<PAGE>
As filed with the Securities and Exchange Commission on October 22, 1999
Registration No. 333-85963
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
-------------------------
Education Loans Incorporated
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 91-1819974
(State or other jurisdiction of incorporation or organization) (I.R.S Employer Identification No.)
</TABLE>
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:
Michael E. Reeslund, 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) 340-2960 (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.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------
Proposed Proposed
Title of Each Amount Maximum Maximum Amount of
Class of Securities to be Offering Price Aggregate Registration
to be Registered Registered Per Share (1) Offering Price Fee
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Student Loan Asset-Backed Notes,
Series 1999-1 $500,000,000 100% $500,000,000 $138,722 (2)
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457.
(2) Registrant previously paid a filing with respect to such securities of
$278.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
Subject to Completion, Dated __________, 1999
Prospectus Supplement
$______________ Student Loan Asset-Backed Notes, Series 1999-[X]
EDUCATION LOANS INCORPORATED
Consider carefully the risk factors beginning on page 4 in the prospectus and
page S-4 of this prospectus supplement
The notes will represent obligations of EdLinc only and will not represent
interests in or obligations of the servicer, the transferor or any of their
affiliates. The notes are not a deposit and are not insured or guaranteed by
any person. Except as noted in this document and the accompanying prospectus,
the underlying accounts and student loans are not insured or guaranteed by any
governmental agency.
This prospectus supplement may be used to offer and sell the notes only if
accompanied by the prospectus.
EdLinc will issue: Senior Notes Subordinate Notes Total
- ------------------ ------------ ----------------- -----
Principal Amount $___________ $____________ $__________
Interest Rate One-month One-month
LIBOR plus [ ]%, LIBOR plus [ ]%,
subject to a cap subject to a cap
of [18%] and of [18%] and
the net loan rate the net loan rate
Interest Paid monthly monthly
First Interest
Payment Date [__________] [___________]
Stated Maturity ____________ _____________
Date
Price to Public ____________% _____________% $___________
Underwriting
Discount ____________% _____________% $___________
Proceeds to Issuer ____________% _____________% $___________
_______________
The subordinate notes are subordinated to the senior notes.
Neither the SEC nor any state securities commission has approved these
notes or determined that this prospectus supplement or the prospectus is
accurate or complete. Any representation to the contrary is a criminal offense.
Salomon Smith Barney
__________, 1999
<PAGE>
Important Notice About The Information in
Your Prospectus Supplement and Prospectus
EdLinc provides information to you about the notes in two separate
documents that progressively provide more detail:
. the accompanying prospectus, which provides general information, some of
which may not apply to your notes; and
. this prospectus supplement, which describes the specific terms of your
notes.
The terms of your series of notes disclosed in this prospectus supplement
may vary from, but should not contradict, the disclosure in the accompanying
prospectus. If these variances occur, you should rely on the information in
this prospectus supplement.
This prospectus supplement includes cross-references to captions in this
prospectus supplement or the accompanying prospectus where you can find further
related discussions. These cross-references are to sections contained in this
prospectus supplement unless you are told otherwise. The following table of
contents and the table of contents included in the accompanying prospectus
provide the pages on which these captions are located.
[EdLinc will not list the notes on any trading exchange.]
[EdLinc has filed preliminary information with the SEC regarding the notes
and the assets making up the trust estate to be used to pay the notes. The
information contained in this document supersedes all of that preliminary
information, which was prepared by the underwriter for prospective investors.]
_______________________
Until ________, all dealers that effect transactions in the notes of this
series, whether or not participating in this offering, may be required to
deliver a prospectus and prospectus supplement. This requirement is in addition
to the dealers' obligation to deliver a prospectus and prospectus supplement
when acting as underwriters for their unsold allotments or subscriptions.
S-2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SUMMARY OF TERMS...................................... S-4
RISK FACTORS.......................................... S-9
USE OF PROCEEDS....................................... S-9
THE FINANCED STUDENT LOANS............................ S-10
Incentive Programs.................................. S-16
MATURITY AND PREPAYMENT CONSIDERATIONS................ S-17
Maturity and Prepayment Assumptions................. S-17
Weighted Average Life of the Series 1999-[X] Notes.. S-18
SERVICING............................................. S-19
General............................................. S-19
[Name of Sub-Servicer].............................. S-20
THE GUARANTEE AGENCIES................................ S-20
General............................................. S-20
[Name of Guarantee Agency].......................... S-20
DESCRIPTION OF THE SERIES 1999-[X]
NOTES............................................... S-20
Generally........................................... S-21
Interest Rate on the Series 1999-[X] Notes.......... S-21
Carry-Over Amounts on the Series 1999-[X] Notes..... S-22
Interest Limited to the Extent Permissible by Law... S-24
Prepayment and Redemption of Series 1999-[X] Notes.. S-24
SOURCE OF PAYMENT AND SECURITY FOR THE SERIES
1999-[X] NOTES...................................... S-25
Subordination of the Subordinate Series
1999-[X] Notes...................................... S-25
[Prior Notes and Series 1999-[X]
Notes............................................ S-26]
[Summary of Indenture Assets,
Liabilities and Fund Balances
and Statement of Revenue,
Expense and Changes in Fund
Balances of the Indenture........................ S-26]
THE TRUSTEE........................................... S-27
[CERTAIN RELATIONSHIPS AMONG FINANCING PARTICIPANTS... S-28]
UNDERWRITING.......................................... S-28
LEGAL MATTERS......................................... S-29
RATING................................................ S-29
</TABLE>
S-3
<PAGE>
SUMMARY OF TERMS
This summary highlights selected information from this document and does not
contain all of the information you need to make your investment decision. To
understand all of the terms of this offering, read this entire document and the
accompanying prospectus.
EDLINC
Education Loans Incorporated, a Delaware corporation and wholly-owned subsidiary
of Student Loan Finance Corporation, will issue the notes and acquire student
loans with the proceeds. EdLinc's principal place of business is located at 105
First Avenue Southwest, Suite 200, Aberdeen, South Dakota 57401, and its phone
number is (605) 622-4400.
THE TRANSFEROR
GOAL Funding, Inc., a Delaware corporation and wholly-owned subsidiary of
Student Loan Finance Corporation, will transfer to EdLinc on the closing date
most of the student loans to be financed with proceeds of the notes of this
series. GOAL Funding, Inc., in its capacity as transferor of the initial
financed student loans, will be referred to in this prospectus supplement as the
transferor.
STUDENT LOAN FINANCE CORPORATION
Student Loan Finance Corporation, a South Dakota corporation:
. has acquired alternative student loans from unaffiliated lenders and
transferred them to the transferor, which loans will be transferred to
EdLinc on the closing date;
. will acquire alternative student loans from unaffiliated lenders and
transfer them directly to EdLinc during the 270-day period after the
closing date; and
. will be the servicer and the administrator.
THE SERVICER
Student Loan Finance Corporation will be the servicer of the student loans
acquired by EdLinc from proceeds of the notes. It may, however, employ one or
more other institutions to service the loans on its behalf on a day-to-day
basis. Student Loan Finance Corporation, in its capacity as servicer of the
financed student loans, together with any successor in such capacity, will be
referred to in this prospectus supplement as the servicer.
THE ADMINISTRATOR
Student Loan Finance Corporation will perform various administrative activities
and obligations for EdLinc in connection with acquiring student loans and
meeting reporting and other requirements under the indenture.
THE TRUSTEE
U.S. Bank National Association will be the trustee under the indenture. U.S.
Bank National Association, in its capacity as
S-4
<PAGE>
trustee under the indenture, together with any successor in such capacity, will
be referred to in this prospectus supplement as the trustee.
TRUST ESTATE ASSETS
The student loans that secure your notes will consist of:
. a portfolio of loans to be transferred by the transferor to EdLinc on the
closing date, which had an aggregate principal balance as of _____________
of approximately $_______________;
. loans to be acquired during the 270-day period after the closing date,
which will have an aggregate principal balance when acquired of
approximately $_______________;
[. loans acquired with proceeds of previous series of notes, which had an
aggregate principal balance as of _______________ of approximately
$_______________;] and
. loans to be acquired with proceeds of any subsequent series of notes and
other available moneys under the indenture.
Student Loan Finance Corporation, the transferor or EdLinc have acquired or will
acquire these loans from unaffiliated lenders. Any loans not acquired by EdLinc
directly from unaffiliated lenders will be transferred to EdLinc by the
transferor or Student Loan Finance Corporation.
The moneys in the funds and accounts under the indenture will also secure your
notes.
[FFELP LOANS
___% of the initial student loans are FFELP loans. Third party agencies
guarantee the payment of both principal and interest on FFELP loans. The extent
of the guarantee ranges from 98% to 100%. See "The Financed Student Loans" and
"The Guarantee Agencies" in this prospectus supplement and "Description of the
FFELP Program" and "Description of the Guarantee Agencies" in the prospectus.]
[ALTERNATIVE LOANS
___% of the initial student loans are alternative loans. No third party
guarantees payment of the alternative loans. See "The Financed Student Loans" in
this prospectus supplement and "Description of the Alternative Loan Programs" in
the prospectus.]
THE TRUSTEE
U.S. Bank National Association will be the trustee under the indenture, as well
as the eligible lender trustee for purposes of holding legal title to all FFELP
loans.
CLOSING DATE
Issuance of the notes is scheduled for ___________________, 1999.
THE DAY OF THE MONTH SCHEDULED PAYMENTS ARE MADE
All payments due in a given month will be paid on the 1st day of that month. If
the 1st is not a business day, payments will be made on the business day
following the 1st.
S-5
<PAGE>
INTEREST
Senior Notes
Interest is paid monthly on the senior notes of this series. The initial
interest rate on the senior notes of this series is fixed at ______% per year.
Beginning ______________________, __________, the interest rate on the senior
notes of this series will be adjusted monthly to equal the lesser of:
. one-month LIBOR plus ______% per year; or
. [18%] per year.
The adjusted monthly interest rate on the senior notes of this series for each
period will be capped, however, at the net loan rate for that period.
Subordinate Notes
Interest is paid monthly on the subordinate notes of this series. The initial
interest rate on the subordinate notes of this series is fixed at ______% per
year.
Beginning ______________________, __________, the interest rate on the
subordinate notes of this series will be adjusted monthly to equal the lesser
of:
. one-month LIBOR plus ______% per year; or
. [18%] per year.
The adjusted monthly interest rate on the subordinate notes of this series for
each period also will be capped at the net loan rate for that period.
The Net Loan Rate
The net loan rate for notes of this series equals the weighted average interest
rate of the student loans financed with proceeds of these notes minus the
administrative cost and note fee rate.
The administrative cost and note fee rate initially is ______% per year, though
it may be increased from time to time with approval from the rating agencies.
You may obtain the applicable interest rates
by telephoning (__) ____-________.
PRINCIPAL
Stated Maturity Dates
The stated maturity date of the senior notes of this series is ________, _____.
The stated maturity date of the subordinate notes of this series is ________,
_____.
Prepayment of Principal
Principal prepayments on the notes of this series will generally equal the
reduction in the principal balance of the student loans financed with the
proceeds of these notes. Principal prepayments could also occur if EdLinc is
unable to use all of the proceeds of the notes deposited in the acquisition fund
to acquire student loans. Prepayments will generally be made pro rata on each
note until the principal balance of all notes of this series has been reduced to
zero.
Special Redemption
All of the notes of this series may, at the option of EdLinc, be redeemed prior
to
S-6
<PAGE>
stated maturity after the principal balance of the student loans acquired with
the proceeds of these notes is less than 10% of the principal balance at the
time the loans were acquired.
See "Description of the Series 1999-[X] Notes--Prepayment and Redemption of
Series 1999-[X] Notes" in this prospectus supplement and "Maturity and
Prepayment Considerations" in the prospectus and this prospectus supplement.
PRIORITY OF PAYMENTS
On each interest payment date, available funds will be applied generally in the
following priority:
. first, to pay interest on the senior notes of this series and any other
series at the time outstanding and on any other senior obligations under
the indenture;
. second, to pay principal due on the senior notes of this series and any
other series at the time outstanding and on any other senior obligations
under the indenture;
. third, to the acquisition fund, the amount necessary to repay any prior
transfers therefrom to pay interest or principal on the notes;
. fourth, to pay interest on the subordinate notes of this series and any
other series at the time outstanding and on any other subordinate
obligations under the indenture;
. fifth, to pay principal due on the subordinate notes of this series and any
other series at the time outstanding and on any other subordinate
obligations under the indenture;
. sixth, to the administration fund, the amount necessary to pay
administrative and servicing fees and expenses;
. seventh, to the reserve fund, the amount necessary to reach its required
balance;
. eighth, to make sinking fund installments to redeem subordinate term notes;
. ninth, to make prepayments of principal on, or to provide for the special
redemption of, notes;
. tenth, to the alternative loan guarantee fund, the amount necessary to
reach its required balance; and
. eleventh, to the surplus fund.
See "Source of Payment and Security for the Notes--Priorities" and "Description
of the Indenture--Funds and Accounts" in the prospectus.
RESERVE FUND
$_____________ of the proceeds of the notes of this series will be deposited
into a reserve fund for the notes. This initial deposit will be supplemented
monthly, if necessary, and otherwise upon the issuance of any new series of
notes.
S-7
<PAGE>
PARITY OBLIGATIONS
The notes of this series will be issued under the indenture. Additional notes
and other obligations [have been and] may be issued under the indenture which
have the same right to payment from the trust estate as the senior notes of this
series or the subordinate notes of this series.
FEDERAL INCOME TAX CONSEQUENCES
In Dorsey & Whitney LLP's opinion, your notes will be characterized as debt
obligations for federal income tax purposes. Interest paid or accrued on the
notes will be taxable to you.
By accepting your note, you agree to treat your note as a debt instrument for
income tax purposes.
Original Issue Discount
We do [not] expect that your notes will be issued with original issue discount.
The final determination, however, depends on the actual sales price of the notes
to a substantial portion of investors.
See "Federal Income Tax Consequences" in the prospectus.
ERISA CONSIDERATIONS
We expect that the notes will be treated as debt obligations without significant
equity features for purposes of applicable ERISA regulations of the Department
of Labor. See "ERISA Considerations" in the prospectus.
REGISTRATION, CLEARING AND SETTLEMENT
You will hold your interest in the notes through DTC in the United States or
Cedel Bank, societe anonyme or the Euroclear System in Europe. You will not be
entitled to receive definitive certificates representing your interests in the
notes, except in limited circumstances. See "Description of the Notes-- Book
Entry Registration" in the prospectus.
MINIMUM DENOMINATIONS
The notes of this series will be offered in denominations of $100,000 and
integral multiples thereof.
RATING
Senior Notes
Fitch Moody's
----- -------
AAA Aaa
Subordinate Notes
Fitch Moody's
----- -------
A A2
See "Risk Factors--Credit Ratings Address Limited Scope of Investor Concerns" in
the prospectus.
S-8
<PAGE>
RISK FACTORS
In addition to the Risk Factors in the prospectus, you should note the
following:
[The Principal Balance of Notes is The aggregate principal balance of the
Greater than the Principal Balance notes [(including notes of each prior
of the Collateral series currently outstanding)] exceeds sum
of: _________, ___.
. the aggregate principal balance of
and accrued interest on the initial
student loans as of ________, _____,
. the remainder of the acquisition
fund deposit after acquisition of
the initial student loans,
[. the aggregate principal balance of
and accrued interest on the student
loans financed with proceeds of
prior series of notes as of ,_______
_____,] and
. the reserve fund balance,
by approximately $____________.
Payment of principal and interest on the
notes is dependent upon collections on the
student loans, particularly interest
collections. If the yield on the financed
student loans does not generally exceed
the interest rate on the notes and
expenses relating to the servicing of the
financed student loans and administration
of the indenture, EdLinc may have
insufficient funds to repay the notes.]
USE OF PROCEEDS
The net proceeds from the sale of the notes of this series, which are
referred to in this prospectus supplement as the Series 1999-[X] Notes, will be
used as follows:
. $__________________ will be used to acquire initial financed student
loans from the transferor on the closing date;
. $__________________ will be deposited in the Acquisition Fund and used to
acquire subsequent financed student loans during a 270-day pre-funding
period following the closing date; and
S-9
<PAGE>
. $__________________ will be used to make the required Reserve Fund
deposit.
The transferor is expected to use the proceeds of its sale of the initial
financed student loans to repay indebtedness incurred in the acquisition of such
loans or for general corporate purposes.
THE FINANCED STUDENT LOANS
The financed student loans to be acquired with proceeds of the Series 1999-
[X] Notes include the initial financed student loans in the approximate
principal amount of $________________ (which will be purchased from the
transferor on the closing date pursuant to the Transfer Agreement, dated as of
___________________, and consist of FFELP Loans in the approximate principal
amount of $________________ and Alternative Loans in the approximate principal
amount of $________________) and subsequent financed student loans in the
approximate principal amount of $________________ (which will be purchased
during the pre-funding period from [the transferor,] SLFC or lenders pursuant to
student loan purchase agreements). The discussion of financed student loans in
the remainder of this section, unless otherwise specified, refers to the initial
financed student loans and the subsequent financed student loans only.
Each financed student loan will (1) have been originated in the United
States or its territories or possessions under and in accordance with the FFEL
Program or an Alternative Loan Program to or on behalf of a student who has
graduated or is expected to graduate from an institution of higher education
qualifying under the FFEL Program or such Alternative Loan Program, as
applicable, and (2) contain terms in accordance with those required by the FFEL
Program and the Guarantee Agreements (as to FFELP Loans) or the related
Alternative Loan Program (as to Alternative Loans) and other applicable
requirements. As of ____________________, no more than 20% by principal balance
of the initial financed student loans [and all other financed student loans
under the indenture as of such date,] were delinquent for 30 days or more. For
this purpose, delinquency refers to the number of days for which a payment is
past due.
Each financed FFELP Loan is required to be guaranteed as to principal and
interest by a guarantee agency and reinsured by the Department of Education to
the extent provided under the Higher Education Act and eligible for Special
Allowance Payments and, with respect to each financed FFELP Loan that is a
Stafford Loan, Interest Subsidy Payments paid by the Department of Education.
See "Description of the FFEL Program" in the prospectus.
The subsequent financed student loans will consist of FFELP Loans and
Alternative Loans. [Describe restrictions on types or characteristics of
subsequent financed student loans.]
Except as described above, there will be no required characteristics of the
subsequent financed student loans. Therefore, following the acquisition of
subsequent financed student loans, the aggregate characteristics of the entire
pool of student loans financed with proceeds of the Series 1999-[X] Notes
[together with those student loans previously financed under the indenture],
including the composition of the financed student loans and of the borrowers
thereof,
S-10
<PAGE>
the distribution by interest rate and the distribution by principal balance
described in the following tables, will vary from those of the initial financed
student loans [and previously financed student loans] as described herein.
Furthermore, the issuance of additional series of notes and the acquisition of
financed student loans with the proceeds thereof, as well as the acquisition of
financed student loans from moneys in the Surplus Account, will cause the
aggregate characteristics of the pool of student loans financed with proceeds of
all notes to vary still further from those of the initial financed student loans
[and previously financed student loans] as described herein.
Each of the financed FFELP Loans provides for the amortization of the
outstanding principal balance of such financed FFELP Loan over a series of
periodic payments. Each periodic payment consists of an installment of interest
which is calculated on the basis of the outstanding principal balance of such
financed FFELP Loan multiplied by the applicable interest rate and further
multiplied by the period elapsed (as a fraction of a calendar year) since the
preceding payment of interest was made. As payments are received in respect of
such financed FFELP Loan, the amount received is applied first to outstanding
late fees, if collected, then to interest accrued to the date of payment and the
balance is applied to reduce the unpaid principal balance. Accordingly, if a
borrower pays a regular installment before its scheduled due date, the portion
of the payment allocable to interest for the period since the preceding payment
was made will be less than it would have been had the payment been made as
scheduled, and the portion of the payment applied to reduce the unpaid principal
balance will be correspondingly greater. Conversely, if a borrower pays a
monthly installment after its scheduled due date, the portion of the payment
allocable to interest for the period since the preceding payment was made will
be greater than it would have been had the payment been made as scheduled, and
the portion of the payment applied to reduce the unpaid principal balance will
be correspondingly less. In either case, subject to any applicable deferment
periods or forbearance periods, the borrower pays installments until the final
scheduled payment date, at which time the amount of the final installment is
increased or decreased as necessary to repay the then outstanding principal
balance of such financed FFELP Loan.
[Describe characteristics of Alternative Loans.]
Set forth below in the following tables is a description of additional
characteristics of the initial financed student loans [and previously financed
student loans] as of ________________________.
Composition of the Initial [and Previously] Financed Student Loans as of
________________________
<TABLE>
<S> <C>
Aggregate Outstanding Principal Balance........................ $
Number of Borrowers............................................
Average Outstanding Principal Balance Per Borrower.............
Number of Loans (Promissory Notes).............................
Average Outstanding Principal Balance Per Loan.................
Repayment Status Loans:
Weighted Average Remaining Term (months)..................
</TABLE>
S-11
<PAGE>
Weighted Average Payments Received (months)...............
Weighted Average Interest Rate.................................
Distribution of the Initial [and Previously] Financed Student Loans by Loan Type
as of ________________________
<TABLE>
<CAPTION>
Percent of Loans
Outstanding by Outstanding
Loan Type Number of Loans Principal Balance Principal Balance
- ---------------------------------- --------------- ----------------- ------------------
<S> <C> <C> <C>
Stafford-Subsidized...............
Stafford-Unsubsidized.............
PLUS..............................
SLS...............................
Consolidation.....................
Alternative.......................
Total...........................
</TABLE>
Distribution of the Initial [and Previously] Financed Student Loans by Borrower
Interest Rate as of ______________________
<TABLE>
<CAPTION>
Percent of Loans
Outstanding by Outstanding
Interest Rate (1) Number of Loans Principal Balance Principal Balance
- ------------------------------------ --------------- ------------------ -----------------
<S> <C> <C> <C>
Less than 7.50%.....................
7.50% to 7.99%......................
8.00% to 8.49%......................
8.50% to 8.99%......................
9.00% to 9.49%......................
9.50% or greater....................
Total............................
</TABLE>
___________________________
(1) Determined using the interest rates applicable to the initial [and
previously] financed student loans as of ________________________. However,
because some of the initial [and previously] financed student loans bear
interest at variable rates per annum, the existing interest rates are not
indicative of future interest rates on the financed student loans. See
"Description of the FFEL Program" in the prospectus.
S-12
<PAGE>
Distribution of the Initial [and Previously] Financed Student Loans by Range of
Outstanding Principal Balances as of ________________________
<TABLE>
<CAPTION>
Percent of Loans
Outstanding by Outstanding
Principal Balance Number of Loans Principal Balance Principal Balance
- ---------------------------------- --------------- ----------------- -----------------
<S> <C> <C> <C>
Less than $1,000..................
$ 1,000-$1,999...................
$ 2,000-$2,999...................
$ 3,000-$3,999...................
$ 4,000-$4,999...................
$ 5,000-$5,999...................
$ 6,000-$6,999...................
$ 7,000-$7,999...................
$ 8,000-$8,999...................
$ 9,000-$9,999...................
$10,000-$10,999...................
$11,000-$11,999...................
$12,000-$12,999...................
$13,000-$13,999...................
$14,000-$14,999...................
$15,000 or greater................
Total...........................
</TABLE>
Distribution of the Initial [and Previously] Financed Student Loans by Borrower
Payment Status as of ________________________
<TABLE>
<CAPTION>
Percent of Loans
Outstanding by Outstanding
Borrower Payment Status Number of Loans Principal Balance Principal Balance
- ------------------------------------- --------------- ------------------ ------------------
<S> <C> <C> <C>
In School............................
Grace................................
Repayment............................
Deferment............................
Forbearance..........................
Claims...............................
Total......................
</TABLE>
S-13
<PAGE>
Distribution of the Repayment Status Initial [and Previously] Financed Student
Loans by Remaining Term to Scheduled Maturity as of ________________________
<TABLE>
<CAPTION>
Percent of Loans
Remaining Months Outstanding by Outstanding
Until Scheduled Maturity Number of Loans Principal Balance Principal Balance
- ---------------------------------- --------------- ----------------- -----------------
<S> <C> <C> <C>
1 to 12
13 to 24
25 to 36
37 to 48
49 to 60
61 to 72
73 to 84
85 to 96
97 to 108
109 to 120
121 to 180
181 to 240
241 to 300
Over 300
Total.....................
</TABLE>
S-14
<PAGE>
Distribution of the Initial [and Previously] Financed Student Loans by
Borrower's Address as of _____________
<TABLE>
<CAPTION>
Percent of Loans
Outstanding by Outstanding
State of Borrower's (1) Number of Loans Principal Balance Principal Balance
- ----------------------------------- --------------- ----------------- -----------------
<S> <C> <C> <C>
....................................
....................................
....................................
....................................
....................................
Others (2)..........................
Total............................
</TABLE>
___________________________
(1) Based on the current permanent billing addresses of the borrowers of the
initial [and previously] financed student loans shown on the servicer's
records.
(2) Consists of locations that include [__] other states, U.S. territories,
possessions and commonwealths, foreign countries, overseas military
establishments, and unknown locations, none of the aggregate principal balance
of the financed student loans relating to which exceeds ___% of the aggregate
principal balance of all initial [and previously] financed student loans.
To the extent that states with a large concentration of financed student
loans experience adverse economic or other conditions to a greater degree than
other areas of the country, the ability of such borrowers to repay their
financed student loans may be impacted to a larger extent than if such borrowers
were dispersed more geographically.
Distribution of the Initial [and Previously] Financed FFELP Loans by Guarantee
Status as of __________________
<TABLE>
<CAPTION>
Percent of Loans
Outstanding by Outstanding
Guarantee Level Number of Loans Principal Balance Principal Balance
- ----------------------------------- --------------- ----------------- -----------------
<S> <C> <C> <C>
FFELP Loan Guaranteed 100%.........
FFELP Loan Guaranteed 98%..........
FFELP Loan Non-Guaranteed..........
Total....................
</TABLE>
S-15
<PAGE>
Distribution of the Initial [and Previously] Financed FFELP Loans by Guarantee
Agency as of _________________
<TABLE>
<CAPTION>
Percent of Loans
Outstanding by Outstanding
Guarantee Agency Number of Loans Principal Balance Principal Balance
- ------------------------------------- --------------- ----------------- -----------------
<S> <C> <C> <C>
Other Guarantors....................
Total........................
</TABLE>
Distribution of the Initial [and Previously] Financed Student Loans by School
Types as of ____________________
<TABLE>
<CAPTION>
Percent of Loans
Outstanding by Outstanding
School Type Number of Loans Principal Balance Principal Balance
- ----------------------------------- --------------- ----------------- -----------------
<S> <C> <C> <C>
Under 4 Year.......................
4 and 5 Year.......................
Proprietary........................
Consolidation......................
Other/Unknown......................
...................................
Total............................
</TABLE>
Incentive Programs
EdLinc currently reduces the interest rate on financed student loans by
.25% per annum for borrowers that arrange to have their loan payments
automatically withdrawn from a bank account.
[Description of any other incentive programs.]
S-16
<PAGE>
MATURITY AND PREPAYMENT CONSIDERATIONS
Maturity and Prepayment Assumptions
The rate of prepayment of principal of the Series 1999-[X] Notes and the
yield on the Series 1999-[X] Notes will be affected by (1) prepayments of the
student loans financed with proceeds of the Series 1999-[X] Notes that may occur
as described below, (2) principal payment requirements of any additional series
of notes, and (3) the ability of EdLinc to expend all of the Series 1999-[X]
Note proceeds on the purchase of student loans. All of the student loans
financed with proceeds of the Series 1999-[X] Notes are prepayable in whole or
in part by the borrowers at any time without penalty (including, in the case of
financed FFELP Loans, by means of Consolidation Loans) and may be prepaid as a
result of a borrower default, death, disability or bankruptcy, school closures
and other events specified in the Higher Education Act or the Alternative Loan
Program, as applicable, and subsequent liquidation or collection of guarantee
payments (as to FFELP Loans) or transfers from the Alternative Loan Guarantee
Fund (as to Alternative Loans) with respect thereto. The rate of such
prepayments cannot be predicted and may be influenced by a variety of economic,
social and other factors, including those described below. In general, the rate
of prepayments may tend to increase to the extent that alternative financing
becomes available at prevailing interest rates which fall significantly below
the interest rates applicable to the financed student loans. However, because
many of the student loans financed with proceeds of the Series 1999-[X] Notes
bear interest at a rate that either actually or effectively is floating, it is
impossible to determine whether changes in prevailing interest rates will be
similar to or vary from changes in the interest rates on the financed student
loans. To the extent borrowers of financed FFELP Loans elect to borrow
Consolidation Loans, such financed student loans will be prepaid. See
"Description of the FFEL Program--Loan Terms--Consolidation Loans" in the
prospectus. In addition, the lenders are obligated to repurchase any financed
student loan pursuant to the related student loan purchase agreement as a result
of a breach of any of their respective representations and warranties with
respect to such financed student loan, which breach is not cured within the
applicable cure period. See "Description of Financing of Eligible Loans--
Student Loan Purchase Agreements" in the prospectus. See, also, "Description of
the Notes--Prepayment and Redemption of the Series 1999-[X] Notes--Call for
Redemption of Series 1999-[X] Notes Upon Reduction of Portfolio Balance" for a
description of the conditions under which EdLinc may, at its option, redeem all
of the Outstanding Series 1999-[X] Notes.
Scheduled payments with respect to, and maturities of, the financed student
loans may be extended, including pursuant to grace periods, deferment periods
and, under some circumstances, forbearance periods. The rate of prepayment of
principal of the Series 1999-[X] Notes and the yield on the Series 1999-[X]
Notes may also be affected by the rate of defaults resulting in losses on
financed student loans, by the severity of those losses and by the timing of
those losses (which also may affect the ability of the guarantee agencies to
make guarantee payments on financed FFELP Loans and the sufficiency of the
Alternative Loan Guarantee Fund to cover losses on financed Alternative
Loans).
S-17
<PAGE>
The rate of prepayment on the student loans financed with proceeds of the
Series 1999-[X] Notes cannot be predicted, and any reinvestment risks resulting
from a faster or slower incidence of prepayment of financed student loans will
be borne entirely by the Series 1999-[X] Noteholders. Such reinvestment risks
may include the risk that interest rates and the relevant spreads above
particular interest rate bases are lower at the time Series 1999-[X] Noteholders
receive prepayments than such interest rates and such spreads would otherwise
have been had such prepayments not been made or had such prepayments been made
at a different time.
In addition, the principal payment requirements of any additional series of
notes could affect the rate of prepayment of principal of the Series 1999-[X]
Notes and the yield on the Series 1999-[X] Notes. The notes of each class and
series have the same right to payment of principal and interest as the notes of
the same class of all other series. It is anticipated that the timing of
payment of principal of each series of notes will depend, at least in part, on
the timing of receipt of principal of the student loans financed with the
proceeds of such series. However, it is possible that, due to losses,
delinquencies or slower than anticipated prepayments on the financed student
loans relating to another series of notes, amounts available from such financed
student loans may not be sufficient to make required payments of principal on
such series. If this were to happen, payments of principal on the student loans
financed with the proceeds of the Series 1999-[X] Notes could be used to make
such required payments, thus reducing, at least temporarily, the amounts
available to make prepayments on the Series 1999-[X] Notes.
Finally, $________________ of the proceeds of the Series 1999-[X] Notes
will be deposited in the Acquisition Fund and used to purchase student loans
from lenders and SLFC during the pre-funding period. EdLinc expects to be able
to so use all of these proceeds. However, any portion of the proceeds not so
expended as of ____________________, together with a portion of the Series 1999-
[X] Note proceeds deposited in the Reserve Fund, will be used to prepay Series
1999-[X] Notes on the first regularly scheduled interest payment date
thereafter. See "Description of the Series 1999-[X] Notes--Prepayment and
Redemption of Series 1999-[X] Notes--Prepayment from Unused Proceeds."
Weighted Average Life of the Series 1999-[X] Notes
The following information is given solely to illustrate the effect of
prepayments on the student loans financed with the proceeds of the Series 1999-
[X] Notes on the weighted average life of the Series 1999-[X] Notes under the
assumptions stated below and is not a prediction of the prepayment rate that
might actually be experienced by the financed student loans.
Weighted average life refers to the average amount of time from the date of
issuance of a security until each dollar of principal of such security will be
repaid to the investor. The weighted average life of the Series 1999-[X] Notes
will be primarily a function of the rate at which payments are made on the
student loans financed with the proceeds of the Series 1999-[X] Notes. Payments
on such financed student loans may be in the form of scheduled amortization
of
S-18
<PAGE>
principal or prepayments (including, without limitation, guarantee payments and
payments from the Alternative Loan Guarantee Fund).
The Constant Prepayment Rate prepayment model ("CPR") represents an assumed
constant rate of prepayment of student loans financed with the proceeds of the
Series 1999-[X] Notes outstanding as of the beginning of each month expressed as
a per annum percentage. There can be no assurance that such financed student
loans will experience prepayments at a constant prepayment rate or otherwise in
the manner assumed by the prepayment model.
The weighted average lives in the following table were determined assuming
that (i) scheduled payments of principal on the financed student loans are
received in a timely manner and prepayments are made at the percentages of the
prepayment model set forth in the table; (ii) the initial principal balance of
the financed student loans is $_________________ and such financed student loans
have the characteristics described under "The Financed Student Loans;" and (iii)
payments are made on the Series 1999-[X] Notes on the 1st day of each month
commencing _____________. No representation is made that these assumptions will
be correct, including the assumption that the financed student loans held in the
Trust Estate will not experience delinquencies or unanticipated losses.
In making an investment decision with respect to the Series 1999-[X] Notes,
investors should consider a variety of possible prepayment scenarios, including
the limited scenarios described in the table below.
Weighted Average Life of the Series 1999-[X] Notes at the Respective CPRs Set
Forth Below:
<TABLE>
<CAPTION>
Weighted Average Life (years)
0% CPR 3% CPR 5% CPR 7% CPR 9% CPR 15% CPR
------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
Senior Series 1999-[X] Notes..........
Subordinate Series 1999-[X] Notes.....
</TABLE>
SERVICING
General
SLFC will, pursuant to the SLFC servicing agreement, act as servicer with
respect to the financed student loans. The servicer may enter into sub-servicing
agreements with one or more sub-servicers providing for the sub-servicers to
perform some or all of the obligations of the servicer with respect to servicing
the financed student loans. Pursuant to a sub-servicing agreement, each sub-
servicer will agree to service, and perform all other related tasks with respect
to, the financed student loans in compliance with applicable standards and
procedures. See "Description of the SLFC Servicing Agreement" in the
prospectus.
S-19
<PAGE>
[Name of Sub-Servicer]
[Description of Sub-Servicer to be inserted]
THE GUARANTEE AGENCIES
General
Of the initial financed FFELP Loans, [for each guarantee agency covering
less than 10%] approximately [___]% by principal balance are guaranteed by
[______________], a non-profit corporation ("[__________]"), organized in [
] and guaranteeing student loans since [ ], and as of [ ] had
an approximate aggregate principal amount of loans guaranteed of $[ ],
approximately [___]% by principal balance are guaranteed by [____________], an
agency of [____________] ("[_______]"), organized in [ ] and
guaranteeing student loans since [ ], and as of [ ] had an
approximate aggregate principal amount of loans guaranteed of $[ ], and
the remaining [___]% by principal balance are guaranteed by one of the following
guarantee agencies: [________________________________________] and
[_______________________________________]. See "Description of the Guarantee
Agencies" in the prospectus for more detailed information concerning the
characteristics of the guarantee agencies.
Information relating to the guarantee agencies set forth in this prospectus
supplement, which is particularly within each guarantee agency's knowledge, has
been requested of and has been provided by the respective guarantee agencies.
Such information and information included in the reports referred to herein has
not been verified or independently confirmed by EdLinc, the transferor, the
servicer or the underwriter, and comprises all information in respect of each
such guarantee agency that EdLinc obtained after a reasonable request and
inquiry. No guarantee agency is affiliated with EdLinc, the transferor, the
servicer or any underwriter.
[Name of Guarantee Agency]
[Description of Guarantee Agency to be inserted]
DESCRIPTION OF THE SERIES 1999-[X] NOTES
The Series 1999-[X] Notes will be issued pursuant to an indenture of trust,
dated as of _________________, as amended and supplemented by a [______]
supplemental indenture of trust, dated as of _________________, between EdLinc
and the trustee. This indenture of trust, as supplemented and amended, including
by the [______] supplemental indenture, is referred to in this prospectus
supplement as the indenture. Any references to notes in this prospectus
supplement without any designation as to series will be to those issued under
the indenture in general.
S-20
<PAGE>
Generally
The Series 1999-[X] Notes will be dated as of the date of their initial
issuance and, subject to call for redemption and prepayment pursuant to the
provisions referred to below, will mature as follows:
Stated Maturity
---------------
Senior Series 1999-[X] Notes
Subordinate Series 1999-[X] Notes
The Series 1999-[X] Notes will bear interest, payable on the first business
day of each month, commencing ______________________, at rates determined as
described below under "Interest Rate on the Series 1999-[X] Notes." The Series
1999-[X] Notes will be issued in fully registered form, without coupons, and
when issued will be registered in the name of Cede & Co., as nominee of DTC, New
York, New York. DTC will act as securities depository for the Series 1999-[X]
Notes. Individual purchases of the Series 1999-[X] Notes will be made in book-
entry form only in the principal amount of $100,000 or integral multiples
thereof. Purchasers of the Series 1999-[X] Notes will not receive certificates
representing their interest in the Series 1999-[X] Notes purchased. See
"Description of the Notes--Book-Entry Registration" in the prospectus.
Interest Rate on the Series 1999-[X] Notes
During the initial interest period for the Series 1999-[X] Notes, being the
period from the date of delivery through _____________________, the Senior and
Subordinate Series 1999-[X] Notes will bear interest at initial interest rates
of ____% and ____%, respectively, per annum. The interest rates for the Senior
and Subordinate Series 1999-[X] Notes for each interest period after the initial
interest period will be the applicable Series 1999-[X] Note LIBOR-Based Rate
based upon one-month LIBOR plus the appropriate spread, determined and subject
to limitations as hereinafter described.
Interest on the Series 1999-[X] 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 thereto (which shall be the first business day of each
calendar month, commencing _____________________) prior to the maturity thereof
and at the maturity thereof. The interest payable on each interest payment date
for the Series 1999-[X] Notes shall be that interest which has accrued through
the last day of the last complete interest period immediately preceding the
interest payment date or, in the case of the maturity thereof, the last day
preceding the date of such maturity. Each such interest period (other than the
initial interest period) will commence on and include the first business day of
a calendar month and terminate on and include the last day preceding the next
interest rate adjustment date. Each interest rate adjustment date shall be the
interest payment date for the preceding interest period. Each Series 1999-[X]
Note interest rate shall be effective as of and on
S-21
<PAGE>
the interest rate adjustment date of the applicable interest period and be in
effect thereafter through the end of such interest period.
The interest rates to be borne by the Series 1999-[X] Notes during each
interest period after the initial interest period shall be determined on the
related interest rate determination date (which will be the ____ Business Day
preceding such interest period) and shall be equal to the lesser of (1) the sum
of one-month LIBOR plus (a) for the Senior Series 1999-[X] Notes, a spread of
______% per annum (which sum is herein referred to as the "Senior Series 1999-
[X] Note LIBOR-Based Rate"), or (b) for the Subordinate Series 1999-[X] Notes,
a spread of ______% per annum (which sum is herein referred to as the
"Subordinate Series 1999-[X] Note LIBOR-Based Rate"), and (2) the Net Loan Rate
determined with respect to such interest period. The trustee shall determine
such interest rates on each interest rate determination date and shall give
EdLinc 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 period shall be determined by or on behalf of EdLinc and written notice
thereof given to the trustee together with the monthly servicing report for the
second preceding calendar month. For purposes of determining the Net Loan Rate
with respect to the Series 1999-[X] Notes, the Administrative Cost and Note Fee
Rate will initially be ______% per year, though it may be increased from time to
time with approval from each Rating Agency. See "Carry-Over Amounts on the
Series 1999-[X] Notes" below.
If the trustee no longer determines, or fails to determine, when required,
the Senior or Subordinate Series 1999-[X] Note LIBOR-Based Rate with respect to
an interest rate determination date, or if, for any reason, such manner of
determination shall be held to be invalid or unenforceable, the Senior or
Subordinate Series 1999-[X] Note LIBOR-Based Rate, as the case may be, for the
related interest period shall be the Net Loan Rate as determined with respect to
such interest period. If EdLinc shall fail or refuse to determine such Net Loan
Rate, the Net Loan Rate for such interest period shall be the most recently
determined Net Loan Rate.
Carry-Over Amounts on the Series 1999-[X] Notes
If the Senior or Subordinate Series 1999-[X] Note LIBOR-Based Rate
determined with respect to a given interest period is greater than the Net Loan
Rate, then the Senior or Subordinate Series 1999-[X] Note interest rate for such
interest period will be the Net Loan Rate. If the Senior or Subordinate Series
1999-[X] Note interest rate for any interest period is the Net Loan Rate, the
trustee shall determine the Carry-Over Amount, if any, with respect to the
Senior or Subordinate Series 1999-[X] Notes, as applicable, for such interest
period. Each such Carry-Over Amount shall bear interest calculated at a rate
equal to the applicable Series 1999-[X] 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 the indenture and the Series 1999-[X] Notes, any reference to
"principal" or "interest" therein shall not include, within the meaning of such
words, Carry-Over Amount or any interest accrued on any such Carry-Over Amount.
On the interest payment date for an interest period with respect to which such
Carry-
S-22
<PAGE>
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
Series 1999-[X] Note.
The Carry-Over Amount (and interest accrued thereon) for the Series 1999-
[X] Notes shall be paid by the trustee on outstanding Series 1999-[X] Notes 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 in the Surplus
Account are available on such interest payment date for transfer to the Interest
Account for such purpose after taking into account all other amounts payable
from the Surplus Fund in accordance with the applicable provisions of the
indenture on such interest payment date. Any Carry-Over Amount (and any
interest accrued thereon) with respect to any Series 1999-[X] Note which is
unpaid as of an interest payment date, which Series 1999-[X] Note is to be
called for redemption or deemed no longer outstanding under the [______]
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 clauses
(a) and (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 1999-[X] 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 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 1999-[X] Note, the trustee shall give written notice to
the holder of such Series 1999-[X] Note of the Carry-Over Amount remaining
unpaid on such Series 1999-[X] Note.
The interest payment date on which any Carry-Over Amount (or any interest
accrued thereon) for the Series 1999-[X] 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 Series 1999-[X] Notes on an interest payment
date.
Any unpaid Carry-Over Amount, including any accrued and unpaid interest
thereon, on a Series 1999-[X] Note not payable on any redemption date with
respect to such Series 1999-[X] Note will be forfeited upon the redemption or at
maturity of such Series 1999-[X] Note, or on such earlier interest payment date,
if any, on which such Series 1999-[X] Note ceases to be outstanding under the
[______] supplemental indenture. Fitch's rating on the Series 1999-[X] Notes
will not apply to any Carry-Over Amount that may accrue on the Series 1999-[X]
Notes.
S-23
<PAGE>
Interest Limited to the Extent Permissible by Law
In no event shall the cumulative amount of interest paid or payable on any
Series 1999-[X] Note exceed the amount permitted by applicable law. If the
applicable law is ever judicially interpreted so as to render any amount
received by the holder or any former holder of a Series 1999-[X] Note in excess
of that permitted by applicable law, then, notwithstanding any provision of the
Series 1999-[X] Notes or related documents to the contrary, all excess amounts
theretofore paid or received with respect to that Series 1999-[X] Note shall be
credited on the principal balance thereof (or, if the Series 1999-[X] Note has
been paid or would thereby be paid in full, refunded by the recipient thereof),
and the provisions of the Series 1999-[X] Note and related documents shall
automatically and immediately be deemed reformed and the amounts thereafter
collectible thereunder reduced.
Prepayment and Redemption of Series 1999-[X] Notes
Prepayment
Special Prepayment. Principal of the Series 1999-[X] Notes shall be
prepaid on any interest payment date from moneys credited to the Retirement
Account as hereinafter described. EdLinc is required to direct the trustee to
transfer to the Retirement Account from the Special Redemption and Prepayment
Account any moneys therein, up to an amount equal to the Special Prepayment
Amount, which EdLinc has not determined are reasonably expected to be required
to be transferred to the Note Fund or the Reserve Fund prior to the next
succeeding regularly scheduled interest payment date, provided no deficiencies
exist at the time of such transfer in the Note Fund, the Rebate Fund, the
Reserve Fund or the Alternative Loan Guarantee Fund. Such prepayments of
principal of Series 1999-[X] Notes shall, subject to the Senior Asset
Requirement, be allocated between the Senior Series 1999-[X] Notes and the
Subordinate Series 1999-[X] Notes pro rata. Within a given class of Series
1999-[X] Notes, the principal amount of such class to be prepaid shall be
allocated pro rata to the reduction of the principal amount of all notes of such
class.
The "Special Prepayment Amount" is an amount, as of the last day of any
month, equal to the excess, if any, of (1) the sum of (a) all payments received
as of such last day with respect to principal of initial financed student loans
and subsequent financed student loans, plus (b) the amount of any balances from
the Acquisition Fund and the Reserve Fund used to prepay Series 1999-[X] Notes
as described under "Prepayment from Unused Proceeds" below, less (c) the
aggregate amount of interest on initial financed student loans and subsequent
financed student loans which has been capitalized after the financing thereof,
less (d) the principal component of the repurchase price of initial financed
student loans and subsequent financed student loans which have been repurchased
from a guarantee agency upon rehabilitation of such Eligible Loans pursuant to
the Higher Education Act, over (2) the sum of (a) the aggregate of the amounts
previously applied to the reduction of the principal amount of all Series 1999-
[X] Notes, plus (b) the aggregate principal amount of Series 1999-[X] Notes to
be prepaid on the next regularly scheduled interest payment date from Balances
then on hand in the Retirement Account.
S-24
<PAGE>
Payments described in clause (1)(a) of the preceding sentence include, without
limitation, any prepayments by borrowers from the proceeds of a Consolidation
Loan made or purchased by the trustee on behalf of EdLinc 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.
In general, this prepayment provision is intended to require EdLinc to
prepay Series 1999-[X] Notes in amounts related to the amount of principal
payments received with respect to student loans financed with proceeds of the
Series 1999-[X] Notes in the Acquisition Fund. See "Maturity and Prepayment
Considerations--Weighted Average Life of the Series 1999-[X] Notes." Because of
the uncertainties relating to the timing of receipt of principal of student
loans expected to be financed with proceeds of the Series 1999-[X] Notes, the
actual level of prepayments resulting therefrom cannot be definitively
stated.
Prepayment from Unused Proceeds. EdLinc expects approximately
$_________________ of the Series 1999-[X] Note proceeds deposited in the
Acquisition Fund to be used to acquire Eligible Loans on or before
___________________. If such proceeds are not so expended, they will be used,
together with an allocable portion of the Series 1999-[X] Note proceeds
deposited in the Reserve Fund, to prepay Series 1999-[X] Notes on the next
regularly scheduled interest payment date. Any such amounts will be applied to
the prepayment of Senior Series 1999-[X] Notes and Subordinate Series 1999-[X]
Notes ratably based upon their respective principal balances.
Call for Redemption of Series 1999-[X] Notes Upon Reduction of Portfolio
Balance
The Series 1999-[X] Notes may, at EdLinc's option but subject to compliance
with the conditions in the indenture relating to the Senior Asset Requirement,
be called for redemption in whole but not in part, at a Redemption Price of 100%
of principal amount, plus accrued interest thereon to the Redemption Date, on
any date when the remaining aggregate outstanding principal balance of student
loans financed with the proceeds of the 1999-[X] Notes is less than 10% of the
aggregate principal balance of initial financed student loans and subsequent
financed student loans.
SOURCE OF PAYMENT AND SECURITY FOR THE SERIES 1999-[X] NOTES
Subordination of the Subordinate Series 1999-[X] Notes
The rights of the holders of the Subordinate Series 1999-[X] Notes to
receive principal and interest payments will be subordinated to such rights of
the holders of the Senior Series 1999-[X] Notes, any other series of Senior
Notes and any Other Senior Obligations to the extent described herein. This
subordination is intended to enhance the likelihood of regular receipt of the
interest and principal by the holders of the Senior Series 1999-[X] Notes, any
other series of
S-25
<PAGE>
Senior Notes and any Other Senior Obligations. See "Source of Payment and
Security for the Notes--Priorities" and "Description of the Indenture--Funds and
Accounts" in the prospectus.
[Prior Notes and Series 1999-[X] Notes
The Series 1999-[X] Notes are being issued on a parity with all previously
issued and outstanding series of notes and Other Obligations under the
indenture. Thus, the Senior Series 1999-[X] Notes will have the same right to
payment of principal and interest from the Trust Estate as [describe prior
series of Senior Notes and any Other Senior Obligations currently outstanding].
Likewise, the Subordinate Series 1999-[X] Notes will have the same right to
payment of principal and interest from the Trust Estate as [describe prior
series of Subordinate Notes and any Other Subordinate Obligations currently
outstanding].]
Summary of Indenture Assets, Liabilities and Fund Balances and Statement of
Revenue, Expense and Changes in Fund Balances of the Indenture
The following is a summary of the funds and accounts under the indenture as
of ______________________, and statement of revenue, expense and changes in fund
balances of funds and accounts under the indenture for the _______ months ended
__________ and the years ended __________.
SUMMARY OF ASSETS, LIABILITIES AND
FUND BALANCES OF INDENTURE
(000's)
ASSETS
Investments..........................
Student Loans Receivable, Net........
Accrued Interest Receivable
U.S. Secretary of Education
Interest Subsidy................
Special Allowance...............
Investments........................
Student Loan Borrowers.............
Other Assets.........................
Total Assets
LIABILITIES AND FUND
BALANCES
Accounts Payable and
Accrued Expenses...................
Accrued Interest Payable.............
Notes Payable........................
Total Liabilities
S-26
<PAGE>
STATEMENT OF REVENUE, EXPENSE AND
CHANGES IN FUND BALANCES OF THE INDENTURE
(000's)
Revenue:
Interest Income on Investments
Interest on Student Loans
Special Allowance on
Student Loans
Total Revenue
Expense:
Note Interest
Auction Agent/Broker Fees
Note Fees
Uncollectible Accounts Expense
Consolidation and Origination
Fees
Servicing and Administration
Fees
Total Expense
Excess of Revenue over Expense
Fund Balances, Beginning of
Period
Fund Balances, End of Period
THE TRUSTEE
U.S. Bank National Association, a national banking association organized
under the laws of the United States, is the trustee under the indenture. The
office of the trustee for purposes of administering the Trust Estate and its
other obligations under the indenture is located at U.S. Bank National
Association, 141 North Main Avenue, Suite 300, Sioux Falls, South Dakota 57104-
6429, Attention: Corporate Trust Services.
The Higher Education Act provides that only "eligible lenders" (defined to
include banks and other entities) may hold title to student loans made under the
FFEL Program. Because EdLinc does not qualify as an "eligible lender," the
trustee will hold title to all financed FFELP Loans on behalf of EdLinc. The
trustee will agree under the indenture to maintain its status as an "eligible
lender" under the Higher Education Act. In addition, the trustee on behalf of
EdLinc will enter into a Guarantee Agreement with each of the guarantee agencies
with respect to each financed FFELP Loan. Failure of the financed FFELP Loans
to be owned by an eligible lender would result in the loss of guarantee
payments, Interest Subsidy Payments and Special Allowance Payments with respect
thereto. See "Description of the FFEL Program" and "Risk
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<PAGE>
Factors--Offset by Guarantee Agencies or the Department of Education Could
Reduce the Amount of Available Funds" in the prospectus.
SLFC and its affiliates, EdLinc and the transferor, maintain other banking
relationships with U.S. Bank National Association and its affiliates from time
to time. See "Certain Relationships Among Financing Participants."
[CERTAIN RELATIONSHIPS AMONG FINANCING PARTICIPANTS
As described under "EdLinc," "The Transferor" and "The Servicer" in the
prospectus, EdLinc and the transferor are wholly-owned subsidiaries of SLFC.
Except for its obligation to repurchase student loans under a student loan
purchase agreement upon a breach of a representation or warranty with respect
thereto or its obligations under the SLFC servicing agreement, SLFC will have no
obligations with respect to the notes or the indenture. EdLinc and the
transferor will have no full-time employees, but will initially contract with
SLFC to perform EdLinc's obligations under the indenture.
The boards of directors of EdLinc, the transferor and SLFC presently
include the same three persons.
The trustee is also the trustee for EdLinc's outstanding student loan
asset-backed note issues. The trustee and its affiliates have in the past
entered into student loan purchase agreements with EdLinc, SLFC and the
transferor, including student loan purchase agreements pursuant to which the
transferor acquired, as of __________________, approximately $__________________
million outstanding principal amount of Eligible Loans which will be financed
under the indenture. EdLinc expects that the trustee will enter into student
loan purchase agreements providing for the sale of a substantial amount of
additional Eligible Loans. SLFC also has obtained financial services from the
trustee and related entities.
Foley & Lardner, counsel to the underwriter, has from time to time
represented, and is currently representing, SLFC in connection with various
matters. In addition, Foley & Lardner has from time to time represented EAC in
connection with various matters.
[For a discussion of relationships between the underwriter or affiliates of
the underwriter and EdLinc or SLFC, see "Underwriting."]]
UNDERWRITING
Subject to the terms and conditions set forth in an Underwriting Agreement
dated __________________________, between EdLinc and Salomon Smith Barney Inc.,
as the underwriter, EdLinc has agreed to sell to the underwriter, and the
underwriter has agreed to purchase from EdLinc, the Series 1999-[X] Notes.
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<PAGE>
In the underwriting agreement, the underwriter has agreed, subject to the
terms and conditions set forth therein, to purchase all of the Series 1999-[X]
Notes offered hereby, if any Series 1999-[X] Notes are purchased. EdLinc has
been advised by the underwriter that the underwriter proposes initially to offer
the Series 1999-[X] Notes to the public at the public offering price with
respect to each class set forth on the cover page of this prospectus supplement.
After the initial public offering, the public offering price may be
changed.
The underwriting agreement provides that SLFC will indemnify the
underwriter against, among other things, liabilities under applicable securities
laws, or contribute to payments the underwriter may be required to make in
respect thereof.
The underwriter may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Exchange Act. Over-allotment involves syndicate sales in excess of the
offering size, which creates a syndicate short position. Stabilizing
transactions permit bids to purchase the underlying security so long as the
stabilizing bids do not exceed a specific maximum. Syndicate covering
transactions involve purchases of the Series 1999-[X] Notes in the open market
after the distribution has been completed in order to cover syndicate short
positions. Penalty bids permit the underwriter to reclaim a selling concession
from a syndicate member when the Series 1999-[X] Notes originally sold by such
syndicate member are purchased in a syndicate covering transaction to cover
syndicate short positions. Such stabilizing transactions, syndicate covering
transactions and penalty bids may cause the price of the Series 1999-[X] Notes
to be higher than it would otherwise be in the absence of such
transactions.
EdLinc estimates that its expenses in connection with the issuance and
offering of the Series 1999-[X] Notes will be approximately $____________. This
information concerning EdLinc's fees and expenses is an approximation and is
subject to future contingencies.
LEGAL MATTERS
Certain legal matters relating to EdLinc, the transferor, the servicer and
the administrator and federal income tax matters will be passed upon by Dorsey &
Whitney LLP. Certain legal matters will be passed upon for the underwriter by
Foley & Lardner. [Foley & Lardner has performed legal services for the servicer
and the administrator and it is expected that they will continue to perform such
services in the future.]
RATING
It is a condition to the issuance and sale of the Senior Series 1999-[X]
Notes that they be rated "AAA" by [Fitch IBCA, Inc.] and "Aaa" by [Moody's
Investors Service, Inc.]. It is a condition to the issuance of the Subordinate
Series 1999-[X] Notes that they be rated at least "A" by [Fitch] and at least
"A2" by [Moody's]. A securities rating is not a recommendation to buy, sell or
hold securities and may be subject to revision or withdrawal at any time by the
assigning rating agency. The ratings of the Series 1999-[X] Notes address the
likelihood of the ultimate
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<PAGE>
payment of principal of and interest on the Series 1999-[X] Notes pursuant to
their terms. The rating agencies do not evaluate, and the ratings on the Series
1999-[X] Notes do not address, the likelihood of prepayments on the Series 1999-
[X] Notes or the likelihood of payment of any Carry-Over Amounts.
S-30
<PAGE>
Prospectus
EDUCATION LOANS INCORPORATED
Student Loan Asset-Backed Notes
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 4 IN THIS PROSPECTUS.
The notes will represent obligations of EdLinc only and will not represent
interests in or obligations of the servicer, the transferor or any of their
affiliates. The notes are not a deposit and are not insured or guaranteed by any
person. Except as noted in this document and the accompanying prospectus
supplement, the underlying accounts and student loans are not insured or
guaranteed by any governmental agency.
This prospectus may be used to offer and sell any series of notes only if
accompanied by the prospectus supplement for that series.
EdLinc:
- ------
. may issue periodically student loan asset-backed notes in one or more
series with one or more classes, all of which will be part of a single
issue of notes.
The Notes:
- ---------
. will be secured by the student loans and other assets of EdLinc that are
acquired with the proceeds of the notes;
. will be rated in one of the four highest rating categories by at least one
nationally recognized rating organization;
. may have one or more forms of credit enhancement; and
. will be issued as part of a designated series, but each series of notes
will be a part of the same issue of notes.
The Noteholders:
- ---------------
. will receive interest and principal payments from
collections on the assets securing the notes; and
. will have the same right to be paid from the assets securing the notes as
all other noteholders of the same class, including noteholders of other
series, except in those cases where a form of credit enhancement has been
provided only for the notes of a particular series.
Neither the SEC nor any state securities commission has approved these
notes or determined that this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
_____________, 1999
<PAGE>
Important Notice About Information Presented In This
Prospectus And The Accompanying Prospectus Supplement
You should rely only on the information provided in this prospectus and the
accompanying prospectus supplement, including the information incorporated by
reference. EdLinc has not authorized anyone to provide you with different
information. The notes are not offered in any state where the offer is not
permitted.
EdLinc has included cross-references in this prospectus to captions in this
prospectus or the accompanying prospectus supplement where you can find further
related discussions. These cross-references are to sections contained in this
prospectus unless you are told otherwise. The following table of contents and
the table of contents included in the accompanying prospectus supplement provide
the pages on which the captions are located.
______________________
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
RISK FACTORS....................................................... 4
USE OF PROCEEDS.................................................... 14
EDLINC............................................................. 14
THE TRANSFEROR..................................................... 14
THE SERVICER....................................................... 15
MATURITY AND PREPAYMENT
CONSIDERATIONS.................................................... 15
DESCRIPTION OF FINANCING
OF ELIGIBLE LOANS................................................. 17
Description of Eligible Loans to be Financed...................... 17
Transfer Agreements............................................... 18
Student Loan Purchase Agreements.................................. 18
Servicing and "Due Diligence"..................................... 19
DESCRIPTION OF THE FFEL PROGRAM.................................... 20
General........................................................... 20
Loan Terms........................................................ 21
Contracts with Guarantee Agencies................................. 33
Federal Special Allowance Payments................................ 38
Federal Student Loan Insurance Fund............................... 39
Direct Loans...................................................... 39
DESCRIPTION OF THE
GUARANTEE AGENCIES................................................ 40
General........................................................... 40
Department of Education Oversight................................. 41
Federal Agreements................................................ 42
Effect of Annual Claims Rate...................................... 43
1998 Reauthorization Amendments................................... 44
DESCRIPTION OF THE ALTERNATIVE
LOAN PROGRAMS..................................................... 47
DESCRIPTION OF THE NOTES........................................... 49
General........................................................... 49
General Terms of Notes............................................ 50
Issuance of Notes................................................. 50
Comparative Security of Noteholders
and Other Beneficiaries......................................... 51
Call for Redemption, Prepayment or Purchase
of Notes; Senior Asset Requirement.............................. 51
Interest.......................................................... 52
Principal......................................................... 53
Determination of LIBOR............................................ 53
Auction Procedures................................................ 54
Book-Entry Registration........................................... 56
Definitive Notes.................................................. 60
Denomination and Payment.......................................... 61
SOURCE OF PAYMENT AND SECURITY
FOR THE NOTES.................................................... 62
General........................................................... 62
Additional Indenture Obligations.................................. 63
Priorities........................................................ 63
DESCRIPTION OF THE SLFC
SERVICING AGREEMENT............................................... 64
General........................................................... 64
Acquisition Process............................................... 64
Origination Process............................................... 65
Servicing......................................................... 65
Right of Inspection and Audits.................................... 66
Administration and Management..................................... 66
Servicing Fees.................................................... 67
Sub-Servicers..................................................... 67
Term and Termination.............................................. 67
Year 2000 Information Systems Procedures.......................... 68
DESCRIPTION OF THE INDENTURE....................................... 69
General........................................................... 69
Funds and Accounts................................................ 69
Pledge; Encumbrances.............................................. 84
Covenants......................................................... 84
No Petition....................................................... 87
Investments....................................................... 88
Reports to Noteholders............................................ 89
Events of Default................................................. 88
Remedies.......................................................... 90
Application of Proceeds........................................... 94
Trustee........................................................... 95
Supplemental Indentures........................................... 96
Discharge of Notes and Indenture.................................. 98
Notices to Noteholders............................................ 98
Rights of Other Beneficiaries..................................... 99
UNITED STATES FEDERAL INCOME
TAX CONSEQUENCES.................................................. 99
Characterization of the Trust Estate.............................. 100
Characterization of the Notes as Indebtedness..................... 99
United States Federal Income Tax
Consequences to United States Holders........................... 101
United States Federal Income Tax
Consequences to Non-United States
Holders......................................................... 103
Information Reporting and Back-up
Withholding..................................................... 105
STATE TAX CONSIDERATIONS........................................... 106
ERISA CONSIDERATIONS............................................... 106
AVAILABLE INFORMATION.............................................. 107
REPORTS TO NOTEHOLDERS............................................. 108
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE............................................ 108
PLAN OF DISTRIBUTION............................................... 109
FINANCIAL INFORMATION.............................................. 109
RATING............................................................. 109
GLOSSARY OF PRINCIPAL
DEFINITIONS....................................................... I-1
</TABLE>
3
<PAGE>
RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase the notes.
A secondary market for the The underwriters may assist in resales of
notes may not develop, the notes but they are not required to do
which means you may have so. A secondary market for the notes may
trouble selling them when not develop. If a secondary market does
you want. develop, it might not continue or it might
not be sufficiently liquid to allow you
to resell any of your notes.
EdLinc will have limited EdLinc will have no assets or sources of
assets to pay principal and funds to pay principal or interest on the
interest, which could result notes other than the student loans acquired
in delays in payment or with proceeds of the notes and the other
losses on your notes. assets making up the trust estate. The notes
are obligations solely of EdLinc, and will
not be insured or guaranteed by the
transferor, the servicer, the guarantee
agencies, the trustee or any of their
affiliates, or by the Department of
Education. Noteholders must rely for
repayment upon proceeds realized from the
student loans, credit enhancement, if any,
and other assets in the trust estate. See
"Source of Payment and Security for the
Notes."
Failure by loan holders or The Higher Education Act requires loan
servicers to comply with holders and servicers to follow specified
student loan origination and procedures to ensure that the FFELP loans
servicing procedures could are properly originated and serviced.
cause delays in payment or Failure to follow these procedures may
losses on your notes. result in:
. Loss of Reinsurance Payments, Interest
Subsidies and Special Allowance Payments.
The Department of Education's refusal to
make reinsurance payments to the guarantee
agencies or to make interest subsidy
payments and special allowance payments to
the trustee with respect to the FFELP
loans; and
. Loss of Guarantee Payments. The guarantee
agencies' inability or refusal to make
guarantee payments with respect to FFELP
loans.
Loss of any of these payments may adversely
affect EdLinc's ability to pay principal and
interest on the notes. See "Description of
Financing of Eligible Loans--Servicing and
'Due Diligence'" and "Description of the FFEL
Program."
4
<PAGE>
Year 2000 problems with If computer programs and information systems
the servicer's or third used by the servicer or third parties upon
parties' computers could which the servicer depends for its
delay payments on your programming and financial operations or with
notes. which it conducts business (including,
without limitation, guarantee agencies, the
Department of Education, the trustee, the
securities depository and utilities providing
services to the servicer or such parties),
are not year 2000 compliant, the servicer's
and such parties' ability to provide services
required in connection with the servicer's
administration of its student loan program
and the payment of the principal of and
interest on your notes in a timely manner may
be adversely affected. See "Description of
the SLFC Servicing Agreement--Year 2000
Information Systems Procedures."
Subordinated classes of If a class of notes is subordinated,
notes face a higher risk of interest and principal payments on a
delayed payments and payment date on such class generally will be
losses. made only after each senior class has
received its interest and principal
entitlement on that payment date.
Consequently, a subordinated class will bear
losses on the student loans prior to such
losses being borne by the more senior
classes. In addition, subordinated
noteholders may be limited in the legal
remedies that are available to them until the
more senior noteholders are paid in full. See
"Source of Payment and Security for the
Notes--Priorities."
Additional notes may be EdLinc may, from time to time, issue
issued without your consent, additional notes or incur other obligations
which could affect the secured by the trust estate without the
make-up of the outstanding consent or approval of any existing
notes. noteholders. These notes or other obligations
may be senior or subordinate to, or on a
parity with,existing classes of notes in
right of payment.
If there is a problem with a The transfer of the student loans from the
loan that arose prior to its transferor to the trustee on behalf of
acquisition by the trustee, EdLinc is without recourse against the
the trust estate may incur transferor. Neither EdLinc nor the trustee
losses on that loan unless will have any right to resell the student
the lender or SLFC loans to the transferor or otherwise to make
repurchases it because of a recourse to or collect from the transferor
breach of a representation or if the student loans should fail to meet the
warranty. requirements of an eligible loan for any
reason or if the transfer should fail to
provide the trustee with good title to
the student loans.
The lenders and SLFC, however, will have made
representations and warranties in the related
student loan purchase agreements in
connection with their sales of student loans
to the transferor or the trustee on behalf of
EdLinc. If those representations and
warranties are breached as to a given student
loan, the applicable
5
<PAGE>
lender or SLFC will be obligated to
repurchase the student loan. However, neither
EdLinc nor the transferor examines the
documents relating to FFELP loans to the
extent necessary to determine whether the
selling lenders have met all of the
conditions necessary for such loans to
qualify for guarantee payments from the
applicable guarantee agency. Furthermore, the
lender or SLFC may not have the financial
resources to repurchase any student loan.
Finally, these representations and warranties
will not cover any problem arising after the
sale of the student loan to the transferor or
the trustee on behalf of EdLinc that was not
caused by a breach of the representations and
warranties (such as a failure to service the
student loan properly).
The failure of a lender or SLFC to repurchase
a student loan is a breach of the related
student loan purchase agreement, enforceable
by the trustee, but is not an event of
default, and would not permit the exercise of
remedies, under the indenture.
See "Description of Financing of Eligible
Loans--Student Loan Purchase Agreements."
Offset by guarantee The trustee will use a Department of
agencies or the Education lender identification number that
Department of Education is also being used for other student loans
could reduce the amounts held by the trustee on behalf of EdLinc and
available for payment of the transferor under other indentures, and
your notes. which may also be used similarly for SLFC or
other entities established by SLFC. The
billings submitted to the Department of
Education will be consolidated with the
billings for payments for student loans under
all of these indentures, and payments on the
billings will be made by the Department of
Education or the guarantee agency to the
trustee in lump sum form. These payments will
be allocated by the trustee among the various
indentures using the same lender
identification number.
If the Department of Education or a guarantee
agency determines that the trustee owes a
liability to the Department of Education or
the guarantee agency on any FFELP loan for
which the trustee is legal titleholder, the
Department of Education or the guarantee
agency might seek to collect that liability
by offsetting against payments due the
trustee under the indenture for the notes.
This offsetting or shortfall of payments due
to the trustee could adversely affect the
amount of available funds for any collection
6
<PAGE>
period and EdLinc's ability to pay interest
and principal on the notes.
Although the indenture contains provisions
for cross-indemnification with respect to
such payments and offsets, there can be no
assurance that the amount of funds available
with respect to such right of indemnification
may be adequate to compensate the indenture
and noteholders for any previous reduction in
the available funds for a collection period.
See "Description of the FFEL Program" and
"Description of the Guarantee Agencies."
The financial health of the The FFELP loans are not secured by any
guarantee agencies could collateral of the borrower. Payments of
decline, which could affect principal and interest are guaranteed by
the timing and amounts guarantee agencies to the extent described
available for payment of herein and in the related prospectus
your notes. supplement. Excessive borrower defaults could
impair a guarantee agency's ability to meet
its guarantee obligations. In addition,
recently enacted legislation is expected to
reduce the guarantee agencies' reserves under
the FFEL program. The financial health of a
guarantee agency could affect the timing and
amount of available funds for any collection
period and EdLinc's ability to pay principal
of and interest on your notes. Although a
holder of FFELP loans could submit claims for
payment directly to the Department of
Education pursuant to section 432(o) of the
Higher Education Act if the Department
determines that a guarantee agency is unable
to meet its insurance obligations, there is
no assurance that the Department of Education
would make such a determination or that it
would pay claims in a timely manner. The
trustee may receive claim payments on FFELP
loans directly from the Department of
Education under Section 432(o) if such a
determination is made. See "Description of
the FFEL Program" and "Description of the
Guarantee Agencies."
7
<PAGE>
The FFEL program could The Higher Education Act and other relevant
change, which could federal or state laws may be amended or
adversely affect the loans modified in the future. In particular, the
and the timing of and level of guarantee payments may be adjusted
amounts available for from time to time. EdLinc cannot predict
payment of your notes. whether any changes will be adopted or, if
so, what impact such changes may have on
EdLinc or your notes.
Increased competition The lenders that sell student loans to
from FFEL program EdLinc and the transferor face competition
participants and the Federal from other lenders and secondary markets
Direct Student Loan that could decrease the volume of eligible
Program could adversely loans that could be acquired by EdLinc and
affect the availability of the transferor. Additionally, the Higher
loans, the cost of servicing, Education Act provides for a Federal Direct
the value of loans and Student Loan Program. This program could
prepayment expectations. result in reductions in the volume of loans
made under the FFEL program. Reduced volume
in EdLinc's program in particular and in the
FFEL Program in general may cause the
servicer to experience increased costs due to
reduced economies of scale. These cost
increases could reduce the ability of the
servicer to satisfy its obligations to
service the student loans. This could also
reduce revenues received by the guarantee
agencies available to pay claims on defaulted
FFELP loans. The competition currently
existing in the secondary market for loans
made under the FFEL program also could be
reduced, resulting in fewer potential buyers
of the FFELP loans and lower prices available
in the secondary market for those loans.
The Department of Education has implemented a
direct consolidation loan program, which may
reduce the volume of loans made under the
FFEL program and, together with consolidation
loans made by lenders in the FFEL program, is
expected to result in prepayments of student
loans.
See "Description of the FFEL Program."
Prepayment of your notes The proceeds of each series of notes may
with unspent proceeds include an amount to be deposited in the
may create reinvestment acquisition fund and used to acquire student
risks. loans over a period of time after the closing
date. If the amount of student loans acquired
by the trustee on behalf of EdLinc during
such period is less than the full amount so
funded, EdLinc will prepay principal on notes
of that series equal to the difference plus
any other related unspent proceeds. See
"Description of Financing of Eligible Loans"
and "Description of the Indenture--Funds and
Accounts-- Acquisition Fund."
8
<PAGE>
Reinvestment risk and Student loans may be prepaid by borrowers at
prepayments may reduce any time without penalty. The rate of
your yield. and other factors, such as interest rates, the
availability of other financing and the
general job market. In addition, under some
circumstances, lenders or SLFC may be
obligated to repurchase student loans from
EdLinc pursuant to the student loan purchase
agreements as a result of breaches of their
representations and warranties. See
"Description of Financing of Eligible Loans--
Transfer Agreements" and " --Student Loan
Purchase Agreements."
To the extent borrowers elect to borrow money
through consolidation loans, the noteholders
will receive as a prepayment of principal the
aggregate principal amount of the loan.
If loan prepayments result in your note being
prepaid prior to its expected maturity, you
may not be able to reinvest your funds at the
same yield as the yield on the note. In
addition, your yield may be reduced if you
purchased your note at a premium and the
principal is paid faster than you expected, or
if you purchased your note at a discount and
the principal is paid slower than you
expected. EdLinc cannot predict the prepayment
rate of any notes, and reinvestment risks or
reductions in yield resulting from a faster or
slower prepayment speed will be borne entirely
by you and the other holders.
The maturity of your Scheduled payments on the student loans and
investment is uncertain. the maturities of the student loans may be
extended without your consent, which may
lengthen the weighted average life of your
investment.Prepayments of principal on the
student loans may shorten the life of your
investment. See "Maturity and Prepayment
Considerations."
The interest rates on The interest rate for any class of LIBOR
the notes are subject to rate notes will be based generally on the
limitations, which could level of LIBOR. The interest rate for any
reduce your yield. class of auction rate notes will be based
generally on the outcome of an auction of
notes. The interest rate for other classes of
notes may be based on the index, formula or
other method described in the related
prospectus supplement. The student loans,
however, generally bear interest at the T-Bill
rate (except for some alternative loans which
bear interest at the prime rate or another
specified variable rate) plus a stated margin.
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<PAGE>
The foregoing interest rates on the notes of
a series generally will be limited by the
net loan rate for that series, which will
equal the weighted average effective
interest rate of the student loans financed
by that series, less specified
administrative costs for that series. For an
interest payment date on which the net loan
rate applies, the difference between the
amount of interest at the rate described
above and the amount of interest at the net
loan rate will be paid on succeeding
interest payment dates to the extent of
available funds and may never be paid.
See "Description of the Notes--Interest."
The interest rates on our Unspent proceeds of the notes and moneys in
investments may be the funds and accounts under the indenture
insufficient to cover interest will be invested at fluctuating interest
on your notes. rates. Although EdLinc will try to minimize
this risk by entering into investment
agreements, there can be no assurance that
the interest rates at which these proceeds
and moneys are invested will equal or exceed
the interest rates on the notes.
The principal amount of The principal amount of notes issued by
the notes may exceed the EdLinc may exceed the principal amount of
principal amount of the student loans and other assets in the trust
assets in the trust estate, estate held by the trustee under the
which could result in losses indenture. If an event of default occurs and
on your notes if there was a the assets in the trust estate are
liquidation. liquidated, the student loans would have to
be sold at a premium for the subordinated
noteholders and possibly the senior
noteholders to avoid a loss. EdLinc cannot
predict the rate or timing of accelerated
payments of principal or when the aggregate
principal amount of the notes may be reduced
to the aggregate principal amount of the
student loans.
