<PAGE>
As filed with the Securities and Exchange Commission on September 3, 1999
Registration No. 333-78725
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
AMENDMENT NO. 1 TO
REGISTRATION STATEMENT
ON FORM S-3
UNDER THE SECURITIES ACT OF 1933
-----------
NELLIE MAE EDUCATION LOAN CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 04-3423352
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1240 Pawtucket Avenue
Rumford, Rhode Island 02916
(401) 438-4500
(Address, including ZIP code, and telephone
number, including area code, of registrant's principal
executive offices)
Ann M. O'Rourke
Secretary
Nellie Mae Education Loan Corporation
1240 Pawtucket Avenue
Rumford, Rhode Island 02916
(401) 438-4500
(Name, address, including ZIP code, and telephone number,
including area code, of agent for service)
-----------
Copy to:
Daniel M. Rossner
Brown & Wood LLP
One World Trade Center
New York, NY 10048-0057
Approximate date of commencement of proposed sale to the public: From
time to time after this Registration Statement becomes effective as determined
by market conditions.
-----------
If the only securities being registered on this Form are being offered
under 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 under 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
under 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 under 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 under Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Proposed
Proposed Maximum
Amount Maximum Aggregate Amount of
Title of Each Class of to Be Offering Price Offering Price Registration
Securities to Be Registered Registered Per Unit(1) (1) Fee(2)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asset-Backed Notes and Certificates... $1,000,000,000 100% $1,000,000,000 $278,000
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Of the entire registration fee of $278,000 calculated in accordance with
Rule 457(o) under the Securities Act of 1933, the sum of $278 was paid by
the Registrant at the time of the initial filing of this Registration
Statement.
-----------
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 under said Section 8(a), may
determine.
<PAGE>
The information in this prospectus supplement and the accompanying prospectus
are not complete and may be changed. We may not sell these securities until
the registration statement filed with the Securities and Exchange Commission
is effective. This prospectus supplement and the accompanying prospectus are
not an offer to sell these securities and they are not soliciting an offer to
buy these securities in any state where the offer or sale of them is not
permitted.
<PAGE>
SUBJECT TO COMPLETION, DATED SEPTEMBER 3, 1999
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED SEPTEMBER __, 1999
Nellie Mae Student Loan Trust 1999-A
Issuer
Nellie Mae Education Loan Corporation
Seller and Master Servicer
$________ Floating Rate Asset-Backed Notes
$________ Floating Rate Asset-Backed Certificates
The Securities
The trust will issue:
<TABLE>
<CAPTION>
Class A-1 Notes Class A-2 Notes Certificates Total
<S> <C> <C> <C> <C>
Principal Amount $_____________ $_____________ $___________ $__________
Class Note Rate or Certificate Rate Three-Month Three-Month LIBOR Three-Month LIBOR
LIBOR plus [ ]%, plus [ ]%, plus [ ]%, subject
subject to an subject to an to an interest
interest rate cap interest rate cap rate cap
Interest Payable Quarterly Quarterly Quarterly
Available Principal Payable Quarterly Quarterly Quarterly
First Payment Date [__________] [___________] [___________]
Note Final Maturity Date or
Certificate Final Distribution
Date _______ ___, 20__ _______ __, 20__ _______ __, 20__
Price to Public ___________% ____________% ____________% $__________
Underwriting Discount ___________% ____________% ____________% $__________
</TABLE>
<PAGE>
Trust Assets
The assets of the Trust will include:
- student loans, legal title to which will be held by an eligible lender
trustee on behalf of the trust ; and
- moneys and other investment securities on deposit in the funds and
accounts under the indenture, including the reserve account.
<PAGE>
Undercollateralization
As of ________ __, 1999, the principal amount of the notes and the certificate
balance of the certificates together exceed the principal amount of the student
loans in the trust, plus accrued interest, by approximately
$__________.
The securities will represent obligations of, or interests in, the
trust only and will not represent interests in or obligations of
the seller, the master servicer, the administrator or any of their
affiliates. The securities are not insured or guaranteed by any
entity.
This prospectus supplement may be used to offer and sell the
securities only if accompanied by the prospectus.
Consider carefully the risk factors beginning on page S-11 of
this prospectus supplement.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement or the prospectus to which it relates is truthful or
complete. Any representation to the contrary is a criminal offense.
[Names of Underwriters]
Prospectus Supplement dated September , 1999
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED
IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
Information about the securities is contained in two separate
documents that are progressively more detailed:
- the accompanying prospectus, which provides general information,
some of which may not apply to your securities, and
- this prospectus supplement, which describes the specific terms of
your securities.
If the description of the terms of the securities varies between this
prospectus supplement and the accompanying prospectus, you should rely on the
information in this prospectus supplement.
You should rely only on information contained in this prospectus
supplement, the accompanying prospectus or any other document to which we have
referred you. We have not authorized anyone to provide you with any other
information. This prospectus supplement may only be used where it is legal to
sell these securities.
This prospectus supplement and the accompanying prospectus include
cross-references to captions in these materials where you can find further
related discussions. The following table of contents and the table of contents
included in the accompanying prospectus indicate where those captions are
located.
[We have filed with the SEC preliminary information that the
underwriters prepared for prospective investors regarding the trust's assets and
the securities. The information contained in this document supersedes all the
information contained in that filing.]
Until 90 days after the date of this prospectus supplement, all dealers
that effect transactions in the securities, whether or not participating in this
offering, may be required to deliver a prospectus and prospectus supplement.
This requirement is in addition to the dealer's obligation to deliver a
prospectus and prospectus supplement when acting as underwriter with respect to
its unsold allotments or subscriptions.
The securities will not be offered in any state where offering them is
not permitted.
Certain persons participating in the offering of the securities may
engage in transactions that stabilize, maintain or otherwise affect the prices
of the securities. Those transactions could cause the prices of the securities
to be higher than they might otherwise be. See "Underwriting" beginning on page
S-69 of this prospectus supplement.
----------
S-2
<PAGE>
TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<S> <C>
Important Notice About Information Presented in This
Prospectus Supplement and the Accompanying Prospectus...........................S-2
Summary..........................................................................S-4
Risk Factors....................................................................S-11
Formation of the Trust..........................................................S-25
The Trust Loan Pool............................................................S-27
Description of the Securities...................................................S-47
Description of the Transfer and Servicing Agreements............................S-59
Federal Family Education Loan Program...........................................S-69
Federal Income Tax Consequences.................................................S-70
ERISA Considerations............................................................S-71
Underwriting....................................................................S-71
Legal Matters...................................................................S-72
Reports to Securityholders......................................................S-73
Glossary of Principal Terms.....................................................S-74
Annex I Global Clearance, Settlement and Tax
Documentation Procedures........................................................I-1
</TABLE>
S-3
<PAGE>
SUMMARY
This summary highlights selected information contained in this
prospectus supplement. However, it does not provide all the information that you
need to consider in making your investment decision. Please read this entire
prospectus supplement and the accompanying prospectus carefully for important
additional information about the securities.
PRINCIPAL PARTIES
The Seller
Nellie Mae Education Loan Corporation, a Delaware corporation, will:
- organize the trust and
- sell the pool of student loans to the trust.
The Trust
Nellie Mae Student Loan Trust 1999-A, a Delaware business trust.
The Master Servicer
Nellie Mae Education Loan Corporation will be responsible, as master
servicer under a master servicing agreement, for servicing the student loans
owned by the trust. The master servicer will arrange for one or more other
institutions to subservice the loans on a daily basis. Initially, the
subservicers will be AFSA Data Corporation and USA Group Loan Services, Inc.
The Administrator
Nellie Mae Education Loan Corporation, as administrator, will provide
management and administrative services to the trust under an administration
agreement between Nellie Mae Education Loan Corporation and the trust.
Eligible Lender Trustee
The First National Bank of Chicago, a national banking association, is
the eligible lender trustee and will hold the trust's beneficial ownership of
the student loans in the trust.
Indenture Trustee
State Street Bank and Trust Company, a Massachusetts banking
corporation, is the indenture trustee.
S-4
<PAGE>
SIGNIFICANT DATES
Closing Date
We expect to issue the securities on ___________, 1999.
Quarterly Payment Dates
We will make payments on the securities on the [ ]th day of each [ ],
[ ], [ ] and [ ]. If the [ ]th is not a business day, we will make payments
on the securities on the next business day. The first quarterly payment date
is [ ], 1999.
Cutoff Date
[ ] 1, 1999. The trust will receive payments made on the related
student loans on and after this date.
DESCRIPTION OF THE SECURITIES
General
We are offering the following floating rate asset-backed securities
under this prospectus supplement and the accompanying prospectus:
- Class A-1 Notes in the aggregate principal amount of $__________,
- Class A-2 Notes in the aggregate principal amount of
$___________, and
- Certificates in the aggregate principal amount of
$______________.
We will issue the securities in book-entry form in multiples of
$1,000. Any securities that you purchase will be held through The Depository
Trust Company in the United States, and Cedelbank or the Euroclear System in
Europe.
Interest Payments
The note rate for each class of notes and the certificate rate for the
certificates is specified on the cover page of this prospectus supplement.
However, the actual interest rate on each class of notes and the actual interest
return rate on the certificates for each quarterly interest period are subject
to an interest rate cap that is equal to the adjusted student loan rate. The
adjusted student loan rate for each quarter will equal the percentage equivalent
of a fraction:
- whose numerator is the expected interest collections on the trust
loans for the related collection period minus the servicing fee
and the administration fee for that period; and
- whose denominator is the sum of the principal amount of the notes
and the certificate balance of the certificates as of the last
day of that period.
S-5
<PAGE>
Interest on the notes and the certificates will be calculated on the
basis of the actual number of days elapsed in the related quarterly interest
period and a 360-day year.
If the interest rate cap is in effect during a particular quarterly
interest period, you will not receive interest on your securities at the
applicable class note rate or certificate rate specified on the cover page of
this prospectus supplement. Nevertheless, the difference between the amount of
interest that would have been payable at the applicable class note rate or
certificate rate and the amount of interest that we actually pay you as a result
of the application of the interest rate cap may be paid to you on a future
quarterly payment date. The ratings of the securities do not address how likely
it is that you will receive this difference.
Principal Payments
Until the securities have been paid in full, we will pay principal on
the securities on each quarterly payment date in an amount generally equal to
the principal collections on the related student loans for the preceding
quarterly period. Principal payments on the notes will be made sequentially;
that is, no principal will be paid on the Class A-2 Notes until the Class A-1
Notes have been paid in full, and no principal will be paid on the certificates
until the Class A-1 Notes and the Class A-2 Notes have been paid in full.
There is one exception to the sequential payment of principal on
the notes. Following a default under the indenture and the acceleration of
the notes, we will pay principal to each class of notes on a pro rata basis
until the notes have been paid in full.
Priority of Payments
On each quarterly payment date, the indenture trustee will pay the
following amounts to the extent that funds are available:
- to the master servicer and administrator, certain fees;
- to the noteholders, pro rata, interest;
- to the certificateholders, interest;
- to the noteholders, principal;
- to the certificateholders, following payment in full of the
notes, principal; and
- to the reserve account, remaining funds.
Final Maturity and Distribution Dates
On the final maturity and distribution dates listed on the cover page
of this prospectus supplement, we will pay any unpaid principal that remains
outstanding on each class of the notes and on the certificates.
S-6
<PAGE>
Auction Sale
Any student loans remaining in the trust at the end of the collection
period immediately preceding the _____ ___ quarterly payment date will be
offered for sale. We will use the proceeds of any sale to redeem the notes and
repurchase the certificate balance of the certificates. The auction price must
at least equal the sum of the aggregate unpaid principal amount of the notes and
the aggregate certificate balance of the certificates, plus, in each case,
accrued and unpaid interest.
Optional Redemption
On any quarterly payment date on which the sum of:
- the unpaid principal amount of the notes and
- the certificate balance of the certificates
IS NO MORE THAN 10% of the sum of:
- the initial unpaid principal amount of the notes and
- the initial certificate balance of the certificates,
Nellie Mae Funding, LLC, a subsidiary of the seller, or its assignee will have
the option to purchase all the student loans in the trust. Any notes and
certificates that remain outstanding on the date on which Nellie Mae Funding,
LLC or its assignee exercises this option will be prepaid in full on that date.
The redemption price for any class of notes will equal the aggregate unpaid
principal amount of that class, plus accrued and unpaid interest, and the
redemption price for the certificates will equal the aggregate certificate
balance, plus accrued and unpaid interest. However, it is possible that the
redemption price will not include payment of any interest that you may not have
received due to the effect of the interest rate cap.
TRUST PROPERTY
General
The primary property of the trust will be:
- the student loans transferred to the trust;
- all amounts collected on the student loans on or after the cutoff
date; and
- moneys and other investment securities on deposit in the funds
and accounts under the indenture, including the reserve account.
The Initial Trust Loans
The initial student loans expected to be transferred to the trust by
the seller will consist of guaranteed education loans to students and parents of
students made under the Federal Family Education Loan Program. All the loans are
reinsured by the United States Department of Education. On the closing date, the
initial trust loans had the characteristics listed below as of _________, 1999.
Although the initial trust loans that are actually transferred to the trust by
the seller on the closing date may differ from those that are
S-7
<PAGE>
expected to be transferred to the trust as of the date of this prospectus
supplement, that difference is limited to no more than 5% of the initial pool
balance.
<TABLE>
<S> <C>
- Aggregate principal amount: $______
- Aggregate principal amount as a percentage of the initial
principal amount to the notes and initial certificate balance of
the certificates: _____%
- Weighted average interest rate: _____%
- Weighted average original term to maturity: __ months
- Weighted average remaining term to maturity: __ months
- Stafford Loans (% by principal balance): ____%
- SLS Loans (% by principal balance): ____%
- PLUS Loans (% by principal balance): ____%
- Consolidation Loans (% by principal balance): ____%
- Guaranteed by California Student Aid Commission (% by principal
balance): ____%
- Guaranteed by American Student Assistance Guarantor
(% by principal balance): ____%
- Guaranteed by New Hampshire Higher Education Assistance Fund
(% by principal balance): ____%
- Guaranteed by New York State Higher Education Services
Corporation (% by principal balance): ____%
- Guaranteed by Pennsylvania Higher Education Assistance Agency
(% by principal balance): ____%
- Guaranteed by United Student Aid Funds, Inc. (% by principal
balance): ____%
- Guaranteed by other guarantors (% by principal balance): ____%
</TABLE>
Additional Trust Loans
From time to time after the closing date, the trust may acquire serial
loans made to borrowers whose existing student loans are already owned by the
trust. The aggregate principal balance of serial loans that the trust may
acquire after the closing date will not exceed 5%
S-8
<PAGE>
of the initial pool balance. In addition, in lieu of using cash to repurchase
from the trust student loans with respect to which there has been a material
breach of the representations and warranties contained in the loan sale
agreement, the seller may transfer to the trust qualified substitute student
loans.
CREDIT ENHANCEMENT
"Credit enhancement" refers to features of a securities offering
designed to reduce delays in payments and losses. The credit enhancement for
the notes will consist of:
- the reserve account and
- the subordination of the certificates.
The credit enhancement for the certificates will consist of the reserve account.
The Reserve Account
The trust will establish a reserve account with the indenture trustee.
The reserve account will be funded as follows:
- On the closing date, the trust will make an initial deposit of
$__________ into the reserve account.
- On each quarterly payment date, any funds remaining after all
required payments have been made will be deposited into the
reserve account.
Funds on deposit in the reserve account on each quarterly payment date
will be available to cover shortfalls in interest and principal payments on the
notes and the certificates to the extent described in this prospectus
supplement. Amounts in the reserve account on any quarterly payment date in
excess of the specified minimum reserve account balance, after all required
payments have been made, will be released to Nellie Mae Funding, LLC or its
assignee.
Subordination of the Certificates
The subordination of the certificates to the notes as described in this
prospectus supplement will provide additional credit enhancement for the notes.
Because no principal will be paid on the certificates until the notes have been
paid in full, any losses on the student loans not covered by amounts available
in the reserve account will be allocated to the certificates before being
allocated to the notes.
FEDERAL INCOME TAX CONSEQUENCES
Although there is no specific authority with respect to the
characterization for federal income tax purposes of securities having the same
terms as the notes, in the opinion of Brown & Wood LLP, special federal tax
counsel for the trust, the notes will be characterized as debt for federal
income tax purposes.
In the opinion of special federal tax counsel for the trust, for
federal income tax purposes the trust will not be characterized as an
association, or publicly traded partnership, taxable as a corporation. The
certificateholders and the seller, as owner of
S-9
<PAGE>
all amounts not otherwise required to be distributed to the noteholders or the
certificateholders or to pay expenses of the trust, will agree to treat the
trust as a partnership in which they are partners. Alternative characterizations
of the trust are possible, but they would not result in materially adverse
federal income tax consequences to the certificateholders. However, there are no
cases or rulings on similar transactions involving a trust that issues debt and
equity interests with terms similar to those of the notes and the certificates.
The material federal income tax consequences with respect to the
securities and the trust are discussed more fully under "Federal Income Tax
Consequences" in this prospectus supplement and "U.S. Federal Income Tax
Consequences" in the accompanying prospectus.
ERISA CONSIDERATIONS
The Notes
Subject to the considerations discussed under "ERISA Considerations" on
page S-69 of this prospectus supplement, the notes may be purchased by employee
benefit plans.
The Certificates
The certificates may not be acquired by, on behalf of, or using the
assets of any plan that is subject to Title I of ERISA or Section 4975 of the
Internal Revenue Code. Each certificateholder, by accepting a certificate, will
be deemed to have made the representations discussed under "ERISA
Considerations" on page S-69 of this prospectus supplement.
RATINGS
It is a condition to the issuance and sale of the notes that at least
two nationally recognized rating agencies rate the notes in their highest
investment rating categories.
It is a condition to the issuance and sale of the certificates that at
least two nationally recognized rating agencies rate the Certificates in one of
their three highest investment rating categories.
S-10
<PAGE>
RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase any of the securities.
The securities are not a suitable
investment for all investors The securities are not a suitable investment
if you require a regular or predictable
schedule of payments or payment on any
specific date. Because the securities are
complex instruments, you should only
consider investing in them if you have
sufficient expertise, either alone or with
your financial, tax and legal advisors, to
analyze the prepayment, reinvestment,
S-default and market risk, the tax
consequences of this investment, and the
interaction of these factors.
Your ability to resell the
securities may be limited The securities will be a new issue without
any established trading market. We do not
currently intend to list them on any
national securities exchange or on the
Nasdaq Stock Market. The underwriters may
assist in resales of the securities but are
not required to do so. A secondary market
for the securities may not develop. If a
secondary market does develop, it might not
continue or it might not be sufficiently
active or liquid for you to resell any of
your securities. [Names of Underwriters]
have advised us that they intend to attempt
to make a secondary market in the
securities; however, they are not obligated
to do so.
The trust has limited assets from
which to make payments on the
securities The trust does not have, nor is it permitted
or expected to have, any significant assets
or sources of funds other than the student
loans, the related guarantee agreements and
the reserve account. The notes represent
obligations of, and the certificates
represent ownership interests in, the trust
alone and will not be insured or guaranteed
by any entity. Consequently, you must rely
on payments on the student loans from
borrowers, guarantors or both, and amounts
on deposit in the reserve account, to repay
your securities. Only a limited amount of
money will be deposited in the reserve
account and that amount will be reduced,
subject to a specified minimum, as the
aggregate principal amount of the notes and
the aggregate certificate balance of the
certificates are
S-11
<PAGE>
reduced. If the reserve account is
exhausted, the trust will depend solely on
payments on the student loans to make
payments on the notes and the certificates
and you could suffer a loss if those
payments are inadequate. You will have no
claim to any amounts that the trust properly
distributes to the seller, the master
servicer or any of their affiliates from
time to time.
Losses may occur if the principal
amount of the notes and the
certificate balance of the
certificates exceed the pool
balance of the student loans As of the closing date, the sum of the
aggregate principal amount of the notes and
the certificate balance of the certificates
will be equal to approximately ___% of the
outstanding principal balance of the student
loans as of the cutoff date.
If the sum of the aggregate principal amount
of the notes and the aggregate certificate
balance of the certificates exceeds the
outstanding principal balance of the student
loans in the trust, you may experience
losses to the extent that excess interest
collections do not make up this difference.
Any of the following will increase the
likelihood of this sort of loss:
- a high rate of prepayments or
S-12
<PAGE>
- a widening of the spread between
the three-month T-bill rate and
three-month LIBOR.
In addition, you may experience losses if an
event of default should occur under the
indenture and the indenture trustee were
required to sell the student loans at a time
when the sum of the principal amount of the
notes and the certificate balance of the
certificates exceeded the outstanding
balance of the student loans. However,
because the notes must be redeemed in full
before any principal is paid on the
certificates, losses to investors in the
notes in this case would be limited to the
amount not absorbed by investors in the
certificates.
Addition of student loans may
change the characteristics of
the trust loans after the
closing date From time to time after the closing date,
the seller may elect to transfer to the
trust serial loans made to borrowers whose
existing student loans are already owned by
the trust. In addition, in lieu of using
cash to repurchase from the trust student
loans with respect to which there has been a
material breach of the representations and
warranties contained in the loan sale
agreement, the seller may transfer qualified
substitute student loans to the trust. As a
result, the characteristics of the pool of
trust loans may vary from the information
presented in this prospectus supplement. The
composition of the student loans and their
borrowers, the related guarantors, the
distribution by loan type, school type, the
distribution by interest rate, the
distribution by principal balance and the
distribution by remaining term to scheduled
maturity all may vary. You should consider
the effect of these potential variances when
making your investment decision concerning
the securities.
Because the timing of principal
payments is uncertain, the return
on your investment will change over
time The pre-tax return on your investment will
change from time to time .
S-13
<PAGE>
- The Rate of Principal is Uncertain.
The amount of principal payments
that you receive on your securities
and the time when you receive them
depend on how borrowers pay the
principal of their student loans.
Principal payments on the
securities derive from regularly
scheduled payments on the student
loans or from unscheduled payments
resulting from prepayments,
defaults or consolidations of the
student loans. We cannot predict
the timing of unscheduled payments.
In addition, principal payments on
the trust loans may be used to
purchase serial loans from the
seller rather than to make
principal payments on the
securities.
- Prior to the Parity Date, Excess
Interest Pays Down Principal. Prior
to the date on which the sum of the
aggregate principal amount of the
notes, plus the aggregate
certificate balance of the
certificates first equals the sum
of the outstanding balance of the
student loans in the trust plus
the amount of the reserve account,
any excess spread on the loans
will be used to make principal
payments on the securities.
You will bear the risk that the timing and
amount of principal payments on your
securities will prevent you from attaining
your desired yield.
You may be unable to reinvest
principal payments at the yield you
earn on the securities Asset-backed securities usually produce
increased principal payments to investors
when market interest rates fall below the
interest rates on the collateral (student
loans in this case) and result in decreased
principal payments when market interest
rates rise above the interest rates on the
collateral. As a result, you are likely to
receive more money to reinvest at a time
when other investments generally are
S-14
<PAGE>
producing lower yields than the yield on the
securities. Similarly, you are likely to
receive less money to reinvest when other
investments generally are producing higher
yields than the yield on the securities.
The securities may be repaid early
due to an auction sale or the
exercise of the purchase option.
If this happens, your yield may be
affected and you will bear the
reinvestment risk The securities may be repaid before you
expect them to be if:
- the indenture trustee successfully
conducts an auction sale or
- Nellie Mae Funding, LLC or its
assignee exercises its option to
purchase all the assets of the
trust.
If this happens, your yield on the
securities may be affected and you will
bear the risk that you cannot reinvest the
money you receive in repayment of the
securities at a yield that is at least equal
to the yield on the securities.
Changes in legislation may
adversely affect student loans and
federal guarantors The Higher Education Act or other relevant
federal or state laws, rules and regulations
may be amended or modified in the future in
a manner that could adversely affect the
federal student loan programs described in
this prospectus supplement and the
accompanying prospectus, as well as the
student loans made under these programs and
the financial condition of the federal
guarantors. Among other things, the level of
guarantee payments may be adjusted from time
to time. We cannot predict whether any
changes will be adopted or, if adopted, what
impact those changes would have on the trust
or the securities.
The federal direct student loan
program could result in reduced
revenues for the master servicer,
the subservicers and the guarantors The Federal Direct Student Loan Program,
established under the Higher Education Act,
could result in reductions in the volume of
loans made under the Federal Family
Education Loan Program. If so, the seller,
the administrator, the master
S-15
<PAGE>
servicer and the subservicers may experience
increased costs due to reduced economies of
scale. These cost increases could reduce the
ability of the master servicer or the
subservicers to satisfy their obligations to
service the student loans. This increased
competition from the Federal Direct Student
Loan Program could also reduce revenues of
the guarantors that would otherwise be
available to pay claims on defaulted student
loans. The level of demand currently
existing in the secondary market for loans
made under the Federal Family Education Loan
Program could be reduced, resulting in fewer
potential buyers of the student loans and
lower prices available in the secondary
market for those loans. The Department of
Education also has implemented a direct
consolidation loan program, which may reduce
the volume of loans outstanding under the
Federal Family Education Loan Program and
also result in prepayments of student loans
held by the trust.
Generally, the Class A-1 Notes will
be most immediately affected by a
high prepayment rate; the
certificates will be at greatest
risk in event of default Since we generally will not pay any
principal to the holders of the Class A-2
Notes or the certificates until the
principal balance of the Class A-1 Notes has
been reduced to zero, the Class A-1
Noteholders would be most immediately
affected by a high rate of principal
prepayments . In contrast, as a result of
the sequential payment of principal, it is
likely that at any time the Class A-2 Notes
will have a greater percent of their initial
principal balance outstanding than the Class
A-1 Notes and therefore, following a default
under the indenture, more losses will be
allocated to the Class A-2 Notes than to the
Class A-1 Notes as a relative percentage of
their respective initial principal amounts.
In any event, all losses will be allocated
first to the certificates before any losses
are allocated to the notes.
You may not receive interest at the
specified rate due to the effect of
the interest rate cap As specified on the cover of this prospectus
supplement, the interest rate for each class
of the notes and the certificate rate for
the certificates will be based on the level
of three-month LIBOR. However, in each
quarterly interest period, the interest
rate on each class of the notes and the
interest return rate on the certificates
will subject to an interest rate cap that is
equal to the adjusted student loan rate
for that period.
S-16
<PAGE>
The interest rate cap may be triggered as a
result of the following:
- The trust loans generally bear
interest based on the three-month
T-Bill rate, while the class note
rate for each class of notes and
the certificate rate for the
certificates is based on
three-month LIBOR. If the spread
between these two indices widens,
the interest rate cap may be
triggered.
- The principal balance of the trust
loans initially will be less than
the sum of the aggregate principal
amount of the notes and the
aggregate certificate balance of
the certificates. Consequently, the
aggregate principal balance of the
trust loans on which interest will
be collected will be less than the
principal amount of the securities.
Any interest not paid on your securities due
to the effect of the interest rate cap may
be paid later on a subordinated basis.
However, the existence of the interest rate
cap may reduce the market value and
liquidity of your securities.
Indenture trustee may have
difficulty liquidating student
loans Generally, during an event of default, the
indenture trustee is authorized to sell the
trust loans. It is possible, however, that
the indenture trustee may not find a
purchaser for them. In addition, the market
value of the trust loans might not equal the
principal amount of the notes and the
certificate balance of the certificates,
plus accrued and unpaid interest. In either
event, you may suffer a loss.
