not less than or in
excess of the applicable rate of interest provided by the Higher Education Act
except as otherwise approved in writing by the Corporation with respect to a
lower rate.
"Guarantor" shall mean Education Assistance Corporation or other guarantor,
if any, as may be approved in writing by the Corporation.
"Indenture" shall mean the Indenture of Trust, dated as of July 1, 1997,
between the Corporation and First Bank National Association, Minneapolis,
Minnesota, or if the rights of First Bank National Association, Minneapolis,
Minnesota, thereunder are assigned to a subsequent Trustee, the Indenture of
Trust under which such subsequent Trustee exercises its authority.
"Series 1997-1 Notes" means the Corporation's Student Loan Asset-Backed
Notes, Series 1997-1, issued in one or more series pursuant to the
Indenture.
"Servicer" shall mean SLFC, as servicer of the Eligible Loans to be
purchased pursuant to this Agreement, and any successor thereto in such
capacity as designated in writing by the Corporation.
"Trustee" means any trustee under an indenture of trust pursuant to which
Obligations are issued by the Corporation, the proceeds of which are used to
purchase loans hereunder, including First Bank National Association,
Minneapolis, Minnesota, or any successor or assignee of such entity.
All capitalized terms used in this Agreement and not otherwise defined
herein, shall have the meaning set forth in Exhibit "A" hereto. The term
"Agreement" shall include Exhibits "A" through "G" attached hereto.
2. Commitment and Purchase.
A. Subject to the terms and conditions and in reliance on the
representations, warranties and agreements set forth in this Agreement,
the Lender agrees to sell to the Trustee, on behalf of the Corporation, and
the Corporation agrees to cause the Trustee to buy from the Lender not
later than 60 months after the date of delivery of the Series 1997-1
Notes, a portfolio of Eligible Loans in the aggregate outstanding principal
amount of $_____________.
B. [reserved]
C. The delivery of, and payment for, the Eligible Loans shall take
place at the Servicer's offices on a date or dates not later than 60 months
after the date of delivery of the Series 1997-1 Notes, to be specified by
the Servicer by not less than fifteen days' prior written notice (the "Loan
Purchase Date").
D. The Corporation agrees to cause the Trustee to purchase the
Eligible Loans at a price equal to 100% of the outstanding unpaid principal
amount thereof on the Loan Purchase Date, plus accrued borrower interest;
provided, however, that such purchase price shall be reduced by the amount
of any accrued rebate or other obligations to the Secretary of Education or
the borrower under the Higher Education Act with respect to such Eligible
Loans which are not otherwise provided for in this Paragraph 2.D. Following
any Loan Purchase Date, the parties agree to adjust the purchase price
based on the actual payments required to be made, to the extent the amount
of such payments was not known as of the Loan Purchase Date. The Lender
shall be responsible for reporting to the Department of Education and
offsetting against interest subsidy payments and Special Allowance Payments
made to the Lender by the Secretary of Education or otherwise paying to the
Secretary of Education the entire amount of (1) any lender origination fee
which is required under the Higher Education Act, (2) any borrower
origination fees authorized to be charged by the Higher Education Act, and
(3) any other amounts due the Secretary of Education which are offset
against interest subsidy and special allowance payments pursuant to the
Higher Education Act.
E. Transfer of the Eligible Loans shall be by the means specified in
this Agreement.
F. Each Financed Eligible Loan shall have physically stamped thereon
a notice in one of the forms set forth in Exhibit "C" (as directed by the
Servicer).
G. To the extent that the Servicer shall determine that the Lender is
or will be unable to fulfill its obligation to sell to the Trustee (on behalf of
the Corporation), Eligible Loans in the aggregate outstanding unpaid principal
amount set forth in paragraph 2.A., the Servicer may, in its discretion, cause
the Trustee to use a portion of the funds set aside by the Corporation for the
purchase of such Eligible Loans to purchase other Eligible Loans, whereupon such
Lender's obligation shall be deemed to have been discharged to the extent of
such purchase.
<PAGE>
3. Representations, Warranties, Covenants and Agreements of the Lender.
The Lender hereby makes, and shall be deemed to again make as of each Loan
Purchase Date, each representation, warranty, covenant and agreement set forth
in Exhibit "D".
4. Survival of Representations and Warranties. Each representation,
warranty, certification and agreement contained in this Agreement shall survive
the Loan Purchase Date.
5. Conditions of Purchase.
The Corporation's obligation to cause the Trustee to purchase and pay for
the Eligible Loans to be Financed hereunder shall be subject to the following
conditions precedent:
A. All representations, warranties and statements by or on behalf of
the Lender contained in this Agreement shall be true on the Loan Purchase
Date.
B. Any notification to or approval by the Secretary of Education or a
Guarantor required by the Higher Education Act or a Guarantee Agreement as
a condition to the assignment of the Eligible Loans to be Financed shall
have been made or received and evidence thereof delivered to both the
Servicer and the Trustee.
C. The entire interest of the Lender in each Eligible Loan to be
Financed shall have been duly assigned by endorsement in one of the forms
set forth in Exhibit "C" (as directed by the Servicer), such endorsement to
be without recourse except as provided in paragraph 8.