If the trustee is forced to Generally, during an event of default, the
sell loans after an event of trustee is authorized with noteholder
default, there could be consent to sell the related student loans.
losses on your notes. However, the trustee may not find a
purchaser for the student loans. Also, the
market value of the student loans plus other
assets in the trust estate might not equal
the principal amount of notes plus accrued
interest. In either event, the noteholders
may suffer a loss.
10
<PAGE>
Insolvency of the transferor EdLinc has taken steps in structuring these
or SLFC could cause delays transactions that are intended to ensure
in payment or losses on your that the voluntary or involuntary
notes. application for relief by the transferor or
SLFC under the United States Bankruptcy Code
or other insolvency laws will not result in
consolidation of the assets and liabilities
of EdLinc with those of the transferor
and/or SLFC. However, there can be no
assurance that the activities of EdLinc
would not result in a court concluding that
the assets and liabilities of EdLinc should
be consolidated with those of the transferor
or SLFC in a proceeding under any insolvency
law. If a court were to reach this
conclusion or if a filing were made under
any insolvency law by or against EdLinc, or
if an attempt were made to litigate any of
the foregoing issues, then delays in
payments on the notes could occur or
reductions in the amounts of such payments
could result.
The transferor and SLFC will transfer
student loans to the trustee on behalf of
EdLinc in accordance with the applicable
transfer agreement or student loan purchase
agreement. The transferor and SLFC each
intends that this transfer constitute a
sale, rather than a pledge to secure
indebtedness. If, however, the transferor or
SLFC were to become subject to any
insolvency law and a creditor or trustee-in-
bankruptcy of the transferor or SLFC were to
take the position that the sale of the
student loans by the transferor or SLFC to
EdLinc, as appropriate, should instead be
treated as a pledge of the student loans to
secure a borrowing from EdLinc, delays in
payments on the notes from collections on
student loans could occur or reductions in
the amounts of these payments could result.
Bankruptcy of EdLinc EdLinc is a limited purpose finance
could result in accelerated subsidiary of SLFC. If EdLinc becomes
prepayment on your notes. bankrupt, the United States Bankruptcy Code
could materially limit or prevent the
enforcement of EdLinc's obligations,
including its obligations under the notes.
EdLinc's trustee in bankruptcy or EdLinc
itself as debtor-in-possession may seek to
accelerate payment on the notes and
liquidate the assets held under the
indenture. If principal on the notes is
declared due and payable, you may lose the
right to future payments and face
reinvestment risks mentioned above.
Other parties may have or If any transfer of the student loans is
may obtain a superior deemed to be a secured financing, other
in loans. persons may have an interest in the loans
prior to the trustee.
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The servicer will have custody of the
promissory notes related to the FFELP loans,
except where the loan has been made under a
master promissory note retained by the
lender. The student loans may not be
physically segregated in the servicer's or
other custodian's offices. If any interest
in the student loans were assigned to
another party, that person could acquire an
interest in the student loans superior to
the interest of the trustee.
Application of consumer Consumer protection laws impose requirements
protection laws to the loans upon lenders and servicers. Some state laws
may increase costs impose finance charge restrictions on some
and uncertainties about the transactions and require contract
loans. disclosures. Furthermore, to the extent
applicable, these laws can impose specific
statutory liabilities upon creditors who
fail to comply with their provisions and may
affect the enforceability of the loan. These
state laws are generally preempted by the
Higher Education Act. However, the form of
promissory notes required by the Department
of Education for FFELP loans provides that
holders of such promissory notes evidencing
some loans made to borrowers attending for-
profit schools are subject to any claims and
legal defenses that the borrower may have
against the school. Alternative loan
programs would be subject to applicable
state laws regulating loans to
consumers
Book-entry registration Your notes may be represented by one or more
may limit your certificates registered in the name of Cede
ability to participate & Co., the nominee for DTC, and will not be
directly as a holder. registered in your name if specified in the
accompanying prospectus supplement. If so,
you will only be able to exercise the right
of noteholders indirectly through DTC and
its participating organizations. See
"Description of the Notes--Book-Entry
Registration."
Credit ratings only address a A rating agency will rate each note in one
limited scope of of its four highest rating categories. A
your concerns. rating is not a recommendation to buy or
sell notes or a comment concerning
suitability for any investor. A rating only
addresses the likelihood of the ultimate
payment of principal and stated interest and
does not address the likelihood of
prepayments on the notes or the likelihood
of the payment of carry-over amounts. A
rating may not remain in effect for the life
of the notes. See "Rating" in this
prospectus and in the accompanying
prospectus supplement.
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EdLinc may enter into swap Under the indenture, EdLinc may enter into
agreements which could swap agreements if, among other things, the
result in delays in payment rating agencies will not reduce or withdraw
or losses on your notes if the the rating on any notes. Swap agreements
counterparty fails to make carry risks relating to the credit quality of
its payments. the counterparty and the enforceability of
the swap agreement. See "Source of Payment
and Security for the Notes--Additional
Indenture Obligations."
The composition and The eligible loans EdLinc intends to acquire
characteristics of the loan with proceeds of a series of notes on the
portfolio will continually closing date, together with any student loans
change, and loans that bear a previously acquired under the indenture, will
lower rate of return or have be described in the prospectus supplement
a greater risk of loss may be relating to such notes. A portion of the
acquired. proceeds of the notes may be deposited in the
acquisition fund and used to acquire eligible
loans over a period of time after the closing
date. The characteristics of the student loan
portfolio included in the trust estate will
change from time to time as new student loans
are acquired and as a result of amendments to
the Higher Education Act, changes in terms of
alternative loan programs, sales or exchanges
of loans and scheduled amortization,
prepayments, delinquencies and defaults on
the loans. In addition, the indenture permits
EdLinc to use surplus moneys under the
indenture to acquire student loans, including
loans that do not qualify as eligible loans.
Any student loans so acquired that are not
eligible loans may bear a lower rate of
return and have a greater risk of loss from
borrower defaults.
The alternative loans have a The alternative loans to be acquired with
higher risk of loss. proceeds of the notes will not be guaranteed
by a third-party guarantor, as is the case
with FFELP loans. Therefore, the receipt by
the trustee of principal and interest on
these loans will be dependent on the ability
of the borrower to make these payments.
Moneys at any time on deposit in the
alternative loan guarantee fund will cover
the principal balance of and accrued interest
on an alternative loan once any payment on
that loan is 180 days late. However, the
trust estate will suffer losses if amounts
available in the alternative loan guarantee
fund are not sufficient to cover all
defaulted alternative loans.
___________________________
Some words and terms will be capitalized when used in this prospectus. You
can find the definitions for these words and terms in the Glossary of Principal
Definitions at the end of this prospectus.
___________________________
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USE OF PROCEEDS
EdLinc will use the net proceeds from the sale of a series of notes to
purchase financed Eligible Loans from the transferor and lenders or to originate
financed Eligible Loans and to make various deposits to the funds and accounts
under the indenture with respect to the notes. The transferor is expected to use
the proceeds of each sale of Eligible Loans to EdLinc to repay debt incurred in
the acquisition of the Eligible Loans.
EDLINC
EdLinc is a bankruptcy remote, limited purpose Delaware corporation and a
wholly owned subsidiary of SLFC.
As a bankruptcy-remote entity, EdLinc's operations will be restricted so
that (1) it does not engage in business with, or incur liabilities to, any other
entity (other than the noteholders and Other Beneficiaries, and beneficiaries
under indentures similar to the indenture) which may bring bankruptcy
proceedings against EdLinc, and (2) the risk that it will be consolidated into
the bankruptcy proceedings of any other entity is diminished. EdLinc has
covenanted in the indenture that it will 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 the indenture
and the activities incidental thereto.
EdLinc will have no substantial assets other than those pledged under the
indenture or under other comparable indentures pursuant to which EdLinc has
issued, or will issue, student loan asset-backed notes similar to the notes. Any
assets held under these other indentures would not be available to pay principal
or interest on the notes. EdLinc will have no full-time employees. Certain
responsibilities of EdLinc under the indenture will be administered by SLFC. See
"The SLFC Servicing Agreement."
EdLinc's address is 105 First Avenue Southwest, Suite 200, Aberdeen, South
Dakota 57401 and its phone number is (605) 622-4400.
THE TRANSFEROR
GOAL Funding, Inc. is a bankruptcy remote, limited purpose Delaware
corporation and a wholly owned subsidiary of SLFC. GOAL Funding, Inc., in its
capacity as transferor of the initial financed student loans with respect to a
given series of notes, will be referred to throughout this prospectus as the
transferor.
The transferor was created to provide a vehicle for the temporary financing
of Eligible Loans pending their sale to EdLinc. Thus, the transferor has entered
into a warehousing indenture and other related agreements pursuant to which it
borrows moneys to acquire Eligible Loans. These Eligible Loans are purchased
from lenders (in the case of FFELP Loans) or from SLFC (in the case of
Alternative Loans) pursuant to student loan purchase agreements.
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The transferor will have no substantial assets other than those pledged
under the warehousing indenture to secure repayment of its borrowings
thereunder. The transferor will have no full-time employees. Certain
responsibilities of the transferor will be performed by SLFC pursuant to an
arrangement comparable to that set forth in the SLFC servicing agreement.
The transferor's address is 105 First Avenue Southwest, Suite 104,
Aberdeen, South Dakota 57401 and its phone number is (605) 622-4400.
THE SERVICER
General
Student Loan Finance Corporation ("SLFC") is a South Dakota corporation
organized in 1997. SLFC, in its capacity as servicer of the financed student
loans, together with any successor in such capacity, will be referred to
throughout this prospectus as the servicer.
SLFC is in the business of purchasing, originating, holding, servicing and
collecting student loans. SLFC's employees and management had, since 1979,
operated the student loan program of Great Plains Education Foundation, Inc., a
South Dakota nonprofit corporation formerly known as Student Loan Finance
Corporation ("Great Plains"). In a reorganization completed in February, 1998,
Great Plains transferred all of its operating assets, including employees, to
SLFC, which was at the time a wholly-owned subsidiary of Great Plains. Great
Plains also transferred its liability on all of its indebtedness, together with
its rights to the student loans and other assets pledged to the repayment
thereof, to SLFC. SLFC, in turn, transferred such liability and pledged assets
to EdLinc. SLFC currently services the related student loans on behalf of
EdLinc.
As of September 30, 1999, SLFC was the servicer for student loans to
approximately 93,300 borrowers representing approximately $669 million
outstanding principal amount of student loans owned by its subsidiaries, EdLinc
and GOAL Funding. In addition, as of that date, SLFC also was the servicer for
student loans owned by other lenders representing approximately $6,000,000
outstanding principal amount. Of these amounts, approximately 5%was being
serviced by one or more sub-servicers on behalf of SLFC.
MATURITY AND PREPAYMENT CONSIDERATIONS
The rate of payment of principal of the notes and the yield on the notes
will be affected by (1) prepayments of the financed Eligible Loans that may
occur as described below (including repurchases by the lenders or SLFC upon a
breach of representations or warranties under the related student loan purchase
agreement), (2) the application of additional principal payments, if any, and
(3) the issuance of additional notes. All the financed Eligible Loans are
prepayable in whole or in part by the borrowers at any time (including by means
of Consolidation Loans as discussed below) and may be prepaid as a result of a
borrower default, death, disability or bankruptcy, school closures and other
events specified in the Higher Education Act and
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subsequent liquidation or collection of guarantee payments with respect thereto.
The rate of such prepayments cannot be predicted and may be influenced by a
variety of economic, social and other factors, including those described below.
In general, the rate of prepayments may tend to increase to the extent that
alternative financing becomes available at prevailing interest rates which fall
significantly below the interest rates applicable to the financed Eligible
Loans. However, because many of the financed Eligible Loans bear interest at a
rate that either actually or effectively is floating, it is impossible to
determine whether changes in prevailing interest rates will be similar to or
vary from changes in the interest rates on the financed Eligible Loans. Other
factors affecting prepayment of loans include changes in the borrower's
employment and other economic circumstances, and refinancing opportunities which
may provide more favorable repayment terms such as those offered under various
consolidation loan programs, including the federal direct consolidation loan
programs. Because of the benefits of consolidating numerous student loans into a
single loan and, in some cases, obtaining more favorable repayment terms, a
borrower may choose to prepay financed Eligible Loans through consolidation
programs regardless of the level of interest rates. The lenders and SLFC are
obligated to repurchase any financed Eligible Loan pursuant to the applicable
student loan purchase agreement if specified representations or warranties are
breached with respect to such loan.
Scheduled payments with respect to, and maturities of, the financed
Eligible Loans may be extended, including pursuant to grace periods, deferment
periods and, under some circumstances, forbearance periods or as a result of
refinancings through Consolidation Loans to the extent such Consolidation Loans
are sold to the trustee on behalf of EdLinc. In that event, the fact that such
Consolidation Loans will likely have longer maturities than the financed
Eligible Loans they are replacing may lengthen the remaining term of the
financed Eligible Loans and the average life of the notes of one or more series.
The rate of payment of principal of the notes of a series and the yield on the
notes may also be affected by the rate of defaults resulting in losses on
financed Eligible Loans, by the severity of those losses and by the timing of
those losses.
The rate of prepayment on the financed Eligible Loans cannot be predicted,
and any reinvestment risks resulting from a faster or slower incidence of
prepayment of financed Eligible Loans will be borne entirely by the noteholders.
Such reinvestment risks may include the risk that interest rates and the
relevant spreads above particular interest rate bases are lower at the time
noteholders receive payments of principal than such interest rates and such
spreads would otherwise have been had such prepayments not been made or had such
prepayments been made at a different time.
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DESCRIPTION OF FINANCING OF ELIGIBLE LOANS
Description of Eligible Loans to be Financed
A portion of the proceeds of each series of notes will be deposited in the
Acquisition Fund and used to originate Eligible Loans or to purchase Eligible
Loans from (1) the transferor pursuant to a transfer agreement on or about the
date of issuance of the notes, or (2) lenders or SLFC pursuant to student loan
purchase agreements within 270 days thereafter. The Eligible Loans to be so
acquired will either be FFELP Loans or Alternative Loans. See "Description of
the FFEL Program" and "Description of the Alternative Loan Programs."
The financed Eligible Loans to be purchased from the transferor will be
selected from the transferor's portfolio of FFELP Loans and Alternative Loans.
All such Eligible Loans will have been previously purchased by the transferor
from a lender (in the case of FFELP Loans) or SLFC (in the case of Alternative
Loans) pursuant to a student loan purchase agreement. The transferor's rights
under each such student loan purchase agreement will be transferred to EdLinc.
The characteristics of the Eligible Loans to be purchased from the
transferor pursuant to a transfer agreement, as well as all financed Eligible
Loans at the time held under the indenture, will be described in the related
prospectus supplement.
Each prospectus supplement will set forth various information with respect
to the Eligible Loans to be purchased from the transferor pursuant to a transfer
agreement, as well as all financed Eligible Loans at the time held under the
indenture. Such information may include the composition of the financed
Eligible Loans, the distribution by loan type, the distribution by interest
rates, the distribution by outstanding principal balance, the distribution by
geography, the distribution by insurance or guarantee level, the distribution by
school type, the distribution by guarantee agency (in the case of FFELP Loans),
the distribution by remaining term to scheduled maturity and the distribution by
borrower payment status. See "The Financed Eligible Loans" in the accompanying
prospectus supplement.
Each of the FFELP Loans provides or will provide for the amortization of
the outstanding principal balance of such financed Eligible Loan over a series
of payments. Each payment consists of an installment of interest which is
calculated on the basis of the outstanding principal balance of such financed
Eligible Loan multiplied by the applicable interest rate and further multiplied
by the period elapsed (as a fraction of a calendar year) since the preceding
payment of interest was made. As payments are received in respect of such
financed Eligible Loan, the amount received is applied first to interest accrued
to the date of payment and the balance is applied to reduce the unpaid principal
balance. Accordingly, if a borrower pays a regular installment before its
scheduled due date, the portion of the payment allocable to interest for the
period since the preceding payment was made will be less than it would have been
had the payment been made as scheduled, and the portion of the payment applied
to reduce the unpaid principal balance will be correspondingly greater.
Conversely, if a borrower pays a monthly
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installment after its scheduled due date, the portion of the payment allocable
to interest for the period since the preceding payment was made will be greater
than it would have been had the payment been made as scheduled, and the portion
of the payment applied to reduce the unpaid principal balance will be
correspondingly less. In either case, subject to any applicable grace periods,
deferment periods or forbearance periods, the borrower pays an installment until
the final scheduled payment date, at which time the amount of the final
installment is increased or decreased as necessary to repay the then outstanding
principal balance of such financed Eligible Loan. The Alternative Loans may
contain different amortization provisions.
The indenture also permits the financing of student loans from moneys in
the Surplus Account under some circumstances. Such student loans are not
required to be Eligible Loans. See "Description of the Indenture--Funds and
Accounts--Surplus Fund."
Transfer Agreements
The trustee, EdLinc and the transferor will enter into a transfer agreement
in connection with the issuance of each series of notes. Pursuant to the
transfer agreement, the transferor will transfer to the trustee, on behalf of
EdLinc, Eligible Loans upon payment of the purchase price therefor (equal to the
principal amount thereof plus accrued interest and, in the case of FFELP Loans,
Special Allowance Payments, thereon, plus, to the extent permitted by the
indenture, a premium) from proceeds of the notes deposited in the Acquisition
Fund. The transferor will also transfer all of its rights under the transferor
student loan purchase agreements pursuant to which such Eligible Loans were
acquired by the transferor.
The transferor will make no representations or warranties as to the
Eligible Loans so transferred, and will have no obligation to repurchase any
such loans. If there is a problem with an Eligible Loan that is attributable to
a breach of a representation or warranty of the lender or SLFC under the related
transferor student loan purchase agreement, the lender or SLFC may be obligated
to repurchase such Eligible Loan. See "Description of Financing of Eligible
Loans--Student Loan Purchase Agreements."
Student Loan Purchase Agreements
EdLinc may enter into student loan purchase agreements with lenders (as to
FFELP Loans) and SLFC (as to Alternative Loans) for the purchase of Eligible
Loans to be financed with the proceeds of each series of notes. These student
loan purchase agreements are referred to as EdLinc student loan purchase
agreements in this prospectus. In addition, the transferor will enter into
student loan purchase agreements with lenders (as to FFELP Loans) and SLFC (as
to Alternative Loans) for the purchase of Eligible Loans. These student loan
purchase agreements are referred to as transferor student loan purchase
agreements in this prospectus. All Eligible Loans transferred to the trustee, on
behalf of EdLinc, pursuant to any transfer agreement will have been purchased by
the transferor pursuant to a transferor student loan purchase agreement. Upon
the transfer to the trustee, on behalf of EdLinc, by the transferor of Eligible
Loans pursuant to a transfer agreement, the transferor will also transfer its
rights under the related transferor
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student loan purchase agreements. EdLinc's right, title and interest in the
student loan purchase agreements will be pledged to the trustee.
EdLinc student loan purchase agreements will provide for the purchase by
the trustee on behalf of EdLinc, of Eligible Loans at 100% of their outstanding
unpaid principal amount, plus accrued interest thereon payable by the borrower.
EdLinc student loan purchase agreements will require the lender, in the case of
FFELP Loans, to report and offset against its Interest Subsidy and Special
Allowance Payments all authorized origination fees. Under some circumstances,
the trustee will also pay to the lender and SLFC reasonable transfer,
origination or assignment fees and a premium to the extent permitted by the
indenture. See "Description of the Indenture--Funds and Accounts--Acquisition
Fund."
Each lender and SLFC makes representations as to the validity,
enforceability and transferability of each Eligible Loan and as to the legal
authority of the lender or SLFC, as applicable, to engage in the transactions
contemplated by the respective student loan purchase agreement. In addition,
each lender, with respect to each FFELP Loan purchased under a student loan
purchase agreement, has represented or will represent that at the date of sale
by the lender, each FFELP Loan was or will be Guaranteed.
The student loan purchase agreements provide that if any representation
furnished by a lender or SLFC with respect to an Eligible Loan sold to the
transferor or the trustee proves to have been materially incorrect, or, in the
case of a FFELP Loan, if the guarantee agency refuses to honor all or part of a
guarantee claim filed with respect to thereto on account of any circumstance or
event occurring prior to the sale of such FFELP Loan to the transferor or the
trustee, or under some other circumstances specified in the student loan
purchase agreement, the lender or SLFC, as applicable, shall repurchase such
loan at a price equal to the then outstanding principal balance, plus accrued
interest and, in the case of a FFELP Loan, Special Allowance Payments, plus any
expenses incurred by the transferor or the trustee in connection therewith and
any other amounts paid to the lender or SLFC, as applicable, by the transferor
or the trustee in connection with the acquisition of such loan.
Servicing and "Due Diligence"
The servicer will service student loans acquired by the trustee under the
indenture. EdLinc will covenant in the indenture to cause a servicer to
administer and collect all financed Eligible Loans in a competent, diligent and
orderly fashion, and in accordance with all requirements of the Higher Education
Act, the Secretary of Education, the indenture, the federal reimbursement
contracts, the Guarantee Agreements and the Alternative Loan Programs.
The Higher Education Act requires that the transferor, the trustee (in its
capacity as "eligible lender"), a lender and their agents (including the
servicer) and employees exercise "due diligence" in the making, servicing and
collection of financed FFELP Loans and that a guarantee agency exercise due
diligence in collecting loans which it holds. The Higher Education Act defines
"due diligence" as requiring the holder of a student loan to utilize servicing
and
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collection practices at least as extensive and forceful as those generally
practiced by financial institutions for the collection of consumer loans, and
requires that specified collection actions be taken within specified time
periods with respect to a delinquent loan or defaulted loan. The guarantee
agencies have established procedures and standards for due diligence to be
exercised by each guarantee agency and by lenders (including the trustee) which
hold loans that are guaranteed by the respective guarantee agencies. The
trustee, a lender or a guarantee agency may not relieve itself of its
responsibility for meeting these standards by delegation to any servicing agent.
Accordingly, if a lender or the servicer fails to meet such standards, the
trustee's ability to realize the benefits of guarantee payments, and (with
respect to student loans eligible for such payments) Interest Subsidy Payments
and Special Allowance Payments may be adversely affected. If a guarantee agency
fails to meet such standards, that guarantee agency's ability to realize the
benefits of federal reinsurance payments may be adversely affected.
To the extent provided in the servicing agreement, the servicer may enter
into sub-servicing agreements with one or more sub-servicers providing for the
sub-servicers to perform some or all of the obligations of the servicer with
respect to servicing the financed student loans. See "Description of the SLFC
Servicing Agreement--Sub-Servicers."
DESCRIPTION OF THE FFEL PROGRAM
General
The Higher Education Act sets forth provisions establishing the FFEL
Program, pursuant to which state agencies or private nonprofit corporations
administering student loan insurance programs are reimbursed for losses
sustained in the operation of their programs, and holders of some loans made
under such programs are paid subsidies for owning such loans.
The Higher Education Act currently authorizes some student loans to be
covered under the FFEL Program if they are contracted for and paid to the
student prior to September 30, 2004, unless a student has received a loan under
the FFEL Program prior to such date, in which case that student may receive a
student loan covered by the FFEL Program until September 30, 2008. Congress has
extended similar authorization dates in prior versions of the Higher Education
Act; however, there can be no assurance that the current authorization dates
will again be extended or that the other provisions of the Higher Education Act
will be continued in their present form.
Various amendments to the Higher Education Act have revised the FFEL
Program from time to time. These amendments include, but are not limited to, the
Higher Education Amendments of 1998 (the "1998 Reauthorization Amendments"), the
Intermodal Surface Transportation Efficiency Act of 1998, the Balanced Budget
Act of 1997, the Higher Education Technical Amendments Act of 1993, the Omnibus
Budget Reconciliation Act of 1993 (the "1993 Amendments"), the Higher Education
Amendments of 1992, which reauthorized the FFEL Program, the Omnibus Budget
Reconciliation Act of 1990, the Omnibus Budget Reconciliation Act of 1989, the
Omnibus Budget Reconciliation Act of 1987, the Higher Education Technical
Amendments Act of 1987, the Higher Education Amendments of 1986, which
reauthorized the
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FFEL Program, the Consolidated Omnibus Budget Reconciliation Act of 1985, the
Postsecondary Student Assistance Amendments of 1981 and the Education Amendments
of 1980.
There can be no assurance that relevant federal laws, including the Higher
Education Act, will not be changed in a manner that may adversely affect the
receipt of funds by the guarantee agencies or by the trustee with respect to
financed FFELP Loans.
This is only a summary of some provisions of the Higher Education Act.
Reference is made to the text of the Higher Education Act for full and complete
statements of its provisions.
Loan Terms
General
Four types of loans are currently available under the FFEL Program:
Stafford Loans, Unsubsidized Stafford Loans, Plus Loans and Consolidation Loans.
These loan types vary as to eligibility requirements, interest rates, repayment
periods, loan limits and eligibility for Interest Subsidy and Special Allowance
Payments. Some of these loan types have had other names in the past. References
herein to the various loan types include, where appropriate, predecessors to
such loan types.
The primary loan under the FFEL Program is the Stafford Loan. Students who
are not eligible for Stafford Loans based on their economic circumstances may be
able to obtain Unsubsidized Stafford Loans. Parents of students may be able to
obtain Plus Loans. Consolidation Loans are available to borrowers with existing
loans made under the FFEL Program and some other federal programs to consolidate
repayment of such existing loans. For periods of enrollment beginning prior to
July 1, 1994, SLS Loans were available to students with costs of education that
were not met by other sources and that exceeded the Stafford or Unsubsidized
Stafford Loan limits.
Eligibility
General. A student is eligible for loans made under the FFEL Program only
if he or she: (1) has been accepted for enrollment or is enrolled in good
standing at an eligible institution of higher education (which term includes
some vocational schools), (2) is carrying or planning to carry at least one-half
the normal full-time workload for the course of study the student is pursuing as
determined by the institution (which, in the case of a loan to cover the cost of
a period of enrollment beginning on or after July 1, 1987, must either lead to a
recognized educational credential or be necessary for enrollment in a course of
study that leads to such a credential), (3) has agreed to notify promptly the
holder of the loan concerning any change of address, (4) if presently enrolled,
is maintaining satisfactory progress in the course of study he or she is
pursuing, (5) does not owe a refund on, and is not (except as specifically
permitted under the Higher Education Act) in default under, any loan or grant
made under the Higher Education
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Act, (6) has filed with the eligible institution a statement of educational
purpose, (7) meets citizenship requirements, and (8) except in the case of a
graduate or professional student, has received a preliminary determination of
eligibility or ineligibility for a Pell Grant.
The educational institution generally determines and documents the amount
of need for a loan and provides the lender with a statement containing
information relating to the loan amount for which a borrower is eligible. The
specific requirements of these determinations of need and statements to lenders
vary based on the type of loan (for example, Stafford, Unsubsidized Stafford or
Plus) and the requirements applicable at the time a loan was made. The amount
of such need is generally based on the student's estimated cost of attendance,
the estimated financial assistance available to such student and, for Stafford
Loans, the expected family contribution with respect to the student, all of
which are computed in accordance with standards set forth in the Higher
Education Act.
Stafford Loans. Stafford Loans generally are made only to student
borrowers who meet financial needs tests.
Unsubsidized Stafford Loans. Unsubsidized Stafford Loans generally are
made to student borrowers without regard to financial need. Unsubsidized
Stafford Loans were not available before October 1, 1992.
Plus Loans. Plus Loans are made only to borrowers who are parents (and,
under some circumstances, spouses of remarried parents) of dependent
undergraduate students. For Plus Loans made on or after July 1, 1993, the
parent borrower must not have an adverse credit history (as determined pursuant
to criteria established by the Department of Education). Prior to the Higher
Education Amendments of 1986, the Higher Education Act did not distinguish
between Plus Loans and SLS Loans. Student borrowers were eligible for Plus
Loans; however, parents of graduate and professional students were
ineligible.
SLS Loans. Eligible borrowers for SLS Loans were limited to (a) graduate
or professional students, (b) independent undergraduate students, and (c) under
some circumstances, dependent undergraduate students, if such students' parents
were unable to obtain a Plus Loan and were also unable to provide such students'
expected family contribution. Except as described in clause (c), eligibility
was determined without regard to need.
Consolidation Loans. To be eligible for a Consolidation Loan a borrower
must (a) have outstanding indebtedness on student loans made under the FFEL
Program or under any of the programs relating to the following student loans:
Federal Direct Student Loans, federally insured student loans, Perkins loans,
health professions student loans, nursing student loans or health education
assistance loans, (b) be in repayment status or in a grace period, or be a
defaulted borrower who has made arrangements to repay the defaulted loan(s)
satisfactory to the holder of the defaulted loan(s), and (c) effective October
1, 1998, not be subject to a judgment secured through litigation with respect to
some Higher Education Act loans or some wage garnishment orders. A married
couple who agree to be jointly liable on a Consolidation Loan for which the
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application is received on or after January 1, 1993 may be treated as an
individual for purposes of obtaining a Consolidation Loan. Various additional
limitations on the amount and type of loans that could be consolidated applied
to loans made prior to July 1, 1994.
Interest Rates
The Higher Education Act establishes maximum interest rates for each of the
various types of loans. These rates vary not only among loan types, but also
within loan types depending upon when the loan was made or when the borrower
first obtained a loan under the FFEL Program. The Higher Education Act allows
lesser rates of interest to be charged. Many lenders, including the transferor,
have offered repayment incentives or other programs that involve reduced
interest rates on some loans made under the FFEL Program.
Stafford Loans. For a Stafford Loan made prior to July 1, 1994, the
applicable interest rate for a borrower who, on the date the promissory note was
signed, did not have an outstanding balance on a previous loan which was made,
insured or guaranteed under the FFEL Program (a "New Borrower"):
(a) is 7% per annum for a loan covering a period of instruction
beginning before January 1, 1981;
(b) is 9% per annum for a loan covering a period of instruction
beginning on or after January 1, 1981, but before September 13, 1983;
(c) is 8% per annum for a loan covering a period of instruction
beginning on or after September 13, 1983, but before July 1, 1988;
(d) for a loan made prior to October 1, 1992, covering a period of
instruction beginning on or after July 1, 1988, is 8% per annum for the
period from the disbursement of the loan to the date which is four years
after the loan enters repayment, and thereafter shall be adjusted annually,
and for any 12-month period commencing on a July 1 shall be equal to the
bond equivalent rate of 91-day U.S. Treasury bills auctioned at the final
auction prior to the preceding June 1, plus 3.25% per annum (but not to
exceed 10% per annum); or
(e) for a loan made on or after October 1, 1992 shall be adjusted
annually, and for any 12- month period commencing on a July 1 shall be
equal to the bond equivalent rate of 91- day U.S. Treasury bills auctioned
at the final auction prior to the preceding June 1, plus 3.1% per annum
(but not to exceed 9% per annum).
For a Stafford Loan made prior to July 1, 1994, the applicable interest
rate for a borrower who, on the date the promissory note evidencing the
loan was signed, had an outstanding balance on a previous loan made,
insured or guaranteed under the FFEL Program (a "Repeat Borrower"):
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(f) for a loan made prior to July 23, 1992 is the applicable interest
rate on the previous loan or, if such previous loan is not a Stafford Loan,
8% per annum; or
(g) for a loan made on or after July 23, 1992 shall be adjusted
annually, and for any twelve month period commencing on a July 1 shall be
equal to the bond equivalent rate of 91-day U.S. Treasury bills auctioned
at the final auction prior to the preceding June 1, plus 3.1% per annum but
not to exceed:
(i) 7% per annum in the case of a Stafford Loan made to a
borrower who has a loan described in clause (a) above;
(ii) 8% per annum in the case of (A) a Stafford Loan made to a
borrower who has a loan described in clause (c) above, (B)
a Stafford Loan which has not been in repayment for four
years and which was made to a borrower who has a loan
described in clause (d) above or (C) a Stafford Loan for
which the first disbursement was made prior to December 20,
1993 to a borrower whose previous loans do not include a
Stafford Loan or an Unsubsidized Stafford Loan;
(iii) 9% per annum in the case of (A) a Stafford Loan made to a
borrower who has a loan described in clauses (b) or (e)
above or (B) a Stafford Loan for which the first
disbursement was made on or after December 20, 1993 to a
borrower whose previous loans do not include a Stafford
Loan or an Unsubsidized Stafford Loan; and
(iv) 10% per annum in the case of a Stafford Loan which has been
in repayment for four years or more and which was made to a
borrower who has a loan described in clause (d) above.
The interest rate on all Stafford Loans made on or after July 1, 1994 but
prior to July 1, 1998, regardless of whether the borrower is a New Borrower or a
Repeat Borrower, is the rate described in clause (g) above, except that such
rate shall not exceed 8.25% per annum. For any Stafford Loan made on or after
July 1, 1995, the interest rate is further reduced prior to the time the loan
enters repayment and during any deferment periods. During such periods, the
formula described in clause (g) above is applied, except that 2.5% is
substituted for 3.1%, and the rate shall not exceed 8.25% per annum.
For Stafford Loans made on or after July 1, 1998 but before October 1,
2003, the applicable interest rate shall be adjusted annually, and for any
twelve month period commencing on a July 1 shall be equal to the bond equivalent
rate of 91-day U.S. Treasury bills auctioned at the final auction prior to the
preceding June 1, plus (x) 1.7% per annum prior to the time the loan enters
repayment and during any deferment periods, and (y) 2.3% per annum during
repayment, but not to exceed 8.25% per annum.
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For Stafford Loans made on or after July 1, 2003, the applicable rate will
continue to be adjusted annually, but for any 12-month period commencing on a
July 1 will be equal to the bond equivalent rate of securities with a comparable
maturity (as established by the Secretary of Education), plus 1% per annum, but
not to exceed 8.25% per annum.
Unsubsidized Stafford Loans. Unsubsidized Stafford Loans are subject to
the same interest rate provisions as Stafford Loans.
Plus Loans. The applicable interest rate on a Plus Loan:
(a) made on or after January 1, 1981, but before October 1, 1981, is
9% per annum;
(b) made on or after October 1, 1981, but before November 1, 1982, is
14% per annum;
(c) made on or after November 1, 1982, but before July 1, 1987, is
12% per annum;
(d) made on or after July 1, 1987, but before October 1, 1992, shall
be adjusted annually, and for any 12-month period beginning on July 1 shall
be equal to the bond equivalent rate of 52-week U.S. Treasury bills
auctioned at the final auction prior to the preceding June 1, plus 3.25%
per annum (but not to exceed 12% per annum);
(e) made on or after October 1, 1992, but before July 1, 1994, shall
be adjusted annually, and for any 12-month period beginning on July 1 shall
be equal to the bond equivalent rate of 52-week U.S. Treasury bills
auctioned at the final auction prior to the preceding June 1, plus 3.1% per
annum (but not to exceed 10% per annum);
(f) made on or after July 1, 1994, but before July 1, 1998, is the
same as that described in clause (e) above, except that such rate shall not
exceed 9% per annum; or
(g) made on or after July 1, 1998, but before July 1, 2003, shall be
adjusted annually, and for any 12-month period beginning on July 1 shall be
equal to the bond equivalent rate of 91-day U.S. Treasury bills auctioned
at the final auction prior to the preceding June 1, plus 3.1% per annum
(but not to exceed 9% per annum).
For Plus Loans made on or after July 1, 2003, the applicable rate will
continue to be adjusted annually, but for any 12-month period commencing on a
July 1 will be equal to the bond equivalent rate of securities with a comparable
maturity (as established by the Secretary of Education), plus 2.1% per annum,
but not to exceed 9% per annum.
If requested by the borrower, an eligible lender may consolidate SLS or
Plus Loans of the same borrower held by the lender under a single repayment
schedule. The repayment period for
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each included loan shall be based on the commencement of repayment of the most
recent loan. The consolidated loan shall bear interest at a rate equal to the
weighted average of the rates of the included loans. Such a consolidation shall
not be treated as the making of a new loan. In addition, at the request of the
borrower, a lender may refinance an existing fixed rate SLS or Plus Loan
(including an SLS or Plus Loan held by a different lender who has refused so to
refinance such loan) at a variable interest rate. In such a case, proceeds of
the new loan are used to discharge the original loan.
SLS Loans. The applicable interest rates on SLS Loans made prior to
October 1, 1992 are identical to the applicable interest rates on Plus Loans
made at the same time. For SLS Loans made on or after October 1, 1992, the
applicable interest rate is the same as the applicable interest rate on Plus
Loans, except that the ceiling is 11% per annum instead of 10% per annum.
Consolidation Loans. A Consolidation Loan made prior to July 1, 1994 bears
interest at a rate equal to the weighted average of the interest rates on the
loans retired, rounded to the nearest whole percent, but not less than 9% per
annum. Except as described in the next sentence, a Consolidation Loan made on or
after July 1, 1994 bears interest at a rate equal to the weighted average of the
interest rates on the loans retired, rounded upward to the nearest whole
percent, but with no minimum rate. For a Consolidation Loan for which the
application is received by an eligible lender (a) on or after November 13, 1997
but before October 1, 1998, the interest rate shall be adjusted annually, and
for any twelve month period commencing on a July 1 shall be equal to the bond
equivalent rate of 91-day U.S. Treasury bills auctioned at the final auction
prior to the preceding June 1, plus 3.1% per annum, but not to exceed 8.25% per
annum, or (b) on or after October 1, 1998 but before July 1, 2003, the interest
rate shall be an annual rate equal to the weighted average of the interest rates
on the loans being consolidated, rounded upward to the nearest higher 1/8 of 1
percent, but not to exceed 8.25% per annum. Notwithstanding these general
interest rates, the portion, if any, of a Consolidation Loan that repaid a loan
made under the HEAL Program has a different variable interest rate. Such portion
is adjusted on July 1 of each year, but is the sum of the average of the T-Bill
Rates auctioned for the quarter ending on the preceding June 30, plus 3.0%,
without any cap on the interest rate. For a discussion of required payments that
reduce the return on Consolidation Loans, see "--Fees--Rebate Fees on
Consolidation Loans" below.
Loan Limits
Each type of loan (other than Consolidation Loans, which are limited only
by the amount of eligible loans to be consolidated) is subject to limits as to
the maximum principal amount, both with respect to a given year and in the
aggregate. All of the loans are limited to the difference between the cost of
attendance and the other aid available to the student. Stafford Loans are also
subject to limits based upon the needs analysis as described above under
"--Eligibility--Stafford Loans." Additional limits are described below.
Stafford and Unsubsidized Stafford Loans. Except as described in the next
paragraph, Stafford and Unsubsidized Stafford Loans are generally treated as one
loan type for loan limit
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purposes. A student who has not successfully completed the first year of a
program of undergraduate education may borrow up to $2,625 in an academic year.
A student who has successfully completed such first year, but who has not
successfully completed the second year may borrow up to $3,500 per academic
year. An undergraduate student who has successfully completed the first and
second year, but who has not successfully completed the remainder of a program
of undergraduate education, may borrow up to $5,500 per academic year. For
students enrolled in programs of less than an academic year in length, the
limits are generally reduced in proportion to the amount by which such programs
are less than one year in length. A graduate or professional student may borrow
up to $8,500 in an academic year. The 1998 Reauthorization Amendments establish
special loan limits for some students taking courses that may lead to enrollment
in undergraduate ($2,625 for Stafford and $4,000 for Unsubsidized Stafford) or
in graduate or professional ($5,500 for Stafford and $5,000 for Unsubsidized
Stafford) degree or certificate programs, or necessary for professional
credential or certification from a state required for employment as an
elementary or secondary school teacher ($5,500 for Stafford and $5,000 for
Unsubsidized Stafford). The maximum aggregate amount of Stafford and
Unsubsidized Stafford Loans (including that portion of a Consolidation Loan used
to repay such loans) which an undergraduate student may have outstanding is
$23,000. The maximum aggregate amount for a graduate and professional student,
including loans for undergraduate education, is $65,500. The Secretary is
authorized to increase the limits applicable to graduate and professional
students who are pursuing programs which the Secretary determines to be
exceptionally expensive.
Under the 1993 amendments, at the same time that SLS Loans were eliminated,
the loan limits for Unsubsidized Stafford Loans to independent students, or
dependent students whose parents cannot borrow a Plus Loan, were increased by
amounts equal to the prior SLS Loan limits (as described below under "--SLS
Loans"). Prior to the enactment of the Higher Education Amendments of 1992, the
annual and aggregate loan limits were generally lower.
Plus Loans. For Plus Loans made on or after July 1, 1993, the amounts of
Plus Loans are limited only by the student's unmet need. Prior to that time Plus
Loans were subject to limits similar to those to which SLS Loans were then
subject (see "--SLS Loans" below), applied with respect to each student on
behalf of whom the parent borrowed.
SLS Loans. A student who had not successfully completed the first and
second year of a program of undergraduate education could borrow an SLS Loan in
an amount of up to $4,000. A student who had successfully completed such first
and second year, but who had not successfully completed the remainder of a
program of undergraduate education could borrow up to $5,000 per year. Graduate
and professional students could borrow up to $10,000 per year. SLS Loans were
subject to an aggregate maximum of $23,000 ($73,000 for graduate and
professional students). Prior to the 1992 changes, the annual and aggregate loan
limits for SLS Loans were generally lower. The 1989 changes limited the amount
of SLS Loans for students enrolled in programs of less than an academic year in
length (similar to the limits described above under "--Stafford Loans"), and
such limits were continued by the 1992 Amendments.
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Repayment
Except for loans to some new borrowers on or after October 7, 1998, loans
made under the FFEL Program (other than Consolidation Loans) generally must
provide for repayment of principal in periodic installments over a period of not
less than five nor more than ten years. A Consolidation Loan must be repaid
during a period agreed to by the borrower and lender, subject to maximum
repayment periods which vary depending upon the principal amount of the
borrower's outstanding student loans (but no longer than 30 years). For
Consolidation Loans for which the application was received prior to January 1,
1993, the repayment period could not exceed 25 years. The 1998 Reauthorization
Amendments provide that, effective October 1, 1998, a lender must offer the
borrower of a Stafford Loan or an Unsubsidized Stafford Loan, not more than six
months prior to the date on which the borrower's first payment is due, the
option of repaying the loan in accordance with a standard, graduated, income-
sensitive, or extended repayment schedule established by the lender in
accordance with regulations of the Secretary of Education. The borrower may
choose from:
. a standard repayment plan, with a fixed annual repayment amount paid
over a fixed period of time, not to exceed 10 years;
. a graduated repayment plan paid over a fixed period of time, not to
exceed 10 years;
. an income-sensitive repayment plan, with income-sensitive repayment
amounts paid over a fixed period of time, not to exceed 10 years,
except that the borrower's scheduled payments shall not be less than
the amount of interest due; and
. for new borrowers on or after October 7, 1998 who accumulate (after
such date) outstanding loans under the FFEL Program totaling more than
$30,000, an extended repayment plan, with a fixed annual or graduated
repayment amount paid over an extended period of time, not to exceed
25 years, except that the borrower shall repay a minimum annual amount
as described in the next paragraph.
If a borrower does not select a repayment plan, the lender shall provide the
borrower with a standard repayment plan. Once established, the borrower may
annually change the selection of a repayment plan.
The repayment period commences
. not more than twelve months after the borrower ceases to pursue at
least a half-time course of study with respect to Stafford Loans for
which the applicable rate of interest is 7% per annum,
. not more than six months after the borrower ceases to pursue at least
a half-time course of study with respect to other Stafford Loans and
Unsubsidized Stafford Loans (the six month or twelve month periods are
the grace periods) and
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. on the date of final disbursement of the loan in the case of SLS, Plus
and Consolidation Loans, except that the borrower of an SLS Loan who
also has a Stafford or Unsubsidized Stafford Loan may defer repayment
of the SLS Loan to coincide with the commencement of repayment of the
Stafford or Unsubsidized Stafford Loan.
The six month grace period excludes any period not in excess of three years
during which a borrower who is a member of the Armed Forces reserves is called
or ordered to active duty for a period of more than 30 days (such period of
exclusion includes the period necessary to resume enrollment at the borrower's
next available regular enrollment period). During periods in which repayment of
principal is required, payments of principal and interest must in general be
made at a rate of not less than the greater of $600 per year (except that a
borrower and lender may agree at any time before or during the repayment period
that repayment may be at a lesser rate) or the interest that accrues during the
year. A borrower may agree, with concurrence of the lender, to repay the loan in
less than five years with the right subsequently to extend his minimum repayment
period to five years. Borrowers are entitled to accelerate, without penalty, the
repayment of all or any part of the loan.
In addition, since 1992, lenders of Consolidation Loans have been required
to establish graduated or income-sensitive repayment schedules and lenders of
Stafford and SLS Loans have been required to offer borrowers the option of
repaying in accordance with graduated or income-sensitive repayment schedules.
Use of income-sensitive repayment schedules may extend the ten-year maximum term
for up to five years. In addition, if the repayment schedule on a loan that has
been converted to a variable interest rate does not provide for adjustments to
the amount of the monthly installment payments, the ten-year maximum term may be
extended for up to three years.
No principal repayments need be made during periods of deferment prescribed
by the Higher Education Act. For loans to a borrower who first obtained a loan
which was disbursed before July 1, 1993, deferments are available as
follows:
(1) during a period not exceeding three years while the borrower is a
member of the Armed Forces, an officer in the Commissioned Corps of the
Public Health Service or, with respect to a borrower who first obtained a
student loan disbursed on or after July 1, 1987, or a student loan to cover
the cost of instruction for a period of enrollment beginning on or after
July 1, 1987, an active duty member of the National Oceanic and Atmospheric
Administration Corps;
(2) during a period not in excess of three years while the borrower
is a volunteer under the Peace Corps Act,;
(3) during a period not in excess of three years while the borrower
is a full-time volunteer under the Domestic Volunteer Act of 1973;
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(4) during a period not exceeding three years while the borrower is
in service, comparable to the service referred to in clauses (2) and (3),
as a full-time volunteer for an organization which is exempt from taxation
under Section 501(c)(3) of the Internal Revenue Code;
(5) during a period not exceeding two years while the borrower is
serving an internship, the successful completion of which is required to
receive professional recognition required to begin professional practice or
service, or a qualified internship or residency program;
(6) during a period not exceeding three years while the borrower is
temporarily totally disabled, as established by sworn affidavit of a
qualified physician, or while the borrower is unable to secure employment
by reason of the care required by a dependent who is so disabled;
(7) during a period not to exceed twenty-four months while the
borrower is seeking and unable to find full-time employment;
(8) during any period that the borrower is pursuing a full-time
course of study at an eligible institution (or, with respect to a borrower
who first obtained a student loan disbursed on or after July 1, 1987, or a
student loan to cover the cost of instruction for a period of enrollment
beginning on or after July 1, 1987, is pursuing at least a half-time course
of study for which the borrower has obtained a loan under the FFEL
Program), or is pursuing a course of study pursuant to a graduate
fellowship program or a rehabilitation training program for disabled
individuals approved by the Secretary of Education;
(9) during a period, not in excess of 6 months, while the borrower is
on parental leave; and
(10) only with respect to a borrower who first obtained a student loan
disbursed on or after July 1, 1987, or a student loan to cover the cost of
instruction for a period of enrollment beginning on or after July 1, 1987,
. during a period not in excess of three years while the borrower is a
full-time teacher in a public or nonprofit private elementary or
secondary school in a "teacher shortage area" (as prescribed by the
Secretary of Education), and
. during a period not in excess of 12 months for mothers, with preschool
age children, who are entering or re-entering the work force and who
are compensated at a rate not exceeding $1 per hour in excess of the
federal minimum wage.
For loans to a borrower who first obtains a loan on or after July 1, 1993,
deferments are available as follows:
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. during any period that the borrower is pursuing at least a half-time
course of study at an eligible institution or a course of study
pursuant to a graduate fellowship program or rehabilitation training
program approved by the Secretary;
. during a period not exceeding three years while the borrower is
seeking and unable to find full-time employment; and
. during a period not in excess of three years for any reason which the
lender determines, in accordance with regulations under the Higher
Education Act, has caused or will cause the borrower economic
hardship. Economic hardship includes working full time and earning an
amount not in excess of the greater of the minimum wage or the poverty
line for a family of two.
Additional categories of economic hardship are based on the relationship between
a borrower's educational debt burden and his or her income. Prior to the 1992
changes, only the deferment periods described above in clauses (6) and (7) (with
respect to the parent borrower) and the deferment period described in clause (8)
(with respect to the parent borrower or a student on whose behalf the parent
borrowed) were available to Plus Loan borrowers, and only the deferment periods
described above in clauses (6), (7) and (8) were available to Consolidation Loan
borrowers. Prior to the 1986 changes, Plus Loan borrowers were not entitled to
deferment periods. Deferment periods extend the maximum repayment periods.
The Higher Education Act also provides for periods of forbearance during
which the borrower, in case of temporary financial hardship, may defer any
payments. A borrower is entitled to forbearance for a period not to exceed
three years while the borrower's debt burden under Title IV of the Higher
Education Act (which includes the FFEL Program) equals or exceeds 20% of the
borrower's gross income, and also is entitled to forbearance while he or she is
serving in a qualifying medical or dental internship program or in a "national
service position" under the National and Community Service Trust Act of 1993. In
addition, mandatory administrative forbearances are provided when exceptional
circumstances such as a local or national emergency or military mobilization
exist; or when the geographical area in which the borrower or endorser resides
has been designated a disaster area by the President of the United States or
Mexico, the Prime Minister of Canada, or by the governor of a state. The 1998
Reauthorization Amendments authorize forbearance for up to 60 days if the lender
reasonably determines that such a suspension of collection activity is warranted
following a borrower's request for deferment, forbearance, a change in repayment
plan, or a request to consolidate loans, in order to collect or process
appropriate supporting documentation related to the request (during which period
interest shall accrue but not be capitalized). In other circumstances,
forbearance is at the lender's option. Such forbearance also extends the
maximum repayment periods.
As described under "--Contracts with Guarantee Agencies--Federal Interest
Subsidy Payments" below, the Secretary of Education makes interest payments on
behalf of the borrower of some eligible loans while the borrower is in school
and during grace and deferment periods. Interest that accrues during forbearance
periods and, if the loan is not eligible for Interest Subsidy
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Payments, while the borrower is in school and during the grace and deferment
periods, may be paid monthly or quarterly or capitalized (added to the principal
balance) not more frequently than quarterly. Interest on Unsubsidized Stafford
Loans disbursed on or after October 7, 1998, that accrues during such periods,
however, may be capitalized only when the loan enters repayment, at the
expiration of the grace period (if the loan qualifies for grace period), the
deferment period or the forbearance period, or when the borrower defaults.
The Secretary of Education has proposed regulations which will, if
finalized in their current form, apply the new capitalization rules that apply
to Unsubsidized Stafford Loans disbursed on or after October 7, 1998, to
Stafford Loans disbursed on or after July 1, 2000 (as they relate to interest
accruing during forbearance periods not covered by Interest Subsidy Payments).
In addition, such regulations will, if finalized in their current form, permit
capitalization to occur on Unsubsidized Stafford Loans (and Stafford Loans with
respect to Forbearance) disbursed on or after July 1, 2000, at the end of each
covered period rather than at the end of a series of consecutive covered
periods.
Disbursement
Loans made under the FFEL Program (except Consolidation Loans) generally
must be disbursed in two or more installments, none of which may exceed 50% of
the total principal amount of the loan.
Fees
Guarantee Fee. A guarantee agency is authorized to charge a premium, or
guarantee fee, of up to 1% of the principal amount of the loan, which must be
deducted proportionately from each installment payment of the proceeds of the
loan to the borrower. Guarantee fees may not currently be charged to borrowers
of Consolidation Loans. However, lenders may be charged an insurance fee to
cover the costs of increased or extended liability with respect to Consolidation
Loans.
Origination Fee. An eligible lender is authorized to charge the borrower
of a Stafford, Unsubsidized Stafford or Plus Loan an origination fee in an
amount not to exceed 3% of the principal amount of the loan. These fees must be
deducted proportionately from each installment payment of the loan proceeds
prior to payment to the borrower and are not retained by the lender, but must be
passed on to the Secretary of Education. Effective October 1, 1998, eligible
lenders that charge origination fees must assess the same fees to all student
borrowers, unless a borrower demonstrates greater financial need based on
income. The Balanced Budget and Deficit Control Act of 1985, as amended (known
as the "Gramm-Rudman Law") requires the President to issue a sequester order for
any federal fiscal year in which the projected budget exceeds the target for
that year. For all FFEL Program loans made during the period when a
sequestration order is in effect, origination fees shall be increased by 0.50
percentage point.
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Lender Loan Fee. The lender of any loan under the FFEL Program made on or
after October 1, 1993 is required to pay to the Secretary of Education a fee
equal to 0.5% of the principal amount of such loan.
The Secretary of Education is authorized to collect from the lender or a
subsequent holder of the loan the maximum origination fee authorized to be
charged by the lender (regardless of whether the lender actually charges the
borrower) and the lender loan fee, either through reductions in Special
Allowance Payments and Interest Subsidy Payments or directly from the lender or
holder.
Rebate Fee on Consolidation Loans. The holder of any Consolidation Loan
made on or after October 1, 1993 is required to pay to the Secretary of
Education a monthly fee equal to .0875% (1.05% per annum) of the principal
amount of, and accrued interest on, such Consolidation Loan; provided that, for
Consolidation Loans based on applications received during the period from
October 1, 1998 through January 31, 1999, the monthly fee shall equal .0517%
(0.62% per annum).
Loan Guarantees
Under the FFEL Program, guarantee agencies are required to guarantee the
payment of not less than 98% of the principal amount of loans made on or after
October 1, 1993 and not less than 100% of the principal amount of loans made
prior to October 1, 1993 and covered by their respective guarantee programs.
For a description of the requirements for loans to be covered by such
guarantees, see "Description of the Guarantee Agencies." Under some
circumstances, guarantees may be assumed by the Secretary of Education or
another guarantee agency. See "--Contracts with Guarantee Agencies" below.
Contracts with Guarantee Agencies
Under the FFEL Program, the Secretary of Education is authorized to enter
into guaranty and interest subsidy agreements with guarantee agencies. The FFEL
Program provides for reimbursements to guarantee agencies for default claims
paid by guarantee agencies, support payments to guarantee agencies for
administrative and other expenses, advances for a guarantee agency's reserve
funds, and Interest Subsidy Payments and Special Allowance Payments to the
holders of qualifying student loans made pursuant to the FFEL Program.
The 1998 Reauthorization Amendments significantly modify requirements
regarding guarantee agencies' reserves and sources of revenues and authorized
the Secretary of Education to enter into agreements with guarantee agencies
which modify or waive many of the requirements of the FFEL Program covered under
existing agreements and otherwise required by the Higher Education Act. See
"Description of the Guarantee Agencies--1998 Reauthorization Amendments."
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The Secretary of Education has oversight powers over guarantee agencies.
Guarantee agencies are required to maintain their Federal Funds (as hereinafter
defined) at a current minimum reserve level of at least 0.25 percent of the
total amount of all outstanding loans guaranteed by such Agency (excluding some
loans transferred to the guarantee agency from an insolvent guarantee agency
pursuant to a plan of the Secretary of Education). If a guarantee agency falls
below the required level in two consecutive years, its claims rate exceeds 5% in
any year, or the Secretary of Education determines that the Agency's
administrative or financial condition jeopardizes its ability to meet its
obligations, the Secretary of Education can require the guarantee agency to
submit and implement a plan by which it will correct such problem(s). If a
guarantee agency fails to timely submit an acceptable plan or fails to improve
its condition, or if the Secretary of Education determines that the guarantee
agency is in danger of financial collapse, the Secretary of Education may
terminate the guarantee agency's reimbursement contract. The Secretary of
Education also may terminate such reimbursement contracts if the Secretary of
Education determines that such action is necessary to protect the federal fiscal
interest or to ensure continued availability of student loans.
The Secretary of Education is authorized to assume the guarantee
obligations of a guarantee agency. The Higher Education Act now provides that,
if the Secretary terminates a guarantee agency's agreements under the FFEL
Program, the Secretary shall assume responsibility for all functions of the
guarantee agency under its program. To that end, the Secretary is authorized to,
among other options, transfer the guarantees to another guarantee agency or
assume the guarantees. It also provides that in the event the Secretary has
determined that a guarantee agency is unable to meet its guarantee obligations,
holders of loans guaranteed by such guarantee agency may submit claims directly
to the Secretary for payment, unless the Secretary has provided for the
assumption of such guarantees by another guarantee agency.
Federal Reimbursement
A guarantee agency's right to receive federal reimbursements for various
guarantee claims paid by such guarantee agency is governed by the Higher
Education Act and various contracts entered into between guarantee agencies and
the Secretary of Education. See "Description of the Guarantee Agencies--Federal
Agreements." Under the Higher Education Act and the federal reimbursement
contracts (as described under "Description of the Guarantee Agencies--Federal
Agreements"), the Secretary of Education currently agrees to reimburse a
guarantee agency for the amounts expended by the guarantee agency in the
discharge of its guarantee obligation (i.e., the unpaid principal balance of and
accrued interest on loans guaranteed by the guarantee agency, which loans are
referred to herein as "guaranteed loans") as a result of the default of the
borrower. The Secretary of Education currently agrees to reimburse the guarantee
agency for up to 100% of the amounts so expended with respect to loans made
prior to October 1, 1993; 98% of the amount expended with respect to guaranteed
loans made on or after October 1, 1993 but before October 1, 1998; and 95% of
the amount expended with respect to guaranteed loans made on or after October 1,
1998. Depending on the claims rate experience of a guarantee agency, such 100%,
98% or 95% reimbursement may be reduced as discussed in the formula described
below. The Secretary of Education also agrees to repay 100%
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of the unpaid principal plus applicable accrued interest expended by a guarantee
agency in discharging its guarantee obligation as a result of the bankruptcy,
death, or total and permanent disability of a borrower (or in the case of a Plus
Loan, the death of the student on behalf of whom the loan was borrowed), or in
some circumstances, as a result of school closures, or if a school fails to make
a refund of loan proceeds which the school owed to a student's lender, which
reimbursements are not to be included in the calculations of the guarantee
agency's Claims Rate experience for the purpose of federal reimbursement under
the federal reimbursement contracts.
The formula for computing the percentage of federal reimbursement under the
federal reimbursement contracts is not accumulated over a period of years but is
measured by the amount of federal reimbursement payments in any one federal
fiscal year as a percentage of the original principal amount of loans under the
FFEL Program guaranteed by the guarantee agency and in repayment at the end of
the preceding fiscal year. Under the formula, federal reimbursement payments to
a guarantee agency in any one fiscal year not exceeding 5% of the original
principal amount of loans in repayment at the end of the preceding fiscal year
are to be paid by the Secretary of Education at 100% for loans made before
October 1, 1993; 98% for loans made on or after October 1, 1993 but before
October 1, 1998; and 95% for loans made on or after October 1, 1998. Beginning
at any time during any fiscal year that federal reimbursement payments exceed
5%, and until such time as they may exceed 9%, of the original principal amount
of loans in repayment at the end of the preceding fiscal year, then
reimbursement payments on claims submitted during that period are to be paid at
90% for loans made before October 1, 1993; 88% for loans made on or after
October 1, 1993 but before October 1, 1998; and 85% for loans made on or after
October 1, 1998. Beginning at any time during any fiscal year that federal
reimbursement payments exceed 9% of the original principal amount of loans in
repayment at the end of the preceding fiscal year, then such payments for the
balance of that fiscal year will be paid at 80% for loans made before October 1,
1993; 78% for loans made on or after October 1, 1993 but before October 1, 1998;
and 75% for loans made on or after October 1, 1998. The original principal
amount of loans in repayment for purposes of computing reimbursement payments to
a guarantee agency means the original principal amount of all loans guaranteed
by such guarantee agency less: (1) guarantee payments on such loans, (2) the
original principal amount of such loans that have been fully repaid, and (3) the
original principal amount of such loans for which the first principal
installment payment has not become due or such first installment need not be
paid because of a deferment period.
Under present practice, after the Secretary of Education reimburses a
guarantee agency for a default claim paid on a guaranteed loan, the guarantee
agency continues to seek repayment from the borrower. The guarantee agency
returns to the Secretary of Education payments that it receives from a borrower
after deducting and retaining (1) a percentage amount equal to the complement of
the reimbursement percentage in effect at the time the loan was reimbursed, and
(2) an amount equal to 24% (or 23% beginning on October 1, 2003, and 18 1/2% in
the case of a payment from the proceeds of a Consolidation Loan) of such
payments for some administrative costs. The Secretary of Education may, however,
require the assignment to the Secretary of defaulted guaranteed loans, in which
event no further collections activity need be undertaken by the guarantee
agency, and no amount of any recoveries shall be paid to the guarantee
agency.
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A guarantee agency may enter into an addendum to its interest subsidy
agreement, which addendum provides for the guarantee agency to refer to the
Secretary of Education some defaulted guaranteed loans. Such loans are then
reported to the Internal Revenue Service to "offset" any tax refunds which may
be due any defaulted borrower. To the extent that the guarantee agency has
originally received less than 100% reimbursement from the Secretary of Education
with respect to such a referred loan, the guarantee agency will not recover any
amounts subsequently collected by the federal government which are attributable
to that portion of the defaulted loan for which the guarantee agency has not
been reimbursed.
Rehabilitation of Defaulted Loans
Under Section 428F of the Higher Education Act, the Secretary of Education
is authorized to enter into an agreement with a guarantee agency pursuant to
which the guarantee agency shall sell defaulted loans that are eligible for
rehabilitation to an eligible lender. The guarantee agency shall repay the
Secretary of Education an amount equal to 81.5% of the then current principal
balance of such loan, multiplied by the reimbursement percentage in effect at
the time the loan was reimbursed. The amount of such repayment shall be deducted
from the amount of federal reimbursement payments for the fiscal year in which
such repayment occurs, for purposes of determining the reimbursement rate for
that fiscal year.
For a loan to be eligible for rehabilitation, the guarantee agency must
have received consecutive payments for 12 months of amounts owed on such loan.
Upon rehabilitation, a loan is eligible for all the benefits under the Higher
Education Act for which it would have been eligible had no default occurred
(except that a borrower's loan may only be rehabilitated once).
Eligibility for Federal Reimbursement
To be eligible for federal reimbursement payments, guaranteed loans must be
made by an eligible lender under the applicable guarantee agency's guarantee
program, which must meet requirements prescribed by the rules and regulations
promulgated under the Higher Education Act, including the borrower eligibility,
loan amount, disbursement, interest rate, repayment period and guarantee fee
provisions described herein and the other requirements set forth in Section
428(b) of the Higher Education Act.
Under the Higher Education Act, a guaranteed loan (for which the first day
of delinquency is on or after October 7, 1998) must be delinquent for 270 days
if it is repayable in monthly installments or 330 days if it is payable in less
frequent installments before a lender may obtain payment on a guarantee from the
guarantee agency (such time periods are 180 days and 240 days, respectively, for
loans for which the first day of delinquency is before October 7, 1998). The
guarantee agency must pay the lender for the defaulted loan prior to submitting
a claim to the Secretary of Education for reimbursement. The guarantee agency
must submit a reimbursement claim to the Secretary of Education within 45 days
after it has paid the lender's default claim. As a prerequisite to entitlement
to payment on the guarantee by the guarantee agency, and in turn payment of
reimbursement by the Secretary of Education, the lender must
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have exercised reasonable care and diligence in making, servicing and collecting
the guaranteed loan. Generally, these procedures require that completed loan
applications be processed, a determination of whether an applicant is an
eligible borrower attending an eligible institution under the Higher Education
Act be made, the borrower's responsibilities under the loan be explained to him
or her, the promissory note evidencing the loan be executed by the borrower and
that the loan proceeds be disbursed by the lender in a specified manner. After
the loan is made, the lender must establish repayment terms with the borrower,
properly administer deferments and forbearances and credit the borrower for
payments made. If a borrower becomes delinquent in repaying a loan, a lender
must perform collection procedures (primarily telephone calls, demand letters,
skiptracing procedures and requesting assistance from the applicable guarantee
agency) that vary depending upon the length of time a loan is delinquent.
Federal Interest Subsidy Payments
"Interest Subsidy Payments" are interest payments paid with respect to an
eligible loan during the period prior to the time that the loan enters repayment
and during grace and deferment periods. The Secretary of Education and the
guarantee agencies entered into the interest subsidy agreements as described in
"Description of the Guarantee Agencies--Federal Agreements," whereby the
Secretary of Education agrees to pay Interest Subsidy Payments to the holders of
eligible guaranteed loans for the benefit of students meeting applicable
requirements, subject to the holders' compliance with all requirements of the
Higher Education Act. Only Stafford Loans, and Consolidation Loans for which the
application was received on or after January 1, 1993, are eligible for Interest
Subsidy Payments. Consolidation Loans made after August 10, 1993 are eligible
for Interest Subsidy Payments only if all loans consolidated thereby are
Stafford Loans, except that Consolidation Loans for which the application is
received by an eligible lender on or after November 13, 1997, are eligible for
Interest Subsidy Payments on that portion of the Consolidation Loan that repays
Stafford Loans or similar subsidized loans made under the direct loan program.
In addition, to be eligible for Interest Subsidy Payments, guaranteed loans must
be made by an eligible lender under the applicable guarantee agency's guarantee
program, and must meet requirements prescribed by the rules and regulations
promulgated under the Higher Education Act, including the borrower eligibility,
loan amount, disbursement, interest rate, repayment period and guarantee fee
provisions described herein and the other requirements set forth in Section
428(b) of the Higher Education Act.
The Secretary of Education makes Interest Subsidy Payments quarterly on
behalf of the borrower to the holder of a guaranteed loan in a total amount
equal to the interest which accrues on the unpaid principal amount prior to the
commencement of the repayment period of the loan or during any deferment period.
A borrower may elect to forego Interest Subsidy Payments, in which case the
borrower is required to make interest payments.
Federal Advances
Pursuant to agreements entered into between the guarantee agencies and the
Secretary of Education under Sections 422 and 422(c) of the Higher Education
Act, the Secretary of
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Education was authorized to advance moneys from time to time to the guarantee
agencies for the purpose of establishing and strengthening the guarantee
agencies' reserves. Section 422(c) currently authorizes the Secretary of
Education to make advances to guarantee agencies in various circumstances, on
terms and conditions satisfactory to the Secretary, including if the Secretary
is seeking to terminate the guarantee agency's reimbursement contract or assume
the guarantee agency's functions, to assist the guarantee agency in meeting its
immediate cash needs or to ensure the uninterrupted payment of claims.
Federal Special Allowance Payments
The Higher Education Act provides for the payment by the Secretary of
Education of additional subsidies, called Special Allowance Payments, to holders
of qualifying student loans. The amount of the Special Allowance Payments, which
are made on a quarterly basis, is computed by reference to the average of the
bond equivalent rates of the 91-day Treasury bills auctioned during the
preceding quarter (the "T-Bill Rate"). The quarterly rate for Special Allowance
Payments for student loans made on or after October 1, 1981 is computed by
subtracting the applicable interest rate on such loans from the T-Bill Rate,
adding a percent specified by the Higher Education Act (the "Applicable SAP
Percent") to the resulting percent, and dividing the resulting percent by four.
The Applicable SAP Percent varies based on the type of loan and when the loan
was made (often determined by when the first disbursement was made). In
general, the Applicable SAP Percent:
. for loans made before November 16, 1986, is 3.5%;
. for loans made on or after November 16, 1986, or loans to cover the
costs of instruction for periods of enrollment beginning on or after
November 16, 1986, but made before October 1, 1992, is 3.25%;
. for loans made on or after October 1, 1992, is 3.1% (except as noted
below);
. for Stafford and Unsubsidized Stafford Loans made on or after July 1,
1995 but before July 1, 1998, is 2.5% prior to the time such loans
enter repayment and during any deferment periods; or
. for Stafford and Unsubsidized Stafford Loans made on or after July 1,
1998 and before July 1, 2003, is 2.2% prior to the time such loans
enter repayment and during any deferment periods, and 2.8% while such
loans are in repayment.
For loans other than Consolidation Loans made on or after July 1, 2003, the
special allowance formula is to be revised similarly to the manner in which the
applicable interest rate formula is revised, as described above under "--Loan
Terms--Interest Rates--Stafford Loans."
For Plus and SLS Loans which bear interest at rates adjusted annually,
Special Allowance Payments are made only in years during which the interest rate
ceiling on such loans operates to
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reduce the rate that would otherwise apply based upon the applicable formula.
See "--Loan Terms--Interest Rates--Plus Loans" and "--SLS Loans" above. Special
Allowance Payments are paid with respect to Plus Loans made on or after July 1,
1994 but before July 1, 1998 only if the rate that would otherwise apply exceeds
10% per annum, notwithstanding that the interest rate ceiling on such loans is
9% per annum. For Consolidation Loans for which the application is received on
or after October 1, 1998 but before July 1, 2003, Special Allowance Payments are
only made for quarters during which the T-Bill Rate plus 3.1% exceeds the
applicable interest rate on such loans. The portion, if any, of a Consolidation
Loan that repaid a loan made under the HEAL Program is ineligible for Special
Allowance Payments.
The Higher Education Act provides that if Special Allowance Payments or
Interest Subsidy Payments have not been made within 30 days after the Secretary
of Education receives an accurate, timely and complete request therefor, the
special allowance payable to such holder shall be increased by an amount equal
to the daily interest accruing on the special allowance and Interest Subsidy
Payments due the holder.
Special Allowance Payments and Interest Subsidy Payments are reduced by the
amount which the lender is authorized or required to charge as an origination
fee, as described above under "--Loan Terms--Fees--Origination Fee." In
addition, the amount of the lender loan fee described above under "--Loan
Terms--Fees--Lender Loan Fees" is collected by offset to Special Allowance
Payments and Interest Subsidy Payments.
Federal Student Loan Insurance Fund
The Higher Education Act authorizes the establishment of a Student Loan
Insurance Fund by the Federal government for making the federal insurance and
the federal reimbursement payments on defaulted student loans to guarantee
agencies. If moneys in the fund are insufficient to make the federal payments on
defaults of such loans, the Secretary of Education is authorized, to the extent
provided in advance by appropriation acts, to issue to the Secretary of the
Treasury obligations containing terms and conditions prescribed by the Secretary
of Education and approved by the Secretary of the Treasury, bearing interest at
a rate determined by the Secretary of the Treasury. The Secretary of the
Treasury is authorized and directed by the Higher Education Act to purchase such
obligations.
Direct Loans
The 1993 Amendments authorized a program of "direct loans" (the "Federal
Direct Student Loan Program") to be originated by schools with funds provided by
the Secretary of Education. Under the Federal Direct Student Loan Program, the
Secretary of Education is directed to enter into agreements with schools, or
origination agents in lieu of schools, to disburse loans with funds provided by
the Secretary. Participation in the program by schools is voluntary. The 1993
amendments established volume goals for the Federal Direct Student Loan Program
during academic years 1994 through 1999. The 1998 Reauthorization Amendments
repealed these goals.
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The loan terms are generally the same under the Federal Direct Student Loan
Program as under the FFEL Program. At the discretion of the Secretary of
Education, students attending schools that participate in the Federal Direct
Student Loan Program (and their parents) may still be eligible for participation
in the FFEL Program, though no borrower could obtain loans under both programs
for the same period of enrollment.
It is difficult to predict the impact of the Federal Direct Student Loan
Program. There is no way to accurately predict the number of schools that will
participate in future years, or, if the Secretary authorizes students attending
participating schools to continue to be eligible for FFEL Program loans, how
many students will seek loans under the Federal Direct Student Loan Program
instead of the FFEL Program. In addition, it is impossible to predict whether
future legislation will eliminate, limit or expand the Federal Direct Student
Loan Program or the FFEL Program.
DESCRIPTION OF THE GUARANTEE AGENCIES
General
The financed Eligible Loans for a series of notes may be guaranteed by any
one or more guarantee agencies identified in the related prospectus supplement.
The following discussion relates to guarantee agencies under the FFEL
Program.
A guarantee agency guarantees loans made to students or parents of students
by lending institutions such as banks, credit unions, savings and loan
associations, some schools, pension funds and insurance companies. A guarantee
agency generally purchases defaulted student loans which it has guaranteed from
its cash and reserves constituting its guarantee fund. A lender may submit a
default claim to the guarantee agency after the student loan has been delinquent
for at least 270 days (unless the first day of delinquency occurred prior to
October 7, 1998, in which case it may be submitted after 180 days of
delinquency). The default claim package must include all information and
documentation required under the FFEL Program regulations and the guarantee
agency's policies and procedures. Under the guarantee agencies' current
procedures, assuming that the default claim package complies with the guarantee
agency's loan procedures manual or regulations, the guarantee agency pays the
lender for a default claim within 90 days of the lender's filing the claim with
the guarantee agency (which generally is expected to be 390 days following the
date a loan becomes delinquent). The guarantee agency will pay the lender
interest accrued on the loan for up to 450 days after delinquency. The guarantee
agency must file a reimbursement claim with the Department of Education within
45 days after the guarantee agency has paid the lender for the default
claim.
In general, a guarantee agency's guarantee fund has been funded principally
by administrative cost allowances paid by the Secretary of Education, guarantee
fees paid by lenders (the cost of which may be passed on to borrowers),
investment income on moneys in the guarantee fund, and a portion of the moneys
collected from borrowers on guaranteed loans that
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have been reimbursed by the Secretary of Education to cover the guarantee
agency's administrative expenses.
The Secretary of Education is required to demand payment on September 1,
2002 of a total of one billion dollars from all the guarantee agencies
participating in the FFEL Program. The amounts to be demanded of each guarantee
agency shall be determined in accordance with formulas included in the Higher
Education Act. Each guarantee agency will be required to deposit funds in a
restricted account in installments, beginning in the federal fiscal year ending
September 30, 1998, to provide for such payment. The Secretary of Education has
made the determinations, and advised the guarantee agencies, of the amounts
required to be so transferred by the guarantee agencies. The 1998
Reauthorization Amendments include significant changes affecting the financial
structure of guarantee agencies in the FFEL Program and their sources of
revenue. These changes will affect the guarantee agencies and their guarantee
funds. See "--1998 Reauthorization Amendments" below.
Additionally, the adequacy of a guarantee agency's guarantee fund to meet
its guarantee obligations with respect to existing student loans depends, in
significant part, on its ability to collect revenues generated by new loan
guarantees. The Federal Direct Student Loan Program may adversely affect the
volume of new loan guarantees. Future legislation may make additional changes to
the Higher Education Act that would significantly affect the revenues received
by guarantee agencies and the structure of the guarantee agency program. There
can be no assurance that relevant federal laws, including the Higher Education
Act, will not be further changed in a manner that may adversely affect the
ability of a guarantee agency to meet its guarantee obligations. For a more
complete description of provisions of the Higher Education Act that relate to
payments described in this paragraph or affect the funding of a guarantee fund,
see "Description of the FFEL Program."