Insufficient funds for principal
distributions is not an event of
default under the indenture The principal amount required to be paid on
the securities on any payment date generally
is limited to amounts available for payment.
Therefore, our failure to pay principal may
not result in an event of default under the
indenture until the final maturity date of
each class the notes shown on the cover of
this prospectus supplement.
S-17
<PAGE>
Trust loans are only insured
by the guarantors only to 98% The trust loans are generally 98% insured by
a guarantor. As a result, in the event of a
trust loan default, the trust will
experience a loss on that loan generally in
the amount of 2% of its outstanding
principal and accrued and unpaid interest.
We will assign a defaulted trust loan to the
applicable federal guarantor in exchange for
a guarantee payment of the 98% guaranteed
portion. We may not have any right to pursue
the borrower for the remaining 2%
unguaranteed portion. If the credit
enhancement described in this prospectus
supplement is insufficient to cover the
unguaranteed portion, you may suffer a loss.
Your investment also depends
on the financial condition of
the guarantors All the trust loans are unsecured. As a
result, the only security for payment of the
trust loans are the guarantees provided
under the guarantee agreements between the
eligible lender trustee and the guarantors.
All of the student loans that will be
conveyed to the trust on the closing date
are guaranteed by guarantors as set forth in
"The Trust Loan Pool - Guarantee of Trust
Loans" in this prospectus supplement. The
financial condition of a guarantor may be
adversely affected by a number of factors
including:
- the amount of claims made against
that guarantor as result of
borrower defaults;
- the amount of claims reimbursed to
that guarantor from the Department
of Education, which range from 75%
to 100% of the 98% guaranteed
portion depending on the date the
student loan was made and the
performance of the guarantor; and
- changes in legislation that may
reduce expenditures from the
Department of Education that
support federal guarantors or that
may require federal guarantors to
pay more of their reserves to the
Department .
If the financial status of the guarantors
deteriorates, they may fail to make
guarantee payments to the eligible lender
trustee. In that event, you may suffer
delays, or losses, in the payment of
principal and interest on the securities.
S-18
<PAGE>
Lag in guarantee payments
could delay interest and
principal payments on the
securities Generally, a lender may not submit a default
claim to a guarantor until the related
student loan has been delinquent for at
least 270 days. If interest on the
performing trust loans and available amounts
in the reserve account are insufficient to
cover collection shortfalls on the
delinquent loans, the delay in receiving
guarantee payments could result in a delay
in principal and interest payments on the
securities.
Bankruptcy of the seller could
adversely affect payments on
the securities The transactions described in this prospectus
supplement have been structured to assure
that the transfer of the trust loans from
the seller to the trust will be treated as a
sale of the trust loans to the trust, not as
a pledge of the trust loans to secure a
borrowing by the seller. In the event of the
bankruptcy of the seller, however, there can
be no assurance that the sale of trust loans
to the trust will not be recharacterized as
a pledge of the trust loans to secure a
borrowing of the seller. Such a
recharacterization could result in delays
and reductions in the amount of collections
on the trust loans.
The seller will acquire the trust loans from
one or more of its affiliates or from third
parties. The seller views each of these
transfers as a "true sale" and not a secured
borrowing by any of its affiliates or a
third party. In addition, the seller will
represent that each trust loan, on the date
on which it is transferred to the eligible
lender trustee on behalf of the trust, is
free and clear of all security interests,
charges and encumbrances. However, if a
court were to disagree and treat those
transfers as secured borrowings, other
persons might be deemed to have an interest
in the trust loans superior to that of the
trust and the eligible lender trustee. Any
superior interest could result in delays and
reductions in the amount of collections on
the trust loans.
Failure to comply with student
loan origination and servicing
procedures could adversely
affect payments on the
securities The Higher Education Act requires loan
holders and servicers to follow specified
procedures, including certain due diligence
procedures, to ensure that
S-19
<PAGE>
student loans are properly originated and
serviced. Failure to follow these procedures
may result in:
- the Department of Education's
refusal to make reinsurance
payments to the guarantors or to
make interest subsidy payments and
special allowance payments to the
eligible lender trustee for the
trust loans; and
- the guarantors' inability or
refusal to make guarantee payments
on the trust loans.
The loss of any of these payments could
adversely affect payment of principal and
interest on the securities.
Offsets by guarantors or the
Department of Education could
reduce the amount of available
funds The eligible lender trustee may use the same
Department of Education lender
identification number for student loans in
the trust which it has used for other
student loans held by the eligible lender
trustee on behalf of other entities
established by the seller or its affiliates
under other indentures. If it does so, the
billings submitted to the Department and the
claims submitted to the guarantors will be
consolidated with the billings and claims
for payments for student loans under other
indentures using the same lender
identification number. Payments on those
billings by the Department as well as claim
payments by the applicable guarantors would
be made to the eligible lender trustee, or
to the master servicer on behalf of the
eligible lender trustee, in lump sum form.
Those payments would be allocated by the
eligible lender trustee among the various
indentures that reference the same lender
identification number.
If the Department or a guarantor determines
that the eligible lender trustee owes it a
liability on any Federal Family Education
Loan Program Loan for which the eligible
lender trustee is or was legal titleholder,
including loans held under the indenture for
your securities or other indentures, the
Department or the applicable guarantor might
seek to collect that liability by offsetting
it against payments due to the eligible
lender trustee under the terms of the trust.
Any offsetting or shortfall of payments due
to the eligible lender trustee could
adversely affect the amount of available
funds for any
S-20
<PAGE>
collection period and thus our ability to
pay you principal and interest on the
securities.
The indenture for your securities and other
indentures of the seller and its affiliates
entered into after [ ], 1999 will contain
provisions for cross-indemnification
concerning those payments and offsets. Even
with cross-indemnification provisions,
however, there can be no assurance that the
amount of funds available to the trust with
respect to indemnification would be adequate
to compensate the trust and investors in the
securities for any previous reduction in the
available funds.
Inability of the seller or master
servicer to meet its repurchase
obligations may adversely affect
the securities Under certain circumstances, the eligible
lender trustee on behalf of the trust has
the right to cause the seller or master
servicer to repurchase trust loans in the
event of a breach of its representations,
warranties or covenants regarding them.
There can be no assurance, however, that the
seller or the master servicer will have the
financial resources to do so.
Computer problems related to the
year 2000 may adversely affect
payments on the securities The year 2000 problem arises from the use by
software developers of two digits rather
than four to denote years in software
programs, computer hardware operating
systems and microprocessor-based embedded
controls in automated equipment. As a
result, information systems that operate
date sensitive software or automated
equipment that contains date sensitive
microprocessors may interpret "00" to
signify 1900 rather than 2000, thereby
impairing the ability of the information
systems or automated equipment to calculate,
sequence or recognize dates correctly. This
could result in serious malfunctions or even
complete failures of the affected systems,
including an inability to process
transactions, issue securities or checks, or
engage in normal business activities.
The master servicer is responsible for
collecting and posting payments to
borrowers' accounts. Failure by the master
servicer or its subservicers to resolve year
S-21
<PAGE>
2000 issues could adversely affect payments
on the securities or the servicing of the
trust loans. All of the master servicer's
internal systems have been tested for year
2000 compliance.
The master servicer relies heavily on
several third-party service providers for
key business processes, such as origination,
servicing and guarantee of student loans.
Consequently, the master servicer has
executed an aggressive strategy to assess
and monitor vendors to ensure, to the extent
within its control, that its business
processes are not jeopardized. To date, year
2000 risks associated with third-party
vendors and business partners have been
categorized and prioritized. The master
servicer will continue to monitor the
progress of its business partners' year 2000
preparation and to work cooperatively with
them to address any concerns.
The master servicer, on behalf of the trust,
will submit claims to the various guarantors
for payment on defaulted trust loans. If any
guarantor that guarantees a significant
portion of the trust loans is unable to
process guarantee payments timely because of
its failure to remediate year 2000 issues,
the liquidity of the trust could be affected
adversely, possibly to a material extent.
Year 2000 issues could cause the
malfunction of DTC's computer
applications and systems as they relate
to book-entry deliveries, processing
payments and settlement of trades. A
malfunction of this type could result in
a temporary illiquidity in the trading of
the securities. Although DTC has advised
NMELC that it has developed and is
implementing a technical assessment and
remediation plan (which includes a
testing phase) to deal with year 2000
issues, there can be no assurance that
DTC will be successful in its remediation
efforts.
S-22
<PAGE>
If the trust, the seller, the administrator,
the master servicer, any subservicers, the
guarantors, the indenture trustee, the owner
trustee , the eligible lender trustee or DTC
are unable to modify their computer and
electronic systems and applications to
resolve any year 2000 issues, or if any of
these parties are adversely affected by the
inability or failure of a third party on
which they rely to resolve any year 2000
issues, the receipt of collections on the
student loans may be delayed. As a
consequence, you may experience a delay in
payment on your securities and/or suffer a
loss.
Year 2000 computer problems related
to the Department of Education may
adversely affect the securities as
a result of adverse effects on
guarantors and guarantee payments The Department of Education has
undertaken a year 2000 compliance project
to address year 2000 issues. Information
regarding the Department's year 2000
efforts can be obtained at the Department
of Education's site on the World Wide Web
at http://www.ed.gov. Any failure by the
Department of Education to resolve any
year 2000 issues, or any adverse effect
on the Department of Education caused by a
party on which the Department of
Education relies as a result of year 2000
issues may have a material adverse effect
on the Federal Family Education Loan
Program, the guarantors and guarantee
payments on the trust loans.
Withdrawal or downgrading of
initial ratings will affect prices
of the securities A security rating is not a recommendation to
buy, sell or hold securities. Similar
ratings on different types of securities do
not necessarily mean the same thing. You
should analyze the significance of each
rating independently from any other rating.
Any rating agency may change its rating of
the securities after they are issued if it
believes that circumstances have changed.
Any subsequent change in rating is likely to
affect the price that a subsequent purchaser
will be willing to pay for the securities.
In addition, the ratings do not address the
likelihood of the ultimate payment to you of
any interest not paid as a result of the
interest rate cap having been triggered.
S-23
<PAGE>
FORMATION OF THE TRUST
THE TRUST
Nellie Mae Student Loan Trust 1999-A will be a business trust formed
under the laws of the State of Delaware and in accordance with the trust
agreement for the transactions described in this prospectus supplement and in
the accompanying prospectus. The trust will perform only the following
activities:
- It will acquire, hold and manage:
- the student loans (the "Initial Trust Loans") to be
sold to the trust on ________ __, 1999 (the "Closing
Date") with effect from _________ ___, 1999 (the
"Cutoff Date");
- any Serial Loans that the seller may transfer to the
trust after the Closing Date;
- any Qualified Substitute Student Loans that the
seller may transfer to the trust after the Closing
Date in lieu of the seller's repurchasing for cash
loans with respect to which there has been a material
breach of the representations and warranties
contained in the loan sale agreement (the Qualified
Substitute Student Loans and the Serial Loans, the
"Additional Loans" and, together with the Initial
Trust Loans, the "Trust Loans");
- moneys and other investment securities of the trust
on deposit in accounts under the related indenture,
including the reserve account; and
- the proceeds of the Trust Loans and other trust
assets.
- It will issue the Class A-1 Floating Rate Asset-Backed Notes
(the "Class A-1 Notes") and the Class A-2 Floating Rate
Asset-Backed Notes (the "Class A-2 Notes" and, together with
the Class A-1 Notes, the "Notes") and the Floating Rate
Asset-Backed Certificates (the "Certificates" and, together
with the Notes, the "Securities").
- It will make payments on the Notes and the Certificates.
- It will engage in other activities that are necessary,
suitable or convenient to accomplish these and or other
related activities.
On behalf of the trust, The First National Bank of Chicago, as eligible
lender trustee, will use the proceeds from the sale of the Securities for the
following purposes:
- to purchase the Initial Trust Loans from Nellie Mae Education
Loan Corporation, the seller under the loan sale agreement;
- to make the initial deposit into the reserve account on the
Closing Date of cash or eligible investments equal to
$__________ (the "Reserve Account Initial Deposit"); and
S-24
<PAGE>
- to fund the costs of issuing the Securities.
After completing the above transactions, the property of the trust will consist
of:
- a pool of guaranteed education loans to students and parents
of students ("FFELP Loans") made under the Federal Family
Education Loan Program (the "FFELP"), legal title to which
loans is held by the eligible lender trustee on behalf of the
trust;
- all funds collected on the Trust Loans on or after the Cutoff
Date; and
- all moneys and investments on deposit in the collection
account and the reserve account.
The Notes will be secured by the assets of the trust and the
Certificates will represent undivided ownership interests in the trust. The
indenture trustee will maintain the collection account and the reserve
account in its name for the benefit of the Noteholders and the
Certificateholders. To facilitate servicing and to minimize administrative
burden and expense, the eligible lender trustee will appoint the master
servicer as custodian of the promissory notes representing the Trust Loans.
Serial Loans will be added to the trust to the extent that the
seller exercises its option to sell Serial Loans to the eligible lender
trustee, acting on behalf of the trust, up to an amount equal to 5% of the
initial Pool Balance. Serial Loans and Qualified Substitute Student Loans may
not be added to the trust unless the procedures in the loan sale agreement
are complied with.
S-25
<PAGE>
The trust's principal offices are in Chicago, Illinois, in care of The
First National Bank of Chicago, as eligible lender trustee, at the address
listed below.
ELIGIBLE LENDER TRUSTEE
The First National Bank of Chicago will act as the eligible
lender trustee for the trust under the trust agreement to be dated as of [ ],
1999 among the seller, Nellie Mae Funding, LLC ("NMF"), a Delaware limited
liability company which is a subsidiary of the seller, and the eligible
lender trustee. The trust agreement may be amended from time to time. The
First National Bank of Chicago is a national banking association whose
principal offices are located at One First National Plaza, Suite 0216,
Chicago, Illinois 60670. Its New York offices are located at 14 Wall Street,
New York, New York 10005.
On behalf of the trust, the eligible lender trustee will acquire
legal title to all the Trust Loans conveyed from time to time under the loan
sale agreement, and enter into a guarantee agreement with each of the
guarantors of the related Trust Loans. The eligible lender trustee qualifies
as an eligible lender and owner of the Trust Loans for all purposes under the
Higher Education Act of 1965, as amended, and the guarantee agreements. Its
failure to qualify as an eligible lender would result in the loss of
guarantee payments from any guarantor and any federal assistance with respect
the Trust Loans it purchases on behalf of the trust. SEE "The Student Loan
Pools" in the accompanying prospectus. The eligible lender trustee's
liability in connection with the issuance and sale of the Securities is
limited solely to its express obligations as set forth in the trust
agreement, the loan sale agreement and the master servicing agreement. SEE
"Description of the Securities" and "Description of the Transfer and
Servicing Agreements" in this prospectus supplement and in the accompanying
prospectus.
The seller and its affiliates may maintain normal commercial banking
relations with the eligible lender trustee.
THE MASTER SERVICER AND THE SUBSERVICERS
S-26
<PAGE>
Nellie Mae Education Loan Corporation ("NMELC"), as master servicer,
will arrange for the servicing of the Trust Loans under the master servicing
agreement. The master servicer has initially arranged for AFSA Data
Corporation and USA Group Loan Services, Inc. to subservice the Trust Loans
on a daily basis. Nevertheless, the master servicer will remain fully
responsible for the servicing of the Trust Loans.
AFSA Data Corporation ("AFSA") acts as a loan servicing agent for
NMELC. AFSA is a for-profit corporation and a wholly-owned subsidiary of
Fleet Holding Corporation, a subsidiary of Fleet National Bank, which in turn
is a wholly-owned subsidiary of Fleet Financial Group of Boston,
Massachusetts, a diversified financial services company. As of December 31,
1998, AFSA provided loan servicing for approximately $52 billion in student
loans. AFSA has its principal offices in Long Beach, California, and a
regional processing center in Utica, New York, which services the guaranteed
student loan and parental loan programs, and a regional processing center in
Lombard, Illinois, which services campus based programs. AFSA's principal
office is located at 2277 E. 220th Street, Long Beach, California 90810-1690;
telephone (313) 513-2700.
USA Group Loan Services, Inc. ("Loan Services"), formerly known as
Education Loan Servicing Center, Inc., is a private, nonprofit, non-stock
membership corporation which was organized in 1982 under and pursuant to the
provisions of the General Corporation Law of the State of Delaware. Loan
Services is an affiliate of USA Group, Inc., a nonprofit corporation which is
also affiliated with United Student Aid Funds, Inc., one of the guarantors of
the Trust Loans. As of September 30, 1998, Loan Services provided loan
servicing for in excess of 3,500,000 student and parent loans with
outstanding balances of over $13.4 billion for approximately 150 different
lenders and secondary market corporations. Loan Services' principal office is
located at 30 South Meridian, Indianapolis, Indiana 46204-3503; telephone
(800) 428-9250.
THE TRUST LOAN POOL
The pool of Trust Loans will include the Initial Trust Loans
purchased by the eligible lender trustee on behalf of the trust as of the
Cutoff Date and any Additional Trust Loans acquired by the eligible lender
trustee on behalf of the trust after the Closing Date.
From time to time after the Closing Date, the seller will have the
option to direct the eligible lender trustee to purchase Serial Loans from
the seller on behalf of the trust. A "Serial Loan" is a student loan made to
a borrower who is also a borrower under at least one outstanding Trust Loan.
The seller generally anticipates that it will cause the eligible lender
trustee to purchase Serial Loans, but the seller is not obligated to do so.
If the seller decides to sell a Serial Loan to the trust, it is expected that
the sale would occur shortly after the Serial Loan was acquired by the
seller. The maximum aggregate amount of Serial Loans that the seller may sell
to the trust is limited to 5% of the initial Pool Balance.
On behalf of the trust, the eligible lender trustee will purchase
Serial Loans by using collections of principal on the outstanding Trust Loans
that would have otherwise been part of Available Funds.
S-27
<PAGE>
In addition, on the quarterly payment date immediately after the end of each
Collection Period during which it has acquired any Serial Loans, the trust will
use any amounts then in the reserve account in excess of the Specified Reserve
Account Balance to pay any Purchase Premium Amounts for the Serial Loans
purchased during that Collection Period.
In selecting the Trust Loans, the seller has not used any procedures
that it believes to be adverse to the Securityholders nor will it do so in the
future. Nevertheless, you should note that the criteria that are described under
"Description of the Transfer and Servicing Agreements--Additional Fundings" in
this prospectus supplement or that are contained in the loan sale agreement are
the only required characteristics of the Additional Trust Loans. Therefore,
following the transfer of to the eligible lender trustee on behalf of the trust
of Serial Loans as well as the replacement of Trust Loans with Qualified
Substitute Student Loans, the aggregate characteristics of the entire pool of
Trust Loans, including the composition of the loans and their borrowers, the
guarantors, the distribution by loan type, the distribution by interest rate,
the distribution by principal balance, the distribution by school type and the
distribution by remaining term to scheduled maturity that are described in the
following tables, may vary from those of the Initial Trust Loans as of the
Cutoff Date. In addition, the distribution by weighted average interest rate
applicable to the Trust Loans on any date following the Cutoff Date may vary
from that set forth in the following tables as a result of variations in the
effective rates of interest applicable to the Trust Loans. Moreover, the
S-28
<PAGE>
information described below regarding the original term to maturity and
remaining term of maturity of the Initial Trust Loans as of the Cutoff Date
may vary significantly from the actual term to maturity of any Trust Loan
whose borrower is granted a deferral or forbearance period. We are unable to
predict the extent of that variance.
The tables below set forth certain characteristics of the Initial
Trust Loans as of the Cutoff Date. Although the Initial Trust Loans that the
seller actually transfers to the trust on the Closing Date may differ from
those that are expected to be transferred to the trust as of the date of this
prospectus supplement, that difference is limited to no more than 5% of the
initial Pool Balance.
In the tables below, the aggregate outstanding principal balance of
the Initial Trust Loans as of the Cutoff Date includes net principal balances
due from borrowers, plus accrued interest in an amount estimated to be
$_________ as of the Cutoff Date that we expect to be capitalized when
repayment begins. Due to rounding, the percentages set forth in the tables
below may not always add to 100%.
Composition of the Initial Trust Loans
as of the Cutoff Date
<TABLE>
<S> <C>
Aggregate outstanding principal balance $ _______
Number of borrowers _______
Average outstanding principal balance per borrower $ _______
Number of loans _______
Average outstanding principal balance per loan $ _______
Weighted average original term to maturity _______ months
Weighted average remaining term to maturity _______ months
Weighted average annual interest rate _______ %
</TABLE>
In the preceding table, the weighted average annual interest rate
was calculated using the interest rates of the Initial Trust Loans in effect
as of the Cutoff Date . However, because some of the Initial Trust Loans bear
interest at a variable annual rate, there can be no assurance that the
foregoing percentage will remain applicable to the Initial Trust Loans at any
time after the Cutoff Date.
In addition, the weighted average original term to maturity was
determined from the date of origination of each Initial Trust Loan and the
weighted average remaining term to maturity was determined from the Cutoff
Date, in each case to the stated maturity date of the related loan. In making
these calculations, we assumed that repayment of each loan would begin
promptly after the expiration of the typical grace period following the
related student's
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<PAGE>
expected graduation date . We also assumed that no deferrals or forebearances
under the FFELP would be granted in the future.
Distribution of the Initial Trust Loans
by Loan Type as of the Cutoff Date
<TABLE>
<CAPTION>
Percent of Initial Trust
Number Aggregate Outstanding Loans by Outstanding
Loan Type of Loans Principal Balance Principal Balance
- ---------- -------- --------------------- --------------------
<S> <C> <C> <C>
Stafford Loans
Unsubsidized Stafford Loans
SLS Loans
PLUS Loans
Consolidation Loans
------------- --------------------- --------------------
Total
</TABLE>
S-30
<PAGE>
Distribution of the Initial Trust Loans
by Borrower Interest Rates as of the Cutoff Date
<TABLE>
<CAPTION>
Percent of Initial Trust
Range of Interest Number Aggregate Outstanding Loans by Outstanding
Rates of Loans Principal Balance Principal Balance
- ------------------ -------- --------------------- --------------------------
<S> <C> <C> <C>
7.00% to 7.49%
7.50% to 7.99%
8.00% to 8.49%
8.50% to 8.99%
9.00% to 9.49%
9.50% and above
Total
</TABLE>
In the preceding table, the ranges of interest rates were
calculated using the interest rates of the Initial Trust Loans in effect as
of the Cutoff Date. However, because some of the Initial Trust Loans bear
interest at a variable annual rate, there can be no assurance that the ranges
shown above will remain applicable to the Initial Trust Loans at any time
after the Cutoff Date.
S-31
<PAGE>
Distribution of the Initial Trust Loans
by Outstanding Principal Balance as of the Cutoff Date
<TABLE>
<CAPTION>
Percent of Initial Trust
Range of Outstanding Number Aggregate Outstanding Loans by Outstanding
Principal Balance of Loans Principal Balance Principal Balance
- -------------------- -------- --------------------- --------------------------
<S> <C> <C> <C>
Less than $2,000
$ 2,000 to $ 3,999
$ 4,000 to $ 5,999
$ 6,000 to $ 7,999
$ 8,000 to $ 9,999
$10,000 to $11,999
$12,000 to $13,999
$14,000 to $15,999
$16,000 to $17,999
$18,000 to $19,999
$20,000 to $21,999
$22,000 to $23,999
$24,000 to $25,999
$26,000 to $27,999
$28,000 and above
Total
</TABLE>
S-32
<PAGE>
Distribution of the Initial Trust Loans
by School Type as of the Cutoff Date
<TABLE>
<CAPTION>
Percent of Initial Trust
Number Aggregate Outstanding Loans by Outstanding
School Type of Loans Principal Balance Principal Balance
------------------------ -------------- --------------------- -------------------------
<S> <C> <C> <C>
4-Year Public
4-Year Private
2-Year Public
2-Year Private
Proprietary/Vocational
Other/Unknown
Total
</TABLE>
S-33
<PAGE>
Distribution of the Initial Trust Loans
by Remaining Term to Scheduled Maturity
as of the Cutoff Date
<TABLE>
<CAPTION>
Range of Remaining Term to Aggregate Percent of Initial
Scheduled Outstanding Trust Loans
Maturity Number Principal by Outstanding
(in months) of Loans Balance Principal Balance
- --------------------------------- --------------- ------------- ------------------
<S> <C> <C> <C>
Less than 24
24 to 35
36 to 47
48 to 59
60 to 71
72 to 83
84 to 95
96 to 107
108 to 119
120 to 131
132 to 143
144 to 155
156 to 167
168 to 179
180 to 191
192 and above
Total
</TABLE>
In the preceding table, the ranges of remaining term to scheduled
maturity was determined from the Cutoff Date to the stated maturity date of the
related Initial Trust Loans. We assumed that repayment of each loan would begin
promptly after the expiration of the typical grace period following the related
student's expected graduation date and that no deferrals or forbearances under
the FFELP would be granted in the future.
S-34
<PAGE>
Distribution of the Initial Trust Loans
by Borrower Payment Status as of the Cutoff Date
<TABLE>
<CAPTION>
Aggregate Percent of Initial Trust
Number Outstanding Loans by Outstanding
Borrower Payment Status of Loans Principal Balance Principal Balance
- -------------------------- ----------------- ---------------------- -------------------------
<S> <C> <C> <C>
In-School
Grace
Deferral
Forbearance
Repayment
Total
</TABLE>
In the preceding table, the heading "Borrower Payment Status" refers
to the status of the borrower of each Initial Trust Loan as of the Cutoff Date.
A borrower still may be attending school ("In-School"), may be in a grace period
prior to beginning repayment ("Grace"), may be repaying the loan ("Repayment")
or may have temporarily ceased repaying the loan through a deferral ("Deferral")
or a forbearance ("Forbearance") period. See "Federal Family Education Loan
Program" below and in the accompanying prospectus. For purposes of the preceding
table, the term "In-School" excludes, and the term "Deferral" includes, all SLS
Loans or PLUS Loans made to borrowers who are still attending school.
S-35
<PAGE>
Geographic Distribution of the
Initial Trust Loans as of the Cutoff Date
<TABLE>
<CAPTION>
Aggregate Percent of Initial Trust
Number Outstanding Loans by Outstanding
Location of Loans Principal Balance Principal Balance
- ------------ -------------- ------------------------ -------------------------
<S> <C> <C> <C>
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Military
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
</TABLE>
S-36
<PAGE>
<TABLE>
<CAPTION>
Aggregate Percent of Initial Trust
Number Outstanding Loans by Outstanding
Location of Loans Principal Balance Principal Balance
- ------------ -------------- ----------------- -------------------------
<S> <C> <C> <C>
Oregon
Pennsylvania
Puerto Rico
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Other
Total
</TABLE>
In the preceding table, the description of a borrower's location is
based on that borrower's permanent billing address as shown in the master
servicer's records as of the Cutoff Date.
S-37
<PAGE>
Distribution of Initial Trust Loans by Date of Disbursement
<TABLE>
<CAPTION>
Aggregate Percent of Initial
Outstanding Trust Loans
Number Principal by Outstanding
Date of Disbursement of Loans Balance Principal Balance
- ------------------------ ----------- ------------------ -------------------
<S> <C> <C> <C>
Before October 1, 1993
From October 1, 1993 through
September 30, 1998
From October 1, 1998 on
Total
</TABLE>
Initial Trust Loans disbursed before October 1, 1993 are 100%
guaranteed by the Initial Guarantors and reinsured against default by the
Department of Education up to a maximum of 100% of the Guarantee Payments.