D. Physical custody and possession of the Financed Eligible Loans
(including all information and documentation which is described in Exhibit
"B") shall be transferred in the manner directed by the Servicer.
E. The Servicer shall receive an opinion of Lender's counsel, dated
as of the date of this Agreement (and addressed to the Corporation) in
substantially the form set forth in Exhibit "F". The Servicer shall receive
a Lender's Closing Certificate, substantially in the form of Exhibit "B",
dated as of the final Loan Purchase Date.
F. If the promissory note evidences more than one loan all loans
covered thereby must be assigned hereunder and must qualify as Eligible
Loans.
6. Purchase Conditional. The Corporation's obligation to cause the
Trustee to purchase Eligible Loans pursuant to this Agreement is subject to the
successful sale and delivery by the Corporation of its Series 1997-1 Notes on
terms satisfactory to the Corporation, in its sole discretion, on or before
October 1, 1997 and the receipt by the Corporation of proceeds of such sale in
an amount sufficient for such purpose. If the Corporation sells and delivers
such Series 1997-1 Notes in an amount less than anticipated, the Corporation's
obligation to cause the Trustee to purchase Eligible Loans pursuant to Paragraph
2.A. shall be reduced pro rata in such manner as the Servicer shall determine.
7. Rejection of Loans.
A. If (i) the Lender is unable to make or furnish the representations
and warranties required to be made or furnished by it pursuant to this
Agreement as to a loan, or (ii) if the Lender is unable to fulfill one or
more covenants or conditions of this Agreement as to a loan, or (iii) if
the Servicer in its reasonable judgment deems that a loan does not comply
with the terms and conditions of this Agreement or is not being delivered
in compliance with such terms and conditions, or (iv) the Servicer in its
reasonable judgment deems that a loan in repayment is for any reason
unacceptable to it, then the Servicer may, in its sole discretion, refuse
to accept and cause the Trustee to pay for such loan (or any substitute
loan offered by the Lender in lieu thereof).
B. If the Servicer rejects a loan, any such loan shall be returned to
the Lender by registered mail (for repurchase pursuant to paragraph 8 if
theretofore purchased by the Trustee on behalf of the Corporation) together
with a letter identifying each returned loan and stating the basis for its
return. Any such loan returned to the Lender which has been endorsed to the
Trustee shall be endorsed by the Trustee to the Lender in the form set
forth in Exhibit "E".
The liability of the Corporation, the Servicer and the Trustee in
connection with the loss of or damage to any loans to be returned to the Lender
hereunder shall be limited to such loss or damage occurring as a result of their
negligence or willful misconduct in handling or safekeeping such loans.
C. If the Servicer rejects a loan, the Lender may substitute a
different Eligible Loan for the rejected loan, provided, however, that the
terms and conditions of such Eligible Loan are acceptable to the Servicer.
D. If at the Loan Purchase Date any Eligible Loan to be Financed is
more than 37 days delinquent with respect to any payment of principal or
interest, the Servicer may elect to cause the Trustee to purchase such
Eligible Loan and allow the Lender 15 days from the Loan Purchase Date
within which to cause such delinquency to be cured. If the delinquency
cannot be so cured, such Financed Eligible Loan shall be subject to
repurchase pursuant to Paragraph 8.
8. Repurchase Obligation.
If:
(i) any representation or warranty made or furnished by the Lender
in or pursuant to this Agreement shall prove to have been materially
incorrect;
(ii) the Secretary of Education or a Guarantor, as the case may be,
refuses to honor all or part of a claim filed with respect to a loan sold
to the Trustee on behalf of the Corporation pursuant to this Agreement
(including any claim for Special Allowance Payments, interest subsidy
payments, reinsurance and guarantee payments) on account of any
circumstances or event that occurred prior to the sale of such loan to the
Trustee on behalf of the Corporation;
(iii) on account of any circumstances or event that occurred prior to
the sale of a loan to the Trustee on behalf of the Corporation pursuant to
this Agreement, a defense is asserted by a maker (or endorser, if any) of
such loan with respect to his obligation to pay all or any part of such
loan and the Servicer in good faith believes that the facts reported, if
true, raise a reasonable doubt as to the legal enforceability of such loan;
or
(iv) a Financed Student Loan is required to be repurchased pursuant
to paragraphs 7.B or 7.D;
then the Lender shall repurchase such loan upon the Servicer's or Trustee's
request by paying to the Trustee, for the account of the Corporation, the then
outstanding principal balance of such loan (or such greater amount as may be
necessary to make the Corporation and the Trustee whole in light of the purchase
price originally paid by the Trustee for such loan), plus interest and Special
Allowance Payments accrued and unpaid with respect to such loan from the Loan
Purchase Date to and including the date of repurchase, plus any reasonable
attorneys' fees, legal expenses, court costs, servicing fees or other expenses
incurred by the Corporation, the Servicer and the Trustee in connection with
such loan.