Information relating to the particular guarantee agencies guaranteeing the
financed Eligible Loans will be set forth in the prospectus supplement. Such
information will be provided by the respective guarantee agencies, and neither
such information nor information included in the reports referred to therein has
been verified by, or is guaranteed as to accuracy or completeness by, EdLinc,
the transferor or the underwriters. No representation is made by EdLinc, the
transferor or the underwriters as to the accuracy or adequacy of such
information or the absence of material adverse changes in such information
subsequent to the dates thereof.
Department of Education Oversight
The Higher Education Act gives the Secretary of Education various oversight
powers over guarantee agencies. These include requiring a guarantee agency to
maintain its guarantee fund at a required level and taking various actions
relating to a guarantee agency if its administrative and financial condition
jeopardizes its ability to meet its obligations. These actions include, among
others, providing advances to the guarantee agency, terminating the guarantee
agency's federal reimbursement contracts, assuming responsibility for all
functions of the guarantee agency, and transferring the guarantee agency's
guarantees to another guarantee
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agency or assuming such guarantees. The Higher Education Act provides that a
guarantee agency's guarantee fund (except to the extent applicable to the
"Operating Fund" described below under "--1998 Reauthorization Amendments")
shall be considered to be the property of the United States to be used in the
operation of the FFEL Program or the Federal Direct Student Loan Program, and,
under some circumstances, the Secretary of Education may demand payment of
amounts in the guarantee fund.
Pursuant to Section 432(o) of the Higher Education Act, if the Department
of Education has determined that a guarantee agency is unable to meet its
insurance obligations, the holders of loans guaranteed by such guarantee agency
may submit claims directly to the Department of Education and the Department of
Education is required to pay the full guarantee payment due with respect thereto
in accordance with guarantee claim processing standards no more stringent than
those applied by the guarantee agency. The Department of Education's obligation
to pay guarantee claims directly in this fashion, however, is contingent upon
the Department of Education making the determination referred to above. There
can be no assurance that the Department of Education would ever make such a
determination with respect to a guarantee agency or, if such a determination
were made, that such determination or the ultimate payment of such guarantee
claims would be made in a timely manner. See "Description of the FFEL
Program."
There are no assurances as to the Secretary of Education's actions if a
guarantee agency encounters administrative or financial difficulties or that the
Secretary of Education will not demand that a guarantee agency transfer
additional portions or all of its guarantee fund to the Secretary of
Education.
Federal Agreements
Each guarantee agency and the Secretary of Education have entered into
federal reimbursement contracts pursuant to Section 428(c) of the Higher
Education Act (which include, for older guarantee agencies, a supplemental
contract pursuant to former Section 428A of the Higher Education Act), which
provide for the guarantee agency to receive reimbursement of a portion of
insurance payments that the guarantee agency makes to eligible lenders with
respect to loans guaranteed by the guarantee agency prior to the termination of
the federal reimbursement contracts or the expiration of the authority of the
Higher Education Act. The portion of reimbursement received by the Board of
Regents ranges from 80% to 100% for loans made prior to October 1, 1993; 78% to
98% for loans made on or after October 1, 1993 but before October 1, 1998; and
75% to 95% for loans made on or after October 1, 1998. See "--Effect of Annual
Claims Rate" below. The federal reimbursement contracts provide for termination
under some circumstances and also provide for actions short of termination by
the Secretary of Education to protect the federal interest. See "Description of
the FFEL Program--Contracts with Guarantee Agencies--Federal
Reimbursement."
In addition to guarantee benefits, qualified Stafford Loans (and some
Consolidation Loans) acquired under the FFEL Program benefit from federal
subsidies. Each guarantee agency
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and the Secretary of Education have entered into an interest subsidy agreement
under Section 428(b) of the Higher Education Act, which entitles the holders of
eligible loans guaranteed by the guarantee agency to receive Interest Subsidy
Payments from the Secretary of Education on behalf of some students while the
student is in school, during a six to twelve month grace period after the
student leaves school, and during some deferment periods, subject to the
holders' compliance with all requirements of the Higher Education Act. See
"Description of the FFEL Program--Contracts with Guarantee Agencies--Federal
Interest Subsidy Payments" for a more detailed description of the Interest
Subsidy Payments.
United States Courts of Appeals have held that the federal government,
through subsequent legislation, has the right unilaterally to amend the
contracts between the Secretary of Education and the guarantee agencies
described herein. Amendments to the Higher Education Act since 1986
. abrogated rights of guarantee agencies under contracts with the
Secretary of Education relating to the repayment of advances from the
Secretary of Education,
. authorized the Secretary of Education to withhold reimbursement
payments otherwise due to some guarantee agencies until specified
amounts of such guarantee agencies' reserves had been eliminated,
. added new reserve level requirements for guarantee agencies and
authorized the Secretary of Education to terminate the federal
reimbursement contracts under circumstances that did not previously
warrant such termination, and
. expanded the Secretary of Education's authority to terminate such
contracts and to seize guarantee agencies' reserves.
There can be no assurance that future legislation will not further adversely
affect the rights of the guarantee agencies, or holders of loans guaranteed by a
guarantee agency under such contracts.
Effect of Annual Claims Rate
A guarantee agency's ability to meet its obligation to pay default claims
on financed Eligible Loans will depend on the adequacy of its guarantee fund,
which will be affected by the default experience of all lenders under the
guarantee agency's guarantee program. A high default experience among lenders
participating in a guarantee agency's guarantee program may cause the guarantee
agency's Claims Rate (as defined below) for its guarantee program to exceed the
5% and 9% levels described below, and result in the Secretary of Education
reimbursing the guarantee agency at lower percentages of default claims payments
made by the guarantee agency.
In general, guarantee agencies are currently entitled to receive
reimbursement payments under the federal reimbursement contracts in amounts that
vary depending on the Claims Rate experience of the guarantee agency. The
"Claims Rate" is computed by dividing total default
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claims since the previous September 30 by the total original principal amount of
the guarantee agency's guaranteed loans in repayment on such September 30. On
October 1 of each year the Claims Rate begins at zero, regardless of the
experience in preceding years. For loans made prior to October 1, 1993, if the
Claims Rate remains equal to or below 5% within a given federal fiscal year
(October 1 through September 30), the Secretary of Education is currently
obligated to provide 100% reimbursement; if and when the Claims Rate exceeds 5%
and until such time, if any, as it exceeds 9% during the fiscal year, the
reimbursement rate is at 90%; if and when the Claims Rate exceeds 9% during the
fiscal year, the reimbursement rate for the remainder of the fiscal year is at
80%. For loans made prior to October 1, 1993, each guarantee agency is currently
entitled to at least 80% reimbursement from the Secretary of Education on
default claims that it purchases, regardless of its Claims Rate. The
reimbursement percentages for loans made on or after October 1, 1993, but before
October 1, 1998, are reduced from 100%, 90% and 80% to 98%, 88% and 78%,
respectively. The reimbursement percentages for loans made on or after October
1, 1998 are further reduced to 95%, 85% and 75%, respectively. See "Description
of the FFEL Program--Federal Reimbursement."
1998 Reauthorization Amendments
General
The 1998 Reauthorization Amendments, enacted October 7, 1998, made various
changes to the Higher Education Act affecting guarantee agencies in the FFEL
Program, including the following:
. each guarantee agency had to establish a federal student loan reserve
fund (the "Federal Fund") and an agency operating fund (the "Operating
Fund") prior to December 7, 1998, each of which must be funded,
invested and used as prescribed by the 1998 Reauthorization
Amendments;
. each guarantee agency's sources of revenue have been modified;
. additional reserves of guarantee agencies have been recalled; and
. the Secretary of Education and a guarantee agency may enter into
voluntary flexible agreements in lieu of existing agreements.
The following briefly summarizes these changes.
The Federal Fund and the Operating Fund
Each guarantee agency was required to deposit prior to December 7, 1998,
all funds, securities and other liquid assets contained in its reserve fund into
the Federal Fund that it established, which shall be an account selected by the
guarantee agency with the approval of the Secretary of Education. The Federal
Fund, and any nonliquid asset (such as a building or
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equipment) developed or purchased by the guarantee agency in whole or in part
with federal reserve funds of the guarantee agency, shall be considered to be
property of the United States (prorated based on the percentage of such asset
developed or purchased with federal reserve funds), which must be used in the
operation of the FFEL Program to pay lender guarantee claims, to pay Default
Aversion Fees (as defined below) into the guarantee agency's Operating Fund, and
to the extent permitted, to make transition payments into the Operating Fund and
for other uses permitted by the Secretary of Education's regulations. The
Secretary of Education may direct a guarantee agency, or its officers and
directors, to cease any activity involving expenditures, use or transfer of the
Federal Fund that the Secretary of Education determines is a misapplication,
misuse or improper expenditure of the Federal Fund or the Secretary of
Education's share of such asset. A guarantee agency is required to maintain in
the Federal Fund a current minimum reserve level of at least 0.25 percent of the
total amount of all outstanding loans guaranteed by such Agency (excluding some
loans transferred to the guarantee agency from an insolvent guarantee agency
pursuant to a plan of the Secretary of Education).
After the Federal Fund is established, the guarantee agency is required to
deposit into the Federal Fund all reinsurance payments received from the
Secretary of Education; from amounts collected from defaulted borrowers, a
percentage amount equal to the complement of the reinsurance percentage in
effect when the guarantee payment was made; all insurance premiums collected
from borrowers; all amounts received from the Secretary of Education as payment
for supplemental preclaims assistance activity performed prior to October 7,
1998; 70 percent of administrative cost allowances received from the Secretary
of Education after October 7, 1998 for loans guaranteed prior to that date; and
other receipts specified in regulations of the Secretary of Education. Funds
transferred to the Federal Fund are required to be invested in low-risk
securities and all earnings from the Federal Fund shall be the sole property of
the United States.
Each guarantee agency also was required to establish its Operating Fund
prior to December 7, 1998. The 1998 Reauthorization Amendments include various
transition rules allowing a guarantee agency to transfer transition amounts from
its Federal Fund to its Operating Fund from time to time during the first three
years following the establishment of the Operating Fund for use in the
performance of the guarantee agency's duties under the FFEL Program. In
determining the amounts that it may transfer, the guarantee agency must ensure
that sufficient funds remain in the Federal Fund to pay lender claims within the
required time periods and to meet reserve recall requirements. In general, the
transition rules require repayment to the Federal Fund of transition amounts
transferred therefrom to the Operating Fund.
The Operating Fund shall be considered to be the property of the guarantee
agency, except for transition amounts transferred from the Federal Fund. The
Secretary of Education may not regulate the uses or expenditure of moneys in the
Operating Fund (but may require necessary reports and audits), except during any
period in which transition funds are owed to the Federal Fund. During such
period, moreover, moneys in the Operating Fund may only be used for expenses
related to the FFEL Program.
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Funds deposited into the Operating Fund shall be invested at the discretion
of the guarantee agency in accordance with prudent investor standards (except
that transition amounts transferred to the Operating Fund from the Federal Fund
must be invested in the same manner as amounts in the Federal Fund). After
establishing the Operating Fund, the guarantee agency shall deposit into the
Operating Fund: Loan Processing and Issuance Fees and Account Maintenance Fees
(as such terms are defined below) paid by the Secretary of Education; Default
Aversion Fees; 30 percent of administrative cost allowances received from the
Secretary of Education after October 7, 1998 for loans guaranteed prior to that
date; 24 percent (decreasing to 23 percent on and after October 1, 2003) of
amounts collected on defaulted loans, excluding such collected amounts required
to be transferred to the Federal Fund; and other receipts specified in
regulations of the Secretary of Education.
In general, funds in the Operating Fund shall be used by the guarantee
agency for application processing, loan disbursement, enrollment and repayment
status management, default aversion activities, default collection activities,
school and lender training, financial aid awareness and related outreach
activities, compliance monitoring, and other student financial aid related
activities, as selected by the guarantee agency. The guarantee agency may
transfer funds from the Operating Fund to the Federal Fund, however, such
transfers are irrevocable and transferred funds would become the property of the
United States.
Modifications in Sources of Revenue
The 1998 Reauthorization Amendments made the following modifications with
respect to principal sources of guarantee agency revenues:
. reduced reinsurance payment percentages for loans made on and after
October 1, 1998 as described above under "--Effect of Annual Claims
Rate;"
. the percentage of the amount of collections on defaulted loans that
may be retained by the guarantee agency is reduced from 27 percent to
24 percent, with a further reduction to 23 percent on and after
October 1, 2003;
. establishes a loan processing and issuance fee (the "Loan Processing
and Issuance Fee"), payable by the Secretary of Education on a
quarterly basis, equal to: (i) for loans originated during fiscal
years beginning on or after October 1, 1998 and before October 1,
2003, 0.65 percent of the total principal amount of loans on which
insurance was issued under the FFEL Program during such fiscal year by
the guarantee agency, and (ii) for loans originated during fiscal
years beginning on or after October 1, 2003, 0.40 percent of the total
principal amount of loans on which insurance was issued under the FFEL
Program during such fiscal year by the guarantee agency;
. eliminates the discretionary administrative cost allowances or
expenses which had been paid at 0.85 percent of such amount;
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. establishes a default aversion fee (the "Default Aversion Fee")
relating to default aversion activities required to be undertaken by
the guarantee agency, payable on a monthly basis from the Federal Fund
to the Operating Fund, in an amount equal to 1 percent of the total
unpaid principal and accrued interest on a loan for which a default
claim has not been paid as a result of the loan being brought into
current repayment status on or before the 300/th/ day after the loan
becomes 60 days delinquent; and
. establishes an account maintenance fee (the "Account Maintenance
Fee"), payable by the Secretary of Education on a quarterly basis
(unless nationwide caps are met, in which case the fee shall be
transferred from the Federal Fund to the Operating Fund), equal to (i)
for fiscal years 1999 and 2000, 0.12 percent of the original principal
amount of outstanding loans on which insurance was issued under the
FFEL Program, and (ii) for fiscal years 2001, 2002 and 2003, 0.10
percent of the original principal amount of outstanding loans on which
insurance was issued under the FFEL Program.
Additional Recalls of Reserves
The 1998 Reauthorization Amendments direct the Secretary of Education to
demand payment from all the guarantee agencies participating in the FFEL Program
of amounts held in their Federal Funds in fiscal years 2002 aggregating $85
million; 2006 aggregating $82.5 million; and 2007 aggregating $82.5 million.
The amounts demanded of each guarantee agency are determined in accordance with
formulas included in Section 422(i) of the Higher Education Act. If a guarantee
agency charges the maximum permitted 1 percent insurance premium, however, the
recall may not result in the depletion of such guarantee agency's reserve funds
below an amount equal to the amount of lender claim payments paid during the 90
days prior to the date of return.
Voluntary Flexible Agreements
The 1998 Reauthorization Amendments authorize the Secretary of Education to
enter into agreements with guarantee agencies which modify or waive many of the
requirements of the FFEL Program covered under existing agreements and otherwise
required by the Higher Education Act, including the sources and uses of revenues
and funds of guarantee agencies. In July 1999, the Secretary of Education
commenced a process to select up to six guarantee agencies to enter into
voluntary flexible agreements by December 1, 1999. The 1998 Reauthorization
Amendments authorize the Secretary of Education to enter into voluntary flexible
agreements with up to six guarantee agencies during federal fiscal years 1999,
2000 and 2001, and with any Guaranty Agency or consortium thereof beginning in
federal fiscal year 2002.
DESCRIPTION OF THE ALTERNATIVE LOAN PROGRAMS
To the extent described in the prospectus supplement for a series, the
proceeds of such series may be used to purchase financed Alternative Loans
issued under one or more Alternative Loan Programs. The Alternative Loan
Programs will be specifically identified in the prospectus
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supplement with respect to such series. The prospectus supplement may specify a
maximum percentage of financed Alternative Loans that may comprise part of the
financed Eligible Loans securing the notes. This summary identifies
characteristics common to most Alternative Loan Programs but is qualified by the
specific disclosure set forth in the related prospectus supplement.
Alternative Loans made under most Alternative Loan Programs are based on
the credit of the borrower or his or her parents or co-borrowers. In general,
applicants are required to have a minimum annual income and are evaluated as to
creditworthiness. In determining whether a student or co-borrower is
creditworthy, a credit bureau report is obtained for each applicant, including
the student. The various Alternative Loan Programs have different standards as
to what constitutes a satisfactory credit history.
Eligible post-secondary borrowers of an Alternative Loan often are required
to be engaged in a course of study at a qualifying educational institution,
which may include two-year colleges, four-year colleges and for-profit schools.
Certain Alternative Loan Programs are specifically designed for graduate or
professional students, or for students attending elementary or secondary private
schools. The institutions generally must be located in the United States or
Canada. Often, the borrower (or a co-applicant) must be a citizen or resident
of the United States. Some Alternative Loans may be a consolidation of existing
Alternative Loans.
The amount that may be borrowed under an Alternative Loan Program varies
based upon the Alternative Loan Program. Typically, borrowers must borrow at
least a minimum amount with respect to any academic year, and may not borrow
more than a maximum amount per academic year, or a maximum amount under the
Alternative Loan Program. However, the amount of the Alternative Loan plus
other financial aid received by a student, normally may not exceed the cost of
education, as determined by the school.
A loan origination fee typically is deducted from the Alternative Loan
proceeds. All or a portion of this fee is paid to the originator of the
Alternative Loan and set aside as a reserve against possible default.
The interest rate on an Alternative Loan varies based upon the Alternative
Loan Program and can either be fixed or variable. Floating rates may be based
upon the prime rate or the T-Bill Rate, or some other objective standard.
Interest typically accrues at a rate equal to the index plus a margin (sometimes
subject to a maximum rate per annum), with the interest rate being adjusted
periodically.
Alternative Loan Programs usually permit a borrower to defer the repayment
of principal and, in some cases, interest, while the student is in school (often
up to a maximum number of years). In such event, principal repayments
(including deferred interest) typically begin within six months after the
student has left school. In some cases, repayment of an Alternative Loan may
be required to commence within 45 to 90 days following the borrowing. Most
Alternative Loan Programs permit prepayment of the Alternative Loan at any time
without penalty.
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Borrowers typically may schedule repayment over a 10- to 30-year period, subject
to a minimum monthly payment obligation.
Alternative Loan Programs typically provide for an origination fee (usually
4% to 6% of the amount of the loan) to be paid at the time of origination of the
loan.
DESCRIPTION OF THE NOTES
General
The notes will be issued in separate series pursuant to the terms of an
indenture of trust, as supplemented by a supplemental indenture relating to each
series, which will be entered into between EdLinc and the trustee. This
indenture of trust, as supplemented and amended, is referred to in this
prospectus as the indenture. Any references in this prospectus to notes
generally, unless otherwise specified, are to all notes issued under the
Indenture. Any references in this prospectus to notes of a particular class,
unless otherwise specified, are to all notes of that class. Even though notes
will be issued in different series, they will all be part of the same issue,
secured by and payable from a common pool of assets comprising the Trust Estate
under the indenture, subject to certain priorities and exceptions as described
in this prospectus. Thus, all notes of a given class will have the same right
to be paid from the assets securing the notes as all other noteholders of the
same class, including noteholders of other series, except in those cases where a
form of credit enhancement has been provided only for the notes of a particular
series. The following summary describes the material terms of the notes. The
summary does not purport to be complete and is qualified in its entirety by
reference to the provisions of the notes, the indenture and the applicable
supplemental indenture, which provisions are incorporated by reference
herein.
General Terms of Notes
Each series of notes will be created by and issued pursuant to a
supplemental indenture, which will designate the notes of that series as Senior
Notes, Subordinate Notes or Class C Notes.
The stated maturities and sinking fund payment dates of all notes will
occur on a June 1 or a December 1, unless otherwise specified in the related
supplemental indenture with respect to any series of variable rate notes (which
are notes bearing interest at a rate which varies from time to time in
accordance with a prescribed formula or method of determination). All EdLinc
swap payments and other payments to be made by EdLinc to credit facility
providers will be payable on a regularly scheduled interest payment date.
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 Other Beneficiary is due on a day other than a business day,
then payment thereof may be made on the next
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succeeding business day with the same force and effect as if made on the date
due and no interest will accrue for the intervening period.
In the event a default occurs in the payment of any interest on any note,
interest will 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.
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 Indenture Obligations are limited obligations of EdLinc,
payable solely from the revenues and assets of EdLinc pledged therefor under the
indenture.
Issuance of Notes
Notes will be issued under the indenture only for the purposes of (a)
providing funds for the purchase or origination of Eligible Loans, (b) refunding
at or before their stated maturity any or all outstanding notes, 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.
At any time, one or more series of notes may be issued upon compliance with
conditions specified in the indenture (including the requirement that each
Rating Agency shall have confirmed that no outstanding ratings on any of the
Outstanding Unenhanced Senior or Subordinate Notes will be reduced or withdrawn
as a result of such issuance) and any additional conditions specified in a
supplemental indenture.
It is expected that each class of the notes of a series will initially be
represented by one or more notes registered in the name of the nominee of DTC
(together with any successor depository selected by EdLinc, the "Securities
Depository"). Notes generally will be available for purchase in denominations
of $100,000 and integral multiples thereof (for variable rate notes) or $5,000
and integral multiples thereof (for fixed rate notes), as the case may be, in
book-entry form. EdLinc has been informed by DTC that DTC's nominee will be
Cede & Co. Accordingly, Cede & Co. is expected to be the holder of record of
the notes. Unless and until definitive notes are issued under the limited
circumstances described herein or in the accompanying prospectus supplement, no
noteholder will be entitled to receive a physical certificate representing his
note. All references herein to actions by noteholders refer to actions taken by
DTC upon instructions from its participating organizations (the "Participants")
and all references herein to distributions, notices, reports and statements to
noteholders refer to distributions, notices, reports and statements to DTC or
Cede & Co., as the registered holder of the notes, for distribution to
noteholders in accordance with DTC's procedures with respect thereto. See "--
Book-Entry Registration" and "--Definitive Notes" below.
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Comparative Security of Noteholders and Other Beneficiaries
The Senior Notes are equally and ratably secured under the indenture with
any Other Senior Obligations. The Senior Obligations have payment and other
priorities over the Subordinate Notes, the Other Subordinate Obligations and the
Class C Notes. The Subordinate Notes are equally and ratably secured under the
indenture with any Other Subordinate Obligations. The Subordinate Obligations
have payment and other priorities over the Class C Notes. See "Source of
Payment and Security for the Notes--Priorities." The Senior Notes and the
Subordinate Notes are each payable from the Note Fund and are secured by the
Reserve Fund. The Class C Notes are payable solely from the Surplus Fund.
EdLinc may at any time issue a series of notes, either as Senior Notes,
Subordinate Notes or Class C Notes or any combination thereof. In connection
with any such Senior Notes or Subordinate Notes, EdLinc may enter into a swap
agreement or credit enhancement facility as it deems in its best interest, and
the swap counterparty or the credit facility provider may become a Senior
Beneficiary or a Subordinate Beneficiary, as herein described. See "Source of
Payment and Security for the Notes--Additional Indenture Obligations."
Call for Redemption, Prepayment or Purchase of Notes; Senior Asset Requirement
No call for redemption (other than mandatory sinking fund redemption of
Senior Notes), prepayment of principal or purchase (other than on a Purchase
Date or mandatory tender date) of notes by the trustee will be effective under
the indenture unless, prior to the trustee giving notice of call for redemption,
determining that such prepayment will be made or soliciting such purchase,
EdLinc furnishes the trustee a certificate to the effect that:
. if Senior Notes are to be called for redemption, prepaid or purchased,
either (A) after giving effect thereto, the Senior Asset Requirement
will be met, or (B) (i) prior thereto, the Senior Asset Requirement is
not being met, (ii) no Subordinate Notes or Class C Notes will be
called for redemption, prepaid or purchased, and (iii) after giving
effect thereto, the Senior Percentage will be greater than it would
have been without such call for redemption, prepayment or
purchase;
. if Subordinate Notes are to be called for redemption, prepaid or
purchased, after giving effect thereto, the Senior Asset Requirement
will be met; and
. if Class C Notes are to be called for redemption, prepaid or
purchased, after giving effect thereto, the Senior Asset Requirement
will be met and there shall be no deficiency then existing in the Note
Fund or the Reserve Fund.
In general, compliance with the foregoing conditions is determined as of
the date of selection of notes to be called for redemption or as of the date on
which moneys are transferred to the Retirement Account to make any prepayment
and any failure to satisfy such conditions as of the redemption date or
prepayment date, as applicable, will not affect such determination;
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provided that, if notes have been defeased and are to be called for redemption,
compliance with such conditions will be determined on the date of defeasance
instead of as of the date of selection. See "--Discharge of Notes and Indenture"
below.
Any election to call notes for redemption or to prepay notes may also be
conditioned upon such additional requirements as may be set forth in the
supplemental indenture authorizing the issuance of such notes.
Interest
Interest will accrue on the principal balance of each class of notes of a
series at a specified rate per annum. Interest is expected to accrue initially
from and including the closing date on which the related series was issued, or
some other specified date, through and including the date set forth in the
related prospectus supplement. Thereafter, except as otherwise set forth in the
related prospectus supplement, interest will accrue for interest periods (which,
with respect to a series and class of notes, is the period of time in which
interest may accrue) consisting of (1) with respect to notes that bear interest
based upon LIBOR (which notes are referred to in this prospectus as LIBOR rate
notes), generally a one-month or three-month period beginning and ending on the
dates set forth in the related prospectus supplement, (2) with respect to notes
that bear interest at an auction rate (which notes are referred to in this
prospectus as auction rate notes), as set forth in the related prospectus
supplement, (3) with respect to fixed rate notes (which are notes that bear
interest at a fixed rate), the six-month periods ending on May 31 and November
30, or (4) with respect to notes accruing interest based on some other method,
the period set forth in the related prospectus supplement. Interest on each
class of notes of each series will be payable on the interest payment dates
described in the applicable prospectus supplement.
If on any interest rate determination date, an auction for a class of
auction rate notes of a series is not held for any reason, then the interest
rate for such class of notes will be the Net Loan Rate or such other rate as may
be described in a prospectus supplement. The interest rate on each class of
notes bearing interest based upon a method other than LIBOR or an auction rate
will be described in the related prospectus supplement.
With respect to auction rate notes, EdLinc may, from time to time, change
the length of one or more auction periods (which are the interest periods
applicable to auction rate notes) to conform with then current market practice
or accommodate other economic or financial factors that may affect or be
relevant to the length of the auction period or any class interest rate. An
auction period adjustment will not cause an auction period to be less than 7
days nor more than one year and will not be allowed unless conditions specified
in the auction procedures described in the related prospectus supplement are
satisfied. If an auction period adjustment is made, the intervals between
interest payment dates will be adjusted accordingly.
Payment of Interest. Payments of interest will be made on each interest
payment date, as specified in the accompanying prospectus supplement. Interest
payments on the notes will be
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made from amounts available therefor in the Interest Account (including amounts
transferred thereto from other funds and accounts under the indenture).
Carry-Over Amounts. If set forth in a prospectus supplement, with respect
to any class of notes of a series for any interest period the LIBOR rate plus
the applicable margin or the auction rate, as the case may be, exceeds the Net
Loan Rate, the applicable interest rate for such class for such interest period
will be the Net Loan Rate, and the excess of the amount of interest on such
class that would have accrued at a rate equal to the LIBOR rate plus any
applicable margin or the auction rate, as appropriate, over the amount of
interest on such class actually accrued at the Net Loan Rate will accrue as the
Carry-Over Amount with respect to such class of notes. Such determination of
the Carry-Over Amount will be made separately for each class of each series of
notes. The Carry-Over Amount on any class of notes will bear interest at a rate
equal to the rate set forth in the related prospectus supplement, from the
interest payment date for the interest period for which the Carry-Over Amount
was calculated until paid.
Carry-Over Amounts will be paid as described under "Description of the
Indenture--Funds and Accounts--Interest Account."
Principal
All payments of principal of notes of a series will be made in amounts
determined as set forth in the related prospectus supplement and will be paid at
the times and will be allocated among the classes of notes of such series in the
order and amounts, all as specified in the related prospectus supplement.
Determination of LIBOR
Pursuant to the indenture, for each interest period after the initial
interest period, the trustee will determine the applicable LIBOR rate for
purposes of calculating the interest rate on the LIBOR rate notes for each given
interest period on a specified interest rate determination date preceding the
commencement of each interest period.
"LIBOR" means the rate of interest per annum equal to the London interbank
offered rate for deposits in U.S. dollars having the applicable maturity (i.e.,
one month or three months) commencing on the related interest rate determination
date (the "Index Maturity") which appears on Telerate Page 5 as of 11:00 a.m.,
London time, on such interest rate determination date. If such rate does not
appear on Telerate Page 5, the rate for that day will be determined by reference
to the Reuters Screen LIBOR Page. If such rate does not appear on Telerate Page
5 or the Reuters Screen LIBOR Page, the rate for that day will be determined on
the basis of the rates at which deposits in U.S. dollars, having the Index
Maturity and in a principal amount of not less than U.S. $1,000,000, are offered
at approximately 11:00 a.m., London time, on such interest rate determination
date to prime banks in the London interbank market by four reference banks
selected by the trustee or an agent of the trustee. The trustee or a specified
agent will request the principal London office of each of such LIBOR rates to
provide a quotation of its rate. If at least
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two such quotations are provided, LIBOR for that day will be the arithmetic mean
(rounded upwards, if necessary, to the nearest .01%) of the quotations. If fewer
than two quotations are provided, LIBOR for that day will be the arithmetic mean
(rounded upwards, if necessary, to the nearest .01%) of the rates quoted by
three major banks in New York City, selected by the trustee or a specified
agent, as applicable, at approximately 11:00 a.m., New York City time, on such
interest rate determination date for loans in U.S. dollars to leading European
banks having the Index Maturity and in a principal amount equal to an amount of
not less than U.S. $1,000,000; provided, however, that if the banks selected as
aforesaid are not quoting as mentioned in this sentence, LIBOR in effect for the
applicable interest period will be LIBOR in effect for the previous interest
period.
Auction Procedures
A series of notes may contain one or more classes of auction rate notes.
The following discussion summarizes procedures that will be used in determining
the interest rates on the auction rate notes. If any auction rate notes are
included in a series, the prospectus supplement will contain a more detailed
description of these procedures. Prospective investors in the auction rate
notes should read carefully the following summary, along with the more detailed
description in the prospectus supplement.
The interest rate on each class of auction rate notes will be determined
periodically (generally, for periods ranging from 7 days to one year) by means
of a "Dutch Auction." In this Dutch Auction, investors and potential investors
submit orders through an eligible broker/dealer as to the principal amount of
auction rate notes such investors wish to buy, hold or sell at various interest
rates. The broker/dealers submit their clients' orders to the auction agent,
who processes all orders submitted by all eligible broker/dealers and determines
the interest rate for the upcoming interest period. The broker/dealers are
notified by the auction agent of the interest rate for the upcoming interest
period and are provided with settlement instructions relating to purchases and
sales of auction rate notes.
In the auction procedures, the following types of orders may be
submitted:
. Bid/Hold Orders - the minimum interest rate that a current investor is
willing to accept in order to continue to HOLD some or all of its
auction rate notes for the upcoming interest period;
. Sell Orders - an order by a current investor to SELL a specified
principal amount of auction rate notes, regardless of the upcoming
interest rate; and
. Potential Bid Orders - the minimum interest rate that a potential
investor (or a current investor wishing to purchase additional auction
rate notes) is willing to accept in order to BUY a specified principal
amount of auction rate notes.
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If an existing investor does not submit orders with respect to all its
auction rate notes of the applicable class, the investor will be deemed to have
submitted a Hold Order at the new interest rate for that portion of the auction
rate notes for which no order was received.
In connection with each auction, auction rate notes will be purchased and
sold between investors and potential investors at a price equal to their then
outstanding principal balance (i.e., par) plus any accrued interest. The
following example helps illustrate how the above-described procedures are used
in determining the interest rate on the auction rate notes.
(a) Assumptions:
1. Denominations (Units) = $100,000
2. Interest Period = 28 Days
3. Principal Amount Outstanding = $50 Million (500 Units)
(b) Summary of All Orders Received For The Auction
BID/HOLD ORDERS SELL ORDERS POTENTIAL BID ORDERS
10 Units at 2.90% 50 Units Sell 20 Units at 2.95%
30 Units at 3.02% 50 Units Sell 30 Units at 3.00%
60 Units at 3.05% 100 Units Sell 50 Units at 3.05%
100 Units at 3.10% 50 Units at 3.10%
100 Units at 3.12% 50 Units at 3.11%
50 Units at 3.14%
100 Units at 3.15%
Total units under existing Bid/Hold Orders and Sell Orders must always
equal issue size (in this case 500 Units).
(c) Auction Agent Organizes Orders In Ascending Order
<TABLE>
<CAPTION>
Cumulative Cumulative
Order Number Total Order Number Total
Number of Units (Units) % Number of Units (Units) %
<S> <C> <C> <C> <C> <C> <C>
1 10(W) 10 2.90% 7 100(W) 300 3.10%
2 20(W) 30 2.95% 8 50(W) 350 3.10%
3 30(W) 60 3.00% 9 50(W) 400 3.11%
4 30(W) 90 3.02% 10 100(W) 500 3.12%
5 60(W) 150 3.05% 11 50(L) 3.14%
6 50(W) 200 3.05% 12 100(L) 3.15%
</TABLE>
________________________
(W) Winning Order (L) Losing Order
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Order #10 is the order that clears the market of all available units. All
winning orders are awarded the winning rate (in this case, 3.12%) as the
interest rate for the next interest period. Multiple orders at the winning rate
are allocated units on a pro rata basis. Notwithstanding the foregoing, in no
event will the interest rate exceed the lesser of the Net Loan Rate or the
maximum auction rate specified in the related prospectus supplement (the
"Maximum Auction Rate").
The above example assumes that a successful auction has occurred (i.e., all
Sell Orders and all Bid/Hold Orders below the new interest rate were fulfilled).
In some circumstances, there may be insufficient Potential Bid Orders to
purchase all the auction rate notes offered for sale. In such circumstances,
the interest rate for the upcoming interest period will equal the lesser of the
Net Loan Rate and the Maximum Auction Rate. Also, if all the auction rate notes
are subject to Hold Orders (i.e., each holder of auction rate notes wishes to
continue holding its auction rate notes, regardless of the interest rate) the
interest rate for the upcoming interest period will equal the lesser of the Net
Loan Rate and the rate at which all investors are willing to hold the notes.
Book-Entry Registration
The description which follows of the procedures and record keeping with
respect to beneficial ownership interests in a series of notes, payment of
principal of and interest on the notes to DTC Participants, Cedel Bank
Participants and Euroclear Participants or to purchasers of the notes,
confirmation and transfer of beneficial ownership interests in the notes, and
other securities-related transactions by and between DTC, Cedel Bank, Euroclear,
DTC Participants, Cedel Bank Participants, Euroclear Participants and Beneficial
Owners, is based solely on information furnished by DTC, Cedel Bank and
Euroclear and has not been independently verified by EdLinc or the underwriters.
If specified in the accompanying prospectus supplement, noteholders may
hold their certificates through DTC (in the United States) or Cedel Bank or
Euroclear (in Europe) if they are participants of such systems, or indirectly
through organizations that are participants in such systems.
DTC will hold the global notes. Cedel Bank and Euroclear will hold omnibus
positions on behalf of the Cedel Bank Participants and the Euroclear
Participants, respectively, through customers securities accounts in Cedel
Bank's and Euroclear's names on the books of their respective depositories
(collectively, the "Depositories") which in turn will hold such positions in
customers' securities accounts in the Depositories' names on the books of DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities for its Participants and facilitates the clearance and
settlement among DTC Participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic book-entry changes in
DTC Participants' accounts,
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thereby eliminating the need for physical movement of securities certificates.
DTC Participants include securities brokers and dealers, banks, trust companies,
clearing corporations and other organizations. Indirect access to the DTC system
is also available to others such as securities brokers and dealers, banks, and
trust companies that clear through or maintain a custodial relationship with a
DTC Participant, either directly or indirectly ("Indirect Participants"). The
rules applicable to DTC and its DTC Participants are on file with the SEC.
Transfers between DTC Participants will occur in accordance with DTC rules.
Transfers between Cedel Bank Participants and Euroclear Participants will occur
in the ordinary way in accordance with their applicable rules and operating
procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Cedel Bank
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by its depository; however, such cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in such system in accordance with its rules and
procedures and within its established deadlines (European time). The relevant
European international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to its depository to take action
to effect final settlement on its behalf by delivering or receiving securities
in DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. Cedel Bank Participants and
Euroclear Participants may not deliver instructions directly to the
Depositories.
Because of time-zone differences, credits of securities in Cedel Bank or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant Cedel
Bank Participant or Euroclear Participant on such business day. Cash received
in Cedel Bank or Euroclear as a result of sales of securities by or through a
Cedel Bank Participant or a Euroclear Participant to a DTC Participant will be
received with value on the DTC settlement date but will be available in the
relevant Cedel Bank or Euroclear cash account only as of the business day
following settlement in DTC. Day traders that use Cedel Bank or Euroclear and
that purchase the globally offered notes from DTC Participants for delivery to
Cedel Bank Participants or Euroclear Participants should note that these trades
may fail on the sale side unless affirmative actions are taken. Participants
should consult with their clearing system to confirm that adequate steps have
been taken to assure settlement.
Purchases of notes under the DTC system must be made by or through DTC
Participants, which will receive a credit for the notes on DTC's records. The
ownership interest of each actual owner of a note (a "Beneficial Owner") is in
turn to be recorded on the DTC Participants' and Indirect Participants' records.
Beneficial Owners will not receive written confirmation from DTC of their
purchase, but Beneficial Owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their
holdings, from the DTC Participant or Indirect Participant through which the
Beneficial Owner entered into the
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transaction. Transfers of ownership interests in the notes are to be
accomplished by entries made on the books of DTC Participants acting on behalf
of Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interest in notes, except when use of the book-
entry system for the notes is discontinued.
To facilitate subsequent transfers, all notes deposited by DTC Participants
with DTC are registered in the name of DTC's nominee, Cede & Co. The deposit of
notes with DTC and their registration in the name of Cede & Co. effects no
change in beneficial ownership. DTC has no knowledge of the actual Beneficial
Owners of the notes; DTC's records reflect only the identity of the DTC
Participants to whose accounts such notes are credited, which may or may not be
the Beneficial Owners. The DTC Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to DTC Participants,
by DTC Participants to Indirect Participants, and by DTC Participants and
Indirect Participants to Beneficial Owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to the notes.
Under its usual procedures, DTC mails an omnibus proxy to the issuer as soon as
possible after the record date, which assigns Cede's consenting or voting rights
to those DTC Participants to whose accounts the notes are credited on the record
date (identified in a listing attached thereto).
Principal and interest payments on the notes will be made to DTC. DTC's
practice is to credit DTC Participants' accounts on the applicable interest or
principal payment date in accordance with their respective holdings shown on
DTC's records unless DTC has reason to believe that it will not receive payment
on such interest or principal payment date. Payments by DTC Participants to
Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers in
bearer form or registered in "street name" and will be the responsibility of
such DTC Participant and not of DTC, the trustee or EdLinc, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of principal and interest to DTC is the responsibility of the trustee,
disbursement of such payments to DTC Participants will be the responsibility of
DTC, and disbursement of such payments to Beneficial Owners will be the
responsibility of DTC Participants and Indirect Participants.
DTC may discontinue providing its services as securities depository with
respect to the notes at any time by giving reasonable notice to EdLinc or the
trustee. Under such circumstances, if a successor securities depository is not
obtained, definitive notes are required to be printed and delivered. EdLinc may
decide to discontinue use of the system of book-entry transfers through DTC (or
a successor securities depository). In that event, definitive notes will be
delivered to noteholders. See " --Definitive Notes" below.
Cedel Bank is a limited liability company (a societe anonyme) organized
under Luxembourg law that operates as a professional depository. Cedel Bank
holds securities for its
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participating organizations ("Cedel Bank Participants") and facilitates the
clearance and settlement of securities transactions between Cedel Bank
Participants through electronic book-entry changes in accounts of Cedel Bank
Participants, thereby eliminating the need for physical movement of
certificates. Transactions may be settled in Cedel Bank in any of 40 currencies,
including United States dollars. Cedel Bank provides to its Cedel Bank
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. Cedel Bank interfaces with domestic markets in several
countries. As a professional depository, Cedel Bank is subject to regulation by
the Luxembourg Monetary Institute. Cedel Bank Participants are recognized
financial institutions around the world, including underwriters, securities
brokers and dealers, banks, trust companies, clearing corporations and other
organizations and may include the underwriters of any series of notes. Indirect
access to Cedel Bank is also available to others, such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Cedel Bank Participant, either directly or indirectly.
The Euroclear System was created in 1968 to hold securities for
participants of the Euroclear System ("Euroclear Participants") and to clear and
settle transactions between Euroclear Participants through simultaneous
electronic book-entry delivery against payment, thereby eliminating the need for
physical movement of certificates and any risk from lack of simultaneous
transfers of securities and cash. Transactions may now be settled in any of 39
currencies, including United States dollars. The Euroclear System includes
various other services, including securities lending and borrowing and
interfaces with domestic markets in 25 countries generally similar to the
arrangements for cross-market transfers with DTC described above. The Euroclear
System is operated by Morgan Guaranty Trust Company of New York, Brussels,
Belgium office (the "Euroclear Operator" or "Euroclear"), under contract with
Euroclear Clearance System, Societe Cooperative, a Belgian cooperative
corporation (the "Cooperative"). All operations are conducted by the Euroclear
Operator, and all Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear Operator, not the Cooperative. The
Cooperative Board establishes policy for the Euroclear System. Euroclear
Participants include banks (including central banks), securities brokers and
dealers and other professional financial intermediaries and may include the
underwriters of any series of notes. Indirect access to the Euroclear System is
also available to other firms that maintain a custodial relationship with a
Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it
is regulated and examined by the Board of Governors of the Federal Reserve
System and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System (collectively, the "Terms
and Conditions"). The Terms and Conditions govern transfers of securities and
cash within the Euroclear System, withdrawal of securities and cash from the
Euroclear System, and receipts of payments with respect to securities in the
Euroclear System. All securities in the Euroclear System are held on a fundable
basis without
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attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the Terms and Conditions only on behalf of
Euroclear Participants and has no record of or relationship with persons holding
through Euroclear Participants.
The Euroclear Operator has advised as follows: Under Belgian law, investors
that are credited with securities on the records of the Euroclear Operator have
a co-property right in the fungible pool of interests in securities on deposit
with the Euroclear Operator in an amount equal to the amount of interests in
securities credited to their accounts. In the event of the insolvency of the
Euroclear Operator, Euroclear Participants would have a right under Belgian law
to the return of the amount and type of interests in securities credited to
their accounts with the Euroclear Operator. If the Euroclear Operator did not
have a sufficient amount of interests in securities on deposit of a particular
type to cover the claims of all Euroclear Participants credited with such
interests in securities on the Euroclear Operator's records, all Euroclear
Participants having an amount of interests in securities of such type credited
to their accounts with the Euroclear Operator would have the right under Belgian
law to the return of their pro-rata share of the amount of interests in
securities actually on deposit. Under Belgian law, the Euroclear Operator is
required to pass on the benefits of ownership in any interests in securities on
deposit with it (such as dividends, voting rights and other entitlements) to any
person credited with such interests in securities on its records.
Distributions with respect to notes held through Cedel Bank or Euroclear
will be credited to the cash accounts of Cedel Bank Participants or Euroclear
Participants in accordance with the relevant system's rules and procedures, to
the extent received by its depository. Such distributions will be subject to
tax reporting in accordance with relevant United States tax laws and
regulations. See "Federal Income Tax Consequences." Cedel Bank or the
Euroclear Operator, as the case may be, will take any other action permitted to
be taken by a noteholder under the Agreement on behalf of a Cedel Bank
Participant or Euroclear Participant only in accordance with its relevant rules
and procedures and subject to its depository's ability to effect such actions on
its behalf through DTC.
Although DTC, Cedel Bank and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of notes among participants of DTC,
Cedel Bank and Euroclear, they are under no obligation to perform or continue to
perform such procedures and such procedures may be discontinued at any time.
Definitive Notes
If set forth in the accompanying prospectus supplement, notes of any series
will be issued in fully registered, certificated form to Beneficial Owners or
their nominees rather than to DTC or its nominee, if (1) the notes of such
series are not eligible for the services of DTC, (2) DTC determines to
discontinue providing its services with respect to the notes of such series or
(3) EdLinc determines that a system of book-entry transfers for the notes of
such series, or the continuation thereof, through DTC is not in the best
interest of the Beneficial Owners or EdLinc. In that event, EdLinc may either
identify another qualified securities depository or direct or cause note
certificates for such series to be delivered to Beneficial Owners thereof or
their nominees
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and, if certificates are delivered to the Beneficial Owners, the Beneficial
Owners or their nominees, upon authentication of the notes of such series in
authorized denominations and registration thereof in the Beneficial Owners' or
nominees' names, will become the holders of such notes for all purposes. In that
connection, the trustee is to mail an appropriate notice to the securities
depository for notification to DTC Participants and Beneficial Owners of the
substitute securities depository or the issuance of note certificates to
Beneficial Owners or their nominees, as applicable.
Distribution of principal of and interest on the notes will be made by the
trustee directly to noteholders of definitive notes in accordance with the
procedures set forth herein and in the indenture.
Definitive notes will be transferable and exchangeable at the offices of
the registrar for the notes, which will initially be the trustee. No service
charges will be imposed for any registration of transfer or exchange, but the
registrar may require payment of a sum sufficient to cover any tax or other
governmental charge imposed in connection therewith.
Denomination and Payment
The notes of each series will be issued in the denominations specified in
the related prospectus supplement.
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 not
a regularly scheduled interest payment date, will be payable in lawful money of
the United States of America upon, except as otherwise provided in the indenture
with respect to a Securities Depository, presentation and surrender of such
notes at the principal office of the trustee, as paying agent with respect to
the notes, or a duly appointed successor paying agent. Interest on each series
of notes will be payable on each regularly scheduled interest payment date with
respect to such series, except as otherwise provided in the indenture with
respect to a Securities Depository, by check or draft drawn upon the paying
agent and mailed to the person who is the registered holder thereof as of the
regular record date for such interest payment date, or, if provided in the
related prospectus supplement, by electronic transfer 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") will cease to
be payable to the person who is the registered holder thereof at the close of
business on the regular record date and will be payable to the person who is the
registered holder thereof at the close of business on a special record date
established by the trustee for the payment of any such Defaulted Interest. Such
special record date will be fixed by the trustee whenever moneys become
available for payment of the Defaulted Interest. All payments of principal of
and interest on the notes will be made in lawful money of the United States of
America.
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SOURCE OF PAYMENT AND SECURITY FOR THE NOTES
General
The notes will be limited obligations of EdLinc payable solely from the
Trust Estate created under the indenture, consisting of revenues and funds and
accounts pledged under the indenture. The pledged revenues include:
. payments of interest and principal made by obligors of financed student
loans;
. guarantee payments made by the guarantee agencies to or for the account
of the trustee as the holder of defaulted financed FFELP Loans;
. Interest Subsidy Payments and Special Allowance Payments made by the
Department of Education to or for the account of the trustee as the
holder of financed FFELP Loans (excluding any Special Allowance Payments
and Interest Subsidy Payments accrued prior to the date of financing the
related FFELP Loan);
. income from investment of moneys in the pledged funds and accounts;
. payments from a swap counterparty under a swap agreement;
. proceeds of any sale or assignment by EdLinc of any financed student
loans; and
. available note proceeds. In addition, the pledged revenues with respect
to one or more series of notes may include payments made by a credit
facility provider pursuant to a credit enhancement facility.
The principal of, premium, if any, and interest on the notes will be
secured by a pledge of and a security interest in all rights, title, interest
and privileges of EdLinc (1) with respect to financed student loans, in, to and
under any servicing agreement, the student loan purchase agreements, the
Guarantee Agreements and the federal reimbursement contracts; (2) in, to and
under all financed student loans (including the evidences of indebtedness
thereof and related documentation), any swap agreement and (subject to the
limitations therein or in the indenture limiting the benefits thereunder to the
notes of one or more series) any credit enhancement facility; and (3) in and to
the proceeds from the sale of the notes (until expended for the purpose for
which issued) and the pledged revenues, moneys, evidences of indebtedness and
securities in the pledged funds and accounts. The security interest in revenues,
moneys, evidences of indebtedness and, unless registered in the name of the
trustee, securities payable into the various funds and accounts does not
constitute a perfected security interest until received by the trustee. Certain
pledged revenues are subject to withdrawal from the pledged funds and accounts,
to prior applications to pay costs of issuance, administrative expenses and Note
Fees, and to other applications as described under "Summary of the Indenture--
Funds and Accounts."
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Additional Indenture Obligations
The indenture provides that, upon the satisfaction of specified conditions,
EdLinc may issue one or more series of notes thereunder. Notes may be issued as
Senior Notes on a parity basis with any previously issued Senior Notes; as
Subordinate Notes on a parity basis with any previously issued Subordinate
Notes; or as Class C Notes on a subordinate basis to the Senior Notes and the
Subordinate Notes. In addition, EdLinc may enter into swap agreements and may
obtain credit enhancement facilities from one or more credit facility providers.
EdLinc's obligations under the swap agreements, and its obligations to pay the
premiums or fees of credit facility providers and, if applicable, to reimburse
payments made under credit enhancement facilities, may be parity obligations
with the Senior Notes (such Other Senior Obligations, together with the Senior
Notes, being referred to herein as "Senior Obligations") or parity obligations
with the Subordinate Notes (such Other Subordinate Obligations, together with
the Subordinate Notes, being referred to herein as "Subordinate Obligations").
The Senior Obligations, the Subordinate Obligations and any Class C Notes are
referred to herein as "Indenture Obligations." See "Description of the Notes--
Issuance of Notes" and "Description of the Indenture--Covenants--Credit
Enhancement Facilities and Swap Agreements."
Under the indenture, EdLinc may not execute a swap agreement unless the
swap counterparty's obligations are rated by each Rating Agency not lower than
in its third highest specific rating category. No swap agreement shall be a
Senior Obligation unless, as of the date EdLinc enters into such swap agreement,
the Senior Asset Requirement will be met and 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 Outstanding notes.
No limitations are imposed by the indenture on the ability of EdLinc to
obtain credit enhancement facilities or to enter into agreements with respect
thereto, or as to the identity or creditworthiness of any credit facility
provider. Any credit enhancement facility may be obtained for the sole benefit
of the series of notes designated therein, in which event payments under such
credit enhancement facility would not be available for the payment of principal
of, premium, if any, or interest on any other series of notes. However, any
payments required to be made to any credit facility provider would be parity
obligations with the other Senior Obligations or Subordinate Obligations, as the
case may be, payable from any revenues available to pay such Indenture
Obligations.
The indenture also permits EdLinc to issue Class C Notes from time to time
upon satisfaction of the conditions specified therein. See "Description of the
Notes--Issuance of Notes."
Priorities
The Senior Notes (and any other Senior Obligations) are entitled to payment
and other priorities over the Subordinate Notes (and any other Subordinate
Obligations). Current payments of interest and principal due on the Subordinate
Notes on an interest payment date or principal
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payment date will be made (on a parity basis with any other Subordinate
Obligations) only to the extent there are sufficient moneys available for such
payment, after making all such payments due on such date with respect to Senior
Obligations. So long as any Senior Obligations remain Outstanding under the
indenture, the failure to make interest or principal payments with respect to
Subordinate Notes will not constitute an event of default under the indenture.
In the event of an acceleration of the notes, the principal of and accrued
interest on the Subordinate Notes will be paid (on a parity basis with any other
Subordinate Obligations) only to the extent there are moneys available under the
indenture after payment of the principal of, and accrued interest on, all Senior
Notes and the satisfaction of all other Senior Obligations. In addition, holders
of Senior Notes and Beneficiaries of other Senior Obligations are entitled to
direct actions to be taken by the trustee prior to and upon the occurrence of an
event of default under the indenture, including election of remedies. See
"Description of the Indenture--Remedies."
Senior Obligations and Subordinate Obligations are entitled to payment and
other priorities over any Class C Notes. Principal of and interest on the Class
C Notes are not payable from moneys in the Note Fund or the Reserve Fund, but
are payable solely from amounts available therefor in the Surplus Fund. See
"Description of the Indenture--Funds and Accounts--Surplus Fund."
DESCRIPTION OF THE SLFC SERVICING AGREEMENT
General
EdLinc and the trustee, prior to the issuance of any series of notes, will
have entered into a servicing and administration agreement with SLFC, as
servicer and administrator. This servicing and administration agreement is
referred to in this prospectus as the SLFC servicing agreement. The following
is a summary of the material terms of the SLFC servicing agreement. The summary
does not purport to be complete and is qualified in its entirety by reference to
the provisions of the SLFC servicing agreement. The SLFC servicing agreement
will be in substantially the form filed as part of the registration statement of
which this prospectus is a part.
Pursuant to the SLFC servicing agreement, SLFC agrees to provide services
to EdLinc and the trustee in connection with the acquisition of student loans to
be financed, and to service the financed student loans, all in accordance with
the SLFC servicing agreement. SLFC may perform all or part of its acquisition
and servicing activities through a subcontractor. See "--Sub-Servicers" below.
SLFC is required to perform or cause its subcontractor to perform all services
under the SLFC servicing agreement in compliance with the Higher Education Act,
each Alternative Loan Program, applicable requirements of each guarantee agency
and all other applicable federal, state and local laws and regulations. SLFC
also agrees to perform various duties of EdLinc under the indenture.
Acquisition Process
SLFC agrees to provide to the trustee all certificates and directions
required to be delivered by EdLinc to the trustee under the indenture in
connection with the financing of
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Eligible Loans and student loans thereunder. SLFC also agrees to work with the
transferor and lenders to obtain from them loan documentation and information
relating to each student loan to be financed and to establish and maintain all
records delivered to SLFC with respect to each financed student loan, and
complete records of SLFC's servicing of the financed student loan from the date
SLFC's servicing commences. However, SLFC will not conduct a complete file and
note examination of each student loan to be financed.
Origination Process
Unless and until otherwise directed in writing by EdLinc, SLFC agrees to
provide to the trustee all certificates and directions required to be delivered
by EdLinc to the trustee under the indenture in connection with the financing
through origination of Eligible Loans and student loans thereunder. SLFC also
agrees to provide disbursement and origination services in connection with the
origination and disbursement of Eligible Loans under the indenture.
Servicing
SLFC agrees to perform all servicing obligations relating to the financed
student loans required of EdLinc or the trustee, or which EdLinc or the trustee
is required to cause the servicer to perform. The SLFC servicing agreement
specifies various activities and obligations to be performed by SLFC in
servicing the financed student loans. These activities and obligations include,
without limitation, file maintenance; maintaining Guarantee coverage on financed
FFELP Loans; handling borrower requests for forbearance and deferments;
exercising due diligence (within the meaning of the Higher Education Act, the
guarantee program regulations and applicable Alternative Loan Programs) in the
servicing, administration and collection of all financed student loans;
collecting payments of principal and interest, Special Allowance Payments, and
guarantee payments with respect to financed student loans and causing all such
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 depositing all other such
payments immediately upon receipt into a lock-box account (which will be part of
the Revenue Fund) to be established by the trustee in the name of and for the
account of the trustee; representing the interests of EdLinc and the trustee in
handling discrepancies or disputes, if any, with the Secretary of Education;
preparing and maintaining all appropriate accounting records with respect to all
transactions related to each financed student loan; for defaulted financed FFELP
Loans, taking 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 assuming responsibility for all necessary communications and
contacts with the Secretary of Education or the guarantee agency, as the case
may be and as required, to recover on such defaulted financed FFELP Loans within
the time required by the Higher Education Act and the requirements of the
guarantee agency; if a claim is 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
FFELP Loan, taking such action as shall be necessary to allow EdLinc or the
trustee to cause such lender to repurchase such financed FFELP Loan; preparing
and filing various reports with the Secretary of Education, the guarantee
agency, EdLinc and the trustee; identifying on the servicing system the notes as
the source of
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financing for each such financed student loan; and maintaining duplicates or
copies of some file documents.
Right of Inspection and Audits
The SLFC servicing agreement provides that, subject to any restrictions of
applicable law, EdLinc, the trustee, the guarantee agency, the Secretary of
Education or any governmental agency having jurisdiction over EdLinc or the
trustee (and, in each case, such entities' representatives), will have the
right, at any time and from time to time, during normal business hours, and upon
reasonable notice to SLFC, to examine and audit any and all of the SLFC's
records or accounts pertaining to any financed student loan. EdLinc and the
trustee also may require SLFC to furnish such documents as they from time to
time deem necessary to determine that SLFC has complied with the provisions of
the SLFC servicing agreement, the student loan purchase agreements and the
indenture.
SLFC also agrees to have prepared and submitted to the Secretary of
Education and the guarantee agencies any third-party servicer compliance audits
and audited financial statements required under the Higher Education Act and the
guarantee program regulations relating to SLFC and its servicing of financed
FFELP Loans, and any lender compliance audits required under the Higher
Education Act, the guarantee program regulations and applicable Alternative Loan
Programs relating to the trustee (as the holder of the financed student loans)
and the financed student loans. SLFC agrees to provide to EdLinc and the
trustee these and various other specified reports and audits.
Administration and Management
SLFC agrees to perform various administrative activities and obligations on
behalf of EdLinc under the SLFC servicing agreement. These include providing all
necessary personnel, facilities, equipment, forms and supplies for operating
EdLinc's student loan acquisition program in accordance with the indenture;
disseminating information on EdLinc's program to lenders and to student
financial aid officers and to other persons as necessary; controlling and
accounting for the receipt and expenditure of EdLinc's funds in accordance with
the resolutions of EdLinc's board of directors and the indenture and maintaining
accurate and complete records on all aspects of the program; reviewing all
statements and reports to EdLinc required of the trustee, the servicer and the
lender in accordance with the provisions of the indenture, the SLFC servicing
agreement and the student loan purchase agreements; preparing and submitting to
the trustee the monthly servicing reports required to be delivered to the
noteholders pursuant to the indenture; and determining and notifying the trustee
and auction agent of the Net Loan Rate. SLFC also agrees to prepare for filing,
and provide such other assistance as is required by EdLinc to file, any other
reports required to be filed by EdLinc under the indenture or under any
applicable law, including without limitation, the Higher Education Act and any
federal and state securities laws.
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Servicing Fees
The SLFC servicing agreement provides that SLFC will be paid for the
performance of its functions under the SLFC servicing agreement (from funds
available for such purpose under the indenture) a monthly fee in an amount each
month equal to .104167% of the outstanding principal balance of all financed
student loans as of the last day of the immediately preceding month. Such fee
is required to be paid to SLFC on a monthly basis within fifteen (15) days of
receipt by the trustee of a written monthly billing statement from SLFC. If SLFC
believes that it is necessary to increase the monthly fee payable under the SLFC
servicing agreement, it will provide a written request to EdLinc 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
thereunder. SLFC acknowledges in the SLFC servicing agreement that such fee
will not be increased unless the conditions for increasing such fees under the
indenture have been satisfied.
SLFC also acknowledges in the SLFC servicing agreement that EdLinc and the
trustee contemplate paying all servicing fees payable under the SLFC 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 SLFC and receipt by the trustee of payments with respect to the
financed student loans. SLFC agrees to continue to be bound by the terms and
provisions of the SLFC servicing agreement relating to financed student loans in
all respects, and to perform for a period of 120 days its obligations
thereunder, regardless of the receipt or non-receipt on a timely basis by it of
any payments in respect of servicing fees.
Sub-Servicers
Under the SLFC servicing agreement, SLFC may enter into sub-servicing
agreements with one or more sub-servicers providing for the sub-servicers to
perform some or all of the obligations of SLFC with respect to servicing the
financed student loans. Pursuant to a sub-servicing agreement, each sub-
servicer will agree to service, and perform all other related tasks with respect
to, the financed student loans in compliance with applicable standards and
procedures. SLFC will be responsible for the performance of its obligations
under the SLFC servicing agreement, whether such obligations are performed by
SLFC or by a sub-servicer, and SLFC will be responsible for any fees and
payments required by the sub-servicer. The prospectus supplement for each
series of notes will identify each sub-servicer sub-servicing 10% or more by
principal balance of the financed student loans.
Term and Termination
The term of the SLFC servicing agreement continues for so long as any of
the notes remain Outstanding, unless the SLFC servicing agreement is terminated
in accordance with its terms. The SLFC servicing agreement may be terminated
upon the occurrence of specified events, including the insolvency of SLFC and
the failure by SLFC to perform its obligations thereunder.
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SLFC agrees to promptly notify the trustee and EdLinc 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 the SLFC
servicing agreement. SLFC also agrees to continue performing its obligations
under the servicing agreement until a successor servicer has been appointed.
Year 2000 Information Systems Procedures
SLFC utilizes a variety of computer programs and information systems in its
daily operations, including its accounting system, its imaging system, and its
student loan servicing system. Computer programs and information systems are
also utilized by the trustee, each guarantee agency, the Department of Education
and other third parties upon which SLFC depends for its programmatic and
financial operations or with which it conducts business. Most existing computer
programs and information systems utilized by SLFC and such other third parties
accept only two digits in date code fields to identify a year in the date fields
used for, among other things, calculation and report generation features.
SLFC has completed its assessment of the computer related activities that
are involved in its programmatic and financial operations, including its
accounting, loan purchase, loan origination and loan servicing programs and the
items required for administration of its programs. The computer programs and
information systems, which SLFC utilizes in performing its administrative
activities, are generally widely used, commercially available hardware and
software or specific programs supplied by vendors. The vendors of these systems
have informed SLFC that their systems are either year 2000 compliant or have
informed SLFC of the necessary upgrades in releases of their software that are
necessary to achieve year 2000 compliance. SLFC has completed upgrades for all
releases of those software packages where upgrade is necessary to obtain year
2000 compliance. Failure of the providers of these software packages to be
year 2000 compliant would not materially affect SLFC's ability to effectively
perform its administrative functions.
SLFC has surveyed its own student loan servicing software to determine if
its systems will be year 2000 compliant before January 1, 2000. SLFC's software
has been upgraded to be year 2000 compliant, and has been tested. Based on the
testing, minor revisions have been completed. Follow-up is now being completed.
Also, such software is now being tested for interface, data exchanges and end-
to-end year 2000 compliance. Such testing is expected to be completed by
November 15, 1999.
SLFC has been monitoring the year 2000 efforts of its major providers of
guarantees in connection with its student loan financings (in particular,
Education Assistance Corporation, the Pennsylvania Higher Education Assistance
Agency and the Department of Education). Failure of any of these entities to
achieve year 2000 compliance could severely impact their ability to provide
timely payments to SLFC. Education Assistance Corporation and the Pennsylvania
Higher Education Assistance Agency have advised SLFC that they have completed
their inventory of current hardware and software products and major software
systems, and are in the process of replacing and upgrading hardware and software
products which are not presently year
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2000 compliant. According to announcements by the Department of Education, it
completed its systems conversion effort with the last system being implemented
on March 8, 1999, ahead of the Office of Management and Budget March 31, 1999
deadline. One hundred percent of the Department's 175 systems are either retired
(28) or are year 2000 compliant and fully implemented (147).
SLFC is in the process of surveying its other business partners (such as
investment bankers, the trustee, guarantee agencies and lenders with which it
does business) to determine their level of year 2000 compliance. The results of
these surveys are expected to be known by November 1, 1999.
SLFC has not independently verified the assurances provided from the
entities with which it conducts business or the vendors that provide software
and can itself give no assurances that such entities have accurately assessed
their level of compliance and will not subsequently discover areas of non-
compliance that will have a material adverse impact on SLFC's operations. SLFC
is presently completing development of its testing and contingency plans for
those systems where year 2000 compliance is essential. These testing and
contingency plan developments are expected to be completed by November 15, 1999.
It is SLFC's intent to complete all year 2000 testing by November 15, 1999. SLFC
expects to incur no material costs in connection with its year 2000 efforts.
DESCRIPTION OF THE INDENTURE
General
EdLinc and the trustee will enter into the indenture, under which each
series of notes will be issued. The following is a summary of the material terms
of the indenture. The summary does not purport to be complete and is qualified
in its entirety by reference to the provisions of the indenture. The indenture
will be in substantially the form filed as part of the registration statement of
which this prospectus is a part.
The indenture establishes the general provisions of notes issued by EdLinc
thereunder and sets forth various covenants and agreements of EdLinc relating
thereto, default and remedy provisions, responsibilities and duties of the
trustee and establishes the various funds into which EdLinc's revenues related
to the notes are deposited and transferred for various purposes.
Funds and Accounts
Acquisition Fund
The indenture establishes an Acquisition Fund. With respect to each series
of notes, the trustee will, 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 will also deposit in the Acquisition Fund: (1) any
funds to be transferred thereto from the Surplus Fund, and (2) any other amounts
specified in a supplemental indenture.
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Balances in the Acquisition Fund will be used only for (a) the purchase or
origination of Eligible Loans, (b) the redemption of notes which are called for
redemption or the purchase of notes as provided in a supplemental indenture, (c)
the payment of debt service on the Senior Notes and Other Senior Obligations, or
(d) the payment of the purchase price of any Senior Notes required to be
purchased on a Purchase Date or a mandatory tender date. The trustee will make,
or authorize any deposit agent to make, payments to the transferor, lenders or
SLFC from the Acquisition Fund for the purchase of Eligible Loans, such payments
to be made at a purchase price not in excess of 100% of the remaining unpaid
principal amount of such Eligible Loan, plus accrued noncapitalized borrower
interest thereon, if any, to the date of purchase, reasonable transfer,
origination or assignment fees, if applicable, and a premium not to exceed the
limitations set forth in the applicable supplemental indenture. The trustee will
also make, or authorize the deposit agent to make, payments from the Acquisition
Fund for the origination of Eligible Loans.
Balances in the Acquisition Fund (other than any portion of such balances
consisting of student loans) will be (1) transferred to 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 Senior
Notes and any Other Senior Obligations, as described under "--Note Fund" below,
and (2) after such transfer, if any, to be made pursuant to the preceding clause
(1) has been taken into account, transferred to the Principal Account on any
Purchase Date or mandatory tender date with respect to Senior Notes, to the
extent described under "--Note Fund" below. If any amounts have been transferred
to the Note Fund pursuant to this paragraph, the trustee will, to the extent
necessary to cure the deficiency in the Acquisition Fund as a result of such
transfer, transfer to the Acquisition Fund amounts from the Revenue Fund as
described below under "--Revenue Fund."
Pending application of moneys in the Acquisition Fund for one or more
authorized purposes, such moneys will be invested in investment securities, as
described under "--Investments" below, and any income from said investments will
be deposited in the Revenue Fund.
Revenue Fund
The indenture establishes a Revenue Fund, which is comprised of two
accounts: the Repayment Account and the Income Account. The trustee and any
deposit agent will credit to the Revenue Fund: (1) all amounts received as
interest and principal payments with respect to financed student loans,
including all guarantee payments, Interest Subsidy Payments and Special
Allowance Payments with respect to financed FFELP Loans, (2) unless otherwise
provided in a supplemental indenture, proceeds of the resale to a lender or SLFC
of any financed student loans pursuant to such lender's or SLFC's repurchase
obligation under the applicable student loan purchase agreement, (3) all amounts
received as income from investment securities in the Acquisition Fund, the
Reserve Fund, the Administration Fund, the Surplus Fund and the Note Fund, and
(4) all amounts to be transferred to the Revenue Fund from the Alternative Loan
Guarantee Fund. The trustee will deposit and credit all such amounts received as
payments of
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principal of financed student loans to the Repayment Account, and all other such
amounts to the Income Account.
Pending transfers from the Revenue Fund, the moneys therein will be
invested in investment securities as described under "--Investments" below, and
any income from said investments will be retained therein.
Repayment 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 will transfer the moneys received since the
preceding Monthly Payment Date in the Repayment Account as follows:
. first, to the appropriate party, amounts in respect of moneys
previously received from the Secretary of Education or a guarantee
agency on financed FFELP Loans for which the Secretary of Education or
such guarantee agency has reimbursed itself through withholding
payments on other FFELP Loans not financed under the indenture;
. second, to the Interest Account, to the extent necessary to increase
the balance thereof to the amount required for the payment of interest
on Senior Notes or Other Senior Obligations payable therefrom;
. third, to the Principal Account, to the extent necessary to increase
the balance thereof to the amount required for the redemption of
Senior Notes or payment of principal or the purchase price of Senior
Notes or the payment of Other Senior Obligations payable therefrom;
. fourth, to the Retirement Account, to the extent and in the manner
provided in the indenture with respect to the redemption of Senior
Notes from the Retirement Account or the payment of Other Senior
Obligations payable therefrom;
. fifth, to the Acquisition Fund, to the extent described above under
"--Acquisition Fund;"
. sixth, to the Interest Account, to the extent necessary to increase
the balance thereof to the amount required for the payment of interest
on Subordinate Notes or Other Subordinate Obligations payable
therefrom;
. seventh, to the Principal Account, to the extent necessary to increase
the balance thereof to the amount required for the payment of
principal at stated maturity or the purchase price of Subordinate
Notes or the payment of Other Subordinate Obligations payable
therefrom;
. eighth, to the Retirement Account, to the extent and in the manner
provided in the indenture with respect to the redemption of
Subordinate Notes from the Retirement Account or payment of Other
Subordinate Obligations payable therefrom;
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. ninth, to the Reserve Fund, to the extent necessary to increase the
balance thereof to the Reserve Fund Requirement;
. tenth, to the Principal Account, to the extent necessary to increase
the balance thereof to the amount required to meet the sinking fund
installment with respect to the redemption of Subordinate Notes on the
next sinking fund payment date therefor;
. eleventh, to the Special Redemption and Prepayment Account, to the
extent necessary to increase the balance thereof to the Special
Redemption and Prepayment Account Requirement with respect to each
series of notes;
. twelfth, to the Alternative Loan Guarantee Fund, the lesser of (1) the
amount necessary to increase the balance thereof to the Alternative
Loan Guarantee Fund Requirement, and (2) the aggregate amount received
by the Servicer and deposited in the Revenue Fund with respect to
Financed Alternative Student Loans for which a transfer has been made
from the Alternative Loan Guarantee Fund, less the aggregate amount
transferred to the Alternative Loan Guarantee Fund from the Revenue
Fund on previous Monthly Payment Dates; and
. thirteenth, any remainder to the Surplus Account.
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 will, after transferring all amounts
received in the Repayment Account pursuant to the preceding paragraph, transfer
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 FFELP Loans, and (2) transfer
the remainder of such moneys as follows:
. first, to the appropriate party, amounts in respect of moneys
previously received from the Secretary of Education or a guarantee
agency on financed FFELP Loans for which the Secretary of Education or
such guarantee agency has reimbursed itself through withholding
payments on other FFELP Loans not financed under the indenture;
. second, to the Interest Account, to the extent necessary to increase
the balance thereof to the amount required for the payment of interest
on Senior Notes or Other Senior Obligations payable therefrom;
. third, to the Principal Account, to the extent necessary to increase
the balance thereof to the amount required for the redemption of
Senior Notes or payment of principal or the purchase price of Senior
Notes or the payment of Other Senior Obligations payable therefrom;
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. fourth, to the Retirement Account, to the extent and in the manner
provided in the indenture with respect to the redemption of Senior
Notes from the Retirement Account or payment of Other Senior
Obligations payable therefrom;
. fifth, to the Acquisition Fund, to the extent described above under
"--Acquisition Fund;"
. sixth, to the Interest Account, to the extent necessary to increase
the balance thereof to the amount required for the payment of interest
on Subordinate Notes or Other Subordinate Obligations payable
therefrom;
. seventh, to the Principal Account, to the extent necessary to increase
the balance thereof to the amount required for the payment of
principal at stated maturity or the purchase price of Subordinate
Notes or the payment of Other Subordinate Obligations payable
therefrom;
. eighth, to the Retirement Account, to the extent and in the manner
provided in the indenture with respect to the redemption of
Subordinate Notes from the Retirement Account or payment of Other
Subordinate Obligations payable therefrom;
. ninth, to the Administration Fund, to extent necessary to increase the
balance thereof to such amounts as an authorized officer of EdLinc
shall direct for costs and expenses;
. tenth, to the Reserve Fund, to the extent necessary to increase the
balance thereof to the Reserve Fund Requirement;
. eleventh, to the Principal Account, to the extent necessary to
increase the balance thereof to the amount required to meet the
sinking fund installment with respect to the redemption of Subordinate
Notes on the next sinking fund payment date therefor;
. twelfth, to the Special Redemption and Prepayment Account, to the
extent necessary to increase the balance thereof to the Special
Redemption and Prepayment Account Requirement with respect to each
series of notes; . thirteenth, to the Alternative Loan Guarantee Fund,
the lesser of (1) the
. thirteenth, to the Alternative Loan Guarantee Fund, the lesser of (1)
amount necessary to increase the balance thereof to the Alternative
Loan Guarantee Fund Requirement, and (2) the aggregate amount received
by the Servicer and deposited in the Revenue Fund with respect to
Financed Alternative Student Loans for which a transfer has been made
from the Alternative Loan Guarantee Fund, less the aggregate amount
transferred to the Alternative Loan Guarantee Fund from the Revenue
Fund on previous Monthly Payment Dates; and
. fourteenth, any remainder to the Surplus Account.
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Note Fund
The indenture establishes a Note Fund, which is comprised of three
accounts: the Interest Account, the Principal Account and the Retirement
Account. The Note Fund will be used only for the payment when due of principal
of, premium, if any, and interest on the Senior Notes and the Subordinate Notes,
the purchase price of Senior Notes and Subordinate Notes to be purchased on a
Purchase Date or mandatory tender date in accordance with the indenture, Other
Indenture Obligations and Carry-Over Amounts (including any accrued interest
thereon). The principal of and interest on the Class C Notes are payable from
the Surplus Fund.
Interest Account. The trustee will deposit in the Interest Account (1) that
portion of the proceeds from the sale of financed student loans representing
accrued interest and Special Allowance Payments thereon, (2) that portion of the
proceeds from the sale of EdLinc's bonds, notes or other evidences of
indebtedness, if any, to be used to pay interest on the Senior Notes or the
Subordinate Notes, (3) all counterparty swap payments, (4) all payments under
any credit enhancement facilities to be used to pay interest on the notes and
(5) 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 will be invested in investment securities as described under
"--Investments" below, and any income from such investments will be deposited in
the Revenue Fund.
To provide for the payment of interest on Senior Notes or Subordinate Notes
on each regularly scheduled interest payment date and all EdLinc swap payments
and fees to a credit facility provider payable on such interest payment date,
the trustee will make deposits to the Interest Account on each Monthly Payment
Date. If, on any interest payment date (including a redemption date or a date
that notes are to be purchased that is not a regularly scheduled interest
payment date), moneys in the Interest Account are insufficient to pay the
accrued interest due on the Senior Notes and Subordinate Notes and all EdLinc
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 will deposit immediately to the Interest Account an
amount equal to such deficiency. Each deposit required by this paragraph will 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 Senior 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 in respect of Subordinate Notes or
Other Subordinate Obligations will be so made from the Principal Account or the
Retirement Account 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 will transfer to the Interest Account
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(to the extent amounts are available therefor in the Surplus Account, after
taking into account all other amounts payable from the Surplus Fund on such
interest payment date) an amount equal to such Carry-Over Amount (including any
accrued interest thereon) so due and payable.