Initial Trust Loans disbursed from October 1, 1993 through September 30, 1998
are 98% guaranteed by the Initial Guarantors and reinsured against default by
the Department of Education up to a maximum of 98% of the guarantee payments.
Initial Trust Loans disbursed on or after October 1, 1998 are 98% guaranteed by
the Initial Guarantors and reinsured against default by the Department up to a
maximum of 95% of the guarantee payments.
S-38
<PAGE>
Distribution of Initial Trust Loans by
Number of Days of Delinquency as of the Cutoff Date
<TABLE>
<CAPTION>
Percent of Initial Trust
Loans
Number Aggregate Outstanding by Outstanding
Days Delinquent of Loans Principal Balance Principal Balance
- --------------- ----------------- ---------------------- --------------------------
<S> <C> <C> <C>
0 - 30
31 - 60
61 - 90
91 - 120
Total
</TABLE>
The outstanding principal balance of each Trust Loan will be amortized
over a series of regular payments. Each regular payment consists of an
installment of interest which is calculated on the basis of the loan's
outstanding principal balance 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. Payments received on each
Trust Loan are applied first to late charges and then to interest accrued to the
date of payment. The remainder is then 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 deferral or forbearance periods, the borrower is
obligated to pay regular monthly installments until the final scheduled payment
date for that Trust Loan, at which time the amount of the final installment is
increased or decreased as necessary to repay the principal balance of the loan
outstanding at that time.
S-39
<PAGE>
Guarantee of Trust Loans
By the Closing Date, the eligible lender trustee will have entered
into guarantee agreements with the state or non-profit guarantors listed on
the chart appearing on page S-39 of this prospectus supplement (the "Initial
Guarantors"). Under the guarantee agreements, each Initial Guarantor has
agreed to serve as guarantor for certain "Initial Trust Loans."
The trust may acquire Additional Loans guaranteed by a state or
non-profit guarantor other than the Initial Guarantors (each, an "Additional
Guarantor" and, together with the Initial Guarantors, the "guarantors") provided
that, at the time the trust acquires the Additional Loan, the related Additional
Guarantor is a state or non-profit guarantor and has entered into a guarantee
agreement with the eligible lender trustee. No more than 20% of the Trust Loans
by principal balance may have guarantees from Additional Guarantors and no more
than 5% of the Trust Loans by principal balance may have guarantees from any one
Additional Guarantor.
Under its guarantee agreement, each guarantor guarantees to pay 100% of
the principal and accrued interest for each Trust Loan covered by its guarantee,
including any interest that may be capitalized from time to time, in the event
any one of the following events has occurred:
- the borrower under the loan fails to make monthly principal or
interest payments when due and the failure continues for a
statutorily determined period of time (at least 180 days for
student loans for which the first day of delinquency occurs
before October 7, 1998 or 270 days for student loans for which
the first day of delinquency occurs on or after October 7,
1998), EXCEPT that the guarantee against the borrower's
failure to make payments will cover only 98% of unpaid
principal and accrued and unpaid interest for Trust Loans
first disbursed on or after October 1, 1993;
- a petition in bankruptcy under any chapter of the Federal
Bankruptcy Code is filed by or against the borrower;
- the borrower dies;
- the borrower becomes totally and permanently disabled to work
and earn money or attend school, as certified by a qualified
physician;
- the borrower's program of study cannot be completed because
the borrower's school closes;
- the loan application is discovered to have been falsely
certified by the borrower's school; or
- a determination is made, based solely on the borrower's
actions in obtaining the loan, that the borrower was
ineligible for the loan.
When one of these conditions is satisfied, the Higher Education Act
requires the guarantor generally to pay the claim within 90 days after the
lender submits it. The
S-40
<PAGE>
obligations of a guarantor under its guarantee agreement are obligations solely
of that guarantor and are not supported by the full faith and credit of the
federal government or any state government. However, the Act provides that if
the Secretary of Education determines that a guarantor is unable to meet its
insurance obligations, the Secretary will assume responsibility for all
functions of that guarantor under the guarantor's loan insurance program. The
Secretary is authorized, among other things, to take those actions that are
necessary to ensure that:
- student loans continue to be available to residents of the
state or states in which the guarantor did business;
- all guarantees issued by the guarantor before the Secretary
assumed its functions are fully honored; and
- the student loans guaranteed by the guarantor are properly
serviced.
For a further discussion of the Secretary's authority in the event that a
guarantor is unable to meet its insurance obligations, SEE "Guarantors Under the
FFELP - Department of Education Oversight" in the accompanying prospectus.
Each guarantor's obligations on any Trust Loan that it guarantees are
conditioned upon the satisfaction of all the conditions set forth in the
applicable guarantee agreement. These conditions generally include, but are not
limited to, the following:
- the Trust Loan was originated and serviced in accordance with
the Higher Education Act and other applicable requirements;
- the guarantee fee payable on the Trust Loan is timely paid to
the guarantor;
- all required pre-claim delinquency status notifications and
the claim for the guarantee payments on the Trust Loan are
timely submitted; and
- the promissory note evidencing the Trust Loan is transferred
and endorsed to the guarantor when a claim for guarantee
payments on the loan is made.
Failure to comply with any of the applicable conditions, including those listed
above, may result in:
- the guarantor's refusal to honor its guarantee agreement with
respect to the Trust Loan;
- the guarantor's denial of coverage on certain accrued interest
amounts on the loan; or
- the loss of certain interest subsidy payments and special
allowance payments with respect to the loan.
Under the master servicing agreement, the master servicer's failure to
comply with any applicable conditions would constitute a breach of its covenants
and would obligate the master servicer to repurchase the affected Trust Loans.
SEE "Risk Factors--Inability of the Seller or Master Servicer to Meet Its
Purchase Obligations May Adversely Affect the Notes" in this prospectus
supplement and "Description of the Transfer and Servicing Agreements--Master
Servicer Covenants" in the accompanying prospectus.
S-41
<PAGE>
Under the loan sale agreement, the seller's material breach of its
representations and warranties would obligate the seller to repurchase (or
provide a substitute for) the affected Trust Loans and reimburse the trust for
any non-guaranteed interest amounts or lost interest subsidy payments or special
allowance payments that result from the breach. SEE "Description of the Transfer
and Servicing Agreements--Sale of Student Loans; Representations and Warranties"
in the accompanying prospectus.
The following table provides information with respect to the portion of
the Initial Trust Loans guaranteed by each Initial Guarantor.
S-42
<PAGE>
Distribution of Initial Trust Loans by Initial Guarantor as of the Cutoff Date
<TABLE>
<CAPTION>
Percent of Initial Trust
Aggregate Outstanding Loans by Outstanding
Number Principal Balance of Principal Balance
Name of Guarantor of Loans Guaranteed Initial Trust Loans Guaranteed
<S> <C> <C> <C>
</TABLE>
S-43
<PAGE>
In the preceding table, the aggregate outstanding principal balance of
the Initial Trust Loans as of the Cutoff Date includes net principal balances
due from borrowers, plus accrued interest in an amount estimated to be
$__________ as of the Cutoff Date that we expect to be capitalized when
repayment begins.
Set forth in the four following tables is current and historical
information for each Initial Guarantor which guarantees Initial Student Loans
comprising at least 5% of the initial Pool Balance (each, a "Significant
Guarantor") concerning all the student loans that it guarantees, including
those not owned by the trust. The information in the four following tables
with respect to the Significant Guarantors has been obtained from Department
of Education publications or other public official documents. Neither the
seller nor the underwriters confirmed the information in the following tables
independently.
GUARANTEE VOLUME. The following table sets forth the approximate
aggregate principal balance of federally reinsured student loans, including PLUS
Loans but excluding Consolidation Loans, that first became guaranteed by the
Significant Guarantors in each of the last five federal fiscal years:
<TABLE>
<CAPTION>
Stafford, SLS and PLUS Loans Guaranteed
by Federal Fiscal Year
(dollars in millions)
Name of Guarantor
1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C>
California Student Aid
Commission .................. $1,913 $1,601 $1,410 $1,563 $1,949
American Student Assistance
Guarantor ................... $1,099 $ 906 $ 707 $ 668 $ 656
New Hampshire Higher Education
Assistance Fund ............. $ 117 $ 134 $ 134 $ 157 $ 154
New York State Higher Education
Services Corporation ........ $1,667 $1,554 $1,404 $1,532 $1,568
Pennsylvania Higher Education
Assistance Agency ........... $1,747 $1,809 $1,777 $1,828 $1,787
United Student Aid Funds, Inc. $4,725 $5,041 $5,293 $6,161 $6,181
</TABLE>
RESERVE RATIOS. Each Guarantor's reserve ratio is determined by
dividing its cumulative cash reserves by the original principal amount of the
outstanding student loans it has agreed to guarantee. The term "cumulative cash
reserves" refers to cash reserves PLUS sources of funds (including insurance
premiums, state appropriations, federal advances, federal reinsurance payments,
administrative cost allowances, collections on claims paid and investment
earnings) MINUS uses of funds (including claims paid to lenders, operating
expenses, lender fees, the Department of Education's share of collections on
claims paid, returned advances and reinsurance fees). The "original principal
amount of outstanding loans" consists of the original principal amount of
student loans guaranteed by that Guarantor MINUS the original principal amount
of loans cancelled, claims paid, loans paid in full and loan guarantees
transferred from that Guarantor to other Guarantors, PLUS the original principal
amount of loan guarantees transferred to that Guarantor from other Guarantors.
The following table sets forth the reserve ratios for each Significant Guarantor
as of the end of each of the last five federal fiscal years, as well as the
national average reserve ratio for all federal guarantors as of the end of the
last four federal fiscal years for which data are available:
<TABLE>
<CAPTION>
Reserve Ratio
By Federal Fiscal Year
Name of Guarantor
1994 1995 1996 1997 1998
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
California Student Aid
Commission..................... 2.1% 2.3% 2.5% 2.5% 1.8%
American Student Assistance
Guarantor...................... 0.7% 0.8% 0.9% 0.7% 0.8%
New Hampshire Higher Education
Assistance Fund................ 1.4% 0.8% 0.7% 1.0% 1.0%
New York State Higher Education
Services Corporation........... 1.0% 1.1% 1.0% 0.8% 1.1%
Pennsylvania Higher Education
Assistance Agency.............. 1.4% 1.5% 1.7% 1.4% 1.4%
United Student Aid Funds, Inc....... 1.2% 1.5% 1.5% 1.5% 1.4%
Not
National Average Reserve Ratio...... 1.4% 1.6% 1.6% 1.5% Available
</TABLE>
RECOVERY RATES. The recovery rate provides a measure of the
effectiveness of a guarantor's collection efforts against defaulting borrowers
after the guarantee claims have been satisfied. It is determined by dividing the
cumulative amount recovered from borrowers by a guarantor by the cumulative
amount of default claims paid by that guarantor . The table below sets forth the
recovery rate for each Significant Guarantor as of the end of each of the last
five federal fiscal years, as well as the national average recovery rate for
all federal guarantors as of the end of each of the last four federal fiscal
years for which data are available:
S-44
<PAGE>
<TABLE>
<CAPTION>
Recovery Rate
By Federal Fiscal Year
Name of Guarantor
1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C>
California Student Aid
Commission .................. 33.6% 35.6% 37.6% 36.4% 42.0%
American Student Assistance
Guarantor ................... 39.0% 38.3% 41.3% 42.7% 49.0%
New Hampshire Higher Education
Assistance Fund ............. 43.8% 44.3% 46.1% 36.0% 52.9%
New York State Higher Education
Services Corporation ........ 41.9% 43.9% 46.2% 49.4% 53.0%
Pennsylvania Higher Education
Assistance Agency ........... 52.9% 53.3% 55.0% 54.8% 59.2%
United Student Aid Funds, Inc. 29.3% 34.9% 39.2% 40.9% 44.3%
Not
National Average Recovery Rate 39.3% 40.7% 43.4% 45.0% Available
</TABLE>
CLAIMS RATE. Each Significant Guarantor's claims rate measures the
amount of federal reinsurance claims paid to it by the Department of Education
during a fiscal year as a percentage of the original principal amount of
guaranteed loans that were in repayment at the end of the prior federal fiscal
year. No assurance can be made that any guarantor will receive full
reimbursement for reinsurance claims (or the full 98% maximum reimbursement for
loans first disbursed on or after October 1, 1993 but before October 1, 1998, or
the full 95% maximum reimbursement for loans first disbursed on or after October
1, 1998). This reimbursement is subject to reduction when the annual default
claims rate of a guarantor for a federal fiscal year exceeds 5%. SEE "Guarantors
Under the FFELP--Federal Reimbursement Agreements" and "--Effect of Annual
Claims Rate on Reimbursement of Guarantors" in the accompanying prospectus. The
following table sets forth the claims rate of each Significant Guarantor for
each of the last five federal fiscal years, as well as the average claims
rate for all federal guarantors as of the end of the last four federal fiscal
years for which data are available:
S-45
<PAGE>
<TABLE>
<CAPTION>
Claims Rate
by Federal Fiscal Year
Name of Guarantor
1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C>
California Student Aid
Commission .................. 4.1% 3.4% 4.5% 4.5% 3.1%
American Student Assistance
Guarantor ................... 3.0% 3.5% 3.1% 3.4% 2.8%
New Hampshire Higher Education
Assistance Fund ............. 2.6% 2.2% 2.4% 2.8% 2.2%
New York State Higher Education
Services Corporation ........ 2.8% 3.2% 2.9% 2.5% 2.7%
Pennsylvania Higher Education
Assistance Agency ........... 2.2% 2.0% 1.6% 1.9% 2.0%
United Student Aid Funds, Inc. 5.0% 4.7% 4.7% 4.7% 4.0%
National Average Claims Rate... 3.5% 3.2% 3.3% 3.4% 2.9%
</TABLE>
Unless otherwise indicated, all the above information relating to a
particular guarantor has been obtained from that guarantor, is not guaranteed as
to accuracy or completeness by the seller or the underwriters and is not to be
construed as a representation by the seller or the underwriters. The guarantee
volumes, recovery rates and claims rates of the other Initial Guarantors and of
any Additional Guarantors may vary from those of the Significant Guarantors. No
assurances can be given as to what the volumes or rates of the other Initial
Guarantors and of any Additional Guarantors will be or as to whether the Initial
Guarantors or the Additional Guarantors will be able to meet their insurance
obligations. The Department of Education Data Books contain information
concerning all state and non-profit guarantors and therefore may be consulted
for additional information concerning the Initial Guarantors and for information
concerning state or non-profit guarantors that could become Additional
Guarantors.
Incentive Programs
The seller currently offers the following incentive programs to
eligible student loan borrowers, including borrowers under the Trust Loans.
- Borrowers who make their student loan payments electronically
through automatic monthly deductions from a savings or
checking account may be eligible to receive a 0.25% interest
rate reduction.
- Borrowers who make their first 36 consecutive student loan
payments on time may be eligible to receive a one percent
reduction in their interest rate for the remaining term of
their loan.
- Borrowers who make their first 48 consecutive loan payments on
time may be eligible either:
S-46
<PAGE>
- to have their final six scheduled loan payments paid by the
master servicer or
- to have their interest rate reduced by two percent for the
remaining term of their loan.
All of the above incentive programs are not applicable to each Trust Loan.
Moreover, these incentive programs may be modified by the master servicer at any
time and, with the exception of the 0.25% interest rate reduction, will be
applicable to Trust Loans only if and to the extent that the trust receives
payment from the seller in an amount sufficient to offset the effective yield
reductions. To the extent that the seller makes the above benefits available to
borrowers under Trust Loans, those borrowers may participate in the programs
described above. Neither the seller nor the trust is able to predict the extent
to which borrowers will be eligible.
DESCRIPTION OF THE SECURITIES
General
The trust will issue the Class A-1 Notes and the Class A-2 Notes under
the terms of an indenture to be dated as of [ ], 1999 (as amended and
supplemented from time to time, the "indenture"), between the trust and State
Street Bank and Trust Company, a Massachusetts banking corporation, as indenture
trustee. The trust also will issue the Certificates under the trust agreement.
The indenture and the trust agreement will be substantially in the forms filed
as an exhibit to the Registration Statement of which this prospectus supplement
forms a part. The following sections summarize important terms of the
Securities, the indenture and the trust agreement. This summary is not complete
and is qualified in its entirety by reference to the actual provisions of the
Notes, the Certificates, the indenture and the trust agreement. It is intended
to supplement and, to the extent of any inconsistency, replace the description
of the general terms and provisions of the Notes, the Certificates, the
indenture and the trust agreement set forth in the accompanying prospectus.
Payments of Interest
WHEN INTEREST IS PAID. We will pay interest on the Notes, and interest
return on the Certificates, quarterly on or about ____25, ____25, ____25, and
____25 of each year or, if that day is not a business day, on the next
succeeding business day, beginning on [ ], 1999 (each, a "quarterly payment
date"). We will make payments to holders of record of the Securities on the
related record date. As long as the Notes and the Certificates are held in
book-entry form in the name of DTC or its nominee, the "record date" with
respect to any quarterly payment date is the [ ]th day of the month in which
that quarterly payment date occurs, whether or not that day is a business day.
If, however, definitive securities are issued in the circumstances set forth
under "Additional Information Regarding the Securities--Definitive Securities"
in the prospectus, the "record date" will be the close of business on the last
day of the month immediately preceding the related quarterly payment date.
WHEN INTEREST IS ACCRUED. Interest will accrue on the principal balance
of the Class A-1 Notes and the principal balance of the Class A-2 Notes at an
annual rate equal to the Class A-1 Note Rate and the Class A-2 Note Rate,
respectively. Interest return will accrue on the certificate balance of the
Certificates at an annual rate equal to the Certificate Rate. Interest on the
outstanding principal amount of each class of Notes, and interest return on the
certificate balance of the Certificates, will accrue during each quarterly
interest period. A "quarterly interest period" means the period from and
including the Closing Date, in the case of the first quarterly payment date,
or from and including the most recent quarterly payment date on which
interest has been paid, to but excluding the current quarterly payment date.
Interest accrued as of any quarterly payment date but not paid on that date
will be due on the next quarterly payment date, together with an amount equal
to interest on the unpaid amount at the applicable annual rate described
below.
S-47
<PAGE>
HOW CLASS NOTE RATES AND CERTIFICATE RATES ARE CALCULATED.
The "Class A-1 Note Rate", the "Class A-2 Note Rate" and the "Certificate
Rate" for each quarterly interest period will equal the LESSER of:
- the Class A-1 Note LIBOR Rate, the Class A-2 Note LIBOR Rate
or the Certificate LIBOR Rate, as applicable,
AND
- the Adjusted Student Loan Rate for that quarterly interest
period.
The "Class A-1 Note LIBOR Rate", the "Class A-2 Note LIBOR Rate" and the
"Certificate LIBOR Rate" shall be equal to Three-Month LIBOR for the related
LIBOR Reset Period plus 0.__%, 0.__% and 0.__%, respectively. Interest on the
Notes and interest return on the Certificates will be calculated on the basis of
the actual number of days elapsed in each quarterly interest period divided by
360.
The "Adjusted Student Loan Rate" for any quarterly interest period will
equal the PRODUCT of:
- the quotient obtained by dividing:
- 365 (or 366 in the case of a leap year) by
- the actual number of days elapsed in that quarterly
period;
MULTIPLIED by
- the percentage equivalent of a fraction
- whose numerator is equal to the sum of the Expected
Interest Collections less the sum of the servicing
fee and the administration fee for that quarterly
interest period; and
- whose denominator is the sum of the aggregate
principal amount of the Notes and the certificate
balance of the Certificates as of the last day of
that quarterly interest period.
"Expected Interest Collections" means, with respect to any quarterly interest
period, the SUM of:
- the amount of interest accrued whether or not actually paid,
net of any accrued monthly rebate fees and other amounts
required by the Higher Education Act to be paid to the
Department of Education or to borrowers with respect to the
Trust Loans for the Collection Period preceding the applicable
S-48
<PAGE>
quarterly payment date (the "Student Loan Rate Accrual
Period"), as described under "Federal Family Education Loan
Program--Consolidation Loan Program" in the accompanying
prospectus;
- interest subsidy payments and special allowance payments
estimated to have accrued for that Student Loan Rate Accrual
Period whether or not actually received, taking into account
any expected deduction of amounts required to be paid to the
Department with respect to the Trust Loans
- for that Student Loan Rate Accrual Period to the extent not
included in the preceding clause;
AND
- Investment Earnings, as that term is defined on page 46 of the
accompanying prospectus, for that Student Loan Rate Accrual
Period.
"Collection Period" means each period of three calendar months from and
including the date next following the end of the preceding Collection Period or,
with respect to the first Collection Period, the period beginning on the Cutoff
Date and ending on [ ], 1999.
HOW INTEREST PAYMENTS ARE FUNDED. We will fund payments of interest on
the Notes and interest return on the Certificates generally from the Available
Funds on deposit in the collection account and from amounts on deposit in the
reserve account that remain after we have paid the servicing fee and all overdue
servicing fees and the administration fee and all overdue administration fees
for that quarterly payment date. SEE "Description of the Transfer and Servicing
Agreements--Distributions" beginning on page S-61 and "--Credit Enhancement"
beginning on page S-64 of this prospectus supplement.
NOTEHOLDERS' INTEREST BASIS CARRYOVER AND CERTIFICATEHOLDERS' RETURN
CARRYOVER. Class A-1 Noteholders' Interest Basis Carryover, Class A-2
Noteholders' Interest Basis Carryover and Certificateholders' Return Carryover
may be incurred on any quarterly payment date.
The "Class A-1 Noteholders' Interest Basis Carryover" means the sum of:
- if the Class A-1 Note Rate for any quarterly payment date is
based on the Adjusted Student Loan Rate, the EXCESS of
- the amount of interest on the Class A-1 Notes that
would have accrued in respect of the related
quarterly interest period had interest been
calculated based on the Class A-1 Note LIBOR Rate,
OVER
- the amount of interest on the Class A-1 Notes
actually accrued in respect of that quarterly
interest period based on the Adjusted Student Loan
Rate;
AND
S-49
<PAGE>
- the unpaid portion of any excess amount under the previous
clause from prior quarterly payment dates and interest accrued
on that amount at the Class A-1 Note LIBOR Rate.
The "Class A-2 Noteholders' Interest Basis Carryover" means the sum of:
- if the Class A-2 Note Rate for any quarterly payment date is
based on the Adjusted Student Loan Rate, the EXCESS of:
- the amount of interest on the Class A-2 Notes that
would have accrued in respect of the related
quarterly interest period had interest been
calculated based on the Class A-2 Note LIBOR Rate,
OVER
- the amount of interest on the Class A-2 Notes
actually accrued in respect of that quarterly
interest period based on the Adjusted Student Loan
Rate;
AND
- the unpaid portion of any excess amount under the previous
clause from prior quarterly payment dates and interest accrued
on that amount at the Class A-2 Note LIBOR Rate.
The "Certificateholders' Return Carryover" means the sum of:
- if the Certificate Rate for any quarterly payment date is
based on the Adjusted Student Loan Rate, the EXCESS of:
- the amount of interest return on the Certificates
that would have accrued in respect of the related
quarterly interest period had interest been
calculated based on the Certificate LIBOR Rate,
OVER
- the amount of interest return actually accrued on the
Certificates in respect of that quarterly interest
period based on the Adjusted Student Loan Rate;
- AND
- the unpaid portion of any excess amount under the previous
clause from prior quarterly payment dates and interest accrued
on that amount at the Certificate Rate calculated based on the
Certificate LIBOR Rate.
HOW CARRYOVER IS PAID. Any Class A-1 Noteholders' Interest Basis
Carryover, Class A-2 Noteholders' Interest Basis Carryover and
Certificateholders' Return Carryover incurred prior to the Parity Date will not
be payable until on or after the Parity Date. The "Parity Date" is the first
quarterly payment date on which the sum of:
- the aggregate principal amount of the Notes,
AND
- the aggregate certificate balance of the Certificates,
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in each case after all distributions on that date are made, is
no longer in excess the sum of:
- the Pool Balance as of the last day of the related Collection
Period and
- the amount on deposit in the reserve account.
On each quarterly payment date from and after the Parity Date, any
Class A-1 Noteholders' Interest Basis Carryover, Class A-2 Noteholders' Interest
Basis Carryover and Certificateholders' Return Carryover incurred and unpaid to
and including that quarterly payment date will be payable on that quarterly
payment date but only out of any Reserve Account Excess that remains after the
following payments have first been made:
- any Purchase Premium Amounts due the seller for Serial Loans
purchased by the trust before the end of the related
Collection Period;
- on the Parity Date, any amount necessary to reduce to zero the
remaining amount by which the sum of the aggregate principal
amount of the Notes and the aggregate certificate balance of
the Certificates exceeds the Pool Balance; and
- in the case of the Certificateholders' Return Carryover,
payment of the Class A-1 Noteholders' Interest Basis Carryover
and the Class A-2 Noteholders' Interest Basis Carryover.
The "Pool Balance" at any time equals the aggregate principal balance
of the Trust Loans at the end of the preceding Collection Period, including
accrued interest through the end of that Collection Period to the extent that
interest will be capitalized when repayment begins, after taking into account
each of the following, without duplication:
- all payments received by the trust during that Collection
Period from borrowers, the guarantors and the Department of
Education;
- all Purchase Amounts received by the trust for that Collection
Period from the seller or the master servicer;
- all Additional Fundings made with respect to that Collection
Period; and
- all losses realized on Trust Loans liquidated during that
Collection Period.
"Purchase Amount" with respect to a Trust Loan means the unpaid balance
owed by the applicable borrower plus accrued interest to the date of purchase.
Payments of Principal
WHEN PRINCIPAL IS PAID. Principal payments will be made to the
Securityholders, sequentially, in the order of priority set forth in the first
paragraph under "--PRIORITY OF PRINCIPAL PAYMENTS" below, on each quarterly
payment date in an amount generally
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equal to the Principal Distribution Amount for that quarterly payment date,
until the sum of the aggregate principal amount of the Notes and the aggregate
certificate balance of the Certificates is reduced to zero.
HOW PRINCIPAL PAYMENTS ARE FUNDED. Payments of the Principal
Distribution Amount generally will be made from the Available Funds remaining
after distribution of:
- the servicing fee and all overdue servicing fees;
- the administration fee and all overdue administration fees;
- the Noteholders' Interest Distribution Amount; and
- the Certificateholders' Return Distribution Amount;
In addition, if the Available Funds are insufficient, amounts on deposit in the
reserve account will be used to pay the Principal Distribution Amount. SEE
"Description of the Transfer and Servicing Agreements--Distributions" and
"--Credit Enhancement" in this prospectus supplement. If the Available Funds and
the amounts on deposit in the reserve account are insufficient to pay the
Noteholders' Principal Distribution Amount or, after the Notes have been paid in
full, the Certificateholders' Balance Distribution Amount, for any quarterly
payment date, the shortfall will be added to the principal payable to the
Noteholders or the Certificateholders, as the case may be, on subsequent
quarterly payment dates.
In addition, on each quarterly payment date, for so long as the sum of
the aggregate principal amount of the Notes and the aggregate certificate
balance of the Certificates outstanding on that date is greater than the Pool
Balance as of the close of business on the last day of the related Collection
Period, any Reserve Account Excess for that quarterly payment date will be
applied to pay the principal of the Securities in the order of priority set
forth in the following paragraph. However, any amount to be applied to principal
will first be reduced by paying to the seller the unpaid Purchase Premium
Amounts for any Serial Loans that the trust purchased before the end of that
Collection Period. Any amounts available to be distributed as set forth in the
two preceding sentences will not be part of the Principal Distribution Amount
for that quarterly payment date. We cannot give you any assurance that there
will ever be a Reserve Account Excess or that it will be available to be paid as
principal on the Securities. SEE "Description of the Transfer and Servicing
Agreements--Credit Enhancement--RESERVE ACCOUNT" on page S-64 of this
prospectus supplement.