(Remainder of page Intentionally Left Blank)
<PAGE>
9. Notification to Borrowers.
The Lender and the Corporation agree that the Servicer and the Lender shall
either jointly or separately notify each borrower under the Financed Eligible
Loans of the assignment and transfer to the Trustee (but for the account and on
behalf of the Corporation) of the Lender's interest in such Financed Eligible
Loans and direct each borrower to make all payments thereon directly to the
Servicer until otherwise notified by the Trustee. Such notice shall be in
compliance with Section 428(b)(2)(F) of the Higher Education Act.
10. Reinvestment of Proceeds.
A. The Lender hereby certifies and agrees, as an inducement to and
condition of the purchase of those Eligible Loans to be Financed hereunder
which were made or originated prior to the date hereof, that the Lender
shall make new Student Loans in an aggregate principal amount equal to the
proceeds received by the Lender pursuant to paragraph 2.D. with respect to
those Eligible Loans sold to the Trustee on behalf of the Corporation
hereunder which were not made or originated prior to the date hereof in
anticipation of purchase by or on behalf of the Corporation (or the
nonprofit corporation formerly known as Student Loan Finance Corporation)
under the Program. Eligible Loans made in anticipation of purchase by or on
behalf of the Corporation under the Program which are sold and delivered to
the Trustee on behalf of the Corporation pursuant to this Agreement may be
applied by the Lender in satisfaction of its reinvestment obligation under
a Loan Purchase Contract, provided that the Lender shall make new Student
Loans in an aggregate principal amount at least equal to the amount of the
Lender's reinvestment obligation under a Loan Purchase Contract satisfied
by such Eligible Loans. Upon the written request of the Servicer, the
Lender shall report to the Servicer as to the new Student Loans made and
the balance of unexpended proceeds remaining to be invested.
B. If the Lender fails to satisfy its obligations under paragraph
10.A., the Corporation may assert such rights and take such other action,
at law or in equity, as it may deem appropriate. In fulfilling its
obligation in this Section 10, the Lender shall (i) make available loan
applications and other documentation, together with qualified loan
personnel, at locations reasonably accessible to students, and (ii)
undertake advertising to publicize the availability of Student Loans.
11. Obligations to Forward Payments and Communications.
A. The Lender shall promptly remit, or cause to be remitted, to the
Trustee as the Servicer may direct, all funds received by the Lender after
the Loan Purchase Date which constitute payments of principal, or interest
or Special Allowance Payments accrued after the Loan Purchase Date with
respect to any Financed Eligible Loan.
B. The Lender shall immediately transmit to the Servicer any
communication received by the Lender after the Loan Purchase Date with
respect to a Financed Eligible Loan or the borrower under such a Financed
Eligible Loan. Such communication shall include, but not be limited to,
letters, notices of death or disability, adjudications of bankruptcy and
similar documents, and forms requesting deferment of repayment or loan
cancellations.
12. Payment of Expenses and Taxes.
Except as specifically provided herein, each party to this Agreement shall
pay its own expenses incurred in connection with the preparation, execution and
delivery of this Agreement and the transactions herein contemplated, including,
but not limited to, the fees and disbursements of counsel, provided, however,
that the Lender shall pay any transfer or other taxes and recording or filing
fees payable in connection with the sale and purchase of the Eligible Loans to
be Financed.
13. Indenmification.
The Lender specifically acknowledges that the Corporation will be making
representations and warranties regarding the Eligible Loans to be Financed as
part of the proposed public offering of Obligations of the Corporation
(including, without limitation, Obligations to be issued under the Indenture)
based in part on the accuracy of the Lender's representations and warranties in
this Agreement. The Lender agrees to cooperate with the Corporation and to
furnish all information in its possession appropriate for inclusion in the
Corporation's offering documents. The Lender agrees to indemnify and save the
Trustee, the Corporation, the nonprofit corporation formerly known as Student
Loan Finance Corporation and the underwriters or dealers for said obligations
harmless of, from and against any and all loss, cost, damage of expense,
including reasonable attorneys' fees, incurred by reason of any breach of the
Lender's warranties or representations hereunder or any false or misleading
representations of the Lender or any failure to disclose any matter which makes
the warranties and representations herein misleading or any inaccuracy in any
information furnished by the Lender in connection herewith.
14. Other Provisions.
A. The Lender shall furnish to the Servicer such additional
information concerning the Financed Student Loans as the Servicer may
reasonably request.
B. The Lender shall, at its expense, execute all other documents and
take all other steps as may be reasonably requested by the Servicer or the
Trustee from time to time to effect the sale hereunder of the Eligible
Loans to be purchased by the Trustee on behalf of the Corporation.
C. Nothing contained in this Agreement is intended, or shall be
deemed, to require the Lender or any related party within the meaning of
Section 144(a)(3) of the Internal Revenue Code of 1986, as amended to
purchase any of the Obligations. The Lender or any related party within the
meaning of Section 144(a)(3) of the Internal Revenue Code of 1986, as
amended has not and shall not enter into any formal or informal arrangement
to purchase any Obligations in an amount related to the amount of Eligible
Loans to be sold to the Trustee on behalf of the Corporation pursuant to
this Agreement.