Apart from transfers to the Principal Account as described under
"--Principal Account" below, balances in the Interest Account will be applied in
the following order of priority:
. first, to the payment of interest on all Senior Notes, EdLinc swap
payments under senior swap agreements and fees payable to senior
credit facility providers due on an interest payment date, and if such
money is less than such interest and Other Senior Obligations on such
interest payment date, such money will be applied, pro rata, among
such indebtedness based upon such amounts then owing to Senior
Beneficiaries and to be paid from the Interest Account;
. second, to the payment of interest on all Subordinate Notes, EdLinc
swap payments under subordinate swap agreements and fees payable to
subordinate credit facility providers due on an interest payment date,
and if such money is less than such interest and Other Subordinate
Obligations on such interest payment date, such money will be applied,
pro rata, among such indebtedness based upon such amounts then owing
to Subordinate Beneficiaries and to be paid from the Interest
Account;
. third, to the payment of all Carry-Over Amounts (including any accrued
interest thereon) due and payable on all series of Senior Notes, and
if such money is less than such Carry-Over Amounts (including any
accrued interest thereon) on an interest payment date, such money will
be applied, pro rata, among such Carry-Over Amounts (including any
accrued interest thereon) based upon such amounts then otherwise due
and payable to Senior Noteholders and to be paid from the Interest
Account; and
. fourth, to the payment of all Carry-Over Amounts (including any
accrued interest thereon) due and payable on all series of Subordinate
Notes, and if such money is less than such Carry-Over Amounts
(including any accrued interest thereon) on an interest payment date,
such money will be applied, pro rata, among such Carry-Over Amounts
(including any accrued interest thereon) based upon such amounts then
otherwise due and payable to Subordinate Noteholders and to be paid
from the Interest Account.
Other Indenture Obligations payable from the Interest Account will include
reimbursement to any credit facility provider for interest paid on Senior Notes
or Subordinate Notes from amounts derived from the related credit enhancement
facility, which reimbursement will have the same priority of payment from the
Interest Account as the interest so paid.
Principal Account. The trustee will deposit to the Principal Account: (1)
that portion of the proceeds from the sale of financed student loans
representing principal thereof, (2) that portion of the proceeds from the sale
of EdLinc's bonds, notes or other evidences of indebtedness, if any, to be used
to pay principal of the Senior Notes and the Subordinate Notes, (3) all payments
under any credit enhancement facilities to be used to pay principal of
Senior
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Notes or Subordinate Notes or the purchase price of Senior Notes or Subordinate
Notes to be purchased on a Purchase Date or mandatory tender date, and (4) all
amounts required to be transferred thereto from the following funds, in the
following order of priority: (a) in the case of payment of principal of notes at
stated maturity, redemption of Senior Notes called for redemption on a sinking
fund payment date or the purchase of notes on a Purchase Date or mandatory
tender date, the Revenue Fund, the Surplus Fund (other than that portion of the
balance thereof consisting of Eligible Loans), the Reserve Fund, the
Administration Fund and the Surplus Fund (including any portion of the balance
thereof consisting of Eligible Loans), and (b) in the case of redemption of
Subordinate Notes called for redemption on a sinking fund payment date, 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 Senior Notes at the stated maturity thereof or upon a sinking fund
payment date therefor, or the purchase price is payable on Senior 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 will be transferred, to the extent necessary, to the
Principal Account for this purpose, (i) from the Interest Account, but only to
the extent that the balance in the Interest Account exceeds any then accrued
payments of interest on the Senior Notes, EdLinc 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).
To provide for the payment of principal due on the stated maturity of
Senior or Subordinate Notes or on a sinking fund payment date for Senior or
Subordinate Notes, the trustee will make deposits to the Principal Account on
each Monthly Payment Date from amounts available therefor in the Revenue Fund
and the other funds referred to above. To the extent there are not available
moneys to make any monthly payment with respect to the cumulative sinking fund
redemption of Subordinate Notes, subsequent monthly payments will be increased
to make up any such deficiency, and to the extent that on any sinking fund
payment date the aggregate of such payments actually made as of the next-to-the-
last Monthly Payment Date prior to such sinking fund payment date is less than
the amount of the sinking fund installment due on such sinking fund payment
date, the amount of such deficiency will be added to the amount of the sinking
fund installment due on the next sinking fund payment date, and the increased
amount thereupon will be deemed to be the amount due for such next sinking fund
installment. However, the requirement for payments of cumulative sinking fund
installments on Subordinate Notes will not be construed to create an event of
default under the indenture in the event of any such deficiency (other than in
amounts due with respect to the stated maturity of Subordinate Notes) unless a
sinking fund installment of such Subordinate Notes shall not only be due and not
applied to the redemption of Subordinate Notes, but also that all contingencies
upon the obligation so to apply it as of such time in fact have been
satisfied.
If EdLinc is required to furnish moneys to a depositary to purchase notes
on a Purchase Date or mandatory tender date, the trustee will, subject to the
applicable provisions of the related supplemental indenture, immediately deposit
to the Principal Account moneys sufficient to pay the purchase price
thereof.
Balances in the Principal Account will be applied in the following order of
priority:
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. first, to the Interest Account to the extent required (see "--Interest
Account" above) for the payment of interest on Senior Notes and Other
Senior Obligations payable therefrom;
. second, to the payment of Senior Notes at their stated maturity or on
their sinking fund payment date and Other Senior Obligations payable
therefrom;
. third, to the payment of the purchase price of Senior Notes on a
Purchase Date or mandatory tender date;
. fourth, to the Interest Account to the extent required (see
"--Interest Account" above) for the payment of interest on Subordinate
Notes and Other Subordinate Obligations payable therefrom;
. fifth, to the payment of Subordinate Notes at their stated maturity
and Other Subordinate Obligations payable therefrom;
. sixth, to the payment of the purchase price of Subordinate Notes on a
Purchase Date or mandatory tender date; and
. seventh, to the payment of Subordinate Notes on a sinking fund payment
date.
Other Indenture Obligations payable from the Principal Account will include
reimbursement to any credit facility provider for principal or the purchase
price paid on Senior Notes or Subordinate Notes from amounts derived from the
related credit enhancement facility, which reimbursement will have the same
priority of payment from the Principal Account as the principal so paid.
Subject to compliance with the provisions of the indenture described under
"Description of the Notes--Call for Redemption, Prepayment or Purchase of Notes;
Senior Asset Requirement," balances in the Principal Account may also be applied
to the purchase of Senior Notes or Subordinate Notes at a purchase price not to
exceed the principal amount thereof plus accrued interest, as determined by
EdLinc at such time, provided the trustee will have first certified that no
deficiencies exist at such time in the Note Fund. Any such purchase will be
limited to those Senior Notes or Subordinate Notes whose stated maturity or
sinking fund payment date is the next succeeding principal payment date.
The moneys in the Principal Account will be invested in investment
securities as described under "--Investments" below, and any income from such
investments will be deposited in the Revenue Fund.
Retirement Account. The trustee will deposit to the Retirement Account (1)
any amounts transferred thereto from the Reserve Fund and the Surplus Fund, (2)
that portion of the proceeds from the sale of EdLinc's bonds, notes or other
evidences of indebtedness, if any, to be used to pay the principal or redemption
price of Senior Notes or Subordinate Notes on a date other than
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the stated maturity thereof or a sinking fund payment date therefor, and (3) all
payments under any credit enhancement facilities to be used to pay the
redemption price of notes payable from the Retirement Account. All Senior Notes
or Subordinate Notes which are to be retired, or the principal of which is to be
prepaid, other than with moneys in the Principal Account will be retired or
prepaid with moneys deposited to the Retirement Account.
Balances in the Retirement Account will be transferred to the Interest
Account to the extent required (see "--Interest Account" above) for the payment
of interest on notes and Other Indenture Obligations payable therefrom.
Other Indenture Obligations payable from the Retirement Account will
include reimbursement to any credit facility provider for the redemption price
paid on Senior Notes or Subordinate Notes from amounts derived from the related
credit enhancement facility, which reimbursement will have the same priority of
payment from the Retirement Account as the redemption price so paid.
Subject to compliance with the provisions of the indenture described under
"Description of the Notes--Call for Redemption, Prepayment or Purchase of Notes;
Senior Asset Requirement," balances in the Retirement Account (other than any
portion thereof to be applied to the mandatory prepayment of principal of any
notes) may also be applied to the purchase of Senior Notes or Subordinate Notes
at a purchase price not to exceed the principal amount thereof plus accrued
interest plus any then applicable redemption premium, as determined by EdLinc at
such time; provided the trustee shall have first certified that no deficiencies
exist at such time in the Note Fund.
The moneys in the Retirement Account will be invested in investment
securities as described under "--Investments" below, and any income from such
investment will be deposited in the Revenue Fund.
Administration Fund
With respect to each series of notes, the trustee will, upon delivery
thereof and from the proceeds thereof, credit to the Administration Fund
established under the indenture the amount, if any, specified in the
supplemental indenture providing for the issuance of such series of notes. The
trustee will also credit to the Administration Fund all amounts transferred
thereto from the Revenue Fund and the Surplus Account. Amounts in the
Administration Fund will be used to pay costs of issuance, administrative
expenses and Note Fees or to reimburse another fund, account or other source of
EdLinc for the previous payment of costs of issuance, administrative expenses or
Note Fees. Balances in the Administration Fund will also be applied to remedy
deficiencies in the Note Fund after transfers thereto from the Revenue Fund, the
Surplus Fund (other than that portion of the balance thereof consisting of
Eligible Loans) and the Reserve Fund.
The trustee will transfer and credit to the Administration Fund moneys
available under the indenture for transfer thereto from the sources set forth in
the following paragraph and in
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such amounts and at such times as an authorized officer of EdLinc shall direct;
provided such officer shall certify that the amounts are required and have been
or will be expended within the next 90 days for a purpose for which the
Administration Fund may be used and applied.
Deposits to the Administration Fund will be made from the following sources
in the following order of priority:
. the Income Account after transfers therefrom to the Interest Account,
the Principal Account (other than with respect to the payment of
sinking fund installments for Subordinate Notes), and the Retirement
Account; and
. the Surplus Account after transfers therefrom to the Interest Account,
the Principal Account (other than with respect to the payment of
sinking fund installments for Subordinate Notes) and the Retirement
Account, provided that any such deposit from the Surplus Account will
only be made to the extent that portion of the balance thereof not
consisting of Eligible Loans is sufficient therefor.
Pending transfers from the Administration Fund, the moneys therein will be
invested in investment securities, as described under "--Investments" below, and
any income from such investments will be deposited in the Revenue Fund.
Reserve Fund
The Reserve Fund is established under the indenture only for the security
of the Senior Beneficiaries and the Subordinate Beneficiaries, and not for the
holders of the Class C Notes. Immediately upon the delivery of any series of
Senior Notes or Subordinate Notes, and from the proceeds thereof or, at the
option of EdLinc, from any amounts to be transferred thereto from the Surplus
Fund and from any other available moneys of EdLinc not otherwise credited to or
payable into any Fund or Account under the indenture or otherwise subject to the
pledge and security interest created by the indenture, the trustee will 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 is less than
the Reserve Fund Requirement, the trustee will transfer and credit thereto an
amount equal to the deficiency from moneys available therefor in the following
funds and accounts in the following order of priority: the Repayment Account,
the Income Account and the Surplus Fund; provided that any such transfer from
the Surplus Fund will only be made to the extent that portion of the balance
thereof not consisting of Eligible Loans is sufficient therefor.
The balance in the Reserve Fund will be used and applied solely for the
payment when due of principal and interest on the Senior Notes and the
Subordinate Notes and any Other Indenture Obligations and the purchase price of
Senior Notes and Subordinate Notes on a Purchase Date or mandatory tender date,
and the other purposes specified in the indenture (see
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"--Note Fund" above), and will be so used and applied by transfer by the trustee
to 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 the
indenture for deposit to the Note Fund at such time (provided, however, that
such amounts will be applied, first, to the payment of interest on the Senior
Notes and Other Senior Obligations payable from the Interest Account, second, to
the payment of principal and the purchase price of Senior Notes and Other Senior
Obligations payable from the Principal Account, third, to the payment of
interest on the Subordinate Notes and Other Subordinate Obligations payable from
the Interest Account, and, fourth, to the payment of principal and the purchase
price of Subordinate Notes and 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 Senior Notes or Subordinate Notes called for redemption as
provided in a supplemental indenture relating thereto. If on any Monthly Payment
Date the balance in the Reserve Fund exceeds the Reserve Fund Requirement, such
excess will, upon order of an authorized officer of EdLinc, be transferred to
the Principal Account, to the extent necessary to make the deposits required to
be made to the Principal Account on such Monthly Payment Date, whether or not
other moneys are available to make such deposits.
Pending transfers from the Reserve Fund, the moneys therein will be
invested in investment securities as described under "--Investments" below and
any income from such investments will be deposited in the Revenue Fund.
Surplus Fund
The indenture establishes a Surplus Fund, which is comprised of two
accounts: the Special Redemption and Prepayment Account and the Surplus Account.
The trustee will deposit to the Surplus Fund balances in the Revenue Fund not
required for deposit to any other Fund or Account. Deposits to the Surplus Fund
from the Revenue Fund will be credited to the Special Redemption and Prepayment
Account to the extent the balance thereof is less than the Special Redemption
and Prepayment Account Requirement for each series of notes, and otherwise to
the Surplus Account.
Balances in the Surplus Fund will be applied to the following purposes in
the following order of priority:
. first, to remedy deficiencies in the Interest Account (after transfers
thereto from the Revenue Fund) for the payment of interest on Senior
Notes or Other Senior Obligations payable therefrom;
. second, to remedy deficiencies in the Principal Account (after
transfers thereto from the Revenue Fund) for the redemption of Senior
Notes or the payment of principal or the purchase price of Senior
Notes or the payment of Other Senior Obligations payable therefrom;
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. third, to remedy deficiencies in the Retirement Account (after transfers
thereto from the Revenue Fund) for the redemption of Senior Notes or the
payment of Other Senior Obligations payable therefrom;
. fourth, to remedy deficiencies in the Interest Account (after transfers
thereto from the Revenue Fund) for the payment of interest on Subordinate
Notes or Other Subordinate Obligations payable therefrom;
. fifth, to remedy deficiencies in the Principal Account (after transfers
thereto from the Revenue Fund) for the payment of the principal at stated
maturity or the purchase price of Subordinate Notes or the payment of
Other Subordinate Obligations payable therefrom;
. sixth, to remedy deficiencies in the Retirement Account (after transfers
thereto from the Revenue Fund) for the redemption of Subordinate Notes or
the payment of Other Subordinate Obligations payable therefrom;
. seventh, to make deposits (but only from the Surplus Account) to the
Administration Fund (after transfers thereto from the Revenue Fund) to
the extent required pursuant to an order of an authorized officer of
EdLinc for costs and expenses;
. eighth, to remedy deficiencies in the Reserve Fund (to the extent that
the balance is less than the Reserve Fund Requirement after transfers
thereto from the Revenue Fund);
. ninth, to remedy deficiencies in the Principal Account (after transfers
thereto from the Revenue Fund) to meet the sinking fund installment with
respect to the redemption of Subordinate Notes on a sinking fund payment
date;
. tenth, to make transfers to the Retirement Account to redeem Senior Notes
or Subordinate Notes which are called for redemption or to prepay Senior
or Subordinate Notes as provided in a supplemental indenture relating
thereto (provided that any such transfers will be made only from balances
in the Special Redemption and Prepayment Account); and
. eleventh, to make deposits (but only from the Surplus Account) to the
Interest Account for the payment of Carry-Over Amounts (and accrued
interest thereon).
Notwithstanding the foregoing, Balances in the Surplus Fund consisting of
Eligible Loans will not be required to be applied (1) pursuant to priorities
first through sixth above until after any transfers from the Reserve Fund have
been taken into account, and (2) in any event pursuant to priorities seventh
through eleventh above. If the Surplus Fund is to be used to make such
transfers, transfers will be made, first, from any cash or investment securities
included in the Surplus Account or the Special Redemption and Prepayment
Account, in that order, and, second, from the proceeds of any sale of student
loans included in the Surplus Account.
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Balances in the Special Redemption and Prepayment Account may also be
transferred to the Acquisition Fund for the purchase or origination of Eligible
Loans as provided in the indenture and as further authorized or limited in a
supplemental indenture.
Subject to compliance with the provisions of the indenture described under
"Description of the Notes--Call for Redemption, Prepayment or Purchase of Notes;
Senior Asset Requirement" and satisfaction of other conditions set forth in the
indenture, 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.
Balances in the Surplus Account may, subject to satisfaction of conditions
set forth in the indenture (including the requirement that, after taking into
account any such payments, the Senior Asset Requirement will be met) also be
applied, as determined by EdLinc from time to time, to the payment of principal
of or interest on Class C Notes when due or upon the call for redemption thereof
at the option of EdLinc.
Subject to compliance with the provisions of the indenture described under
"Description of the Notes--Call for Redemption, Prepayment or Purchase of Notes;
Senior Asset Requirement," balances in the Surplus Account may also be applied
to any one or more of the following purposes at any time as determined by
EdLinc, provided the trustee will have first certified that no deficiencies
exist at such time in the Note Fund, the Reserve Fund or the Special Redemption
and Prepayment Account:
(1) transfer to the Retirement Account for the redemption of Senior
Notes or Subordinate Notes called for redemption;
(2) transfer to the Principal Account or the Retirement Account for
the purchase of Senior Notes or Subordinate Notes; or
(3) upon satisfaction of conditions set forth in the indenture, (a)
the acquisition of student loans meeting the requirements of clauses (A)
(1) and (2) or (B) of the definition of "Eligible Loan"; (b) to reimburse
another fund, account or other source of EdLinc for the previous payment of
costs of issuance; and (c) for such other purposes as EdLinc shall
determine; provided, however, that balances in the Surplus Account will not
be applied to any of the purposes specified in the preceding clause (3)(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 the value of the Trust Estate,
any financed student loans which are not Eligible Loans and any moneys
reasonably expected to be needed to be used to pay costs of issuance, Note
Fees or administrative expenses, (i) the Senior Percentage will not be less
than 112% (or such lower percentage which, if Unenhanced Senior Notes are
Outstanding, will not result in the lowering or withdrawal of the
outstanding rating assigned by any Rating Agency to any of the Unenhanced
Senior Notes Outstanding, or, if no Unenhanced Senior Notes are Outstanding
but Other Senior Obligations are Outstanding, is acceptable to the
other
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Senior Beneficiaries), and (ii) the Subordinate Percentage will not be less
than 102% (or such lower percentage which, if Unenhanced Subordinate Notes
are Outstanding, will not result in the lowering or withdrawal of the
outstanding rating assigned by any Rating Agency to any of the Unenhanced
Subordinate Notes Outstanding, or, if no Unenhanced Subordinate Notes are
Outstanding but Other Subordinate Obligations are Outstanding, is
acceptable to the Other Subordinate Beneficiaries); and provided, further,
that balances in the Surplus Account may be applied to the purchase of
Eligible Loans as specified in the preceding clause (3)(a) without
satisfying any other condition of this clause (3), to the extent provided
in a supplemental indenture.
The trustee will 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 described above. In
addition, EdLinc 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 100% of the principal balance thereof plus accrued noncapitalized interest
thereon payable by the 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 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 borrower. Student
loans from time to time held in the Surplus Account may also be purchased at any
time with the proceeds of EdLinc's bonds, notes or other evidences of
indebtedness, at a purchase price equal to 100% of the principal balance of the
student loans so purchased plus accrued noncapitalized interest thereon payable
by the borrower. Any money received by EdLinc in connection with a sale of
financed student loans pursuant to this paragraph will be deposited to the
Surplus Account.
Pending transfers from the Surplus Fund, the moneys therein will be
invested in investment securities as described under "--Investments" below, and
any income from such investments will be deposited in the Revenue Fund.
Alternative Loan Guarantee Fund
The indenture establishes an Alternative Loan Guarantee Fund. The trustee
will, upon the purchase of each Alternative Loan from the transferor or SLFC,
deposit to the Alternative Loan Guarantee Fund the amount received in respect of
an origination fee relating to such Alternative Loan. The trustee will also
deposit to the Alternative Loan Guarantee Fund any amounts transferred thereto
from the Revenue Fund.
To the extent, as of the end of any calendar month, any payment on a
financed Alternative Loan has not been received within 180 days after the due
date therefor, such financed Alternative Loan will be deemed a Liquidated
Alternative Loan. The trustee will, on each Monthly Payment Date, transfer from
the Alternative Loan Guarantee Fund to the Revenue Fund an amount equal to the
unpaid principal balance of and accrued interest on each financed Alternative
Loan that became a Liquidated Alternative Loan during the preceding calendar
month.
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If on any monthly payment date the balance in the Alternative Loan
Guarantee Fund exceeds the Alternative Loan Guarantee Fund Requirement, the
trustee shall transfer to the Revenue Fund an amount equal to such excess.
Pending transfers from the Alternative Loan Guarantee Fund, the moneys
therein will be invested in investment securities as described under "--
Investments" below, and any income from such investments will be retained
therein.
Pledge; Encumbrances
The notes and all Other Indenture Obligations are special, limited
obligations of EdLinc specifically secured by the pledge of the proceeds of the
sale of notes (until expended for the purpose for which the notes were issued),
the financed student loans and the revenues, moneys and securities in the
Acquisition Fund, the Note Fund, the Revenue Fund, the Administration Fund, the
Reserve Fund, the Alternative Loan Guarantee Fund and the Surplus Fund, in the
manner and subject to the prior applications provided in the indenture.
Financed student loans purchased with the proceeds of EdLinc's bonds, notes or
obligations or sold to another purchaser, or resold to a lender or SLFC pursuant
to its repurchase obligation under a student loan purchase agreement, or sold or
exchanged for Eligible Loans in accordance with the provisions of the indenture,
are, contemporaneously with receipt by the trustee of the purchase price
thereof, no longer pledged to nor serve as security for the payment of the
principal of, premium, if any, or interest on, or any Carry-Over Amounts (or
accrued interest thereon) with respect to the notes or any Other Indenture
Obligations.
EdLinc agrees that it will not create, or permit the creation of, any
pledge, lien, charge or encumbrance upon the financed student loans or the
revenues and other assets pledged under the indenture, except only as to a lien
subordinate to the lien of the indenture created by any other indenture
authorizing the issuance of bonds, notes or other evidences of indebtedness of
EdLinc, the proceeds of which have been or will be used to refund or otherwise
retire all or a portion of the Outstanding notes or as otherwise provided in or
permitted by the indenture. EdLinc agrees that it will not issue any bonds or
other evidences of indebtedness, other than the notes as permitted by the
indenture and other than swap agreements and credit enhancement facilities
relating to notes as permitted by the indenture, secured by a pledge of the
revenues and other assets pledged under the indenture, creating a lien or charge
equal or superior to the lien of the indenture; provided that nothing in the
indenture is intended to prevent EdLinc from issuing obligations secured by
revenues and assets of EdLinc other than the revenues and other assets pledged
in the indenture.
Covenants
Certain covenants with the holders of the notes and Other Beneficiaries
contained in the indenture are summarized as follows:
Trustee to Hold Financed Student Loans. EdLinc will cause all financed
student loans to be endorsed and otherwise conveyed to the trustee on behalf of
EdLinc in accordance with the
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provisions of the applicable student loan purchase agreement or, in the case of
any origination of financed student loans, will cause such student loans to be
originated in the name of the trustee. The trustee will be the legal owner of
all financed FFELP Loans for all purposes of the Higher Education Act and each
guarantee program. The trustee will so hold such financed student loans in its
capacity as trustee pursuant to the indenture and, in such capacity, will be
acting on behalf of EdLinc, 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.
Enforcement and Amendment of Guarantee Agreements. So long as any notes or
Other Indenture Obligations are Outstanding and financed FFELP Loans are
Guaranteed by a guarantee agency, EdLinc agrees that it (1) will, from and after
the date on which the trustee on its behalf shall have entered into the
Guarantee Agreement, cause the trustee to maintain the same and diligently
enforce the trustee's rights thereunder, (2) will cause the trustee to enter
into such other similar or supplemental agreements as shall be required to
maintain benefits for all financed FFELP Loans covered thereby, and (3) will not
consent to or permit any rescission of or consent to any amendment to or
otherwise take any action under or in connection with the same which in any
manner will materially adversely affect the rights of the noteholders or Other
Beneficiaries under the indenture.
Acquisition, Collection and Assignment of Student Loans. EdLinc agrees
that it will, except as provided with regard to the Surplus Fund (see "--Funds
and Accounts--Surplus Fund" above), cause the trustee to purchase or originate
only Eligible Loans with moneys in any of the funds and (subject to any
adjustments referred to in the following paragraph) will diligently cause to be
collected all principal and interest payments on all the financed student loans
and other sums to which EdLinc is entitled pursuant to any student loan purchase
agreement, and all grants, subsidies, donations, insurance payments, Special
Allowance Payments and all defaulted payments Guaranteed by any guarantee agency
which relate to such financed student loans. EdLinc will also make, or cause to
be made by lenders or servicers, every effort to perfect EdLinc'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
financed FFELP Loans. EdLinc will cause the trustee to assign such financed
FFELP Loans for payment of guarantee or insurance benefits within the time
required under applicable law and regulations. EdLinc will cause all United
States and state statutes, rules and regulations which apply to financed student
loans to be complied with.
Enforcement of Financed Student Loans. EdLinc agrees that it will cause to
be diligently enforced, and 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 (1) any discount EdLinc may cause to be made
available to borrowers who make payments on financed student loans through
automatic withdrawals, and (2) 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 EdLinc or the trustee thereunder. Nothing
in the provisions of the indenture described in this paragraph, however, shall
be construed to prevent EdLinc from settling a default or curing a
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delinquency on any financed student loan on such terms as shall be required by
law. In addition, EdLinc may cause the trustee to 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.
Servicing and Other Agreements. EdLinc may contract with other entities to
assist it in performing its duties under the indenture, and any performance of
such duties by an entity so identified to the trustee will be deemed to be
action taken by EdLinc. EdLinc is required to enter into a servicing agreement
providing for the servicing of the financed student loans and performance of its
other obligations under the indenture.
Administration and Collection of Financed Student Loans. EdLinc agrees
that all financed student loans will be administered and collected by a servicer
selected by EdLinc in a competent, diligent and orderly fashion and in
accordance with all requirements of the Higher Education Act, the Secretary of
Education, the indenture, the Contract of Insurance, the federal reimbursement
contracts, each guarantee program, each Guarantee Agreement and each Alternative
Loan Program.
Books of Account, Annual Audit. EdLinc agrees that it will cause to be
kept and maintained proper books of account 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 EdLinc, and within 120 days after the end of each fiscal year
will cause such books of account to be audited by an independent accountant. A
copy of each audit report, annual balance sheet and income and expense statement
showing in reasonable detail the financial condition of EdLinc 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, will be filed promptly with the trustee and be available for
inspection by any noteholder or Other Beneficiary.
Punctual Payments. EdLinc agrees that it will 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) with respect to each and every
note and each Other Indenture Obligation from the revenues and other assets
pledged under the indenture on the dates and at the places, and in the manner
provided, in the notes and with respect to each Other Indenture Obligation
according to the true intent and meaning thereof, and EdLinc will 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 Indenture Obligations and the indenture.
Monthly Servicing Reports. EdLinc will prepare, or cause a servicer to
prepare, a monthly servicing report for each calendar month and will furnish, or
cause to be furnished, to the trustee a copy of each such report by the 25th day
of the next calendar month (or the next succeeding business day if such 25th day
is not a business day).
Limitation on Administrative Expenses and Note Fees. EdLinc covenants and
agrees that the administrative expenses and Note Fees will not, in any fiscal
year, exceed those that are
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reasonable and 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 EdLinc to pay or perform, as the case may be, any of its obligations
under the indenture or the security for any Beneficiaries.
Amendment of Student Loan Purchase Agreements. EdLinc will notify the
trustee in writing of any proposed amendments to the student loan purchase
agreements. No such amendment will become effective unless and until the
trustee consents in writing thereto, which consent will 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.
Credit Enhancement Facilities and Swap Agreements. EdLinc may from time to
time enter into any credit enhancement facilities or swap agreements with
respect to any notes of any series; provided that a supplemental indenture is
entered into authorizing the execution and delivery of such agreement. See "--
Supplemental Indentures" below.
No supplemental indenture will authorize the execution of a swap agreement
unless, as of the date EdLinc enters into such swap agreement, the swap
counterparty 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, such as a
comparable rating of claims paying ability or deposits). No such swap agreement
will be designated as a senior swap agreement unless, as of the date EdLinc
enters into such swap agreement, the Senior Asset Requirement will be met and
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
Outstanding Unenhanced Senior or Subordinate Notes.
Any supplemental indenture authorizing the execution by EdLinc of a swap
agreement or credit enhancement facility may include provisions with respect to
the application and use of all amounts to be paid thereunder. No amounts paid
under any such credit enhancement facility will be part of the Trust Estate
except to the extent, if any, specifically provided in such supplemental
indenture and no Beneficiary will have any rights with respect to any such
amounts so paid except as may be specifically provided in such supplemental
indenture.
No Petition
The trustee, by entering into the indenture, and each noteholder, by
accepting a note, covenants and agrees that it will not at any time institute
against EdLinc, or join in any institution against EdLinc 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 or the indenture.
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Investments
Moneys from time to time on deposit in the funds and accounts may be
invested in one or more of the following investment securities:
. Government Obligations;
. interest-bearing time or demand deposits, certificates of deposit or
other similar banking arrangements with any bank, trust company, national
banking association or other depositary institution (including the
trustee or any of its affiliates), provided that, at the time of deposit
or purchase, if the 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;
. 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 will 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)
will either be rated by Fitch IBCA, Inc. or, if not rated by Fitch IBCA,
Inc., 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;
. 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 Government Obligations to a level sufficient to
obtain a rating by each Rating Agency in its highest applicable specific
rating category, or with brokers or dealers whose unsecured long-term
debt is rated by each Rating Agency in its highest applicable specific
rating category;
. any money market fund, including a qualified regulated investment company
described in I.R.S. Notice 87-22, rated by each Rating Agency not lower
than its highest applicable specific rating category;
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. 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;
. any investment agreement which constitutes a general obligation of an
entity 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
. 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 Outstanding
Unenhanced Senior or Subordinate Notes to be lowered or withdrawn or, if
no Unenhanced Senior or Subordinate Notes are then Outstanding but Other
Indenture Obligations are Outstanding, is acceptable to the Other
Beneficiaries entitled to such Other Indenture Obligations.
Reports to Noteholders
The trustee, in accordance with the indenture, is required to mail a copy
of each monthly servicing report to each noteholder of record as of the most
recent record date. In addition, Beneficial Owners of the notes may receive
such reports, upon written request to the trustee together with a certification
that they are Beneficial Owners of the notes.
Events of Default
If any of the following events occur, it is an "event of default" under the
indenture:
(A) default in the due and punctual payment of any interest on any
Senior Note; or
(B) default in the due and punctual payment of the principal of, or
premium, if any, on, any Senior Note; or
(C) default by EdLinc in its obligation to purchase any Senior Note on
a Purchase Date or mandatory tender date therefor; or
(D) default in the due and punctual payment of any amount owed by
EdLinc to any Other Senior Beneficiary under a senior swap agreement or
senior credit enhancement facility; or
(E) if no Senior Obligations are Outstanding, default in the due and
punctual payment of any interest on any Subordinate Note; or
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(F) if no Senior Obligations are Outstanding, default in the due and
punctual payment of the principal of, or premium, if any, on, any
Subordinate Note; or
(G) if no Senior Obligations are Outstanding, default by EdLinc in its
obligation to purchase any Subordinate 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 EdLinc to any Other Subordinate
Beneficiary under a subordinate swap agreement or a subordinate credit
enhancement facility; 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
(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; or
(K) default in the performance of any of EdLinc's obligations with
respect to the transmittal of moneys to be credited to the Revenue Fund,
the Acquisition Fund or the Note Fund under the provisions of the indenture
and such default shall have continued for a period of 30 days; or
(L) default in the performance or observance of any other of the
covenants, agreements or conditions on the part of EdLinc in the indenture
or in the notes contained, and such default shall have continued for a
period of 30 days after written notice thereof, specifying such default,
shall have been given by the trustee to EdLinc, which may give such notice
in its discretion and will give such notice at the written request of the
Acting Beneficiaries Upon Default, or by the holders of not less than 10%
in aggregate principal amount of the Outstanding notes to EdLinc and the
trustee, provided that, if the default is such that it can be corrected,
but not within such 30 days, it will not constitute an event of default if
corrective action is instituted by EdLinc within such 30 days and is
diligently pursued until the default is corrected; or
(M) events of bankruptcy or insolvency of EdLinc.
Remedies
Whenever any event of default other than that described in paragraph (L)
under "--Events of Default" above 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 EdLinc, declare
the principal of and interest accrued on all notes then Outstanding due and
payable.
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Whenever any event of default described in paragraph (L) under "--Events of
Default" above shall have occurred and be continuing, (1) the trustee may, by
notice in writing delivered to EdLinc, declare the principal of and interest on
all notes then Outstanding due and payable; and (2) the trustee will, upon the
written request of the Acting Beneficiaries Upon Default, by notice in writing
delivered to EdLinc, declare the principal of and interest on all notes then
Outstanding due and payable.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the trustee, the Acting Beneficiaries Upon Default, by written notice to EdLinc
and the trustee, may 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 EdLinc, or provision satisfactory to the trustee has been made for
the payment of, a sum sufficient to pay:
(A) if Senior Notes or Other Senior Obligations are Outstanding: (i)
all overdue installments of interest on all Senior Notes; (ii) the
principal of (and premium, if any, on) any Senior Notes which have become
due other than by such declaration of acceleration, together with interest
thereon at the rate or rates borne by such Senior Notes; (iii) to the
extent that payment of such interest is lawful, interest upon overdue
installments of interest on the Senior Notes at the rate or rates borne by
such Senior 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 EdLinc's obligations with respect
to the transmittal of moneys to be credited to the Revenue Fund, the
Acquisition Fund and the Interest Account under the provisions of the
indenture; and (vi) all sums paid or advanced by the trustee under the
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 Notes
or Other Subordinate Obligations are Outstanding: (i) all overdue
installments of interest on all Subordinate Notes; (ii) the principal of
(and premium, if any, on) any Subordinate Notes which have become due other
than by such declaration of acceleration, together with interest thereon at
the rate or rates borne by such Subordinate Notes; (iii) to the extent that
payment of such interest is lawful, interest upon overdue installments of
interest on the Subordinate Notes at the rate or rates borne by such
Subordinate Notes; (iv) all Other Subordinate 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 EdLinc's obligations with
respect to the transmittal of moneys to be credited to the Revenue Fund,
the Acquisition Fund and the Interest Account under the provisions of the
indenture; and (vi) all sums paid or advanced by the trustee under the
indenture and the reasonable compensation, expenses, disbursements and
advances of the trustee, its agents and
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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
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 EdLinc's obligations with respect to the transmittal of moneys to
be credited to the Revenue Fund and the Acquisition Fund under the
provisions of the indenture; and (v) all sums paid or advanced by the
trustee under the 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; and
(2) All events of default, other than the nonpayment of the principal of
and interest on notes or amounts owing to Other Beneficiaries which have become
due solely by such declaration of acceleration, have been cured or waived as
provided in the indenture.
If an event of default has occurred and is continuing, the trustee may,
subject to applicable law, pursue any available remedy by suit at law or in
equity to enforce the covenants of EdLinc in the indenture 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 in the indenture. The trustee is also authorized to file proofs
of claims in any equity, receivership, insolvency, bankruptcy, liquidation,
readjustment, reorganization or other similar proceedings.
Notwithstanding any other provisions of the indenture, if an "event of
default" (as defined therein) occurs under a swap agreement or a credit
enhancement facility 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 does not adversely affect the
legal ability of the trustee or Acting Beneficiaries Upon Default to exercise
any remedy available under the indenture.
If an event of default has occurred and is continuing, and if it shall have
been requested so to do by the holders of not less than 25% in aggregate
principal amount of all notes then Outstanding or any Other Beneficiary and
shall have been indemnified as provided in the indenture, the trustee is obliged
to exercise such one or more of the rights and powers conferred by the indenture
as the trustee shall deem most expedient in the interests of the Beneficiaries;
provided, however, that the trustee has 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
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not less than a majority in aggregate principal amount of the notes then
Outstanding or from any Other Beneficiary.
The Acting Beneficiaries Upon Default have the right to direct the method
and place of conducting all proceedings to be taken in connection with the
enforcement of the terms and conditions of the indenture; provided that (a) such
direction shall not be otherwise than in accordance with the provisions of law
and of the 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 thereunder; and (c) the trustee may take
any other action deemed proper by the trustee which is not inconsistent with
such direction.
Except as may be permitted in a supplemental indenture with respect to an
Other Beneficiary, no holder of any note or Other Beneficiary will have any
right to institute any suit, action or proceeding in equity or at law for the
enforcement of the indenture or for the execution of any trust under the
indenture or for the appointment of a receiver or any other remedy under the
indenture unless (1) an event of default shall have occurred and be continuing,
(2) the holders of not less than 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, (4) the trustee shall have thereafter failed for a period of 60 days
after the receipt of the request and indemnification or refused to exercise the
powers granted in the indenture 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 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; provided, however, that,
notwithstanding the foregoing provisions of the indenture, 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 under the indenture.
The trustee, unless it has declared the principal of and interest on all
Outstanding notes immediately due and payable and a judgment or decree for
payment of the money due has been obtained by the trustee, must waive any event
of default and its consequences upon written request of the Acting Beneficiaries
Upon Default; provided, however, that there will 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 the third
paragraph under this caption "Remedies;" (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, EdLinc has paid or deposited with the trustee a
sum sufficient to pay all amounts owed to such Beneficiary; (c) any event of
default arising from the failure of EdLinc to pay unpaid expenses of the
trustee, its agents and counsel, and any authenticating agent, paying agents,
note registrars, deposit agents, remarketing agents, depositaries, auction
agents and broker-dealers as required by the indenture, unless, prior to such
waiver, EdLinc has paid or deposited with the trustee sums required to satisfy
such obligations of EdLinc under the provisions of the indenture.
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Application of Proceeds
All moneys received by the trustee pursuant to any remedy will, after
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, 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 will be
applied as follows:
. FIRST, to the payment to the Senior Beneficiaries of all
installments of principal and interest then due on the Senior
Notes and all Other Senior Obligations, and if the amount
available will not be sufficient to pay all such amounts in full,
then to the payment ratably, in proportion to the amounts due, to
the Senior Noteholders and to each Other Senior Beneficiary,
without any discrimination or preference, and the trustee will
apply the amount so apportioned to the Senior Noteholders first to
the payment of interest and thereafter to the payment of
principal;
. SECOND, to the payment to the Subordinate Beneficiaries of all
installments of principal and interest then due on the Subordinate
Notes and all Other Subordinate Obligations, and if the amount
available will 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 Subordinate Noteholders and to
each Other Subordinate Beneficiary, without any discrimination or
preference, and the trustee will apply the amount so apportioned
to the Subordinate Noteholders first to the payment of interest
and thereafter to the payment of principal; and
. THIRD, to the payment of the holders of the Class C Notes of all
installments of principal and interest (other than interest on
overdue principal) then due and payable.
(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 the indenture, all such
moneys will be applied as follows:
. FIRST, to the payment to the Senior Beneficiaries of all principal
and interest then due on the Senior Notes and all Other Senior
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 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 on the Subordinate Notes and all
Other Subordinate Obligations, without preference or priority of
principal over interest or of interest over
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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 person 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 Outstanding notes shall have been declared
due and payable and if such declaration will thereafter have been rescinded and
annulled, then (subject to the provisions described in paragraph (B) above, if
the principal of all the Outstanding notes shall later become or be declared due
and payable) the money held by the trustee under the indenture will be applied
in accordance with the provisions described in paragraph (A) above.
Trustee
Prior to the occurrence of an event of default under the indenture which
has not been cured, the trustee is required to perform such duties and only such
duties as are specifically set forth in the indenture. Upon the occurrence and
continuation of an event of default, the trustee will exercise the rights and
powers vested in it by 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 his own affairs.
Before taking any action under the indenture, the trustee may require that
satisfactory indemnity be furnished to it for the reimbursement of all expenses
to which it may be put and to protect it against all liability by reason of any
action so taken, except liability which is adjudicated to have resulted from its
negligence or willful misconduct.
The trustee may at any time resign upon 60 days' notice to EdLinc and to
the Beneficiaries, such resignation to take effect upon the appointment of a
successor trustee. The trustee may be removed at any time by EdLinc at the
request of the holders of a majority in principal amount of notes Outstanding,
except during the existence of an event of default under the indenture. No such
removal will be effective until the appointment of a successor trustee.
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Supplemental Indentures
Supplemental Indentures Not Requiring Consent of Beneficiaries
EdLinc 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, enter
into an indenture or indentures supplemental to the indenture to, among other
things:
. cure any ambiguity or formal defect or omission in the indenture or in
any supplemental indenture,;
. grant to the trustee for the benefit of the Beneficiaries any additional
rights, remedies, powers, authority or security;
. describe or identify more precisely any part of the Trust Estate or
subject additional revenues, properties or collateral to the lien and
pledge of the indenture;
. authorize the issuance of a series of notes, subject to the requirements
of the indenture (see "Description of the Notes --Issuance of Notes");
. amend the assumptions contained in the definition of "cash flow
projection;"
. modify the indenture as required by any credit facility provider or swap
counterparty, or otherwise necessary to give effect to any credit
enhancement facility or swap agreement; provided that no such
modifications will be effective (1) if the consent of any noteholders
would be required therefor under the proviso described in the next
succeeding paragraph and such consent has not been obtained, or (2) the
trustee will determine that such modifications are to the prejudice of
any Class C Noteholder; or
. make any other change in the indenture which, in the judgment of the
trustee, is not to the prejudice of the trustee or any Beneficiary.
Supplemental Indentures Requiring Consent of Noteholders
Exclusive of supplemental indentures described in the preceding paragraph,
the trustee, upon receipt of an instrument evidencing the consent to the below-
mentioned supplemental indenture by: (1) if they are affected thereby, the
holders of not less than two-thirds of the aggregate principal amount of the
Outstanding Senior Notes not held by EdLinc or a related person, (2) if they are
affected thereby, the holders of not less than two-thirds of the aggregate
principal amount of the Outstanding Subordinate Notes not held by EdLinc or a
related person, and (3) 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, will join with EdLinc
in the execution of such other supplemental indentures for the purpose of
modifying, altering, amending, adding to or rescinding any of the terms or
provisions contained
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in the indenture; provided, however, that no such supplemental indenture will
permit without the consent of each Beneficiary which would be affected
thereby:
. an extension of the maturity of the principal of or the interest on any
note;
. a reduction in the principal amount, redemption price or purchase price
of any note or the rate of interest thereon;
. a privilege or priority of any Senior Obligation over any other Senior
Obligation;
. a privilege or priority of any Subordinate Obligation over any other
Subordinate Obligation;
. a privilege or priority of any Class C Note over any other Class C
Note;
. a privilege of any Senior Notes over any Subordinate Notes or Class C
Notes, or of any Subordinate Notes over any Class C Notes, other than as
theretofore provided in the indenture;
. the surrendering of a privilege or a priority granted by the indenture
if, in the judgment of the trustee, to the detriment of another
Beneficiary under the indenture;
. a reduction or an increase in the aggregate principal amount of the
notes required for consent to such supplemental indenture;
. the creation of any lien ranking prior to or on a parity with the lien
of the indenture on the Trust Estate or any part thereof, except as
expressly permitted in the indenture;
. any Beneficiary to be deprived of the lien created on the rights, title,
interest, privileges, revenues, moneys and securities pledged under the
indenture;
. the modification of any of the provisions of the indenture described in
this paragraph; or
. the modification of any provision of a 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 or swap
agreement of such class.
Rights of Trustee
If, in the opinion of the trustee, any supplemental indenture adversely
affects the rights, duties or immunities of the trustee under the indenture or
otherwise, the trustee may, in its discretion, decline to execute such
supplemental indenture.
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Consent of Depositaries, Remarketing Agents, Auction Agents and Broker-Dealers
So long as any depositary agreement, remarketing agreement, auction agent
agreement or broker-dealer agreement is in effect, no supplemental indenture
which materially adversely affects the rights, duties or immunities of the
depositary, the remarketing agent, the auction agent or the broker-dealer will
become effective unless and until delivery to the trustee of a written consent
of the depositary, the remarketing agent, the auction agent or the broker-
dealer, as the case may be, to such supplemental indenture.
Opinion and Rating Agency Approval Required Prior to Execution of Supplemental
Indenture
No supplemental indenture will be executed unless, prior to the execution
thereof, 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.
Discharge of Notes and Indenture
The obligations of EdLinc under the indenture, and the liens, pledges,
charges, trusts, covenants and agreements of EdLinc therein made or provided
for, will be fully discharged and satisfied as to any note and such note will no
longer be deemed to be Outstanding thereunder
. when such note shall have been canceled, or shall have been purchased by
the trustee from moneys held by it under the indenture; or
. 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, either
(a) shall have been made in accordance with the terms of the indenture,
or (b) shall have been provided for by irrevocably depositing with the
trustee exclusively for such payment, (i) moneys sufficient to make such
payment or (ii) 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 is to be so provided for, the payment of
all fees and expenses of the trustee and any other fiduciaries under the
indenture.
Notices to Noteholders
Except as is otherwise provided in the indenture, any provision in the
indenture for the mailing of notice or other instrument to holders of notes will
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
maintained by the trustee. In addition, whenever notice is to be mailed under
the indenture to the holders of notes, the trustee is also, upon request, to
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 event less than $1,000,000 in
aggregate principal amount of notes is outstanding,
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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 will not affect the validity of any proceedings to be taken
(including, without limitation, for the redemption of notes) pursuant to such
notice.
Rights of Other Beneficiaries
All rights of any Other Beneficiary under the indenture to consent to or
direct remedies, waivers, actions and amendments thereunder will cease for so
long as such Other Beneficiary is in default of any of its obligations or
agreements under the swap agreement or the credit enhancement facility by reason
of which such person is an Other Beneficiary.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the principal United States federal income
tax consequences resulting from the beneficial ownership of notes by specified
persons. This summary does not consider all the possible United States federal
tax consequences of the purchase, ownership or disposition of the notes and is
not intended to reflect the individual tax position of any beneficial owner.
Moreover, except as expressly indicated, it addresses initial purchasers of a
note at its issue price, which is the first price to the public at which a
substantial amount of the notes in an issue is sold, and does not address
beneficial owners that may be subject to special tax rules, such as banks,
insurance companies, dealers in securities or currencies, purchasers that hold
notes or foreign currency as a hedge against currency risks or as part of a
straddle with other investments or as part of a synthetic security or other
integrated investment (including a conversion transaction) comprised of a note
and one or more other investments, or purchasers that have a functional currency
other than the U.S. dollar. Except to the extent discussed below under "United
States Federal Income Tax Consequences to Non-United States Holders," this
summary is not applicable to non-United States persons not subject to United
States federal income tax on their worldwide income. This summary is based upon
the United States federal tax laws and regulations currently in effect and as
currently interpreted and does not take into account possible changes in the tax
laws or the interpretations, any of which may be applied retroactively. It does
not discuss the tax laws of any state, local or foreign governments. It does
not discuss the tax treatment of notes denominated in hyperinflationary
currencies or dual currency notes.
Persons considering the purchase of notes should consult their own tax
advisors concerning the United States federal income tax consequences to them in
light of their particular situations as well as any consequences to them under
the laws of any other taxing jurisdiction.
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Characterization of the Trust Estate
In Dorsey & Whitney LLP's opinion, based upon some assumptions and
representations of EdLinc, the notes will be treated as debt of EdLinc, rather
than as an interest in the financed Eligible Loans and other assets of the Trust
Estate, for federal income tax purposes. This opinion will not be binding on
the courts or the Internal Revenue Service. It is possible that the Internal
Revenue Service could assert that, for purposes of the Internal Revenue Code,
the transaction contemplated by this prospectus constitutes a sale of the assets
comprising the Trust Estate (or an interest therein) to the noteholders or that
the relationship which will result from this transaction is that of a
partnership or of an association taxable as a corporation.
If, instead of treating the transaction as creating secured debt in the
form of the notes issued by EdLinc as a corporate entity, the Internal Revenue
Service treats the transaction as creating a partnership among the noteholders,
the servicer and EdLinc, which has purchased the underlying Trust Estate assets,
the resulting partnership would not be subject to federal income tax. Rather,
the servicer, EdLinc and each noteholder would be taxed individually on their
respective distributive shares of the partnership's income, gain, loss,
deductions and credits. The amount and timing of items of income and deduction
of the noteholder may differ from the tax consequences set forth in the
following summary if the Internal Revenue Service holds that the notes
constitute partnership interests rather than indebtedness.
If, alternatively, the Internal Revenue Service determines that this
transaction created an entity other than EdLinc which was classified as a
corporation or a publicly traded partnership taxable as a corporation and which
was treated as having sold the assets comprising the Trust Estate, the Trust
Estate would be subject to federal income tax at corporate income tax rates on
the income it derives from the financed Eligible Loans and other assets.
Imposition of this corporate income tax would reduce the amounts available for
payment to the noteholders. Cash payments to the noteholders generally would be
treated as dividends for tax purposes to the extent of such corporation's
earnings and profits. A similar result would apply if the noteholders were
deemed to have acquired stock or other equity interests in EdLinc. However, as
noted above, EdLinc has been advised that the notes will be treated as debt of
EdLinc for federal income tax purposes.
Characterization of the Notes as Indebtedness
EdLinc and the noteholders express in the indenture their intent that, for
applicable tax purposes, the notes will be indebtedness of EdLinc secured by the
Trust Estate. EdLinc and the noteholders, by accepting the notes, have agreed
to treat the notes as indebtedness of EdLinc for federal income tax purposes.
EdLinc intends to treat this transaction as a financing reflecting the notes as
its indebtedness for tax and financial accounting purposes.
In general, the characterization of a transaction as a sale of property or
a secured loan, for federal income tax purposes, is a question of fact, the
resolution of which is based upon the economic substance of the transaction,
rather than upon its form or the manner in which it is characterized. While the
Internal Revenue Service and the courts have set forth several factors to
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be taken into account in determining whether the substance of a transaction is a
sale of property or a secured indebtedness, the primary factor in making this
determination is whether the transferee has assumed the risk of loss or other
economic burdens relating to the property and has obtained the benefits of
ownership thereof. Notwithstanding the foregoing, in some instances, courts have
held that a taxpayer is bound by the particular form it has chosen for a
transaction, even if the substance of the transaction does not accord with its
form.
EdLinc believes that it has retained the preponderance of the primary
benefits and burdens associated with the financed Eligible Loans and other
assets comprising the Trust Estate and should therefore be treated as the owner
of such assets for federal income tax purposes. If, however, the Internal
Revenue Service were to successfully assert that this transaction should be
treated as a sale of the Trust Estate assets, the Internal Revenue Service could
further assert that the entity created pursuant to the indenture, as the owner
of the Trust Estate for federal income tax purposes, should be deemed engaged in
a business and, therefore, characterized as an association taxable as a
corporation.
United States Federal Income Tax Consequences to United States Holders
Payments of Interest
In general, interest on a note will be taxable to a beneficial owner which
is a United States holder of the note. For purposes of the following summary,
the term United States holder refers generally to: (1) a citizen or resident of
the United States, (2) a corporation created or organized under the laws of the
United States or any state (including the District of Columbia) or (3) a person
otherwise subject to United States federal income taxation on its worldwide
income. Interest will be taxable as ordinary income at the time it is received
or accrued, depending on the holder's method of accounting for tax purposes. If
a partnership holds notes, the tax treatment of a partner will generally depend
upon the status of the partner and upon the activities of the partnership.
Partners of partnerships holding notes should consult their tax advisors.
Although the matter is not free from doubt, it is anticipated that the
notes will be treated as providing for stated interest at qualified floating
rates, as this term is defined by applicable Treasury Regulations, and
accordingly as having been issued without original issue discount. EdLinc
intends to report interest income in respect of the notes in a manner consistent
with this treatment. If the Internal Revenue Service were to determine that the
notes do not provide for stated interest at qualified floating rates, the notes
would be treated as having been issued with original issue discount. In that
event, the noteholder would be required to include original issue discount in
gross income as it accrues on a constant yield to maturity basis in advance of
the receipt of any cash attributable to the income, regardless of whether the
holder is a cash or accrual basis taxpayer. We anticipate, however, that even
if the notes were treated as issued with original issue discount under these
circumstances, the amount which a noteholder would be required to include in
income currently under this method would not differ materially from the amount
of interest on the note otherwise includable in income.
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Although the matter is also not free from doubt, EdLinc intends to take the
position that the Carry-Over Amounts are taxable as interest payments when
received or accrued, depending on the noteholder's method of accounting. It is
possible, however, that the Internal Revenue Service could take the position
that the Carry-Over Amounts are contingent payments and accordingly that the
notes were issued with original issue discount includable in income as it
accrues, as described above. If the holder does not ultimately collect the
accrued Carry-Over Amounts, the amount of the unpaid Carryover Amounts would
first reduce the interest (including any original issue discount) includable in
the holder's taxable income for that taxable year, and any excess would be
treated as ordinary loss to the extent of prior year interest income inclusions
on the note.
Notes Purchased at a Premium
Under the Internal Revenue Code, a United States holder that purchases a
note for an amount in excess of its stated redemption price at maturity may
elect to treat this excess as amortizable bond premium. If the holder makes
this election, the amount of interest which the United States holder must
include in income each year with respect to interest on the note will be reduced
by the amount of amortizable bond premium allocable (based on the note's yield
to maturity) to that year. If the amortizable bond premium allocable to a year
exceeds the amount of interest allocable to that year, the excess would be
allowed as a deduction for that year but only to the extent of the United States
holder's prior interest inclusions on the note. Any excess is generally carried
forward and allocable to the next year. A holder who elects to amortize bond
premium must reduce his tax basis in the note as described below under
"Purchase, Sale, Exchange and Retirement of the Notes." Any election to
amortize bond premium is applicable to all bonds (other than bonds the interest
on which is excludable from gross income) held by the United States holder at
the beginning of the first taxable year to which the election applies or
thereafter acquired by the United States holder, and may not be revoked without
the consent of the Internal Revenue Service.
Notes Purchased at a Market Discount
A note, other than a note that matures one year or less from the date of
issuance, will be treated as acquired at a market discount (a "market discount
note") if the amount for which a United States holder purchased the note is less
than the note's issue price, unless such difference is less than a specified de
minimis amount.
In general, any partial payment of principal or any gain recognized on the
maturity or disposition of a market discount note will be treated as ordinary
income to the extent that such gain does not exceed the accrued market discount
on such note. Alternatively, a United States holder of a market discount note
may elect to include market discount in income currently over the life of the
market discount note. That election applies to all debt instruments with market
discount acquired by the electing United States holder on or after the first day
of the first taxable year to which the election applies and may not be revoked
without the consent of the Internal Revenue Service.
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Market discount accrues on a straight-line basis unless the United States
holder elects to accrue such discount on a constant yield to maturity basis.
That election is applicable only to the market discount note with respect to
which it is made and is irrevocable. A United States holder of a market discount
note that does not elect to include market discount in income currently
generally will be required to defer deductions for interest on borrowings
allocable to the note in an amount not exceeding the accrued market discount on
such note until the maturity or disposition of the note.
Purchase, Sale, Exchange and Retirement of the Notes
A United States holder's tax basis in a note generally will equal its cost,
increased by any market discount and original issue discount included in the
United States holder's income with respect to the note, and reduced by the
amount of any amortizable bond premium applied to reduce interest on the note.
A United States holder generally will recognize gain or loss on the sale,
exchange or retirement of a note equal to the difference between the amount
realized on the sale or retirement and the United States holder's tax basis in
the note. Except to the extent described above under "Notes Purchased at a
Market Discount," and except to the extent attributable to accrued but unpaid
interest, gain or loss recognized on the sale, exchange or retirement of a note
will be capital gain or loss and will be long-term capital gain or loss if the
note was held for more than one year. In the event that the Internal Revenue
Service takes the position that the notes were issued with original issue
discount as a result of the Carry-Over Amounts, as discussed in "Payments of
Interest" above, this gain would be recharacterized as ordinary gain and a
portion of the loss would be recharacterized as ordinary loss.
United States Federal Income Tax Consequences to Non-United States Holders
The following is a general discussion of some United States federal income
and estate tax consequences resulting from the beneficial ownership of notes by
a non-United States holder, which refers generally to a person other than a
United States holder.
Subject to the discussions of Carry-Over Amounts and backup withholding
below, payments of principal, any premium and interest by us or any agent of
ours (acting in its capacity as agent) to any non-United States holder will not
be subject to United States federal withholding tax, provided, in the case of
interest, that (1) the non-United States holder does not actually or
constructively own 10% or more of the total combined voting power of all classes
of our stock entitled to vote, (2) the non-United States holder is not a
controlled foreign corporation for United States tax purposes that is related to
us (directly or indirectly) through stock ownership and (3) either (A) the non-
United States holder certifies to us or our agent under penalties of perjury
that it is not a United States person and provides its name and address or (B) a
securities clearing organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business and holds
the note certifies to us or our agent under penalties of perjury that such
statement has been received from the non-United States holder by it or by
another financial institution and furnishes the payor with a copy.
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It is possible that any payments of Carry-Over Amounts may be treated as
contingent interest and that the Internal Revenue Service may accordingly take
the position that such payments do not qualify for the exemption from
withholding described above.
A non-United States holder that does not qualify for exemption from
withholding as described above generally will be subject to United States
federal withholding tax at the rate of 30% (or lower applicable treaty rate)
with respect to payments of interest on the notes.
If a non-United States holder is engaged in a trade or business in the
United States and interest on the note is effectively connected with the conduct
of this trade or business, the non-United States holder, although exempt from
the withholding tax discussed above (provided that such holder timely furnishes
the required certification to claim this exemption), may be subject to United
States federal income tax on the interest in the same manner as if it were a
United States holder. In addition, if the non-United States holder is a foreign
corporation, it may be subject to a branch profits tax equal to 30% (or lower
applicable treaty rate) of its effectively connected earnings and profits for
the taxable year, subject to adjustments. For purposes of the branch profits
tax, interest on a note will be included in the earnings and profits of the
holder if the interest is effectively connected with the conduct by the holder
of a trade or business in the United States. Such a holder must provide the
payor with a properly executed Internal Revenue Service Form 4224 (or successor
form) to claim an exemption from United States Federal withholding tax.
Any capital gain or market discount realized on the sale, exchange,
retirement or other disposition of a note by a non-United States holder will not
be subject to United States federal income or withholding taxes if (a) the gain
is not effectively connected with a United States trade or business of the non-
United States holder and (b) in the case of an individual, the non-United States
holder is not present in the United States for 183 days or more in the taxable
year of the sale, exchange, retirement or other disposition, and other
conditions are met.
Notes held by an individual who is neither a citizen nor a resident of the
United States for United States federal tax purposes at the time of the
individual's death will not be subject to United States federal estate tax,
provided that the income from the notes was not or would not have been
effectively connected with a United States trade or business of the individual
and that the individual qualified for the exemption from United States federal
withholding tax (without regard to the certification requirements) described
above.
Recently finalized Treasury Regulations, generally effective for payments
made after December 31, 2000, provide alternative procedures to be followed by a
non-United States holder in establishing eligibility for a withholding tax
reduction or exemption.
Purchasers of notes that are non-United States holders should consult their
own tax advisors with respect to the possible applicability of United States
withholding and other taxes upon income realized in respect of the notes.
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Information Reporting and Back-up Withholding
For each calendar year in which the notes are outstanding, we are required
to provide the Internal Revenue Service with information, including the holder's
name, address and taxpayer identification number (either the holder's Social
Security number or its employer identification number, as the case may be), the
aggregate amount of principal and interest paid to that holder during the
calendar year and the amount of tax withheld, if any. This obligation, however,
does not apply with respect to some United States holders, including
corporations, tax-exempt organizations, qualified pension and profit sharing
trusts and individual retirement accounts.
If a United States holder subject to the reporting requirements described
above fails to supply its correct taxpayer identification number in the manner
required by applicable law or under reports its tax liability, we, our agents or
paying agents or a broker may be required to backup withhold a tax equal to 31%
of each payment of interest, principal and any premium on the notes. This
backup withholding is not an additional tax and may be credited against the
United States holder's federal income tax liability, provided that the holder
furnishes the required information to the Internal Revenue Service.
Under current Treasury regulations, backup withholding and information
reporting will not apply to payments of interest made by us or any of our agents
(in their capacity as such) to a non-United States holder of a note if the
holder has provided the required certification that it is not a United States
person as set forth in clause (3) in the first paragraph under "Non-United
States Holders" above, or has otherwise established an exemption (provided that
neither we nor our agent has actual knowledge that the holder is a United States
person or that the conditions of an exemption are not in fact satisfied).
Payments of the proceeds from the sale of a note to or through a foreign
office of a broker will not be subject to information reporting or backup
withholding. However, information reporting (but not backup withholding) may
apply to those payments if the broker is one of the following:
. a United States person,
. a controlled foreign corporation for United States tax purposes,
. a foreign person 50 percent or more of whose gross income from all
sources for the three-year period ending with the close of its taxable
year preceding the payment was effectively connected with a United
States trade or business or
. for payments made after December 31, 2000, a foreign partnership with
some connections to the United States.
Payment of the proceeds from a sale of a note to or through the United
States office of a broker is subject to information reporting and backup
withholding unless the holder or beneficial
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owner certifies as to its taxpayer identification number or otherwise
establishes an exemption from information reporting and backup withholding.
Recently finalized Treasury regulations unify current certification
procedures and forms relating to information reporting and backup withholding
for payments made after December 31, 2000. Among other things, these
regulations provide presumptions under which a non-United States holder is
subject to information reporting and backup withholding unless we or our agent
receives certification from the holder regarding non-United States status.
The federal income tax discussion set forth above is included for general
information only and may not be applicable depending upon a holder's particular
situation. Holders should consult their tax advisors with respect to the tax
consequences to them of the purchase, ownership and disposition of the notes,
including the tax consequences under state, local, foreign and other tax laws
and the possible effects of changes in federal or other tax laws.
STATE TAX CONSIDERATIONS
In addition to the federal income tax consequences described in "Federal
Income Tax Consequences," potential investors should consider the state income
tax consequences of the acquisition, ownership and disposition of the notes.
State income tax law may differ substantially from the corresponding federal
law, and this discussion does not purport to describe any aspect of the income
tax laws of any state. Therefore, potential investors should consult their own
tax advisors with respect to the various state tax consequences of an investment
in the notes.
ERISA CONSIDERATIONS
ERISA imposes fiduciary and prohibited transaction restrictions on employee
pension and welfare benefit plans subject to ERISA ("ERISA Plans"). Section
4975 of the Internal Revenue Code imposes essentially the same prohibited
transaction restrictions on tax-qualified retirement plans described in Section
401(a) of the Internal Revenue Code ("Qualified Retirement Plans") and on
Individual Retirement Accounts ("IRAs") described in Section 408(b) of the
Internal Revenue Code (collectively, "Tax-Favored Plans"). Certain employee
benefit plans, such as governmental plans (as defined in Section 3(32) of
ERISA), and, if no election has been made under Section 410(d) of the Internal
Revenue Code, church plans (as defined in Section 3(33) of ERISA), are not
subject to ERISA requirements. Accordingly, assets of such plans may be invested
in notes of a series without regard to the ERISA considerations described below,
subject to the provisions of applicable federal and state law. Any such plan
which is a Qualified Retirement Plan and exempt from taxation under Sections
401(a) and 501(a) of the Internal Revenue Code, however, is subject to the
prohibited transaction rules set forth in the Internal Revenue Code.
In addition to the imposition of general fiduciary requirements, including
those of investment prudence and diversification and the requirement that a
plan's investment be made in accordance with the documents governing the plan,
Section 406 of ERISA and Section 4975 of the Internal Revenue Code prohibit a
broad range of transactions involving assets of ERISA
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Plans and Tax-Favored Plans and entities whose underlying assets include plan
assets by reason of ERISA Plans or Tax-Favored Plans investing in such entities
(collectively, "Benefit Plans") and persons who have specified relationships to
the Benefit Plans ("Parties in Interest" or "Disqualified Persons"), unless a
statutory or administrative exemption is available. Certain Parties in Interest
(or Disqualified Persons) that participate in a prohibited transaction may be
subject to a penalty (or an excise tax) imposed pursuant to Section 502(i) of
ERISA (or Section 4975 of the Internal Revenue Code) unless a statutory or
administrative exemption is available.
Certain transactions involving the purchase, holding or transfer of notes
of a series might be deemed to constitute prohibited transactions under ERISA
and the Internal Revenue Code if assets of EdLinc were deemed to be assets of a
Benefit Plan. Under a regulation issued by the United States Department of
Labor (the "Plan Assets Regulation"), the assets of EdLinc would be treated as
plan assets of a Benefit Plan for the purposes of ERISA and the Internal Revenue
Code only if the Benefit Plan acquires an "equity interest" in EdLinc and none
of the exceptions contained in the Plan Assets Regulation is applicable. An
equity interest is defined under the Plan Assets Regulation as an interest in an
entity other than an instrument which is treated as indebtedness under
applicable local law and which has no substantial equity features. Although
there can be no assurances in this regard, it appears that the notes should be
treated as debt without substantial equity features for purposes of the Plan
Assets Regulation. However, without regard to whether the notes are treated as
an equity interest for such purposes, the acquisition or holding of notes by or
on behalf of a Benefit Plan could be considered to give rise to a prohibited
transaction if EdLinc or the trustee, or any of their respective affiliates, is
or becomes a party in interest or a disqualified person with respect to such
Benefit Plan. In such case, some exemptions from the prohibited transaction
rules could be applicable depending on the type and circumstances of the plan
fiduciary making the decision to acquire a note. Included among these
exemptions are: Prohibited Transaction Class Exemption ("PTCE") 96-23,
regarding transactions effected by "in-house asset managers;" PTCE 90-1,
regarding investments by insurance company pooled separate accounts; PTCE 95-60,
regarding transactions effected by "insurance company general account;" PTCE 91-
38, regarding investments by bank collective investment funds; and PTCE 84-14,
regarding transactions effected by "qualified professional assets
managers."
Any ERISA Plan fiduciary considering whether to purchase notes of a series
on behalf of an ERISA Plan should consult with its counsel regarding the
applicability of the fiduciary responsibility and prohibited transaction
provisions of ERISA and the Internal Revenue Code to such investment and the
availability of any of the exemptions referred to above. Persons responsible
for investing the assets of Tax-Favored Plans that are not ERISA Plans should
seek similar counsel with respect to the prohibited transaction provisions of
the Internal Revenue Code.
AVAILABLE INFORMATION
EdLinc has filed with the SEC a registration statement under the Securities
Act with respect to the notes offered hereby. This prospectus and the
accompanying prospectus supplement, which forms part of the registration
statement, does not contain all the information
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contained therein. For further information, reference is made to the
registration statement which may be inspected and copied at the public reference
facilities maintained by the SEC at 450 Fifth Street, N.W., Washington D.C.
20549; and at the SEC's regional offices at Seven World Trade Center, Suite
1300, New York, New York 10048; and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, and copies of all or any part thereof may be obtained
from the Public Reference Branch of the SEC, 450 Fifth Street, N.W., Washington,
D.C. 20549 upon the payment of fees prescribed by the SEC. In addition, the
registration statement may be accessed electronically through the SEC's
Electronic Data Gathering, Analysis and Retrieval system at the SEC's site on
the World Wide Web located at http:/ /www.sec.gov.
REPORTS TO NOTEHOLDERS
Unless definitive notes are issued for any series of notes, monthly
unaudited reports and annual unaudited reports containing information concerning
the financed Eligible Loans will be prepared by the servicer and sent on behalf
of EdLinc only to Cede, as nominee of DTC and registered holder of the notes but
will not be sent to any Beneficial Owner of the notes. Such reports will not
constitute financial statements prepared in accordance with generally accepted
accounting principles. See "Description of the Notes--Book-Entry Registration"
and "Description of the Indenture--Reports to Noteholders." EdLinc will file
with the SEC such periodic reports as are required under the Exchange Act and
the rules and regulations of the SEC thereunder. EdLinc intends to suspend the
filing of such reports under the Exchange Act when and if the filing of such
reports is no longer statutorily required.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the EdLinc pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
prospectus and prior to the termination of the offering of any series of notes
will be deemed to be incorporated by reference into this prospectus and the
accompanying prospectus supplement and to be a part hereof. After the initial
distribution of the notes by the underwriters, this prospectus will be
distributed together with, and should be read in conjunction with, an
accompanying supplement to the prospectus. Such supplement will contain the
reports described above and generally will include the information contained in
the monthly statements furnished to noteholders. See "Description of the Notes--
Book-Entry Registration" and "Description of the Indenture--Reports to
Noteholders." Any statement contained herein or in a document incorporated or
deemed to be incorporated by reference herein will be deemed to be modified or
superseded for purposes of this prospectus and the accompanying prospectus
supplement to the extent that a statement contained herein or therein or in any
subsequently filed document that also is or is deemed to be incorporated by
reference herein or therein modifies or supersedes such statement. Any such
statement so modified or superseded will not be deemed, except as so modified or
superseded, to constitute a part of this prospectus and the accompanying
prospectus supplement.
SLFC, as administrator under the SLFC Servicing and Administration
Agreement, will provide without charge to each person to whom a copy of this
prospectus and the accompanying prospectus supplement are delivered, on the
written or oral request of any such person, a copy of
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any or all of the documents incorporated herein by reference, except the
exhibits to such documents (unless such exhibits are specifically incorporated
by reference in such documents). Written requests for such copies should be
directed to Mr. Larry Buckmeier, Student Loan Finance Corporation, 105 First
Avenue Southwest, Aberdeen, South Dakota 57401, or "[email protected]" on the
Internet. Telephone requests for such copies should be directed to (605) 622-
4400.
PLAN OF DISTRIBUTION
The notes will be offered in one or more series and one or more classes
through one or more underwriters or underwriting syndicates. The prospectus
supplement for each series of notes will set forth the terms of the offering of
such series and of each class within such series, including the name or names of
the underwriters, the proceeds to EdLinc, and either the initial public offering
price, the discounts and commissions to the underwriters and any discounts or
concessions allowed or reallowed to some dealers, or the method by which the
price at which the underwriters will sell the notes will be determined.
The notes may be acquired by underwriters for their own account and may be
resold from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. The obligations of any underwriters will be subject to
conditions precedent, and such underwriters will be jointly and severally
obligated to purchase all of a series of notes described in the related
prospectus supplement, if any are purchased. If notes of a series are offered
other than through underwriters, the related prospectus supplement will contain
information regarding the nature of such offering and any agreements to be
entered into between the seller and purchasers of notes of such series.
The time of delivery for the notes of a series in respect of which this
prospectus is delivered will be set forth in the related prospectus
supplement.
FINANCIAL INFORMATION
EdLinc has determined that its financial statements are not material to the
offering made hereby. EdLinc will, in each prospectus supplement, include a
description of the financed student loans and other assets at the time
comprising the Trust Estate, as well as a description of all Outstanding notes
and Other Obligations, if any.
RATING
It is a condition to the issuance and sale of each series and class of
notes that they each be rated by at least one nationally recognized statistical
rating organization in one its four highest applicable rating categories. A
securities rating is not a recommendation to buy, sell or hold securities and
may be subject to revision or withdrawal at any time by the assigning Rating
Agency. See "Rating" in the accompanying prospectus supplement.
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GLOSSARY OF PRINCIPAL DEFINITIONS
Set forth below is a glossary of the principal defined terms used in
this prospectus.
"Acting Beneficiaries Upon Default" means:
(a) at any time that any Senior Obligations are Outstanding: (i) with
respect to directing the trustee to accelerate the Outstanding notes upon
an event of default under the indenture (other than an event of default
described in paragraph (L) under "Description of the Indenture--Events of
Default"): (x) the holders of a majority in aggregate principal amount of
Senior Notes Outstanding; or (y) (unless the trustee determines that
acceleration of the Outstanding notes is not in the overall interest of the
Senior Beneficiaries) any Other Senior Beneficiary; (ii) with respect to
directing the trustee to accelerate the Outstanding notes upon an event of
default described in paragraph (L) under "Description of the Indenture--
Events of Default:" (x) the holders of all Senior Notes Outstanding; or (y)
(unless the trustee determines that acceleration of the Outstanding notes
is not in the overall interest of the Senior Beneficiaries) all Other
Senior Beneficiaries; (iii) with respect to requesting the trustee to
exercise rights and powers under the indenture, directing the conduct of
proceedings in connection with the enforcement of the indenture and
requiring the trustee to waive events of default: (x) the holders of a
majority in aggregate principal amount of the Senior Notes Outstanding,
unless the trustee shall receive conflicting requests or directions from
another Other Senior Beneficiary; or (y) any Other Senior Beneficiary,
unless the trustee determines that the requested action is not in the
overall interest of the Senior Beneficiaries or receives conflicting
requests or directions from another Other Senior Beneficiary or the holders
of a majority in aggregate principal amount of the Senior Notes
Outstanding; and (iv) with respect to all other matters under the
indenture, the holders of a majority in aggregate principal amount of
Senior Notes Outstanding or any Other Senior Beneficiary;
(b) at any time that no Senior Obligations are Outstanding but
Subordinate Obligations are Outstanding: (i) with respect to directing the
trustee to accelerate the Outstanding notes upon an event of default under
the indenture (other than an event of default described in paragraph (L)
under "Description of the Indenture--Events of Default"): (x) the holders
of a majority in aggregate principal amount of Subordinate Notes
Outstanding; or (y) (unless the trustee determines that acceleration of the
Outstanding notes is not in the overall interest of the Subordinate
Beneficiaries) any Other Subordinate Beneficiary; (ii) with respect to
directing the trustee to accelerate the Outstanding notes upon an event of
default described in paragraph (L) under "Description of the Indenture--
Events of Default:" (x) the holders of all Subordinate Notes Outstanding;
or (y) (unless the trustee determines that acceleration of the Outstanding
notes is not in the overall interest of the Subordinate Beneficiaries) all
Other Subordinate Beneficiaries; (iii) with respect to requesting the
trustee to exercise rights and powers under the indenture, directing the
conduct of proceedings in connection with the enforcement of the indenture
and requiring the trustee to waive events of default: (x) the holders of a
majority in aggregate principal amount of the Subordinate Notes
Outstanding, unless the trustee receives conflicting requests or directions
from another
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Other Subordinate Beneficiary; or (y) any Other Subordinate Beneficiary,
unless the trustee determines that the requested action is not in the
overall interest of the Subordinate Beneficiaries or receives conflicting
requests or directions from another Other Subordinate Beneficiary or the
holders of a majority in aggregate principal amount of the Subordinate
Notes Outstanding; and (iv) with respect to all other matters under the
indenture, the holders of a majority in aggregate principal amount of
Subordinate Notes Outstanding or any Other Subordinate Beneficiary;
and
(c) at any time that no Senior Obligations are Outstanding and no
Subordinate Obligations are Outstanding, the holders of a majority in
aggregate principal amount of Class C Notes Outstanding.