PRIORITY OF PRINCIPAL PAYMENTS. On each quarterly payment date on
which principal payments are made to the holders of the Notes whether in respect
of the Noteholders' Principal Distribution Amount, Reserve Account Excess or
amounts in respect of a mandatory redemption as described below, or otherwise,
all payments of principal will be applied to pay principal as follows:
- FIRST, to the Class A-1 Noteholders until the aggregate
principal amount of the Class A-1 Notes has been reduced to
zero; and
- SECOND, to the Class A-2 Noteholders until the aggregate
principal amount of the Class A-2 Notes has been reduced to
zero.
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In addition, on each quarterly payment date on which principal payments are made
on the Securities whether in respect of the Principal Distribution Amount,
Reserve Account Excess, mandatory redemption amounts or otherwise, all payments
of principal will be applied to pay principal of the Securities as follows:
- FIRST, to the Noteholders until the aggregate principal amount
of the Notes has been paid in full; and
- SECOND, to the Certificateholders until the aggregate
certificate balance of the Certificates has been reduced to
zero.
There is one exception to the sequential payment of principal on the
Notes described above. Following a default under the indenture and the
acceleration of the Notes, we will pay principal on the Class A-1 Notes and
the Class A-2 Notes on a pro rata basis until the Notes have been paid in
full.
NOTE FINAL MATURITY DATES AND CERTIFICATE FINAL DISTRIBUTION DATE. Any
outstanding principal amount of the Class A-1 Notes will be payable in full on
the ______ quarterly payment date. Any outstanding principal amount of the Class
A-2 Notes will be payable in full on the ____ quarterly payment date. Any
remaining certificate balance of the Certificates will be paid on the ____
quarterly payment date. However, the actual final payment on either class of the
Notes or on the Certificates could occur on dates other than those listed in
this paragraph as a result of a variety of factors including those described
under "Risk Factors--Because the Timing of Principal Payments Is Uncertain, the
Return on Your Investment Will Change over Time" and "--The Securities May Be
Repaid Early Due to an Auction Sale or the Exercise of the Purchase Option"
in this prospectus supplement.
Calculation of Three-Month LIBOR
For purposes of calculating the Class A-1 Note LIBOR Rate, the Class
A-2 Note LIBOR Rate and the Certificate LIBOR Rate for each quarterly interest
period, the trust agreement requires the indenture trustee to determine
Three-Month LIBOR on the second business day before the LIBOR Reset Period
within which that quarterly interest period begins or, in the case of the
initial LIBOR Reset Period, on the second business day before the Closing Date
(each, a "LIBOR Determination Date"). For purposes of calculating Three-Month
LIBOR, a business day is any day on which banks in The City of New York and the
City of London are open for international business. Interest due for any
quarterly interest period will be determined based on the actual number of days
in that quarterly interest period over a 360-day year.
"Three-Month LIBOR" means, for any LIBOR Reset Period, the London
interbank offered rate for deposits in U.S. dollars having a maturity of three
months commencing on the related LIBOR
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Determination Date (the "Index Maturity") as it appears on Telerate Page 3750 as
of 11:00 a.m., London time, on that LIBOR Determination Date. If the rate does
not appear on Telerate Page 3750, 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 at least U.S. $1,000,000, are offered at
approximately 11:00 a.m., London time, on that LIBOR Determination Date, to
prime banks in the London interbank market by the Reference Banks. The indenture
trustee will request the principal London office of each Reference Bank to
provide a quotation of its rate. If at least two quotations are provided, the
rate for that day will be the arithmetic mean of the quotations. If at least two
quotations are not provided, the rate for that day will be the arithmetic mean
of the rates quoted at approximately 11:00 a.m., New York time, on that LIBOR
Determination Date by major banks in The City of New York that have been
selected by the indenture trustee for loans in U.S. dollars to leading European
banks having the Index Maturity and in a principal amount of at least U.S.
$1,000,000. However, if the banks selected by the indenture trustee are not
quoting rates, Three-Month LIBOR as in effect for the previous LIBOR Reset
Period will be used.
"LIBOR Reset Period" means the three-month period beginning on the [
]th day (or, if that day is not a business day, on the next succeeding business
day) of each [ ], [ ], [ ] and [ ] and ending on the day immediately preceding
the following LIBOR Reset Period. However, the initial LIBOR Reset Period will
begin on the Closing Date.
"Telerate Page 3750" means the display page so designated on the Bridge
Telerate, Inc. service (or such other page as may replace that page for the
purpose of displaying comparable rates or prices).
"Reference Banks" means four major banks in the London interbank market
selected by the indenture trustee.
Book-Entry Registration
The Depository Trust Company is a limited-purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the UCC and a
"clearing agency" registered under the provisions of Section 17A of the Exchange
Act. DTC was created to hold securities for its participating organizations
("Participants") and to facilitate the clearance and settlement of securities
transactions between Participants through electronic book-entry changes in their
accounts, thereby eliminating the need for physical movement of certificates.
Participants include the underwriters, securities brokers and dealers, banks,
trust companies and clearing corporations and may include certain other
organizations. Indirect access to the DTC system also is available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants").
Securityholders that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or other interests
in, the Securities may do so only through Participants and Indirect
Participants. In addition, Securityholders will receive all distributions of
principal and interest on their Securities through DTC and its Participants.
Under a book-entry format, Securityholders will receive payments after the
related quarterly payment date because, while payments are required to be
forwarded on that date to Cede & Co., as nominee for DTC, DTC will forward the
payments to its Participants which will then be required to forward them to
Indirect Participants or Securityholders. It is anticipated that the only
"Securityholder" will be Cede & Co., as nominee for DTC, and that
Securityholders will not be recognized by the indenture trustee or owner trustee
as a Securityholder under the indenture or trust agreement. Securityholders will
be permitted to exercise their rights indirectly through DTC and its
Participants which in turn will exercise their rights through DTC.
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Under the rules, regulations and procedures creating and affecting DTC
and its operations, DTC is required to make book-entry transfers among
Participants on whose behalf it acts with respect to the Securities and is
required to receive and transmit distributions of principal and interest on the
Securities. Participants and Indirect Participants with which Securityholders
have accounts with respect to the Securities are likewise required to make
book-entry transfers and receive and transmit payments on behalf of their
respective Securityholders.
Because DTC can only act on behalf of Participants that in turn act on
behalf of Indirect Participants and certain banks, a Securityholder may be
unable to pledge the Securities to persons or entities that do not participate
in the DTC system or otherwise to take actions in respect of the Securities due
to the lack of a physical certificate for the Securities.
Cedelbank ("CEDEL") is incorporated under the laws of Luxembourg as a
professional depository. CEDEL holds securities for its participating
organizations ("CEDEL Participants") and facilitates the clearance and
settlement of securities transactions between CEDEL Participants through
electronic book-entry changes in accounts of CEDEL Participants, thereby
eliminating the need for physical movement of certificates. Transactions may be
settled in CEDEL in any of 36 currencies, including United States dollars. CEDEL
provides to its CEDEL Participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. CEDEL interfaces with domestic
markets in several countries. As a professional depository, CEDEL is subject to
regulation by the Luxembourg Monetary Institute. CEDEL Participants are
recognized financial institutions around the world, including underwriters,
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations. Indirect access to CEDEL is also available to
others, such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a CEDEL Participant, either directly
or indirectly.
The Euroclear System ("Euroclear") was created in 1968 to hold
securities for participants of Euroclear ("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 be settled in any of 34
currencies, including United States dollars. Euroclear includes various other
services, including securities lending and borrowing and interfaces with
domestic markets in several countries generally similar to the arrangements for
cross-market transfers with DTC described above. Euroclear is operated by the
Brussels, Belgium office of Morgan Guaranty Trust Company of New York (the
"Euroclear Operator") under contract with Euroclear Clearance Systems S.C., 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 establishes policy for Euroclear on behalf
of Euroclear Participants. Euroclear Participants include banks (including
central banks), securities brokers and dealers and other professional financial
intermediaries. Indirect access to Euroclear is also available to other firms
that clear through or 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 and applicable Belgian
law (collectively, the "Terms and Conditions"). The Terms and
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Conditions govern transfers of securities and cash within Euroclear, withdrawals
of securities and cash from Euroclear, and receipts of payments with respect to
securities in Euroclear. All securities in Euroclear are held on a fungible
basis without 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.
Distributions with respect to Securities held through CEDEL or
Euroclear will be credited to the cash accounts of CEDEL Participants or
Euroclear Participants in accordance with the relevant system's rules and
procedures, to the extent received by its Depositary. Such distributions will be
subject to tax reporting in accordance with relevant United States tax laws and
regulations. CEDEL or the Euroclear Operator, as the case may be, will take any
other action permitted to be taken by a Securityholder under the indenture on
behalf of a CEDEL Participant or Euroclear Participant only in accordance with
the relevant rules and procedures and subject to the relevant Depositary's
ability to effect those actions on its behalf through DTC.
Securityholders may hold their Securities through DTC (in the United
States) or CEDEL or Euroclear (in Europe) if they are participants of those
systems, or indirectly through organizations which are participants in those
systems.
The Securities initially will be registered in the name of Cede & Co.,
the nominee of DTC. CEDEL and Euroclear will hold omnibus positions on behalf of
their participants through customers' securities accounts in CEDEL's and
Euroclear's names on the books of their respective depositaries (collectively,
the "Depositaries").which in turn will hold those positions in customers'
securities accounts in the Depositaries' names on the books of DTC.
Transfers between Participants will occur in accordance with DTC Rules.
Transfers between CEDEL Participants and Euroclear Participants will occur in
accordance with their respective rules and operating procedures.
Because of time-zone differences, credits of Securities received in
CEDEL or Euroclear as a result of a transaction with a Participant will be made
during subsequent securities settlement processing and dated the business day
following the DTC settlement date. The credits or any transactions in the
securities settled during that processing will be reported to the relevant
Euroclear or CEDEL Participants on that business day. Cash received in CEDEL or
Euroclear as a result of sales of securities by or through a CEDEL Participant
or Euroclear Participant to a Participant will be received with value on the DTC
settlement date but will be available in the relevant CEDEL or Euroclear cash
account only as of the business day following settlement in DTC. For information
with respect to tax documentation procedures for the Securities, SEE "Federal
Income Tax Consequences--Trusts for Which a Partnership Election Is Made--Tax
Consequences to Holders of the Debt Securities--FOREIGN DEBT SECURITY HOLDERS"
and "--Tax Consequences to Holders of the Equity Securities--FOREIGN EQUITY
SECURITY HOLDERS" in the accompanying prospectus.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC's rules on behalf of the relevant European international
clearing system by its Depositary. However, such cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in that 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 Depositary 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 Participants and Euroclear
Participants may not deliver instructions to the Depositaries.
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DTC has advised the administrator that it will take any action
permitted to be taken by a Securityholder under the indenture or the trust
agreement only at the direction of one or more Participants to whose accounts
with DTC the Securities are credited.
Although DTC, CEDEL and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of interests in the Securities among
participants of DTC, CEDEL and Euroclear, they are under no obligation to
perform or continue to perform those procedures, which may be discontinued at
any time.
DTC management is aware that some computer processing applications,
systems and the like for processing dates ("Systems") that are dependent upon
calendar dates, including dates before, on, and after January 1, 2000, may
encounter year 2000 problems. DTC has informed its Participants and other
members of the financial community (the "Industry") that it has developed and is
implementing a program so that its Systems, as the same relate to the timely
payment of distributions (including principal and income payments) to
securityholders, book-entry deliveries, and settlement of trades within DTC
("DTC Services"), continue to function appropriately. This program includes a
technical assessment and a remediation plan, each of which is complete.
Additionally, DTC's plan includes a testing phase, which is expected to be
completed within appropriate time frames.
However, DTC's ability to perform properly its services is also
dependent upon other parties, including but not limited to issuers and their
agents, as well as third party vendors from which DTC licenses software and
hardware, and third party vendors on which DTC relies for information or the
provision of services, including telecommunication and electrical utility
service providers, among others. DTC has informed the Industry that it is
contacting (and will continue to contact) third party vendors from which DTC
acquires services to:
- impress upon them the importance of such services being year
2000 compliant; and
- determine the extent of their efforts for year 2000
remediation (and, as appropriate, testing) of their services.
In addition, DTC is in the process of developing such
contingency plans as it deems appropriate.
According to DTC, the information set forth in the preceding two
paragraphs about DTC has been provided to the Industry by DTC for informational
purposes only and is not intended to serve as a representation, warranty or
contract modification of any kind.
There will be no responsibility or obligation on the part of any trust,
the seller, the master servicer, the administrator, the eligible lender trustee,
the indenture trustee or the underwriters to any Participants, CEDEL
Participants or Euroclear Participants or the persons for whom they act as
nominees with respect to:
- the accuracy of any records maintained by DTC, CEDEL or
Euroclear or any Participant,
- the payment by DTC, CEDEL or Euroclear or any Participant of
any amount due to any beneficial owner in respect of the
principal amount or interest on the Securities,
- the delivery by any Participant, CEDEL Participant or
Euroclear Participant of any notice to any beneficial owner
which is required or permitted under the terms of the
indenture or the trust agreement to be given to
Securityholders, or
- any other action taken by DTC as the Securityholder.
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DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
AGREEMENTS COVERED
In the sections below certain terms of the following documents
(collectively, the "Transfer and Servicing Agreements") have been summarized:
- - the loan sale agreement to be dated as of [ ], 1999 (as amended
and supplemented from time to time, the "loan sale agreement"),
among the seller, the trust and the eligible lender trustee,
- - the master servicing agreement to be dated as of [ ], 1999 (as
amended and supplemented from time to time, the "master servicing
agreement") among the trust, the eligible lender trustee and
Nellie Mae Education Loan Corporation in its capacity as master
servicer,
- - the administration agreement to be dated as of [ ], 1999 (as
amended and supplemented from time to time, the "administration
agreement") among the trust, the indenture trustee and Nellie Mae
Education Loan Corporation in its capacity as administrator, and
- - the trust agreement .
The eligible lender trustee will purchase the Initial Trust Loans on behalf of
the trust pursuant to the loan sale agreement. The master servicer will be
responsible for servicing the Trust Loans under the master servicing agreement.
The administrator will undertake certain administrative duties and functions
with respect to the trust and the Trust Loans pursuant to the administration
agreement. The trust will be created under the trust agreement. Forms of the
Transfer and Servicing Agreements have been filed with the SEC as exhibits to
the Registration Statement of which this prospectus supplement and the
accompanying prospectus form a part. A copy of the Transfer and Servicing
Agreements will be filed with the SEC after the Securities are issued.
This summary does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the Transfer
and Servicing Agreements. The following summary supplements the description of
the general terms and provisions of the Transfer and Servicing Agreements set
forth in the accompanying prospectus. To the extent the two are inconsistent,
this summary replaces the information in the accompanying prospectus.
SALE OF TRUST LOANS; REPRESENTATIONS AND WARRANTIES
Under the heading "Description of the Transfer and Servicing
Agreements" in the accompanying prospectus, you will find information about:
- - the sale on the Closing Date, of the Initial Trust Loans to the
eligible lender trustee on behalf of the trust as provided in the
loan sale agreement; and
- - the representations and warranties made by the seller in
connection with its transfer of the Additional Trust Loans to the
eligible lender trustee on behalf of the trust.
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ADDITIONAL FUNDINGS
Following the Closing Date, the seller shall have the option to cause
the eligible lender trustee to purchase Serial Loans. A "Serial Loan" is a
student loan made to a borrower who is already a borrower under at least one
Trust Loan. Serial Loans will be made or acquired by The First National Bank of
Chicago or another eligible lender on behalf of the seller at the seller's
discretion and in accordance with its usual business practices. The seller
generally anticipates that it will cause the eligible lender trustee to purchase
Serial Loans for the trust after the Closing Date, but the seller has no
obligation to do so. The amount of Serial Loans that the seller may sell to the
trust is limited to 5% of the initial Pool Balance.
Each purchase of a Serial Loan will be funded by a transfer to the
seller of an amount equal to the SUM of:
- - the principal balance owed by the related borrower plus accrued
interest (the "Purchase Collateral Balance");
AND
- - an additional amount not to exceed __% of the principal balance
owed by that borrower (the "Purchase Premium Amount" and, together
with the Purchase Collateral Balance, the "Serial Loan Purchase
Amount").
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The Purchase Collateral Balance for each Serial Loan will be funded by
amounts representing collections of principal on the outstanding Trust Loans
which otherwise would have been part of the Available Funds as described
beginning on page S-62 of this prospectus supplement. The Purchase Premium
Amount for each Serial Loan purchased in a Collection Period will be funded
on the next quarterly payment date from any Reserve Account Excess on that
quarterly payment date as described under "--Credit Enhancement--RESERVE
ACCOUNT" on page S-64 of this prospectus supplement.
The trust is prohibited from purchasing any Serial Loans after the
Closing Date in any of the following circumstances:
- - if an Event of Default occurs under the indenture,
- - if a Master Servicer Default occurs under the master servicing
agreement,
- - if an Administrator Default occurs under the administration agreement,
or
- - if certain events of insolvency occur with respect to the seller.
The eligible lender trustee will purchase each Serial Loan on behalf of
the trust under a transfer agreement (each, a "Transfer Agreement") among the
seller, the trust and the eligible lender trustee. The seller will designate
each date (a "Transfer Date") on which the trust will purchase Serial Loans
under one or more Transfer Agreements. On each Transfer Date, the seller will
assign to the eligible
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lender trustee on behalf of the trust, without recourse except as otherwise set
forth in the Transfer Agreements, the seller's entire interest in the Serial
Loans being transferred on that date, in exchange for the related Serial Loan
Purchase Amount . However, payment of that portion of the Serial Loan Purchase
Amount consisting of the Purchase Premium Amount will be deferred until the next
quarterly payment date on which amounts in excess of the Specified Reserve
Account balance are available in the reserve account.
During certain qualifying periods as described under "Federal Family
Education Loan Program" in this prospectus supplement and in the accompanying
prospectus, borrowers under certain student loans are not required to pay
interest currently; instead, the interest is added to the outstanding principal
balance of their loans at the end of the qualifying period. When current
collections of interest on the
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Trust Loans are inadequate, any shortfalls in interest payments to the
Securityholders will be funded with amounts that would otherwise have been
distributable as part of the Principal Distribution Amount for the related
quarterly payment date. See "--Distributions" below.
ACCOUNTS
In addition to the collection account referred to in the accompanying
prospectus under "Description of the Transfer and Servicing
Agreements--Accounts," the administrator will establish and maintain a reserve
account in the name of the indenture trustee on behalf of the Noteholders and
the Certificateholders.
SERVICING FEE; ADMINISTRATION FEE
The master servicer will be entitled to receive from the trust monthly
in arrears, on each monthly payment date that is not a quarterly payment date
and on each quarterly payment date, a servicing fee equal to one-twelfth of the
product of ___% times the Pool Balance as of the close of business on the first
day of the preceding calendar month. A "monthly payment date" means the 25th day
of each month, or if any such date is not a business day, the next succeeding
business day, beginning in [ ] 1999.
The servicing fee, together with any portion of the servicing fee that
remains unpaid from prior monthly payment dates, will be payable on each monthly
payment date and will be paid solely out of:
- - the Monthly Available Funds in the case of each monthly payment date
that is not a quarterly payment date, and
- - out of the Available Funds in the case of each quarterly payment date,
as well as amounts on deposit in the reserve account on that date.
As compensation for performing its obligations under the administration
agreement and as reimbursement for its related expenses, the administrator will
be entitled to receive monthly in arrears, on each monthly payment date that is
not a quarterly payment date and on each quarterly payment date, an
administration fee equal to $________. The administration fee, together with
any portion of the administration fee that remains unpaid from prior monthly
payment dates, will be payable on each monthly payment date and will be paid
solely out of the same sources from which the servicing fee is paid.
DISTRIBUTIONS
DEPOSITS TO THE COLLECTION ACCOUNT. On or about the third business day
before each monthly payment date (the "Determination Date"), the administrator
will provide the indenture trustee with certain information about the preceding
monthly collection period or, in the case of a monthly payment date that is also
a quarterly payment date, the preceding Collection Period, including the amount
of the Monthly Available Funds or the Available Funds, as the case may be,
received on the Trust Loans, and the aggregate Purchase Amounts relating to the
Trust Loans repurchased by the seller or purchased by the master servicer.
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"Monthly collection period" means, with respect to any monthly payment
date that is not a quarterly payment date, the calendar month immediately
preceding the month in which that monthly payment date occurs.
"Monthly Available Funds" means, with respect to each monthly payment
date that is not a quarterly payment date, the sum of the following amounts with
respect to the related monthly collection period:
- - all collections received by the master servicer on the Trust Loans
during that monthly collection period and remitted to the
indenture trustee, including any guarantee payments received on
the Trust Loans;
- - interest subsidy payments and special allowance payments on the
Trust Loans received by the eligible lender trustee during that
monthly collection period;
- - all proceeds received from the liquidation of defaulted Trust
Loans ("Liquidated Student Loans") which became Liquidated Student
Loans during that monthly collection period in accordance with the
master servicer's customary servicing procedures, net of expenses
incurred by the master servicer in connection with the liquidation
and any amounts required by law to be remitted to the borrowers on
the Liquidated Student Loans (such net proceeds, "Liquidation
Proceeds");
- - all amounts in respect of Liquidated Student Loans written off in
prior monthly collection periods that were received by the master
servicer during that monthly collection period and remitted to the
indenture trustee;
- - the aggregate amount received by the indenture trustee on the
Trust Loans repurchased by the seller or purchased by the master
servicer under an obligation which arose during that monthly
collection period;
- - Investment Earnings , as that term is defined on page 51 of the
accompanying prospectus, for that monthly payment date; and
- - with respect to each monthly payment date other than a quarterly
payment date and other than a monthly payment date immediately
following a quarterly payment date, the Monthly Available Funds
remaining on deposit in the collection account from the monthly
collection period relating to the preceding monthly payment date
after giving effect to application of the Monthly Available Funds
on that preceding monthly payment date.
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However, if on any monthly payment date there would not be sufficient
funds, after application of the Monthly Available Funds and amounts available in
the reserve account, to pay any of the items specified in clauses FIRST and
SECOND, respectively, under the first paragraph of "----DISTRIBUTIONS FROM THE
COLLECTION ACCOUNT" on page S-63 of this prospectus supplement, then the
Monthly Available Funds for that monthly payment date will include, in
addition to the Monthly Available Funds, amounts on deposit in the collection
account on the Determination Date relating to that monthly payment date which
would have constituted part of the Monthly Available Funds for the monthly
payment date succeeding that monthly payment date up to the amount necessary
to pay those items. The Monthly Available Funds for that succeeding monthly
payment date will be adjusted accordingly. However, the Monthly Available
Funds will exclude:
- - all payments and proceeds, including Liquidation Proceeds, of any
Trust Loans if their Purchase Amounts were included in the Monthly
Available Funds for a prior monthly collection period;
- - any monthly rebate fees paid to the Department of Education
during the related Monthly Collection Period by or on behalf of
the trust as described under "Federal Family Education Loan
Program--Consolidation Loan Program" in the accompanying
prospectus; and
- - any collections in respect of principal on the Trust Loans applied
during the related monthly collection period by the eligible
lender trustee to purchase Serial Loans as described under
"--Additional Fundings" beginning on page S-59 of this prospectus
supplement.
"Available Funds" means, with respect to any quarterly payment date and
the related Collection Period, the sum of the amounts specified in the first six
bullet points under the definition of Monthly Available Funds on page S-61 of
this prospectus supplement for each of the three monthly collection periods
included in that Collection Period. However, if with respect to any quarterly
payment date there would not be sufficient funds, after application of the
Available Funds and amounts available in the reserve account, to pay any of
the items specified in clauses FIRST through SIXTH, under the second
paragraph of "--DISTRIBUTIONS FROM THE COLLECTION ACCOUNT" on page S-57 of
this prospectus supplement, then the Available Funds for that quarterly
payment date will include, in addition to the Available Funds, amounts on
deposit in the collection account on the Determination Date relating to that
quarterly payment date which would have constituted part of the Available
Funds for the quarterly payment date succeeding that quarterly payment date
up to the amount necessary to pay those items. The Available Funds for the
succeeding quarterly payment date will be adjusted accordingly. In any event,
Available Funds will exclude:
- - all payments and proceeds, including Liquidation Proceeds, of any
Trust Loans if their Purchase Amounts were included in the
Available Funds for a prior Collection Period;
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- - any collections in respect of principal on the Trust Loans applied
during the related Collection Period by the eligible lender
trustee to purchase Serial Loans;
- - any monthly rebate fees paid to the Department of Education
during the related Collection Period by or on behalf of the
trust as described under "Federal Family Education Loan
Program--Consolidation Loan Program" in the accompanying
prospectus; and
- - the servicing fee, all overdue servicing fees, the administration
fee and all overdue administration fees paid on each monthly
payment date that is not a quarterly payment date during the
related Collection Period.
DISTRIBUTIONS FROM THE COLLECTION ACCOUNT. On each monthly payment date
that is not a quarterly payment date, the administrator will instruct the
indenture trustee to make the following distributions to the extent of the
Monthly Available Funds in the collection account for that monthly payment date,
in the following order of priority:
- - FIRST, to the master servicer, the servicing fee for that monthly
payment date and all prior unpaid servicing fees; and
- - SECOND, to the administrator, the administration fee for that
monthly payment date and all prior unpaid administration fees.
On each quarterly payment date, the administrator will instruct the
indenture trustee to make the following deposits and distributions to the extent
of the Available Funds in the collection account for that quarterly payment
date, in the following order of priority:
- - FIRST, to the master servicer, the servicing fee for that
quarterly payment date and all prior unpaid servicing fees;
- - SECOND, to the administrator, the administration fee for that
quarterly payment date and all prior unpaid administration fees;
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- - THIRD, to the Class A-1 Noteholders, the Class A-1 Noteholders'
Interest Distribution Amount and to the Class A-2 Noteholders, the
Class A-2 Noteholders' Interest Distribution Amount for that
quarterly payment date, pro rata, based on the ratio of each of
those amounts to the total of those amounts;
- - FOURTH, to the Certificateholders, the Certificateholders' Return
Distribution Amount for that quarterly payment date;
- - FIFTH, to the Noteholders, the Noteholders' Principal Distribution
Amount for that quarterly payment date (to be allocated among the
Noteholders as described under "Description of the
Securities--Payments of Principal--PRIORITY OF PRINCIPAL PAYMENTS"
on page S-52 of this prospectus supplement);
- - SIXTH, after the Notes have been paid in full, to the
Certificateholders, the Certificateholders' Balance Distribution
Amount for that quarterly payment date; and
- - SEVENTH, to the reserve account, any remaining amounts after
application of clauses FIRSt through SIXTh.
SEE the "Glossary of Principal Terms" for definitions of a number of
the capitalized terms used in the preceding sections but not elsewhere defined.