D. The provisions of this Agreement cannot be waived or modified
unless such waiver or modification be in writing and signed by the parties
hereto and the Trustee. Inaction or failure to demand strict performance
shall not be deemed a waiver.
E. This Agreement shall be governed by the laws of the State.
F. All covenants and agreements herein contained shall extend to and
be obligatory upon all successors of the respective parties hereto.
G. This Agreement 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.
H. If any provisions of this Agreement shall be held, or deemed to be
or shall, in fact, be inoperative or unenforceable as applied in any
particular situation, such circumstance shall not have the effect of
rendering the provision in question inoperative or unenforceable in any
other situation, or of rendering any other provision or provisions herein
contained invalid, inoperative or unenforceable to any extent whatsoever.
The invalidity of any one or more phrases, sentences, clauses or paragraphs
herein contained shall not affect the remaining portions of this Agreement
or any part hereof.
(Remainder of page Intentionally Left Blank)
<PAGE>
I. All notices, requests, demands or other instruments which may or
are required to be given by either party to the other or to the Trustee, or
the Servicer, shall be in writing and each shall be deemed to have been
properly given when served personally on an officer of the party to whom
such notice is to be given, or upon expiration of a period of 48 hours from
and after the postmark thereof when mailed postage prepaid by registered or
certified mail, requesting return receipt, addressed as follows:
If intended for the Corporation or the Servicer:
Student Loan Finance Corporation
105 First Avenue Southwest
Aberdeen, South Dakota 57401
If intended for the Lender:
If intended for the Trustee:
First Bank National Association
Post Office Box 1308
141 North Main Avenue
Sioux Falls, South Dakota 57117-1308
Either party, the Servicer or the Trustee may change the address and name
of the addressee to which subsequent notices are to be sent to it, by notice to
the others given as aforesaid, but any such notice of change, if sent by mail,
shall not be effective until the fifth day after it is mailed.
J. This Agreement may not be terminated by either party hereto except
in the manner and with the effect herein specifically provided for.
K. Time is of the essence is this Agreement.
L. This Agreement shall not be assignable by the Lender, in whole or
in part, without the prior written consent of the Corporation and the
Trustee.
M. No remedy by the terms of this Agreement conferred upon or
reserved to the Trustee or the Corporation is intended to be exclusive of
any other remedy, but each and every such remedy shall be cumulative and in
addition to every other remedy given under this Agreement or existing at
law or in equity (including, without limitation, the right to such
equitable relief by way of injunction), or by statute on or after the date
of this Agreement.
N. This Agreement has been made and entered into not only for the
benefit of the Lender and the Corporation but also for the benefit of the
Trustee and all holders of Obligations issued for the purpose of Financing
Eligible Loans and any other assignee of loans purchased hereunder
(including any trustee for holders of obligations, notes or other evidences
of indebtedness issued by the Corporation to refinance such loans), and its
provisions may be enforced not only by the parties to this Agreement but
also by the Trustee or such other assignee.
15. Non-Petition Covenant.
The Lender, by entering into this Agreement, covenants and agrees that it
shall not at any time petition or otherwise invoke the process of any court or
government authority for the purpose of commencing or sustaining a case against
the Corporation 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 Corporation or any substantial part of its
property, or ordering the winding up or liquidation of the affairs of the
Corporation, in connection with any obligation relating to this Agreement.
IN WITNESS WHEREOF, The parties have hereunto set their hands and seals as
of the day and year first above written.
EDUCATION LOANS INCORPORATED
Name of Lender
By By
--------------------------------- ---------------------------------
Title: Title:
--------------------------- -------------------------
ATTEST:
-----------------------------------
Title
-------------------------------
(Seal)
<PAGE>
Exhibit "A" to Student Loan Purchase Agreement
DEFINITIONS
1.00 Terms
1.01 "Certificate of Insurance" shall mean a certificate of federal loan
insurance issued with respect to an Insured Eligible Loan by the Secretary of
Education pursuant to the provisions of the Higher Education Act.
1.02 "Eligible Borrower" shall mean a borrower who is eligible under the
Higher Education Act to be the obligor of a loan for financing a program of
post-secondary education for an Eligible Student as described in Sections 1.31
and 1.32.
1.03 "Federal Reimbursement Contract" means an agreement between a
Guarantor and the Secretary of Education providing for the payment by the
Secretary of Education of amounts authorized to be paid pursuant to the Higher
Education Act, including reimbursement amounts paid or payable upon defaulted
Financed Eligible Loans and other student loans guaranteed or insured by the
Guarantor and providing for interest subsidy payments to holders of qualifying
student loans guaranteed or insured by the Guarantor.
1.04 "Financed" in the case of Eligible Loans and Student Loans generally,
shall mean those acquired by the Trustee on behalf of the Corporation with
moneys derived from any of the funds or accounts established by the Indenture,
and where the context so permits or requires such usage, shall mean those
specific Eligible Loans so acquired by the Trustee on behalf of the Corporation
from the Lender pursuant to this Agreement, inclusive of the promissory notes
evidencing such Eligible Loans or Student Loans and the related documentation in
connection with each thereof.