"Administrative Cost and Note Fee Rate" shall mean a rate per annum
specified for a series of notes relating to administrative expenses and Note
Fees to be covered by the return on student loans financed with the proceeds of
such series.
"Alternative Loan Guarantee Fund Requirement" means, at any time, an amount
equal to that specified by the Rating Agencies as a condition to the acquisition
of Alternative Loans under the Indenture.
"Alternative Loan Programs" mean one or more of the Alternative Loan
Programs that are identified in the related prospectus supplement.
"Alternative Loans" means loans that are originated under Alternative Loan
Programs.
"Beneficial Owner" means, with respect to a note held in book-entry form,
the actual purchaser of such note.
"Beneficiaries" means, collectively, all Senior Beneficiaries, all
Subordinate Beneficiaries and all holders of any outstanding Class C Notes.
"Carry-Over Amount" means, if and to the extent specifically provided for
as such in a supplemental indenture with respect any series of variable rate
notes, the amount, if any, by which (a) the interest payable on such series with
respect to a given interest period is exceeded by (b) 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 the indenture and in the related notes will not include, within
the meanings of such words, any Carry-Over Amount or any interest accrued on any
Carry-Over Amount.
"Cedel Bank" means a professional depository incorporated under the laws of
Luxembourg which holds securities for its participating organizations and
facilitates the
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clearance and settlement of securities transactions between Cedel Bank
Participants through electronic book-entry.
"Cedel Bank Participants" means recognized financial institutions around
the world that utilize the services of Cedel Bank, including underwriters,
securities brokers and dealers, banks, trust companies, clearing corporations
and other organizations and may include the underwriters of any series of
notes.
"Claims Rates" means those rates determined by dividing total default
claims since the previous September 30 by the total original principal amount of
the guarantee agency's guaranteed loans in repayment on such September 30.
"Class C Notes" means any notes designated in a supplemental indenture as
Class C Notes, which are secured under the indenture on a basis subordinate to
any Senior Obligations and any Subordinate Obligations.
"Consolidation Loan" means a student loan made pursuant to Section 428C of
the Higher Education Act.
"Depositories" means DTC, Cedel Bank and Euroclear, collectively.
"DTC Participants" means the participating organizations that utilize the
services of DTC, including securities brokers and dealers, banks, trust
companies, clearing corporations and other organizations.
"EdLinc" means Education Loans Incorporated, a Delaware corporation.
"Effective Interest Rate" means, with respect to any financed student loan,
the interest rate per annum borne by such financed student loan after giving
effect to all applicable Interest Subsidy Payments, Special Allowance Payments,
rebate fees on Consolidation Loans and reductions pursuant to borrower
incentives. For this purpose, the Special Allowance Payment rate shall be
computed based upon the average of the bond equivalent rates of 91-day United
States Treasury Bills auctioned during that portion of the then current calendar
quarter which ends on the date as of which the Effective Interest Rate is
determined.
"Eligible Loan" means: (A) a FFELP Loan which: (1) has been or will be made
to a borrower for post-secondary education; (2) is 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; 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 (including Alternative Loans) if EdLinc shall have
caused to be provided to the trustee 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 Senior or Subordinate
Notes or, if
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no Unenhanced Senior or Subordinate Notes are then Outstanding but Other
Indenture Obligations are Outstanding, the Other Beneficiaries consent to the
treatment of such type of loan as an Eligible Loan.
"Euroclear Operator" means Morgan Guaranty Trust Company of New York,
Brussels, Belgium office.
"Euroclear Participants" means the participating organizations that utilize
the services of Euroclear, including banks, securities brokers and dealers and
other professional financial intermediaries and may include the underwriters of
any series of notes.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Federal Direct Student Loan Program" means the Federal Direct Student Loan
Program established by the Higher Education Act pursuant to which loans are made
by the Secretary of Education, and any predecessor or successor program.
"Federal Fund" means the federal student loan reserve fund established by
each guarantee agency as required by the 1998 Reauthorization Amendments.
"FFEL Program" means the Federal Family Education Loan Program established
by the Higher Education Act pursuant to which loans are made to borrowers
pursuant to specified guidelines, and the repayment of such loans is guaranteed
by a guarantee agency, and any predecessor or successor program.
"FFELP Loans" means student loans made under the FFEL Program.
"Government Obligations" means 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.
"Guarantee Agreement" means any 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 financed FFELP Loans acquired by the trustee from time to
time.
"Indenture Obligations" means the Senior Obligations, the Subordinate
Obligations and any Class C Notes.
"Indirect Participants" means organizations which have indirect access to
the Securities Depository, such as securities brokers and dealers, banks, and
trust companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly.
"Interest Subsidy Payments" means interest payments on student loans
authorized to be made by the Secretary of Education by Section 428(a) of the
Higher Education Act.
I-4
<PAGE>
"Liquidated Alternative Loan" means a financed Alternative Loan as to which
any payment has been delinquent for 180 days or more. Any financed Alternative
Loan which becomes a Liquidated Alternative Loan shall cease to be treated as a
financed student loan for purposes of valuing the Trust Estate under the
indenture.
"Monthly Payment Date" means the 12th day of each calendar month (or, if
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.
"Net Loan Rate" for any interest period and series of notes, will equal (1)
the weighted average Effective Interest Rate of the financed student loans in
the Acquisition Fund acquired with proceeds of such series, determined as of the
last day of the second preceding month, less (ii) the Administrative Cost and
Note Fee Rate.
"1998 Reauthorization Amendments" means the Higher Education Amendments of
1998.
"Note Fees" means the fees, costs and expenses, excluding costs of
issuance, of the trustee and any paying agents, authenticating agent,
remarketing agents, depositaries, auction agents, broker-dealers, deposit
agents, note registrar or independent accountants incurred by EdLinc 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 Guarantee Agreements, the Higher Education Act, any Alternative
Loan Program or any requirement of the laws of the United States, as such
powers, duties and functions relate to financed student loans, (2) any swap
agreements and any credit enhancement facilities (other than any amounts payable
thereunder which constitute Other Indenture Obligations), (3) any remarketing
agreement, depositary agreement, auction agent agreement or broker-dealer
agreement and (4) the indenture.
"Operating Fund" means the agency operating fund established by each
guarantee agency as required by the 1998 Reauthorization Amendments.
"Other Beneficiary" means an Other Senior Beneficiary or an Other
Subordinate Beneficiary.
"Other Indenture Obligations" means, collectively, the Other Senior
Obligations and Other Subordinate Obligations.
"Other Senior Beneficiary" means a person or entity who is a Senior
Beneficiary other than as a result of ownership of Senior Notes.
"Other Senior Obligations" means EdLinc's obligations to pay any amounts
under any senior swap agreements and any senior credit enhancement facilities.
I-5
<PAGE>
"Other Subordinate Beneficiary" means a person or entity who is a
Subordinate Beneficiary other than as a result of ownership of Subordinate
Notes.
"Other Subordinate Obligations" means EdLinc's obligations to pay any
amounts under any subordinate swap agreements and any subordinate credit
enhancement facilities.
"Outstanding" means, with respect to a note or Other Indenture Obligation,
that such note or Other Indenture Obligation has not been paid in full or
otherwise deemed not to be outstanding under the Indenture as described under
"Description of the Indenture--Discharge of Notes and Indenture."
"Participants" means the participating organizations that utilize the
services of the Securities Depository.
"Plus Loan" means a student loan made pursuant to Section 428B of the
Higher Education Act.
"Purchase Date" means, with respect to a note required to be purchased by
or on behalf of EdLinc, at the option of the holder thereof, upon receipt of a
purchase demand, the date specified in a purchase demand as the date on which
the holder of such note is demanding purchase of such note in accordance with
the applicable provisions of the related supplemental indenture, or the next
preceding or succeeding business day if such date is not a business day.
"Rating Agency" means any rating agency that shall have an outstanding
rating on any of the notes pursuant to request by EdLinc.
"Relief Act" means the Taxpayer Relief Act of 1997, as amended.
"Reserve Fund Requirement" means, at any time, an amount equal to the
greater of (1) 2.00% of the aggregate principal amount of Senior Notes and
Subordinate Notes then Outstanding, and (2) $500,000; or, as determined upon the
issuance of any Senior Notes or any Subordinate Notes, such lesser or greater
amount as will not cause any Rating Agency to lower or withdraw any rating on
any Outstanding Unenhanced Senior or Subordinate Notes, or, if no Unenhanced
Senior or Subordinate Notes are then Outstanding but Other Indenture Obligations
are Outstanding and the Reserve Fund Requirement is to be reduced, such lesser
amount as is acceptable to the Other Beneficiaries.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Depository" means DTC or any successor or other clearing agency
selected by EdLinc as securities depository for any book-entry notes.
"Senior Asset Requirement" means that: (a) the Senior Percentage is at
least equal to 110% (or such lower percentage specified in a certificate
delivered to the trustee which, if Unenhanced Senior Notes are Outstanding,
shall not result in the lowering or withdrawal of the
I-6
<PAGE>
outstanding rating assigned by any Rating Agency to any of the Unenhanced Senior
Notes Outstanding, or, if no Unenhanced Senior Notes are Outstanding but Other
Senior Obligations are Outstanding, is acceptable to the Other Senior
Beneficiaries), and (b) the Subordinate Percentage is at least equal to 100% (or
such lower percentage which, if Unenhanced Subordinate 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 Subordinate Notes
Outstanding, or, if no Unenhanced Subordinate Notes are Outstanding but Other
Subordinate Obligations are Outstanding, is acceptable to the Other Subordinate
Beneficiaries).
"Senior Beneficiaries" means (1) the holders of any Outstanding Senior
Notes, and (2) any senior credit facility provider and any senior swap
counterparty entitled to Other Senior Obligations then Outstanding.
"Senior Notes" means any notes designated in a supplemental indenture as
Senior Notes, which are secured under the indenture on a basis senior to any
Subordinate Obligations and any Class C Notes, and on a parity with other Senior
Obligations.
"Senior Obligations" means, collectively, the Senior Notes and the Other
Senior Obligations.
"Senior Percentage" means the percentage resulting by dividing the value of
the Trust Estate by the sum of (1) the aggregate principal amount of Outstanding
Senior Notes plus accrued interest thereon, (2) accrued EdLinc swap payments
under senior swap agreements and (3) other payments accrued and owing by EdLinc
on Other Senior Obligations.
"SLFC" means Student Loan Finance Corporation, a South Dakota corporation.
"SLS Loan" means a student loan made pursuant to former Section 428A of the
Higher Education Act.
"Special Allowance Payments" means 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 Redemption and Prepayment Account Requirement" means, with respect
to any series of notes, the amount described in the supplemental indenture
providing for the issuance thereof.
"Stafford Loan" means a student loan made pursuant to Section 428 of the
Higher Education Act.
"Subordinate Beneficiaries" means (1) the holders of any Outstanding
Subordinate Notes, and (2) any subordinate credit facility provider and any
subordinate swap counterparty entitled to any Other Subordinate Obligations then
Outstanding.
I-7
<PAGE>
"Subordinate Notes" means any notes designated in a supplemental indenture
as Subordinate Notes, which are secured under the indenture on a basis
subordinate to any Senior Obligations, on a parity with other Subordinate
Obligations and on a basis senior to any Class C Notes.
"Subordinate Obligations" means, collectively, the Subordinate Notes and
the Other Subordinate Obligations.
"Subordinate Percentage" means the percentage resulting by dividing the
value of the Trust Estate by the sum of (1) the aggregate principal amount of
Outstanding Senior Notes and Subordinate Notes plus accrued interest thereon,
(2) accrued EdLinc swap payments and (3) other payments accrued and owing by
EdLinc on Other Indenture Obligations.
"Trust Estate" means (1) financed student loans and moneys due or paid
thereunder after the applicable date of acquisition; (2) funds on deposit in the
funds and accounts held under the indenture (including investment earnings
thereon); and (3) rights of EdLinc in and to some agreements, including any
servicing agreement, the student loan purchase agreements, the transfer
agreements and the Guarantee Agreements, as the same relate to financed student
loans.
"Unenhanced" means, with respect to a Senior Note or a Subordinate Note,
that the payment of the principal of and interest on such note is not secured by
a credit enhancement facility.
"Unsubsidized Stafford Loan" means a student loan made pursuant to Section
428H of the Higher Education Act.
I-8
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR ON OTHER
INFORMATION TO WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO
PROVIDE YOU WITH DIFFERENT INFORMATION. THIS DOCUMENT DOES NOT CONSTITUTE AN
OFFER TO SELL ANY SECURITIES OTHER THAN THE NOTES NOR AN OFFER OF SUCH NOTES TO
ANY PERSON IN ANY STATE OR OTHER JURISDICTION IN WHICH SUCH OFFER WOULD BE
UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AND PROSPECTUS SUPPLEMENT AT ANY TIME
DOES NOT IMPLY THAT INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
ITS DATE.
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUPPLEMENT
SUMMARY OF TERMS........................................................ S-4
RISK FACTORS............................................................ S-9
USE OF PROCEEDS......................................................... S-9
THE FINANCED STUDENT
LOANS................................................................... S-10
MATURITY AND PREPAYMENT CONSIDERATIONS.................................. S-17
SERVICING............................................................... S-19
THE GUARANTEE AGENCIES.................................................. S-20
DESCRIPTION OF THE SERIES 1999-[X] NOTES................................ S-20
SOURCE OF PAYMENT AND SECURITY FOR THE SERIES 1999-[X] NOTES............ S-25
THE TRUSTEE............................................................. S-27
[CERTAIN RELATIONSHIPS AMONG FINANCING PARTICIPANTS..................... S-28]
UNDERWRITING............................................................ S-28
LEGAL MATTERS........................................................... S-29
RATING.................................................................. S-29
PROSPECTUS
RISK FACTORS............................................................ 4
USE OF PROCEEDS......................................................... 14
EDLINC.................................................................. 14
THE TRANSFEROR.......................................................... 14
THE SERVICER............................................................ 15
MATURITY AND PREPAYMENT CONSIDERATIONS.................................. 15
DESCRIPTION OF FINANCING OF ELIGIBLE LOANS.............................. 17
DESCRIPTION OF THE FFEL PROGRAM......................................... 20
DESCRIPTION OF THE GUARANTEE AGENCIES................................... 40
DESCRIPTION OF THE ALTERNATIVE LOAN PROGRAMS............................ 47
DESCRIPTION OF THE NOTES................................................ 49
SOURCE OF PAYMENT AND SECURITY FOR THE NOTES........................... 62
DESCRIPTION OF THE SLFC SERVICING AGREEMENT............................. 64
DESCRIPTION OF THE INDENTURE............................................ 69
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES........................... 99
STATE TAX CONSIDERATIONS................................................ 106
ERISA CONSIDERATIONS.................................................... 106
AVAILABLE INFORMATION................................................... 107
REPORTS TO NOTEHOLDERS.................................................. 108
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE......................... 108
PLAN OF DISTRIBUTION.................................................... 109
FINANCIAL INFORMATION................................................... 109
RATING.................................................................. 109
GLOSSARY OF PRINCIPAL
DEFINITIONS.......................................................... I-1
</TABLE>
<PAGE>
$ ____________
EDUCATION LOANS
INCORPORATED
STUDENT LOAN
ASSET-BACKED NOTES
SENIOR SERIES 1999-[X]
SUBORDINATE SERIES 1999-[X]
PROSPECTUS
SALOMON SMITH BARNEY
-----------------------
<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:
SEC registration fee.................. $ 139,000
Blue Sky fees and expenses............ $ 20,000
Trustees' fees and expenses........... $ 60,000
Printing and engraving expenses....... $ 60,000
Legal fees and expenses............... $ 750,000
Accounting fees and expenses.......... $ 10,000
Rating agency fees.................... $ 300,000
Total............................ $1,339,000
All of the above expenses except the SEC registration fee are estimated.
Item 15. Indemnification of Directors and Officers.
Education Loans Incorporated is incorporated under the laws of
Delaware. Section 145 of the Delaware General Corporation Law provides that
a Delaware corporation may indemnify any persons, including officers and
directors, who are, or are threatened to be made, parties to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in
the right of such corporation, by reason of the fact that such person was
an officer, director, employee or agent of such corporation, or is or was
serving at the request of such corporation as a director, employee or agent
of such corporation, or is or was serving at the request of such
corporation as a director, officer, employee or agent of another
corporation or enterprise). The indemnity may include expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by such person in connection with such action, suit
or proceeding, provided such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the corporation's best
interests and, for criminal proceedings, had no reasonable cause to believe
that his conduct was illegal. A Delaware corporation may indemnify officers
and directors in an action by or in the right of the corporation under the
same conditions, except that no indemnification is permitted without
judicial approval if the officer or director is adjudged to be liable to
the corporation. Where an officer or director is successful on the merits
or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director actually and reasonably incurred.
Article Eleven of the Bylaws of the registrant permits the registrant
to, under certain circumstances, indemnify such persons for such
liabilities in such manner under such circumstances and to such extent as
permitted by Section 145 of the Delaware General Corporation Law.
II-1
<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.
<TABLE>
<S> <C>
Item 16. Exhibits.
** 1.1 Proposed form of Underwriting Agreement
* 3.1 Certificate of Incorporation of Registrant
* 3.2 Bylaws of Registrant
** 4.1 Form of Indenture
** 4.2 Form of Supplemental Indenture
** 4.3 Form of Auction Agent Agreement
** 4.4 Form of Broker-Dealer Agreement
** 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 Forms of Student Loan Purchase Agreement
** 10.3 Form of Transfer Agreement
23.1 Consents of Dorsey & Whitney LLP (included in Exhibits 5.1 and 8.1)
24.1 Powers of Attorney (included on Part II, page 4)
** 25.1 Statement of Eligibility of Trustee (Form T-1)
-----------------------
* Previously filed
** Filed herewith
</TABLE>
Item 17. Undertakings.
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 liabilities (other than the
payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as a
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.
(2) 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.
II-2
<PAGE>
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change to such information in the
registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change in the information set forth in the
registration statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the registration statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs
is contained in periodic reports filed by the registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
II-3
<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 No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized on October 21, 1999.
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
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ A. Norgrin Sanderson President, Treasurer October 21, 1999
- -----------------------------------
A. Norgrin Sanderson and Director
(principal executive officer,
principal financial and accounting officer)
* Chairman of the Board
- -----------------------------------
V. G. Stoia
* Vice Chairman of the Board
- -----------------------------------
Manley B. Feinstein
* Director
- -----------------------------------
Peter H. Sorensen
* Director
- -----------------------------------
Dwight Jenkins
*By /s/ A. Norgrin Sanderson October 21, 1999
- -----------------------------------
A. Norgrin Sanderson
Attorney-in-fact
</TABLE>
<PAGE>
Exhibit 1.1
$____________
Education Loans Incorporated
----------------------------
STUDENT LOAN ASSET-BACKED NOTES, SERIES 1999-[X]
consisting of
$____________ Student Loan Asset-Backed Notes, Senior Series 1999-[X]
$____________ Student Loan Asset-Backed Notes, Subordinate Series 1999-[X]
Underwriting Agreement
----------------------
__________, 1999
SALOMON SMITH BARNEY INC.
[,as Representative of the several
Underwriters named herein
c/o Salomon Smith Barney Inc.]
388 Greenwich Street
32nd Floor
New York, NY 10013
Dear Sirs:
Education Loans Incorporated, a Delaware corporation ("EdLinc") and
wholly-owned subsidiary of Student Loan Finance Corporation, a South Dakota
corporation ("SLFC"), proposes to sell to Salomon Smith Barney Inc. [(sometimes
referred to herein as the "Representative," the "Underwriter," or the
"Underwriters")][and ____________ (collectively, the "Underwriters" and each
individually an "Underwriter"), for whom you (the "Representative") are acting
as representative], pursuant to the terms of this Underwriting Agreement (this
"Agreement"), $__________ aggregate principal amount of its Student Loan
Asset-Backed Notes, Series 1999-[X] (the "Notes"). The Notes are to be issued in
[_____] series designated as Student Loan Asset-Backed Notes, Senior Series
1999-[X] (the "Series 1999-[X] Senior Notes") and Student Loan Asset-Backed
Notes, Subordinate Series 1999-[X] (the "Series 1999-[X] Subordinate Notes").
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 ________ 1, 1999 (the
"Supplemental Indenture"), supplemental to an Indenture of Trust, dated as of
________ 1, 1999 (as supplemented and amended, the "Indenture"), between EdLinc
and U.S. Bank National Association, as trustee (the "Trustee"). Upon issuance,
the Trustee shall use proceeds of the Notes to acquire Student Loans as
described in the Prospectus from Goal Funding, Inc., a Delaware corporation (the
<PAGE>
"Transferor") and wholly-owned subsidiary of SLFC, and the Notes will be secured
by, among other things, Financed Student Loans pledged to the Trustee and
described in the Prospectus (as hereinafter defined).
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) EdLinc hereby agrees, subject to all of the terms and conditions set
forth herein, to sell to the Underwriters and, upon the basis of the
representations, warranties and agreements of EdLinc, the Transferor 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 [_____] in Section 13 hereof)] agree to purchase from
EdLinc, all (but not less than all) of the Notes at the aggregate purchase price
of $__________, and EdLinc hereby agrees to pay to the Underwriters an aggregate
underwriting fee in the amount of $____________ [and to additionally pay, on
behalf of the Underwriters, the fees and expenses of counsel to the Underwriters
in the aggregate 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 Series 1999-[X] Senior Notes and the Series 1999-[X] Subordinate
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 EdLinc 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
[_____]% per annum. Thereafter, such rates per annum shall be determined in
accordance with the Supplemental Indenture. (for auction rate Notes)] [The
Series 1999-[X] Note Initial Interest Rate (as defined in the Supplemental
Indenture) will be determined by Salomon Smith Barney Inc. two Business Days
prior to Closing to equal One-Month LIBOR plus [_____]% per annum with respect
to the Series 1999-[X] Senior Notes and One-Month LIBOR plus [_____]% per annum
with respect to the Series 1999-[X] Subordinate Notes. The Series 1999-[X] Note
Interest Rate following the Initial Interest Period (as such terms are defined
in the Supplemental Indenture) with respect to the Series 1999-[X] Notes will be
determined by the Trustee from time to time as described in the Supplemental
Indenture to equal One-Month LIBOR plus [_____]% per annum with respect to the
Series 1999-[X] Senior Notes and One-Month LIBOR plus [_____]% per annum with
respect to the Series 1999-[X] Subordinate Notes. (for LIBOR rate based Notes)]
(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 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.
-2-
<PAGE>
(d) The Representative 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 [_____] A.M., New York City time, on ____________, or at such other time
or on such earlier or later business day as shall have been mutually agreed upon
by EdLinc, SLFC, the Transferor and the Underwriters (the "Closing Date"),
EdLinc 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 EdLinc and EdLinc shall
pay [(i)] to the Underwriters the underwriting fee as set forth in Section 1
hereof in immediately available funds to the account of the Representative [,
and (ii) to Underwriters' counsel, on behalf of the Underwriters, the fees and
expenses of Underwriters' counsel as set forth in Section 1 hereof in
immediately available funds to the account of Foley & Lardner.] Delivery of the
Notes and payment as aforesaid shall be made at such location in New York, New
York as shall be requested by the Representative. Delivery of the other
documents shall be at the offices [_____]. 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 Representative shall have requested.
3. Representations and Warranties of EdLinc, SLFC and the Transferor.
EdLinc, SLFC and the Transferor represent and warrant to, and agree with,
the Underwriters that:
(a) A registration statement on Form S-3 (File No. ____________), including
a prospectus and such amendments thereto as may have been required to the date
hereof, relating
-3-
<PAGE>
to the Notes and the offering thereof from time to time in accordance with Rule
415 under the Securities Act of 1933, as amended (the "Securities Act") has been
filed with the Securities and Exchange Commission (the "Commission") and such
registration statement, as amended, has become effective under the Securities
Act; such registration statement, as amended, including all information (if any)
deemed to be a part of such registration statement as of the Effective Time (as
defined below), and including the exhibits thereto and any material incorporated
by reference therein, and the prospectus and the prospectus supplement relating
to the sale of the Notes offered thereby constituting a part thereof, as amended
or supplemented including any prospectus filed under Rule 424(b) under the
Securities Act, are respectively referred to herein as the "Registration
Statement" and the "Prospectus"; and the conditions to the use of a registration
statement on Form S-3 under the Securities Act, as set forth in the General
Instructions to Form S-3, and the conditions of Rule 415 under the Securities
Act have been satisfied with respect to the Registration Statement. For purposes
of this Agreement, "Effective Time" means (x) if EdLinc has advised the
Representative that it does not propose to amend the Registration Statement, the
date and time as of which the Registration Statement, or the most recent
amendment thereto (if any) filed prior to the execution and delivery of this
Agreement, was declared effective by the Commission, or (y) if EdLinc has
advised the Representative that it proposes to file an amendment or post
effective amendment to the Registration Statement, the date and time as of which
the Registration Statement, as amended by such amendment or post effective
amendment, as the case may be, is declared effective by the Commission.
"Effective Date" means the date of the Effective Time. Copies of the
Registration Statement, the Prospectus and all other documents which were filed
by EdLinc with the Commission on or prior to the date hereof have been delivered
to you.
(b) On the Effective Date and on the date of this Agreement, the
Registration Statement and the Prospectus conformed and conform in all material
respects to the requirements of the Securities Act, the rules and regulations of
the Commission (the "Rules and Regulations") and the Trust Indenture Act of
1939, as amended, and the rules and regulations thereunder (the "Trust Indenture
Act"), and in the case of the Registration Statement, did not and does not
include any 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 and in the case of the Prospectus, did not and does not include any
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, in the light of
the circumstances under which they were made, 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 EdLinc
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 EdLinc and
SLFC, 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
prospectus has been issued by the Commission or any state regulatory authority
or other jurisdictional regulatory agency ("Blue Sky Authorities").
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(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 EdLinc, SLFC, the Transferor 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) EdLinc 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 EdLinc and,
upon their execution and delivery by EdLinc, 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 EdLinc
and will constitute valid and legally binding agreements of EdLinc, 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 Indenture, the Supplemental Indenture [and the Auction Agent
Agreements] conform in all material respects to the descriptions thereof in the
Prospectus.
(f) EdLinc has the requisite power and authority to issue the Notes. The
Notes have been duly authorized by EdLinc and, when executed by EdLinc,
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 EdLinc 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) EdLinc and the Transferor each has the requisite power and authority to
execute, deliver and perform its obligations under the Transfer Agreement. The
Transfer Agreement has been duly and validly authorized, executed and delivered
by EdLinc and the Transferor and, upon their execution and delivery (assuming
due authorization, execution and delivery by the Trustee and the Transferor's
Trustee) will be duly executed and delivered by each of EdLinc and the
Transferor and will constitute valid and legally binding agreements of each of
EdLinc and the Transferor, 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 Transfer
Agreement conforms in all material respects to the descriptions thereof in the
Prospectus.
(h) SLFC and EdLinc 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 EdLinc 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 EdLinc
and will constitute a valid and legally
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binding agreement of each of SLFC and EdLinc, 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.
(i) EdLinc, SLFC and the Transferor each have all requisite power and
authority to execute, deliver and perform its respective obligations under this
Agreement; the execution and delivery of, and the performance by each of EdLinc,
SLFC and the Transferor of its respective obligations under this Agreement have
been duly and validly authorized by EdLinc, SLFC and the Transferor,
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.
(j) EdLinc has duly adopted EdLinc's Authorizing Resolutions and has duly
approved the execution, delivery and performance of the Basic Documents, this
Agreement, EdLinc'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 EdLinc to carry out, give effect to
and consummate the transactions contemplated by this Agreement, the Prospectus,
the Basic Documents, and EdLinc's Program Agreements, and all approvals
necessary in connection with the foregoing have been obtained.
(k) SLFC and the Transferor have duly adopted SLFC's Authorizing
Resolutions and the Transferor's Authorizing Resolutions, respectively, and have
duly approved the execution, delivery and performance of the Basic Documents to
which such entity is a party, SLFC's Program Agreements and the Transferor's
Program Agreements, as applicable, 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 Transferor to carry out, give effect to
and consummate the transactions contemplated by this Agreement, the Prospectus,
EdLinc Program Agreements, SLFC's Program Agreements and the Basic Documents,
and all approvals necessary in connection with the foregoing have been obtained.
(l) EdLinc, the Transferor and SLFC each has the requisite power and
authority to execute, deliver and perform its respective obligations under
EdLinc's Program Agreements and SLFC's Program Agreements to which it is a
party. EdLinc's Program Agreements and SLFC's Program Agreements have been duly
and validly authorized by EdLinc, the Transferor and SLFC to the extent each is
a party thereto and, assuming due authorization, execution and delivery by the
other parties thereto, duly executed and delivered by EdLinc, the Transferor and
SLFC, respectively, and constitute valid and legally binding agreements of
EdLinc, the Transferor and SLFC, respectively, 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
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equitable principles. EdLinc's Program Agreements and SLFC's Program Agreements
conform in all material respects to the descriptions thereof in the Prospectus.
(m) EdLinc 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. EdLinc 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, prospects, properties, net worth or results of operations.
(n) SLFC is a corporation 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,
prospects, properties, net worth or results of operations.
(o) The Transferor 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. The Transferor 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, prospects,
properties, net worth or results of operations.
(p) 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 EdLinc, SLFC or the
Transferor or to which EdLinc, SLFC, the Transferor or any of their respective
properties is subject, nor to the best of the knowledge of EdLinc, SLFC and the
Transferor 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, EdLinc's
Authorizing Resolutions, SLFC's Authorizing Resolution, the Transferor's
Authorizing Resolution, the Basic Documents, EdLinc's Program Agreements, SLFC's
Program Agreements, [the Investment Agreement,] this Agreement or any other
agreement or instrument to which EdLinc, SLFC or the Transferor is a party, used
or contemplated for use in the consummation of transactions contemplated by this
Agreement, the Basic Documents or by the Prospectus.
(q) Neither the offer, sale or delivery of the Notes by EdLinc, nor the
execution, delivery or performance of this Agreement, any of the Basic Documents
or any of
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EdLinc's Program Agreements or SLFC's Program Agreements by EdLinc, SLFC or the
Transferor, nor the adoption of the EdLinc's Authorizing Resolutions, SLFC's
Authorizing Resolution or the Transferor's Authorizing Resolution, nor the
consummation by EdLinc, SLFC or the Transferor 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 EdLinc, SLFC or the Transferor 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 EdLinc, SLFC or the Transferor is a party or
by which EdLinc, SLFC or the Transferor 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 EdLinc, SLFC or the Transferor 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 EdLinc, SLFC or the
Transferor pursuant to the terms of any agreement or instrument to which any is
a party or by which any may be bound or to which any of their respective
properties is subject other than as contemplated by the Basic Documents.
(r) Neither EdLinc, SLFC nor the Transferor is, and following the
consummation of the transactions contemplated hereby and the use of proceeds
from the Notes as described in the Prospectus will be, an "investment company"
under the Investment Company Act of 1940, as amended (the "1940 Act').
(s) Neither EdLinc, SLFC, the Transferor 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 EdLinc, SLFC and
the Transferor agrees to comply with such Section if prior to the completion of
the distribution of the Notes it commences doing such business. EdLinc, SLFC and
the Transferor are not, and have not at any time been, in default in the payment
of principal of or interest on any obligations of EdLinc, SLFC, or the
Transferor, respectively.
(t) The representations and warranties made by (i) EdLinc herein, in the
Basic Documents, in EdLinc's Program Agreements and in any officer's certificate
delivered pursuant hereto or thereto and (ii) the Transferor and SLFC herein, in
the Servicing Agreement, in EdLinc's Program Agreements, in SLFC's Program
Agreements, in the Transfer Agreement, and in any officer's certificate of the
Transferor or SLFC delivered pursuant hereto or thereto, will be true and
correct at the time made and on and as of the Closing Date.
(u) 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
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Trust Estate for the benefit of EdLinc, 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.
(v) Neither EdLinc, SFLC or the Transferor 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.
(w) Other than as contemplated by this Agreement or as disclosed in the
Prospectus, there is no broker, finder or other party that is entitled to
receive from SLFC or any of its subsidiaries any brokerage or finder's fee or
other fee or commission as a result of any transactions contemplated by this
Agreement.
4. Agreements of EdLinc, SLFC and the Transferor
EdLinc, SLFC and the Transferor agree with the Underwriters as follows:
(a) Immediately following the execution of this Agreement, EdLinc will
pursuant to Rule 424(b) under the Securities Act prepare and file a prospectus
supplement, properly completed, with the Commission. EdLinc will advise the
Representative promptly of any such filing. EdLinc will advise the
Representative promptly of any proposal to amend or supplement the Registration
Statement or the Prospectus and will not effect such amendment or supplement
without the consent of the Representative prior to the Closing Date, and
thereafter will not effect any such amendment or supplement relating to or
affecting the Notes to which the Representative reasonably objects; provided,
however, except for the Current Report on Form 8-K described in Section 4(m), no
consent of the Representative shall be required in connection with any filing
made pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations promulgated thereunder; EdLinc will also
advise the Representative promptly of any request by the Commission for any
amendment of or supplement to the Registration Statement or the Prospectus or
for any additional information; and EdLinc will also advise the Representative
promptly of the effectiveness of the Registration Statement and of any amendment
or supplement to the Registration Statement or the Prospectus, of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the institution or known threat of any proceeding for
that purpose, of the suspension of the qualification of the Notes for offering
or sale in any jurisdiction, and of the initiation or threatening of any
proceeding relating to the offering or sale of the Notes; and EdLinc will use
its best efforts to prevent the issuance of any such stop order or other order
preventing or suspending the use of 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) If the delivery of a prospectus is required at any time under the
Securities Act 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
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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, the Rules and Regulations or the Trust Indenture Act,
EdLinc and SLFC will notify the Underwriters and, upon the Underwriters'
request, prepare and file with the Commission 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 amendment or supplement to such
Prospectus which corrects such statement or omission or amendment that effects
such compliance.
(c) EdLinc and SLFC will immediately inform the Representative (i) of the
receipt by EdLinc or SLFC of any communication from the Commission or any state
securities authority concerning the offering or sale of the Notes and (ii) of
the commencement of any lawsuit or proceeding to which EdLinc or SLFC is a party
relating to the offering or sale of the Notes.
(d) EdLinc 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.
(e) EdLinc, SLFC and the Transferor 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 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 Transferor, SLFC or EdLinc 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.
(f) EdLinc, SLFC and the Transferor 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.
(g) 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 EdLinc, SLFC or the Transferor, SLFC, EdLinc,
SLFC and the Transferor shall cause to be furnished such documents and such
other actions to be taken.
(h) So long as any of the Notes are outstanding, EdLinc, SLFC or the
Transferor will furnish to the Representative (i) as soon as available, a copy
of each document relating to EdLinc, SLFC, the Transferor or the Notes required
to be filed with the Commission pursuant to the Exchange Act, or any order of
the Commission thereunder, and (ii) such other
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information concerning EdLinc, SLFC or the Transferor, as the Representative may
request from time to time.
(i) 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.
(j) 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 EdLinc, SLFC or the Transferor to comply with the terms or fulfill any
of the conditions of this Agreement SLFC agrees 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 EdLinc, SLFC
and the Transferor; 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 SLFC for loss of profits or otherwise.
(k) The net proceeds from the sale of the Notes hereunder will be applied
substantially in accordance with the description set forth in the Prospectus.
EdLinc, SLFC and the Transferor 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.
(l) Except as stated in this Agreement and in the Prospectus, neither
EdLinc, the Transferor 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; it
being understood that no such action of any Underwriter shall be deemed to be an
action of EdLinc, the Transferor or SLFC.
(m) Provided that EdLinc received the Computational Materials (as defined
in Section 8 below) within the time frame set forth in Section 8, EdLinc will
cause such Computational Materials to be filed with Commission on a Current
Report on Form 8-K (the "Current Report") not later than the second Business Day
following the receipt of such Computational Materials.
(n) Deposits required by the Indenture into the Acquisition Fund and the
Reserve Fund shall be made on the Closing Date.
(o) Other than pursuant to your consent and as permitted by the Securities
Act and the Rules and Regulations, EdLinc, SLFC and the Transferor will not
distribute any prospectus or other offering material in connection with the
offering of the Notes.
5. Indemnification and Contribution
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(a) SLFC agrees 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 the
preliminary prospectus supplement, dated ____________ , 1999 (the "Preliminary
Prospectus"), or in any application filed under the Blue Sky laws of any
jurisdiction or other document executed by EdLinc or SLFC 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
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 EdLinc by or on behalf of
any Underwriter through the Representative expressly for use in connection
therewith; provided, however, that the indemnification contained in this
paragraph (a) with respect to the Preliminary Prospectus shall not inure to the
benefit of any Underwriter (or to the benefit of any person controlling such
Underwriter) on account of any such loss, claim, damage, liability or expense
arising from the sale of the Series of Notes covered thereby by the Underwriter
to any person if the untrue statement or alleged untrue statement or omission or
alleged omission of a material fact contained in such Preliminary Prospectus was
corrected in the final Prospectus relating to such Series of Notes and the
Underwriter sold Notes of such Series to that person without sending or giving
at or prior to the written confirmation of such sale, a copy of the final
Prospectus (as then amended or supplemented) if EdLinc or SLFC has previously
furnished sufficient copies thereof to the Underwriters. The foregoing indemnity
agreement shall be in addition to any liability which EdLinc or SLFC may
otherwise have.
(b) If any action, suit or proceeding shall be brought against an
Underwriter or any person controlling an Underwriter in respect of which
indemnity may be sought against SLFC, such Underwriter or such controlling
person, as the case may be, shall promptly notify the party 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 reasonable 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 Underwriter or such controlling person unless (i) the
indemnifying parties have agreed in writing to pay such fees and expenses, (ii)
the indemnifying parties have failed to assume the defense and employ counsel,
or (iii) the named parties to any such action, suit or proceeding (including any
impleaded parties) include both the Underwriter or such controlling person and
the indemnifying parties and the Underwriter or such controlling person shall
have been advised by its counsel that representation of such indemnified party
and any indemnifying party by the same counsel would be inappropriate under
applicable standards of professional conduct (whether or not such representation
by the same counsel has been proposed) due to actual or potential differing
interests between them (in which case the indemnifying party shall not have the
right to assume the defense of such action, suit or proceeding on behalf of the
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Underwriter or such controlling person). It is understood, however, that the
indemnifying parties shall, in connection with any one such action, suit or
proceeding or separate but substantially similar or related actions, suits or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses of only one
separate firm of attorneys (in addition to any local counsel) at any time for
the Underwriter and controlling persons not having actual or potential differing
interests with the Underwriter or among themselves, which firm shall be
designated in writing by the Underwriter, and that all such fees and expense
shall be reimbursed on a monthly basis. The indemnifying parties shall not be
liable for any settlement of any such action, suit or proceeding effected
without their written consent, but if settled with such written consent, or if
there be a final judgment for the plaintiff in any such action, suit or
proceeding, the indemnifying parties agree to indemnify and hold harmless the
Underwriter and any such controlling person from and against any loss, claim,
damage, liability or expense by reason of such settlement or judgment to the
extent provided in paragraph (a).
(c) The Underwriters agree, jointly and severally, to indemnify and hold
harmless EdLinc and SLFC and their respective directors and officers, and any
person who controls EdLinc or 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 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 Underwriters through the Representative 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 EdLinc or SLFC, 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 SLFC by paragraph (b) above (except that if
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 EdLinc 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 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 EdLinc 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
EdLinc and SLFC on the one hand and the Underwriters on the other in connection
with the
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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 EdLinc 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 EdLinc and SLFC bear to the total underwriting discounts and
commissions received by the Underwriters. The relative fault of EdLinc 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 EdLinc 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) EdLinc, 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 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 EdLinc, SLFC, the Transferor 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, EdLinc, SLFC or the Transferor 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, EdLinc or SLFC or any person controlling any of
them or their respective directors or officers, shall be entitled to the
benefits of the indemnity, contribution and reimbursement agreements contained
in this Section 5.
6. Conditions of the Underwriters' Obligations
The obligations of the Underwriters to purchase the Notes hereunder are
subject to the following conditions:
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(a) All actions required to be taken and all filings required to be made by
EdLinc, SLFC or the Transferor 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 EdLinc, SLFC, the Transferor 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 EdLinc, SLFC and the Transferor to your reasonable
satisfaction.
(c) Since the respective dates as of which information is given in the
Registration Statement (or any amendment or supplement thereto), except as may
otherwise be stated therein or contemplated thereby, 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 EdLinc, SLFC or
the Transferor not contemplated by the Registration Statement, which in the
opinion of the Representative, would materially adversely affect the market for
the Notes, or (ii) any event or development which makes any statement made in
the Registration Statement or Prospectus untrue or which, in the opinion of
EdLinc and its counsel SLFC and its counsel, the Transferor 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,
EdLinc's Program Agreements, SLFC's Program Agreements [the Investment
Agreement,] 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) EdLinc's Authorizing Resolutions,
SLFC's Authorizing Resolution and the Transferor's Authorizing Resolution shall
have been duly adopted by EdLinc, SLFC and the Transferor, as applicable, and
shall be in full force and effect; (iii) 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 Representative and shall not have been amended, modified or
supplemented from the respective forms heretofore delivered to the
Representative, except as may have been agreed to in writing by the
Representative, and EdLinc, SLFC and the Transferor 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) EdLinc, SLFC, the Transferor, the Trustee, [the Auction Agent, the
Broker-Dealer, 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,]
EdLinc's Authorizing Resolutions, SLFC's
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Authorizing Resolution, the Transferor's Authorizing Resolution, EdLinc's
Program Agreements, SLFC's Program Agreements and the Trustee's Program
Agreements, 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 EdLinc, SLFC and the Transferor, dated
the Closing Date and addressed to the Underwriters, in form and scope
satisfactory to the Representative and its counsel.
(f) The Underwriters shall have received on the Closing Date the approving
opinion of Dorsey & Whitney LLP, dated the Closing Date and in form and scope
satisfactory to the Representative and its 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 EdLinc, SLFC and the Transferor, dated the Closing
Date and addressed to the Underwriters, in form and scope satisfactory to the
Representative and its counsel.
(h) The Underwriters shall have received on the Closing Date an opinion of
Davenport, Evans, Hurwitz & Smith, counsel for the Trustee and for the
Transferor's Trustee, dated the Closing Date and addressed to the Underwriters,
in form and scope satisfactory to the Representative and its 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 Representative and its
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
Representative and its counsel.]
(k) The Underwriters shall have received on the Closing Date opinions of
counsel for such Guarantee Agencies, if any, specified by the Representative,
each dated the Closing Date and addressed to the Underwriters, in form and scope
satisfactory to the Representative and its 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
Representative.
(m) The Underwriters shall have received on the Closing Date from Eide,
Helmeke PLLP, certified public accountants, an agreed-upon procedures letter
dated the Closing Date, and in form and substance satisfactory to the
Representative, to the effect that they have carried out certain specified
procedures, not constituting an audit, with respect to certain financial
information pertaining to EdLinc and to the Financed Student Loans and setting
forth the results of such specified procedures.
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<PAGE>
(n) All the representations and warranties of EdLinc, SLFC and the
Transferor contained in this Agreement, EdLinc's Program Agreements, SLFC's
Program Agreements and the Basic Documents shall be true and correct in all
material respects on and as of the date hereof and on and as of the Closing Date
as if made on and as of the Closing Date.
(o) EdLinc, SLFC and the Transferor 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 Representative), 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) the Series 1999-[X] Senior Notes "Aaa" and
"AAA", respectively, and (ii) the Series 1999-[X] Subordinate Notes, "A3" and
"A", respectively, 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
EdLinc, SLFC and the Transferor, as applicable, affirming the matters specified
in Sections 6(n) through (q) and such other matters as the Representative may
reasonably request.
(s) The Underwriters shall have received (i) a certificate or certificates
from the Secretary or Assistant Secretary of each of EdLinc, SLFC and the
Transferor certifying and attaching copies of (A) organizational documents, (B)
resolutions authorizing this Agreement, the Basic Documents, [the Investment
Agreement,] EdLinc's Program Agreements, SLFC'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 SLFC from
the Secretary of State of the State of South Dakota and with respect to EdLinc
and the Transferor 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 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
Transfer Agreement, [the Investment Agreement, the Auction Agent Agreements] and
the Trustee's Program Agreements, have been duly authorized, executed and
delivered on behalf of
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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 Basic Documents, [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 Representative may in its sole discretion accept an opinion of
the Trustee's counsel as to the matters referred to above, acceptable to the
Representative 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), and (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 certified copies of the Basic
Documents, EdLinc's Authorizing Resolutions, SLFC's Authorizing Resolution, the
Transferor's Authorizing Resolution, EdLinc's Program Agreements, SLFC's Program
Agreements, in each case certified as of the Closing Date by each corporation's
respective corporate Secretary to be a true and correct copy thereof and in full
force and effect.
(v) 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].
(w) The Underwriters shall have received a certificate of the Transferor's
Trustee, signed by an officer of such trustee, dated the Closing Date, (i)
containing permission to include the information concerning the Transferor's
Trustee in the Preliminary Prospectus and the Prospectus; (ii) representing that
(A) the Transfer Agreement has been duly authorized, executed and delivered on
behalf of the Transferor's Trustee and is in full force and effect, (B) such
agreement may be used in connection with the public offering of the Notes, (C)
the Transferor's 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 in any way contesting or affecting the validity or
enforceability of the Transfer Agreement, (E) there is no litigation pending or
to his or her knowledge threatened against the Transferor's Trustee, or
involving any of the property or assets under the control of the Transferor's
Trustee, which
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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 Representative may
in its sole discretion accept an opinion of the Transferor's Trustee counsel as
to the matters referred to above, acceptable to the Representative 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), and (F) he or she has carefully examined
the Prospectus with respect to references to the Transferor's Trustee and that,
in his or her opinion, with respect to references to the Transferor's 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;
(x) The Underwriters shall have received such additional certificates,
instruments and other documents as shall be requested by the Representative,
including, without limitation, from EdLinc, SLFC, the Transferor, the Trustee,
the Transferor's Trustee, [Subservicers], [the Auction Agent, the Broker-Dealer,
the Investment Agreement Provider,] and such Guarantee Agencies, if any,
specified by the Representative.
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 Representative and counsel
for the Underwriters.
Any certificate or document signed by any officer of EdLinc, SLFC or the
Transferor and delivered to the Underwriters, or to counsel for the
Underwriters, shall be deemed a representation and warranty by EdLinc, SLFC or
the Transferor, 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 EdLinc, SLFC or
the Transferor shall be under further obligation hereunder, except that the
respective obligations of EdLinc, the Transferor 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
EdLinc 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 the Transferor of their respective
obligations hereunder: (i) the preparation, printing or reproduction of any
Registration Statement, each Prospectus and each amendment or supplement thereto
and each other Basic Document, EdLinc's Program Agreement, SLFC's Program
Agreement, [Investment Agreement] and Trustee's Program Agreement; (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) counsel and Special
Counsel for EdLinc, SLFC and the
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Transferor, (B) the Trustee and its counsel, (C) [the Auction Agent and its
counsel,] (D) any Guarantee Agencies 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, (G) Eide, Helmeke
PLLP, accountants for EdLinc, SLFC and the Transferor and issuer of the
specified procedures letter referenced in Section 6(m) hereof, and (H) counsel
for the Underwriters [as set forth in Sections 1 and 2 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 EdLinc, SLFC or the Transferor 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 EdLinc, SLFC
or the Transferor 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. Computational Materials
Not later than 4:00 p.m. New York City time, on the date on which
Computational Materials (as defined below) are first used by an Underwriter,
said Underwriter shall deliver to EdLinc electronically 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 Commission 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 Commission to the Public Securities Association and the no-action
letter of February 17, 1995 issued by the Commission 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 EdLinc, as of the date hereof and as of the Closing Date, that the
Computational Materials furnished to EdLinc by such Underwriter pursuant to this
Section 8 constitute (either in original, aggregated or consolidated form) all
of the materials furnished to the prospective investors in the Notes by such
Underwriter prior to the time of delivery thereof to EdLinc that are required to
be filed with the Commission 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 Edlinc, SLFC
or the Transferor to such Underwriter.
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9. Effective Date of Agreement
This Agreement shall become effective upon the execution and delivery
hereof by all the parties hereto.
10. Representations, Warranties and Agreements to Survive Delivery
All representations, warranties and agreements contained in the Agreement
or contained in certificates of officers of EdLinc, SFLC or the Transferor
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 EdLinc, SFLC or the Transferor, and shall survive delivery of the Notes to
the Underwriters. The expense payment provisions set forth in Sections 4(j) 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.
11. Termination of Agreement
This Agreement shall be subject to termination in the absolute discretion
of the Representative, without liability on the part of the Underwriters to
EdLinc, SLFC or the Transferor, by notice to EdLinc, SLFC and the Transferor, 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 Representative, 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 Representative 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
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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 Representative materially affects the market price of the Notes; (vi)
additional material restrictions not in force as of the date hereof shall have
been imposed upon trading in securities of the general character of the Notes by
any governmental authority or by any national securities exchange; (vii) a
default shall have occurred in the payment of principal or interest on
outstanding obligations of EdLinc, SLFC or the Transferor, the State of South
Dakota, or any agency or authority thereof, which in the opinion of the
Representative materially and adversely affects the market for the Notes; or
(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
Representative, shall materially and adversely affect the market for the Notes.
Notice of such termination may be given to EdLinc, SLFC and the Transferor, by
telegram, telecopy or telephone and shall be subsequently confirmed by letter.
12. Information Furnished by the Underwriters
The statements set forth [under the subheading "Weighted Average Life of
the Series 1999-[X] Notes" under the heading "Maturity and Prepayment
Considerations", and] under the heading "Underwriting" in the Prospectus
Supplement dated ____________ , 1999 (the "Prospectus Supplement") and the
computational material contained in the Form 8-K filed with Commission on
____________ , 1999 relating to the Notes constitute the only information
furnished by or on behalf of the Underwriters as such information is referred to
in Sections 3(b) and 5 hereof, and each Underwriter confirms that such
statements relating to such Underwriter are correct and the Representative
confirms that [the information under the subheading "Weighted Average Life of
the Series 1999-[X] Notes" under the heading "Maturity and Prepayment
Considerations" in the Prospectus Supplement, and] the computational materials
contained in the Form 8-K filed with Commission on ____________ , 1999 is
correct; provided that with respect to [the information contained under the
subheading "Weighted Average Life of the Series 1999-[X] Notes" under the
heading "Maturity and Prepayment Considerations" in the Prospectus Supplement,
and] the computational materials contained in the Form 8-K filed with Commission
on ____________ , 1999 relating to the Notes, each Underwriter (including the
Representative) has assumed that the underlying financial information regarding
the Financed Student Loans as furnished by or on behalf of EdLinc, SLC or the
Transferor to such Underwriter is accurate and each Underwriter makes no
representation, warranty or confirmation with respect to such underlying
financial information regarding the Financed Student Loans. Anything to the
contrary notwithstanding in this Agreement, EdLinc, SLFC and the Transferor
agree that the information contained [under the subheading "Weighted Average
Life of the Series 1999-[X] Notes" under the heading "Maturity and Prepayment
Considerations" in the Prospectus Supplement, and] the computational materials
contained in the Form 8-K filed with Commission on ____________ , 1999 relating
to the Notes is not included in the indemnification provided by each Underwriter
contained in Section 5(c) hereof.
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13. 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] [The]
obligation of each particular Underwriter hereunder is joint and several. [To
the extent [_____] 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 EdLinc, 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 Underwriting Agreement.]
14. Miscellaneous
Except as otherwise provided in Sections 4 and 11 hereof, notice given
pursuant to any provision of this Agreement shall be in writing and shall be
delivered (i) if to EdLinc, SLFC or the Transferor, at 105 First Avenue,
Southwest, Aberdeen, South Dakota 57401, Attention: A. Norgrin Sanderson, (ii)
if to the Underwriters, to Salomon Smith Barney Inc., 388 Greenwich Street, 32nd
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 Transferor, SLFC, EdLinc, 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.
15. Applicable Law; Counterparts; Headings
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York applicable to contracts made and to be performed
within the State of New York without giving effect to the choice of laws or
conflict of laws principles thereof.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof or
thereof shall have been executed and delivered on behalf of each party hereto.
The headings of the Sections of this Agreement are inserted for convenience
only and shall not be deemed to be part hereof.
[The remainder of this page is intentionally left blank.]
-23-
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement among
EdLinc, SLFC, the Transferor and the Underwriters.
Very truly yours,
EDUCATION LOANS INCORPORATED
("EdLinc")
By
------------------------------------
Name:
Title:
STUDENT LOAN FINANCE CORPORATION
("SLFC")
By
------------------------------------
Name:
Title:
GOAL FUNDING, INC.
(the "Transferor")
By
------------------------------------
Name:
Title:
Confirmed as of the date
first above mentioned.
SALOMON SMITH BARNEY INC.
[___________________________
By Salomon Smith Barney Inc.]
By
--------------------------------
Name:
Title:
-24-
<PAGE>
APPENDIX A
<TABLE>
<CAPTION>
Initial Aggregate Underwriting
Series Principal Amount Maturity Date Purchase Price Fee
------ ---------------- ------------- -------------- ------------
<S> <C> <C> <C> <C>
1999-[X] $ % $
1999-[X]
</TABLE>
-25-
<PAGE>
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
Transfer Agreement, [the Auction Agent Agreements, the Broker-Dealer
Agreements,] the Servicing Agreement and the Letter of Representations.
"EdLinc's Authorizing Resolutions" means the Resolutions of EdLinc's board
of directors, adopting, accepting, ratifying and approving:
1. the Basic Documents;
2. this Agreement and the Prospectus;
3. 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"); and
4. EdLinc's Program Agreements.
"EdLinc's Program Agreements" means the Loan Purchase Contracts and the
forms of Student Loan Purchase Agreements.
"Letter of Representations" means, individually and collectively, the
Blanket Issuer Letter of Representations, dated as of July 31, 1997, from EdLinc
to The Depository Trust Company ("DTC") and the Blanket Issuer Letter of
Representations, dated as of September 26, 1997, from the Corporation to DTC,
each 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 EdLinc and the eligible lenders described in
Exhibits [_____] to the Supplemental Indenture, and the Transferor's Student
Loan Purchase Agreements.
"SLFC's Authorizing Resolutions" means the Resolutions of the SLFC's board
of directors, adopting, accepting, ratifying and approving:
1. the Basic Documents, this Agreement and the Prospectus;
2. SLFC's Program Agreements; and,
3. EdLinc's Program Agreements.
"SLFC's Program Agreements" means [the Subservicing Agreements].
-26-
<PAGE>
"Transferor's Authorizing Resolutions" means the Resolutions of the
Transferor's board of directors, adopting, accepting, ratifying and approving:
1. the Transfer Agreement, this Agreement and the Prospectus; and,
2. the Transferor's Student Loan Purchase Agreements.
"Transferor's Student Loan Purchase Agreements" means the Student Loan
Purchase Agreements between the Transferor and the eligible lenders described in
Exhibit [_____] to the Supplemental Indenture.
"Transferor's Trustee" means [[_____]], as trustee under the Indenture of
Trust, dated as of [[_____]], between the Transferor and [[_____]].
"Trustee's Program Agreements" means the Guarantee Agreements.
-27-
<PAGE>
Exhibit 4.1
================================================================================
INDENTURE OF TRUST
between
EDUCATION LOANS INCORPORATED
and
U.S. BANK NATIONAL ASSOCIATION
as Trustee
-------------------------------
Dated as of ___________ 1, 1999
-------------------------------
================================================================================
<PAGE>
CROSS REFERENCE TABLE
TIA Indenture
Section Section
- ------- -------
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
- ----------
/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
Page
----
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...........................1-29
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......1-33
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
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<PAGE>
Section 4.4. Reserve Fund............................................4-6
Section 4.5. Indemnification Fund....................................4-8
Section 4.6. Revenue Fund...........................................4-13
Section 4.7. Note Fund..............................................4-15
Section 4.7.1. Interest Account.......................................4-16
Section 4.7.2. Principal Account......................................4-19
Section 4.7.3. Retirement Account.....................................4-25
Section 4.8. Surplus Fund...........................................4-26
Section 4.9. Alternative Loan Guarantee Fund........................4-32
Section 4.10. Pledge.................................................4-33
Section 4.11. Investments............................................4-34
Section 4.12. Transfer of Investment Securities......................4-35
Section 4.13. Termination............................................4-35
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. Trustee to Hold Alternative Loan Notes..................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. Use of Trustee Eligible Lender Number...................5-7
Section 5.15. Limitation on Administrative Expenses and
Note Fees; Reports......................................5-8
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....................................5-9
Section 5.20. Amendment of Remarketing Agreements
and Depositary Agreements..............................5-10
Section 5.21. Additional Covenants of the Corporation................5-10
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<PAGE>
Section 5.22. Representations and Warranties of the Corporation......5-13
Section 5.23. Trustee to Furnish Monthly Servicing Report............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
Section 7.14. Preferential Collection of Claims Against
Corporation............................................7-10
Section 7.15. Statement by Trustee of Funds and Accounts
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<PAGE>
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
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
-iv-
<PAGE>
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 FFELP Loan Acquisition Certificate.............A-1
EXHIBIT B Eligible FFELP Loan Origination Certificate.............B-1
EXHIBIT C Student Loan Acquisition Certificate....................C-1
EXHIBIT D Form of Updating Eligible FFELP Loan Acquisition
Certificate.............................................D-1
-v-
<PAGE>
EXHIBIT E Eligible Alternative Loan Acquisition Certificate.......E-1
-vi-
<PAGE>
THIS INDENTURE OF TRUST, dated as of ________________ 1, 1999, between
EDUCATION LOANS INCORPORATED, a corporation duly organized and existing under
the laws of the State of Delaware (herein called the "Corporation"), and U.S.
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 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
-vii-
<PAGE>
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 Federal Reimbursement
Contracts, 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, Indemnification Fund,
Alternative Loan Guarantee 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;
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
-viii-
<PAGE>
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 Section 4.5 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:
-ix-
<PAGE>
ARTICLE ONE
DEFINITIONS AND GENERAL PROVISIONS
Section 1.1. Definitions. In this Indenture the following terms have 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 PLLP, 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 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
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(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
(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 Guarantee Agreements,
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the Program, the Higher Education Act, any Alternative Loan Program or any
requirement of the laws of the United States 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, shall mean the power
to direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Aggregate Value" shall mean on any calculation date the sum of the Values
of all assets of the Trust Estate, less moneys in any Fund or Account which the
Corporation is then entitled to receive for deposit into the Indemnification
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.
"Alternative Loan Guarantee Fund" shall mean the Fund by that name created
and established by Section 4.1 hereof.
"Alternative Loan Guarantee Fund Requirement" shall mean, at any time, an
amount equal to _____________.
"Alternative Loan Program" shall mean each program for the making of
Student Loans other than FFELP Loans that is identified in a Supplemental
Indenture as a program the Alternative Loans under which are eligible to be
Financed under this Indenture.
"Alternative Loans" shall mean Student Loans that are originated under
Alternative Loan Programs.
"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
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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.
"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.
"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
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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
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
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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 five and two-tenths percent (5.2%) per annum; and
(4) a reinvestment rate of five and two-tenths percent (5.2%) 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.
"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.
"Corporation" shall mean (1) Education Loans Incorporated, a corporation
duly organized and existing under the laws of the State of Delaware, (2) any
successor thereto under this Indenture, and (3) 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.
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"Corporation Student Loan Purchase Agreements" shall mean all agreements
between the Corporation and a Lender (in the case of FFELP Loans) or SLFC (in
the case of Alternative Loans) providing for the sale by such Lender or SLFC 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.
"Corporation Swap Payment" shall mean 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).
"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" shall mean 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" shall mean, 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.
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"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 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.
"Eligible Alternative Loan Acquisition Certificate" shall mean a
certificate signed by an Authorized Officer of the Corporation and substantially
in the form attached as Exhibit E hereto.
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"Eligible Borrower" shall mean a borrower who, in the case of a FFELP Loan,
is eligible under the Higher Education Act, or, in the case of an Alternative
Loan, is eligible under an Alternative Loan Program, to be the obligor of a loan
for financing a program of post-secondary education, including a borrower who is
eligible under the Higher Education Act to be an obligor of a Plus Loan.
"Eligible FFELP 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 FFELP 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.
"Eligible Loan" shall mean: (A) a FFELP Loan which: (1) has been or will be
made to an Eligible Borrower for post-secondary education; (2) is 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; 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 (including Alternative Loans) if the
Corporation shall have caused to be provided to the Trustee 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.
"Event of Default" shall mean one of the events described as such in
Section 6.1 hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"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.
"FFEL Program" shall mean the Federal Family Education Loan Program
established by the Higher Education Act pursuant to which loans are made to
borrowers pursuant to specified guidelines, and the repayment of such loans is
guaranteed by a guarantee agency, and any predecessor or successor program.
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"FFELP Loans" shall mean Student Loans made under the FFEL Program or the
FISL Program.
"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 (1) 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 or (2) for certain purposes under this Indenture,
Liquidated Alternative Loans.
"Fiscal Year" shall mean the fiscal year of the Corporation as established
from time to time.
"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 IBCA, Inc., 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.
"GOAL Funding" shall mean GOAL Funding, Inc., a corporation duly organized
and existing under the laws of the State of Delaware, its successors and
assigns.
"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 FFELP Loan, the
insurance or guarantee by a Guarantee Agency, to the extent provided in the
Higher Education Act, of the principal of and accrued interest on such FFELP
Loan, and, where applicable, the coverage of such FFELP 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.
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"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, (12) the Secretary of Education, to the extent the Secretary of
Education has directly insured or guaranteed FFELP Loans, or (13) 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 July 3,
1997, between the Trustee and Education Assistance Corporation, (2) that certain
Lender Agreement for Guarantee of Student Loans With Federal Reinsurance, dated
February 28, 1994, between the Trustee and Pennsylvania Higher Education
Assistance Agency, (3) that certain Agreement to Guarantee Loans, dated July 11,
1997, between the Trustee and United Student Aid Funds, Inc., (4) that certain
Lender Participation Agreement for Insurance, dated July 8, 1997, between the
Trustee and Student Loans of North Dakota, (5) that certain Lender Agreement for
Guarantee of Student Loans With Federal Reinsurance, dated July 15, 1997,
between the Trustee and Northstar Guarantee, Inc., (6) that certain Student Loan
Guaranty, dated July 15, 1997, between the Trustee and Great Lakes Higher
Education Corporation, (7) that certain Agreement for Payment on Guarantee of
Student Loans With Federal Reinsurance, dated December 15, 1994, between the
Trustee and Educational Credit Management Corporation (formerly known as
Transitional Guaranty Agency, Inc.), (8) that certain Agreement to Guarantee
Loans, dated July 15, 1997, and that certain Agreement to Guarantee PLUS/SLS
Loans, dated July 15, 1997, each between the Trustee and Iowa College Aid
Commission, (9) that certain Agreement to Guarantee Federal Stafford Loans
(Subsidized and Unsubsidized), Federal PLUS Loans, Federal SLS Loans, dated July
15, 1997, 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 Agreement
to Guarantee Loans Made by a Commercial Lender, dated July 10, 1997, that
certain Agreement to Guarantee CLAS Program Loans Made by a Commercial Lender,
dated July 10, 1997, that certain Consolidation Loan Program Lender
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Participation Agreement, dated July 6, 1997, each 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 FFELP 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 FFELP
Loans.
"Guaranteed Loan" shall mean a FFELP 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.
"Indemnification Fund" shall mean the Fund 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, shall mean
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.
"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.
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"Initial Notes" shall mean the Notes of the initial twelve (12) series
hereunder issued contemporaneously with the execution and delivery of this
Indenture.
"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 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
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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 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 5.14(2) hereof.
"Lender" shall mean (1) as to a FFELP Loan, any "eligible lender" (as
defined in the Higher Education Act) which has received an eligible lender
designation from a Guarantee Agency, and (2) as to an Alternative Loan, any
entity eligible to be a lender under the related Alternative Loan Program.
"Liquidated Alternative Loan" shall mean a Financed Alternative Loan as to
which any payment has been delinquent for 180 days or more. At such time, and
for so long, as any such Financed Alternative Loan no longer has any payment
that has been delinquent for 180 days or more, such Financed Alternative Loan
shall cease to be a Liquidated Alternative Loan.
"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.
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"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 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 Guarantee Agreements, the
Program, the Higher Education Act, any Alternative Loan Program 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
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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.
"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.
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<PAGE>
"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.
"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 (a) with respect to a FFELP Loan
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, and (b) with
respect to an Alternative Loan, any unpaid interest thereon that is authorized
to be added to the principal balance thereof under the applicable Alternative
Loan Program) 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 Servicer for the
purchase of Student Loans from Lenders, SLFC and GOAL Funding 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
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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
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.
"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,
shall mean 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.
"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
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.
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"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.
"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
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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.
"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 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.
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"Servicing Agreement" shall mean, the Servicing and Administration
Agreement, dated as of ________________ 1, 1999, among the Corporation, the
Trustee and SLFC, as servicer and administrator, 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.
"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, 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
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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).
"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.
"Student Loan" shall mean a loan to a borrower for post-secondary
education.
"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, collectively, all
Corporation Student Loan Purchase Agreements and Transferor Student Loan
Purchase Agreements.
"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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"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.
"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.
"Transfer Agreement" shall mean the Transfer Agreement, dated as of
________________ 1, 1999, among the Corporation, the Trustee, GOAL Funding and
the trustee for GOAL Funding, and any other agreement among the Corporation, the
Trustee and the Transferor
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providing for the sale by the Transferor to the Corporation of Student Loans
Financed or to be Financed under this Indenture (which Student Loans have
previously been purchased from one or more Lenders or SLFC pursuant to one or
more Student Loan Purchase Agreements), together with all of the Transferor's
right, title and interest in and to the related Student Loan Purchase Agreements
as they relate to such Student Loans.
"Transferor" shall mean GOAL Funding, and any other organization with which
the Corporation and the Trustee have entered into a Transfer 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.
"Transferor Student Loan Purchase Agreements" shall mean, with respect to
Financed Student Loans transferred pursuant to a Transfer Agreement, all
agreements between the Transferor and a Lender (in the case of FFELP Loans) or
SLFC (in the case of Alternative Loans) providing for the sale of such Financed
Student Loans by such Lender or SLFC to the Transferor or its agent and
substantially in the forms which are on file with the Trustee, including
amendments thereto made in accordance with Section 5.18 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 U.S. 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; provided that any Liquidated Alternative Loan shall be
deemed to have a value of zero;
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(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 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;
(6) any accrued but unpaid Swap Counterparty Payment, unless the Swap
Counterparty is in default of its obligations under the Swap Agreement; and
(7) with respect to any Student Loan that does not constitute an
Eligible Loan, unless otherwise specifically provided herein, the lesser of
(i) the market value thereof, as determined by a nationally recognized
evaluator acceptable to the Trustee, and (ii) the Principal Balance
thereof, plus any unamortized premiums and accrued interest thereon;
provided that any Liquidated Alternative Loan shall be deemed to have a
value of zero.
"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,"
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"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 any public law or
statute of the United States or any section thereof, are to the respective or
corresponding articles, 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 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) Except as otherwise specifically provided in this Indenture, 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;
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(ii) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(iii) a statement that, in the opinion of each such signatory, such
signatory has made such examination or investigation as is necessary to
enable such signatory to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such signatory,
such condition or covenant has been complied with.
(b) (i) 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
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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 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.
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
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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 FFELP Loan Acquisition Certificate;
Exhibit B: Form of Eligible FFELP Loan Origination Certificate;
Exhibit C: Form of Student Loan Acquisition Certificate;
Exhibit D: Form of Updating Eligible FFELP Loan Acquisition Certificate;
and
Exhibit E: Form of Eligible Alternative 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.
"indenture security holder" means a Noteholder or Other Beneficiary.
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"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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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:
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FOR VALUE RECEIVED, EDUCATION LOANS INCORPORATED, a corporation organized
under the laws of the State of Delaware (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 ________________ 1, 1999, as
[amended and] supplemented by a ________________ Supplemental Indenture of
Trust, dated as of ________________, (collectively, the "Indenture"), each
between the Corporation and U.S. 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")
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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.
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.
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[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 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
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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 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.
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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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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.
U.S. BANK NATIONAL
ASSOCIATION, as Trustee [or ____________, ____________, as
Authenticating Agent
By______________________________ By__________________________________
Authorized Representative Authorized 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
OF ASSIGNEE NOTICE: The signature to this
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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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.
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
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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
Indemnification 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 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.
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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
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.
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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.
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
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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
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
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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.
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.
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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.
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
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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 Subordinate Obligations in respect of each of the provisions
of this Indenture which express the subordination of the Subordinate
Obligations.
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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. An Indemnification Fund.
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. An Alternative Loan Guarantee Fund.
8. 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
pursuant to a Student Loan Purchase Agreement from other available moneys of the
Corporation) or Transfer Agreement, (b) the origination of Eligible Loans, (c)
the redemption or purchase of Notes as provided in a Supplemental Indenture
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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 Indemnification Fund
(upon transfer to the Indemnification Fund as set forth in the following
paragraph). The Trustee shall make or shall authorize the Deposit Agent to make
payments to the Transferor, Lenders or SLFC 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 FFELP Loan Acquisition
Certificate, in the case of Eligible FFELP Loans, or an Eligible Alternative
Loan Acquisition Certificate, in the case of Eligible Alternative Loans, and all
documents, opinions and certificates required thereby (including, in the case of
an Eligible Alternative Loan, the original promissory note relating thereto and
all endorsements thereof required by the related Student Loan Purchase
Agreement). Within three (3) Business Days after the disbursement of moneys from
the Acquisition Fund for the purchase of Eligible FFELP Loans pursuant to an
Eligible FFELP 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 FFELP Loans. The Trustee shall
make or shall authorize the Deposit Agent to make payments from the Acquisition
Fund for the origination of Eligible FFELP Loans upon receipt by the Trustee of
an Eligible FFELP Loan Origination Certificate and all documents, opinions and
certificates required thereby. The Trustee shall make or shall authorize the
Deposit Agent to make payments to a Transferor from the Acquisition Fund for the
acquisition of Eligible Loans pursuant to a Transfer Agreement (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 all documents, opinions and certificates required by such Transfer
Agreement (including, in the case of an Eligible Alternative Loan, the original
promissory note relating thereto and all endorsements thereof required by the
Transfer Agreement). After any such acquisition, the Corporation and the Trustee
shall amend the Exhibit or Exhibits to the applicable Supplemental Indentures to
reflect the addition of the student loan purchase agreements relating to the
Eligible Loans so acquired and such agreements shall become Student Loan
Purchase Agreements for all purposes under this Indenture.
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
Indemnification 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 Indemnification 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
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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 Indemnification 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 Indemnification Fund from all other Funds
and Accounts, a deficiency exists in the Indemnification 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 proceeds of any such sale shall be credited to the
Indemnification Fund, to the extent of any deficiency in the Indemnification
Fund, and otherwise to the Revenue Fund. If any amounts have been transferred to
either or both of the Indemnification 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 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 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, prior to any such sale and exchange, the Trustee shall have received an
Eligible FFELP Loan Acquisition Certificate, in the case of Eligible FFELP
Loans, or an Eligible Alternative Loan Acquisition Certificate, in the case of
Eligible Alternative Loans and, in the case of Eligible FFELP Loans, 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
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proposed to be sold or exchanged, exceed $1,000,000, a Corporation Certificate
that, based on a Cash Flow 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 Indemnification 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,
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 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 Indemnification Fund to the
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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 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.
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
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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. 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 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 Indemnification Fund, the Note Fund or the
Acquisition Fund), the Income Account (to the extent not required for credit to
the Indemnification Fund, the Note Fund, the Acquisition Fund or the
Administration Fund) and the Surplus Fund (to the extent not required for credit
to the Indemnification 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 Indemnification 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 Indemnification 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
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(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 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 Indemnification 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 Indemnification 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. Indemnification Fund. The Trustee shall, upon receipt of any
notice that an amount is payable from the Trust Estate pursuant to the
indemnification provisions of a Joint Sharing Agreement, immediately furnish a
copy thereof to the Corporation. Thereafter, the Corporation and the Trustee
shall promptly determine if, and the extent to which, such amount is so payable
and, if and to the extent it is, the Trustee shall transfer such amount to the
Indemnification Fund 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
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Acquisition Fund, in that order of priority. Any amount so transferred to the
Indemnification Fund shall be immediately paid by the Trustee to the appropriate
party or parties.
Amounts in the Indemnification Fund shall be used only for the purposes
specified in the preceding paragraph, and shall not be available for any other
purpose, including, but not limited to, payment of Debt Service on or the
purchase price of the Notes or Other Obligations.
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 Guarantee payments and 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 or SLFC of any Financed Student Loans
pursuant to such Lender's or SLFC'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
Indemnification Fund, (vi) any amounts received by the Trustee pursuant to the
indemnification provisions of any Joint Sharing Agreement, and (vii) all amounts
to be transferred to the Revenue Fund from the Alternative Loan Guarantee Fund.
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, SLFC, a Transferor 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 or in
respect 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 or in respect 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
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connection with Financed Student Loans, and (2) transfer the remainder of such
moneys, as follows:
First, to the credit of the Indemnification 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 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;
twelfth, to the Alternative Loan Guarantee Fund, the lesser of (1) the
amount necessary to increase the balance thereof to the Alternative Loan
Guarantee Fund Requirement, and (2) the aggregate amount received by the
Servicer and deposited in the Revenue Fund with respect to Financed
Alternative Student Loans for which a transfer has been made from the
Alternative Loan Guarantee Fund, less the aggregate amount transferred to
the Alternative Loan Guarantee Fund from the Revenue Fund on previous
Monthly Payment Dates; and thirteenth, 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, to the extent
amounts in the Repayment Account were not sufficient therefor, (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 Indemnification 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
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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 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; twelfth, to the Alternative Loan
Guarantee Fund, the lesser of (1) the amount necessary to increase the
balance thereof to the Alternative Loan Guarantee Fund Requirement, and (2)
the aggregate amount received by the Servicer and deposited in the Revenue
Fund with respect to Financed Alternative Student Loans for which a
transfer has been made from the Alternative Loan Guarantee Fund, less the
aggregate amount transferred to the Alternative Loan Guarantee Fund from
the Revenue Fund on previous Monthly Payment Dates; and fourteenth, 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 Indemnification 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
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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 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
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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 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
Indemnification 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 Indemnification 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
Indemnification Fund as hereinbefore provided shall be transferred to such Fund
without further
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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 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 Indemnification 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; fifth, to
the payment of all Carry-Over Amounts (including any accrued interest thereon)
due and payable on all series of Class A 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 Class A Noteholders and to be paid from the
Interest Account; and sixth, to the payment of all Carry-Over Amounts (including
any accrued interest thereon) due and payable on all series of Class B 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 Class B 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
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or required to be deposited and credited to the Principal 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 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.