CREDIT ENHANCEMENT
RESERVE ACCOUNT. Under the Transfer and Servicing Agreements, the
reserve account will be created with an initial deposit by the trust on the
Closing Date of cash or eligible investments in an amount equal to the Reserve
Account Initial Deposit. The Available Funds remaining on each quarterly payment
date after payment of the servicing fee and all overdue servicing fees, the
administration fee and all overdue administration fees, the Noteholders'
Interest Distribution
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Amount, the Certificateholders' Return Distribution Amount, the Noteholders'
Principal Distribution Amount and the Certificateholders' Balance Distribution
Amount for that date will be deposited in the reserve account on that quarterly
payment date. SEE "--Distributions--DISTRIBUTIONS FROM THE COLLECTION ACCOUNT"
above. As described below, subject to certain limitations, any amount on deposit
in the reserve account that exceeds the specified reserve account balance will
be released to NMF or its assignee.
"Specified Reserve Account Balance" with respect to any quarterly
payment date generally will be the GREATER of:
- - ___% of the sum of the aggregate principal amount of the Notes and
the certificate balance of the Certificates outstanding on such
date after taking into account the effect of distributions on that
quarterly payment date,
AND
- - $--------.
However, the Specified Reserve Account Balance shall in no event exceed the sum
of the aggregate principal amount of the Notes and the aggregate certificate
balance of the Certificates outstanding on that date.
If the amount on deposit in the reserve account on any quarterly
payment date, after giving effect to all distributions required to be made from
the Available Funds on that date, is greater than the Specified Reserve Account
Balance for that date, the administrator will instruct the indenture trustee to
apply the amount of that excess (the "Reserve Account Excess") in the priority
indicated:
- - FIRST, to the seller, any unpaid Purchase Premium Amounts for any
Serial Loans purchased by the trust
before the end of the related Collection Period;
- - SECOND, if such quarterly payment date is on or before the Parity
Date, to the Noteholders, an amount equal to the LESSER of:
- - the remaining amount of that excess
- AND
- - the sum of the aggregate unpaid principal amount of the Notes and
the aggregate certificate balance of the Certificates, after
giving effect to all other principal payments on the Notes for
that quarterly payment date;
this amount to be allocated between the Class A-1 Noteholders and
the Class A-2 Noteholders as described in the first paragraph
under "Description of the Securities--Payments of
Principal--PRIORITY OF PRINCIPAL PAYMENTS" on page S-52 of this
prospectus supplement;
- - THIRD, to the Class A-1 Noteholders and the Class A-2 Noteholders,
pro rata, the aggregate unpaid amount of any Class A-1
Noteholders' Interest Basis Carryover and Class A-2 Noteholders'
Interest Basis Carryover based on the ratio of each of those
amounts to the total of those amounts;
- - FOURTH, to the Certificateholders, the aggregate unpaid amount of
any Certificateholders' Return
Carryover; and
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- - FIFTH, to NMF or its assignee, any excess remaining after
application of subclauses FIRST through FOURTH above, and, once
that excess has been paid to NMF or its assignee, the
Securityholders will not have any rights in or claims to it.
Subject to the limitation described in the preceding paragraph, amounts
held from time to time in the reserve account will continue to be held for the
benefit of the trust. Funds will be withdrawn from the reserve account as
follows:
- - on each monthly payment date that is not a quarterly payment date,
to the extent that the amount of the Monthly Available Funds on
that monthly payment date is insufficient to pay the servicing fee
and all overdue servicing fees and the administration fee and all
overdue administration fees; and
- - on any quarterly payment date, to the extent that the amount of
the Available Funds on that quarterly payment date is insufficient
to pay any of the items specified in clauses FIRST through SIXTH
of the second paragraph under "--Distributions--DISTRIBUTIONS FROM
THE COLLECTION ACCOUNT" on page S-63 of this prospectus
supplement.
(i) Funds withdrawn from the reserve account will be paid to the
persons and in the order of priority specified for distribution from the
collection account on that date. As a result of the subordination of the
Certificates to the Notes described elsewhere in this prospectus supplement, any
amounts that the Certificateholders would otherwise receive from the reserve
account in respect of the Certificateholders' Return Distribution Amount on any
quarterly payment date will be paid to the Noteholders until the Noteholders'
Interest Distribution Amount for that quarterly payment date has been paid in
full. In addition, by virtue of the subordination, Certificateholders will not
receive any amounts from the reserve account in respect of the
Certificateholders' Balance Distribution Amount until the Notes have been paid
in full. See "--SUBORDINATION" below.
The reserve account is intended to enhance the likelihood of timely
payment of principal and interest due to the Noteholders and the
Certificateholders and to decrease the likelihood that the Noteholders or the
Certificateholders will experience losses. In certain circumstances, however,
the reserve account could be depleted. If the amount required to be withdrawn
from the reserve account to cover shortfalls in the amount of the Available
Funds or the Monthly Available Funds exceeds the amount in the reserve account,
the Noteholders or the Certificateholders could incur losses or a temporary
shortfall in the amount of principal and interest distributed to them. Such a
temporary shortfall could, in turn, increase the average life of the Notes or
the Certificates, as the case may be. Amounts on deposit in the reserve account
will not be available until the Parity Date to cover any aggregate unpaid Class
A-1 Noteholders' Interest Basis Carryover, Class A-2 Noteholders' Interest Basis
Carryover or Certificateholders' Return Carryover. After the Parity Date, only
amounts on deposit in the reserve account that are in excess of the Specified
Reserve Account Balance, after paying any unpaid Purchase Premium Amounts for
any Serial Loans purchased by the trust before the end of the related Collection
Period, will be available for payment of the amounts listed in the preceding
sentence.
SUBORDINATION. The Class A-1 Noteholders and the Class A-2 Noteholders
will have equal priority to the payment of interest. However, on any quarterly
payment date on which principal is due to be paid on the Notes, the Class A-2
Noteholders will receive no payments of principal until the Class A-1
Noteholders have received payments of principal so that the aggregate principal
amount of the Class A-1 Notes is reduced to zero. Nevertheless, from and after
any acceleration of the Notes following an "Event of Default" as defined in the
accompanying prospectus, principal will be allocated on a pro rata basis between
the Class A-1 Notes and the Class A-2 Notes, based on the ratio of the aggregate
principal amount of each of those classes to the aggregate principal amount of
the Notes, until the aggregate principal amount of the Notes has been reduced to
zero. In
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<PAGE>
addition, the rights of the Certificateholders to receive payments of interest
return on any quarterly payment date out of the Available Funds or the reserve
account are subordinated to the rights of the Noteholders to receive payments of
interest on that date. Similarly, the rights of the Certificateholders to
receive payments of principal out of the Available Funds or the reserve account
on any quarterly payment date are subordinated to the rights of the Noteholders
to receive payments of principal on that date. The Certificateholders will not
be entitled to any payments of principal out of the Available Funds or the
reserve account until the Notes have been paid in full.
TERMINATION
Certain information regarding termination of the trust is set forth in
"Description of the Transfer and Servicing Agreements--Termination" in the
accompanying prospectus.
Any Trust Loans remaining in the trust at the end of the Collection
Period immediately preceding the _________ quarterly payment date will be
offered for sale by the indenture trustee. The seller, its affiliates and
unrelated third parties may offer bids to purchase the Trust Loans on that
quarterly payment date. If at least two bids (one of which from a bidder other
than the seller and its affiliates) are received, the indenture trustee will
accept the highest bid equal to or in excess of the GREATER of:
- - the aggregate Purchase Amounts of the Trust Loans as of the end of the
Collection Period immediately preceding that quarterly payment date,
AND
- - an amount that would be sufficient to:
- - reduce the sum of the outstanding principal amount of the Notes and the
certificate balance of the Certificates to zero on that quarterly
payment date, and
- - pay to the Securityholders, the Securityholders' Interest Distribution
Amount payable on that quarterly payment date
(such greater amount, the "Minimum Purchase Price"). If at least two bids are
not received or the highest bid is not equal to or in excess of the Minimum
Purchase Price, the indenture trustee will not consummate the sale. The proceeds
of the sale will be used to redeem any Notes and repurchase any Certificates
outstanding on that quarterly payment date. If the sale is not consummated in
accordance with the foregoing, the indenture trustee may, but shall not be under
any obligation to, solicit bids to purchase the Trust Loans on future quarterly
payment dates upon terms similar to those described above. No assurance can be
given as to whether the indenture trustee will be successful in soliciting
acceptable bids to purchase the Trust Loans on any date.
OPTIONAL REDEMPTION
As of the end of any Collection Period immediately preceding a
quarterly payment date on which the then outstanding Pool Balance is 10% or less
of the sum of the aggregate initial principal amount of the Notes and the
aggregate initial certificate balance of the Certificates, NMF or an assignee of
NMF may at its option purchase from the eligible lender trustee all remaining
Trust Loans at a price equal to the greater of the aggregate Purchase Amounts as
of the end of that Collection Period and the Minimum Purchase Price. That amount
will be used to retire the Notes and repurchase the Certificates concurrently
with the sale of the Trust Loans. Upon termination of the trust, all right,
title and interest in the Trust Loans and other funds of the trust, after giving
effect to any final distributions to the Securityholders, will be conveyed and
transferred to NMF or its assignee.
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FEDERAL FAMILY EDUCATION LOAN PROGRAM
A description of the Federal Family Education Loan Program is provided
in the accompanying prospectus under "Federal Family Education Loan Program".
The information provided below sets forth recent developments and additional
information with respect the Federal Family Education Loan Program.
RECENT DEVELOPMENTS--PRESIDENT CLINTON'S PROPOSED FISCAL YEAR 2000
BUDGET. In his proposed budget for fiscal year 2000, President Clinton has
proposed billions of dollars in funding cuts to FFELP. In addition, President
Clinton has again proposed a number of changes to the Higher Education Act
that would affect lenders and state and non-profit guarantors. These
proposals would, among other things:
- - deny lenders interest that accrues on student loans for which
payments are more than 180 days delinquent, representing as much
as a six month penalty for lenders on some loan defaults;
- - reduce the share of default collections (from 24% to 18.5%) that
state and non-profit guarantors are allowed to retain; and
- - recall an additional $1.6 billion in reserves held by state and
non-profit guarantors.
The President's proposed changes, if enacted, would increase the risk
that resources available to the guarantors to meet their guarantee obligations
will be significantly reduced.
OTHER RECENT DEVELOPMENTS. In June, 1999, the Department of Education
issued a draft notice of proposed rulemaking, in which the Department proposes
to amend the regulations governing the Federal Direct Student Loan Program to
reduce the origination fee previously required to be charged to borrowers. If
this proposal is implemented and origination fees are reduced to an extent that
makes the overall cost of borrowing under the Federal Direct Student Loan
Program more attractive to borrowers, the volume of loans originated under the
FFELP could be reduced. SEE "Risk Factors--The Federal Direct Student Loan
Program Could Result in Reduced Revenues for the Master Servicer, the
Subservicers and the Guarantors" in this prospectus supplement.
FEDERAL INCOME TAX CONSEQUENCES
The seller and the master servicer will agree, and the
Certificateholders will agree by their purchasing Certificates, to treat the
trust as a partnership for purposes of federal and state income tax, franchise
tax and any other tax measured in whole or in part by income, with the assets of
the partnership being the assets held by the trust, the partners of the
partnership being the Certificateholders, including NMF in its capacity as
recipient of distributions from the reserve account, if any, and the Notes being
treated as debt of the partnership. However, the proper characterization of the
arrangement involving the trust, the Certificateholders, the seller and the
master servicer is not clear because there is no authority on transactions
comparable to those contemplated in this prospectus supplement. Brown & Wood
LLP (the "Special Federal Tax Counsel") is of the opinion that the Notes will
properly be characterized as indebtedness for federal income tax purposes and
the trust will not be characterized as an association or publicly traded
partnership taxable as a corporation. These opinions are not binding on the
Internal Revenue Service, however, and thus no assurance can be given that
the above characterization will prevail.
The Notes provide for stated interest at a floating rate based upon
Three-Month LIBOR, but are subject to certain restrictions on the maximum level
of the floating rate. Under Treasury regulations governing "original issue
discount" ("OID"), stated interest payable at a variable rate is not taxed as
OID or contingent interest if the variable rate is a qualified floating rate.
The tax treatment of interest that is not based on a qualified floating rate is
not certain and the regulations do not address the tax treatment of debt
instruments bearing contingent interest except in circumstances not relevant to
this discussion. While the tax treatment of interest on the Notes, including, in
particular, interest equal to the Noteholders' Interest Basis Carryover
amounts, is not entirely clear under the regulations, the trust intends to
treat the stated interest as a "qualified floating rate" for OID purposes and
thus such interest should not be taxable to the Noteholders as OID or as
contingent interest.
The Certificates provide for stated interest at a floating rate based
upon Three Month LIBOR, but are subject to certain restrictions on the maximum
level of the floating rate. While the tax treatment of Certificateholders'
Return Carryover is not entirely clear, Certificateholders will have to include
on a current basis as ordinary income any Certificateholders' Return Carryover
allocated to them.
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Prospective purchasers of the Securities should read "U.S. Federal
Income Tax Consequences" in the accompanying prospectus for a discussion of the
application of material federal income tax laws to the trust, the Notes and the
Certificates.
ERISA CONSIDERATIONS
Subject to the applicable provisions of ERISA and the Internal Revenue
Code, the Notes may be purchased by an employee benefit plan or an individual
retirement account or other arrangement described in Section 3(3) of ERISA or
Section 4975(e)(1) of the Code (a "Plan"). Fiduciaries of a Plan subject to
ERISA must first determine that the Plan's acquisition of a Note is consistent
with their fiduciary duties under ERISA, including the requirements of
investment prudence and diversification and the requirement that a Plan's
investments be made in accordance with the documents governing the Plan. Plan
fiduciaries must also determine that the acquisition will not result in a
nonexempt prohibited transaction as defined in Section 406 of ERISA or Section
4975 of the Code. Employee benefit plans which are governmental plans (as
defined in Section 3(32) of ERISA) or certain church plans (as defined in
Section 3(33) of ERISA) are not subject to the fiduciary responsibility or
prohibited transaction provisions of ERISA or the Code. However, any such plan
which is qualified under Section 401(a) of the Code and exempt from tax under
Section 501(a) of the Code is subject to the prohibited transaction rules set
forth in Section 503 of the Code.
The Certificates may not be acquired by, on behalf of, or using the
assets of any Plan that is subject to Title I of ERISA or Section 4975 of the
Code. Each Certificateholder, by accepting a Certificate, will be deemed to have
represented that it is not a Plan within the meaning of Title I of ERISA or
Section 4975 of the Code and is not acquiring the Certificate on behalf of, or
with the assets of, a Plan.
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting
agreement relating to the Securities (the "Underwriting Agreement"), the seller
has agreed to cause the trust to sell to each of the underwriters named below
(collectively, the "underwriters") for which [ ] is acting as representative,
and each of the underwriters has severally agreed to purchase, the principal
amount of Securities set forth opposite its name below.
<TABLE>
<CAPTION>
Principal Amount
Underwriter Class A-1 Notes Class A-2 Notes Certificates
- ----------- --------------- --------------- ------------
<S> <C> <C> <C>
</TABLE>
The seller has been advised by the underwriters that they propose to
offer the Notes to the public initially at the public offering prices set forth
on the cover page of this prospectus supplement, and to certain dealers at those
prices less a concession of 0.___% per Class A-1 Note, 0.___% per Class A-2 Note
and 0.____% per Certificate. In addition, the underwriters and those dealers may
allow a discount of 0.___% per Class A-1 Note, 0.___% per Class A-2 Note and
0.____% per Certificate on sales to certain other dealers. After the initial
public offering of the Securities, the public offering prices and the
concessions and discounts to dealers may be changed by the underwriters.
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Until the distribution of the Securities is completed, rules of the
Commission may limit the ability of the underwriters and certain selling group
members to bid for and purchase the Securities. As an exception to these rules,
the underwriters' representative is permitted to engage in certain transactions
that stabilize the prices of the classes of Notes and the Certificates. Such
transactions consist of bids or purchases for the purpose of pegging, fixing or
maintaining the prices of the classes of Notes and the Certificates.
If the underwriters create a short position in any class of the Notes
or in the Certificates in connection with the offering (I.E., if they sell more
Notes or Certificates than are set forth on the cover page of this Prospectus
Supplement), the representative may reduce that short position by purchasing
Notes or Certificates in the open market.
The underwriters' representative may also impose a penalty bid on
certain underwriters and selling group members. This means that if the
representative purchases Securities in the open market to reduce the
underwriters' short position or to stabilize the price of any class of the
Securities, it may reclaim the amount of the selling concession from the
underwriters and selling group members which sold those Securities as part of
the offering.
In general, purchases of a security for the purpose of stabilization or
to reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a penalty
bid might also have an effect on the price of a security to the extent that it
discourages resales of the security.
Neither the seller nor any of the underwriters makes any representation
or prediction as to the direction or magnitude of any effect that the
transactions described above may have on the prices of the Securities. In
addition, neither the seller nor any of the underwriters makes any
representation that the underwriters' representative will engage in such
transactions or that such transactions, once commenced, will not be discontinued
without notice.
The Underwriting Agreement provides that the seller will indemnify the
underwriters against certain liabilities, including liabilities under applicable
securities laws, or contribute to payments the underwriters may be required to
make.
The trust may, from time to time, invest the funds in the collection
account and the reserve account in eligible investments acquired from the
underwriters.
LEGAL MATTERS
Ann M. O'Rourke, General Counsel of Nellie Mae Corporation, will pass
upon certain legal matters relating to the seller, the master servicer and the
administrator.
Brown & Wood LLP will pass upon federal income tax matters on behalf
of the trust and upon certain legal matters relating to the Securities for the
underwriters. From time to time, Brown & Wood LLP has provided and expects to
continue to provide legal services to Nellie Mae Corporation and its affiliates.
REPORTS TO SECURITYHOLDERS
Unless and until Definitive Securities are issued, quarterly and annual
unaudited reports containing information concerning the Trust Loans will be
prepared by the administrator and sent on behalf of the trust only to Cede &
Co., as nominee of DTC and registered holder of the Securities, and will not be
sent to the beneficial owners of the Securities. Beneficial owners of Securities
will, however, be able to obtain the reports by requesting them from the
indenture trustee or, if the Notes are no longer outstanding, from the eligible
lender trustee. The reports will contain the information described under
"Description of the Transfer and Servicing Agreements--
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Statements to the Indenture Trustee and the Trust" in the accompanying
prospectus. However, the reports will not constitute financial statements
prepared in accordance with generally accepted accounting principles. See
"Certain Information Regarding the Securities--Book-Entry Registration" and
"Reports to Securityholders" in the accompanying prospectus.
The trust will file with the SEC all periodic reports that are required
under the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the SEC. These materials may be inspected and copied at the
public reference facilities maintained by the SEC at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington D.C. 20549 or at its regional offices at 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661, and 7 World Trade Center,
Suite 1300, New York, New York 10048. Copies of these materials can also be
obtained from the SEC's Public Reference Section at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. You may obtain information about the
operation of the Public Reference Section by calling the SEC at 1-800-SEC-0330.
Certain information about the trust is also available on the SEC's website at
http://www.sec.gov.
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GLOSSARY OF PRINCIPAL TERMS
The terms listed below are used in this prospectus supplement primarily in
connection with the "Description of the Transfer and Servicing
Agreements--Distributions" beginning on page S-61 of this prospectus supplement.
"Certificateholders' Balance Distribution Amount" means, with respect to each
quarterly payment date on and after which the Notes have been paid in full, the
sum of:
- - the Principal Distribution Amount for that quarterly payment date or,
in the case of the quarterly payment date on which the Notes are paid
in full, any remaining Principal Distribution Amount not otherwise
distributed to the Noteholders on that quarterly payment date;
AND
- - the Certificateholders' Balance Shortfall as of the close of the
preceding quarterly payment date.
However, the Certificateholders' Balance Distribution Amount will in no
event exceed the certificate balance of the Certificates outstanding on
that date. In addition, on the Certificate Final Distribution Date, the
principal required to be distributed to the Certificateholders will
include the amount required to reduce the certificate balance of the
Certificates to zero.
"Certificateholders' Balance Shortfall" means, as of the close of any quarterly
payment date on or after which the Notes have been paid in full, the EXCESS of:
- - the Certificateholders' Balance Distribution Amount on that quarterly
payment date,
OVER
- - the amount of principal actually distributed to the Certificateholders
on that quarterly payment date.
"Certificateholders' Distribution Amount" means, with respect to any quarterly
payment date, the Certificateholders' Return Distribution Amount for that
quarterly payment date plus, with respect to any quarterly payment date on and
after which the Notes have been paid in full, the Certificateholders' Balance
Distribution Amount for that quarterly payment date.
"Certificateholders' Return Distribution Amount" means, with respect to any
quarterly payment date, the SUM of:
- - the amount of interest return accrued at the Certificate Rate for the
related quarterly interest period on the certificate balance
outstanding on the immediately preceding quarterly payment date after
giving effect to all principal distributions to the Certificateholders
on that quarterly payment date or, in the case of the first quarterly
payment date, on the Closing Date;
AND
- - the Certificateholders' Return Shortfall for that quarterly payment
date.
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However, the Certificateholders' Return Distribution Amount will not
include any Certificateholders' Return Carryover.
"Certificateholders' Return Shortfall" means, with respect to any
quarterly payment date, the EXCESS of:
- - the Certificateholders' Return Distribution Amount on the preceding
quarterly payment date,
OVER
- - the amount of interest return actually distributed to the
Certificateholders on that preceding quarterly payment date;
PLUS interest on the amount of such excess, to the extent permitted by
law, at the interest return rate borne by the Certificates from that
preceding quarterly payment date to the current quarterly payment date.
"Class A-1 Noteholders' Interest Carryover Shortfall" means, with
respect to any quarterly payment date, the EXCESS of:
- - the Class A-1 Noteholders' Interest Distribution Amount on the
preceding quarterly payment date,
OVER
- - the amount of interest actually distributed to the Class A-1
Noteholders on that preceding quarterly payment date;
PLUS interest on the amount of that excess, to the extent permitted by
law, at the interest rate borne by the Class A-1 Notes from that
preceding quarterly payment date to the current quarterly payment date.
"Class A-1 Noteholders' Interest Distribution Amount" means, with
respect to any quarterly payment date, the SUM of:
- - the amount of interest accrued at the Class A-1 Note Rate for the
related quarterly interest period on the aggregate principal amount of
the Class A-1 Notes outstanding on the immediately preceding quarterly
payment date after giving effect to all principal distributions to the
Class A-1 Noteholders on that date or, in the case of the first
quarterly payment date, on the Closing Date;
AND
- - the Class A-1 Noteholders' Interest Carryover Shortfall for that
quarterly payment date.
However, the Class A-1 Noteholders' Interest Distribution Amount will
not include any Class A-1 Noteholders' Interest Basis Carryover.
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"Class A-2 Noteholders' Interest Carryover Shortfall" means, with
respect to any quarterly payment date, the EXCESS of:
- - the Class A-2 Noteholders' Interest Distribution Amount on the
preceding quarterly payment date,
o OVER
- - the amount of interest actually distributed to the Class A-2
Noteholders on that preceding quarterly payment date;
PLUS interest on the amount of that excess, to the extent permitted by
law, at the interest rate borne by the Class A-2 Notes from that
preceding quarterly payment date to the current quarterly payment date.
"Class A-2 Noteholders' Interest Distribution Amount" means, with
respect to any quarterly payment date, the SUM of:
- - the amount of interest accrued at the Class A-2 Note Rate for the
related quarterly interest period on the aggregate principal amount of
the Class A-2 Notes outstanding on the immediately preceding quarterly
payment date after giving effect to all principal distributions to the
Class A-2 Noteholders on that date or, in the case of the first
quarterly payment date, on the Closing Date;
AND
- - the Class A-2 Noteholders' Interest Carryover Shortfall for that
quarterly payment date.
However, the Class A-2 Noteholders' Interest Distribution Amount will
not include any Class A-2 Noteholders' Interest Basis Carryover.
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"Noteholders' Distribution Amount" means, with respect to any quarterly
payment date, the sum of the Class A-1 Noteholders' Interest
Distribution Amount, the Class A-2 Noteholders' Interest Distribution
Amount and the Noteholders' Principal Distribution Amount for that
quarterly payment date.
"Noteholders' Interest Distribution Amount" means, with respect to any
quarterly payment date, the SUM of:
- the Class A-1 Noteholders' Interest Distribution
Amount,
(i) AND
- the Class A-2 Noteholders' Interest Distribution
Amount for that quarterly payment date.
However, the Noteholders' Interest Distribution Amount will not include
any Class A-1 Noteholders' Interest Basis Carryover or Class A-2
Noteholders' Interest Basis Carryover.
"Noteholders' Principal Carryover Shortfall" means, as of the close of any
quarterly payment date, the EXCESS of:
- the Noteholders' Principal Distribution Amount on
that quarterly payment date,
OVER
- the amount of principal actually distributed to the
Noteholders on that quarterly payment date.
"Noteholders' Principal Distribution Amount" means, with respect to any
quarterly payment date, the SUM of:
- the Principal Distribution Amount for that quarterly
payment date,
(i) AND
- the Noteholders' Principal Carryover Shortfall as of
the close of the preceding quarterly payment date.
However, the Noteholders' Principal Distribution Amount will not exceed
the aggregate principal amount of the Notes outstanding on such date.
In addition,
- on the Class A-1 Note Final Maturity Date, the
principal required to be distributed to the Class A-1
Noteholders will include the amount required to
reduce the outstanding aggregate principal amount of
the Class A-1 Notes to zero; and
- on the Class A-2 Note Final Maturity Date, the
principal required to be distributed to the Class A-2
Noteholders will include the amount required to
reduce the outstanding aggregate principal amount of
the Class A-2 Notes to zero.
"Principal Distribution Adjustment" means, with respect to any quarterly
payment date, the amount of the Available Funds on that
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quarterly payment date to be used to make additional principal
distributions to the Noteholders and, after the Notes have been paid in
full, to the Certificateholders, to account for:
- the amount of any insignificant balances remaining
outstanding as of that quarterly payment date on the
Trust Loans after receipt of a final payment from
borrowers or guarantors, when such insignificant
balances are waived in the ordinary course of
business by the master servicer at the direction of
the administrator in accordance with the master
servicing agreement; and
- the amount of principal collections erroneously
treated as interest collections including, without
limitation, by reason of a borrower's failure to
capitalize interest that had been expected to be
capitalized.
However, the Principal Distribution Adjustment for any quarterly
payment date shall not exceed the LESSER of:
- $100,000
(i) AND
- the amount of any Reserve Account Excess remaining
after giving effect to all distributions to be made
from the reserve account on that quarterly payment
date other than distributions to NMF or its assignee.
"PRINCIPAL DISTRIBUTION AMOUNT" means, with respect to any quarterly payment
date, the SUM of the following amounts with respect to the related
Collection Period:
- that portion of all collections received by the
master servicer on the Trust Loans and remitted to
the indenture trustee that is allocable to principal,
including the portion of any guarantee payments
received that is allocable to principal of the Trust
Loans LESS the SUM of:
- those collections which were applied by the
trust during that Collection Period to
purchase Serial Loans,
AND
- accrued and unpaid interest on the Trust
Loans for that Collection Period to the
extent interest is not currently being paid
but will be capitalized when repayment
begins on those Trust Loans;
- all Liquidation Proceeds attributable to the
principal balances of Trust Loans which became
Liquidated Student Loans during that Collection
Period in accordance with the master servicer's
customary servicing procedures to the extent received
by the master servicer during the related Collection
Period and remitted to the indenture trustee,
together with all Realized Losses on those Trust
Loans;
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- to the extent attributable to principal, the amount
received by the indenture trustee with respect to
each Trust Loan repurchased by the seller or
purchased by the master servicer as a result of a
material breach of a representation, warranty or
covenant under an obligation which arose during the
related Collection Period;
AND
(II)
- the Principal Distribution Adjustment, if any.