1.05 "Guarantee" or "Guaranteed" shall mean, with respect to a Student
Loan, the insurance or guarantee by a Guarantor of at least ninety-eight percent
(98%) of the principal of and accrued interest on such Student Loan and the
coverage of such Student Loan by (1) the Federal Reimbursement Contracts
providing, among other things, for reimbursement by the Secretary of Education
to such Guarantor for losses incurred by it on defaulted Financed Eligible Loans
insured or guaranteed by such Guarantor at the levels provided for under the
Higher Education Act as in effect on the date of the Student Loan Purchase
Agreement and (2) any guarantee fund established by the Guarantor, prior to the
termination of such guarantee fund.
1.06 "Guarantee Agreement" means an agreement between a Guarantor and
either the Trustee or the Lender providing for the insurance or guarantee by
such Guarantor of at least 98% of the principal of and accrued interest on loans
to Eligible Borrowers made or acquired by the Corporation or the Lender from
time to time.
1.07 "Guarantee Program" means a Guarantor's loan insurance program
pursuant to which such Guarantor guarantees or insures loans to Eligible
Borrowers.
1.08 "Guaranteed Loans" means loans that are Guaranteed.
1.09 "Guarantor" means a state agency or private nonprofit institution or
organization which administers a Guarantee Program.
1.10 "Higher Education Act" shall mean the Higher Education Act of 1965,
as amended or supplemented from time to time, and all regulations promulgated
thereunder.
1.11 "Insurance" or "Insured" or "Insuring" means, with respect to a loan
to an Eligible Borrower the insuring by the Secretary of Education (as evidenced
by a Certificate of Insurance or other document or certification issued under
the provisions of the Higher Education Act), of 100% of the principal of and
accrued interest on such loan.
1.12 "Insured Loans" means loans which are Insured.
1.13 "Loan Purchase Date" has the meaning assigned thereto in Section 2.C.
of this Agreement.
1.14 "Obligations" shall mean all notes, bonds or other obligations of the
Corporation issued pursuant to the applicable indenture to finance or refinance
the purchase of student loans or for other purposes authorized by the applicable
Indenture.
1.15 "Program" shall mean SLFC's Eligible Loan acquisition program with
respect to Financed Eligible Loans under which the Corporation will cause the
Trustee to acquire Eligible Loans from lenders to increase the supply of moneys
available for new loans to assist students in obtaining a post-secondary
education.
1.16 "Secretary of Education" shall mean the Commissioner of Education,
Department of Health, Education and Welfare of the United States, and the
Secretary of the United States Department of Education (who succeeded to the
functions of the Commissioner of Education pursuant to the Department of
Education Organization Act), or any other officer, board, body, commission or
agency succeeding to the functions thereof under the Higher Education Act.
1.17 "Servicing Agreement" means a separate agreement between the
Corporation and a Servicer under which such Servicer agrees to act as the
Corporation's agent in administering and collecting Financed Student Loans.
1.18 "Special Allowance Payments" shall mean special allowance payments
authorized to be made by the Secretary of Education pursuant to Section 438 of
the Higher Education Act, or similar allowances authorized from time to time by
federal law or regulation.
1.19 "State" shall mean the State of South Dakota.
1.20 "Student Loans" shall mean loans to Borrowers for post-secondary
education.
1.21 "Student Loan Purchase Agreement" or "Loan Purchase Contract" means
an agreement between the Corporation and a lender providing for the sale by the
lender to the Trustee on behalf of the Corporation of Eligible Loans within the
time specified in such agreement.
1.22 "Trustee" shall mean the entity serving as trustee under the
Indenture.
1.30 Eligible Students
1.31 An Eligible Student is any student who:
(a) is accepted for enrollment or is enrolled at least half-time at
an Eligible Institution and is in good standing and making
satisfactory progress in a prescribed course of study; and,
(b) is a U.S. citizen or permanent resident, except that aliens, even
with immigrant or permanent resident status, are not Eligible
Students if enrolled in institutions located abroad; and,
(c) does not, at the time of application for the loan, owe a refund
on a federally-funded grant awarded by the institution, and has
never defaulted, and is not then in default on a national direct
or guaranteed loan.
1.32 A prescribed course of study shall be and include an academic
workload sufficient to secure a degree or certificate in the period normally
taken therefor as determined by the institution and approved by the Servicer;
provided, however, that in no event shall such approval be given for a workload
of less than one-half the normal requirement.
1.40 Eligible Institutions
1.41 Eligible Institutions shall mean those institutions which satisfy the
definition of an "eligible educational institution" under the Higher Education
Act and the regulations of the applicable Guarantor. In all cases, a basic
requirement is approval by the Secretary of Education as an eligible institution
under the Higher Education Act and approval by the Secretary of Education for
civil rights compliance.