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(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
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
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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 (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),
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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 Indemnification 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 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 Indemnification 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
Indemnification Fund required by Section 4.5 hereof. Any moneys in the Principal
Account required to be so transferred to the Indemnification 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
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time, provided the Trustee shall have first certified that no deficiencies exist
at such time in the Note Fund or the Indemnification 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
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.
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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 Indemnification 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 Indemnification Fund required by
Section 4.5 hereof. Any moneys in the Retirement Account required to be so
transferred to the Indemnification 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 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 Indemnification 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 Indemnification Fund, the Note Fund, the Acquisition Fund,
the Administration Fund, the Reserve Fund or the Alternative Loan Guarantee Fund
to the extent necessary to increase the
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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 Indemnification Fund, the Note Fund, the Acquisition Fund, the
Administration Fund, the Reserve Fund, the Alternative Loan Guarantee 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 or SLFC of any
Student Loans previously purchased with moneys in the Surplus Account pursuant
to the repurchase obligation of the Lender or SLFC under the applicable Student
Loan Purchase Agreement.
Balances in the Surplus Fund shall be applied to the following purposes in
the following order of priority: first, to remedy deficiencies in the
Indemnification 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
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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 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 FFELP Loan Acquisition Certificate or an Eligible
FFELP Loan Origination Certificate, in the case of FFELP Loans, or an Eligible
Alternative Loan Acquisition Certificate, in the case of Eligible Alternative
Loans, 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 Indemnification 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
Indemnification 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 Indemnification 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 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, 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 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, 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, 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 Indemnification
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 Indemnification 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 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
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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
Indemnification 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 Indemnification 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 Indemnification 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 or SLFC upon the receipt by the
Trustee of a Student Loan Acquisition Certificate and all documents,
opinions and certifications required thereby (including, in the case of an
Alternative Loan, the original promissory note relating thereto and all
endorsements thereof required by the related Student Loan Purchase
Agreement), or to a Transferor upon the receipt by the Trustee of a all
documents, opinions and certifications required by the related Transfer
Agreement (including, in the case of an Alternative Loan, the original
promissory note relating thereto and all endorsements thereof required by
the Transfer Agreement); (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 Section 5.16 hereof, is
authorized by the Corporation's Articles of Incorporation and Bylaws;
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 Indemnification Fund or to be
used to pay Costs of Issuance, Note Fees or Administrative Expenses, (1)
the Senior Percentage
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will not be less than one hundred twelve percent (112%) (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 two percent (102%) (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).
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
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.
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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.
Section 4.9. Alternative Loan Guarantee Fund. The Trustee will, upon the
purchase of each Alternative Loan from a Transferor or SLFC, deposit to the
credit of the Alternative Loan Guarantee Fund the amount received in respect of
an origination fee relating to such Alternative Loan. The Trustee will also
deposit to the Alternative Loan Guarantee Fund any amounts transferred thereto
from the Revenue Fund.
To the extent, as of the end of any calendar month, any payment on a
Financed Alternative Loan has not been received within 180 days after the due
date therefor, such Financed Alternative Loan will be deemed a Liquidated
Alternative Loan. The Trustee will, on each Monthly Payment Date, transfer from
the Alternative Loan Guarantee Fund to the Revenue Fund an amount equal to the
Principal Balance of and accrued interest on each Financed Alternative Loan that
became a Liquidated Alternative Loan during the preceding calendar month.
If on any Monthly Payment Date the Balance in the Alternative Loan
Guarantee Fund exceeds the Alternative Loan Guarantee Fund Requirement, the
Trustee shall transfer to the Revenue Fund an amount equal to such excess.
Pending transfers from the Alternative Loan Guarantee 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 retained
therein.
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 or SLFC 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
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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.
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, SLFC or any Lender, Transferor, 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
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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.
Subject 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.
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 Value of
Investment Securities determined with respect thereto as of the date of
transfer.
Section 4.13. 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
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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.
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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 (i) in the case of Financed Student Loans
to be acquired pursuant to Student Loan Purchase Agreements, in accordance with
the provisions of the applicable Student Loan Purchase Agreement, (ii) in the
case of Financed Student Loans to be acquired pursuant to a Transfer Agreement,
in accordance with the provisions of such Transfer Agreement, and (iii) in the
case of Financed Student Loans previously acquired with proceeds of other bonds
or notes of the Corporation which are acquired from either the trustee for such
bonds or notes or the Corporation, in accordance with the provisions of the
applicable assignment or other transfer document. In the case of any origination
of Financed Student Loans, the Corporation 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, each
Alternative Loan Program 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
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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
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. Trustee to Hold Alternative Loan Notes. The Trustee shall hold
the original of each promissory note delivered in connection with the
acquisition of each Financed Alternative Loan. The Trustee shall not release
custody of any such promissory note except upon the sale thereof or to the
Servicer as necessary in connection with the servicing of the related Financed
Alternative Loan under the Servicing Agreement. Any such promissory note so
released to the custody of the Servicer shall, except in the case of the
liquidation thereof, be promptly returned to the Trustee. The Trustee shall
maintain a record of all such promissory notes held by the Trustee and any
releases thereof to the custody of the Servicer.
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 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 by any Guarantee Agency 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
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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 Financed FFELP Loans. The Corporation will cause the
Trustee to assign such Financed FFELP 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, the (1) the
Corporation may cause the Trustee to forgive the remaining indebtedness on 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) 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 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
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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, Special
Allowance Payments and all defaulted payments Guaranteed by any Guarantee Agency
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, and shall require the Servicer to prepare and furnish to
the Trustee, no later than the twenty-fifth day (or, if such twenty-fifth day is
not a Business Day, the next succeeding Business Day) of each calendar month a
Monthly Servicing Report with respect to the previous calendar month. Any
Servicer may perform all or part of its servicing or other activities under the
Servicing Agreement through a subcontractor. Any Servicer shall perform or shall
cause its subcontractor to perform all services under the Servicing Agreement in
compliance with the Higher Education Act, applicable requirements of each
Guarantee Agency and each Alternative Loan Program and all other applicable
federal, state and local laws and regulations. Each Servicer shall be
responsible for the performance of its obligations under the Servicing
Agreement, whether such obligations are performed by such Servicer or by its
subcontractor, and such Servicer shall be responsible for any fees and payments
required by the subcontractor.
Section 5.8. Administration and Collection of Financed Student Loans. All
Financed Student Loans shall be administered and collected by a Servicer
selected by the Corporation 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 Federal Reimbursement Contracts, each Alternative
Loan Program, 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
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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 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.
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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 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. Use of Trustee Eligible Lender Number. The Trustee covenants
and agrees not to hold any other FFELP Loans under the federal eligible lender
number under which it holds any Financed FFELP 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, Guarantee
payments or any other payments by 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,
or otherwise seeks reimbursement from the Trustee, with respect to student loans
held by the Trustee on behalf of the other party.
Section 5.15. Limitation on Administrative Expenses and Note Fees. The
Corporation covenants and agrees that the Administrative Expenses and Note Fees
will not, in any Fiscal Year, exceed those that are reasonable and 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 elsewhere in this Indenture or under
comparable provisions of any future indenture of the Corporation with respect
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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; and
E. 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, any Transfer 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 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).
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 the related Alternative
Loan Program, or is not to the prejudice of the Holders of the Notes or Other
Beneficiaries.
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Section 5.19. Enforcement and Amendment of Guarantee Agreements. So long as
any Notes are Outstanding or other obligations to Other Beneficiaries are
Outstanding and Financed Eligible FFELP 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 FFELP 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.
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. The Corporation
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 arising under this Indenture or otherwise 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,
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assets or 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 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 (other than any such commingling which might result
from the performance of the Servicer's duties in accordance with any
Servicing Agreement);
(iii) conduct its own business in its own name and will hold all
of its assets in its own name;
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(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;
(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;
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(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 Indenture, 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 Delaware, 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
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
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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, 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.
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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
(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
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(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 Indemnification 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, 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, 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
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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;
(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 Indemnification
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
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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 Indemnification
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
(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;
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(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 Indemnification
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 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,
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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.
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:
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(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 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:
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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
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:
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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 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
charges of the Trustee have been paid, the Corporation and the Trustee shall be
restored to their former positions hereunder.
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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 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,
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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.
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,
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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 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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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
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
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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 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.
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(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 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 and
each Alternative Loan Program; 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
any Guarantee Agreement relating to any Financed FFELP 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 each Guarantee Agreement.
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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 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
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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
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
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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 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.
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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 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.
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(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.
(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
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corporation shall be deemed to be its combined capital 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 ss. 310(a).
The Trustee shall comply with TIA ss. 310(b), including the optional provision
permitted by the second sentence of TIA ss. 310(b)(9); provided, however, that
there shall be excluded from the operation of TIA ss. 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 ss. 310(b)(1) are met.
Section 7.14. Preferential Collection of Claims Against Corporation. The
Trustee shall comply with TIA ss. 311(a), excluding any creditor relationship
listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be
subject to TIA ss. 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 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
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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.
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
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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.
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.
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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 account 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
(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
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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 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;
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(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 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 ____________ 1,
1999, 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 acquire Eligible Loans
described in clause (B) of the definition thereof (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), (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 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
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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 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
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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 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, the Trustee shall have received written evidence
that the Rating Agency Condition has been satisfied.
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.
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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
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 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
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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 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
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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 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; 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
Indemnification 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
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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 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
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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 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
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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 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 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 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
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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 Indemnification 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 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.
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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 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.
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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 ss. 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 TIAss. 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
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
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(iii) supply to the Trustee a sufficient number of copies (and the
Trustee shall transmit by mail to all Noteholders described in TIA ss.
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 December 31 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 ss. 313(a), within
sixty (60) days after each December 31 beginning with December 31, 2001, the
Trustee shall mail to each Noteholder as required by TIA ss. 313(c) a brief
report dated as of such date that complies with TIA ss. 313(a). The Trustee also
shall comply with TIA ss. 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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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 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.
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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, Suite 200
Aberdeen, South Dakota 57401
Attn: President
To the Trustee: U.S. Bank National Association
141 North Main Avenue
Sioux Falls, South Dakota 57117
Attn: Corporate Trust Department
To Fitch: Fitch IBCA, 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 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.
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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 be included in this Indenture by any of the provisions of the Trust
Indenture Act, such required provision shall control.
The provisions of TIA ss.ss. 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
13-3
<PAGE>
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 December 31 in each calendar year, beginning in 2001, 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 December 31 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.
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.
13-4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the day and year first above written.
EDUCATION LOANS INCORPORATED
By
---------------------------------
President
Attest:
- ---------------------------------
Secretary
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
By
---------------------------------
Its
------------------------------
Attest:
- ---------------------------------
Its
------------------------------
13-5
<PAGE>
EXHIBIT A
Addressed to Trustee
ELIGIBLE FFELP LOAN ACQUISITION CERTIFICATE
This Eligible FFELP Loan Acquisition Certificate is submitted pursuant to
the provisions of Section 4.2 of the Indenture of Trust, dated as of
____________ 1, 1999 (as amended and supplemented from time to time in
accordance with its terms, the "Indenture"), between Education Loans
Incorporated (the "Corporation") and U.S. 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 FFELP Loans. With respect to the Eligible FFELP Loans so
to be acquired, the Corporation hereby certifies as follows:
1. The Eligible FFELP 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 Guaranteed Loan included among the Acquired
Eligible Loans, a certified copy of the Guarantee Agreement relating
thereto;
(c) a copy of the opinion of counsel for the Lender referred to in the
related Student Loan Purchase Agreement;
A-1
<PAGE>
(d) an opinion of Counsel to the Corporation specifying each action
necessary to perfect a security interest in all Eligible FFELP 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. ss.ss. 1087-2(d)(3) and 1082(m)(1)(D)(iv);
(e) 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(d) hereof;
(f) 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
(g) 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(c) and 4(d) 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 FFELP LOAN ORIGINATION CERTIFICATE
This Eligible FFELP Loan Origination Certificate is submitted pursuant to
the provisions of Section 4.2 of the Indenture of Trust, dated as of
________________ 1, 1999 (as amended and supplemented from time to time in
accordance with its terms, the "Indenture"), between Education Loans
Incorporated (the "Corporation") and U.S. 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 FFELP
Loans. With respect to the Eligible FFELP Loans so to be originated, the
Corporation hereby certifies as follows:
1. The Eligible FFELP 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 Guaranteed Loan included among the Originated
Eligible Loans, a certified copy of the Guarantee Agreement relating
thereto;
(b) 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. ss.ss. 1087-2(d)(3) and
1082(m)(1)(D)(iv);
(c) 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(b) hereof;
B-1
<PAGE>
(d) 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
(e) 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 opinion of
counsel referred to in paragraph 4(b) 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 _____________
1, 1999 (as amended or supplemented from time to time in accordance with its
terms, the "Indenture"), between Education Loans Incorporated (the
"Corporation") and U.S. 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 or SLFC 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 (a) FFELP 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 or (b) Alternative Loans
meeting the requirements of clause (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 (i) in the case of FFELP Loans, between the
Corporation and the Lender relating thereto, or (ii) in the case of
Alternative Loans, between the Corporation and SLFC relating thereto;
(b) with respect to each Acquired Student Loan that constitutes an
Alternative Loan, the original promissory note relating thereto, endorsed
as required by the Student Loan Purchase Agreement;
(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 or SLFC referred
to in 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 (including, in the case of FFELP Loans,
in the manner provided for by the provisions of 20 U.S.C. ss.ss.
1087-2(d)(3) and 1082(m)(1)(D)(iv));
(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, neither SLFC nor
any 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 FFELP LOAN ACQUISITION CERTIFICATE
This Updating Eligible FFELP Loan Acquisition Certificate is submitted
pursuant to the provisions of Section 4.2 of the Indenture of Trust, dated as of
____________ 1, 1999 (as amended and supplemented from time to time in
accordance with its terms, the "Indenture"), between Education Loans
Incorporated (the "Corporation") and U.S. 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 FFELP 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 FFELP Loans. With
respect to the Eligible FFELP Loans so acquired, the Corporation hereby
certifies as follows:
1. The Eligible FFELP 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 E
Addressed to Trustee
ELIGIBLE ALTERNATIVE LOAN ACQUISITION CERTIFICATE
This Eligible Alternative Loan Acquisition Certificate is submitted
pursuant to the provisions of Section 4.2 of the Indenture of Trust, dated as of
____________ 1, 1999 (as amended and supplemented from time to time in
accordance with its terms, the "Indenture"), between Education Loans
Incorporated (the "Corporation") and U.S. 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 SLFC the amounts specified in
Schedule A hereto 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 Alternative Loans. With
respect to the Eligible Alternative Loans so to be acquired, the Corporation
hereby certifies as follows:
1. Each Eligible Alternative Loans to be acquired (the "Acquired Eligible
Loans") is described, including the Principal Balance thereof, on Schedule B
hereto.
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 SLFC relating thereto;
(b) with respect to each Acquired Eligible Loan, the original
promissory note relating thereto, endorsed as required by the Student Loan
Purchase Agreement;
(c) with respect to each Acquired Eligible Loan, the amount to be
deposited in the Alternative Loan Guarantee Fund with respect thereto, as
required by the Indenture;
(d) a copy of the opinion of counsel for SLFC referred to in the
related Student Loan Purchase Agreement;
E-1
<PAGE>
(e) an opinion of Counsel to the Corporation specifying each action
necessary to perfect a security interest in all Eligible Alternative Loans
to be acquired by the Corporation pursuant to the Student Loan Purchase
Agreement in favor of the Trustee;
(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, if any, 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 the Student Loan Purchase Agreement relating to the Acquired
Eligible Loans, and, to the best knowledge of the Corporation, SLFC is not in
default under the 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 Agreement
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.
E-2
<PAGE>
WITNESS my hand this _____ day of _______________, _____.
EDUCATION LOANS INCORPORATED
By
---------------------------------
Its
------------------------------
E-3
<PAGE>
Exhibit 4.2
================================================================================
FIRST SUPPLEMENTAL INDENTURE OF TRUST
between
EDUCATION LOANS INCORPORATED
and
U.S. BANK NATIONAL ASSOCIATION
as Trustee
------------------------------
Dated as of __________ 1, 1999
------------------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION> Page
----
<S> <C> <C>
PARTIES .......................................................................................... 1
RECITALS .......................................................................................... 1
Section 1. Definitions............................................................................... 1
Section 2. Authorization and Terms of Series 1999-1 Notes............................................ 14
Section 3. Interest Payable on Series 1999-1 Notes................................................... 17
Section 4. Determining the Series 1999-1 Senior Note Auction Rate.................................... 24
Section 5. Determination of Payment Defaults and Payment of
Auction Agent and Broker-Dealer Fees...................................................... 34
Section 6. Calculation of Maximum Auction Rate, All Hold
Rate, Net Loan Rate, One-Month LIBOR, Three-Month
LIBOR and Non-Payment Rate................................................................ 34
Section 7. Notification of Rates, Amounts and Payment Dates.......................................... 35
Section 8. Auction Agent............................................................................. 36
Section 9. Broker-Dealers............................................................................ 37
Section 10. Changes in Auction Period or Periods...................................................... 37
Section 11. Changes in the Auction Date............................................................... 38
Section 12. Additional Provisions Regarding the Series 1999-1 Senior
Note Interest Rate........................................................................ 39
Section 13. Qualifications of Market Agent............................................................ 40
Section 14. Conversion of Series 1999-1 Senior Note Auction Rate and
Auction Period on the Series 1999-1 Senior Notes to a
New Interest Period....................................................................... 40
Section 15. Mandatory Tender and Purchase of Series 1999-1 Senior Notes
in connection with Conversion to a New Interest Period.................................... 42
Section 16. Remarketing Agent Notes................................................................... 44
Section 17. Purposes of Issuance of Series 1999-1 Notes............................................... 45
Section 18. Deposit of Series 1999-1 Note Proceeds.................................................... 45
Section 19. Redemption of Series 1999-1 Notes......................................................... 45
Section 20. Book-Entry Series 1999-1 Notes ........................................................... 52
Section 21. Series 1999-1 Accounts and Subaccounts.................................................... 55
Section 22. Purchase of Eligible Loans From Series 1999-1 Acquisition Account and
Series 1999-1 Surplus Subaccount.......................................................... 56
Section 23. Limitation on Costs of Issuance, Administrative Expenses and Note Fees.................... 57
Section 24. Proceeds of Sales of Certain Student Loans To Be Deposited in the
Acquisition Fund.......................................................................... 57
Section 25. Limitation on Acquisition of Consolidation Loans and Special Program
Loans..................................................................................... 57
Section 26. Notice Regarding Servicing Agreements .................................................... 58
Section 27. Servicing Review.......................................................................... 58
Section 28. Certain Findings, Determinations and Designations......................................... 62
Section 29. Governing Law............................................................................. 64
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Section 30. Section Headings; Table of Contents....................................................... 64
Section 31. Severability.............................................................................. 65
Section 32. Counterparts.............................................................................. 65
Section 33. Effect of First Supplemental Indenture.................................................... 65
SIGNATURES .......................................................................................... 66
Exhibit A--Form of Series 1999-1 Senior Notes (prior to Conversion Date)............................... A-1
Exhibit B--Form of Series 1999-1C Notes................................................................ B-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--List of Student Loan Purchase Agreements .................................................. H-1
</TABLE>
-ii-
<PAGE>
THIS FIRST SUPPLEMENTAL INDENTURE OF TRUST, dated as of ____________ 1,
1999, between EDUCATION LOANS INCORPORATED, a corporation duly organized and
existing under the laws of the State of Delaware (the "Corporation"), and U.S.
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 (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 three series of Notes in the respective aggregate principal
amounts of $_______ (the "Series 1999-1A Notes") and $________ (the "Series
1999-1B Notes"), each of which will be a series of Class A Notes, and
$__________ (the "Series 1999-1C Notes," and, together with the Series 1999-1A
Notes and the Series 1999-1B Notes, the "Series 1999-1 Notes"), 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 1999-1 Notes, all as more fully
set forth herein; and
WHEREAS, the Corporation also desires, at this time, to amend certain
provisions of the Original Indenture in conjunction with the issuance of the
Series 1999 Notes; and
WHEREAS, the execution and delivery of this First Supplemental Indenture
and the issuance of the Series 1999-1 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
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:
"All Hold Rate" shall mean, with respect to a series of Series 1999-1
Senior Notes, One-Month LIBOR less .___%.
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<PAGE>
"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.
"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 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 1999-1A
Notes, _______________, and with respect to the Series 1999-1B Notes,
__________________, and, thereafter, with respect to each such series of Series
1999-1 Senior Notes, the Business Day immediately preceding the first day of
each Auction Period for such series, other than:
(A) an Auction Period which commences on a Conversion Date;
(B) an Auction Period commencing after the ownership of such series is no
longer maintained in Book-Entry Form by the Securities Depository;
(C) an Auction Period commencing after and during the continuance of a
Payment Default; or
(D) 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 the Series
1999-1A Notes and the Series 1999-1B Notes during which time the Series 1999-1
Senior Note Auction Rate is determined pursuant to Section 4 hereof, which
Auction Period (after the Initial Interest Period for each such series)
initially shall consist generally of 28 days, as the same may be adjusted
pursuant to Section 10 hereof.
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"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.
"Authorized Denominations" shall mean (i) with respect to the Series 1999-1
Senior Notes, $100,000 and any integral multiple thereof, and (ii) with respect
to the Series 1999-1C Notes, $5,000 and any integral multiple thereof.
"Available Series 1999-1A Notes" or "Available Series 1999-1B 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) hereof.
"Bidder" shall have the meaning ascribed to such term in Section 4(a)(i)
hereof.
"Bond Equivalent Yield--91-Day T-Bill" shall mean, in respect of any
security the rate for which is quoted in The Wall Street Journal on a bank
discount basis, a yield (expressed as a percentage) calculated in accordance
with the following formula and rounded up to the nearest .01%:
Bond Equivalent Yield = Q x N x 100
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360 - (91 x Q)
where "Q" refers to the per annum rate for the security quoted on a bank
discount basis and expressed as a decimal, and "N" refers to 365 or 366 (days),
as the case may be.
"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 book entry is the record that identifies the owners of beneficial interests
in that principal and interest.
"Broker-Dealer" shall mean Salomon Smith Barney Inc. or any other broker or
dealer (each as defined in the Securities Exchange Act of 1934, as amended),
commercial bank or other entity permitted by law to perform the functions
required of a Broker-Dealer set forth in the Auction Procedures that (a) is a
Participant (or an affiliate of a Participant), (b) has been
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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 shall be in substantially the form of the Broker-Dealer Agreement,
dated as of _________ 1, 1999, between Bankers Trust Company, as Auction Agent,
and Salomon 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 and (iii) The New York Stock Exchange is not closed. The Trustee shall
provide to the Auction Agent on the Closing Date, and on each _______________ 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 Series 1999-1 Senior
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
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 Series 1999-1C 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
Series 1999-1C 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 and in the Series 1999-1 Notes shall
not include, within the meanings of such words, any Carry-Over Amount or any
interest accrued on any Carry-Over Amount.
"Closing Cash Flow Projection" shall mean the Cash Flow Projection
delivered in conjunction with the issuance of the Series 1999-1 Notes.
"Closing Date" shall mean, with respect to the Series 1999-1 Notes,
______________, 1999, the date of initial issuance and delivery of the Series
1999-1 Notes hereunder.
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"Conversion" shall mean the conversion from time to time of the Series
1999-1 Senior Note Interest Rate on a series of the Series 1999-1 Senior Notes
from a Series 1999-1 Senior Note Interest Rate calculated on the basis of one
Interest Period to one calculated or fixed, as the case may be, on the basis of
another Interest Period pursuant to the provisions of this First Supplemental
Indenture, excluding, however, any Auction Period Adjustment; provided that the
period during which the Series 1999-1 Senior Note Interest Rate on a series of
the Series 1999-1 Senior Notes shall be calculated on the basis of any such
other Interest Period shall be not less than thirty (30) days.
"Conversion Date" shall mean the date on which a Conversion and the new
Series 1999-1 Senior Note Interest Rate and Interest Period are effective, which
date must be a regularly scheduled Interest Payment Date with respect to the
applicable series of Series 1999-1 Senior Notes.
"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 Series 1999-1 Senior 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 Series 1999-1 Senior
Note Auction 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 the Series 1999-1C Notes as to which, as of the
first day of such Interest Period, there is any unpaid Carry-Over Amount, an
amount equal to the lesser of (a) interest computed on the principal balance of
the Series 1999-1C Notes in respect of such Interest Period at a per annum rate
equal to the excess, if any, of the Net Loan Rate over the Series 1999-1C
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 Series 1999-1 Senior Note Auction Rate, in the
case of a series of Series 1999-1 Senior Notes, or (2) the Series 1999-1C
LIBOR-Based Rate, in the case of the Series 1999-1C 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 Series 1999-1 Senior Notes.
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"Existing Holder Registry" shall mean the registry of Persons who are
owners of the Series 1999-1 Senior 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.
"Initial Auction Agent" shall mean Bankers Trust Company, a New York
banking corporation, its successors and assigns.
"Initial Auction Agent Agreement" shall mean the Auction Agent Agreement,
dated as of ___________ 1, 1999, 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 Series 1999-1
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 1999-1A Notes, _________, (ii) with respect to the Series 1999-1B Notes,
___________, and (iii) with respect to the Series 1999-1C Notes, ______________.
"Interest Payment Date" shall mean (i) each regularly scheduled interest
payment date on the Series 1999-1 Notes, which shall be (a) with respect to a
series of Series 1999-1 Senior Notes, (1) so long as such series bears interest
at a Series 1999-1 Senior Note Auction Rate, the Business Day immediately
following the expiration of the Initial Interest Period for such series and each
related Auction Period thereafter, and (2) upon Conversion of such series from
an Auction Period to a new Interest Period, the date or dates set forth in the
Supplemental Indenture executed in connection with such Conversion, and (b) with
respect to the Series 1999-1C Notes, the first day of each calendar month,
commencing _________________; or (ii) with respect to the payment of interest
upon redemption or acceleration of a Series 1999-1 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 Series 1999-1
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 (i) with respect to a series of
Series 1999-1 Senior Notes, the date on which a Series 1999-1 Senior Note
Interest Rate for such series is effective, which shall be (a) so long as such
series bears interest at a Series 1999-1 Senior Note Auction Rate, the date of
commencement of each Auction Period, and (b) if the Interest Period for such
series has been or is being converted from an Auction Period to a new Interest
Period,
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the date set forth in the Supplemental Indenture executed in connection with the
Conversion of such series, and (ii) with respect to the Series 1999-1C Notes,
the date on which the Series 1999-1C Note Interest Rate is effective, which
shall be each Interest Payment Date.
"Interest Rate Determination Date" shall mean (i) with respect to a series
of Series 1999-1 Senior Notes, (a) so long as such series bears interest at a
Series 1999-1 Senior Note Auction Rate, 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 (b) if the Interest Period for such
series has been or is being converted from an Auction Period to a new Interest
Period, the date set forth in the Supplemental Indenture executed in connection
with the Conversion of such series, and (ii) with respect to the Series 1999-1C
Notes, the second Business Day immediately preceding the date of commencement of
an Interest Period (other than the Initial Interest Period).
"London Business Day" shall mean any business day on which dealings in
deposits in United States dollars are transacted in the London interbank market.
"Market Agent" shall mean Salomon 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, with respect to a series of Series
1999-1 Senior Notes: (i) for Auction Periods of thirty-five (35) days or less,
either (a) One-Month LIBOR plus ___% (if the ratings assigned by Moody's and
Fitch to the Series 1999-1 Senior Notes are at least "Aa3" and "AA-,"
respectively), (b) One-Month LIBOR plus ___% (if any one of the ratings assigned
by Moody's and Fitch to the Series 1999-1 Senior Notes is less than "Aa3" or
"AA-," respectively, but is at least "A") or (c) One-Month LIBOR plus ___% (if
any one of the ratings assigned by Moody's and Fitch to the Series 1999-1 Senior
Notes is less than "A"); or (ii) for Auction Periods of greater than thirty-five
(35) days, either (a) the greater of One-Month LIBOR or Three-Month LIBOR, plus,
in either case, ___% (if the ratings assigned by Moody's and Fitch to the Series
1999-1 Senior Notes are at least "Aa3" and "AA-," respectively), (b) the greater
of One-Month LIBOR or Three-Month LIBOR, plus, in either case, ___% (if any one
of the ratings assigned by Moody's and Fitch to the Series 1999-1 Senior Notes
is less than "Aa3" or "AA-," respectively, but is at least "A") or (c) the
greater of One-Month LIBOR or Three-Month LIBOR, plus, in either case, ___% (if
any one of the ratings assigned by Moody's and Fitch to the Series 1999-1 Senior
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 Series 1999-1
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 ___% 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 Series 1999-1 Notes,
that rate of interest per 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
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preceded the Interest Rate Adjustment Date with respect to which such Net Loan
Rate is being computing.
"Non-Payment Rate" shall mean, with respect to a series of Series 1999-1
Senior Notes, One-Month LIBOR plus ___%.
"Note Registrar" shall mean, with respect to the Series 1999-1 Notes, the
Trustee.
"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 Series 1999-1
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 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
_____________, 1, 1999, between the Corporation and the Trustee, as originally
executed.
"Participant" shall mean a member of, or participant in, the Securities
Depository.
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"Payment Default" shall mean, with respect to a series of Series 1999-1
Senior 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.
"Paying Agent" shall mean, with respect to the Series 1999-1 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 1999-1 Notes is payable.
"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 Series 1999-1 Senior Notes (or, in the case of an Existing Holder
thereof, an additional principal amount of Series 1999-1 Senior Notes).
"Regular Record Date" shall mean (i) with respect to any regularly
scheduled Interest Payment Date occurring with respect to a series of Series
1999-1 Senior Notes, (a) so long as such series bears interest at a Series
1999-1 Senior Note Auction Rate, the last Business Day preceding such Interest
Payment Date, and (b) upon Conversion of such series from an Auction Period to a
new Interest Period, the date set forth in the Supplemental Indenture executed
in connection with such Conversion, and (ii) with respect to any regularly
scheduled Interest Payment Date occurring with respect to the Series 1999-1C
Notes, the last Business Day preceding such Interest Payment Date.
"Remarketing Agent" shall mean a remarketing agent designated under a
Remarketing Agreement.
"Remarketing Agreement" shall mean any remarketing agreement hereafter
entered into by the Corporation and a remarketing agent with respect to, and in
connection with, the Conversion of a series of the Series 1999-1 Senior Notes,
in each case as originally executed and as from time to time amended or
supplemented in accordance with the terms thereof.
"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).
"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
1999-1 Notes or (ii) the Corporation discontinues use of the Securities
Depository pursuant to Section 20(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 1999-1 Notes and which is
selected by the Corporation with the consent of the Trustee.
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"Sell Order" shall have the meaning ascribed to such term in Section
4(a)(i) hereof.
"Series 1999-1 Notes" shall mean the Series 1999-1A Notes, the Series
1999-1B Notes and the Series 1999-1C Notes.
"Series 1999-1 Senior Note Auction Rate" shall mean the rate of interest
per annum borne by a series of the Series 1999-1 Senior Notes for each Auction
Period and determined in accordance with the provisions of Sections 4 through 12
hereof; provided, however, that in the event of a Payment Default, the Series
1999-1 Senior Note Auction Rate shall equal the Non-Payment Rate; and provided,
further, that such Series 1999-1 Senior Note Auction Rate shall in no event
exceed the Series 1999-1 Senior Note Auction Rate Limitation.
"Series 1999-1 Senior Note Auction Rate Limitation" shall mean 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 Series 1999-1 Senior
Notes.
"Series 1999-1 Senior Note Initial Interest Rate" shall mean ___% for the
Series 1999-1A Notes and ___% for the Series 1999-1B Notes.
"Series 1999-1 Senior Note Interest Rate" shall mean the rate of interest
per annum borne by a series of Series 1999-1 Senior Notes, as of the time
referred to, including, without limitation, the Series 1999-1 Senior Note
Initial Interest Rate, the Series 1999-1 Senior Note Auction Rate and any other
Series 1999-1 Senior Note Variable Rate or fixed rate of interest per annum that
upon Conversion may be borne by a series of Series 1999-1 Senior Notes.
"Series 1999-1 Senior Note Variable Rate" shall mean the variable rate of
interest per annum, including the Series 1999-1 Senior Note Initial Interest
Rate, borne by a series of Series 1999-1 Senior Notes during the Initial
Interest Period for such series and each Interest Period thereafter, as such
rate of interest is determined in accordance with the provisions of Sections 4
through 15 hereof, or, in the event that such series is converted to a new
Interest Period and bears interest at a new variable rate of interest per annum,
the variable rate of interest per annum for such series determined in accordance
with the provisions of the Supplemental Indenture executed in connection with
such Conversion.
"Series 1999-1 Senior Notes" shall mean the Series 1999-1A Notes and the
Series 1999-1B Notes.
"Series 1999-1A 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 "Student Loan Asset-Backed Notes, Senior Series 1999-1A."
"Series 1999-1B 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 "Student Loan Asset-Backed Notes, Senior
Series 1999-1B."
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"Series 1999-1C Note Initial Interest Rate" shall mean ___%.
"Series 1999-1C Note Interest Rate" shall mean the rate of interest per
annum, including the Series 1999-1C Note Initial Interest Rate, borne by the
Series 1999-1C Notes during the Initial Interest Period therefor and each
Interest Period thereafter, as such rate of interest is determined in accordance
with the provisions of Section 3(B) hereof.
"Series 1999-1C Note LIBOR-Based Rate" shall mean the variable rate of
interest per annum determined with respect to the Series 1999-1C Notes on the
basis of One-Month LIBOR plus the Series 1999-1C Note Spread, as such rate of
interest is determined in accordance with the provisions of Section 3(B) hereof.
"Series 1999-1C Note Spread" shall mean .___%.
"Series 1999-1C 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 "Student Loan Asset-Backed Notes, Subordinate Series
1999-1C."
"Special Redemption Account Requirement" shall mean an amount, as of any
Monthly Payment Date, with respect to the Series 1999-1 Notes, equal to $0.00.
"Submission Deadline" shall mean 1:00 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 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.
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"Sufficient Bids" shall have the meaning ascribed to such term in Section
4(c)(i) hereof.
"Three-Month LIBOR" shall mean, with respect to a series of Series 1999-1
Senior Notes, the rate of interest per annum equal to the rate per annum at
which United States dollar deposits having a maturity of three months 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, Three-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, Three-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 three
months are offered to prime banks in the London interbank market by four major
banks in the London interbank market selected by (i) the 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 of such
banks to provide a quotation of its rate. If at least two quotations are
provided, Three-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, Three-Month LIBOR will be the arithmetic mean (rounded
upwards, if necessary, to 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
three months and in a principal amount equal to an amount of not less than U.S.
$1,000,000 and that is representative for a single transaction in such market at
such time; provided, however, that if the banks selected as aforesaid are not
quoting as mentioned in this sentence, Three-Month LIBOR will be the Three-Month
LIBOR in effect for the immediately preceding Interest Period.
Section 2. Authorization and Terms of Series 1999-1 Notes.
There is hereby created and there shall be (1) a series of Class A Notes
entitled "Student Loan Asset-Backed Notes, Senior Series 1999-1A," (2) a series
of Class A Notes entitled "Student Loan Asset-Backed Notes, Senior Series
1999-1B," and (3) a series of Class B Notes entitled "Student Loan Asset-Backed
Notes, Subordinate Series 1999-1C." The aggregate principal amount of the Series
1999-1A 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 1999-1B 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 1999-1C Notes that may
be authenticated and delivered and Outstanding under the Indenture is limited to
and shall not exceed $_________.
The Series 1999-1A Notes shall consist of Term Notes with a Stated Maturity
on August 1, 2020.
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The Series 1999-1B Notes shall consist of Term Notes with a Stated Maturity
on ____________.
The Series 1999-1C Notes shall consist of Term Notes with a Stated Maturity
on ___________.
Each series of Series 1999-1 Senior Notes shall bear interest at a rate per
annum equal to the applicable Series 1999-1 Senior Note Interest Rate (which,
unless and until a Conversion occurs, shall be the Series 1999-1 Senior Note
Auction 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 1999-1C Notes shall bear interest at a rate per annum equal to
the Series 1999-1C 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 1999-1 Notes shall be issued as fully registered Notes without
coupons in Authorized Denominations.
The Series 1999-1 Notes shall be dated as provided in Section 3.9 of the
Indenture and shall bear interest from their date until payment of principal has
been made or duly provided for. The date of original issue of the Series 1999-1
Notes shall be the Closing Date. The Series 1999-1 Notes of each series shall be
numbered in such manner as the Note Registrar shall determine.
Interest on each series of Series 1999-1 Senior Notes shall, unless and
until a Conversion occurs, 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, on and
after the Conversion Date, if any, be computed in the manner set forth in the
Supplemental Indenture executed in connection with the Conversion, and shall be
payable on each regularly scheduled Interest Payment Date with respect to such
series prior to the Maturity thereof and at the Maturity thereof. The interest
payable on each Interest Payment Date for each series of the Series 1999-1
Senior Notes shall be that interest which has accrued through the last day of
the last complete Interest Period immediately preceding the Interest Payment
Date or, in the case of the Maturity of such series, the last day preceding the
date of such Maturity. The applicable Series 1999-1 Senior 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 1999-1C 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 thereto prior to the Maturity thereof and at the Maturity
thereof. The interest payable on each Interest Payment Date for the Series
1999-1C Notes shall be that interest which has accrued through the last day of
the last complete Interest Period immediately preceding the Interest Payment
Date or, in the case of the Maturity thereof, the last day preceding the date of
such Maturity. The Series 1999-1C Note
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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 principal of and premium, if any, on the Series 1999-1 Notes, together
with interest payable on the Series 1999-1 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 20 hereof, presentation and surrender of such
Series 1999-1 Notes at the Principal Office of the Trustee, as Paying Agent with
respect to the Series 1999-1 Notes, or a duly appointed successor Paying Agent.
Interest on the Series 1999-1 Notes shall be payable on each regularly scheduled
Interest Payment Date, except as otherwise provided in Section 20 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 1999-1 Note the Holder of which is the Holder of Series
1999-1 Notes in the aggregate principal amount of $1,000,000 or more, 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 1999-1 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 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 and interest on the Series 1999-1 Notes
shall be made in lawful money of the United States of America.
The Series 1999-1 Notes are subject to redemption prior to their Stated
Maturities upon the terms and conditions and at the Redemption Prices specified
in Section 19 hereof. The Series 1999-1 Senior Notes are also subject to
mandatory tender on any Conversion Date as hereinafter provided.
Subject to the provisions of the Indenture, the Series 1999-1 Senior Notes
shall, prior to the Conversion Date, if any, be in substantially the form set
forth in Exhibit A hereto, and, on and after the Conversion Date, be in
substantially the form set forth in the Supplemental Indenture executed in
connection with the Conversion, in each case 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 1999-1C Notes shall
be in substantially the form set forth in Exhibit B 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.
Section 3. Interest Payable on Series 1999-1 Notes. (A) The Initial
Interest Rate Adjustment Dates for the Series 1999-1A Notes and the Series
1999-1B Notes shall be ___________ and ____________, respectively.
During the Initial Interest Period, each series of Series 1999-1 Senior
Notes shall bear interest at the Series 1999-1 Senior Note Initial Interest Rate
for such series. Thereafter, until Conversion, if any, and except with respect
to an Auction Period Adjustment, the Series 1999-1 Senior Notes shall bear
interest at a Series 1999-1 Senior Note Auction Rate based on a 28-day Auction
Period, as determined pursuant to this Section 3(A) and Sections 4 through 12
hereof.
The Series 1999-1 Senior Note Auction Rate to be borne by each series of
Series 1999-1 Senior Notes after such Initial Interest Period for each Auction
Period until Conversion, if any, or an Auction Period Adjustment, if any, shall
be determined as hereinbelow described. Each such Auction Period shall commence
on and include the first Business Day following the expiration of the
immediately preceding Auction Period (or other Interest Period, in the event of
Conversion from another Interest Period to an 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 Series 1999-1
Senior Notes, such Auction Period shall commence on the Initial Interest Rate
Adjustment Date for such series. The Series 1999-1 Senior Note Auction Rate on
each series of Series 1999-1 Senior Notes for each Auction Period shall be the
lesser of (i) the Net Loan Rate in effect for such Auction Period and (ii) 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 Series 1999-1 Senior Note Auction
Rate on such series for the next succeeding Auction Period shall be the Net Loan
Rate.
Notwithstanding the foregoing:
(a) if the ownership of a series of Series 1999-1 Senior Notes is no
longer maintained in Book-Entry Form, the Series 1999-1 Senior Note Auction
Rate on such series for any Interest Period commencing after the delivery
of definitive notes representing such series pursuant to Section 20 hereof
shall equal the lesser of (i) the Maximum Auction Rate and (ii) the Net
Loan 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 Series 1999-1 Senior Notes, the Series 1999-1 Senior Note Auction Rate
on such series for the
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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; or
(c) if a proposed Conversion of a series of Series 1999-1 Senior Notes
under Section 14 hereof shall have failed, as provided in said Section 14,
the Series 1999-1 Senior Note Auction Rate on such series shall be equal to
the lesser of (i) the Maximum Auction Rate and (ii) the Net Loan Rate as of
the failed Conversion Date for the Interest Period commencing on such date.
In accordance with Section 4(c)(ii) hereof, the Auction Agent shall
promptly give written notice to the Trustee and the Corporation of each Series
1999-1 Senior Note Auction Rate (unless the Series 1999-1 Senior Note Auction
Rate is the Non-Payment Rate) and either the Auction Rate or the Net Loan Rate,
as the case may be, when such rate is not the Series 1999-1 Senior Note Auction
Rate, applicable to each series of Series 1999-1 Senior Notes. The Trustee shall
notify the Holders of Series 1999-1 Senior Notes of the Series 1999-1 Senior
Note Auction Rate applicable to each such series for each Auction Period on the
second Business Day of such Auction Period.
In the event that there are no Business Days in any week during which the
Auction Period for a series of Series 1999-1 Senior Notes would otherwise be
scheduled to expire, the expiration date and Interest Payment Date for such
Auction Period then in effect, and the Interest Rate Determination Date and
commencement date for the immediately following Interest Period for such series,
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 Series 1999-1 Senior Notes.
Notwithstanding any other provision of the Series 1999-1 Senior Notes or
this First Supplemental Indenture, and except for the occurrence of a Payment
Default, interest payable on each series of the Series 1999-1 Senior Notes for
an Auction Period shall never exceed for such Auction Period the amount of
interest payable at the Net Loan Rate (subject to the Series 1999-1 Senior Note
Auction Rate Limitation) in effect for such Auction Period.
If the Auction Rate for a series of Series 1999-1 Senior Notes is greater
than the Net Loan Rate, then the Series 1999-1 Senior Note Auction Rate
applicable to such series for that Interest Period will be the Net Loan Rate. If
the Series 1999-1 Senior Note Auction Rate for a series of Series 1999-1 Senior
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 Series 1999-1 Senior 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
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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 Series 1999-1 Senior
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 Series 1999-1 Senior 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 Series 1999-1 Senior 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 1999-1 Senior 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 Series 1999-1 Senior Note (and all
accrued interest thereon) that remains unpaid shall be cancelled and no
Carry-Over Amount (or interest accrued thereon) shall be paid with respect to
such Series 1999-1 Senior Note), (i) the Carry-Over Amount (and interest accrued
thereon) shall be paid by the Trustee on such Series 1999-1 Senior Note on the
earlier of (a) the Conversion Date, if any, and, if then so paid, shall be paid
in full, or (b) 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 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 cancelled.
The Carry-Over Amount (and interest accrued thereon) for a series of Series
1999-1 Senior Notes shall be paid by the Trustee on Outstanding Series 1999-1
Senior Notes of such series on the earlier of (a) the Conversion Date, if any,
and, if then so paid, shall be paid in full, or (b) 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 Series 1999-1
Senior Note which is unpaid as of an Interest Payment Date, which Series 1999-1
Senior 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
(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 cancelled
with respect to such Series
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1999-1 Senior 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 earlier of (a)
the Conversion Date, if any, and, if then so paid, shall be paid in full, or (b)
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 1999-1 Senior Note, the
Trustee shall give written notice in the manner set forth in the immediately
preceding paragraph to the Holder of such Series 1999-1 Senior Note of the
Carry-Over Amount remaining unpaid on such Series 1999-1 Senior Note.
The Interest Payment Date on which any Carry-Over Amount (or any interest
accrued thereon) for a series of Series 1999-1 Senior 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 Series 1999-1 Senior
Notes on an Interest Payment Date.
In the event that the Auction Agent no longer determines, or fails to
determine, when required, the Series 1999-1 Senior Note Auction Rate with
respect to a series of Series 1999-1 Senior Notes, or, if for any reason, such
manner of determination shall be held to be invalid or unenforceable, the Series
1999-1 Senior Note Auction Rate for the next succeeding Interest Period (which
Interest Period shall be an Auction Period for such series of Series 1999-1
Senior Notes) shall be the Net Loan Rate as determined by the Auction Agent for
such next succeeding Auction Period, and if the Auction Agent shall fail or
refuse to determine such Net Loan Rate, 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.
(B) The Initial Interest Rate Adjustment Date for the Series 1999-1C Notes
shall be __________.
During the Initial Interest Period, the Series 1999-1C Notes shall bear
interest at the Series 1999-1C Note Initial Interest Rate. The interest rate to
be borne by the Series 1999-1C 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 Series 1999-1C Note Spread (which
is herein referred to as the "Series 1999-1C 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.
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Notwithstanding any other provision of the Series 1999-1C Notes or this
First Supplemental Indenture, interest payable on the Series 1999-1C 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 Series 1999-1C Note LIBOR-Based Rate determined with respect to a
given Interest Rate Determination Date is greater than the Net Loan Rate, then
the Series 1999-1C Note Interest Rate for the related Interest Period will be
the Net Loan Rate. If the Series 1999-1C Note Interest Rate for any Interest
Period is the Net Loan Rate, the Trustee shall determine the Carry-Over Amount,
if any, with respect to the Series 1999-1C Notes for such Interest Period. Each
such Carry-Over Amount shall bear interest calculated at a rate equal to the
Series 1999-1C 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 Series 1999-1C 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 Series 1999-1C 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 such Holder's Series 1999-1C
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 1999-1C 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 Series 1999-1C Note
(and all accrued interest thereon) that remains unpaid shall be cancelled and no
Carry-Over Amount (or interest accrued thereon) shall be paid with respect to
such Series 1999-1C Note), (i) the Carry-Over Amount (and interest accrued
thereon) shall be paid by the Trustee on such Series 1999-1C 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 Series 1999-1C Note LIBOR-Based Rate
until such Carry-Over Amount is paid in full or is cancelled.
The Carry-Over Amount (and interest accrued thereon) for the Series 1999-1C
Notes shall be paid by the Trustee on Outstanding Series 1999-1C Notes 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 in the Surplus Account are
available on such Interest Payment Date for transfer to the
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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) which is
unpaid as of an Interest Payment Date with respect to any Series 1999-1C Note,
which Series 1999-1C 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
clauses (a) and (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 cancelled with respect to such Series 1999-1C 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 1999-1C Note,
the Trustee shall give written notice in the manner set forth in the immediately
preceding paragraph to the Holder of such Series 1999-1C Note of the Carry-Over
Amount remaining unpaid on such Series 1999-1C Note.
The Interest Payment Date on which any Carry-Over Amount (or any interest
accrued thereon) for the Series 1999-1C 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 Series 1999-1C Notes on an Interest Payment Date.
In the event that the Trustee no longer determines, or fails to determine,
when required, the Series 1999-1C Note LIBOR-Based Rate with respect to an
Interest Rate Determination Date, or if, for any reason, such manner of
determination shall be held to be invalid or unenforceable, the Series 1999-1C
Note LIBOR-Based Rate for the related Interest Period shall be the Net Loan Rate
as determined by or on behalf of the Corporation with respect to such 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 Series 1999-1C 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 Series 1999-1C Notes to
which such Series 1999-1C 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 the
Series 1999-1C Notes (including interest calculated as provided herein, plus any
other amounts that constitute interest on the Series 1999-1C Notes under
applicable law, which are contracted for,
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charged, reserved, taken or received pursuant to the Series 1999-1C Notes or
related documents) calculated from the date of issuance of the Series 1999-1C
Notes through any subsequent day during the term of the Series 1999-1C Notes or
otherwise prior to payment in full of the Series 1999-1C Notes exceed the amount
permitted by applicable law. If the applicable law is ever judicially
interpreted so as to render usurious any amount called for under the Series
1999-1C Notes or related documents or otherwise contracted for, charged,
reserved, taken or received in connection with the Series 1999-1C Notes, or if
the redemption or acceleration of the Maturity of the Series 1999-1C Notes
results in payment to or receipt by the Holder or any former Holder of the
Series 1999-1C Notes of any interest in excess of that permitted by applicable
law, then, notwithstanding any provision of the Series 1999-1C Notes or related
documents to the contrary, all excess amounts theretofore paid or received with
respect to the Series 1999-1C Notes shall be credited on the principal balance
of the Series 1999-1C Notes (or, if the Series 1999-1C Notes have been paid or
would thereby be paid in full, refunded by the recipient thereof), and the
provisions of the Series 1999-1C Notes and related documents shall automatically
and immediately be deemed reformed and the amounts thereafter collectible
hereunder and thereunder reduced, without the necessity of the execution of any
new document, so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for under the Series 1999-1C
Notes and under the related documents.
Section 4. Determining the Series 1999-1 Senior Note Auction Rate. By
purchasing Series 1999-1 Senior Notes, whether in an Auction or otherwise, each
purchaser of the Series 1999-1 Senior 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 Series 1999-1 Senior 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 Series 1999-1 Senior Notes is
maintained in Book-Entry Form by the Securities Depository, an Existing Holder
may sell, transfer or otherwise dispose of Series 1999-1 Senior Notes of such
series only pursuant to a Bid or Sell Order placed in an Auction or otherwise
sell, transfer or dispose of Series 1999-1 Senior 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. Prior to a Conversion Date, 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 Series 1999-1 Senior Notes):
(a) (i) Prior to the Submission Deadline on each Auction Date;
(A) each Existing Holder of Series 1999-1 Senior Notes may submit
to a Broker-Dealer by telephone or otherwise any information as to:
(1) the principal amount of Outstanding Series 1999-1 Senior
Notes, if any, owned by such Existing Holder which such Existing
Holder
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desires to continue to own without regard to the Series 1999-1
Senior Note Auction Rate for the next succeeding Auction Period;
(2) the principal amount of Outstanding Series 1999-1 Senior
Notes, if any, which such Existing Holder offers to sell if the
Series 1999-1 Senior Note Auction 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 Series 1999-1 Senior
Notes, if any, owned by such Existing Holder which such Existing
Holder offers to sell without regard to the Series 1999-1 Senior
Note Auction Rate for the next succeeding Auction Period; and
(B) one or more Broker-Dealers may contact Potential Holders to
determine the principal amount of Series 1999-1 Senior Notes which
each Potential Holder offers to purchase, if the Series 1999-1 Senior
Note Auction 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 Series 1999-1 Senior
Notes specified in such Bid if the Series 1999-1 Senior Note
Auction 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 Series 1999-1 Senior Notes to be determined as set
forth in Section 4(d)(i)(D) hereof, if the Series 1999-1 Senior
Note Auction Rate determined as 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 Series 1999-1 Senior Notes to be determined as set
forth in Section 4(d)(ii)(C) hereof, if the rate specified
therein shall be higher than the Series 1999-1 Senior Note
Auction Rate and Sufficient Bids have not been made.
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(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 Series 1999-1 Senior
Notes specified in such Sell Order; or
(2) such principal amount, or a lesser principal amount, of
Outstanding Series 1999-1 Senior 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 Series 1999-1 Senior
Notes specified in such Bid if the Series 1999-1 Senior Note
Auction 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 Series 1999-1 Senior Notes set forth in Section
4(d)(i)(E) hereof, if the Series 1999-1 Senior Note Auction 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 Series 1999-1 Senior Notes
that are the subject of such Order;
(C) to the extent that such Bidder is an Existing Holder:
(1) the principal amount of Series 1999-1 Senior Notes, if
any, subject to any Hold Order placed by such Existing Holder;
(2) the principal amount of Series 1999-1 Senior 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 Series 1999-1 Senior 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.
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(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 Series 1999-1
Senior 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 Series 1999-1 Senior 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 Series 1999-1 Senior 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 Series 1999-1 Senior Notes
owned by such Existing Holder, and if the aggregate principal amount
of Series 1999-1 Senior Notes subject to such Hold Orders exceeds the
aggregate principal amount of Series 1999-1 Senior Notes owned by such
Existing Holder, the aggregate principal amount of Series 1999-1
Senior Notes subject to each such Hold Order shall be reduced pro rata
so that the aggregate principal amount of Series 1999-1 Senior Notes
subject to such Hold Order equals the aggregate principal amount of
Outstanding Series 1999-1 Senior 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 Series 1999-1
Senior Notes owned by such Existing Holder over the aggregate
principal amount of Series 1999-1 Senior 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
Series 1999-1 Senior 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
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(4) in any such event, the amount of Outstanding Series
1999-1 Senior 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 Series
1999-1 Senior Notes owned by such Existing Holder over the aggregate
principal amount of Series 1999-1 Senior 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 Series 1999-1 Senior 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 Series
1999-1 Senior 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 Series 1999-1 Senior Notes not equal 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 Series 1999-1 Senior 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
Series 1999-1 Senior Notes over the sum of the aggregate principal
amount of Outstanding Series 1999-1 Senior Notes subject to Submitted
Hold Orders (such excess being herein referred to as the "Available
Series 1999-1 Senior Notes"), and
(B) from the Submitted Orders whether:
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(1) the aggregate principal amount of Outstanding
Series 1999-1 Senior 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
Series 1999-1 Senior 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
Series 1999-1 Senior Notes subject to Submitted Sell Orders;
(in the event such excess or such equality exists, other than because
all of the Outstanding Series 1999-1 Senior 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 Series 1999-1 Senior 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 Series 1999-1 Senior Notes which, when added to the
aggregate principal amount of Outstanding Series 1999-1 Senior Notes
to be purchased by such Potential Holders described in subclause (2)
above, would equal not less than the Available Series 1999-1 Senior
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, 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;
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(B) if Sufficient Bids do not exist (other than because all of
the Outstanding Series 1999-1 Senior 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
(C) if all Outstanding Series 1999-1 Senior 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
Series 1999-1 Senior Note Auction Rate, which rate shall be the lesser of
(a) the Auction Rate and (b) the Net Loan Rate; provided, however, that in
no event shall the Series 1999-1 Senior Note Auction Rate exceed the Series
1999-1 Senior Note Auction Rate Limitation.
(d) Existing Holders shall continue to own the principal amount of Series
1999-1 Senior Notes that are subject to Submitted Hold Orders. If the Net Loan
Rate is equal to or greater than the Bid Auction Rate and if Sufficient Bids
have been received by the Auction Agent, the Bid Auction Rate will be the Series
1999-1 Senior Note Auction 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 the Net Loan Rate is less than the Auction Rate, the Net Loan Rate will
be the Series 1999-1 Senior Note Auction Rate. If the Auction Rate and the Net
Loan Rate are both greater than the Series 1999-1 Senior Note Auction Rate
Limitation, the Series 1999-1 Senior Note Auction Rate shall be equal to the
Series 1999-1 Senior Note Auction Rate Limitation. If the Auction Agent has not
received Sufficient Bids (other than because all of the Outstanding Series
1999-1 Senior Notes are subject to Submitted Hold Orders), the Series 1999-1
Senior Note Auction Rate will be 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 the Net Loan Rate is equal
to or greater than the Bid Auction Rate (in which case the Series 1999-1
Senior Note Auction 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 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 Series 1999-1 Senior Note Auction Rate shall be
accepted, thus requiring each such Existing Holder to sell the
aggregate principal amount of Series 1999-1 Senior Notes subject to
such Submitted Bids;
(B) Existing Holders' Submitted Bids specifying any rate that is
lower than the Series 1999-1 Senior Note Auction Rate shall be
rejected, thus entitling
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each such Existing Holder to continue to own the aggregate principal
amount of Series 1999-1 Senior Notes subject to such Submitted Bids;
(C) Potential Holders' Submitted Bids specifying any rate that is
lower than the Series 1999-1 Senior Note Auction Rate shall be
accepted;
(D) Each Existing Holders' Submitted Bid specifying a rate that
is equal to the Series 1999-1 Senior Note Auction Rate shall be
rejected, thus entitling such Existing Holder to continue to own the
aggregate principal amount of Series 1999-1 Senior Notes subject to
such Submitted Bid, unless the aggregate principal amount of
Outstanding Series 1999-1 Senior Notes subject to all such Submitted
Bids shall be greater than the principal amount of Series 1999-1
Senior Notes (the "remaining principal amount") equal to the excess of
the Available Series 1999-1 Senior Notes over the aggregate principal
amount of Series 1999-1 Senior 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 Series 1999-1 Senior Notes subject to such
Submitted Bid, but only in an amount equal to the aggregate principal
amount of Series 1999-1 Senior Notes obtained by multiplying the
remaining principal amount by a fraction, the numerator of which shall
be the principal amount of Outstanding Series 1999-1 Senior 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 Series 1999-1 Senior Notes subject to such Submitted Bids
made by all such Existing Holders that specified a rate equal to the
Series 1999-1 Senior Note Auction Rate; and
(E) Each Potential Holder's Submitted Bid specifying a rate that
is equal to the Series 1999-1 Senior Note Auction Rate shall be
accepted, but only in an amount equal to the principal amount of
Series 1999-1 Senior Notes obtained by multiplying the excess of the
aggregate principal amount of Available Series 1999-1 Senior Notes
over the aggregate principal amount of Series 1999-1 Senior 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 Series 1999-1 Senior Notes
subject to such Submitted Bid and the denominator of which shall be
the sum of the principal amount of Outstanding Series 1999-1 Senior
Notes subject to Submitted Bids made by all such Potential Holders
that specified a rate equal to the Series 1999-1 Senior Note Auction
Rate.
(ii) If Sufficient Bids have not been made (other than because all of
the Outstanding Series 1999-1 Senior Notes are subject to Submitted Hold
Orders), or if the Net Loan Rate is less than the Bid Auction Rate (in
which case the Series 1999-1 Senior Note Auction Rate shall be the Net Loan
Rate), or if the Series 1999-1 Senior Note Auction Rate Limitation applies,
subject to the provisions of Section 4(d)(iv) hereof,
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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 Series 1999-1 Senior Note Auction Rate
shall be rejected, thus entitling such Existing Holders to continue to
own the aggregate principal amount of Series 1999-1 Senior Notes
subject to such Submitted Bids;
(B) Potential Holders' Submitted Bids specifying (1) any rate
that is equal to or lower than the Series 1999-1 Senior Note Auction
Rate shall be accepted and (2) any rate that is higher than the Series
1999-1 Senior Note Auction Rate shall be rejected; and
(C) each Existing Holder's Submitted Bid specifying any rate that
is higher than the Series 1999-1 Senior Note Auction 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 Series 1999-1 Senior 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 Series 1999-1
Senior Notes obtained by multiplying the aggregate principal amount of
Series 1999-1 Senior 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 Series
1999-1 Senior Notes owned by 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 Series 1999-1
Senior Notes subject to all such Submitted Bids and Submitted Sell
Orders.
(iii) If all Outstanding Series 1999-1 Senior 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 Series 1999-1 Senior 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 Series 1999-1 Senior Notes to be purchased or sold by
any Existing Holder or Potential Holder so that the principal amount of
Series 1999-1 Senior 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 (ii) of
this Section 4(d), any Potential Holder would be entitled or required to
purchase less than an Authorized Denomination of Series 1999-1 Senior
Notes, the Auction Agent shall, in such manner as in its sole discretion it
shall determine, allocate Series 1999-1 Senior Notes for purchase among
Potential Holders so that only Series 1999-1 Senior Notes in Authorized
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Denominations are purchased by any Potential Holder, even if such
allocation results in one or more of such Potential Holders not purchasing
any Series 1999-1 Senior Notes.
(e) Based on the result of each Auction, the Auction Agent shall determine
the aggregate principal amount of Series 1999-1 Senior Notes to be purchased and
the aggregate principal amount of Series 1999-1 Senior 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 Series 1999-1 Senior Notes to be
sold differs from such aggregate principal amount of Series 1999-1 Senior 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, Series 1999-1 Senior Notes.
(f) Any calculation by the Auction Agent or the Trustee, as applicable, of
the Series 1999-1 Senior Note Auction 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.
(g) Notwithstanding anything in this First Supplemental Indenture to the
contrary notwithstanding, no Auction will be held on any Auction Date hereunder
on which there are insufficient moneys in the Note Fund to pay, or otherwise
held by the Trustee under the Indenture and available to pay, the principal of
and interest due on the Series 1999-1 Senior Notes on the Interest Payment Date
immediately following such Auction Date.
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 relating to
a series of Series 1999-1 Senior Notes, whether a Payment Default has occurred
with respect to such series. 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 relating to a series of Series 1999-1 Senior Notes, 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 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.
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Section 6. Calculation of Maximum Auction Rate, All Hold Rate, Net Loan
Rate, One-Month LIBOR, Three-Month LIBOR and Non-Payment Rate. The Auction Agent
shall calculate the Net Loan Rate, the Maximum Auction Rate, the All Hold 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 Net Loan Rate,
the Maximum Auction Rate, the All Hold Rate and One-Month LIBOR or Three-Month
LIBOR, as the case may be, as provided in the Auction Agent Agreement. Upon
receipt of notice from the Trustee of a failed Conversion as described in
Sections 14 and 15 hereof, the Auction Agent shall calculate the Maximum Auction
Rate and the Net Loan Rate as of such failed Conversion Date and give notice
thereof as provided and to the parties specified in Section 2.3(c) of the
Auction Agent Agreement. If the ownership of the Series 1999-1 Senior 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 Payment Date after the delivery
of definitive Series 1999-1 Senior Notes pursuant to Section 20 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 such Payment
Default and (ii) any Interest Period commencing less than two Business Days
after the cure of any Payment Default. The Auction Agent shall determine
One-Month LIBOR or Three-Month LIBOR, as applicable, for each Interest Period
other than the first Interest Period; provided that if the ownership of the
Series 1999-1 Senior Notes is no longer maintained in Book-Entry Form, or if a
Payment Default has occurred, then the Trustee shall determine One-Month LIBOR
or Three-Month LIBOR, as applicable, for each such Interest Period. The
determination by the Trustee or the Auction Agent, as the case may be, of
One-Month LIBOR or Three-Month LIBOR, as applicable, 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 One-Month LIBOR or Three-Month LIBOR, as applicable.
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 each series of Series 1999-1 Senior Notes, the Trustee shall
determine the aggregate amounts of interest distributable on the next succeeding
Interest Payment Date to the beneficial owners of such series.
(b) Promptly after the Closing Date and after the beginning of each
subsequent Interest Period with respect to each series of Series 1999-1 Senior
Notes, and in any event at least 10 days prior to any Interest Payment Date with
respect to each series, as the case may be, the Trustee shall:
(i) confirm with the Auction Agent, so long as no Payment Default has
occurred and is continuing and the ownership of such series of Series
1999-1 Senior Notes is maintained in Book-Entry Form by the Securities
Depository, (1) the date of such next Interest Payment Date and (2) the
amount payable to the Auction Agent on the Auction Date pursuant to Section
5(b) hereof;
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(ii) pursuant to Section 3 hereof, advise the Holders of such
series of Series 1999-1 Senior Notes of any Carry-Over Amount accruing
on such Series 1999-1 Senior Notes; and
(iii) advise the Securities Depository, so long as the
ownership of such series of Series 1999-1 Senior Notes is maintained in
Book-Entry Form by the Securities Depository, upon request, of the
Series 1999-1 Senior Note Interest Rate payable on such series of
Series 1999-1 Senior Notes and the interest amount.
If any day scheduled to be an Interest Payment Date with respect to a
series of Series 1999-1 Senior Notes shall be changed after the Trustee shall
have given the notice or confirmation referred to in clause (i) of the preceding
sentence, the Trustee shall, not later than 9:15 a.m., New York City time, on
the Business Day next preceding the earlier of the new Interest Payment Date or
the old Interest Payment Date, by such means as the Trustee deems practicable,
give notice of such change to the Auction Agent, so long as no Payment Default
has occurred and is continuing and the ownership of the Series 1999-1 Senior
Notes is maintained in Book-Entry Form by the Securities Depository.
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 90 days' notice to the Trustee,
the Market Agent and the Corporation. The Auction Agent 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
Series 1999-1 Senior 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 90 days' notice. Neither
resignation nor removal of the Auction Agent pursuant to the preceding two
sentences shall be effective 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 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
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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
Salomon Smith Barney Inc., as the initial Broker-Dealer. 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 Salomon Smith Barney Inc. is serving
as a Broker-Dealer, Salomon Smith Barney Inc. shall have the right to consent to
the approval of any additional Broker-Dealers, which consent will not be
unreasonably withheld.
(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 appointed and acting as such.
Section 10. Changes in Auction Period or Periods.
(a) While any of the Series 1999-1 Senior 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 Series 1999-1 Senior Note Interest Rate borne by the
Series 1999-1 Senior Notes. The Corporation shall not initiate an Auction Period
Adjustment unless it shall have received the written consent of the Market
Agent, which consent shall not be unreasonably withheld, not less than three (3)
days nor more than twenty (20) days prior to the Auction Period Adjustment. The
Corporation shall initiate the Auction Period Adjustment by
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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.
(b) 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 twenty-eight (28) days, 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.
(c) 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 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 certificate of the Market Agent
described above in subparagraph (a) above and, if applicable, the written
statement of the Trustee, the Auction Agent and the Securities Depository
described in subparagraph (b) above, 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 Series 1999-1 Senior 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 in (B) above is not met, the Series
1999-1 Senior Note Auction Rate for the next Auction Period shall be the 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.
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.
Section 11. Changes in the Auction Date. Until the Series 1999-1 Senior
Notes have been subject to Conversion, the Market Agent, with the written
consent of an Authorized Officer of the Corporation, may specify an earlier
Auction Date (but in no event more than five Business Days earlier) than the
Auction Date that would otherwise be determined in accordance with the
definition of "Auction Date" in Section 1 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 Series 1999-1 Senior Note
Interest Rate borne by the Series 1999-1 Senior Notes. 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
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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 Series 1999-1 Senior Note
Interest Rate. The determination of a Series 1999-1 Senior Note Variable 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 Series 1999-1 Senior Notes to which such
Series 1999-1 Senior Note Variable 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 Series 1999-1 Senior Notes (including interest calculated as provided
herein, plus any other amounts that constitute interest on the Series 1999-1
Senior Notes of such series under applicable law, which are contracted for,
charged, reserved, taken or received pursuant to the Series 1999-1 Senior 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 Series 1999-1 Senior 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 Series 1999-1 Senior Notes of a series or related documents or otherwise
contracted for, charged, reserved, taken or received in connection with the
Series 1999-1 Senior Notes of such series, or if the redemption or acceleration
of the maturity of the Series 1999-1 Senior Notes of such series results in
payment to or receipt by the Holder or any former Holder of the Series 1999-1
Senior Notes of such series of any interest in excess of that permitted by
applicable law, then, notwithstanding any provision of the Series 1999-1 Senior
Notes of such series or related documents to the contrary, all excess amounts
theretofore paid or received with respect to the Series 1999-1 Senior Notes of
such series shall be credited on the principal balance of the Series 1999-1
Senior Notes of such series (or, if the Series 1999-1 Senior Notes of such
series have been paid or would thereby be paid in full, refunded by the
recipient thereof), and the provisions of the Series 1999-1 Senior 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 Series 1999-1 Senior 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
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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.
Section 14. Conversion of Series 1999-1 Senior Note Auction Rate and
Auction Period on the Series 1999-1 Senior Notes to a New Interest Period. At
the option of the Corporation, the method of determining the Series 1999-1
Senior Note Interest Rate for a series of the Series 1999-1 Senior Notes is
subject to Conversion on a Conversion Date for such series from a Series 1999-1
Senior Note Interest Rate calculated on the basis of an Auction Period to a
Series 1999-1 Senior Note Interest Rate calculated on the basis of another
Interest Period. The method of determining the new Series 1999-1 Senior Note
Interest Rate for the new Interest Period and the length of the new Interest
Period, which may be any length of time between one day and the Stated Maturity
of the Series of Series 1999-1 Senior Notes subject to such Conversion, shall be
set forth in a Supplemental Indenture executed in connection with the
Conversion. No Supplemental Indenture shall be executed in connection with a
Conversion unless the Corporation shall have furnished to the Trustee, prior to
such execution, written evidence from each of the Rating Agencies then rating
the Notes that execution of the Supplemental Indenture and the related
Conversion will not adversely affect the ratings on any series of the Notes any
of which are Outstanding.
The Corporation shall give written notice to the Trustee, the Remarketing
Agent and the Auction Agent of any such Conversion not less than twenty-eight
(28) days prior to the effective date of the Supplemental Indenture executed in
connection therewith, which effective date shall be no later than the Interest
Rate Determination Date for such new Interest Period. Upon receipt of such
written notice from the Corporation, the Trustee shall give written notice to
the Holders of the series of Series 1999-1 Senior Notes subject to such
Conversion in the manner set forth in Section 10.4 of the Indenture not less
than twenty-five (25) days prior to the effective date of such Supplemental
Indenture. Such notice shall state (i) that the method of determining the Series
1999-1 Senior Note Variable Rate for such series of Series 1999-1 Senior Notes
will be converted; (ii) the Conversion Date; (iii) that all Holders of such
series are required to tender their Series 1999-1 Senior Notes of such series to
the Trustee no later than the Conversion Date
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for purchase at a price equal to 100% of the principal amount thereof; provided,
however, that all Series 1999-1 Senior Notes of such series that are not
tendered to the Trustee by such date shall be deemed tendered to the Trustee as
of the Conversion Date, subject, however, to remarketing or purchase by the
Remarketing Agent for settlement on the Conversion Date and receipt by the
Trustee of the price equal to 100% of the principal amount of such Series 1999-1
Senior Notes from the purchasers thereof or the Remarketing Agent; (iv) that, in
the event that on the Conversion Date the Remarketing Agent has been unable to
remarket all Series 1999-1 Senior Notes of such series for settlement on the
Conversion Date and has elected not to purchase for its own account such
unremarketed Series 1999-1 Senior Notes, or on the Conversion Date the Trustee
has not received the price equal to 100% of the principal amount of such Series
1999-1 Senior Notes from the purchasers thereof or the Remarketing Agent, the
proposed Conversion of such series of Series 1999-1 Senior Notes shall be
cancelled, such series of Series 1999-1 Senior Notes shall remain in an Auction
Period and all Series 1999-1 Senior Notes of such series shall bear interest at
the lesser of the Net Loan Rate or the Maximum Auction Rate (subject to the
Series 1999-1 Senior Note Auction Rate Limitation) as of the failed Conversion
Date for the Interest Period commencing on such date; (v) that the proposed
Conversion is conditioned upon there being sufficient moneys available in the
Interest Account, after making provision for the payment of accrued interest on
such series of Series 1999-1 Senior Notes, as well as all other obligations
payable from the Interest Account having priority over the payment of Carry-Over
Amounts, due and payable on such Conversion Date, to pay on the Conversion Date
all Carry-Over Amount (and accrued interest thereon), if any, on such series of
Series 1999-1 Senior Notes through the Conversion Date; (vi) that a Holder has
no right to elect to retain any Series 1999-1 Senior Notes of such series that
have been remarketed, or will be purchased, by the Remarketing Agent, on the
Conversion Date; and (vii) if it shall be the case, that the ratings on such
series of Series 1999-1 Senior Notes may be reduced or withdrawn. The Trustee
shall mail a copy of such notice to each of the Rating Agencies.
Notwithstanding anything to the contrary in this Section 14 or elsewhere in
this First Supplemental Indenture, if all of the Series 1999-1 Senior Notes of a
series are not remarketed or purchased by the Remarketing Agent for settlement
on the Conversion Date, or if the Trustee does not, by 11:00 a.m., New York City
time, on the Conversion Date, receive from the purchaser or the Remarketing
Agent the price equal to 100% of the principal amount thereof, or if there are
not sufficient moneys available in the Interest Account, after making provision
for the payment of accrued interest on such series of Series 1999-1 Senior
Notes, as well as all other obligations payable from the Interest Account having
priority over the payment of Carry-Over Amounts, due and payable on such
Conversion Date, to pay on the Conversion Date all Carry-Over Amount (and
accrued interest thereon), if any, on such series of Series 1999-1 Senior Notes
through the Conversion Date, none of the Series 1999-1 Senior Notes of such
series shall be converted to a new Interest Period on the Conversion Date, but
all Series 1999-1 Senior Notes of such series shall bear interest at the lesser
of the Net Loan Rate or the Maximum Auction Rate (subject to the Series 1999-1
Senior Note Auction Rate Limitation) as of the failed Conversion Date for the
Interest Period commencing on such date and shall continue to be owned by and
registered to the Holders that owned Series 1999-1 Senior Notes of such series
immediately prior to the failed Conversion.
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Section 15. Mandatory Tender and Purchase of Series 1999-1 Senior Notes in
connection with Conversion to a New Interest Period. In the event that
Conversion from an Auction Period to a new Interest Period for a series of
Series 1999-1 Senior Notes is to take place, such series shall be tendered to
the Trustee no later than the related Conversion Date for purchase at a price
equal to 100% of the principal amount thereof; provided, however, that any
Series 1999-1 Senior Notes of such series not tendered to the Trustee by such
date shall be deemed tendered to the Trustee. Any unpaid Carry-Over Amount (and
any interest accrued thereon) with respect to such series as of the Conversion
Date, as well as interest on such Series 1999-1 Senior Notes accrued to the
Conversion Date, will be paid in the ordinary fashion. The Trustee shall give
notice by mail to the Holders of such series of Series 1999-1 Senior Notes, not
less than twenty-five (25) days prior to the effective date of the Supplemental
Indenture executed in connection with the Conversion, of the mandatory tender of
such series of Series 1999-1 Senior Notes, which notice shall be contained in
the notice given in accordance with the provisions of Section 14 hereof.