However, the Principal Distribution Amount will exclude all payments
and proceeds, including Liquidation Proceeds of any Trust Loan if its
Purchase Amount was included in the Available Funds for a prior
Collection Period .
"Realized Losses" means the excess of the aggregate principal balances of the
Liquidated Student Loans over the related Liquidation Proceeds to the
extent allocable to principal.
"Securityholders' Interest Distribution Amount" means, with respect to any
quarterly payment date, the sum of the Class A-1 Noteholders' Interest
Distribution Amount, the Class A-2 Noteholders' Interest Distribution
Amount and the
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Certificateholders' Return Distribution Amount for that quarterly
payment date.
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<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered
Securities of Nellie Mae Student Loan Trust 1999-A (the "Global Securities")
will be available only in book-entry form. Investors in the Global Securities
may hold such Global Securities through any of DTC, CEDEL or Euroclear. The
Global Securities will be tradeable as home market instruments in both the
European and U.S. domestic markets. Initial settlements and all secondary
trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities
through CEDEL and Euroclear will be conducted in the ordinary way in accordance
with their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations and prior asset-backed securities issues.
Secondary cross-market trading between CEDEL or Euroclear and DTC
Participants holding Global Securities will be effected on a
delivery-against-payment basis through the applicable Depositaries of CEDEL and
Euroclear (in such capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be
subject to U.S. withholding taxes unless such holders meet certain requirements
and deliver appropriate U.S. tax documents to the securities clearing
organizations or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the
name of Cede & Co. as nominee of DTC. Investors' interests in the Global
Securities will be represented through financial institutions acting on their
behalf as direct and indirect Participants in DTC. As a result, CEDEL and
Euroclear will hold positions on behalf of their participants through their
respective Depositaries, which in turn will hold such positions in accounts as
DTC Participants.
Investors electing to hold their Global Securities through DTC will
follow the settlement practices applicable to conventional asset-backed
securities. Investor securities custody accounts will be credited with their
holdings against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through CEDEL or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important
to establish at the time of the trade where both the purchaser's and the
seller's accounts are located to ensure that settlement can be made on the
desired value date.
Trading Between DTC Participants. Secondary market trading between DTC
Participants will be settled in same-day funds.
Trading Between CEDEL and/or Euroclear Participants. Secondary market
trading between CEDEL Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
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Trading between DTC and CEDEL or Euroclear Purchaser. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a CEDEL Participant or a Euroclear Participant, the purchaser will
send instructions to CEDEL or Euroclear through a CEDEL Participant or Euroclear
Participant at least one business day prior to settlement. CEDEL or Euroclear,
as the case may be, will instruct the applicable Depositary to receive the
Global Securities against payment. Payment will include interest accrued on the
Global Securities from and including the last coupon payment date to and
excluding the settlement date, on the basis of a calendar year consisting of
twelve 30-day calendar months. Payment will then be made by the respective
Depositary of the DTC Participant's account against delivery of the Global
Securities. After settlement has been completed, the Global Securities will be
credited to the respective clearing system and by the clearing system, in
accordance with its usual procedures, to the CEDEL Participant's or Euroclear
Participant's account. The securities credit will appear the next day (European
time) and the cash debit will be back-valued to, and the interest on the Global
Securities will accrue from, the value date (which would be the preceding day
when settlement occurred in New York). If settlement is not completed on the
intended value date (i.e., the trade fails), the CEDEL or Euroclear cash debit
will be valued instead as of the actual settlement date.
CEDEL Participants and Euroclear Participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to preposition
funds for settlement, either from cash on hand or existing lines of credit, as
they would for any settlement occurring within CEDEL or Euroclear. Under this
approach, they may take on credit exposure to CEDEL or Euroclear until the
Global Securities are credited to their accounts one day later.
As an alternative, if CEDEL or Euroclear has extended a line of credit
to them, CEDEL Participants or Euroclear Participants may elect not to
preposition funds and allow that credit line to be drawn upon to finance
settlement. Under this procedure, CEDEL Participants or Euroclear Participants
purchasing Global Securities would incur overdraft charges for one day, assuming
they cleared the overdraft when the Global Securities were credited to their
accounts. However, interest on the Global Securities would accrue from the value
date. Therefore, in many cases the investment income on the Global Securities
earned during that one-day period may substantially reduce or offset the amount
of such overdraft charges, although this result will depend on each CEDEL
Participant's or Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours,
DTC Participants may employ their usual procedures for sending Global Securities
to the applicable Depositary for the benefit of CEDEL Participants or Euroclear
Participants. The sale proceeds will be available to the DTC on the settlement
date. Thus, to the DTC Participants a cross-market transaction will settle no
differently from a trade between two DTC Participants.
Trading between CEDEL or Euroclear and DTC Purchaser. Due to time zone
differences in their favor, CEDEL Participants and Euroclear Participants may
employ their customary procedures for transactions in which Global Securities
are to be transferred by the respective clearing system, through Euroclear
Participants, to a DTC Participant. The seller will send instructions to CEDEL
or Euroclear through a CEDEL Participant or a Euroclear Participant at least one
business day prior to settlement. In these cases, CEDEL or Euroclear will
instruct Euroclear Participants, to deliver the Global Securities to the DTC
Participant's account against payment. Payment will include interest accrued on
the Global Securities from and including the last coupon payment to and
excluding the settlement date, on the basis of a calendar year consisting of
twelve 30-day calendar months. The payment will then be reflected in the account
of the CEDEL Participant or Euroclear Participant the following day, and receipt
of the cash proceeds in the CEDEL Participant's or Euroclear Participant's
account would be back-valued to the value date (which would be the preceding
day, when settlement occurred in New York). Should the CEDEL Participant or
Euroclear Participant have a line of credit with its respective clearing system
and elect to be in debit in anticipation of receipt of the sale proceeds in its
account, the back-valuation will extinguish any overdraft incurred over that
one-day period. If settlement is not completed on the intended
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value date (i.e., the trade fails), receipt of the cash proceeds in the CEDEL
Participant's or Euroclear Participant's account would instead be valued as of
the actual settlement date.
Finally, day traders that use CEDEL or Euroclear and that purchase
Global Securities from DTC Participants for delivery to CEDEL Participants or
Euroclear Participants should note that these trades will automatically fail on
the sale side unless affirmative action is taken. At least three techniques
should be readily available to eliminate this potential problem:
(1) borrowing through CEDEL or Euroclear for one day (until the
purchase side of the day trade is reflected in their CEDEL or Euroclear
accounts) in accordance with the clearing system's customary procedures;
(2) borrowing the Global Securities in the U.S. from a DTC Participant
no later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their CEDEL or Euroclear account
in order to settle the sale side of the trade; or
(3) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC Participant is at least one
day prior to the value date for the sale to the CEDEL Participant or Euroclear
Participant.
Certain U.S. Federal Income Tax Documentation Requirements
A beneficial owner of Global Securities holding securities through
CEDEL or Euroclear (or through DTC if the holder has an address outside the
U.S.) will be subject to 30% U.S. withholding tax that generally applies to
payments of interest on registered debt issued by U.S. Persons, unless (i) each
clearing system, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business in the chain of
intermediaries between such beneficial owner and the U.S. entity required to
withhold tax complies with applicable certification requirements and (ii) such
beneficial owner takes one of the following steps to obtain an exemption or
reduced tax rate:
Exemption for Non-U.S. Persons (Form W-8). Beneficial owners of Global
Securities that are non-U.S. Persons can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status). If
the information shown on Form W-8 changes, a new Form W-8 must be filed within
30 days of such change.
Exemption for Non-U.S. Persons with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, can obtain an exemption from the
withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States).
Exemption or Reduced Rate for Non-U.S. Persons Resident in Treaty
Countries (Form 1001). Non-U.S. Persons that are beneficial owners residing in a
country that has a tax treaty with the United States can obtain an exemption or
reduced tax rate (depending on the treaty terms) by filing Form 1001 (Ownership,
Exemption or Reduced Rate Certificate). If the treaty provides only for a
reduced rate, withholding tax will be imposed at that rate unless the filer
alternatively files Form W-8. Form 1001 may be filed by the beneficial owner or
his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a
complete exemption from the withholding tax by filing Form W-9 (Payee's Request
for Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Global Securities
holder, or in the case of a Form 1001 or a Form 4224 filer, his agent, files by
submitting the appropriate form to the person through whom he holds (e.g., the
clearing agency, in the case of persons holding directly on the books of the
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clearing agency). Form W-8 and Form 1001 are effective for three calendar years
and Form 4224 is effective for one calendar year.
This summary does not deal with all aspects of foreign income tax
withholding that may be relevant to foreign holders of these Global Securities.
Investors are advised to consult their own tax advisors for specific tax advice
concerning their holding and disposing of these Global Securities.
U.S. Person. As used in these procedures, the term "U.S. Person"
means a beneficial owner of a Security that is for United States federal
income tax purposes (i) a citizen or resident of the United States, (ii) a
corporation, partnership or other entity created or organized in or under the
laws of the United States or of any political subdivision thereof, (iii) an
estate the income of which is subject to United States federal income
taxation regardless of its source, (iv) any other person whose income or gain
in respect of a Security is effectively connected with the conduct of a
United States trade or business, or (v) a trust if a court within the United
States is able to exercise primary supervision of the administration of the
trust and one or more United States fiduciaries have the authority to control
all substantial decisions of the trust. As used in these procedures, the term
"Non-U.S. Person" means a beneficial owner of a Security that is not a U.S.
Person.
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SUBJECT TO COMPLETION, DATED SEPTEMBER 2, 1999
PROSPECTUS
NELLIE MAE ASSET-BACKED FUNDING TRUSTS
ASSET-BACKED NOTES AND CERTIFICATES
(Issuable in Series)
NELLIE MAE EDUCATION LOAN CORPORATION,
SELLER AND MASTER SERVICER
----------------
The Securities
CONSIDER CAREFULLY THE
RISK FACTORS IN THE Nellie Mae Education Loan Funding Corporation may
PROSPECTUS SUPPLEMENT periodically form trusts which will issue securities.
THAT ACCOMPANIES THIS The securities may be in the form of asset-backed
PROSPECTUS. notes or asset-backed certificates. Each issue of
securities will have its own series designation and
Each issue of will evidence obligations of or interests in the
securities will trust established for that issue.
represent obligations
of, or interests in, Trust Assets
the applicable trust
only. They will not The assets of each trust will include:
represent an
obligation of, or - student loans, legal title to which will be
interest in, the held by an eligible lender trustee on behalf
seller, the master of the trust;
servicer, the - moneys and investments; and
administrator or any - other property described on the cover page
of their affiliates. of the related prospectus supplement.
The securities are NOT
insured or guaranteed Types of Securities
by any entity.
Each series of securities may include one or more
This prospectus may be classes of certificates that represent beneficial
used to offer and sell ownership of the assets of the trust, and one or more
any series of classes of notes that are secured by the assets of
securities only if the trust. A class of certificates or notes may:
accompanied by the
prospectus supplement - be senior or subordinate to other classes;
for that series. and
- receive payments from one or more forms of
credit enhancement that are designed to
reduce the harm to investors caused by
shortfalls in payments on the related
student loans.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
September __, 1999
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS AND THE RELATED
PROSPECTUS SUPPLEMENT
We provide information to you about the securities in two separate
documents that progressively provide more detail:
- this prospectus, which provides general information, some of
which may not apply to your series of securities; and
- the related prospectus supplement that describes the specific
terms of your series of securities, including:
- the timing of interest and principal payments;
- financial and other information about the student
loans;
- information about credit enhancement for each series;
- the ratings for each series; and
- the method of selling the securities.
If the terms of a particular series of securities are described
differently in this prospectus and the related prospectus supplement, you should
rely on the information in the prospectus supplement.
You should rely only on the information provided in this prospectus and
the related prospectus supplement, including the information they incorporate by
reference. We have not authorized anyone to provide you with different
information. The securities are not offered in any state where offering them is
not permitted.
We have made cross-references to captions in this prospectus and the
accompanying prospectus supplement under which you can find further related
discussions. The following table of contents and the table of contents in the
related prospectus supplement indicate where these captions are located.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
FORMATION OF THE TRUSTS...........................................................................................5
Eligible Lender Trustee......................................................................................5
THE SELLER, THE MASTER SERVICER AND THE ADMINISTRATOR.............................................................6
The Seller...................................................................................................6
The Master Servicer and Administrator........................................................................7
USE OF PROCEEDS...................................................................................................7
THE STUDENT LOAN POOLS............................................................................................7
General......................................................................................................7
Origination and Marketing Process............................................................................8
Servicing and Collections Process............................................................................9
Claims and Recovery Rates....................................................................................9
FEDERAL FAMILY EDUCATION LOAN PROGRAM............................................................................10
General.....................................................................................................10
Eligible Lenders, Students and Educational Institutions.....................................................11
Financial Need Analysis.....................................................................................11
Special Allowance Payments..................................................................................11
Stafford Loans..............................................................................................12
Unsubsidized Stafford Loans.................................................................................17
PLUS and SLS Loan Programs.................................................................................17
Consolidation Loan Program..................................................................................19
GUARANTORS UNDER THE FFELP.......................................................................................21
Loan Guarantees.............................................................................................21
Guarantor Reserve Funds.....................................................................................21
Federal Reimbursement Agreements............................................................................22
Eligibility for Federal Reimbursement.......................................................................23
Effect of Annual Claims Rate on Reimbursement of Guarantors.................................................23
Other Federal Agreements....................................................................................25
Rehabilitation of Defaulted Loans...........................................................................25
Federal Advances............................................................................................25
Changes to Federal Agreements...............................................................................25
Department of Education Oversight...........................................................................26
1998 Reauthorization Amendments.............................................................................26
WEIGHTED AVERAGE LIVES OF THE SECURITIES.........................................................................30
POOL FACTORS AND TRADING INFORMATION.............................................................................31
DESCRIPTION OF THE NOTES.........................................................................................31
General.....................................................................................................31
Principal and Interest on the Notes.........................................................................32
The Indenture...............................................................................................33
DESCRIPTION OF THE CERTIFICATES..................................................................................38
General.....................................................................................................38
Principal and Interest on the Certificates..................................................................38
ADDITIONALINFORMATION REGARDING THE SECURITIES...................................................................39
Fixed Rate Securities.......................................................................................39
Floating Rate Securities....................................................................................39
Book-Entry Registration.....................................................................................40
Definitive Securities.......................................................................................41
List of Securityholders.....................................................................................42
Reports to Securityholders..................................................................................42
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS.............................................................42
Agreements Covered..........................................................................................42
Sale of Student Loans; Representations and Warranties.......................................................43
Additional Fundings.........................................................................................44
</TABLE>
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<TABLE>
<S> <C>
Accounts....................................................................................................44
Servicing Procedures........................................................................................45
Payments on Student Loans...................................................................................46
Master Servicer Covenants...................................................................................46
Master Servicer Compensation................................................................................47
Payments of Principal and Interest..........................................................................47
Credit and Cash Flow Enhancement............................................................................48
Statements to the Indenture Trustee and the Trust...........................................................48
Evidence as to Compliance...................................................................................49
Matters Regarding the Master Servicer.......................................................................50
Master Servicer Default.....................................................................................50
Rights upon Master Servicer Default.........................................................................51
Waiver of Past Defaults.....................................................................................51
Amendment...................................................................................................52
Payment of Notes............................................................................................52
Termination.................................................................................................52
Optional Redemption.........................................................................................53
Auction of Student Loans....................................................................................53
Administration Agreement....................................................................................53
LEGAL ASPECTS OF THE STUDENT LOANS...............................................................................54
Transfer of the Student Loans...............................................................................54
Consumer Protection Laws....................................................................................54
Loan Origination and Servicing Procedures Applicable to Student Loans.......................................55
Student Loans Generally Not Subject to Discharge in Bankruptcy..............................................55
U.S. FEDERAL INCOME TAX CONSEQUENCES.............................................................................56
Trusts for Which a Partnership Election Is Made.............................................................56
Tax Characterization of the Trust......................................................................56
Tax Consequences to Holders of Debt Securities.........................................................56
Tax Consequences to Holders of Equity Securities.......................................................59
Trusts in Which All Residual Interests Are Retained by the Seller or an Affiliate of the Seller.............64
Tax Characterization of the Trust......................................................................64
ERISA CONSIDERATIONS.............................................................................................65
The Notes...................................................................................................66
The Certificates............................................................................................67
AVAILABLE INFORMATION............................................................................................67
REPORTS TO SECURITYHOLDERS.......................................................................................68
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..................................................................68
PLAN OF DISTRIBUTION.............................................................................................68
LEGAL MATTERS....................................................................................................69
</TABLE>
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<PAGE>
FORMATION OF THE TRUSTS
Each trust will be formed under the laws of the jurisdiction set forth
in the related prospectus supplement pursuant to a trust agreement. A trust will
perform only the following activities:
- acquire, hold, sell and manage student loans, the other trust
assets and proceeds from the student loans and other trust
assets; - issue one or more classes of securities; - make
payments on the related securities; and
- engage in other activities that are necessary, suitable or
convenient to accomplish the foregoing or other incidental or
related activities.
Each trust will be capitalized initially with a nominal cash payment.
The right to receive any amount remaining after payment of the securities will
be held by Nellie Mae Funding, LLC ("NMF"), a subsidiary of the seller. On
behalf of each trust, the related eligible lender trustee will use the initial
equity of the trust, together with the proceeds from the sale of the related
series of securities, to purchase student loans pursuant to a loan sale
agreement.
When the eligible lender trustee has purchased student loans on behalf
of a trust, the assets of that trust will include:
- the student loans themselves, legal title to which will be
held by the eligible lender trustee on behalf of the trust;
- all funds collected on the student loans on or after the
applicable cutoff date;
- all moneys and investments on deposit in the collection
account, any reserve account and any other trust accounts or
any other form of credit enhancement that may be obtained for
the benefit of one or more classes of the securities; and
- any other property specified in the related prospectus
supplement.
To the extent provided in the applicable prospectus supplement, the
certificates will represent beneficial ownership of the assets of the trust, and
the notes of the related series will be secured by the assets of the trust. To
facilitate servicing and to minimize administrative burden and expense, the
master servicer, directly or through subservicers, will retain possession of the
promissory notes and other documents related to the student loans as custodian
for the trust and the related eligible lender trustee.
Eligible Lender Trustee
The eligible lender trustee for a trust will be the entity specified in
the related prospectus supplement. The eligible lender trustee will acquire
legal title to all the related student loans on behalf of that trust pursuant
to a loan sale agreement and will enter into a guarantee agreement with each
of the guarantors of those student loans. The eligible lender trustee will
qualify as an eligible lender and owner of student loans for all purposes
under the Higher Education Act of 1965, as amended, and the related guarantee
agreements. If student loans are not owned by an eligible lender at any point
in time, federal guarantee payments from a guarantor and federal assistance
would be lost for those student loans. SEE "Federal Family Education Loan
Program-Eligible Lenders, Students and Educational Institutions" and
"Guarantors Under the FFELP--Eligibility for Federal Reimbursement".
The liability of the eligible lender trustee in connection with the
issuance and sale of the securities is limited solely to its express obligations
contained in the related trust agreement and loan sale agreement. An eligible
lender trustee may resign at any time. If it does, the administrator for that
trust must appoint a successor eligible lender trustee. The administrator of a
trust may also remove the eligible
5
<PAGE>
lender trustee if the eligible lender trustee becomes insolvent or ceases to be
eligible to continue as eligible lender trustee. In that event, the
administrator must appoint a successor eligible lender trustee. The resignation
or removal of an eligible lender trustee and appointment of a successor eligible
lender trustee will not become effective until a successor eligible lender
trustee accepts the appointment.
The principal office of each trust and eligible lender trustee will be
specified in the related prospectus supplement.
THE SELLER, THE MASTER SERVICER AND THE ADMINISTRATOR
The Seller
Nellie Mae Education Loan Corporation ("NMELC"), a Delaware
corporation, is a wholly-owned subsidiary of Nellie Mae Corporation ("Nellie
Mae"). Nellie Mae originates and purchases student loans which it then sells
to NMELC. NMELC is in the business of managing student loan assets and
selling them to trusts. In this prospectus, we refer to NMELC in its selling
capacity as the "seller".
The principal executive offices of NMELC are located at 1240 Pautucket
Avenue, Rumford, Rhode Island 02916. Its telephone number is (401) 438-4500.
Nellie Mae is a Delaware business corporation created in 1998 as the
successor to the business of The New England Education Loan Marketing
Corporation ("NEELMC"). Nellie Mae acquires and originates student loans under
the Federal Family Education Loan Program ("FFELP Loans") that are either
guaranteed and reinsured under the Higher Education Act of 1965, as amended, or
directly insured by the Secretary of the Department of Education pursuant to the
Act. Nellie Mae also acquires student loans made under its private loan programs
that are not guaranteed or insured under the Higher Education Act. All
references in this prospectus to "student loans" that are included as assets of
any trust are to FFELP Loans.
On June 30, 1998, NEELMC made a one-time election, permitted under
Section 150(d)(3) of the Internal Revenue Code of 1986, as amended, to transfer
its assets and liabilities to Nellie Mae. As a for-profit corporation, Nellie
Mae operates without the Code's restrictions on activities to which NEELMC was
subject. In return for the transfers, NEELMC received all of the outstanding
equity of Nellie Mae. Nellie Mae also assumed the private, nongovernmental loan
operations previously operated by Nellie Mae, Inc., NEELMC's sister corporation.
In July 1999, all of the outstanding equity of Nellie Mae was purchased by
the Student Loan Marketing Association (Sallie Mae).
During calendar year 1998, Nellie Mae purchased or originated $698
million of FFELP Loans and private student loans. As of June 30, 1999, Nellie
Mae held FFELP Loans and private student loans with an aggregate principal
balance of approximately $2.6 billion.
The principal executive offices of Nellie Mae are located at 50
Braintree Hill Park, Braintree, MA 02184 and its telephone number is (781)
849-1325.
The structure of the transactions described in this prospectus seeks to
assure that the transfer of student loans from the seller to each trust will be
treated as a sale of the student loans to that trust and not, in the event of a
bankruptcy of the seller, as a pledge of the student loans to secure a borrowing
by the seller. In the event of the seller's bankruptcy, however, there can be no
assurance that the sale of student loans by the seller to a trust will not be
recharacterized as a pledge of the student loans to secure a borrowing of the
seller. If the sale were to be recharacterized in that way, delays and
reductions in payments to holders of the related notes and certificates could
occur.
6
<PAGE>
The Master Servicer and Administrator
If specified in the prospectus supplement for a series of securities,
NMELC will provide management and administrative services to the trust as
administrator. The administrator will receive an administration fee as
compensation for performing its obligations and as reimbursement for its
expenses as administrator.
If specified in the prospectus supplement for a series of securities,
NMELC will service the student loans owned by the related trust pursuant to a
master servicing agreement between NMELC, as master servicer, and that trust.
The master servicer will receive a master servicing fee as compensation for
performing its obligations and reimbursement for its expenses as master
servicer.
The prospectus supplement for a series of securities may set forth
certain additional information with respect to the administrator and the
master servicer. SEE ALSO "Description of the Transfer and Servicing
Agreements--Servicing Procedures" in this prospectus.
An administrator or master servicer other than, or in addition to,
NMELC may be specified for a series of securities in the related prospectus
supplement.
USE OF PROCEEDS
On the closing date specified in the applicable prospectus supplement,
the related trust will purchase student loans from the seller and make an
initial deposit into the reserve account or Pre-Funding Account, if any, with
the net proceeds from the sale of that issue of securities. The seller will use
the money it receives for general corporate purposes, which may include
purchasing student loans from its affiliates.
THE STUDENT LOAN POOLS
General
The eligible lender trustee, acting on behalf of the related trust,
will buy a pool of FFELP Loans made to students (or their parents) which the
seller will have selected in accordance with the related loan sale agreement.
The student loans will have been originated under the Federal Family Education
Loan Program (the "FFELP") to meet several criteria, including the following:
- Each student loan is guaranteed as to principal and interest
by a guarantor that is reinsured by the Department of
Education in accordance with the FFELP.
- Each student loan was originated in the United States, its
territories or its possessions in accordance with the FFELP.
- Each student loan contains the terms required by the FFELP,
the applicable guarantee agreements and any other required
terms.
- Each student loan provides for regular payments that fully
amortize the amount financed over its original term to
maturity (exclusive of any deferral or forbearance periods).
- Each student loan satisfies any other criteria that are set
forth in the related prospectus supplement.
The seller will select student loans for inclusion in a trust in accordance with
the criteria described in this prospectus and in the related prospectus
supplement. In no event,
7
<PAGE>
however, will more than 20% of the student loans by principal balance in any
trust be more than 30 days delinquent as of the related cutoff date and no
student loan will be more than 120 days delinquent as of that date.
The student loans comprising the assets of each trust will be held by
the related eligible lender trustee, as trustee on behalf of that trust. The
eligible lender trustee will also enter into guarantee agreements with the
related guarantors. Under the guarantee agreements, each student loan will be
guaranteed by a guarantor. SEE "Formation of the Trusts" above.
The prospectus supplement for each series of securities will provide
information about the student loans in the related trust that will include, to
the extent appropriate:
- the composition of the pool,
- the distribution of the pool by loan type and payment status,
- the borrowers' states of residence, and
- the percentages of the student loans guaranteed by the
applicable guarantors.
In the case of certain series of securities, the applicable trust may
be allowed to acquire or originate student loans after the related cutoff date.
Where this is the case, the prospectus supplement will set forth the criteria
that those student loans must meet. In addition, the prospectus supplement will
provide information regarding:
- the duration and conditions of any related Funding Period or
Revolving Period, and
- the circumstances under which Additional Fundings will be
made.
In the case of a trust fund that has a Pre-Funding Account, no Funding
Period relating to the Pre-Funding Account will be greater than one year.
Origination and Marketing Process
In order for student loans to be guaranteed and eligible for federal
assistance, lenders must comply with certain rules set forth in the Act that
govern loan origination practices. A lender that makes student loans may not
offer points, premiums, payments or other inducements, directly or indirectly,
to any educational institution or individual in an attempt to secure student
loan applications, nor may it mail a student loan application to a student to
whom it has not previously made a student loan unless the student requests one.
Generally, the student and the educational institution complete the
application, which is accompanied by a promissory note. The application is then
mailed or electronically transmitted directly to either a lender or the
applicable guarantor. Both the lender and the guarantor must approve the
application and confirm that it is complete . They must also confirm that the
application, the prospective borrower and the educational institution have
complied with all applicable requirements of both the Higher Education Act and
the guarantor. The Act requires that each guarantor have procedures designed to
assure that it guarantees student loans only to students attending institutions
which meet the requirements of the Act. Each lender will only make loans that
the applicable
8
<PAGE>
guarantor has approved according to its own requirements and the requirements of
the Higher Education Act. For each application it approves, the guarantor will
issue a guarantee certificate to the lender. The lender will then disburse the
loan, typically in multiple installments, and send a disclosure statement
confirming the terms of the student loan to the borrower.
These procedures differ slightly for Consolidation Loans.