<PAGE>
Exhibit "B" to Student Loan Purchase Agreement
LENDER'S CLOSING CERTIFICATE
___________________ (the "Lender") does hereby certify that all representations,
warranties and statements by or on behalf of the undersigned contained in a
certain Student Loan Purchase Agreement by and between the Lender and Education
Loans Incorporated dated as of July 1, 1997, (the "Agreement"), are true and
correct on and as of the date hereof, without exception or qualification
whatsoever;
FURTHERMORE, the Lender does hereby certify that the following documents,
where applicable to each Eligible Loan Financed under the Agreement, have
heretofore been furnished to the Corporation pursuant to paragraph 5.D. of the
Agreement:
Department of Education or Guarantor application, as supplemented
Interim note(s), if applicable
Payout note(s), if applicable
Evidence of disbursement
Disclosure statement
Certificate of Insurance and contract of insurance (or a certified copy
thereof) with respect to each Insured Loan or notification of loan
approval by Guarantor, with respect to each Guaranteed Loan (or a
certified copy thereof)
Guarantee Agreement and Agreement for Participation in the Guaranteed Loan
Program with respect to each Guaranteed Loan (or a certified copy
thereof)
Any other documentation held by the Lender relating to the history of such
Eligible Loan
Secretary of Education or Guarantor Loan Transfer Statement
Uniform Commercial Code financing statement, if any, securing any interest
in an Eligible Loan to be Financed, and an executed termination
statement related thereto
FURTHERMORE, the Lender does hereby certify that it has in its possession
evidence of loan disbursement for each Eligible Loan, and does hereby warrant
that it will maintain such evidence throughout the term of each such Eligible
Loan and will provide a copy thereof to the Servicer and the Trustee upon
request.
IN WITNESS WHEREOF, the undersigned has caused this Certificate to be executed
and delivered by its officers thereunto duly authorized this ______________, day
of __________________, 19____.
____________________________________
Name of Lender
By__________________________________
Title:____________________
ATTEST:
___________________________________
Title:_____________________________
(Seal)
<PAGE>
Exhibit "C" to Student Loan Purchase Agreement
ENDORSEMENT
"All right, title and interest of the undersigned in and to the within
promissory note and related documents is hereby assigned to First Bank National
Association, Minneapolis, Minnesota as trustee (the "Trustee") under the
Indenture of Trust, dated as of July 1, 1997, by and between Education Loans
Incorporated and the Trustee (but for the account and on behalf of Education
Loans Incorporated), without recourse except as provided in paragraph 8 of the
Student Loan Purchase Agreement dated as of July 1, 1997 between Education Loans
Incorporated and _________________________________.
- --------------------------------- ---------------------------------
Title and Signature of Name of Transferor
Trustee Officer
- --------------------------------- ---------------------------------
Title and Signature of Title and Signature of
Corporation Officer Transferor Officer
Dated:_____________________________, 19____"
NOTICE
"The within note and related documentation is subject to a Uniform
Commercial Code Security Agreement between Education Loans Incorporated, and
First Bank National Association, Minneapolis, Minnesota, as Trustee, and
Financing Statements evidencing the Trustee's security interest therein have
been filed of record in the manner provided for by 20 U.S.C. (S)1087-2(d)(3)."
ENDORSEMENT
"All right, title and interest of the undersigned in and to the within
promissory note and related documents is hereby assigned to
_______________________________________________________________, as trustee (the
"Trustee") under the _______________, dated as of _________________, by and
between Education Loans Incorporated and the Trustee (but for the account and on
behalf of Education Loans Incorporated), without recourse except as provided in
paragraph 8 of the Student Loan Purchase Agreement dated as of July 1, 1997
between Education Loans Incorporated and _____________________________________.
- --------------------------------- ---------------------------------
Title and Signature of Name of Transferor
Trustee Officer
- --------------------------------- ---------------------------------
Title and Signature of Title and Signature of
Corporation Officer Transferor Officer
Dated:_____________________________, 19____"
NOTICE
"The within note and related documentation is subject to a Uniform Commercial
Code Security Agreement between Education Loans Incorporated, and
_____________________________________________________________________, as
Trustee, and Financing Statements evidencing the Trustee's security interest
therein have been filed of record in the manner provided for by 20 U.S.C.
(S)1087-2(d)(3)."
<PAGE>
Exhibit "D" to Student Loan Purchase Agreement
Representations, warranties, covenants and agreements of Lender:
A. Any information furnished by the Lender to the Corporation or its
agents (including the Servicer) with respect to any Eligible Loan to be Financed
is true, complete and correct.
B. The amount of the unpaid principal balance of each Eligible Loan to be
Financed is due and owing, and no counterclaim, offset, defense or right of
rescission exists with respect to any Eligible Loan to be Financed which could
be asserted and maintained or which, with notice, lapse of time, or the
occurrence or failure to occur of any act or event, could be asserted and
maintained, by the borrower against the Trustee as assignee of such Eligible
Loan. The Lender shall take all reasonable actions to assure that no maker of an
Eligible Loan has or may acquire a defense to the payment thereof. No Eligible
Loan to be Financed carries a rate of interest less than or in excess of the
applicable rate provided by the provisions of the Higher Education Act, except
as previously approved in writing by the Corporation with respect to a lower
rate of interest.