Pursuant to the Remarketing Agreement, the Remarketing Agent shall be
obligated (i) to use its best efforts to remarket the Series 1999-1 Senior Notes
of such series subject to Conversion based upon the new Series 1999-1 Senior
Note Interest Rate and new Interest Period upon Conversion at a price of not
less than 100% of the principal amount thereof, (ii) not later than 3:00 p.m.,
New York City time, on the Business Day before the Conversion Date, to give
notice to the Trustee stating whether all of the Series 1999-1 Senior Notes of
such series have been remarketed or will be purchased by the Remarketing Agent
on the Conversion Date and (iii) to cause the purchase price of each Series
1999-1 Senior Note of such series so remarketed or to be purchased by the
Remarketing Agent to be deposited in the fund to be established under the
Remarketing Agreement and maintained by the Remarketing Agent pursuant to the
Remarketing Agreement (the "Note Purchase Fund") in immediately available funds.
Pursuant to the Remarketing Agreement, all amounts deposited in the Note
Purchase Fund as aforesaid shall be held by the Remarketing Agent uninvested and
in cash and in trust for the sole and exclusive benefit of the Holders of the
Series 1999-1 Senior Notes for the purchase of which such amounts were deposited
in the Note Purchase Fund and shall be applied by the Remarketing Agent to such
purchase by payment to such Holders without further authorization or direction.
Accrued interest on and any unpaid Carry-Over Amount (and any interest accrued
thereon) with respect to the Series 1999-1 Senior Notes of such series shall be
paid by the Trustee to such Holders from the Interest Account.
If, by 11:00 a.m., New York City time, on the Conversion Date there is on
deposit in the Note Purchase Fund an amount sufficient to pay the purchase price
of all Series 1999-1 Senior Notes of the series subject to Conversion equal to
100% of the principal amount thereof and there is on deposit in the Interest
Account an amount sufficient, and available, to pay accrued interest on, and any
unpaid Carry-Over Amount (and any interest accrued thereon) with respect to,
such series as of the Conversion Date, all Series 1999-1 Senior Notes of such
series which have not been delivered to the Trustee shall be deemed to have been
tendered in accordance with the provisions hereof. Replacement Series 1999-1
Senior Notes of such series shall be authenticated by the Trustee and delivered
to the purchasers thereof; provided, however, that in the case of Series 1999-1
Senior Notes of such series held in a Book-Entry System, replacement Series
1999-1 Senior Notes of such series shall be authenticated by the Trustee and
delivered to
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the Securities Depository. The Holder of any undelivered Series 1999-1 Senior
Notes of such series shall not be entitled to any payment (including any
interest to accrue on and subsequent to the Conversion Date) other than the
purchase price for such undelivered Series 1999-1 Senior Notes, together with
accrued interest thereon, and any unpaid Carry-Over Amount (and any interest
accrued thereon) with respect thereto, as of the Conversion Date, and
undelivered Series 1999-1 Senior Notes of such series shall no longer be
entitled to the benefit of this First Supplemental Indenture, except for the
purpose of payment of the purchase price therefor, together with accrued
interest thereon, and any unpaid Carry-Over Amount (and any interest accrued
thereon) with respect thereto, as of the Conversion Date.
As of the Conversion Date, the Series 1999-1 Senior Notes of the series
subject to Conversion shall be registered to the purchasers thereof, regardless
of tender of the predecessor Series 1999-1 Senior Notes of such series by the
Holders thereof, and shall bear interest at the applicable new Series 1999-1
Senior Note Interest Rate.
The Holders of Series 1999-1 Senior Notes of a series which are subject to
mandatory tender on the Conversion Date do not have the right to elect to retain
such Series 1999-1 Senior Notes. Subject only to receipt by the Trustee from the
purchasers of the price equal to 100% of the principal amount of all Series
1999-1 Senior Notes of such series on the Conversion Date and the payment of
accrued interest thereon and any unpaid Carry-Over Amount (and accrued interest
thereon) with respect thereto, such Series 1999-1 Senior Notes will be deemed to
be tendered to the Trustee on such Conversion Date and registered in the names
of the purchasers thereof.
If, by 11:00 a.m., New York City time, on the Conversion Date there is not
on deposit in the Note Purchase Fund an amount sufficient to pay the purchase
price of all Series 1999-1 Senior Notes of the series subject to Conversion
equal to 100% of the principal amount thereof and on deposit in the Interest
Account an amount sufficient, and available, to pay accrued interest on, and any
unpaid Carry-Over Amount (and interest accrued thereon) with respect to, such
series as of the Conversion Date, all Series 1999-1 Senior Notes of such series
that have been tendered to the Trustee shall be returned by the Trustee to the
tendering Holders thereof, and the Trustee shall give written notice on the date
that the proposed Conversion was to have occurred to each Holder of Series
1999-1 Senior Notes of such series, whether such Holder has actually tendered
his Series 1999-1 Senior Note or not, that (i) the Conversion of such series of
Series 1999-1 Senior Notes has been cancelled and the reason therefor, and (ii)
such series of Series 1999-1 Senior Notes will bear interest at the lesser of
the Net Loan Rate or the Maximum Auction Rate as of the failed Conversion Date
for the Interest Period commencing on such date, written notice of which Series
1999-1 Senior Note Interest Rate will be given by the Trustee to each such
Holder on the second Business Day of the new Auction Period.
Section 16. Remarketing Agent Notes. Notwithstanding the fact that the
Remarketing Agent is under no obligation to purchase any series of Series 1999-1
Senior Notes in connection with Conversion of such series, in the event that the
Remarketing Agent should elect, in its sole discretion, to purchase Series
1999-1 Senior Notes of such series, then the Series 1999-1 Senior Notes of such
series so purchased by the Remarketing Agent will constitute "Remarketing Agent
Notes" until the date, if any, on which such Series 1999-1 Senior Notes are
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sold by the Remarketing Agent. For so long as such Series 1999-1 Senior Notes
constitute Remarketing Agent Notes, the Remarketing Agent will be entitled to
payment of the Remarketing Agent Recovery Amount, as hereinbelow defined, with
respect to the principal amount of Remarketing Agent Notes. For purposes of this
Section 16, "Remarketing Agent Recovery Amount" shall mean, with respect to any
Remarketing Agent Notes, an amount equal to the Daily Deferred Rate, as
hereinbelow defined, multiplied by the daily principal balance of such
Remarketing Agent Notes for the actual number of days such Series 1999-1 Senior
Notes constitute Remarketing Agent Notes. For purposes of this Section 16,
"Daily Deferred Rate" shall mean an amount equal to the excess, if any, of (x)
the rate published as the "Broker Call" in The Wall Street Journal on each day
the Remarketing Agent is the owner of such Remarketing Agent Notes over (y) the
new Series 1999-1 Senior Note Interest Rate or Rates in effect for such series
of Series 1999-1 Senior Notes from and after the Conversion Date. Any accrued
but unpaid Remarketing Agent Recovery Amount is payable from the Interest
Account, to the extent funds are available therefor after payment of all other
amounts payable therefrom, on each Interest Payment Date for such series of
Series 1999-1 Senior Notes so purchased and held by the Remarketing Agent in
connection with a Conversion.
In the event that the Remarketing Agent acquires Series 1999-1 Senior Notes
of a series other than in connection with a mandatory tender in anticipation of
a Conversion, such Series 1999-1 Senior Notes will not constitute Remarketing
Agent Notes prior to a Conversion. In the event that the Remarketing Agent holds
such Series 1999-1 Senior Notes and such Series 1999-1 Senior Notes become
subject to Conversion, the Remarketing Agent will tender them to the Trustee,
and in connection with such Conversion such Series 1999-1 Senior Notes may
become Remarketing Agent Notes in accordance with the provisions of this Section
16.
Section 17. Purposes of Issuance of Series 1999-1 Notes. The Series 1999-1
Notes are being issued to provide funds to be used to (a) acquire student loan
notes incurred under the Higher Education Act, and (b) fund the Reserve Fund.
Section 18. Deposit of Series 1999-1 Note Proceeds. From the proceeds
derived from the sale of the Series 1999-1 Notes, there shall be deposited with
the Trustee:
(1) for credit to the Series 1999-1 Reserve Account, an amount equal to
$________; and
(2) for credit to the Series 1999-1 Acquisition Account, the remainder , to
remain in the Series 1999-1 Acquisition 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 hereto (as such Exhibit H may be amended or supplemented from time to
time).
Section 19. Redemption of Series 1999-1 Notes. The Series 1999-1 Notes are
subject to redemption as provided in this Section 19.
(A) Redemption From Unexpended Proceeds. Subject to compliance with Section
10.2 of the Indenture, Outstanding Series 1999-1 Notes may and, under the
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circumstances described in the next succeeding sentence, shall be redeemed, in
whole or in part, on any regularly scheduled Interest Payment Date (in the case
of the Series 1999-1 Senior Notes) or on any date (in the case of the Series
1999-1C Notes), at a Redemption Price equal to 100% of the principal amount of
Series 1999-1 Notes so redeemed, from proceeds of the Series 1999-1 Notes
constituting a portion of the Balance of the Series 1999-1 Acquisition Account
that have not been used to acquire Eligible Loans and from that portion of the
Reserve Fund 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 occurring in
____________, for the Series 1999-1 Senior Notes, and on _____________, for the
Series 1999-1C Notes, from such sources not so used by _______________, unless
the Corporation delivers to the Trustee: (i) a Corporation Certificate
certifying that, based on a Cash Flow Projection, the failure to redeem such
Series 1999-1 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 Indemnification Fund, and (ii) written confirmation
from Moody's and Fitch to the effect that the failure to redeem such Series
1999-1 Notes will not result in a reduction or withdrawal of the rating of the
Series 1999-1 Notes. The Trustee shall transfer any such moneys to the credit of
the Series 1999-1 Retirement Subaccount for such purpose without any further
authorization or direction.
(B) Sinking Fund Redemption.
(1) Series 1999-1A Notes. The Trustee shall, in the manner provided in
Section 4.7.2(A) of the Indenture, deposit moneys to the credit of the
Principal Account, to be accumulated for sinking fund installments with
respect to the Series 1999-1A Notes, in amounts sufficient to redeem, on
the last regularly scheduled Interest Payment Date with respect to the
Series 1999-1A Notes occurring in July in each of the years set forth below
(each such date being hereinafter referred to as a "Sinking Fund Payment
Date"), at a Redemption Price equal to 100% of the principal amount
thereof, Series 1999-1A Notes equal to the following principal amounts:
Principal Principal
Year Amount Year Amount
---- --------- ---- ---------
$ $
or, if less than such amount of Series 1999-1A Notes is Outstanding on such
Sinking Fund Payment Date, an amount equal to the aggregate principal
amount of all Series 1999-1A Notes then Outstanding.
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Moneys deposited to the credit of the Principal Account on account of
any such sinking fund installment shall be applied to the redemption or
purchase of Series 1999-1A Notes in the manner provided in subsections (A)
and (F) of Section 4.7.2 of the Indenture and this Section 19.
(2) Series 1999-1B Notes. The Trustee shall, in the manner provided in
Section 4.7.2(A) of the Indenture, deposit moneys to the credit of the
Principal Account, to be accumulated for sinking fund installments with
respect to the Series 1999-1B Notes, in amounts sufficient to redeem, on
the last regularly scheduled Interest Payment Date with respect to the
Series 1999-1B Notes occurring in July in each of the years set forth below
(each such date being hereinafter referred to as a "Sinking Fund Payment
Date"), at a Redemption Price equal to 100% of the principal amount
thereof, Series 1999-1B Notes equal to the following principal amounts:
Principal Principal
Year Amount Year Amount
---- --------- ---- ---------
$ $
or, if less than such amount of Series 1999-1B Notes is Outstanding on such
Sinking Fund Payment Date, an amount equal to the aggregate principal
amount of all Series 1999-1B Notes then Outstanding.
Moneys deposited to the credit of the Principal Account on account of
any such sinking fund installment shall be applied to the redemption or
purchase of Series 1999-1B Notes in the manner provided in subsections (A)
and (F) of Section 4.7.2 of the Indenture and this Section 19.
(3) Series 1999-1C Notes. The Trustee shall, in the manner provided in
subsections (A) and (B) of Section 4.7.2 of the Indenture but subject to
compliance with Section 10.2 of the Indenture, deposit moneys to the credit
of the Principal Account, to be accumulated for sinking fund installments
with respect to the Series 1999-1C Notes, in amounts sufficient to redeem
or pay at the Stated Maturity thereof, on __________ 1 in each of the years
set forth below (each such date being hereinafter referred to as a "Sinking
Fund Payment Date"), at a Redemption Price equal to 100% of the principal
amount thereof, Series 1999-1C Notes equal to the following principal
amounts:
Principal Principal
Year Amount Year Amount
---- --------- ---- ---------
$ $
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*
------------------
* Stated Maturity
or, if less than such amount of Series 1999-1C Notes is Outstanding on such
Sinking Fund Payment Date, an amount equal to the aggregate principal
amount of all Series 1999-1C Notes then Outstanding; provided, however,
that, except with respect to deposits to be made for sinking fund
installments due on the Stated Maturity of the Series 1999-1C Notes (as to
which there shall be no contingency), the making of each deposit to the
credit of the Principal Account to be accumulated for sinking fund
installments with respect to the Series 1999-1C Notes shall be contingent
upon there being, and shall be made only to the extent there are, amounts
available therefor in the Revenue Fund and (except for that portion of the
Balance thereof consisting of Student Loans) the Surplus Fund.
To the extent that payments on account of any sinking fund installment
with respect to the Series 1999-1C Notes (other than a sinking fund
installment due on the Stated Maturity of the Series 1999-1C Notes) are not
deposited and accumulated in the Principal Account in the full amount of
such installment on or before the next-to-the-last Monthly Payment Date
preceding the Sinking Fund Payment Date with respect thereto, the
deficiency shall be added to the amount of the sinking fund installment for
the next succeeding Sinking Fund Payment Date with respect to the Series
1999-1C Notes.
Moneys deposited to the credit of the Principal Account on account of
any such sinking fund installment shall be applied to the redemption,
payment at Maturity or purchase of Series 1999-1C Notes in the manner
provided in subsections (A), (B) and (F) of Section 4.7.2 of the Indenture
and this Section 19, but subject to subsection (D) of Section 4.7.2 and
Section 10.2 of the Indenture.
(3) Reduction in Sinking Fund Installments. The Corporation may reduce
the amount of any sinking fund installment payable on any Sinking Fund
Payment Date with respect to Series 1999-1 Notes of any series by an amount
equal to the principal amount of Outstanding Series 1999-1 Notes of such
series that shall be surrendered uncanceled by the Corporation to the
Trustee, together with a Corporation Request stating its election to use
such Series 1999-1 Notes for such purpose; provided that, unless such
surrendered Series 1999-1 Notes are to be applied to the sinking fund
installment due on the Stated Maturity of such Series 1999-1 Notes, the
Corporation shall have surrendered such Series 1999-1 Notes, together with
the Corporation Request, to the Trustee not less than sixty (60) days prior
to such Sinking Fund Payment Date. In such case, the Trustee shall reduce
the amount of Series 1999-1 Notes of such series to be redeemed on the
Sinking Fund Payment Date specified in such Corporation Request by the
principal amount of Series 1999-1 Notes of such series so surrendered by
the Corporation. In case of the failure of the Corporation, at or before
the time required above, to present such
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Corporation Request and to surrender such Series 1999-1 Notes to the
Trustee, the Corporation shall not be permitted to make any such reduction
in the amount of the sinking fund installment payable on such Sinking Fund
Payment Date and the Trustee shall make no reduction in the amount of
Series 1999-1 Notes of such series to be so redeemed on such Sinking Fund
Payment Date.
In the event that Series 1999-1 Notes are purchased pursuant to
Section 10.7 of the Indenture or are redeemed pursuant to subsection (A),
(C) or (D) of this Section 19, the Series 1999-1 Notes so purchased or
redeemed may, at the option of the Corporation, be applied as a credit
against any subsequent sinking fund installment with respect to the Series
1999-1 Notes of the same series otherwise to be redeemed or paid at Stated
Maturity, as the case may be, thereby, such credit to be equal to the
principal amount of such Series 1999-1 Notes of such series purchased
pursuant to Section 10.7 of the Indenture or redeemed pursuant to said
subsections (A), (C) or (D) of this Section 19; provided that, unless such
purchased or redeemed Series 1999-1 Notes are to be applied to the sinking
fund installment due on the Stated Maturity of such Series 1999-1 Notes,
the Corporation shall have delivered to the Trustee a Corporation Request
stating its election to apply the Series 1999-1 Notes of such series as
such a credit not less than sixty (60) days prior to the Sinking Fund
Payment Date specified in such Corporation Request. In such case, the
Trustee shall reduce the amount of Series 1999-1 Notes of such series to be
redeemed on the Sinking Fund Payment Date specified in such Corporation
Request by the principal amount of Series 1999-1 Notes of such series so
purchased or so redeemed. In case of the failure of the Corporation, at or
before the time required above, to present such Corporation Request, the
Corporation shall not be permitted to make any such reduction in the amount
of the sinking fund installment payable on such Sinking Fund Payment Date
and the Trustee shall make no reduction in the amount of Series 1999-1
Notes of such series to be so redeemed on such Sinking Fund Payment Date.
Any credit given to sinking fund installments pursuant to this
subsection (B)(3) shall not affect any subsequent sinking fund
installments, which shall remain payable as otherwise provided in this
subsection (B), unless and until another credit is given in accordance with
the provisions hereof.
(C) Redemption from Surplus Account. Subject to compliance with Section
10.2 of the Indenture, Outstanding Series 1999-1 Notes may, at the option of the
Corporation, be redeemed on any regularly scheduled Interest Payment Date with
respect thereto, 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 from the Surplus Account for such purpose in accordance with Section 4.8
of the Indenture and from that portion of the Reserve Fund 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 Indemnification Fund, the
Note Fund, the Reserve Fund or the Special Redemption Account, the Trustee
shall, upon Corporation Order, transfer to the Retirement Account any Balances
in the Surplus Account (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
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Outstanding Notes, Administrative Expenses or Note Fees, or for transfer to the
Indemnification Fund.
(D) Optional Redemption. Subject to compliance with Section 10.2 of the
Indenture, Outstanding Series 1999-1 Senior Notes may, at the option of the
Corporation and from amounts credited to the Retirement Account for such
purpose, be redeemed on any regularly scheduled Interest Payment Date with
respect thereto, in whole or in part, at a Redemption Price equal to 100% of the
principal amount of Series 1999-1 Senior Notes to be so redeemed. Subject to
compliance with Section 10.2 of the Indenture, Outstanding Series 1999-1C 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:
Redemption
Redemption Period Price
----------------- -----
, through %
---------------------- ----------------------
, through %
---------------------- ----------------------
, and thereafter 100%
----------------------
Notwithstanding the foregoing, no Series 1999-1 Notes shall be redeemed
pursuant to this subsection (D) 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 1999-1 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
Indemnification Fund.
(E) Selection of Series 1999-1 Notes for Redemption. If less than all
Outstanding Series 1999-1 Notes are to be redeemed pursuant to subsections (A),
(C) or (D) of this Section 19, the principal amounts of each series of Series
1999-1 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) that principal amount of Series 1999-1C Notes shall be redeemed which bears,
as nearly as practicable, the same (but no greater) proportion to the aggregate
principal amount of all Outstanding Series 1999-1 Notes to be redeemed as the
aggregate principal amount of Outstanding Series 1999-1C Notes bears to the
aggregate principal amount of all Outstanding Series 1999-1 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 1999-1C 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 Indemnification Fund, Series
1999-1C Notes shall be redeemed in such principal amount as is designated by the
Corporation in such certificate. The remaining Series 1999-1 Notes to be
redeemed shall be selected from each series
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of the Series 1999-1 Senior Notes in, as nearly as practicable, the same
proportion to the aggregate principal amount of all Outstanding Series 1999-1
Senior Notes to be redeemed as the aggregate principal amount of Outstanding
Series 1999-1 Senior Notes of such series bears to the aggregate principal
amount of all Outstanding Series 1999-1 Senior Notes.
Notwithstanding the foregoing provisions of this Section 19, to the extent
Series 1999-1C Notes cannot be redeemed due to the application of Section 10.2
of the Indenture, but Series 1999-1 Senior Notes may be redeemed without
violating the provisions of said Section 10.2, the particular Series 1999-1
Notes to be redeemed shall be selected from the Series 1999-1 Senior Notes.
If less than all of the Outstanding Series 1999-1 Notes of a given series
are to be redeemed pursuant to this Section 19, the particular Series 1999-1
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 1999-1 Notes in
an Authorized Denomination.
The Trustee shall promptly notify the Note Registrar and any Paying Agent
for the Series 1999-1 Notes (in each case, if other than the Trustee) in writing
of the Series 1999-1 Notes selected for redemption and, in the case of any
Series 1999-1 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 1999-1 Notes shall relate,
in the case of any Series 1999-1 Note redeemed or to be redeemed only in part,
to the portion of the principal of such Series 1999-1 Note which has been or is
to be redeemed.
(F) Notice of Redemption. Notice of redemption of Series 1999-1 Notes
pursuant to this Section 19 shall be given not less than fifteen (15) days (in
the case of Series 1999-1 Senior Notes) or thirty (30) days (in the case of
Series 1999-1C Notes), as the case may be, prior to the Redemption Date in
accordance with the provisions of Section 10.4 of the Indenture.
Section 20. Book-Entry Series 1999-1 Notes. (a) The registered Holder of
all Series 1999-1 Notes shall be the Securities Depository and the Series 1999-1
Notes shall be registered in the name of the nominee for the Securities
Depository. The "Series 1999-1 Notes" referred to in this subsection (a) shall
refer to the Series 1999-1 Notes registered in the name of the Securities
Depository.
(b) The Series 1999-1 Notes shall be initially issued in the form of
separate, single, authenticated fully-registered Series 1999-1 Notes for each
series thereof in the amount of such series. Upon initial issuance, the
ownership of each such Series 1999-1 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 1999-1
Notes registered in its name for the purposes of (1) payment of the principal or
Redemption Price of, interest on or Carry-Over Amount (including any accrued
interest thereon) with respect to the Series 1999-1 Notes, (2) selecting the
Series 1999-1 Notes or portions thereof to be redeemed, (3) giving any notice
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permitted or required to be given to Holders under the Indenture, (4)
registering the transfer of Series 1999-1 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 1999-1 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, interest on or Carry-Over Amount
(including any accrued interest thereon) with respect to the Series 1999-1
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
1999-1 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, interest on and Carry-Over Amount (including any accrued interest thereon)
with respect to the Series 1999-1 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, interest on and
Carry-Over Amount (including any accrued interest thereon) with respect to the
Series 1999-1 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 1999-1 Note evidencing the obligation of the
Corporation to make payments of principal or Redemption Price, interest and
Carry-Over Amount (including any accrued interest thereon) pursuant to this
Indenture. Upon delivery by the Securities Depository to the 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 1999-1 Notes will be
transferable to such new nominee in accordance with subsection (f) below.
(c) Except with respect to any Series 1999-1 Senior 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 1999-1 Notes. In such
event, the Trustee shall authenticate, transfer and exchange definitive Series
1999-1 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 1999-1 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 1999-1 Notes as
described in this Indenture and in accordance with
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subsection (f) below. In the event definitive Series 1999-1 Notes are issued,
the provisions of this Indenture shall apply to such definitive Series 1999-1
Notes in all respects, including, among other things, the transfer and exchange
of such Series 1999-1 Notes and the method of payment of principal or Redemption
Price of, interest on and Carry-Over Amount (including any accrued interest
thereon) with respect to such Series 1999-1 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 1999-1 Notes to any Participant having Series 1999-1
Notes credited to its account with the Securities Depository or (B) to arrange
for another securities depository to maintain custody of definitive Series
1999-1 Notes.
(d) Notwithstanding any other provision of the Indenture to the contrary,
so long as any Series 1999-1 Note is registered in the name of the nominee of
the Securities Depository, all payments with respect to the principal or
Redemption Price of, interest on and Carry-Over Amount (including any accrued
interest thereon) with respect to such Series 1999-1 Note and all notices with
respect to such Series 1999-1 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 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 1999-1 Notes is
permitted under subsection (b) or (c) of this Section 20, such transfer or
exchange shall be accomplished upon receipt by the Trustee from the registered
Holder thereof of the Series 1999-1 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 1999-1 Notes are issued to Holders other than the nominee of
the Securities Depository, or another securities depository as Holder of all the
Series 1999-1 Notes, the provisions of the Indenture shall also apply to, among
other things, the printing of such definitive Series 1999-1 Notes and the
methods of payment of principal or Redemption Price of, interest on and
Carry-Over Amount (including any accrued interest thereon) with respect to such
Series 1999-1 Notes.
(g) Notwithstanding any provision of Article Ten of the Indenture to the
contrary, in connection with any redemption of Series 1999-1 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 the Series
1999-1 Senior Notes (so long as they constitute Variable Rate Notes) or at least
forty-five (45) days prior to the date fixed for redemption with respect to all
other Series 1999-1 Notes, and the Trustee shall give notice of redemption to
DTC as Holder of such Series 1999-1 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 Series 1999-1 Senior Notes (so long
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as they constitute Variable Rate Notes) or at least thirty (30) days and not
more than sixty (60) days prior to the date fixed for redemption of all other
Series 1999-1 Notes.
Section 21. Series 1999-1 Accounts and Subaccounts. So long as any Series
1999-1 Notes are Outstanding, the following Accounts and Subaccounts, which are
hereby established, shall be maintained by the Trustee or the Deposit Agent, as
the case may be:
In the Acquisition Fund, an Account to be known as the "Series 1999-1
Acquisition Account"; in the Administration Fund, an Account to be known as the
"Series 1999-1 Administration Account"; in the Reserve Fund, an Account to be
known as the "Series 1999-1 Reserve Account"; in the Interest Account, a
Subaccount to be known as the "Series 1999-1 Interest Subaccount"; in the
Principal Account, a Subaccount to be known as the "Series 1999-1 Principal
Subaccount"; in the Retirement Account, a Subaccount to be known as the "Series
1999-1 Retirement Subaccount"; and in the Surplus Account, a Subaccount to be
known as the "Series 1999-1 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 Series 1999-1 Notes or the
Student Loans Financed with the proceeds thereof shall be deposited to the
credit of the Series 1999-1 Acquisition Account, the Series 1999-1
Administration Account, the Series 1999-1 Reserve Account, the Series 1999-1
Interest Subaccount, the Series 1999-1 Principal Subaccount, the Series 1999-1
Retirement Subaccount or the Series 1999-1 Surplus Subaccount, respectively, and
as appropriate.
Except as heretofore provided in this Section 21, nothing herein shall be
deemed to prohibit (1) the Trustee from using Balances of any Account or
Subaccount established by this Section 21 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 Account or Subaccount established by this Section 21 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 Series 1999-1 Notes Outstanding, the Series 1999-1
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 Series
1999-1 Notes Outstanding, the Series 1999-1 Interest Account shall terminate and
any Balance thereof at such time shall be used as other Balances of the Interest
Account, the Series 1999-1 Principal Account shall terminate and any Balance
thereof at such time shall be used as other Balances of the Principal Account,
the Series 1999-1 Retirement Account shall terminate and any Balance thereof at
such time shall be used as other Balances of the Retirement Account, the Series
1999-1 Reserve Account shall terminate and any Balance thereof at such time
shall be used as other Balances of the Reserve Fund and the Series 1999-1
Surplus Subaccount shall terminate and any Balance thereof at such time shall be
used as other Balances of the Surplus Account.
Section 22. Purchase of Eligible Loans From Series 1999-1 Acquisition
Account and Series 1999-1 Surplus Subaccount. Each Student Loan Financed from
Balances
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in the Series 1999-1 Acquisition Account or the Series 1999-1 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
1999-1 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 Indemnification 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
1999-1 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 Indemnification 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.
Any Student Loans Financed from Balances in the Series 1999-1 Surplus
Subaccount prior to _____________, and constituting Eligible Loans shall, upon
the financing thereof, be credited to, and included in the Balance of, the
Series 1999-1 Acquisition Account, 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
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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 Indemnification Fund and (ii) written confirmation from each of
the Rating Agencies then rating the Series 1999-1 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 1999-1 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 1999-1 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 1999-1 Acquisition Account or the Series 1999-1
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) ___% of the aggregate of the amounts applied 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
so Financed 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 Indemnification Fund.
The Corporation shall not acquire or originate any Consolidation Loan from
Balances in the Series 1999-1 Acquisition Account or the Series 1999-1 Surplus
Subaccount if, as a result of such acquisition or origination, either: (1) 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) ___% of the aggregate of the amounts applied from such Balances to the
acquisition or origination of all Student Loans; or (2) 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 so Financed 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 Indemnification Fund.
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The Corporation shall not acquire or originate any Student Loan subject to
any interest rate reduction or other program that would reduce the yield thereon
(I) if such yield reduction (a) is more than ___% per annum, (b) may commence if
any of the first ____ consecutive payments have not been received in a timely
fashion or (c) may continue if any payments are not received in a timely
fashion, or (II)(a) from Balances in the Series 1999-1 Acquisition Account if,
as a result of such acquisition or origination, the aggregate of the amounts
applied from such Balances to the acquisition or origination of Student Loans
subject to such programs would exceed $______, or (b) from Balances in the
Series 1999-1 Surplus Subaccount if, as a result of such acquisition or
origination, the aggregate of the amounts applied from such Balances to the
acquisition or origination of Student Loans subject to such programs would
exceed ___% of the aggregate of the amounts applied from such Balances to the
acquisition or origination of all Student Loans, unless the Corporation delivers
to the Trustee a Corporation Certificate certifying that, based on a Cash Flow
Projection, the acquisition or origination of such Student 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 Indemnification Fund; provided that the
foregoing restrictions shall not apply to the acquisition or origination of any
Student Loan subject to a yield reduction program which the Corporation may, at
its option, discontinue at any time and which would not reduce the yield thereon
by more than ___% per annum.
The Corporation shall not agree to, or permit any Servicer to agree to, any
discount or other reduction in the yield on any Student Loan Financed from
Balances in the Series 1999-1 Acquisition Account or the Series 1999-1 Surplus
Subaccount (other than any such reduction that existed at the time such Student
Loan was so Financed) if, as a result thereof, the yield on such Student Loan
would be reduced by more than .___% per annum, unless the Corporation delivers
to the Trustee a Corporation Certificate certifying that, based on a Cash Flow
Projection, such reduction 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 Indemnification Fund.
Section 26. Notice Regarding Servicing Agreements. The Corporation shall
give written notice to each Rating Agency at least ninety (90) days (or such
lesser number of days as shall be acceptable to each Rating Agency) prior to
entering into any Servicing Agreement.
Section 27. Servicing Review. To the extent available at a reasonable cost
to the Corporation, the Corporation shall furnish to the Trustee, as soon as
possible and in no event more than one hundred twenty (120) days after the end
of each Fiscal Year, a compliance audit attesting to the compliance of the
servicing of Financed Student Loans with applicable requirements prepared by an
Independent Accountant or other Person reasonably acceptable to the Trustee. The
Corporation shall notify each Rating Agency in writing in the event any such
audit is to be prepared by a Person other than Eide Helmeke PLLP, Certified
Public Accountants, Aberdeen, South Dakota.
Section 28. Certain Findings, Determinations and Designations. The
Corporation hereby finds and determines as follows:
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<PAGE>
(A) The Original Indenture has not been amended, supplemented or
repealed since the execution thereof. This First Supplemental Indenture
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 1999-1A Notes and the Series 1999-1B 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 1999-1C 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 1999-1
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 other than the
Series 1999-1 Notes.
(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."
Section 29. 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 30. 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 31. 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.
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<PAGE>
Section 32. 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 33. Effect of First Supplemental Indenture. Upon the execution and
delivery of this First Supplemental Indenture, the Indenture shall be amended
and 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 all as of the day and year first above written.
EDUCATION LOANS INCORPORATED
By________________________________
President
Attest:
__________________________
Secretary
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
By________________________________
Trust Officer
Attest:
___________________________
Trust Officer
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<PAGE>
EXHIBIT A
---------
FORM OF SERIES 1999-1 SENIOR NOTES
(prior to Conversion Date)
--------------------------
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
STUDENT LOAN ASSET-BACKED NOTE
SENIOR SERIES 1999-1A [B]
CLASS A
THIS NOTE IS SUBJECT TO MANDATORY TENDER FOR PURCHASE AT THE TIMES AND IN
THE MANNER HEREINAFTER DESCRIBED, AND MUST BE SO TENDERED OR WILL BE DEEMED TO
HAVE BEEN SO TENDERED UNDER CERTAIN CIRCUMSTANCES DESCRIBED HEREIN.
No. R___ $_________
Stated Date of Original Interest
Maturity Date Issue Rate CUSIP
- ------------- --------------- -------- -----
Variable ______
REGISTERED HOLDER: CEDE & CO.
PRINCIPAL AMOUNT:
FOR VALUE RECEIVED, EDUCATION LOANS INCORPORATED, a corporation organized
under the laws of the State of Delaware (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
A-1
<PAGE>
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 1999-1 Notes (as
hereinafter defined), or a duly appointed successor Paying Agent, and to pay
interest on said Principal 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 and at Maturity, at the
Series 1999-1 Senior 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 1999-1 Notes in the aggregate principal amount
of $1,000,000 or more, 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 ________ 1, 1999 (as supplemented and amended, the
"Indenture"), as supplemented by a First Supplemental Indenture of Trust, dated
as of _________ 1, 1999 (the "First Supplemental Indenture"), each between the
Corporation and U.S. Bank National Association, in 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 1999-1A [B]
Notes"). The Series 1999-1A [B] Notes are issued simultaneously with one other
series of Class A Notes issued in the aggregate principal amount of $______ (the
"Series 1999-1B [A] Notes" and, together with the Series 1999-1A [B] Notes,
collectively referred to herein as the "Series 1999-1 Senior Notes"), and a
series of Class B Notes issued in the aggregate principal amount of $________
(the "Series 1999-1C
A-2
<PAGE>
Notes" and, together with the Series 1999-1 Senior Notes, collectively referred
to herein as the "Series 1999-1 Notes"). The proceeds of the Series 1999-1 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 1999-1 Senior Notes are being issued as, and will constitute, Class A
Notes under the Indenture. The Series 1999-1C Notes are being issued as, and
will constitute, 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.
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 that interest which has
accrued through the last day of the last complete Interest Period immediately
preceding the Interest Payment Date or, in the case of the Maturity of this
Note, the last day preceding the date of such Maturity. The Series 1999-1 Senior
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.
Until Conversion, if any, of the Series 1999-1 Senior Note Interest Rate on
this Note calculated on the basis of an Auction Period to a Series 1999-1 Senior
Note Interest Rate
A-3
<PAGE>
calculated on the basis of another Interest Period, the unpaid principal amount
hereof from time to time outstanding shall bear interest at a Series 1999-1
Senior Note Auction 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
Series 1999-1 Senior Note Initial Interest Rate. Thereafter until Conversion or
an Auction Period Adjustment, if any, this Note shall bear interest at a Series
1999-1 Senior Note Auction Rate based on an Auction Period that shall generally
consist of 28 days, all as determined in the First Supplemental Indenture.
The Series 1999-1 Senior Note Auction Rate to be borne by this Note after
the Initial Interest Period for each Auction Period until Conversion, if any, or
an Auction Period Adjustment, if any, shall be the lesser of (i) the Net Loan
Rate in effect for such Auction Period and (ii) the Auction Rate determined in
accordance with the applicable provisions of the First Supplemental Indenture.
In no event shall the Series 1999-1 Senior Note Auction Rate on this Note
exceed 18% per annum (the "Series 1999-1 Senior Note Auction Rate Limitation").
The Interest Period, including, without limitation, an Auction Period, the
applicable Series 1999-1 Senior Note Auction Rate, the method of determining the
applicable Series 1999-1 Senior Note Auction Rate on each of the Series 1999-1A
[B] Notes and the Auction Procedures related thereto, including, without
limitation, required notices thereof to the Holders or Existing Holders of the
Series 1999-1 Senior Notes, an Auction Period Adjustment, a change in the
Auction Date and the Interest Payment Dates will be determined in accordance
with the terms, conditions and provisions of the First Supplemental Indenture
and the Auction Agent Agreement, to which terms, conditions and provisions
specific reference is hereby made, and all of which terms, conditions and
provisions are hereby specifically incorporated herein by reference.
If the Auction Rate for the Series 1999-1A [B] Notes is greater than the
Net Loan Rate, then the Series 1999-1 Senior Note Auction Rate applicable to the
Series 1999-1 Notes for that Interest Period will be the Net Loan Rate. If the
Series 1999-1 Senior Note Auction Rate applicable to the Series 1999-1A [B]
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 1999-1A [B] 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 1999-1A [B] 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
A-4
<PAGE>
Trustee, the Trustee shall give written notice to each Holder of the Carry-Over
Amount applicable to each Holder's Series 1999-1A [B] 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 1999-1A [B] 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 1999-1A [B] Note), (i)
the Carry-Over Amount (and interest accrued thereon) shall be paid by the
Trustee on such Series 1999-1A [B] Note on the earlier of (a) the Conversion
Date, if any, and, if then so paid, shall be paid in full, or (b) 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 cancelled.
The Carry-Over Amount for the Series 1999-1A [B] Notes shall be paid by the
Trustee on Outstanding Series 1999-1A [B] Notes on the earlier of (a) the
Conversion Date, if any, and, if then so paid, shall be paid in full, or (b) 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 1999-1A [B] Note, which Series 1999-1A [B] 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 cancelled with respect to such Series
1999-1A [B] 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 earlier of (a)
the Conversion Date, if any, and, if then so paid, shall be paid in full, or (b)
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 1999-1A [B] Note, the Trustee
shall give written notice in the manner set forth in the immediately preceding
paragraph to the Holder of such Series 1999-1A [B] Note of the Carry-Over Amount
remaining unpaid on such Series 1999-1A [B] Note.
A-5
<PAGE>
The Interest Payment Date in such subsequent Interest Period on which such
Carry-Over Amount for the Series 1999-1A [B] 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 1999-1A [B] Notes on an Interest Payment Date.
By purchasing Series 1999-1A [B] Notes, whether in an Auction or otherwise,
each purchaser of the Series 1999-1A [B] 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 1999-1A [B] 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 1999-1A [B] Notes is maintained in Book-Entry Form by the
Securities Depository, an Existing Holder may sell, transfer or otherwise
dispose of Series 1999-1A [B] Notes only pursuant to a Bid or Sell Order placed
in an Auction or otherwise sell, transfer or dispose of Series 1999-1A [B] 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.
At the option of the Corporation, the method of determining the Series
1999-1 Senior Note Interest Rate for the Series 1999-1A [B] Notes is subject to
Conversion on a Conversion Date from a Series 1999-1 Senior Note Auction Rate
calculated on the basis of an Auction Period to a Series 1999-1 Senior Note
Interest Rate calculated on the basis of another Interest Period. The method of
determining the new Series 1999-1 Senior Note Interest Rate for the new Interest
Period and the length of the new Interest Period, which may be any length of
time between one day and the Stated Maturity of the Series 1999-1A [B] Notes
subject to conversion, shall be set forth in a Supplemental Indenture executed
in connection with the Conversion. No Supplemental Indenture shall be executed
in connection with a Conversion unless the Corporation shall have furnished to
the Trustee prior to such execution written evidence from each of the Rating
Agencies then rating the Notes that execution of the Supplemental Indenture and
the related Conversion will not adversely affect the ratings on any Series of
the Outstanding Notes.
The Corporation shall give written notice to the Trustee, the Remarketing
Agent and the Auction Agent of any such Conversion not less than 28 days prior
to the effective date of the Supplemental Indenture executed in connection with
the Conversion, which effective date shall be no later than the Interest Rate
Determination Date for such new Interest Period. Upon receipt of such written
notice from the Corporation, the Trustee shall give written notice to the
Holders of the Series 1999-1A [B] Notes subject to conversion in the manner set
forth in the First Supplemental Indenture not less than 25 days prior to the
effective date of such Supplemental Indenture. Such notice shall state such
information as is required by the First Supplemental Indenture.
A-6
<PAGE>
If all of the Series 1999-1A [B] Notes that have been tendered or deemed
tendered in connection with such Conversion in accordance with the provisions of
the next succeeding paragraph are not remarketed or purchased by the Remarketing
Agent for settlement on the Conversion Date or if the Trustee does not, by 11:00
a.m., New York City time, on the Conversion Date, receive from the purchasers or
the Remarketing Agent the purchase price equal to 100% of the principal amount
thereof, or if there are not sufficient moneys available in the Interest
Account, after making provision for the payment of accrued interest on the
Series 1999-1A [B] Notes, as well as all other obligations payable from the
Interest Account having priority over the payment of Carry-Over Amounts, due and
payable on such Conversion Date, to pay on the Conversion Date all Carry-Over
Amount (and accrued interest thereon), if any, on the Series 1999-1A [B] Notes
through the Conversion Date, none of the Series 1999-1A [B] Notes shall be
converted to a new Interest Period on the Conversion Date, but all Series
1999-1A [B] Notes shall bear interest at the lesser of the Net Loan Rate or the
Maximum Auction Rate (subject to the Series 1999-1 Senior Note Auction Rate
Limitation) as of the failed Conversion Date for the Interest Period commencing
on such date and shall continue to be owned by and registered to the Holders
that owned Series 1999-1A [B] Notes immediately prior to the failed Conversion.
In the event that Conversion from an Auction Period to a new Interest
Period for the Series 1999-1A [B] Notes is to take place, the Series 1999-1A [B]
Notes shall be tendered to the Trustee no later than the related Conversion Date
for purchase at a price equal to 100% of the principal amount thereof; provided,
however, that any Series 1999-1A [B] Notes not tendered to the Trustee by such
date shall be deemed tendered to the Trustee. Any unpaid Carry-Over Amount (and
any interest accrued thereon) with respect to the Series 1999-1A [B] Notes as of
the Conversion Date, as well as interest on the Series 1999-1A [B] Notes accrued
to the Conversion Date, will be paid in the ordinary fashion. The Trustee shall
give notice by mail to the Holders of Series 1999-1A [B] Notes not less than 25
days prior to the effective date of the Supplemental Indenture executed in
connection with the Conversion of the mandatory tender of such Notes.
If there has been deposited with the Trustee by 11:00 a.m., New York City
time, on the Conversion Date amounts sufficient, and available, to pay the
purchase price of all Series 1999-1A [B] Notes subject to conversion equal to
100% of the principal amount thereof plus accrued interest thereon and any
unpaid Carry-Over Amount (and any interest accrued thereon) with respect thereto
as of the Conversion Date, all Series 1999-1A [B] Notes which have not been
delivered to the Trustee shall be deemed to have been tendered in accordance
with the provisions hereof and of the First Supplemental Indenture. Replacement
Series 1999-1A [B] Notes shall be authenticated by the Trustee and delivered to
the purchasers thereof; provided, however, that in the case of Series 1999-1A
[B] Notes held in a Book-Entry System, replacement Series 1999-1A [B] Notes
shall be authenticated by the Trustee and delivered to the Securities
Depository. The Holder of any undelivered Series 1999-1A [B] Notes shall not be
entitled to any payment (including any interest to accrue on and subsequent to
the Conversion Date) other than the purchase price for such undelivered Series
1999-1A [B] Notes, together with accrued interest thereon, and any unpaid
Carry-Over Amount (and any interest accrued thereon) with respect thereto, as of
the Conversion Date, and undelivered Series 1999-1A [B] Notes shall no longer be
entitled to the benefit of the First Supplemental Indenture, except for the
purpose of payment of the purchase price therefor, together with accrued
interest thereon, and any unpaid Carry-Over Amount (and any interest accrued
thereon) with respect thereto, as of the Conversion Date.
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<PAGE>
The Holders of Series 1999-1A [B] Notes which are subject to mandatory
tender on the Conversion Date do not have the right to elect to retain such
Series 1999-1A [B] Notes. Subject only to receipt by the Trustee from the
purchasers of the price equal to 100% of the principal amount of all Series
1999-1A [B] Notes on the Conversion Date and the payment of accrued interest
thereon and any unpaid Carry-Over Amount (and accrued interest thereon) with
respect thereto, the Series 1999-1A [B] Notes will be deemed to be tendered to
the Trustee on such Conversion Date and registered in the names of the
purchasers thereof.
If by 11:00 a.m., New York City time, on the Conversion Date there is not
on deposit with the Trustee an aggregate amount sufficient, and available, to
pay the purchase price of all Series 1999-1A [B] Notes subject to conversion
plus accrued interest thereon and any unpaid Carry-Over Amount (and any interest
accrued thereon) with respect thereto as of the Conversion Date, all Series
1999-1A [B] Notes that have been tendered to the Trustee shall be returned by
the Trustee to the tendering Holders thereof, and the Trustee shall give written
notice on the date that the proposed Conversion was to have occurred to each
Holder of Series 1999-1A [B] Notes, whether such Holder has actually tendered
his Series 1999-1A [B] Note or not, that (i) the Conversion of the Series
1999-1A [B] Notes has been cancelled and (ii) the Series 1999-1A [B] Notes will
bear interest at the lesser of the Net Loan Rate or the Maximum Auction Rate as
of the failed Conversion Date for the Interest Period commencing on such date,
written notice of which Series 1999-1 Senior Note Interest Rate will be given by
the Trustee to each such Holder on the second Business Day of the new Auction
Period.
The determination of a Series 1999-1 Senior 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 1999-1A [B] Notes to which such Series 1999-1 Senior 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 balance 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
A-8
<PAGE>
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.
The Series 1999-1A [B] Notes are subject to mandatory sinking fund
redemption on the last regularly scheduled Interest Payment Date with respect to
the Series 1999-1A [B] Notes occurring in ______ in each of the years _____
through ____, at a Redemption Price equal to 100% of the principal amount
thereof, as provided in the Indenture. In addition, the Corporation may elect to
apply Series 1999-1A [B] Notes redeemed pursuant to other provisions of, or
purchased and retired pursuant to, the Indenture as a credit against such
sinking fund redemption in the manner provided in the Indenture.
Subject to compliance with the provisions of the Indenture relating to
certain asset requirements, Outstanding Series 1999-1 Notes may 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, at a
Redemption Price equal to 100% of the principal amount of Series 1999-1 Notes so
redeemed, from proceeds of the Series 1999-1 Notes constituting a portion of the
Balance of the Acquisition Fund that have not been used to acquire Eligible
Loans and from that portion of the Reserve Fund 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
occurring in _____, from such sources not so used by ________, unless the
Corporation delivers to the Trustee: (i) a Corporation Certificate certifying
that, based on a Cash Flow Projection, the failure to so redeem Series 1999-1
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 Moody's and
Fitch to the effect that the failure to so redeem Series 1999-1 Notes will not
result in a reduction or withdrawal of the rating of the Series 1999-1 Notes.
Subject to compliance with the provisions of the Indenture relating to
certain asset requirements, Outstanding Series 1999-1A [B] Notes may, at the
option of the Corporation, be redeemed on 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 from the Surplus Account for such purpose in accordance with the
Indenture and from that portion of the Reserve Fund 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 Account,
the Trustee shall, upon Corporation Order, transfer to the Retirement Account
any Balances in the Surplus Account (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.
A-9
<PAGE>
Subject to compliance with the provisions of the Indenture relating to
certain asset requirements and certain other requirements, Outstanding Series
1999-1A [B] Notes may, at the option of the Corporation, be redeemed on 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 1999-1 Notes are to be redeemed, the particular Series
1999-1 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 1999-1A [B] 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 1999-1A [B] Notes not affected by such
defect or failure. All Series 1999-1A [B] 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 1999-1A [B] 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 1999-1A [B] 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 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
A-10
<PAGE>
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. 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 1999-1A [B] Notes. Notwithstanding the
foregoing provisions of this paragraph, no Series 1999-1A [B] Note shall be
required to be transferred, (i) during a period beginning at the opening of
business fifteen days before any selection of Series 1999-1A [B] Notes for
redemption and ending at the close of business on the day of such selection,
(ii) if such Series 1999-1A [B] Note has been selected for redemption in whole
or in part, or (iii) on or after the date notice of a Conversion Date is given
through such Conversion Date.
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.
A-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.
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
By_____________________________
Authorized Representative
A-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
OF ASSIGNEE NOTICE: The signature to this
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-13
<PAGE>
EXHIBIT B
---------
FORM OF SERIES 1999-1C 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
STUDENT LOAN ASSET-BACKED NOTE
SUBORDINATE SERIES 1999-1C
CLASS B
No. R____ $____
Stated Date of Original Interest
Maturity Date Issue Rate CUSIP
- ------------- ---------------- -------- -----
Variable _____
REGISTERED HOLDER: CEDE & CO.
PRINCIPAL AMOUNT:
FOR VALUE RECEIVED, EDUCATION LOANS INCORPORATED, a corporation organized
under the laws of the State of Delaware (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 of the Trustee
(as hereinafter defined), as Paying Agent for the Series 1999-1 Notes (as
hereinafter defined), or a duly appointed successor Paying Agent, and to pay
interest on said Principal 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
B-1
<PAGE>
Principal Amount has been made or duly provided for, payable on each Interest
Payment Date and at Maturity, at the Series 1999-1C 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 1999-1 Notes
in the aggregate principal amount of $1,000,000 or more, 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 __________ 1, 1999 (as supplemented and amended, the
"Indenture"), as supplemented by a First Supplemental Indenture of Trust, dated
as of ___________ 1, 1999, (the "First Supplemental Indenture"), each between
the Corporation and U.S. Bank National Association, in 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 1999-1C Notes"). The Series 1999-1C Notes are issued simultaneously with
two series of Class A Notes issued in the aggregate principal amount of
$___________ (the "Series 1999-1 Senior Notes" and, together with the Series
1999-1C Notes, collectively referred to herein as the "Series 1999-1 Notes").
The proceeds of the Series 1999-1 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
B-2
<PAGE>
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 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.
The Series 1999-1C 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 Prior Senior Notes and the Series 1999-1
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 hereof and at the Maturity hereof. The interest payable on each
Interest Payment Date for this Note shall be that interest which has accrued
through the last day of the last complete Interest Period immediately preceding
the Interest Payment Date or, in the case of the Maturity hereof, the last day
preceding the date of such Maturity. The Series 1999-1C 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.
During the Initial Interest Period, this Note shall bear interest at the
Series 1999-1C Note Initial Interest Rate. 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 "Series 1999-1C 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.
B-3
<PAGE>
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 Series 1999-1C Note LIBOR-Based Rate determined with respect to a
given Interest Rate Determination Date is greater than the Net Loan Rate, then
the Series 1999-1C Note Interest Rate for the related Interest Period will be
the Net Loan Rate. If the Series 1999-1C Note Interest Rate for any Interest
Period is the Net Loan Rate, the Trustee shall determine the Carry-Over Amount,
if any, with respect to the Series 1999-1C Notes for such Interest Period. Each
such Carry-Over Amount shall bear interest calculated at a rate equal to the
Series 1999-1C 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 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 1999-1C 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 such Holder's Series 1999-1C
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 1999-1C 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 Series 1999-1C Note
(and all accrued interest thereon) that remains unpaid shall be cancelled and no
Carry-Over Amount (or interest accrued thereon) shall be paid with respect to
such Series 1999-1C Note), (i) the Carry-Over Amount (and interest accrued
thereon) shall be paid by the Trustee on such Series 1999-1C 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 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 Series 1999-1C Note LIBOR-Based Rate
until such Carry-Over Amount is paid in full or is cancelled.
The Carry-Over Amount (and interest accrued thereon) for the Series 1999-1C
Notes shall be paid by the Trustee on Outstanding Series 1999-1C Notes 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 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 in
accordance with such paragraph 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 1999-1C Note, which Series 1999-1C Note
is
B-4
<PAGE>
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 clauses (a) and (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 cancelled with respect to
such Series 1999-1C 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 1999-1C Note, the Trustee shall give written notice in
the manner set forth in the immediately preceding paragraph to the Holder of
such Series 1999-1C Note of the Carry-Over Amount remaining unpaid on such
Series 1999-1C Note.
The Interest Payment Date on which any Carry-Over Amount (or any interest
accrued thereon) for the Series 1999-1C 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 Series 1999-1C Notes on an Interest Payment Date.
In the event that the Trustee no longer determines, or fails to determine,
when required, the Series 1999-1C Note LIBOR-Based Rate with respect to an
Interest Rate Determination Date, or if, for any reason, such manner of
determination shall be held to be invalid or unenforceable, the Series 1999-1C
Note LIBOR-Based Rate for the related Interest Period shall be the Net Loan Rate
as determined by or on behalf of the Corporation with respect to such 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 Series 1999-1C 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 1999-1C
Notes to which such Series 1999-1C 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
B-5
<PAGE>
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 balance 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, the Series 1999-1C Notes are subject to cumulative
sinking fund redemption on __________ 1 in each of the years ___________ through
__________, at a Redemption Price equal to 100% of the principal amount thereof
plus accrued interest to the date of redemption, but only to the extent there
are amounts available therefor in the Revenue Fund and (except Balances therein
consisting of Student Loans) the Surplus Fund. In addition, the Corporation may
elect to apply Series 1999-1C Notes redeemed pursuant to other provisions of, or
purchased and retired pursuant to, the Indenture as a credit against such
sinking fund redemption in the manner provided in the Indenture.
Subject to compliance with the provisions of the Indenture relating to
certain asset requirements, Outstanding Series 1999-1 Notes may 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, at a
Redemption Price equal to 100% of the principal amount of Series 1999-1 Notes so
redeemed, from proceeds of the Series 1999-1 Notes constituting a portion of the
Balance of the Acquisition Fund that have not been used to acquire Eligible
Loans and from that portion of the Reserve Fund 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 ____________, from such sources not so used by
___________, unless the Corporation delivers to the Trustee: (i) a Corporation
Certificate certifying that, based on a Cash Flow Projection, the failure to so
redeem Series 1999-1 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 Moody's and Fitch to the effect that the failure to so redeem Series 1999-1
Notes will not result in a reduction or withdrawal of the rating of the Series
1999-1 Notes.
Subject to compliance with the provisions of the Indenture relating to
certain asset requirements, Outstanding Series 1999-1C Notes may, at the option
of the Corporation, be redeemed on 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
from the Surplus Account for such purpose in accordance with the Indenture and
from that portion of the Reserve Fund 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 Account, the
B-6
<PAGE>
Trustee shall, upon Corporation Order, transfer to the Retirement Account any
Balances in the Surplus Account (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
1999-1C 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:
Redemption
Redemption Period Price
----------------- ----------
, through %
---------------------- ----------------------
, through %
---------------------- ----------------------
, and thereafter 100%
----------------------
If not all Series 1999-1 Notes are to be redeemed, the particular Series
1999-1 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 1999-1C 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 1999-1C 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 1999-1C 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 1999-1C 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.
B-7
<PAGE>
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
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
1999-1C Notes. Notwithstanding the foregoing provisions of this paragraph, no
Series 1999-1C Note shall be required to be transferred, (i) during a period
beginning at the opening of business fifteen days before any selection of Series
1999-1C Notes for redemption and ending at the close of business on the day of
such selection, or (ii) if such Series 1999-1C Note has been selected for
redemption in whole or in part.
B-8
<PAGE>
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 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.
B-9
<PAGE>
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
By____________________________
Authorized 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
OF ASSIGNEE NOTICE: The signature to this
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-10
<PAGE>
EXHIBIT C
---------
NOTICE OF A PAYMENT DEFAULT
---------------------------
EDUCATION LOANS INCORPORATED
STUDENT LOAN ASSET-BACKED NOTES
SENIOR SERIES 1999-1A [B]
NOTICE IS HEREBY GIVEN that a Payment Default has occurred and not been
cured with respect to the Notes identified above. Determination of the Series
1999-1 Senior Note Interest Rate pursuant to the Auction Procedures will be
suspended. The Series 1999-1 Senior Note Interest Rate on the Series 1999-1A [B]
Notes for each Auction Period commencing after the date of Payment Default will
equal the Non-Payment Rate 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:_______________
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
By:________________________
C-1
<PAGE>
EXHIBIT D
---------
NOTICE OF CURE OF PAYMENT DEFAULT
---------------------------------
EDUCATION LOANS INCORPORATED
STUDENT LOAN ASSET-BACKED NOTES
SENIOR SERIES 1999-1A [B]
NOTICE IS HEREBY GIVEN that a Payment Default with respect to the Notes
identified above has been waived or cured. The next Interest Payment Date is and
the next Auction Date is .
Terms used herein have the meanings set forth in the First Supplemental
Indenture of Trust relating to the above-referenced Notes.
Dated:_______________
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
By:________________________-
D-1
<PAGE>
EXHIBIT E
---------
NOTICE OF PROPOSED AUCTION PERIOD ADJUSTMENT
--------------------------------------------
EDUCATION LOANS INCORPORATED
STUDENT LOAN ASSET-BACKED NOTES
SENIOR SERIES 1999-1A [B]
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 shall take effect on the Interest Payment Date for the
current Auction Period and the date of commencement of the next Auction Period
(the "Effective Date").
2. The Auction Period Adjustment in Paragraph 1 shall take place only if
(A) the Trustee and the Auction Agent receive, by 11:00 a.m., New York City
time, on the Business Day before the Auction Date for the Auction Period
commencing on the Effective Date, a certificate from the Market Agent, as
required by the First Supplemental Indenture authorizing the change in length of
one or more Auction Periods and (B) Sufficient Bids exist on the Auction Date
for the Auction Period commencing on the Effective Date.
3. If the condition referred to in (A) above is not met, the Auction Rate
for the Auction Period commencing on the Effective Date will be determined
pursuant to the Auction Procedures and the Auction Period shall be the Auction
Period determined without reference to the proposed change. If the condition
referred to in (A) is met but the condition referred to in (B) above is not met,
the Auction Rate for the Auction Period commencing on the Effective Date shall
be the Maximum Auction Rate and the Auction Period shall be the Auction Period
determined without reference to the proposed change.
4. It is hereby represented, upon advice of the Auction Agent for the Notes
described herein, that there were Sufficient Bids for such Notes at the Auction
immediately preceding the date of this Notice.
Terms used herein have the meanings set forth in the First Supplemental
Indenture.
Dated:_________________
EDUCATION LOANS INCORPORATED
By:____________________________
E-1
<PAGE>
EXHIBIT F
---------
NOTICE ESTABLISHING AUCTION PERIOD ADJUSTMENT
---------------------------------------------
EDUCATION LOANS INCORPORATED
STUDENT LOAN ASSET-BACKED NOTES
SENIOR SERIES 1999-1A [B]
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 Payment
Date for the current Auction Period and the date of commencement of the next
Auction Period (the "Effective Date").
2. For the Auction Period commencing on the Effective Date, the Interest
Payment Date shall be ________________, or the next succeeding Business Day if
such date is not a Business Day.
3. For Auction Periods occurring after the Auction Period the Interest
Payment Dates shall be [_______________ (date) and every _____________ (number)
______________ (day of week) thereafter] [every ______________ (number) (day of
week) after the date set forth in paragraph 2 above], or the next Business Day
if any such day is not a Business Day; provided, however, that the length of
subsequent Auction Periods shall be subject to further change hereafter as
provided in Section 11 of the First Supplemental Indenture.
4. The changes described in paragraphs 2 and 3 above shall take place only
upon delivery of this Notice and the satisfaction of other conditions set forth
in the 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
STUDENT LOAN ASSET-BACKED NOTES
SENIOR SERIES 1999-1A [B]
Notice is hereby give by Salomon 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
third and fourth lines thereof and by substituting "_____________________
(number) Business Days" for "two (2) Business Days" in subsection (d) thereof.
2. This change shall take effect on _______________, which shall be the
Auction Date for the Auction Period commencing on _______________.
3. The Auction Date for 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:___________________
SALOMON SMITH BARNEY INC., as
Market Agent
By:________________________
G-1
<PAGE>
EXHIBIT H
---------
[List of Student Loan Purchase Agreements]
H-1
<PAGE>
Exhibit 4.3
================================================================================
AUCTION AGENT AGREEMENT
by and among
EDUCATION LOANS INCORPORATED,
as Issuer,
U.S. BANK NATIONAL ASSOCIATION,
as Trustee,
and
BANKERS TRUST COMPANY,
as Auction Agent
-----------
Dated as of _________ 1, 1999
-----------
Relating to
$__________
EDUCATION LOANS INCORPORATED
STUDENT LOAN ASSET-BACKED NOTES
SENIOR SERIES 1999-1A AND B
================================================================================
<PAGE>
TABLE OF CONTENTS
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 Series 1999-1 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
-i-
<PAGE>
7.3 Entire Agreement..................................................19
7.4 Benefits..........................................................19
7.5 Amendment; Waiver.................................................19
7.6 Successors and Assigns............................................20
7.7 Severability......................................................20
7.8 Execution in Counterparts.........................................20
Exhibits
- --------
Exhibit A -- List of Initial Broker-Dealers
Exhibit B -- Broker-Dealer Agreement
Exhibit C -- Notice of Ratings
Exhibit D -- Notice of Series 1999-1 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 Series 1999-1 Note Interest Rate
-ii-
<PAGE>
THIS AUCTION AGENT AGREEMENT, dated as of __________ 1, 1999 (this "Auction
Agent Agreement"), is being entered into by and among EDUCATION LOANS
INCORPORATED, a Delaware corporation (together with any successors or assigns,
the "Issuer"), U.S. 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 1999-1, including therein two series designated Student Loan
Asset-Backed Notes, Senior Series 1999-1A (the "Series 1999-1A Notes"), and
Student Loan Asset-Backed Notes, Senior Series 1999-1B (the "Series 1999-1B
Notes" and, together with the Series 1999-1A Notes, the " Series 1999-1 Notes").
The Series 1999-1 Notes are being issued under the First Supplemental Indenture
of Trust, dated as of _________ 1, 1999 (the "First Supplemental Indenture"), by
and between the Issuer and the Trustee and executed pursuant to an Indenture of
Trust, dated as of _________ 1, 1999 (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.
"Broker-Dealer" shall mean a person listed on Exhibit A hereto, as such
Exhibit A may be amended from time to time.
-2-
<PAGE>
"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 Series 1999-1 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.
"Participant" shall mean a member of, or participant in, the Securities
Depository.
"Settlement Procedures" shall mean the Settlement Procedures attached as
Exhibit G hereto.
-3-
<PAGE>
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 1999-1A
Notes and the Series 1999-1B Notes, but separately in each case. References
to " Series 1999-1 Notes" shall, unless the context clearly contemplates a
reference to all the Series 1999-1 Notes, be deemed to refer only to a
particular series of Series 1999-1 Notes.
Section 2. The Auction.
2.1 Interest Rate on Series 1999-1 Notes; Incorporation by Reference of
Auction Procedures and Settlement Procedures.
(a) During the Initial Interest Period, each of the Series 1999-1A
Notes and the Series 1999-1B Notes shall bear interest at the Series 1999-1
Note Initial Interest Rate for such series. Thereafter, the Series 1999-1
Notes shall bear interest at the Series 1999-1 Note Interest Rate based on
an Interest Period that shall be an Auction Period. The Series 1999-1 Note
Interest Rate on each series of the Series 1999-1 Notes for each Auction
Period shall be the lesser of (i) the Net Loan Rate and (ii) the Auction
Rate determined in 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 Series 1999-1 Note
Interest Rate for each series of the Series
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1999-1 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 Salomon 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 Series 1999-1 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 Series
1999-1 Notes. Pursuant to the Broker-Dealer Agreement, Salomon 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 Series 1999-1
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
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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 Series 1999-1 Notes is sent to the Securities
Depository as the Holder of Series 1999-1 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 Series 1999-1 Notes Outstanding. In the
event the Auction Agent receives from the Trustee written notice of
any partial redemption of any Series 1999-1 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 Series 1999-1 Notes are
to be redeemed) the aggregate principal amount of such Series 1999-1
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 Series 1999-1 Notes shown in the Existing Holder
Registry.
(iii) The Auction Agent shall be required to register in the
Existing Holder Registry a transfer of Series 1999-1 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
Series 1999-1 Notes in an Auction of the failure of such Series 1999-1
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 Series 1999-1 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 Series 1999-1 Notes and the aggregate
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principal amount of Series 1999-1 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 Series 1999-1 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 and One-Month LIBOR or Three-Month
LIBOR, as the case may be. The Net Loan Rate with respect to each Auction
Date shall be determined and written notice thereof given to the Auction
Agent in accordance with Section 6 of the First Supplemental Indenture. 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 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 Series 1999-1 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 Series 1999-1 Note Interest Rate
for the next succeeding Auction Period shall be the Net Loan Rate.
(ii) If the ownership of the Series 1999-1 Notes is no longer
maintained in Book-Entry Form by the Securities Depository, no further
Auctions shall be held and the Series 1999-1 Note Interest Rate for
each Interest Period commencing after the delivery of certificated
Series 1999-1 Notes pursuant to Section 17 of the First Supplemental
Indenture shall equal the lesser of the Net
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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 Series 1999-1 Notes, the Series 1999-1 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
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Supplemental Indenture. The Series 1999-1 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 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 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 Series 1999-1 Notes
is 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. /1/ or Broker-Dealers of the results of the Auction as
4:00 p.m. /2/ provided in Section 4(c)(ii) of the First
Supplemental Indenture.
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/1/ If the Series 1999-1 Note Interest Rate is the Auction Rate.
/2/ If the Series 1999-1 Note Interest Rate is the Net Loan Rate.
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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 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.
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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 Salomon 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 Salomon Smith Barney Inc., so long
as Salomon 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 Auction (or for such longer period requested by the Trustee or the
Issuer, not to exceed four years after each Auction), and such
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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 Series 1999-1 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 Series 1999-1 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 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
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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 Series 1999-1 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.
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.
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(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
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.
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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 Series 1999-1 Notes.
6.4 Compensation, Remedies and Indemnification.
(a) With respect to each series of Series 1999-1 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 Series 1999-1
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 Series 1999-1
Notes of such series on the date of original issuance of the Series 1999-1
Notes.
(b) With respect to each series of Series 1999-1 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 Series 1999-1 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 Series 1999-1 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 Series 1999-1 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
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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 the Series 1999-1 Notes, not later than 12:00
noon, New York City time, on each Interest Payment Date with respect to
each Interest Period immediately following an Auction 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 in such Interest Period and the denominator of
which is 360, times (iii) the aggregate principal amount of Series 1999-1
Notes of such series outstanding on the date of original issuance of the
Series 1999-1 Notes (in the case of the initial Interest Period) or at the
close of business on the first day of such Interest Period (in the case of
all succeeding Interest Periods), 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 Salomon 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
-16-
<PAGE>
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)
and shall be given to such party addressed to it at its address, or facsimile
number set below:
If to the Trustee,
addressed: U.S. 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, Suite 200
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
-17-
<PAGE>
If to the Market Agent,
addressed: Salomon Smith Barney Inc.
388 Greenwich Street
32nd Floor
New York, New York 10013
Attn: Student Loan Finance
Group
Telephone: (212) 816-9948
Facsimile: (212) 816-0598
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 Series
1999-1 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.
-18-
<PAGE>
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 (including, without limitation,
EdLinc upon the Section 150(d)(3) Transfer) and the Auction Agent. Except as to
the Section 150(d)(3) Transfer and the associated assignment of the Issuer's
rights hereunder to, and assumption of the Issuer's obligations hereunder by,
EdLinc (consent to which assignment and assumption by the Trustee and Auction
Agent are hereby acknowledged), 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.
-19-
<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
U.S. BANK NATIONAL
ASSOCIATION, as Trustee
By:____________________________
Title: Trust Officer
BANKERS TRUST COMPANY, as
Auction Agent
By:____________________________
Title:_________________________
-20-
<PAGE>
EXHIBIT A
TO AUCTION AGENT AGREEMENT
--------------------------
LIST OF INITIAL BROKER-DEALERS
------------------------------
Salomon 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
STUDENT LOAN
ASSET-BACKED NOTES
SENIOR SERIES 1999-1A AND B
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
Series 1999-1 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
Series 1999-1 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 SERIES 1999-1 NOTES OUTSTANDING
-----------------------------------------
EDUCATION LOANS INCORPORATED
STUDENT LOAN
ASSET-BACKED NOTES
SENIOR SERIES 1999-1A[B]
NOTICE IS HEREBY GIVEN that $_________ aggregate principal amount of Series
1999-1A[B] Notes were outstanding at the close of business on the immediately
preceding Regular Record Date. Such aggregate principal amount of Series
1999-1A[B] Notes, less $_________ aggregate principal amount of Series
1999-1A[B] Notes to be redeemed by the Issuer pursuant to the First Supplemental
Indenture, for a net aggregate principal amount of Series 1999-1A[B] 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.
U.S. 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
STUDENT LOAN
ASSET-BACKED NOTES
SENIOR SERIES 1999-1A AND B
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
STUDENT LOAN
ASSET-BACKED NOTES
SENIOR SERIES 1999-1A[B]
NOTICE IS HEREBY GIVEN that a Payment Default has occurred and not been
cured with respect to the Series 1999-1 ____ Notes. Determination of the Series
1999-1 Note Interest Rate on the Series 1999-1 Notes pursuant to the Auction
Procedures will be suspended. The Series 1999-1 Note Interest Rate on each
series of the Series 1999-1 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 Series 1999-1 Notes.
(a) Not later than (1) 3:00 p.m., if the Series 1999-1 Note Interest
Rate is the Auction Rate, or (2) 4:00 p.m., if the Series 1999-1 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 Series 1999-1 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 Series 1999-1 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 Series
1999-1 Notes, if any, to be purchased by such Potential Holder;
(v) If the aggregate amount of Series 1999-1 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 Series 1999-1 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 excess principal amount of Series
1999-1 Notes and the principal amount of Series 1999-1 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;
G-1
<PAGE>
(vi) if the principal amount of Series 1999-1 Notes to be
purchased by all Potential Holders on whose behalf such Buyer's
Broker-Dealer submitted a Bid exceeds the amount of Series 1999-1
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 Series 1999-1 Notes and the
principal amount of Series 1999-1 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
Series 1999-1 Notes to be purchased pursuant to such Bid against
receipt of such Series 1999-1 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 Participant) through the Securities
Depository the principal amount of Series 1999-1 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
G-2
<PAGE>
(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
Series 1999-1 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
Series 1999-1 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 amount necessary to purchase Series 1999-1 Notes to be
purchased pursuant to paragraph (b)(ii) above against receipt of such
Series 1999-1 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
G-3
<PAGE>
(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 Series 1999-1 Notes in an Auction
fails to deliver such Series 1999-1 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 Series 1999-1 Notes
that is less than the principal amount of Series 1999-1 Notes that
otherwise was to be purchased by such Potential Holder. In such event, the
principal amount of Series 1999-1 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 Series 1999-1
Notes shall constitute good delivery. Notwithstanding the foregoing terms
of this paragraph (f), any delivery or nondelivery of Series 1999-1 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 Series 1999-1 Notes purchased or sold pursuant to an
Auction or otherwise.
G-4
<PAGE>
EXHIBIT H
TO AUCTION AGENT AGREEMENT
--------------------------
NOTICE OF CONTINUATION OF AUCTION PERIOD
----------------------------------------
EDUCATION LOANS INCORPORATED
STUDENT LOAN
ASSET-BACKED NOTES
SENIOR SERIES 1999-1A[B]
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 Series 1999-1
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 SERIES 1999-1 NOTE INTEREST RATE
------------------------------------------
EDUCATION LOANS INCORPORATED
STUDENT LOAN
ASSET-BACKED NOTES
SENIOR SERIES 1999-1A[B]
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
Series 1999-1 Notes have not been provided. The Series 1999-1 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
BROKER-DEALER AGREEMENT
between
[_______],
as Auction Agent
and
SALOMON SMITH BARNEY INC.,
as Broker-Dealer
Dated as of [_____]
Relating to
EDUCATION LOANS INCORPORATED
STUDENT LOAN ASSET-BACKED NOTES
[_____] SERIES 1999-[X]
<PAGE>
BROKER-DEALER AGREEMENT
This BROKER-DEALER AGREEMENT (the "Broker Dealer Agreement"), dated as of
[_____], is by and between [_____], a [_____] (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
Delaware corporation and SALOMON 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 Student Loan
Asset-Backed Notes, [_____] Series 1999-[X] (the "Series 1999-[X] Notes"). The
Series 1999-[X] Notes are being issued under the [_____] Supplemental Indenture
of Trust, dated as of [_____] (the "[_____] Supplemental Indenture"), executed
in accordance with the Indenture of Trust, dated as of ____________ 1, 1999 (the
"Indenture"), each between the Corporation and U.S. Bank National Association,
Minneapolis, Minnesota (together with its successors and assigns, the
"Trustee"). The Series 1999-[X] Notes are being issued as adjustable rate
securities.
The [_____] Supplemental Indenture provides that the Series 1999-[X] 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 Series 1999-[X] Notes.
Pursuant to Section 2.9(a) of the Auction Agent Agreement, dated as of
[_____], 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:
Section 1. Definitions and Rules of Construction
1.1. Terms Defined by Reference to the [_____] Supplemental Indenture
Capitalized terms used herein and not otherwise defined herein shall have
the meanings given such terms in the [_____] 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:
<PAGE>
"Applicable Series 1999-[X] Note Interest Rate" shall mean the Series
1999-[X] Note Interest Rate as defined in the [_____] 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 Series
1999-[X] 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.
(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 Series 1999-[X]
Notes, but
-2-
<PAGE>
separately. References to "Series 1999-[X] Notes," unless the context clearly
contemplates a reference to all Series 1999-[X] Notes shall refer only to the
Series 1999-[X] Notes as to rights and duties regarding Series 1999-[X] Notes;
and only to the Series 1999-[X] Notes as to rights and duties regarding Series
1999-[X] 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
Series 1999-[X] 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 Series 1999-[X]
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.
(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 Series
1999-[X] 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
Series 1999-[X] Notes (listed by series) and the aggregate principal amount of
each series of Series 1999-[X] 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
-3-
<PAGE>
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 Series 1999-[X] 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 Series 1999-[X] 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 under the
Auction Procedures, the [_____] Supplemental
Indenture and the 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 [_____]
Supplemental Indenture. The Submission
Deadline is 12:30 P.M.
Not earlier than 12:30 P.M. The Auction Agent makes determinations
pursuant to Section 4(c)(i) of the [_____]
Supplemental Indenture. Submitted Bids and
Submitted Sell Orders are accepted and
rejected in whole or in part and Series
1999-[X] Notes allocated as provided in
Section 4(d) of the [_____] Supplemental
Indenture.
By approximately The Auction Agent advises the Trustee and
3:00 P.M.* the Broker-Dealers of the results of the
4:00 P.M.** Auction as provided in Section 4(c)(ii) of
the [_____] Supplemental Indenture. The
Auction Agent gives notice of Auction
results as set forth in Section 2.4(a)
hereof.
*If the Series 1999-[X] Note Interest Rate is the Auction Rate.