Servicing and Collections Process
To ensure that student loans are repaid on a timely basis, the
applicable guarantee agreements and the Higher Education Act require that the
holders of student loans perform specified due diligence procedures . In the
related master servicing agreement, the master servicer agrees to be
responsible for performing these procedures, as well as certain collection
procedures, for the student loans. For example, if a payment is late, the
master servicer may be required to attempt to contact the delinquent borrower
by mail within ten days after the delinquency and at further specified times
by mail and by telephone. The master servicer will maintain a borrower loan
file in which it will note all telephone calls and letters to the borrower,
as well as a synopsis of each. If a delinquent borrower cannot be located,
the master servicer must perform "skip tracing" procedures, which include
contacting the borrower's school and references. If the master servicer fails
to comply with these procedures, the related eligible lender trustee, as
holder of legal title to the student loans on behalf of the related trust,
may find it difficult to obtain the benefits of any guarantee agreement or to
receive the benefits of federal assistance from the Department of Education
in connection with those loans. Even if the master servicer's failure to
comply with the procedures has not caused the loss of the guarantee of the
principal of a student loan, failure to comply with certain procedures may
nonetheless jeopardize coverage under a guarantee agreement for certain
accrued interest amounts.
The master servicer is required to notify the applicable guarantor at
certain prescribed times that a student loan is delinquent before it submits a
claim for payment under the related guarantee agreement. This requirement
enables the guarantor to be aware of seriously delinquent accounts and to be
able to make additional attempts to collect the loan before receiving a claim.
Any student loan that is delinquent beyond a certain number of days is
considered to be in default. When a student loan is in default, the master
servicer will submit a claim for reimbursement to the applicable guarantor. If
the master servicer fails to file a claim within specified times of delinquency,
the guarantor may deny the claim. A failure by the master servicer to file a
guarantee claim in a timely fashion would constitute a breach of its covenants.
If, as a result of a failure of this type, the related guarantee payment is no
longer available to the trust, the master servicer must arrange for the purchase
of that student loan from the trust, unless the prospectus supplement for that
series provides otherwise. The securityholders and the eligible lender trustee
will have no further remedies against the master servicer in this situation. SEE
"Description of the Transfer and Servicing Agreements--Master Servicer
Covenants" in this prospectus.
Claims and Recovery Rates
Each prospectus supplement will contain historical information
concerning guarantee claims and recovery rates for the guarantors that guarantee
the student loans held by the related trust as of the applicable closing date.
Because the characteristics of pools of student loans differ, however, the claim
and recovery experience of any series may differ from the guarantors' historical
experience.
9
<PAGE>
FEDERAL FAMILY EDUCATION LOAN PROGRAM
General
The Federal Family Education Loan Program under Title IV of the Higher
Education Act provides for loans to be made to students who are enrolled in
eligible institutions, or to parents of such students, to finance a portion of
the cost of attendance. Payment of principal and interest on the student loans
is guaranteed by the applicable guarantor against:
- default of the borrower;
- the death, bankruptcy or disability of the borrower;
- closing of the borrower's school, a false certification by the
borrower's school or an unpaid school refund; or
- a determination that the borrower was not eligible for the
loan.
Subject to certain conditions, a program of federal reinsurance under the Act
entitles guarantors to be reimbursed by the Department of Education for between
75% and 100% of the amount of each guarantee payment. In addition, the eligible
lender trustee, as a holder of the student loans on behalf of the related trust,
is entitled to receive from the Department interest subsidy payments and special
allowance payments for eligible student loans.
The FFELP provides for loans to students and their parents which are
guaranteed by a guarantor and either reinsured or directly insured by the
federal government. Several types of student loans are currently authorized
under the Higher Education Act:
- Stafford Loans to students who demonstrate financial need;
- Unsubsidized Stafford Loans to students who either do not
demonstrate financial need or require additional loans to
supplement their Stafford Loans;
- PLUS Loans to parents of students who are dependents and whose
estimated costs of attending school exceed other available
financial aid; and
- Consolidation Loans to consolidate into a single loan the
borrower's obligations under various federally authorized
student loan programs.
Before July 1, 1994, the Act also authorized SLS Loans to graduate and
professional students, independent undergraduate students and, under certain
circumstances, dependent undergraduate students, to supplement their Stafford
Loans.
Although the description and summaries of the Higher Education Act, the
FFELP, the guarantee agreements and the other statutes, regulations and
amendments referred to in this prospectus describe or summarize the material
provisions of those statutes, regulations and agreements, they do not purport to
be comprehensive and are qualified in their entirety by reference to each actual
statute, regulation or document. Both the Act and the regulations promulgated
under the Act have been the subject of extensive amendments in recent years.
Accordingly, there can be no assurance that future amendments or modifications
will not materially change any of the terms or provisions of the programs
described in this prospectus or of the statutes and regulations that implement
them.
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<PAGE>
Eligible Lenders, Students and Educational Institutions
Lenders eligible to make loans under the FFELP generally include banks,
savings and loan associations, credit unions, pension funds, insurance companies
and, under certain conditions, schools and guarantors. A student loan may only
be made to, or on behalf of, a "qualified student". The term "qualified student"
is defined as a United States citizen or national or otherwise eligible
individual under federal regulations who:
- has been accepted for enrollment or is enrolled and is
maintaining satisfactory academic progress at a participating
educational institution;
- is carrying at least one-half of the normal full-time academic
workload for the course of study the student is pursuing, as
determined by the institution;
- has agreed to notify the holder of the loan promptly of any
address change; and
- meets the "need" requirements described in the application for
the particular loan program, in the case of Stafford Loans.
Eligible schools include institutions of higher education and
proprietary institutions meeting the standards set forth in the Act. In order
for a school to participate in the program, its eligibility must be approved by
the Department of Education under standards established by regulation.
Financial Need Analysis
Subject to certain limits and conditions, student loans generally may
be made in amounts sufficient to cover the student's estimated costs of
attending school, including tuition and fees, books, supplies, room and board,
transportation and miscellaneous personal expenses as determined by the
institution. Each Stafford Loan and Unsubsidized Stafford Loan applicant (and
parents, in the case of a dependent child) must undergo a financial need
analysis. This requires the applicant (and parents, in the case of a dependent
child) to submit a financial need analysis form to a federal processor. The
federal processor evaluates the parents' and student's financial condition under
federal guidelines and calculates the amount that the student and/or the family
is expected to contribute towards the student's cost of education (the "family
contribution"). After receiving information on the family contribution, the
institution then subtracts the family contribution from the student's costs to
attend the institution to determine the student's eligibility for grants, loans
and work assistance. A student's "unmet need" is the difference between the
amount of grants and Stafford Loans for which the borrower is eligible and the
student's estimated cost of attendance. This unmet need may be borrowed through
Unsubsidized Stafford Loans subject to annual and aggregate loan limits
prescribed in the Act. Parents may finance the family contribution amount with
their own resources or with PLUS Loans.
Special Allowance Payments
The Act provides for quarterly special allowance payments to be made by
the Department to holders of student loans to the extent necessary to ensure
that they receive at least specified market interest rates of return on the
loans. The rates for special allowance payments are based on formulas that vary
according to the type of loan, the date the loan was originally made and the
type of funds (I.E., tax-exempt or taxable) used to finance the loan. A special
allowance payment is made for each of the 3-month periods ending March 31, June
30, September 30 and December 31.
The special allowance payment equals the average unpaid principal
balance (including interest which has been capitalized) of all eligible loans
held by a holder during a quarterly period multiplied by the special allowance
percentage. The special allowance percentage is computed by:
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<PAGE>
(1) determining the average of the bond equivalent rates of
3-month Treasury bills auctioned for that quarter;
(2) subtracting the applicable borrower interest rate on the loan;
(3) adding the applicable special allowance margin (described in
the table below); and
(4) dividing the resultant percentage by 4.
If the amount determined by the application of clauses (1), (2) and (3) is in
the negative, the special allowance margin is zero.
<TABLE>
<CAPTION>
Date of First Disbursement Special Allowance Margin
<S> <C>
Before 10/17/86 3.50%
From 10/17/86 through 09/30/92 3.25%
From 10/01/92 through 06/30/95 3.10%
From 07/01/95 through 06/30/98 2.50% (Stafford Loans and
Unsubsidized Stafford Loans that are
In-School, Grace or Deferment);
3.10% (Stafford Loans and
Unsubsidized Stafford Loans that are
in repayment and all other loans)
From 07/01/98 through 06/30/03 2.20% (Stafford Loans and
Unsubsidized Stafford Loans that are
In-School, Grace or Deferment);
2.80% (Stafford Loans and
Unsubsidized Stafford Loans that are
in repayment) and 3.10% for all
other loans
</TABLE>
Special allowance payments are available on variable rate PLUS Loans
and SLS Loans made on or after July 1, 1987 and before July 1, 1994 and on any
PLUS Loans made on or after July 1, 1998, only if the variable rate, which is
reset annually based on the 1-year Treasury bill for loans made before July 1,
1998 or based on the 3-month Treasury bill for loans made on or after July 1,
1998, exceeds the applicable maximum borrower rate.
The maximum borrower rate is between 9% and 12%.
Stafford Loans
With respect to Stafford Loans, the Higher Education Act provides for :
- federal insurance or reinsurance of Stafford Loans made by
eligible lenders to qualified students;
- federal interest subsidy payments on certain eligible Stafford
Loans to be paid by the Department of Education to holders of
the loans in lieu of the borrowers' making interest payments;
and
- special allowance payments representing an additional subsidy
paid by the Department to the holders of eligible Stafford
Loans.
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<PAGE>
In this prospectus we refer to all three types of assistance as "federal
assistance".
INTEREST. The borrower's interest rate on a Stafford Loan may be fixed
or variable. Stafford Loan interest rates are summarized in the chart below.
<TABLE>
<CAPTION>
Maximum Borrower
Trigger Date Borrower Rate Rate Interest Rate Margin
<S> <C> <C> <C>
Before 01/01/81............... 7% 7% N/A
From 01/01/81 through
09/12/83................. 9% 9% N/A
From 09/13/83 through
06/30/88................. 8% 8% N/A
From 07/01/88 through
09/30/92................. 8% for 48 months; thereafter, 8% for 48 months, 3.25% for loans made
3-month Treasury + Interest Rate then 10% before 7/23/92 and for
Margin loans made on or after
7/23/92 and before
10/1/92 to new
student loan
borrowers; 3.10%
for loans made after
7/23/92 and before
7/1/94 to borrowers
with outstanding FFELP
loans
From 10/01/92 through
06/30/94................. 3-month Treasury + Interest Rate 9% 3.10%
Margin
From 07/01/94 through
06/30/95................. 3-month Treasury + Interest Rate 8.25% 3.10%
Margin
From 07/01/95 through
06/30/98................. 3-month Treasury + Interest Rate 8.25% 2.50% (In-School, Grace
Margin or Deferment);3.10% (in
repayment)
From 07/01/98................. 3-month Treasury + Interest Rate 8.25% 1.70% (In-School, Grace
Margin or Deferment); 2.30% (in
repayment)
</TABLE>
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<PAGE>
The trigger date for Stafford Loans made before October 1, 1992 is the
first day of the enrollment period for which the borrower's first Stafford Loan
is made. The trigger date for Stafford Loans made on or after October 1, 1992 is
the date of the disbursement of the borrower's first Stafford Loan. All Stafford
Loans made on or after July 1, 1994 have a variable interest rate regardless of
the applicable rate on any prior loans.
The rate for variable rate Stafford Loans applicable for any 12-month
period beginning on July 1 and ending on June 30 is determined on the preceding
June 1 and is equal to the LESSER of:
- the applicable Maximum Rate
AND
- the sum of
- the bond equivalent rate of 3-month Treasury bills auctioned
at the final auction held before that June 1, and
- the applicable interest rate margin.
In 1992 the Higher Education Act was amended to provide that, for fixed
rate Stafford Loans made on or after July 23, 1992 and certain loans made to new
borrowers on or after July 1, 1988, the lender convert the interest rate on
those loans (by January 1, 1995) to an annual variable interest rate adjusted
each July 1 equal to:
- for certain fixed rate Stafford Loans made between July 1,
1988 and July 23, 1992, and for certain fixed rate Stafford
Loans made to new FFELP borrowers on or after July 23, 1992
and before October 1, 1992, the 3-month Treasury bill rate at
the final auction before the preceding June 1 plus 3.25%; and
- for fixed rate Stafford Loans made on or after July 23, 1992
to borrowers with outstanding FFELP Loans, the 3-month
Treasury bill rate at the final auction before the preceding
June 1 PLUS 3.10%,
in each case capped at the applicable interest rate for the loan that existed
before the conversion. The variable interest rate conversion requirement does
not apply to loans made before July 23, 1992 during the first 48 months of
repayment.
INTEREST SUBSIDY PAYMENTS. The Department of Education is responsible
for paying interest on Stafford Loans:
- while the borrower is a qualified student,
- during the grace period, and
- during certain deferral periods.
The Department makes quarterly interest subsidy payments to the owner of a
Stafford Loan in an amount equal to the interest that accrues on the unpaid
balance of that loan before repayment begins or during any deferral periods. The
Higher Education Act provides that the owner of an eligible Stafford Loan shall
be deemed to have a contractual right against the United States to receive
interest subsidy payments and special allowance payments in accordance with the
provisions of the Act. However, receipt of interest subsidy payments and special
allowance payments is conditioned on compliance with the requirements of the
Act, including the following:
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<PAGE>
- satisfaction of certain need-based criteria,
- the delivery of sufficient information by the borrower and the
lender to the Department to confirm the foregoing, and
- continued eligibility of the loan for federal reinsurance.
If the loan is not held by an eligible lender in accordance with the
requirements of the Act and the applicable federal guarantee agreements, the
loan may lose its eligibility. SEE "--Eligible Lenders, Students and Educational
Institutions" as well as "Formation of the Trusts--Eligible Lender Trustee" and
"Description of the Transfer and Servicing Agreements--Servicing Procedures" in
this prospectus. The seller expects that substantially all of the Stafford Loans
that are to be conveyed to a trust will be eligible to receive interest subsidy
payments and special allowance payments.
Interest subsidy payments and special allowance payments are generally
received within 45 days to 60 days after the master servicer submits to the
Department the applicable forms for any given calendar quarter. However, there
can be no assurance that payments will, in fact, be received from the Department
within that period. The master servicer has agreed to prepare and file with the
Department claim forms and any other required documents or filings on behalf of
each eligible lender trustee as owner of the related student loans on behalf of
the related trust. The master servicer has also agreed to assist each eligible
lender trustee to monitor, pursue and obtain any interest subsidy payments and
special allowance payments with respect to the student loans. The master
servicer will be required to deposit in the related collection account the
interest subsidy payments and special allowance payments for the related student
loans within two business days after it receives and identifies them.
LOAN LIMITS. The Higher Education Act generally requires that
eligible lenders disburse student loans in at least two equal disbursements.
The Act limits the amount a student can borrow in any academic year. The
following chart sets forth the current and historic loan limits.
15
<PAGE>
<TABLE>
<CAPTION>
All Students (1) Independent Students
Base Amount Additional
Subsidized and Unsubsidized Maximum
Borrower's Subsidized Subsidized on Unsubsidized on or only on or after Annual Total
Academic Level Pre-1/1/87 or after 1/1/87 after 10/1/93 (2) 7/1/94(3) Amount
<S> <C> <C> <C> <C> <C>
Undergraduate (per year):
1st year $ 2,500 $ 2,625 $ 2,625 $ 4,000 $ 6,625
2nd year $ 2,500 $ 2,625 $ 3,500 $ 4,000 $ 7,500
3rd year and above $ 2,500 $ 4,000 $ 5,500 $ 5,000 $ 10,000
Graduate (per year) $ 5,000 $ 7,500 $ 8,500 $10,000 $ 18,500
Aggregate Limit:
Undergraduate $12,500 $17,250 $23,000 $23,000 $ 46,000
Graduate (including $25,000 $54,750 $65,500 $73,000 $138,500
undergraduate)
</TABLE>
- -------------------------
(1) The loan limits include both Stafford Loans and federal direct student
loans.
(2) These amounts represent the combined maximum loan amount per year for
Stafford Loans and Unsubsidized Stafford Loans. Accordingly, the
maximum amount that a student may borrow under an Unsubsidized Stafford
Loan is the difference between the combined maximum loan amount and the
amount the student received in the form of a Stafford Loan.
(3) Independent undergraduate students, graduate students or professional
students may borrow these additional amounts. Moreover, dependent
undergraduate students may also receive these additional loan amounts
if their parents are unable to provide the family contribution amount
and it is unlikely that the student's parents will qualify for a PLUS
Loan.
The annual loan limits are sometimes reduced when the student is
enrolled in a program of less than one academic year or has less than a full
academic year remaining in his program. The Department of Education has
discretion to raise these limits to accommodate highly specialized or
exceptionally expensive courses of study.
REPAYMENT. In general, repayment of principal on a Stafford Loan does
not begin while the borrower remains a qualified student, but only after the
applicable grace period, as described below. Any borrower may prepay a loan
voluntarily without premium or penalty, and may waive any grace period or
deferral period related to his loan. In general, each loan must be scheduled for
repayment over a period of not more than ten years after repayment begins. New
borrowers on or after October 7, 1998 who accumulate outstanding loans under the
FFELP totaling more than $30,000 are entitled to extend repayment for up to 25
years, subject to certain scheduled minimum repayment amounts. The Act currently
requires minimum annual payments of $600 or, if greater, the amount of accrued
interest for that year, unless the borrower and the lender agree to lower
payments. The Act and related regulations require lenders to offer the choice of
a standard, graduated, income-sensitive or extended repayment schedule, if
applicable, to all borrowers entering repayment.
GRACE PERIODS, DEFERRAL PERIODS AND FORBEARANCE PERIODS. After the
borrower stops pursuing at least a half-time course of study, he generally must
begin to repay principal of a Stafford Loan following a grace period. The grace
period is:
16
<PAGE>
- at least 9 months but not more than 12 months, if the loan's
interest rate is 7% per year; and
- not more than 6 months for loans made to first-time borrowers
under the FFELP on or after July 1, 1988.
In addition, no principal repayments need be made, subject to certain
conditions, during certain deferral periods.
For new borrowers whose loans are first disbursed on or after July 1,
1993, repayment of principal may be deferred, subject to a maximum deferment of
three years, only:
- while the borrower is at least a half-time student or is
enrolled in an approved graduate fellowship program or
rehabilitation program; or
- when the borrower is seeking, but unable to find, full-time
employment; or
- when for any reason the lender determines that payment of
principal will cause the borrower economic hardship.
In 1992 the Act was amended to permit, and in some cases require,
forbearance of loan collection in certain circumstances (each, a "forbearance
period").
Unsubsidized Stafford Loans
The Unsubsidized Stafford Loan program is designed for students who do
not qualify for the maximum Stafford Loan due to parental and/or student income
and assets in excess of permitted amounts or who need funds in excess of the
maximum permitted under Stafford Loans in order to finance their education.
The basic terms of Unsubsidized Stafford Loans are generally the same
as those of Stafford Loans, including interest rate provisions, annual loan
limits and special allowance payments. The terms of the Unsubsidized Stafford
Loans differ, however, in some respects from the terms of Stafford Loans. The
federal government does not make interest subsidy payments on Unsubsidized
Stafford Loans. The borrower must begin making interest payments on a monthly or
quarterly basis or the interest will be capitalized. Subject to the same loan
limits as those established for Stafford Loans, a student may borrow up to the
amount of his unmet need.
PLUS and SLS Loan Programs
The Higher Education Act authorizes PLUS Loans to be made to parents of
eligible dependent students and previously authorized SLS Loans to be made to
certain categories of students. Since July 1, 1993, only parents who have no
adverse credit history or who are able to secure an endorser without an adverse
credit history are eligible for PLUS Loans. The basic provisions applicable to
PLUS Loans and SLS Loans are similar to those of Stafford Loans with respect to
the federal insurance and reinsurance. However, PLUS and SLS Loans differ from
Stafford Loans, particularly because interest subsidy payments are not available
under the PLUS and SLS programs and, in some instances, special allowance
payments are more restricted.
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LOAN LIMITS. PLUS Loans and SLS Loans disbursed before July 1, 1993
were limited to $4,000 per academic year with a maximum aggregate amount of
$20,000. Limits for SLS Loans disbursed on or after July 1, 1993 depend upon the
class year of the student and the length of the academic year. The annual loan
limits for SLS Loans first disbursed on or after July 1, 1993 range from $4,000
for first and second year undergraduate borrowers to $10,000 for graduate
borrowers, with a maximum aggregate amount of $23,000 for undergraduate
borrowers and $73,000 for graduate and professional borrowers.
After July 1, 1994, the SLS Loan program was merged with the
Unsubsidized Stafford Loan program, with the borrowing limits reflecting the
combined eligibility under both programs. The annual and aggregate amounts of
PLUS Loans first disbursed on or after July 1, 1993 are limited only to the
difference between the cost of the student's education and other financial aid
received, including scholarship, grants and other student loans.
INTEREST. The interest rate for a PLUS Loan or an SLS Loan depends both
on the date of disbursement and the period of enrollment. The interest rates for
PLUS Loans and SLS Loans are summarized in the following chart.
<TABLE>
<CAPTION>
Interest Rate
Trigger Date Borrower Rate Maximum Borrower Rate Margin
<S> <C> <C> <C>
Before 10/01/81............. 9% 9% N/A
From 10/01/81 through N/A
10/30/82................. 14% 14%
From 11/01/82 through
06/30/87................. 12% 12% N/A
From 07/01/87 through
09/30/92................. 1-year Treasury + Interest Rate Margin 12% 3.25%
From 10/01/92 through PLUS 10%,
06/30/94................. 1-year Treasury + Interest Rate Margin SLS 11% 3.10%
SLS repealed 07/01/94
From 07/01/94 through
06/30/98................. 1-year Treasury + Interest Rate Margin 9% 3.10%
After 6/30/98............... 3-month Treasury + Interest Rate Margin 9% 3.10%
</TABLE>
For PLUS Loans and SLS Loans made before October 1, 1992, the trigger
date is the first day of the enrollment period for which the loan was made. For
PLUS Loans and SLS Loans made on or after October 1, 1992, the trigger date
is the date of the disbursement of the loan.
For Federal PLUS Loans or Federal SLS Loans that carry a variable rate,
the rate is set annually for 12-month periods (beginning on July 1 and ending on
June 30) on the preceding June 1 to be equal to the LESSER of:
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- the applicable maximum borrower rate
AND
- the sum of
- the bond equivalent rate of 1-year Treasury bills or
3-month Treasury bills, as applicable, auctioned at
the final auction held before that June 1, and
- the applicable interest rate margin.
A holder of a PLUS Loan or SLS Loan is eligible to receive special
allowance payments during any quarter if:
- the borrower rate is set at the maximum borrower rate and
- the sum of the average of the bond equivalent rates of 3-month
Treasury bills auctioned during that quarter and the
applicable interest rate margin exceeds the maximum borrower
rate.
REPAYMENT, DEFERMENTS. In 1992 the Higher Education Act was amended to
grant to each borrower under an SLS Loan the option to defer repaying principal
until he begins to repay his Stafford Loans. Otherwise, borrowers must begin to
repay principal of their PLUS Loans and SLS Loans no later than 60 days after
the date of disbursement, subject to certain deferral and forbearance
provisions. The deferral provisions which apply to PLUS Loans and SLS Loans are
more limited than those applicable to Stafford Loans. However, borrowers may
defer and capitalize repayment of interest during certain periods of educational
enrollment and periods of unemployment or hardship, as specified under the Act.
Further, while interest subsidy payments are not available while repayment is
being deferred, interest may be capitalized during the deferral period if the
borrower does not pay the interest. Maximum loan repayment periods and minimum
payment amounts for PLUS Loans and SLS Loans are the same as those for Stafford
Loans.
Consolidation Loan Program
The Higher Education Act also authorizes a program under which certain
borrowers may consolidate one or more of their student loans into a single
Consolidation Loan that is insured and reinsured on a basis similar to Stafford
Loans. Consolidation Loans may be made in an amount sufficient to pay
outstanding principal, unpaid interest, late charges and collection costs on all
federally insured or reinsured student loans incurred under the FFELP that the
borrower selects for consolidation, as well as loans made under various other
student loan programs and student loans made by different lenders. Under this
program, a lender may make a Consolidation Loan to an eligible borrower who
requests it so long as the lender holds an outstanding loan of the borrower or
the borrower certifies that he has been unable to obtain a Consolidation Loan
from the holders of his outstanding student loans. In 1998 the Act was amended
to allow a lender to make a Consolidation Loan to a borrower whose loans are
held by multiple lenders even if the lender making the Consolidation Loan does
not hold any of the borrower's outstanding loans. A borrower who is unable to
obtain a Consolidation Loan from an eligible lender or a Consolidation Loan with
an income-sensitive repayment plan acceptable to the borrower may obtain a
Consolidation Loan under the direct loan program.
Consolidation Loans that were made on or after July 1, 1994 have no
minimum loan amount, although Consolidation Loans for less than $7,500 must be
repaid in ten years. Applications for Consolidation Loans received on or after
January 1, 1993 but before July 1, 1994 were available only to borrowers who had
aggregate outstanding student loan balances of at least $7,500. For applications
received before January 1, 1993, Consolidation Loans were available only to
borrowers who had aggregate outstanding student loan balances of at least
$5,000.
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<PAGE>
To be eligible to obtain a Consolidation Loan, the borrower must be
either in repayment status or in a grace period before repayment begins. In
addition, for applications received before January 1, 1993, the borrower must
not have been delinquent by more than 90 days on any student loan payment; and
for applications received on or after January 1, 1993, delinquent or defaulted
borrowers are eligible to obtain Consolidation Loans only if they re-enter
repayment through loan consolidation.
In connection with applications received on or after January 1, 1993,
borrowers may, within 180 days after the origination of a Consolidation Loan,
add additional loans ("Add-on Consolidation Loans") made before the origination
of that Consolidation Loan that will be consolidated with it; and in addition,
in 1998, the Act was amended to permit student loans made within the 180-day
period after the date of consolidation to be added to that Consolidation Loan.
If the borrower obtains student loans after the Consolidation Loan is originated
(except as provided above), he may consolidate the new loans and the existing
Consolidation Loan into a new Consolidation Loan. After a Consolidation Loan is
consolidated with any Add-on Consolidation Loans, the interest rate and term of
the Consolidation Loan may be recomputed within the parameters permitted by the
Act. For applications received on or after January 1, 1993, married couples who
agree to be jointly and severally liable will be treated as one borrower for
purposes of loan consolidation eligibility. For applications received on or
after November 13, 1997, borrowers may include federal direct loans in
Consolidation Loans.
Consolidation Loans bear interest at a rate equal to the greater of
the weighted average of the interest rates on the unpaid principal balances of
the consolidated loans and 9% for loans originated before July 1, 1994. For
Consolidation Loans made on or after July 1, 1994 and for which applications
were received before November 13, 1997, the weighted average interest rate must
be rounded up to the nearest whole percent. Consolidation Loans made on or after
July 1, 1994 for which applications were received on or after November 13, 1997
through September 30, 1998 bear interest at the annual variable rate applicable
to Stafford Loans subject to a cap of 8.25%. Consolidation Loans for which the
application is received on or after October 1, 1998 bear interest at a rate
equal to the weighted average interest rate of the loans being consolidated
(rounded up to the nearest one-eighth of one percent) subject to a cap of 8.25%.
Interest on Consolidation Loans accrues and, for applications received
prior to January 1, 1993, is to be paid without interest subsidy by the
Department. For Consolidation Loans received on or after January 1, 1993, all
interest of the borrower is paid during all deferral periods. However,
Consolidation Loan applications received on or after August 10, 1993 will only
be subsidized if all of the underlying loans being consolidated were subsidized
Stafford Loans. Nevertheless, in the case of Consolidation Loans made on or
after November 13, 1997, the portion of a Consolidation Loan that is comprised
of subsidized Stafford Loans will retain its subsidy benefits during deferral
periods. Borrowers may elect to accelerate principal payments without penalty.