C. Each Eligible Loan to be Financed has been duly executed and delivered
and constitutes the legal, valid and binding obligation of the maker (and the
endorser or co-maker) thereof, enforceable in accordance with its terms.
D. Each Eligible Loan to be Financed complies in all respects with the
requirements of the Higher Education Act and this Agreement and is an Eligible
Loan as that term is defined in this Agreement. If a promissory note relating to
an Eligible Loan to be Financed covers more than one loan, all loans covered
thereby are to be Financed and constitute an Eligible Loan.
E. The Lender has applied for and received the Guarantor's or Secretary's
designation, as the case may be, as an "eligible lender" under the Higher
Education Act. No payment of principal or of interest with respect to any
Eligible Loan sold hereunder shall be delinquent by more than 37 days on the
Loan Purchase Date unless waived by the Servicer pursuant to Section 7.D of this
Agreement.
F. The Lender is the sole owner and holder of each Eligible Loan to be
Financed and has full right and authority to sell and assign the same free and
clear of all liens, pledges or encumbrances, and no Eligible Loan to be Financed
has been pledged or assigned for any purpose.
G. Each Eligible Loan to be Financed is either insured by the Secretary or
guaranteed by a Guarantor as to 98% of the principal and interest on the
Eligible Loan, such Insurance or Guarantee, as the case may be, is in full
force and effect, is freely transferable as an incident to the sale of each
Eligible Loan to be Financed; all premiums due and payable to the Guarantor,
have been or will be paid in full by the Lender and none of the Eligible Loans
to be Financed has at any time been tendered to the Secretary or a Guarantor
for payment and rejected unless the situation giving rise to such rejection has
been cured.
H. There are no circumstances or conditions with respect to any Eligible
Loan to be Financed, the borrower thereunder or the creditworthiness of said
borrower that would reasonably cause prudent private investors to regard any of
the Eligible Loans to be Financed as an unacceptable investment, or adversely
affect the value or marketability thereof or the guarantee thereof.
I. Each Eligible Loan to be Financed was made in compliance with all
applicable local, state and federal laws, rules and regulations, including
without limitation all applicable nondiscrimination, truth-in-lending, consumer
credit and usury laws.
J. The Lender has, and its officers acting on its behalf have, full legal
authority to engage in the transactions contemplated by this Agreement; the
execution and delivery of this Agreement, the consummation of the transactions
herein contemplated and compliance with the terms, conditions and provisions of
this Agreement do not and will not conflict with or result in a breach of any of
the terms, conditions or provisions of the charter, Articles or By-laws of the
Lender or any agreement or instrument to which the Lender is a party or by which
it is bound, or constitute a default thereunder; the Lender is not a party to or
bound by any agreement or instrument or subject to any charter or other
corporate restriction or judgment, order, writ, injunction, decree, law, rule or
regulation which may materially and adversely affect the ability of the Lender
to perform its obligations under this Agreement and this Agreement constitutes a
valid and binding obligation of the Lender enforceable against it in accordance
with its terms, and no consent, approval or authorization of any government or
governmental body, including, without limitation, the Office of Thrift
Supervision, the Federal Deposit Insurance Corporation, the Comptroller of the
Currency, the Board of Governors of the Federal Reserve System or any state bank
regulatory agency, is required in connection with the consummation of the
transactions herein contemplated.
K. The Lender is duly organized, validly existing and in good standing
under the laws of its applicable jurisdiction and has the power and authority to
own its assets and carry on its business as now being conducted.
L. The Lender and each independent servicer has exercised and shall
continue to exercise due diligence and reasonable care in making, administering,
servicing and collecting the Eligible Loans to be Financed and the Lender has
conducted a reasonable investigation of sufficient scope and content to enable
it duly to make the representations and warranties contained in this Exhibit D.
The Lender shall be solely responsible for the payment of the costs and expenses
incident to origination of the Eligible Loans, without any right of
reimbursement therefor from the Corporation. With respect to all Guaranteed
Loans being acquired, a Guarantee Agreement is in effect with respect thereto
and is valid and binding upon the parties thereto in all respects material to
the security of the Obligations, and the Lender is not in default in the
performance of any of its covenants and agreements made in such Guarantee
Agreement.
M. The Lender shall notify the borrower of the sale in the manner provided
in the Higher Education Act.
N. In determining the need of the Eligible Borrowers for Eligible Loans,
no Eligible Loan may be made in an amount greater than the difference between
the cost of education for the relevant period and the other aid awarded for such
period, and the maximum amount of loans to any Eligible Borrower made pursuant
to the Higher Education Act shall not exceed the limits stated therein.
O. Each Eligible Loan made pursuant to Section 428B of the Higher
Education Act shall be subject to the credit requirements as determined by the
Lender and the Guarantor which may include but are not necessarily limited to
those described in Exhibit G to this Loan Purchase Agreement.
P. At the time a Lender makes an Eligible Loan to an Eligible Borrower,
the Lender shall provide thorough and accurate loan information to the Eligible
Borrower, which shall include all information required to be provided to an
Eligible Borrower pursuant to Section 433 of the Higher Education Act and any
other information that a lender is required to provide an Eligible Borrower by
the Guarantor or the Secretary of Education.