**If the Series 1999-[X] Note Interest Rate is the Net Loan Rate.
-4-
<PAGE>
(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 Series 1999-[X] 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 Series 1999-[X] Note Interest Rate to be transferred to or
payment to be made by any person that purchased or sold Series 1999-[X] 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
-5-
<PAGE>
days in the Interest Period related to the Auction by which the Applicable
Series 1999-[X] Note Interest Rate was determined and the denominator of which
is 360 times (iii) the sum of (A) the aggregate principal amount of Series
1999-[X] 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
Series 1999-[X] Notes subject to valid Hold Orders submitted to the Auction
Agent by the Broker-Dealer plus (C) the aggregate principal amount of Series
1999-[X] 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 Series 1999-[X] Notes through the Broker-Dealer transfers those
Series 1999-[X] Notes to another person other than pursuant to an Auction, then
the Broker-Dealer shall continue to be the Broker-Dealer through which the
Series 1999-[X] 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 Series 1999-[X] 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 Series 1999-[X] Notes that was accepted in whole or in
part fails to instruct its Participant to deliver the Series 1999-[X] Notes
subject to such Bid or Sell Order against payment therefor, the Broker-Dealer
shall instruct such Participant to deliver such Series 1999-[X] 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 Series 1999-[X] Notes that is less than the
principal amount of the Series 1999-[X] Notes specified in such Bid to be
purchased by such Potential Holder. Notwithstanding the foregoing terms of this
Section, any delivery or nondelivery of Series 1999-[X] 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 Series
1999-[X] Notes or to pay for Series 1999-[X] 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).
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.
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<PAGE>
(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.
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 Salomon 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
-7-
<PAGE>
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 Salomon 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 Series 1999-[X] Notes pursuant to Section 17 of the [_____]
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: SALOMON SMITH BARNEY INC.
388 Greenwich Street
32nd Floor
New York, New York 10013
Attention: Student Loan Finance Group
Telephone: (212) 816-9948
Facsimile: (212) 816-0598
If to the Auction Agent, addressed: ____________
____________
____________, ____________ ____________
Attention: ______________
Telephone: (___) ___-____
Facsimile: (___) ___-____
If to the Trustee, addressed: U.S. 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
-8-
<PAGE>
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 [_____], 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.
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.
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<PAGE>
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.
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.
[_______]
as Auction Agent
By:_________________________________
Title:__________________________
SALOMON SMITH BARNEY INC.,
as Broker-Dealer
By:_________________________________
Title:__________________________
Pursuant to and in accordance
with Section 9 of the [_____]
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.
U.S. Bank National Association, as Trustee
By_________________________________
Title:_____________________________
<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 [_____] Supplemental
Indenture. These Settlement Procedures shall apply separately for each series of
Series 1999-[X] Notes.
(a) Not later than (1) 3:00 P.M., if the Series 1999-[X] Note Interest Rate
is the Auction Rate or (2) 4:00 p.m. if the Series 1999-[X] 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 Series 1999-[X] 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 Series 1999-[X] 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
Series 1999-[X] Notes, if any, to be purchased by such Potential
Holder;
(v) if the aggregate amount of Series 1999-[X] 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 Series 1999-[X] 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)
acting for one or more purchasers of such excess principal amount
of Series 1999-[X] Notes and the principal amount of Series
1999-[X] 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 Series 1999-[X] Notes to be purchased
by all Potential Holders on whose behalf such Buyer's
Broker-Dealer submitted a Bid exceeds the amount of Series
1999-[X]
A-1
<PAGE>
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 Series
1999-[X] Notes and the principal amount of Series 1999-[X] 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 the principal amount of Series
1999-[X] Notes to be purchased pursuant to such Bid against
receipt of such Series 1999-[X] 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 Series 1999-[X]
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 Series 1999-[X] Note
Interest Rate for the next Series 1999-[X] 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
A-2
<PAGE>
(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 Series 1999-[X] 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 (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 Series
1999-[X] 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 Series 1999-[X] Notes to be
purchased pursuant to (b) (ii) above against receipt of such
Series 1999-[X] 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) (11i) or (b) (iii)
above for such Auction, and the Depository shall e4cute 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
A-3
<PAGE>
for such Auction, and the Depository shall execute such
transactions.
(f) If an Existing Holder selling Series 1999-[X] Notes in an Auction fails
to deliver such Series 1999-[X] 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 Series 1999-[X] Notes
that is less than the principal amount of Series 1999-[X] Notes that otherwise
was to be purchased by such Potential Holder. In such event, the principal
amount of Series 1999-[X] 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 Series 1999-[X] Notes shall constitute good delivery.
Notwithstanding the foregoing terms of this paragraph (f), any delivery or
nondelivery of Series 1999-[X] 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 Series 1999-[X] Notes or to pay
for the Series 1999-[X] Notes purchased or sold pursuant to an Auction or
otherwise.
A-4
<PAGE>
EXHIBIT B TO BROKER-DEALER AGREEMENT
EDUCATION LOANS INCORPORATED
STUDENT LOAN ASSET-BACKED NOTES
[_____] SERIES 1999-[X]
ORDER FORM
AUCTION DATE ___________
ISSUE ___________
SERIES ___________
Bidder(s) indicated The undersigned Broker-Dealer submits the following
orders on behalf of the below:
<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
STUDENT LOAN ASSET-BACKED NOTES
[_____] SERIES 1999-[X]
BIDS BY POTENTIAL 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. _______________________ _______________________ ____________________
11. _______________________ _______________________ ____________________
12. _______________________ _______________________ ____________________
13. _______________________ _______________________ ____________________
14. _______________________ _______________________ ____________________
15. _______________________ _______________________ ____________________
</TABLE>
NOTES:
1. If one or more Orders covering in the aggregate more than the outstanding
principal amount of Series 1999-[X] 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 Series 1999-[X] Notes not greater than the principal
amount currently held by such Existing Holder.
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 (.00 1 of 1%).
5. An order must be submitted in principal amounts of $100,000 or integral
multiples thereof.
B-2
<PAGE>
*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: [AUCTION AGENT NAME]
____________
____________, ____________ _____
Telephone: (___) ___-____
Telecopier: (___) ___-____
B-4
<PAGE>
EXHIBIT C TO BROKER-DEALER AGREEMENT
EDUCATION LOANS INCORPORATED
STUDENT LOAN ASSET-BACKED NOTES
[_____] SERIES 1999-[X]
(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 1999-[X] 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
STUDENT LOAN ASSET-BACKED NOTES
[_____] SERIES 1999-[X]
NOTICE OF A FAIL TO DELIVER OR MAKE PAYMENT
COMPLETE EITHER I OR II.
We are a Broker-Dealer for * (the "Purchaser"), which purchased
$_________ (must be in units of $100,000) of the [_____] Series
1999-[X] Notes in the Auction held on _____________________ from the
seller of such Series 1999-[X] Notes.
We are a Broker-Dealer for * (the "Seller"), which sold $___________
(must be in units of $100,000) of the [_____] Series 1999-[X] Notes in
the Auction held on ___________________ to the purchaser of such
[_____] Series 1999-[X] Notes.
We hereby notify you that (check one)
_______________ the Seller failed to deliver such [_____] Series 1999-[X]
Notes to the Purchaser.
_______________ the Purchaser failed to make payment to the Seller upon
delivery of such Series 1999-[X] 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>
[Letterhead of Dorsey & Whitney LLP]
EXHIBIT 5.1
Education Loans Incorporated
105 First Avenue Southwest
Aberdeen, South Dakota 57401
Re: Registration Statement on Form S-3
File No. 333-85963
Ladies and Gentlemen:
We have acted as counsel to Education Loans Incorporated, a Delaware
corporation (the "Registrant"), in connection with the preparation of a
Registration Statement on Form S-3 filed by the Registrant with the Securities
and Exchange Commission (the "Commission") on August 26, 1999 (the "Registration
Statement"), relating to the registration by the Registrant of $500,000,000
Student Loan Asset-Backed Notes (the "Notes") to be issued by the Registrant
under an Indenture of Trust in substantially the form incorporated by reference
as Exhibit 4.1 to the Registration Statement (the "Indenture"), as supplemented
by Supplemental Indentures of Trust in substantially the form incorporated by
reference as Exhibit 4.2 to the Registration Statement (each a "Supplemental
Indenture"), to be entered into between the Registrant and U.S. Bank National
Association, as trustee (the "Trustee"). The Notes will be issued from time to
time in series.
We have examined the Registration Statement, the forms of such agreements
filed as exhibits thereto, and such other documents, and have reviewed such
questions of law, as we have considered necessary and appropriate for the
purposes of this opinion. Based on the foregoing, we are of the opinion that:
1. The Indenture and each Supplemental Indenture, when it has been
duly authorized by the Board of Directors of the Registrant and duly
executed and delivered by the Registrant and the Trustee, will constitute
the valid and binding obligation of the Registrant.
2. Each series of Notes issued pursuant to the Indenture, when duly
executed, authenticated and delivered in accordance with the terms of the
Indenture
<PAGE>
Education Loans Incorporated
October 20, 1999
Page 2
and the related Supplemental Indenture, will be legally and validly issued,
and the holders of such Notes will be entitled to the benefits of the
Indenture.
The opinions set forth above are subject to the following qualifications
and exceptions:
(a) In rending the opinions set forth above, we have assumed that, at
the time of the execution of the Indenture and each Supplemental Indenture
and the execution, authentication and delivery of each series of Notes,
there will not have occurred any change in the law affecting the
authorization, execution, delivery, validity or enforceability of the
Notes, the Registration Statement will have been declared effective by the
Commission and will continue to be effective, the Notes will be issued and
sold as described in the Registration Statement, none of the particular
terms of a series of Notes will violate any applicable law and neither the
issuance and sale thereof nor the compliance by the Registrant with the
terms thereof will result in a violation of any agreement or instrument
then binding upon the Registrant or any order of any court or governmental
body having jurisdiction over the Registrant.
(b) Our opinions in paragraphs 1 and 2 above are subject to the effect
of any applicable bankruptcy, insolvency, reorganization, moratorium or
other similar law of general application affecting creditors' rights.
(c) Our opinions in paragraphs 1 and 2 above are subject to the effect
of general principles of equity, including (without limitation) concepts of
materiality, reasonableness, good faith and fair dealing, and other similar
doctrines affecting the enforceability of agreements generally (regardless
of whether considered in a proceeding in equity or at law).
(d) Minnesota Statutes ss. 290.371, Subd. 4, provides that any
corporation required to file a Notice of Business Activities Report does
not have a cause of action upon which it may bring suit under Minnesota law
unless the corporation has filed a Notice of Business Activities Report and
provides that the use of the courts of the State of Minnesota for all
contracts executed and all causes of action that arose before the end of
any period for which a corporation failed to file a required report is
precluded. Insofar as our opinion may relate to the valid, binding and
enforceable character of any agreement under Minnesota law or in a
Minnesota court, we have assumed that any party seeking to enforce such
agreement has at all times been, and will continue at all times to be,
exempt from the requirement of filing a Notice of Business Activities
Report or, if not exempt, has duly filed, and will continue to duly file,
all Notice of Business Activities Reports.
Our opinions expressed above are limited to the laws of the State of
Minnesota and the Delaware General Corporation Law.
<PAGE>
Education Loans Incorporated
October 20, 1999
Page 3
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, and to the reference to our firm under the heading
"Legal Matters" in the Prospectus comprising part of the Registration Statement.
Dated: October 20, 1999
Very truly yours,
/s/ DORSEY & WHITNEY LLP
MER
<PAGE>
[Letterhead of Dorsey & Whitney LLP]
EXHIBIT 8.1
Education Loans Incorporated
105 First Avenue Southwest
Aberdeen, South Dakota 57401
Re: Registration Statement on Form S-3
File No. 333-85963
Ladies and Gentlemen:
We have acted as counsel to Education Loans Incorporated, a Delaware
corporation (the "Registrant"), in connection with the preparation of a
Registration Statement on Form S-3 filed by the Registrant with the Securities
and Exchange Commission (the "Commission") on August 26, 1999 (the "Registration
Statement"), relating to the registration by the Registrant of $500,000,000
Student Loan Asset-Backed Notes (the "Notes") to be issued by the Registrant
under an Indenture of Trust in substantially the form incorporated by reference
as Exhibit 4.1 to the Registration Statement (the "Indenture"), as supplemented
by Supplemental Indentures of Trust in substantially the form incorporated by
reference as Exhibit 4.2 to the Registration Statement (each a "Supplemental
Indenture"), to be entered into between the Registrant and U.S. Bank National
Association, as trustee (the "Trustee"). The Notes will be issued from time to
time in series.
The Notes are described in the prospectus constituting Part I of the
Registration Statement (the "Prospectus"). Each series of Notes will be more
particularly described in a supplement to the Prospectus (each, a "Supplement").
You have requested our opinion with respect to certain federal income tax
consequences of the purchase, ownership and disposition of the Notes. For
purposes of rendering our opinion we have examined the Registration Statement
and the Indenture. Each Supplement and Supplemental Indenture pertaining to a
specific series is to be completed subsequent to the date of this opinion.
Accordingly, we have not examined any Supplement or Supplemental Indenture
relating to any specific series to be issued, and our opinion does not address
the contents of any such
<PAGE>
Education Loans Incorporated
October 20, 1999
Page 2
Supplement or Supplemental Indenture except as and to the extent that the
provisions of same may be described in the Prospectus. We understand that each
Supplement will contain a discussion of any material federal income tax
consequences pertaining to the series to be offered thereunder which are not
addressed in the Prospectus.
Our opinion is based upon existing law and currently applicable Treasury
Department regulations, current published administrative positions of the
Internal Revenue Service contained in revenue rulings and revenue procedures,
and judicial decisions, all of which are subject to change, either prospectively
or retroactively, and to possibly differing interpretations. Our opinion is also
based on the representations and warranties set forth in the Indenture and
applicable Supplemental Indenture and the assumptions that the Registrant and
the Trustee will at all times comply with the requirements of the Indenture and
applicable Supplemental Indenture.
An opinion of counsel is predicated on all the facts and conditions set
forth in the opinion and is based upon counsel's analysis of the statutes,
regulatory interpretations and case law in effect as of the date of the opinion.
It is not a guarantee of the current status of the law and should not be
accepted as a guarantee that a court of law or an administrative agency will
concur in the opinion.
The characterization of an instrument as debt or equity for federal income
tax purposes depends on all of the facts and circumstances in each case. In any
such determination, several factors must be considered, including, among other
things, the independence of the debt holder and equity holders, the intention of
the parties to create a debt, the creation of a formal debt instrument, the
safety of the principal amount, and the debt to equity ratio of the issuer. In
this regard, we note that the Trustee and each Noteholder will agree to treat
the Notes as debt for federal income tax purposes. Based on such agreement, the
factors listed above and other considerations, it is our opinion that the Notes
will be treated as debt of the Registrant for federal income tax purposes.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the use of our name under the heading "United States Federal
Income Tax Consequences" in the Prospectus, and we hereby confirm that, insofar
as they constitute statements of law or legal conclusions as to the likely
outcome of material issues under the federal income tax laws, the discussion
under such heading accurately sets forth our advice.
Dated: October 20, 1999
Very truly yours,
/s/ DORSEY & WHITNEY LLP
MER
<PAGE>
Exhibit 10.1
================================================================================
SERVICING AND ADMINISTRATION AGREEMENT
among
EDUCATION LOANS INCORPORATED,
as Issuer
STUDENT LOAN FINANCE CORPORATION,
as Servicer and Administrator
and
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
----------------------------
Dated as of ________ 1, 1999
----------------------------
================================================================================
<PAGE>
SERVICING AND ADMINISTRATION AGREEMENT
THIS SERVICING AND ADMINISTRATION AGREEMENT (the "Agreement") entered into
as of the 1st day of _____________, 1999 by and among Student Loan Finance
Corporation, a corporation organized under the laws of the State of South Dakota
("SLFC," and, in its capacity as servicer hereunder, the "Servicer,"and, in its
capacity as administrator hereunder, the "Administrator"), Education Loans
Incorporated, a corporation organized under the laws of the State of Delaware
(the "Issuer"), and U.S. Bank National Association, a national banking
association headquartered in Minneapolis, Minnesota, in its capacity as trustee
under the Indenture hereinafter referred to (the "Trustee").
W I T N E S E T H:
WHEREAS, the Servicer services student loans ("Student Loans") which have
been (1) 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")(such Student Loans being herein referred
to as "FFELP Loans"), or (2) have been originated under certain loan programs
(the "Alternative Loan Programs") established by SLFC to make amounts available
for the post-secondary education of eligible students in excess of the amounts
available through FFELP Loans (such Student Loans being herein referred to as
"Alternative Loans"); and
WHEREAS, SLFC has established its Student Loan Purchase Program pursuant to
which it acquires or causes the acquisition of certain Student Loans from
lenders ("Lenders") eligible to originate or hold such Student Loans under the
Higher Education Act or under an Alternative Loan Program, as applicable; and
WHEREAS, pursuant to SLFC's Student Loan Purchase Program, the Issuer has
entered into or will enter into Student Loan Purchase Agreements ("Issuer
Student Loan Purchase Agreements") (1) with certain Lenders pursuant to which
the Issuer agrees to cause the purchase of FFELP Loans by the Trustee (for the
account and on behalf of the Issuer) from such Lenders, and (2) with SLFC
pursuant to which the Issuer has agreed to cause the purchase of Alternative
Loans by the Trustee (for the account and on behalf of the Issuer) from SLFC;
and
WHEREAS, pursuant to SLFC's Student Loan Purchase Program, GOAL Funding,
Inc., a Delaware corporation ("GOAL Funding"), has entered into or will enter
into Student Loan Purchase Agreements ("GOAL Funding Student Loan Purchase
Agreements" and, together with the Issuer Student Loan Purchase Agreements,
collectively the " Student Loan Purchase Agreements") (1) with certain Lenders
pursuant to which GOAL Funding agrees to cause the purchase of FFELP Loans by
U.S. Bank National Association, as trustee for GOAL Funding (in such capacity,
the "GOAL Funding Trustee") (for the account and on behalf of GOAL Funding) from
such Lenders, and (2) with SLFC pursuant to which GOAL Funding has agreed to
cause the purchase of Alternative Loans by the GOAL Funding Trustee (for the
account and on behalf of GOAL Funding) from SLFC; and
<PAGE>
WHEREAS, SLFC, as servicer and administrator (in such capacities, the "GOAL
Funding Servicer"), has, pursuant to a servicing and administration agreement
with GOAL Funding and the GOAL Funding Trustee, agreed to service the Student
Loans acquired by GOAL Funding under the GOAL Funding Student Loan Purchase
Agreements while such Student Loans are pledged under GOAL Funding's warehouse
financing; and
WHEREAS, the Issuer will enter into Transfer Agreements ("Transfer
Agreements") with the Trustee, GOAL Funding and the GOAL Funding Trustee,
pursuant to which the Issuer will purchase from GOAL Funding FFELP Loans and
Alternative Loans previously purchased pursuant to GOAL Funding Student Loan
Purchase Agreements ("GOAL Funding Student Loans") and will be assigned all
right, title and interest of GOAL Funding in such agreements with respect to the
Student Loans so sold; and
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 herein referred to as "Financed Student Loans"); and
WHEREAS, the Issuer initially will obtain funds necessary to originate and
purchase Student Loans through the issuance of its Student Loan Asset-Backed
Notes, Series 1999-[X] (the "Series 1999-[X] Notes"), pursuant to an Indenture
of Trust, dated as of __________ 1, 1999 (as amended or supplemented, the
"Indenture"), between the Issuer and the Trustee, as Trustee; 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 executed Transfer Agreements and (iii) the Indenture have been or will be
furnished to the Servicer; 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 Alternative Loan Programs, the Student
Loan Purchase Agreements, the Transfer Agreements and the Indenture, and the
Servicer is willing to undertake such obligations on the terms hereinafter
specified; and
WHEREAS, the Issuer wishes to retain the Administrator to perform other
administrative requirements on behalf of the Issuer, including those required to
allow the Issuer to satisfy certain requirements under the Indenture;
-2-
<PAGE>
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto agree as follows:
1. Term. The term of this Agreement shall commence as of the date hereof
and shall continue for so long as any of the Notes shall remain Outstanding,
unless this Agreement is terminated in accordance with the terms hereof.
2. Definitions. In addition to terms elsewhere defined in this 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.
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 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 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 each Guarantee Agency and each Alternative Loan
Program 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
agree to reasonable audits, examinations and inspections with
respect to the performance of its activities on behalf of the
Servicer. The Servicer shall provide the Issuer and the Trustee
with prior written notice of any subcontractor relationship
(other than the existing relationships with AFSA Data Corporation
and Great Lakes Higher Education Servicing Corporation).
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 Agreement.
4. Acquisition Process. The Issuer, the Trustee and the Servicer agree
that:
-3-
<PAGE>
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. (1) Pursuant to the Issuer Student Loan Purchase Agreements, the
Servicer will, on behalf of the Issuer and the Trustee, require
that each Lender (in the case of FFELP Loans) or SLFC (in the
case of Alternative Loans) transfer to the Servicer or the
Servicer's bailee (or, in the case of the promissory notes
relating to Alternative Loans, to the Trustee or a custodian
designated by the Trustee), 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 A (in the case of
Issuer Student Loan Purchase Agreements relating to Alternative
Loans) or Exhibit B (in the case of Issuer Student Loan Purchase
Agreements relating to FFELP Loans) attached to the Issuer
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.
(2) Pursuant to the Transfer Agreements, the Servicer will, on
behalf of the Issuer and the Trustee, require that GOAL Funding
transfer, or cause to be transferred, to the Servicer or the
Servicer's bailee (or, in the case of the promissory notes
relating to Alternative Loans, to the Trustee or a custodian
designated by the Trustee), on or before each applicable Loan
Purchase Date (which term, as used in this Agreement with respect
to the purchase of Financed GOAL Funding Student Loans, means the
date of purchase of such loans under the applicable Transfer
Agreement), 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 A (in the case of GOAL
Funding Student Loan Purchase Agreements relating to Alternative
Loans) or Exhibit B (in the case of GOAL Funding Student Loan
Purchase Agreements relating to FFELP Loans) attached to the GOAL
Funding 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.
-4-
<PAGE>
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 Guarantee Program or Alternative Loan Program, as
appropriate, and the applicable Student Loan Purchase Agreement.
The Servicer shall give Lenders (in the case of FFELP Loans) or
SLFC (in the case of Alternative Loans), as appropriate, a
reasonable opportunity (but in no event longer than 30 days or
such greater period of time as the Trustee shall consent to in
writing) 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 the case of FFELP Loans) or SLFC (in
the case of Alternative Loans), as appropriate, 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 (in the case of FFELP Loans), SLFC (in the case of
Alternative Loans) and the GOAL Funding Servicer (in the case of
Financed GOAL Funding Student Loans) sufficient to ensure that
the Servicer receives notice from each Lender, SLFC and the GOAL
Funding Servicer of all transactions with respect to each Student
Loan prior to the required time of delivery by the
-5-
<PAGE>
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 or
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 (in the case
of FFELP Loans), SLFC (in the case of Alternative Loans) or GOAL
Funding or the GOAL Funding Servicer (in the case of Financed
GOAL Funding Student Loans) 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.
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 (in the case of FFELP Loans), SLFC's (in the case of
Alternative Loans) or GOAL Funding's (in the case of Financed
GOAL Funding Student Loans) 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 (in the case of FFELP Loans),
SLFC (in the case of Alternative Loans) or GOAL Funding or the
GOAL Funding Servicer (in the case of Financed GOAL Funding
Student Loans) 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 any information required to
be included by the Higher Education Act and the requirements of
the Guarantee Agency or Alternative Loan Program, as appropriate.
h. The assignment of each Financed FFELP 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
-6-
<PAGE>
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 (in the case of FFELP Loans) or SLFC
(in the case of Alternative Loans) 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.
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 Guarantor and each
Alternative Loan Program 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, the Guarantee Program
regulations and, where applicable, each Alternative Loan Program. 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 Loan Documents, and at least the following information
relating to each of the Financed Student Loans: name and social
security number of Eligible Borrower, actual
-7-
<PAGE>
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
Servicer (including those owned by or on behalf of the Issuer).
b. Take all steps necessary to maintain the Guarantee coverage on
each Financed FFELP 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 or the applicable Alternative Loan
Program, as appropriate) 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, the Guarantee Program regulations and the
Alternative Loan Programs) 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 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
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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, the Guarantee Program regulations and, where applicable,
each Alternative Loan Program) 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 Allowance Payments
relating to all Financed FFELP 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 FFELP 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 FFELP Loans within the time required
by the Higher Education Act and the requirements of the Guarantee
Agency. In the case of defaulted Financed Alternative Loans, take
all steps necessary
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to recover on such defaulted Financed Alternatives Loans in
accordance with the requirements of the applicable Alternative
Loan Program.
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 FFELP Loan, take
such action as shall be necessary to allow the Issuer or the
Trustee to cause such Lender to repurchase such Financed FFELP
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 FFELP 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 l0th day
of each month the following reports with respect to activity
concerning each Financed Student Loan during the preceding month:
(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, 181-270 days and over 270
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
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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; and
(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 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 to
include, without limitation, a copy of each loan application,
interim and payout note(s) if applicable, Guarantee Agreement,
disclosure statement and Secretary of Education Loan Transfer
Statement, where applicable).
q. Maintain the original promissory note pertaining to each Financed
FFELP 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 FFELP
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
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the Servicer might 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
(in the case of FFELP Loans), SLFC (in the case of Alternative
Loans), the GOAL Funding Servicer (in the case of Financed GOAL
Funding Student Loans), 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. 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 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:
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;
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<PAGE>
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 Alternative Loan Programs, 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, SLFC, GOAL Funding, 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, SLFC, GOAL Funding,
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, each 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
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.
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<PAGE>
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 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 FFELP 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 FFELP Loans)
and the Financed FFELP Loans.
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
FFELP 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
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<PAGE>
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
Agreement, this 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)).
g. The costs of audits and reports prepared under subsections (c)
through (f) above shall be paid by the Servicer.
10. Amendments; Benefits; Termination. This 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
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. This Agreement shall terminate with respect to the Servicer (in
the case of any of the following events relating solely to the
Servicer) or the Administrator (in the case of any of the
following events relating solely to the Administrator) or both
(in the case of any of the following events relating to both the
Servicer and the Administrator):
(1) upon the expiration of the term stated in Section 1 hereof;
(2) if the Servicer or the Administrator 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
property of the Servicer or the
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<PAGE>
Administrator, as the case may be, or f ail 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 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 the Administrator, as the case may be, 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 or the
Administrator, as the case may be;
(3) upon written notice by the Issuer or the Trustee to the
Servicer or the Administrator, as applicable, if the
Servicer or the Administrator materially breaches its
obligations, or any representation or warranty, under this
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 FFELP Loans or, in the case of the Department of
Education, all Special Allowance Payments or interest
benefit payments with respect to Financed FFELP 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
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Allowance Payments and interest subsidy payments, the Servicer or
the Administrator, as the case may be, shall have the right to
cure such breach, within ninety (90) days of the date the
Servicer or the Administrator, as the case may be, 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 any related Guarantee, Special
Allowance Payments and interest subsidy payments.
Each of the Servicer and the Administrator 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 Agreement shall be terminated with respect to the
Servicer 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), (3) or (4). There shall be no
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.
c. If this Agreement shall be terminated with respect to the
Servicer or the Administrator, or both, under subsection (a), the
terminated party agrees that it shall continue to perform all its
obligations under this Agreement until a successor servicer or
administrator, as the case may be, has been appointed or until
otherwise directed in writing by the Trustee.
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12. Disposition of Files on Termination. Upon termination of this Agreement
with respect to the Servicer or the Administrator, all files and information
held by the Servicer or the Administrator, as the case may be, 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 and Administrator Not Agents. Neither the Servicer nor the
Administrator is, nor shall they hold themselves out to be, the agent of the
Issuer or the Trustee except for the specific limited purposes set forth in this
Agreement. Except as set forth in this Agreement, the Issuer and the Trustee may
not direct the methods or means by which the Servicer or the Administrator shall
accomplish its duties under this 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 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. Nevertheless, the Trustee shall
retain possession of the original Student Loan Note with respect
to each Alternative Loan and may elect to retain such other
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 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 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.
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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 FFELP Loan, the obligations of the Servicer shall be
only to the Trustee during the time the Notes are Outstanding 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. SLFC hereby represents,
warrants and agrees as follows:
a. SLFC 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 SLFC is required to carry out the
obligations of the Servicer and the Administrator under this
Agreement.
b. SLFC 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
Agreement.
c. SLFC 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 articles of
incorporation or bylaws of SLFC or any agreement or instrument to
which SLFC is a party or by which it is bound, or constitute a
default thereunder; SLFC 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 SLFC to perform its obligations
under this Agreement, and this Agreement constitutes a valid and
binding obligation of SLFC 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
Agreement, and (ii) which has not been or will
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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 (in the case
of FFELP Loans) or SLFC (in the case of Alternative Loans), as the case may be,
which is a party thereto, and that each Transfer Agreement provides that GOAL
Funding, shall, to the extent required by the Higher Education Act and the
Guarantee Program regulations or the Alternative Loan Program, as appropriate,
notify, or cause to be notified, 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, SLFC's or GOAL Funding'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 regulations or
the Alternative Loan Program, as appropriate, the Servicer may, on behalf of the
Issuer, waive this requirement of any Lender (in the case of FFELP Loans), SLFC
(in the case of Alternative Loans) or GOAL Funding (in the case of Financed GOAL
Funding Student Loans) if the notice is sent by the Servicer on behalf of such
Lender, SLFC or GOAL Funding.
17. Obligations to Forward Payments. The parties hereto acknowledge and
agree that each Student Loan Purchase Agreement provides that if the Lender (in
the case of FFELP Loans) or SLFC (in the case of Alternative Loans), as the case
may be, which is a party thereto, and that each Transfer Agreement provides that
if GOAL Funding, after any Loan Purchase Date, is 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, SLFC or GOAL
Funding 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 thereof.
18. 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
and the Administrator, for the performance of the Servicer's and the
Administrator's functions under this Agreement, a monthly fee in an amount each
month equal to _____% of the outstanding principal balance of all Financed
Student Loans as of the last day of the immediately preceding month; provided,
however, that such monthly fee shall be reduced by an amount equal to the
Administrative Expenses incurred by the Issuer for employee compensation,
subject to a maximum amount for each calendar year of $50,000, unless the
Servicer agrees to a higher amount. 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. The Servicer shall promptly
remit to the Administrator its allocable portion (equal to one-fourth) of such
fee. If the Servicer or the Administrator 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
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under the Indenture for the Trustee to approve an increase in the fees payable
hereunder. Each of the Servicer and the Administrator acknowledges that such fee
shall not be increased unless the conditions for increasing such fee under the
Indenture have been satisfied.
Each of the Servicer and the Administrator acknowledges that the Issuer and
the Trustee contemplate paying all fees payable under this 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. Each of the Servicer and the Administrator covenants and agrees to
continue to be bound by the terms and provisions of this Agreement relating to
the Financed Student Loans in all respects, and to perform for a period of one
hundred twenty (120) days its obligations hereunder, regardless of the receipt
or non-receipt on a timely basis by it of any payments in respect of fees under
this Agreement.
Each of the Servicer and the Administrator, by entering into this
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 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 Agreement shall pay its own
expenses incurred in connection with the preparation, execution and delivery of
this Agreement, including, but not limited to, the fees and expenses of legal
counsel.
21. Administrative Functions to be Performed by Servicer and Administrator.
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 Sections 5.
5 through 5.8 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. 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; and
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d. 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 (i) determine the Net Loan Rate and notify
the Trustee and the Auction Agent thereof at the times required
by the Indenture, and (ii) 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 Higher
Education Act and any Alternative Loan Program.
The Issuer, the Trustee and the Administrator agree that the Administrator
shall, on behalf of the Issuer and as part of its responsibilities under this
Agreement, cause the duties and responsibilities of the Issuer under the
Indenture to be performed, including, but not limited to, the actions set forth
below. The Administrator shall advise the Issuer when action by the Issuer is
necessary to comply with the Issuer's duties under the Indenture and the
agreements relating thereto. The Administrator shall prepare, or shall cause the
preparation by other appropriate persons of, all such documents, reports,
filings, instruments, certificates and opinions (other than those to be prepared
by the Servicer as part of its responsibilities under this Agreement) as it
shall be the duty of the Issuer to prepare, file or deliver pursuant to the
Indenture. In furtherance of the foregoing, the Administrator shall take all
appropriate action, including but not limited to, the following:
1. obtaining and preserving the Issuer's qualification to do
business in each jurisdiction in which such qualification is or
shall be necessary to protect the validity and enforceability of
the Indenture, the Notes and each instrument and agreement
included in the Trust Estate;
2. preparing all supplements, amendments, financing statements,
continuation statements, instruments of further assurance and
other instruments, in accordance with the relevant provisions of
the Indenture, necessary to protect the Trust Estate;
3. arranging for the delivery of any opinions of counsel and
certificates of officers of the Issuer and other statements
required under the relevant provisions of the Indenture;
4. preparing and obtaining documents and instruments required for
the release of the Issuer from its obligations under the
Indenture;
5. monitoring the Issuer's obligations as to the satisfaction and
discharge of the Indenture;
6. preparing, obtaining or filing the instruments and other
documents required for the release of Trust Estate from the lien
of the Indenture;
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7. taking such actions as may be required of the Issuer under the
Indenture upon the occurrence and continuance of a default or an
Event of Default thereunder;
8. causing the directions of the Issuer to be carried out in
connection with opening one or more accounts in the Issuer's
name, preparing any orders of the Issuer and other documents
required, and taking all other actions necessary, with respect to
investment and reinvestment of funds in the Funds and Accounts
established under the Indenture in accordance with the investment
criteria and requirements of the Indenture and the investment
policies adopted by the Issuer from time to time;
9. preparing or coordinating the obtaining of all documents required
with respect to any requests by the Issuer of the Trustee to take
any action under the Indenture;
10. preparing orders of the Issuer and obtaining all documents as
necessary or required for the execution of any amendments or
supplements to the Indenture;
11. preparing and delivering to the Trustee any agreements with
respect to notice provisions; and
12. taking such actions as may be required of the Issuer under any
agreement between the Issuer and other parties relating to the
Indenture.
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
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
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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 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. Indemnification. The Servicer and the Administrator shall each
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 failure of the
Servicer or the Administrator, as the case may be, to perform its obligations
under this Agreement. In addition, and without limiting the generality of the
foregoing, the Servicer and the Administrator shall each 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 the Administrator, as the
case may be; or
b. any claim by an employee of the Servicer or the Administrator, as
the case may be, arising in consequence of, or relating to, the
employee's employment by the Servicer or the Administrator, as
applicable.
24. 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.
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<PAGE>
b. This 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 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 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 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
forty-eight (48) hours (excluding weekends and holidays) 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 Issuer:
Education Loans Incorporated
Suite 200
105 First Avenue Southwest
Aberdeen, South Dakota 57401
Attention: President
if intended for the Trustee:
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<PAGE>
U.S. Bank National Association
P.O. Box 5308
141 North Main Avenue, Suite 300
Sioux Falls, South Dakota 57104-6429
Attention: Corporate Trust Department
if intended for the Servicer or the Administrator:
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 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 Agreement.
i No remedy by the terms of this 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
Agreement or existing at law or in equity or by statute on or
after the date of this Agreement, including, without limitation,
the right to such equitable relief by way of injunction,
mandatory or prohibitory, to prevent the breach or threatened
breach of any of the provisions of this Agreement or to enforce
the performance hereof.
j. This Agreement has been made and entered into not only for the
benefit of the Issuer, the Trustee, the Servicer and the
Administrator, but also for the benefit of all Noteholders, and
its provisions may be enforced not only by the parties to this
Agreement but also by each Noteholder in the manner and to the
extent such Noteholders 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 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 a consolidated
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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. SLFC 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 SLFC's and warranties in this
Agreement. SLFC agrees to cooperate with the Issuer and to
furnish all information in its possession appropriate for
inclusion in the Issuer's Prospectus. SLFC 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 breach of SLFC's warranties or representations
hereunder or any false or misleading representations of SLFC or
any failure to disclose any matter which makes the warranties and
representations herein misleading or any inaccuracy in any
information furnished by SLFC in connection herewith.
m. It is hereby acknowledged and agreed that the Trustee will be
serving as "Eligible Lender Trustee" under the Indenture and that
(i) legal title to all Financed Student Loans constituting FFELP
Loans will, pursuant to the applicable FFELP Loan Purchase
Agreement, be transferred to the Trustee in such capacity for the
benefit of the Issuer, and (ii) upon such transfer, the Trustee
will be the legal owner and the Issuer will be the beneficial
owner of such FFELP Loans.
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<PAGE>
IN WITNESS WHEREOF, the parties have hereunto set their hands by their
officers thereunto duly authorized and executed this Agreement as of the day and
year first above written.
EDUCATION LOANS INCORPORATED
By:__________________________________
President
STUDENT LOAN FINANCE
CORPORATION, as Servicer and
Administrator
By:__________________________________
President
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
By:__________________________________
Its_______________________________
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<PAGE>
EXHIBIT A
Student Loan Finance Corporation
Monthly Statement Pursuant to Section 5.23 of the Indenture and Section 21 of
the Servicing and Administration Agreement (Unaudited)
Education Loans Incorporated
Student Loan Asset-Backed Notes
Report for the Month Ended __________, ____ [sample for ___________, 1999]
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<PAGE>
EXHIBIT 10.2(a)
STUDENT LOAN FINANCE CORPORATION
STUDENT LOAN PURCHASE PROGRAM
STUDENT LOAN PURCHASE AGREEMENT
This Agreement made and entered into as of this [ , ] 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 [ , ], between
the Corporation and U.S. Bank National Association, Minneapolis, Minnesota, or
if the rights of U.S. Bank National Association, Minneapolis, Minnesota,
hereunder are assigned to a subsequent Trustee, the Indenture of Trust under
which such subsequent Trustee exercises its authority.
"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 U.S. 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 purchase of 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 [_________], 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 the form set forth in Exhibit "C".
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.
<PAGE>
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
Corporation.
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 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 Finance Student Loan is required to be repurchases 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. lndemnification.
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>
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 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.
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:
U.S. 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 1.32.
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 t, 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 the 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 [ , ], (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 U.S. Bank National
Association, Minneapolis, Minnesota as trustee (the "Trustee") under the
Indenture of Trust, 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 [ , ] 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
U.S. 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. ss.1087-2(d)(3) and
20 U.S.C. ss.1082(m)1(D)(iv)."
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 [ , ] 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.
ss.1087-2(d)(3) and 20 U.S.C. ss.1082(m)1(D)(iv)."
<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 [ , ] 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 [ , ]
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 10.2(b)
STUDENT LOAN FINANCE CORPORATION
GOAL LOAN PROGRAM
STUDENT LOAN PURCHASE AGREEMENT
This Agreement made and entered into as of this first day of [ , ],
by and between EDUCATION LOANS INCORPORATED, (hereinafter referred to as the
"Corporation"), and STUDENT LOAN FINANCE CORPORATION a corporation organized and
existing under the laws of the State of South Dakota and having the principal
office at 105 First Avenue Southwest in the City of Aberdeen, State of South
Dakota (hereinafter referred to as the "Seller").
WITNESSETH:
WHEREAS, pursuant to the GOAL Loan Program of the Seller, the Corporation
desires to cause the purchase from the Seller of certain loans made pursuant to
such program and the Seller desires to cause the origination of 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 Borrower" shall mean a borrower who is eligible under the GOAL
Loan Program to be the obligor of a loan for financing a program of
post-secondary education for a student eligible under such program.
"Eligible Loan" shall mean a loan to an Eligible Borrower for
post-secondary education made in accordance with the requirements of the GOAL
Loan Program.
"Financed", in the case of Eligible Loans, shall mean those Eligible Loans
acquired by the Trustee on behalf of the Corporation from the Seller pursuant to
this Agreement with moneys derived from any of the funds or accounts established
by the Indenture, inclusive of the promissory notes evidencing such Eligible
Loans and the related documentation in connection with each thereof.
"GOAL Loan Program" shall mean the programs established by the Seller for
the origination of loans to finance costs of post-secondary education in excess
of those costs financed from loans made under the Higher Education Act.
"Higher Education Act" shall mean the Higher Education Act of 1965, as
amended or supplemented from time to time, and all regulations promulgated
thereunder.
"Indenture" shall mean the Indenture, dated as of [ , ], between the
Corporation and the Trustee.
"Loan Purchase Date" has the meaning assigned thereto in Section 2.C. of
this Agreement.
"Obligations" shall mean all notes, bonds or other obligations of the
Corporation (including those issued pursuant to the Indenture) incurred to
finance or refinance the purchase of Eligible Loans or for other purposes
authorized by the indenture under which such obligations were issued.
"Origination Fee", with respect to an Eligible Loan, shall mean the
origination fee payable in connection with the origination of such Eligible Loan
in accordance with the GOAL Loan Program.
"Servicer" shall mean the Seller, 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.
"State" shall mean the State of South Dakota.
"Trustee" means U.S. Bank National Association, Minneapolis, Minnesota, in
its capacity as trustee under the Indenture, or any successor thereto in such
capacity or any assignee thereof.
The term "Agreement" shall include Exhibits "A" through "E" 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
Seller agrees to sell to the Trustee on behalf of the Corporation, and the
Corporation agrees to cause the Trustee to buy from the Seller, Eligible
Loans the Seller 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 GOAL Loan Program.
B. Upon the purchase of each Eligible Loan pursuant to this Agreement,
the Seller shall pay to the Trustee on behalf of the Corporation an amount
equal to the Origination Fee applicable to such Eligible Loan.
<PAGE>
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 this Agreement, 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.
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.
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 the form set forth in Exhibit "B".
3. Representations, Warranties, Covenants and Agreements of the Seller. The
Seller 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
"C".
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 Seller contained in this Agreement shall be true on the Loan Purchase
Date.
B. Receipt by the Trustee of all related Origination Fees.
C. The entire interest of the Seller in each Eligible Loan to be
Financed shall have been duly assigned by endorsement in the form set forth
in Exhibit "B", such endorsement to be without recourse except as provided
in paragraph 8.
D. Physical custody and possession of (i) the promissory notes
evidencing the Financed Eligible Loans shall be transferred to the Trustee,
and (ii) all other information and documentation relating to the Financed
Eligible Loans (including the documentation described in Exhibit "A") shall
be transferred in the manner directed by the Servicer.
E. The Corporation shall receive an opinion of Seller's counsel, dated
as of the date of this Agreement, in substantially the form set forth in
Exhibit "E". The Servicer shall receive a Seller's Closing Certificate,
substantially in the form of Exhibit "A", when requested by the
Corporation.
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 Seller 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 Seller is unable to fulfill one or
more covenants or conditions of this Agreement as to a loan, or (iii) if
the Servicer (if other than the Seller) 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,
then the Corporation may, in its sole discretion, refuse to accept and
cause the Trustee to pay for such loan (or any substitute loan offered by
the Seller in lieu thereof).
B. If a loan is rejected, any such loan shall be returned to the
Seller 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 Seller which has been endorsed to the
Trustee shall be endorsed by the Trustee to the Seller in the form set
forth in Exhibit "D". 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 Seller 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 a loan is rejected, the Seller 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 Corporation may elect to cause the Trustee to purchase such
Eligible Loan and allow the Seller 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:
<PAGE>
(i) any representation or warranty made or furnished by the Seller in
or pursuant to this Agreement shall prove to have been materially
incorrect;
(ii) 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 Corporation in good faith believes that the facts reported, if
true, raise a reasonable doubt as to the legal enforceability of such loan;
or
(iii) a Financed Eligible Loan is required to be repurchased pursuant
to paragraph 7.B or 7.D,;
then the Seller 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 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. Upon receipt of such amounts, the
Corporation shall cause the Trustee to transfer to the Seller the amount of the
related Origination Fee.
9. Notification to Borrowers.
The Seller and the Corporation agree that the Servicer and the Seller 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 Seller'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.
10. Obligations to Forward Payments and Communications.
A. The Seller shall promptly remit, or cause to be remitted, to the
Trustee as the Servicer may direct, all funds received by the Seller after
the Loan Purchase Date which constitute payments of principal, or interest
accrued after the Loan Purchase Date, with respect to any Financed Eligible
Loan.
B. The Seller shall immediately transmit to the Servicer any
communication received by the Seller 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 Seller 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. lndemnification.
The Seller specifically acknowledges that the Corporation will be making
representations and warranties regarding the Eligible Loans to be Financed as
part of the proposed offering of Obligations of the Corporation (including
without limitation Obligations to be issued under the Indenture) based in part
on the accuracy of the Seller's representations and warranties in this
Agreement. The Seller agrees to indemnify and save the Trustee and the
Corporation 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 Seller's warranties or representations hereunder or any false or
misleading representations of the Seller or any failure to disclose any matter
which makes the warranties and representations herein misleading or any
inaccuracy in any information furnished by the Seller in connection herewith.
13. Other Provisions.
A. The Seller shall furnish to the Servicer such additional
information concerning the Seller's Eligible Loan portfolio as the Servicer
may reasonably request.
B. The Seller 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 provision 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
<PAGE>
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 Seller:
Student Loan Finance Corporation
105 First Avenue Southwest
Aberdeen, South Dakota 57401
If intended for the Trustee:
U.S. 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 in this Agreement.
K. This Agreement shall not be assignable by the Seller, 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 Seller 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.
<PAGE>
14. Non-Petition Covenant.
The Seller, 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 STUDENT LOAN FINANCE CORPORATION
By______________________________ By_________________________________
Title:_________________ Title:___________________
ATTEST:
___________________________________
Title:___________________
<PAGE>
Exhibit "A" to Student Loan Purchase Agreement
SELLER'S CLOSING CERTIFICATE
Student Loan Finance Corporation (the "Seller") 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 Seller and Education Loans Incorporated, dated as of [ , ] (the
"Agreement"), are true and correct on and as of the date hereof, without
exception or qualification whatsoever;
FURTHERMORE, the Seller 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:
Promissory note(s)
Evidence of disbursement
Disclosure statement
Any other documentation held by the Seller relating to the history of
such Eligible Loan
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 Seller 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 _____________________________, ______.
STUDENT LOAN FINANCE CORPORATION
By__________________________________
Title:_________________________
ATTEST:
________________________
Title:__________________
<PAGE>
Exhibit "B" 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 U.S. Bank National
Association, Minneapolis, Minnesota as trustee (the "Trustee") under the
Indenture, 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 [ , ], between Education Loans Incorporated and Student
Loan Finance Corporation.
_______________________________ _________________________________
Title and Signature of Name of Transferor
Trustee Officer
_______________________________ _________________________________
Title and Signature of Title and Signature of
Corporation Officer Transferor Officer
Dated:_____________________________, ______"
NOTICE
"The within note and related documentation is subject to a Uniform
Commercial Code Security Agreement between Education Loans Incorporated, and
U.S. 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. ss.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 [ , ], between Education Loans Incorporated and Student
Loan Finance Corporation.
_______________________________ _________________________________
Title and Signature of Name of Transferor
Trustee Officer
_______________________________ _________________________________
Title and Signature of Title and Signature of
Corporation Officer Transferor Officer
Dated:_____________________________, ______"
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.
ss.1087-2(d)(3)."
<PAGE>
Exhibit "C" to Student Loan Purchase Agreement
Representations, warranties, covenants and agreements of Seller:
A. Any information furnished by the Seller 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 Seller shall take all reasonable actions to assure that no maker of an
Eligible Loan has or may acquire a defense to the payment thereof.
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 GOAL Loan Program 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. 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 Corporation pursuant to Section 7.D of this Agreement.
F. The Seller 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 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.
H. The Seller 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
hereof do not and will not conflict with or result in a breach of any of the
terms, conditions or provisions of the Articles or Bylaws of the Seller or any
agreement or instrument to which the Seller is a party or by which it is bound,
or constitute a default thereunder; the Seller 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 Seller to perform its
obligations under this Agreement; this Agreement constitutes a valid and binding
obligation of the Seller 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.
I. The Seller is duly organized, validly existing and in good standing
under the laws of the State and has the power and authority to own its assets
and carry on its business as now being conducted.
J. The Seller 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 Seller has
conducted a reasonable investigation of sufficient scope and content to enable
it duly to make the representations and warranties contained in this Exhibit C.
The Seller 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.
K. 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 GOAL Loan Program shall not exceed the limits stated therein.
L. Each Eligible Loan shall be subject to the credit requirements of the
GOAL Loan Program.
M. At the time the Seller makes, or causes to be made, an Eligible Loan to
an Eligible Borrower, the Seller shall provide thorough and accurate loan
information to the Eligible Borrower.
<PAGE>
Exhibit "D" 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 [ , ], did not become
effective there under and no rights in the same have been conveyed thereby.
Dated:____________________________
___________________________________________
Title and Signature of Trustee Officer
<PAGE>
Exhibit "E" 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 [ , ]
Gentlemen:
Pursuant to the above mentioned Student Loan Purchase Agreement (the
"Agreement") between Education Loans Incorporated and Student Loan Finance
Corporation (the "Seller"), 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 considerations which
we deem relevant, we are of the opinion that:
(i) The Seller 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
Seller, is in full force and effect and constitutes the legal, valid, binding
and enforceable obligation of the Seller.
(iii) The Seller 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 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 is required
for the execution and delivery of the Agreement, or the sale, transfer and
assignment of the Eligible Loans; and
(v) The officers of the Seller are authorized to execute the endorsement
required by the Agreement, transferring the Eligible Loans to be Financed.
Very truly yours
(Seller's Counsel)
<PAGE>
EXHIBIT 10.2(c)
STUDENT LOAN FINANCE CORPORATION
GOAL LOAN PROGRAM
STUDENT LOAN PURCHASE AGREEMENT
This Agreement made and entered into as of this first day of May, 1999, by
and between GOAL FUNDING, INC. (hereinafter referred to as the "Corporation"),
and STUDENT LOAN FINANCE CORPORATION a corporation organized and existing under
the laws of the State of South Dakota and having the principal office at 105
First Avenue Southwest in the City of Aberdeen, State of South Dakota
(hereinafter referred to as the "Seller").
WITNESSETH:
WHEREAS, pursuant to the GOAL Loan Program of the Seller, the Corporation
desires to cause the purchase from the Seller of certain loans made pursuant to
such program and the Seller desires to cause the origination of 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 Borrower" shall mean a borrower who is eligible under the GOAL
Loan Program to be the obligor of a loan for financing a program of
post-secondary education for a student eligible under such program.
"Eligible Loan" shall mean a loan to an Eligible Borrower for
post-secondary education made in accordance with the requirements of the GOAL
Loan Program..
"Financed", in the case of Eligible Loans, shall mean those Eligible Loans
acquired by the Trustee on behalf of the Corporation from the Seller pursuant to
this Agreement with moneys derived from any of the funds or accounts established
by the Indenture, inclusive of the promissory notes evidencing such Eligible
Loans and the related documentation in connection with each thereof.
"GOAL Loan Program" shall mean the programs established by the Seller for
the origination of loans to finance costs of post-secondary education in excess
of those costs financed from loans made under the Higher Education Act.
"Higher Education Act" shall mean the Higher Education Act of 1965, as
amended or supplemented from time to time, and all regulations promulgated
thereunder.
"Indenture" shall mean the Indenture, dated as of May 1, 1999, between the
Corporation and the Trustee.
"Loan Purchase Date" has the meaning assigned thereto in Section 2.C. of
this Agreement.
"Obligations" shall mean all notes, bonds or other obligations of the
Corporation (including those issued pursuant to the Indenture) incurred to
finance or refinance the purchase of Eligible Loans or for other purposes
authorized by the indenture under which such obligations were issued.
"Origination Fee", with respect to an Eligible Loan, shall mean the
origination fee payable in connection with the origination of such Eligible Loan
in accordance with the GOAL Loan Program.
"Servicer" shall mean the Seller, 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.
"State" shall mean the State of South Dakota.
"Trustee" means U.S. Bank National Association, Minneapolis, Minnesota, in
its capacity as trustee under the Indenture, or any successor thereto in such
capacity or any assignee thereof.
The term "Agreement" shall include Exhibits "A" through "E" 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
Seller agrees to sell to the Trustee on behalf of the Corporation, and the
Corporation agrees to cause the Trustee to buy from the Seller, Eligible
Loans the Seller 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 GOAL Loan Program.
B. Upon the purchase of each Eligible Loan pursuant to this Agreement,
the Seller shall pay to the Trustee on behalf of the Corporation an amount
equal to the Origination Fee applicable to such Eligible Loan.
<PAGE>
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 this Agreement, 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.
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.
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 the form set forth in Exhibit "B".
3. Representations, Warranties, Covenants and Agreements of the Seller. The
Seller 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
"C".
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 Seller contained in this Agreement shall be true on the Loan Purchase
Date.
B. Receipt by the Trustee of all related Origination Fees.
C. The entire interest of the Seller in each Eligible Loan to be
Financed shall have been duly assigned by endorsement in the form set forth
in Exhibit "B", such endorsement to be without recourse except as provided
in paragraph 8.
D. Physical custody and possession of (i) the promissory notes
evidencing the Financed Eligible Loans shall be transferred to the Trustee,
and (ii) all other information and documentation relating to the Financed
Eligible Loans (including the documentation described in Exhibit "A") shall
be transferred in the manner directed by the Servicer.
E. The Corporation shall receive an opinion of Seller's counsel, dated
as of the date of this Agreement, in substantially the form set forth in
Exhibit "E". The Servicer shall receive a Seller's Closing Certificate,
substantially in the form of Exhibit "A", when requested by the
Corporation.
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 Seller 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 Seller is unable to fulfill one or
more covenants or conditions of this Agreement as to a loan, or (iii) if
the Servicer (if other than the Seller) 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,
then the Corporation may, in its sole discretion, refuse to accept and
cause the Trustee to pay for such loan (or any substitute loan offered by
the Seller in lieu thereof).
B. If a loan is rejected, any such loan shall be returned to the
Seller 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 Seller which has been endorsed to the
Trustee shall be endorsed by the Trustee to the Seller in the form set
forth in Exhibit "D". 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 Seller 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 a loan is rejected, the Seller 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 Corporation may elect to cause the Trustee to purchase such
Eligible Loan and allow the Seller 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:
<PAGE>
(i) any representation or warranty made or furnished by the Seller in
or pursuant to this Agreement shall prove to have been materially
incorrect;
(ii) 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 Corporation in good faith believes that the facts reported, if
true, raise a reasonable doubt as to the legal enforceability of such loan;
or
(iii) a Financed Eligible Loan is required to be repurchased pursuant
to paragraph 7.B or 7.D,;
then the Seller 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 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. Upon receipt of such amounts, the
Corporation shall cause the Trustee to transfer to the Seller the amount of the
related Origination Fee.
9. Notification to Borrowers.
The Seller and the Corporation agree that the Servicer and the Seller 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 Seller'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.
10. Obligations to Forward Payments and Communications.
A. The Seller shall promptly remit, or cause to be remitted, to the
Trustee as the Servicer may direct, all funds received by the Seller after
the Loan Purchase Date which constitute payments of principal, or interest
accrued after the Loan Purchase Date, with respect to any Financed Eligible
Loan.
B. The Seller shall immediately transmit to the Servicer any
communication received by the Seller 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 Seller 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. lndemnification.
The Seller specifically acknowledges that the Corporation will be making
representations and warranties regarding the Eligible Loans to be Financed as
part of the proposed offering of Obligations of the Corporation (including
without limitation Obligations to be issued under the Indenture) based in part
on the accuracy of the Seller's representations and warranties in this
Agreement. The Seller agrees to indemnify and save the Trustee and the
Corporation 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 Seller's warranties or representations hereunder or any false or
misleading representations of the Seller or any failure to disclose any matter
which makes the warranties and representations herein misleading or any
inaccuracy in any information furnished by the Seller in connection herewith.
13. Other Provisions.
A. The Seller shall furnish to the Servicer such additional
information concerning the Seller's Eligible Loan portfolio as the Servicer
may reasonably request.
B. The Seller 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 provision 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
<PAGE>
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 Seller:
Student Loan Finance Corporation
105 First Avenue Southwest
Aberdeen, South Dakota 57401
If intended for the Trustee:
U.S. 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 in this Agreement.
K. This Agreement shall not be assignable by the Seller, 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 Seller 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.
<PAGE>
14. Non-Petition Covenant.
The Seller, 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.
GOAL FUNDING, INC. STUDENT LOAN FINANCE CORPORATION
By__________________________ By_______________________________
Title:_________________ Title:____________________
ATTEST:
_________________________________
Title:____________________
<PAGE>
Exhibit "A" to Student Loan Purchase Agreement
SELLER'S CLOSING CERTIFICATE
Student Loan Finance Corporation (the "Seller") 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 Seller and GOAL Funding, Inc. dated as of May 1, 1999 (the
"Agreement"), are true and correct on and as of the date hereof, without
exception or qualification whatsoever;
FURTHERMORE, the Seller 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:
Promissory note(s)
Evidence of disbursement
Disclosure statement
Any other documentation held by the Seller relating to the history of
such Eligible Loan
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 Seller 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 _____________________________, ______.
STUDENT LOAN FINANCE CORPORATION
By__________________________________
Title:_______________________
ATTEST:
____________________________
Title:______________________
<PAGE>
Exhibit "B" 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 U.S. Bank National
Association, Minneapolis, Minnesota as trustee (the "Trustee") under the
Indenture, dated as of May 1, 1999, by and between GOAL Funding, Inc. and the
Trustee (but for the account and on behalf of GOAL Funding, Inc.), without
recourse except as provided in paragraph 8 of the Student Loan Purchase
Agreement dated as of May 1, 1999, between GOAL Funding, Inc. and Student Loan
Finance Corporation.
____________________________________ _________________________________
Title and Signature of Name of Transferor
Trustee Officer
____________________________________ _________________________________
Title and Signature of Title and Signature of
Corporation Officer Transferor Officer
Dated:_____________________________, ______"
NOTICE
"The within note and related documentation is subject to a Uniform
Commercial Code Security Agreement between GOAL Funding, Inc., and U.S. 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. ss.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 GOAL Funding, Inc. and the Trustee (but for
the account and on behalf of GOAL Funding, Inc.), without recourse except as
provided in paragraph 8 of the Student Loan Purchase Agreement dated as of May
1, 1999, between GOAL Funding, Inc. and Student Loan Finance Corporation.
____________________________________ _________________________________
Title and Signature of Name of Transferor
Trustee Officer
____________________________________ _________________________________
Title and Signature of Title and Signature of
Corporation Officer Transferor Officer
Dated:_____________________________, ______"
NOTICE
"The within note and related documentation is subject to a Uniform
Commercial Code Security Agreement between GOAL Funding, Inc. 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.
ss.1087-2(d)(3)."
<PAGE>
Exhibit "C" to Student Loan Purchase Agreement
Representations, warranties, covenants and agreements of Seller:
A. Any information furnished by the Seller 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 Seller shall take all reasonable actions to assure that no maker of an
Eligible Loan has or may acquire a defense to the payment thereof.
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 GOAL Loan Program 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. 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 Corporation pursuant to Section 7.D of this Agreement.
F. The Seller 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 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.
H. The Seller 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
hereof do not and will not conflict with or result in a breach of any of the
terms, conditions or provisions of the Articles or Bylaws of the Seller or any
agreement or instrument to which the Seller is a party or by which it is bound,
or constitute a default thereunder; the Seller 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 Seller to perform its
obligations under this Agreement; this Agreement constitutes a valid and binding
obligation of the Seller 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.
I. The Seller is duly organized, validly existing and in good standing
under the laws of the State and has the power and authority to own its assets
and carry on its business as now being conducted.
J. The Seller 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 Seller has
conducted a reasonable investigation of sufficient scope and content to enable
it duly to make the representations and warranties contained in this Exhibit C.
The Seller 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.
K. 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 GOAL Loan Program shall not exceed the limits stated therein.
L. Each Eligible Loan shall be subject to the credit requirements of the
GOAL Loan Program.
M. At the time the Seller makes, or causes to be made, an Eligible Loan to
an Eligible Borrower, the Seller shall provide thorough and accurate loan
information to the Eligible Borrower.
<PAGE>
Exhibit "D" 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 GOAL Funding, Inc. and the Trustee (but for the
account and on behalf of GOAL Funding, Inc.), affixed pursuant to a Student Loan
Purchase Agreement dated as of May 1, 1999, did not become effective there under
and no rights in the same have been conveyed thereby.
Dated:____________________________
______________________________________
Title and Signature of Trustee Officer
<PAGE>
Exhibit "E" to Student Loan Purchase Agreement
(Opinion dated as of Date of Agreement)
GOAL Funding, Inc.
Student Loan Finance Corporation
105 First Avenue Southwest
Aberdeen, South Dakota 57401
Re: Student Loan Purchase Agreement
Dated as of May 1, 1999
Gentlemen:
Pursuant to the above mentioned Student Loan Purchase Agreement (the
"Agreement") between GOAL Funding, Inc. and Student Loan Finance Corporation
(the "Seller"), 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 considerations which
we deem relevant, we are of the opinion that:
(i) The Seller 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
Seller, is in full force and effect and constitutes the legal, valid, binding
and enforceable obligation of the Seller.
(iii) The Seller 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 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 is required
for the execution and delivery of the Agreement, or the sale, transfer and
assignment of the Eligible Loans; and
(v) The officers of the Seller are authorized to execute the endorsement
required by the Agreement, transferring the Eligible Loans to be Financed.
Very truly yours
(Seller's Counsel)
<PAGE>
EXHIBIT 10.2(d)
STUDENT LOAN FINANCE CORPORATION
STUDENT LOAN PURCHASE PROGRAM
STUDENT LOAN PURCHASE AGREEMENT
This Agreement made and entered into as of this ____ day of ________, ____,
by and between GOAL FUNDING, INC. (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, dated as of May 1, 1999, among the
Corporation, Kitty Hawk Funding Corporation, certain financial institutions
identified therein, NationsBank, N.A., AMBAC Assurance Corporation and U.S. Bank
National Association, Minneapolis, Minnesota, or if the rights of U.S. Bank
National Association, Minneapolis, Minnesota, hereunder are assigned to a
subsequent Trustee, the Indenture under which such subsequent Trustee exercises
its authority.
"Servicer" shall mean SLFC, as servicer under the Servicing and
Administration Agreement dated as of May 1, 1999, among the Corporation, the
Trustee and SLFC, and any successor thereto in such capacity as designated in
writing by the Corporation.
"Trustee" means any trustee under an Indenture pursuant to which
Obligations are issued by the Corporation, the proceeds of which are used to
purchase loans hereunder, including U.S. 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 purchase of Eligible Loans from the Lender
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, 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 sixty
months after the date of this Agreement, to be specified by the Servicer by
not less than fifteen days' (or such lesser number of days as shall be
acceptable to the Corporation, the Lender and the Servicer) 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
<PAGE>
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 the form set forth in Exhibit "C".
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
each 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 the form set forth
in Exhibit "C", 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 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
Corporation.
F. If the promissory note relating to an Eligible Loan to be Financed
hereunder 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 8.
8. Repurchase Obligation.
<PAGE>
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
paragraph 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. lndemnification.
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 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 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>
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 provision 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.
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:
U.S. Bank National Association
Post Office Box 1308
141 North Main Avenue, Suite 300
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 in 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.
<PAGE>
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.
GOAL FUNDING, INC.GOAL FUNDING, INC.
_________________________________
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 Section 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, 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, Illinois
Student Assistance Commission, Northwest Education Loan Association, Oregon
State Scholarship Commission, 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, 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 "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 "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.
<PAGE>
1.20 "State" shall mean the State of South Dakota.
1.21 "Student Loans" shall mean loans to Eligible Borrowers for
post-secondary education.
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 GOAL Funding, Inc. dated as of _______________________________(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
Any term capitalized but not defined in the Certificate shall have the
meaning ascribed thereto in the Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Certificate to be
executed and delivered by its officers thereunto duly authorized this
______________, day of _____________________________, ______.
_________________________________
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 U.S. Bank National
Association, Minneapolis, Minnesota as trustee (the "Trustee") under the
Indenture, dated as of May 1, 1999, by and among GOAL Funding, Inc., Kitty Hawk
Funding Corporation, certain financial institutions identified therein,
NationsBank, N.A., AMBAC Assurance Corporation and the Trustee (but for the
account and on behalf of GOAL Funding, Inc.), without recourse except as
provided in paragraph 8 of the Student Loan Purchase Agreement dated as of ,
between GOAL Funding, Inc. and ______________________.
____________________________________ _________________________________
Title and Signature of Name of Transferor
Trustee Officer
____________________________________ _________________________________
Title and Signature of Title and Signature of
Corporation Officer Transferor Officer
Dated:_____________________________, ______"
NOTICE
"The within note and related documentation is subject to a Uniform
Commercial Code Security Agreement among GOAL Funding, Inc., Kitty Hawk Funding
Corporation, certain financial institutions identified therein, NationsBank,
N.A., AMBAC Assurance Corporation and U.S. 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. ss.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 among GOAL Funding, Inc., Kitty Hawk Funding
Corporation, certain financial institutions identified therein, NationsBank,
N.A., AMBAC Assurance Corporation and the Trustee (but for the account and on
behalf of GOAL Funding, Inc.), without recourse except as provided in paragraph
8 of the Student Loan Purchase Agreement dated as of
, between GOAL Funding, Inc. and
____________________________________________________________.
____________________________________ _________________________________
Title and Signature of Name of Transferor
Trustee Officer
____________________________________ _________________________________
Title and Signature of Title and Signature of
Corporation Officer Transferor Officer
Dated:_____________________________, ______"
NOTICE
"The within note and related documentation is subject to a Uniform
Commercial Code Security Agreement among GOAL Funding, Inc.,
_________________________________ 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.
ss.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, and 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
hereof 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; 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.
<PAGE>
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.
<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
__________________, among GOAL Funding, Inc., ___________________and the Trustee
(but for the account and on behalf of GOAL Funding, Inc.), affixed pursuant to a
Student Loan Purchase Agreement dated as of , did not become effective there
under and no rights in the same have been conveyed thereby.
Dated:____________________________
______________________________________
Title and Signature of Trustee Officer
<PAGE>
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)
GOAL Funding, Inc.
Student Loan Finance Corporation
105 First Avenue Southwest
Aberdeen, South Dakota 57401
Re: Student Loan Purchase Agreement
Dated as of
Gentlemen:
Pursuant to the above mentioned Student Loan Purchase Agreement (the
"Agreement") between GOAL Funding, Inc. 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 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; and
(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
================================================================================
TRANSFER AGREEMENT
from
GOAL FUNDING, INC.
and
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
to
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
and
EDUCATION LOANS INCORPORATED
-----------------------------
Dated as of _________ 1, 1999
-----------------------------
================================================================================
<PAGE>
GOAL FUNDING, INC., a Delaware corporation ("GOAL Funding"), and U.S. BANK
NATIONAL ASSOCIATION, a national banking association, as trustee (the "Warehouse
Trustee" and, together with GOAL Funding, the "Transferors") under the
Indenture, dated as of May 1, 1999 (the "Warehouse Indenture"), among GOAL
Funding, Kittyhawk Funding Corporation, the financial institutions named
therein, NationsBank, N.A., AMBAC Assurance Corporation and the Warehouse
Trustee, in consideration of the payment of $___________ , receipt of which is
hereby acknowledged, hereby assign, transfer and convey, subject to the
following paragraph, to U.S. BANK NATIONAL ASSOCIATION, as trustee (the "Note
Trustee") under the Indenture of Trust, dated as of _______________ 1, 1999 (as
amended and supplemented, including by a First Supplemental Indenture of Trust,
dated as of _____________ 1, 1999, the "Note Indenture"), between Education
Loans Incorporated, a Delaware corporation (the "Corporation"), and the Note
Trustee, and to the Corporation, as their interests may appear, without
recourse, all right, title and interest in, to and under (1) each of the Student
Loans (as defined in the Note Indenture), including any evidences of
indebtedness and all related documentation, identified in the list attached
hereto as Exhibit A (the "Assigned Student Loans"), and by this reference made a
part hereof, each of which was purchased by GOAL Funding with moneys available
therefor under the Warehouse Indenture pursuant to the Student Loan Purchase
Agreements identified in the list attached hereto as Exhibit B (the "Student
Loan Purchase Agreements"), together with accrued and unpaid borrower interest[,
federal interest subsidy payments and Special Allowance Payments thereon], (2)
the Student Loan Purchase Agreements, to the extent they relate to the Assigned
Student Loans, (3) all rights and remedies of the Transferors under all of the
foregoing, including the right to enforce the same in the same manner and to the
same extent as the Transferors might do but for the execution and delivery of
this Transfer Agreement, (4) $________________ from amounts on deposit in the
Guarantee Account established under the Warehouse Indenture, such amount having
been transferred on the date hereof to the Note Trustee for deposit in the
Alternative Loan Guarantee Fund established under the Note Indenture, and (5)
all proceeds of any of the foregoing.
It is hereby acknowledged that the foregoing transfer and assignment is
being made pursuant to, and subject to the provisions of, Section 5.1 of the
Note Indenture, which provides that the Note Trustee shall be the legal owner of
all student loans financed under the Note Indenture (which includes the Assigned
Student Loans) for all purposes of the Higher Education Act and each Guarantee
Program and Alternative Loan Program (as such terms are defined in the Note
Indenture), but that the Note Trustee shall so hold such financed student loans
(including the Assigned Student Loans) in its capacity as trustee of an express
trust created pursuant to the Note Indenture and, in such capacity, shall be
acting on behalf of the Corporation, as the beneficial owner of such financed
student loans (including the Assigned Student Loans), as well as the Holders of
the Notes and all Other Beneficiaries, as their interests may appear.
To the extent required by the Higher Education Act and the Guarantee
Program regulations or the Alternative Loan Program, the Transferors agree to
notify, or cause to be notified, each borrower under each Assigned Student Loan
of the assignment and transfer to the Trustee (but for the account and on behalf
of the Corporation) of the Transferors' interest in such Assigned 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 regulations or the Alternative
Loan Program, as appropriate, the Corporation may waive this requirement if the
notice is or has been sent by the Servicer on behalf of the Transferors.
<PAGE>
If either of the Transferors is the recipient of any funds, from whatever
source received, which constitute payment of principal with respect to any
Assigned Student Loan, or accrued and unpaid borrower interest[, federal
interest subsidy payments and Special Allowance Payments] thereon as of the date
of this Agreement, or accrued interest or Special Allowance Payments accrued
thereon for any period subsequent to the date of this Agreement, such Transferor
shall promptly remit, or cause to be remitted, all such funds to the Servicer or
in such manner as the Trustee may otherwise direct.
Each of the Transferors, by entering into this Agreement, covenants and
agrees that it 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 obligation relating to this Agreement.
The Transferors further agree to individually endorse any of the
above-described Assigned Student Loans or any documents related thereto payable
to the Note Trustee upon the request of the Note Trustee for any reason,
including, without limitation, the default of any maker of any of the Assigned
Student Loans described hereinabove or assigned hereunder, and the default of
the Corporation under the Note Indenture.
All terms capitalized but not defined herein shall have the meaning
ascribed thereto in the Note Indenture.
This Transfer Agreement shall be governed by, and construed in accordance
with, the laws of the State of South Dakota.
This transfer and assignment shall be effective the date hereof. Dated this
day of ________, 1999.
GOAL FUNDING, INC
By:___________________________________
President
U.S. BANK NATIONAL ASSOCIATION,
as Warehouse Trustee
By:___________________________________
Trust Officer
-2-
<PAGE>
The undersigned, as Note Trustee, hereby accepts the above Transfer
Agreement and acknowledges receipt of the Assigned Student Loans (including any
evidences of indebtedness and all related documentation), the Student Loan
Purchase Agreements and the $____________ described above.
Dated this _____ day of __________, 1999.
U.S. BANK NATIONAL ASSOCIATION,
as Note Trustee
By:___________________________________
Trust Officer
The Corporation hereby accepts the above Transfer Agreement.
Dated this ____ day of ___________, 1999.
EDUCATION LOANS INCORPORATED
By:___________________________________
President
-3-
<PAGE>
EXHIBIT A
[List of Assigned Student Loans]
A-1
<PAGE>
EXHIBIT B
[List of Student Loan Purchase Agreements]
<PAGE>
B-1
<PAGE>
B-2
<PAGE>
B-3
<PAGE>
C-1
<PAGE>
D-1
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM T-1
Statement of Eligibility and Qualification Under the
Trust Indenture Act of 1939 of a Corporation
Designated to Act as Trustee
U.S. BANK NATIONAL ASSOCIATION
(Exact name of Trustee as specified in its charter)
United States 41-0417860
(State of Incorporation) (I.R.S. Employer
Identification No.)
U.S. Bank Trust Center
180 East Fifth Street
St. Paul, Minnesota 55101
(Address of Principal Executive Offices) (Zip Code)
Education Loans Incorporated
(Exact name of registrant as specified in its charter)
Delaware 91-1819974
(State of Incorporation) (I.R.S. Employer
Identification No.)
105 First Avenue Southwest
Aberdeen, South Dakota 57401
(Address of Principal Executive Offices) (Zip Code)
Student Loan Asset-Backed Notes, Series 1999-1
(Title of the Indenture Securities)
<PAGE>
GENERAL
-------
1. General Information Furnish the following information as to the Trustee.
(a) Name and address of each examining or supervising authority to which
it is subject. Comptroller of the Currency Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers. Yes
2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS If the obligor or any
underwriter for the obligor is an affiliate of the Trustee, describe each
such affiliation. None
See Note following Item 16.
Items 3-15 are not applicable because to the best of the Trustee's
knowledge the obligor is not in default under any Indenture for which the
Trustee acts as Trustee.
16. LIST OF EXHIBITS List below all exhibits filed as a part of this statement
of eligibility and qualification.
1. Copy of Articles of Association.*
2. Copy of Certificate of Authority to Commence Business.*
3. Authorization of the Trustee to exercise corporate trust powers
(included in Exhibits 1 and 2; no separate instrument).*
4. Copy of existing By-Laws.*
5. Copy of each Indenture referred to in Item 4. N/A.
6. The consents of the Trustee required by Section 321(b) of the act.
7. Copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or examining
authority incorporated by reference to File Number 333-56865.
*Incorporated by reference to File Number 333-30939.
NOTE
The answers to this statement insofar as such answers relate to what
persons have been underwriters for any securities of the
<PAGE>
obligors within three years prior to the date of filing this statement, or what
persons are owners of 10% or more of the voting securities of the obligors, or
affiliates, are based upon information furnished to the Trustee by the obligors.
While the Trustee has no reason to doubt the accuracy of any such information,
it cannot accept any responsibility therefor.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, U.S. Bank National Association, an Association organized and existing
under the laws of the United States, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, and its seal to be hereunto affixed and attested, all
in the City of Saint Paul and State of Minnesota on the 19th day of October,
1999.
U.S. BANK NATIONAL ASSOCIATION
/s/ Gloria S. Kessler
------------------------
Gloria S. Kessler
Assistant Vice President
/s/ Harry H. Hall
- ------------------------
Harry H. Hall
Assistant Secretary
<PAGE>
EXHIBIT 6
CONSENT
In accordance with Section 321(b) of the Trust Indenture Act of 1939, the
undersigned, U.S. BANK NATIONAL ASSOCIATION hereby consents that reports of
examination of the undersigned by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon its request therefor.
Dated: October 19, 1999
U.S. BANK NATIONAL ASSOCIATION
/s/ Gloria S. Kessler
-------------------------------
Gloria S. Kessler
Assistant Vice President