[Remainder of page Intentionally Left Blank]
<PAGE>
Exhibit "E" to Student Loan Purchase Agreement
The assignment of the within promissory note and related documents
to____________________________________, as trustee (the "Trustee") under the
_______________________________________________________, dated as of
__________________, between Education Loans Incorporated and the Trustee (but
for the account and on behalf of Education Loans Incorporated), affixed pursuant
to a Student Loan Purchase Agreement dated as of July 1, 1997 did not become
effective thereunder and no rights in the same have been conveyed thereby.
Dated: ________________
________________________________________
Title and Signature of Trustee Officer
Exhibit "F" to Student Loan Purchase Agreement
(Opinion dated as of Date of Agreement)
Education Loans Incorporated
Student Loan Finance Corporation
105 First Avenue Southwest
Aberdeen, South Dakota 57401
Re: STUDENT LOAN PURCHASE AGREEMENT
Dated as of July 1, 1997
Gentlemen:
Pursuant to the above mentioned Student Loan Purchase Agreement (the
"Agreement") between Education Loans Incorporated and ___________________
_________________________________, (the "Lender"), we have reviewed the
Agreement and made such examinations and further investigations as we deemed
necessary as a basis for the opinions expressed herein. All capitalized terms
used in this opinion and not otherwise defined shall have the same meanings as
in the Agreement. Pursuant to Paragraph 5 of the Agreement, you have requested
our opinion on a number of matters. Opinions hereinafter expressed are qualified
to the extent the validity or enforceability of any provisions in the Agreement
or the Eligible Loans or of any rights granted to you pursuant to any of these
instruments, may be subject to or affected by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally or by general principles of equity.
Based upon the foregoing, and having regard to legal considerations which
we deem relevant, we are of the opinion that:
(i) The Lender is duly organized and existing and in good standing under
the laws of the jurisdiction of its organization.
(ii) The Agreement has been duly authorized, executed and delivered by the
Lender, is in full force and effect and constitutes the legal, valid, binding
and enforceable obligation of the Lender.
(iii) The Lender has all requisite power and authorization under the laws
of the jurisdiction of its organization, to sell, assign and transfer the
promissory notes evidencing the Eligible Loans to the Corporation or to the
Trustee on behalf of the Corporation, and to enter into and carry out its
obligations under the Agreement;
(iv) No authorization or approval of any governmental authority (other
than notice to the Secretary of Education and approval of the Guarantor for the
sale of the Eligible Loans) is required for the execution and delivery of the
Agreement, or the sale, transfer and assignment of the Eligible Loans;
(v) The officers of the Lender are authorized to execute the endorsement
required by the Agreement, transferring the Eligible Loans to be Financed;
(vi) With respect to all Financed Guaranteed Eligible Loans, the
applicable Guarantee Agreement has been duly authorized, executed and delivered
by the Lender and is in full force and effect, and with respect to all Financed
Insured Eligible Loans the applicable insurance is in full force and effect.
Very truly yours
(Lender's Counsel)
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Exhibit "G" to Student Loan Purchase Agreement
ADVERSE CREDIT FOR DETERMINING FEDERAL PLUS LOAN ELIGIBILITY
The lender must obtain a credit history of the parent applicant from at least
one national credit bureau organization. This credit report must be secured
within a time frame that ensures the most accurate, current representation of
the applicant's credit history before the first day of the period of enrollment
for which the loan is intended. When reviewing the credit report, unless the
lender determines that an extenuating circumstance exists, the lender should
consider an applicant to have an adverse credit history if any of the following
conditions are evidenced by the credit report:
1. The applicant(s), on the date of the lender's examination of the credit
report, is considered 90 days or more delinquent on the repayment of any
debt; or
2. The applicant(s) have been the subject of a default determination (on any
debt), foreclosure, repossession, tax lien, wage garnishment or write-off
of a Title IV debt during the five years preceding the date of the credit
report; provided that the failure to pay a debt that has been discharged in
bankruptcy or that is dischargeable in a pending bankruptcy proceeding
shall not be deemed an adverse credit history.
If one of these conditions exists, the lender may still make the loan if the
lender determines, and documents in the file, that extenuating circumstances
exist. The documentation of extenuating circumstances may include, but is not
limited to:
1. an updated credit report that shows the applicant is no longer 90 or more
days delinquent on a debt or corrects other information found on the
original credit report examined by the lender that led to the determination
of adverse credit;
2. a statement from the creditor that the applicant has made satisfactory
arrangements to repay the debt(s) that is the basis of the adverse credit
determination;
3. in the case of a debt with an outstanding balance that is less than $500
but is 90 days or more delinquent, a satisfactory written explanation from
the applicant explaining the reason for the delinquency; or
4. evidence that the debt that is the basis of the adverse credit
determination has been discharged in bankruptcy or is dischargeable in
pending bankruptcy proceedings.
A lender may have stricter standards for determining adverse credit than those
outlined above.