No insurance premium may be charged to a borrower and no insurance
premium may be charged to a lender in connection with a Consolidation Loan.
However, a fee may be charged to the lender by a guarantor to cover the costs of
increased or extended liability with respect to a Consolidation Loan, and
lenders must pay a monthly rebate fee to the Department at an annualized rate of
1.05% on principal of and interest on Consolidation Loans for loans disbursed on
or after October 1, 1993 and at an annualized rate of 0.62% for Consolidation
Loan applications received between October 1, 1998 and January 31, 1999). The
rate for special allowance payments for Consolidation Loans is determined in the
same manner as for Stafford Loans.
A borrower must begin to repay his Consolidation Loan within 60 days
after his prior consolidated loans have been discharged. For applications
received on or after January 1, 1993, repayment schedule options must include
the establishment of graduated or income-sensitive repayment plans, subject to
certain limits applicable to the sum of the Consolidation Loan and the amount of
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<PAGE>
the borrower's other eligible student loans outstanding. The lender may, at its
option, include graduated and income-sensitive repayment plans in connection
with student loans for which the applications were received prior to that date.
Generally, depending on the total loans outstanding, repayment may be scheduled
over periods no less than ten and not more than 25 years. For applications
received on or after January 1, 1993, the maximum maturity schedule is 30 years
for Consolidation Loans of $60,000 or more.
All eligible student loans of a borrower paid in full through
consolidation are discharged in the consolidation process when the new
Consolidation Loan is made.
GUARANTORS UNDER THE FFELP
The student loans for a series of securities may be guaranteed by one
or more guarantors that will be identified in the related prospectus supplement.
Loan Guarantees
Under the FFELP, guarantors guarantee loans made by lending
institutions such as banks, credit unions, savings and loan associations,
certain schools, pension funds and insurance companies to students or their
parents. Student loans made before October 1, 1993 are guaranteed by guarantors
as to 100% of principal and accrued interest against default, death, disability
or bankruptcy. Student loans made on or after October 1, 1993 are guaranteed as
to 100 percent of principal and accrued interest against death, disability or
bankruptcy and 98% of principal and accrued interest against default. The
guarantor is reimbursed by the Secretary of Education for amounts paid to
lenders pursuant to agreements for reimbursement. See "--Federal Reimbursement
Agreements" in this prospectus.
A lender may submit a default claim to the guarantor after the related
student loan has been delinquent for at least 270 days. However, if the first
day of delinquency occurred prior to October 7, 1998, the default claim may be
submitted after 180 days of delinquency. The lender must submit a default claim
package that includes all information and documentation required under the FFELP
regulations and the guarantor's policies and procedures. Under current
procedures, assuming that the default claim package complies with the
guarantor's loan procedures manual and regulations, the guarantor will pay the
lender for a default claim within 90 days after the lender has filed its claim,
which generally is expected to be 390 days following the date a loan became
delinquent. The guarantor will pay the lender interest accrued on the loan for
up to 450 days after delinquency. The guarantor must file a reimbursement claim
with the Secretary within 45 days after the guarantor has paid the lender for
the default claim.
Guarantor Reserve Funds
A guarantor generally pays claims to lenders for student loans that it
has guaranteed using the cash and reserves that comprise its guarantee funds. In
general, these funds have 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 - up to 1% of the principal
amount of the student loan), investment income on moneys in the guarantee fund,
and a portion of the moneys collected from borrowers on guaranteed loans that
have been reimbursed by the Secretary to cover the guarantor's administrative
expenses.
The Secretary is required to demand payment on September 1, 2002 of a
total of one billion dollars from the funds of all the guarantors participating
in the FFELP. The amounts demanded of each guarantor will be determined in
accordance with formulas included in the Higher Education Act. Each guarantor is
required to deposit funds in a restricted account in installments, beginning in
the federal fiscal year ending September 30, 1998, to provide for its payment.
The Secretary has made the determination, and advised each guarantor, of the
amount required to be transferred by that guarantor.
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<PAGE>
The Higher Education Act was amended in 1998 to include significant changes
affecting the financial structure of guarantors in the FFELP and their sources
of revenue. These changes will affect the guarantors and their guarantee funds.
SEE "--1998 Reauthorization Amendments" beginning on page 30 of this prospectus.
The adequacy of a guarantor's guarantee fund to meet its guarantee
obligations for existing student loans also depends, in significant part, on its
ability to collect revenues generated by guarantees of new student loans. The
federal direct student loan program may adversely affect the volume of new
guarantees. Future legislation may make additional changes to the Act that could
significantly affect the revenues received by guarantors and the structure of
the guarantor program. There can be no assurance that relevant federal laws,
including the Act, will not be further changed in a manner that may adversely
affect the ability of a guarantor to meet its guarantee obligations
Information about the particular guarantors that guarantee the initial
student loans in a trust will be set forth in the related prospectus supplement.
Federal Reimbursement Agreements
GENERAL
Each guarantor and the Secretary of Education have entered into a
federal reimbursement contract. Each contract provides that the guarantor will
be reimbursed for a portion of the insurance payments that it makes to eligible
lenders for loans guaranteed by the guarantor before the termination of its
contract or expiration of the authority of the Higher Education Act. Under
certain circumstances, the Secretary can terminate federal reimbursement
contracts or take other actions short of termination to protect the federal
interest. SEE "--Department of Education Oversight" below.
Under the Act and the federal reimbursement contracts, the Secretary
currently agrees to reimburse a guarantor for the amounts it expends in the
discharge of its guarantee obligation (I.E., the unpaid principal balance and
accrued interest on the guaranteed loans) as a result of borrower default. The
Secretary currently agrees to reimburse each guarantor for:
- up to 100% of the amounts it expends for guaranteed loans made
prior to October 1, 1993;
- up to 98% of the amounts it expends for guaranteed loans made on
or after October 1, 1993 but before October 1, 1998; and
- up to 95% of the amounts it expends for guaranteed loans made on
or after October 1, 1998. Depending on the claims rate of a
guarantor, the 100%, 98% or 95% reimbursement may be reduced as
described in "--Effect of Annual Claims Rate on Reimbursement of
Guarantors" beginning on page 26 of this prospectus.
The Secretary also agrees to repay 100% of the unpaid principal balance
and accrued interest on guaranteed loans that the guarantor expends 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 whose behalf the loan was borrowed) or, in certain
circumstances, as a result of school closure, or if a school fails to make a
refund of loan proceeds which the school owed to the student's lender. The
latter reimbursements are not included in the calculations of the guarantor's
claims rate experience for the purpose of federal reimbursement under the
contracts.
Under present practice, after the Secretary reimburses a guarantor for
a default claim paid on a guaranteed loan, the guarantor continues to seek
repayment from the borrower. The guarantor returns to the Secretary any payments
that it receives from the borrower after deducting and retaining:
- a percentage amount equal to the complement of the
reimbursement percentage in effect at the time the loan was
reimbursed,
PLUS
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<PAGE>
- 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 those payments for certain
administrative costs.
However, the Secretary may require that the defaulted guaranteed loans be
assigned to the Department of Education. In that case, no further collections
activity would be undertaken by the guarantor, and no recoveries could be paid
to the guarantor.
A guarantor may enter into an addendum to its interest subsidy
agreement under which the guarantor would refer certain defaulted guaranteed
loans to the Secretary. Those loans would then be reported to the Internal
Revenue Service to "offset" any tax refunds which may be due the defaulted
borrowers. To the extent that a guarantor originally received less than 100%
reimbursement from the Secretary with respect to a referred loan, it will not
recover any amounts subsequently collected by the federal government which are
attributable to that portion of the defaulted loan for which the guarantor was
not reimbursed.
Eligibility for Federal Reimbursement
To be eligible for federal reimbursement payments, guaranteed loans
must be made by an eligible lender under the applicable guarantor's guarantee
program and meet the 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 and the other requirements set forth in the Act.
Generally, these procedures require that the lender process the
applicant's completed loan application, determine whether the applicant is an
eligible borrower attending an eligible institution , explain to the borrower
his responsibilities under the loan, ensure that the promissory note evidencing
the loan is executed by the borrower and disburse the loan proceeds as required.
After the loan is made, the lender must establish repayment terms with the
borrower, properly administer deferrals and forbearances and credit the borrower
for payments made. If a borrower becomes delinquent in repaying a loan, a lender
must perform collection procedures that vary depending upon the length of time a
loan is delinquent. The collection procedures consist primarily of telephone
calls, demand letters, skiptracing procedures and requesting assistance from the
applicable guarantor.
Under the 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 the guarantor's guarantee.
These time periods are 180 days and 240 days, respectively, for loans for which
the first day of delinquency was before October 7, 1998. The guarantor must
submit a reimbursement claim to the Secretary within 45 days after it has paid
the lender's default claim. The lender must have exercised reasonable care and
diligence in making, servicing and collecting the guaranteed loan in order for
the lender to be entitled to the guarantor's payment on the guarantee and for
the guarantor to be entitled to reimbursement by the Secretary of Education.
Effect of Annual Claims Rate on Reimbursement of Guarantors
A guarantor's ability to meet its obligations to pay default claims on
student loans that it has guaranteed will depend on the adequacy of its
guarantee fund. That, in turn, will be affected by the default experience of all
the lenders participating in the guarantor's guarantee program. A high default
experience among participating lenders may cause the guarantor's claims rate to
exceed the 5% and 9% levels described below, with the result that the Secretary
of Education would reimburse the guarantor's default claims payment at lower
percentages.
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<PAGE>
In general, guarantors are currently entitled to receive reimbursement
payments under federal reimbursement contracts in amounts that vary depending on
their claims rate experience. A guarantor's "claims rate" is computed by
dividing the total amount of its default claims since the previous September 30
by the total original principal amount of student loans in repayment on that
date that it had guaranteed. 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 (I.E., October 1 through September 30)
as a percentage of the original principal amount of loans under the FFELP
guaranteed by the guarantor and in repayment at the end of the preceding
federal fiscal year. For purposes of computing reimbursement payments to a
guarantor, the original principal amount of loans in repayment means the
original principal amount of all loans guaranteed by that guarantor less the
sum of:
- the guarantee payments made on those loans;
- the original principal amount of those loans that have been
fully repaid; and
- the original principal amount of those loans for which the
first principal installment payment has not become due or the
first installment need not be paid because of a deferral
period.
On October 1 of each year the claims rate begins again at zero, regardless of a
guarantor's experience in preceding years.
Under the formula,
- if a guarantor has a claims rate throughout any federal fiscal
year that does not exceed 5%, the Secretary will make federal
reimbursement payment to that guarantor 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;
- if, beginning at any time in a federal fiscal year, a
guarantor has a claims rate that is greater than 5% but does
not exceed 9%, the Secretary will make federal reimbursement
payments to that guarantor 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;
- if, beginning at any time in a federal fiscal year, a
guarantor has a claims rate that is greater than 9%, the
Secretary will make federal reimbursement payments to that
guarantor 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.
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<PAGE>
OTHER FEDERAL AGREEMENTS
In addition to guarantees, qualified Stafford Loans and certain
Consolidation Loans acquired under the FFELP benefit from certain federal
subsidies. Each guarantor and the Secretary of Education have entered into an
interest subsidy agreement, which entitles the holders of eligible loans
guaranteed by the guarantor to receive interest subsidy payments from the
Secretary on behalf of certain students while the student is in school, during a
six- to twelve-month grace period after the student leaves school, and during
certain deferral periods, in each case subject to the holders' compliance with
all the requirements of the Act. SEE "Federal Family Education Loan Program --
Stafford Loans -- INTEREST SUBSIDY PAYMENTS" in this prospectus for a more
detailed description of the interest subsidy payments.
REHABILITATION OF DEFAULTED LOANS
The Secretary of Education is authorized to enter into an agreement
with each guarantor under which the guarantor may sell defaulted loans that are
eligible for rehabilitation to an eligible lender. The guarantor must repay the
Secretary an amount equal to 81.5% of the then current principal balance of the
sold defaulted loan, multiplied by the reimbursement percentage in effect for
the guarantor at the time the loan was reimbursed. The amount of the repayment
is deducted from the amount of federal reimbursement payments for the federal
fiscal year in which the repayment occurs, for purposes of determining the
guarantor's reimbursement rate for that federal fiscal year.
For a loan to be eligible for rehabilitation, the guarantor must have
received consecutive payments for 12 months of amounts owed on the loan. Upon
rehabilitation, a loan is eligible for all the benefits under the Act that it
would have been eligible for had no default occurred. However, no student loan
may be rehabilitated more than once.
FEDERAL ADVANCES
Pursuant to agreements entered into between the guarantors and the
Secretary of Education under the Higher Education Act, the Secretary was
authorized to advance moneys from time to time to guarantors for the purpose of
establishing and strengthening their reserves. If the Secretary seeks to
terminate a guarantor's federal reimbursement contract or to assume its
functions, the Act currently authorizes the Secretary to make advances to the
guarantor to assist it in meeting its immediate cash needs or ensuring the
uninterrupted payment of claims.
CHANGES TO FEDERAL AGREEMENTS
United States Courts of Appeals have held that the federal government,
through subsequent legislation, has the right unilaterally to amend the federal
reimbursement contracts between the Secretary of Education and the guarantors.
Amendments to the Higher Education Act since 1986 have had the following
effects:
- certain rights of guarantors under their contracts with the
Secretary relating to the repayment of certain advances from
the Secretary were abrogated;
- the Secretary was authorized to withhold reimbursement
payments otherwise due to certain guarantors until specified
amounts of their reserves had been eliminated;
- new reserve level requirements were added for guarantors; and
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<PAGE>
- the Secretary's authority to terminate federal reimbursement
contracts and to seize guarantors' reserves was expanded.
There can be no assurance that future legislation will not further
adversely affect the rights of guarantors or holders of loans guaranteed by a
guarantor under a federal reimbursement contract.
DEPARTMENT OF EDUCATION OVERSIGHT
The Secretary of Education has certain oversight powers over
guarantors. Each guarantor is required to maintain its Federal Fund at a current
minimum reserve level of at least 0.25 % of the total amount of all outstanding
student loans guaranteed by that guarantor excluding certain loans transferred
to that guarantor from an insolvent guarantor pursuant to a plan of the
Secretary. SEE "--1998 Reauthorization Amendments" beginning on page 27 of this
prospectus. The Secretary can require the guarantor to submit and implement a
corrective plan in the following circumstances:
- if the guarantor falls below its minimum reserve level in two
consecutive years; or
- if the guarantor's claims rate exceeds 5% in any year; or
- if the Secretary determines that the guarantor's
administrative or financial condition jeopardizes its ability
to meet its obligations.
The Secretary of Education may terminate a guarantor's reimbursement contract in
the following circumstances:
- if the guarantor fails to timely submit an acceptable plan to
improve its condition;
- if the Secretary determines that it is in danger of collapse;
or
- if the Secretary determines that termination is necessary to
protect the federal fiscal interest or to ensure the continued
availability of student loans.
If the Department of Education has determined that a guarantor is
unable to meet its insurance obligations, the holders of loans guaranteed by
that guarantor may submit claims directly to the Department and the Department
is required to pay the full guarantee payments due, in accordance with guarantee
claim processing standards no more stringent than those applied by the
terminated guarantor. However the Department's obligation to pay guarantee
claims directly in this fashion is contingent upon its making the determination
referred to above. There can be no assurance that the Department would ever make
such a determination with respect to any guarantor or, if it did, that the
determination or the ultimate payment of the guarantee claims would be made in a
timely manner.
No assurances can be given as to the Secretary's actions if a guarantor
encounters administrative or financial difficulties or that the Secretary will
not demand that a guarantor transfer additional portions, or all, of its
guarantee fund to the Secretary.
1998 REAUTHORIZATION AMENDMENTS
GENERAL
The 1998 Reauthorization Amendments, enacted October 7, 1998, made
various changes to the Higher Education Act that affected guarantors, including
the following:
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- Each guarantor had to establish a federal student loan reserve
fund (a "Federal Fund") and an operating fund (an "Operating
Fund") before December 7, 1998, that would be funded, invested
and used as prescribed by the 1998 Reauthorization Amendments.
- Each guarantor's sources of revenue were modified.
- Guarantors' additional reserves were recalled.
- The Secretary of Education and each guarantor may enter into
voluntary flexible agreements in lieu of existing agreements.
FEDERAL FUND AND OPERATING FUND
Each guarantor 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. Each Federal Fund is an account selected by the guarantor with
the approval of the Secretary of Education. The Federal Fund, as well as any
nonliquid assets such as buildings or equipment developed or purchased by the
guarantor in whole or in part with federal reserve funds of the guarantor, is
considered to be property of the United States (prorated to the extent that an
asset was developed or purchased with federal reserve funds) and must be used in
the operation of the FFELP to pay lender guarantee claims, to pay default
aversion fees into the guarantor's Operating Fund and, to the extent permitted,
to make certain transition payments into the Operating Fund. The Secretary may
direct a guarantor, or its officers and directors, to cease any activity
involving expenditures, use or transfer of the Federal Fund that the Secretary
determines is a misapplication, misuse or improper expenditure of the Federal
Fund or the Secretary's share of any asset. A guarantor is required to maintain
a current minimum reserve level in the Federal Fund of at least 0.25% of the
total amount of all outstanding loans that it has guaranteed, excluding certain
loans transferred to the guarantor from an insolvent guarantor pursuant to a
plan of the Secretary.
After the Federal Fund is established, the guarantor is required to
deposit into the Federal Fund:
- all reinsurance payments received from the Secretary;
- a percentage of all amounts collected from defaulted borrowers
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 as payment for
supplemental pre-claims assistance activity performed before
October 7, 1998;
- 70% of administrative cost allowances received from the
Secretary after October 7, 1998 for loans guaranteed prior to
that date; and
- other receipts specified in regulations of the Secretary.
Funds transferred to the Federal Fund are required to be invested in low-risk
securities and all earnings from the Federal Fund are the sole property of the
United States.
In addition, each guarantor was required to establish an Operating Fund
prior to December 7, 1998. The 1998 Reauthorization Amendments include various
transition rules allowing a guarantor to transfer certain 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 its duties under the FFELP. In determining the amounts that it
may transfer, the guarantor must ensure that
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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 that the Federal Fund be repaid any transition amounts
transferred from it to the Operating Fund.
The Operating Fund shall be considered to be the property of the
guarantor, except for any transition amounts transferred from the Federal Fund.
The Secretary 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. Moreover, during
that period, moneys in the Operating Fund may only be used for expenses related
to the FFELP.
Funds deposited into the Operating Fund must be invested at the
discretion of the guarantor 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 guarantor shall make the following
deposits into the Operating Fund:
- loan processing and issuance fees and account maintenance fees
paid by the Secretary;
- default aversion fees;
- 30% of administrative cost allowances received from the
Secretary after October 7, 1998 for loans guaranteed prior to
that date;
- 24% (decreasing to 23% on and after October 1, 2003) of
amounts collected on defaulted loans, excluding collected
amounts required to be transferred to the Federal Fund; and
- other receipts specified in regulations of the Secretary.
In general, funds in the Operating Fund shall be used by the guarantor
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 guarantor. The guarantor may transfer funds from the Operating
Fund to the Federal Fund, but any transfers are irrevocable and transferred
funds become the property of the United States.
MODIFICATIONS IN SOURCES OF REVENUE
The 1998 Reauthorization Amendments made the following modifications
with respect to the principal sources of guarantor revenues:
- Reinsurance payment percentages for loans made on and after
October 1, 1998 were reduced as described above "--Effect of
Annual Claims Rate on Reimbursement of Guarantors".
- The percentage of the amount of collections on defaulted loans
that may be retained by a guarantor was reduced from 27% to
24%, with a further reduction to 23% on and after October 1,
2003.
- A loan processing and issuance fee, payable by the Secretary
of Education on a quarterly basis, was established equal to:
- for loans originated during fiscal years beginning on
or after October 1, 1998 and before October 1, 2003,
0.65% of the total principal amount of loans on
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which insurance was issued under the FFELP during the
fiscal year by the guarantor; and
- for loans originated during fiscal years beginning on
or after October 1, 2003, 0.40% of the total
principal amount of loans on which insurance was
issued under the FFELP during the fiscal year by the
guarantor; and
- The discretionary administrative cost allowances or expenses
that had been paid at a rate of 0.85% of the loans originated
in each fiscal year was eliminated.
- A default aversion fee was established. This fee, which is
related to the default aversion activities that each guarantor
is required to perform, is payable on a monthly basis from the
Federal Fund to the Operating Fund, in an amount equal to 1%
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 300th day after the loan became 60 days delinquent.
- An account maintenance fee was established that is payable
quarterly to the Secretary. If however, certain nationwide
caps are met, the account maintenance fee will be transferred
from the Federal Fund to the Operating Fund. The account
maintenance fee is equal to:
- for fiscal years 1999 and 2000, 0.12% of the original
principal amount of outstanding loans on which
insurance was issued under the FFELP; and
- for fiscal years 2001, 2002 and 2003, 0.10% of the
original principal amount of outstanding loans on
which insurance was issued under the FFELP.
ADDITIONAL RECALLS OF RESERVES
The 1998 Reauthorization Amendments direct the Secretary of Education
to demand that each guarantor participating in the FFELP pay its share of the
following amounts held in its Federal Fund:
- in fiscal year 2002, an aggregate of $85 million;
- in fiscal year 2006, an aggregate of $82.5 million; and
- in fiscal year 2007, an aggregate of $82.5 million.
The share demanded from each guarantor is determined in accordance with formulas
included in Section 422(i) of the Higher Education Act. If a guarantor charges
the maximum permitted 1% insurance premium, however, the recall may not result
in the depletion of its reserve funds below an amount equal to the amount of
lender claim payments paid during the 90 days before the date of return.
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VOLUNTARY FLEXIBLE AGREEMENTS
The 1998 Reauthorization Amendments authorize the Secretary of
Education to enter into agreements with guarantors which modify or waive many of
the requirements of the FFELP covered under existing agreements and otherwise
required by the Higher Education Act.
WEIGHTED AVERAGE LIVES OF THE SECURITIES
The weighted average lives of the notes and the certificates of any
series generally will be influenced by the rate at which the principal balances
of the related student loans are paid. Payment may be in the form of scheduled
amortization or prepayments. For this purpose, the term "prepayments" includes
prepayments in full or in part, including the discharge of student loans by
Consolidation Loans, as a result of:
- borrower default, death, disability or bankruptcy;
- the closing of the borrower's school;
- the school's false certification of borrower eligibility;
- subsequent liquidation of the student loan or collection of
the related guarantee payments; and
- repurchase of a student loan by the seller or the master
servicer for administrative reasons.
All of the student loans held by the trust are prepayable at any time without
penalty to the borrower.
A variety of economic, social and other factors, including the factors
described below and in the applicable prospectus supplement, influence the rate
at which student loans are prepaid. In general, the rate of prepayments may tend
to increase when cheaper alternative financing becomes available at interest
rates below those applicable to the student loans. However, because many student
loans bear interest at a rate that is either actually or effectively floating,
it is impossible to predict whether changes in prevailing interest rates will
correspond to changes in the interest rates on student loans. In addition, under
certain circumstances, the seller or the master servicer will be obligated to
repurchase, or arrange for the repurchase of, student loans from a given trust
under the related loan sale agreement or master servicing agreement, as
applicable, as a result of the breach of applicable representations and
warranties or covenants. SEE "Description of the Transfer and Servicing
Agreements--Sale of Student Loans; Representations and Warranties" and
"--Master Servicer Covenants" in this prospectus. SEE ALSO "Description of
the Transfer and Servicing Agreements--Termination" and "--Optional
Redemption" in this prospectus regarding the option of the seller or other
party to purchase the student loans from a given trust. Moreover, the
addition of student loans to a trust, including during any Funding Period or
Revolving Period, could affect the weighted average lives of the securities
of the related series. SEE "Description of the Transfer and Servicing
Agreements--Additional Fundings" in this prospectus.
On the other hand, scheduled payments on the student loans, as well as
their maturities, may be extended pursuant to applicable grace, deferral and
forbearance periods, and for other reasons. The rate of defaults resulting in
losses on student loans, as well as the severity and timing of those losses, may
affect the rate of payment of the principal of, and the yield on, the notes and
the certificates. The rate of default factors may, in turn, affect the ability
of the guarantors to make necessary guarantee payments.
In light of the above considerations, there can be no assurance
regarding the amount of principal payments which will be made on the notes or
the certificates of a given series on each distribution date,
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since that amount will depend, in part, on the amount of principal collected on
the related pool of student loans during the applicable collection period. Any
reinvestment risk resulting from a faster or slower rate of prepayment of the
loans will be borne entirely by the noteholders and the certificateholders of
the related series. The related prospectus supplement may set forth certain
additional information with respect to the maturity and prepayment
considerations applicable to that pool of student loans and series of
securities.
POOL FACTORS AND TRADING INFORMATION
The "note pool factor" for each class of notes and the
"certificate pool factor" for each class of certificates (each, a "pool
factor") will be a seven-digit decimal computed by the indenture trustee
before each distribution date. Each pool factor will indicate the outstanding
aggregate principal amount of the related class of notes, or the outstanding
aggregate certificate balance of the related class of certificates, as of
that distribution date (after giving effect to payments to be made on that
distribution date), as a fraction of the initial principal amount of the
related class of notes or the initial certificate balance of the related
class of certificates. Each pool factor will be 1.0000000 as of the closing
date of the related series, and thereafter will decline to reflect reductions
in the outstanding principal amount of the related class of notes or the
outstanding aggregate certificate balance of the related class of
certificates, as applicable. A securityholder's portion of the aggregate
outstanding principal amount of the related class of notes or certificates,
as applicable, is the product of:
- the original denomination of the securityholder's note or
certificate,
TIMES
- the applicable pool factor.
If so provided in the related prospectus supplement with respect to a
trust, the securityholders will receive reports on or about each distribution
date concerning various matters including the payments the trust has received on
the student loans, the pool balance and the applicable pool factor.
Securityholders of record during any calendar year will be furnished information
for tax reporting purposes not later than the latest date permitted by law. SEE
"Additional Information Regarding the Securities--Reports to Securityholders" in
this prospectus.
DESCRIPTION OF THE NOTES
GENERAL
Each trust may issue one or more classes of notes of a given series
under an indenture. A form of the indenture has been filed as an exhibit to the
Registration Statement of which this prospectus is a part. The following
summarizes important terms of the notes and the indenture. It does not purport
to be complete and is qualified in its entirety by reference to the actual
provisions of the notes and the indenture.
Unless otherwise specified in the related prospectus supplement, each
class of notes initially will be represented by one or more notes registered in
the name of the nominee of The Depository Trust Company except as set forth
below. In this prospectus we refer to DTC and any successor depository selected
by the administrator as the "Depository". Unless otherwise specified in the
related prospectus supplement, the notes will be available for purchase in
denominations of $1,000 and integral multiple increments in book-entry form
only. DTC has informed the seller that its nominee will be Cede & Co., unless
another nominee is specified in the related prospectus supplement. Thus, either
Cede & Co. or another specified nominee is expected to be the holder of record
of the notes of each class. Unless and
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until definitive notes are issued under the limited circumstances described in
this prospectus or the related prospectus supplement, no noteholder will be
entitled to receive a physical instrument representing a note. All references in
this prospectus or in the related prospectus supplement to actions by holders of
notes held in book-entry form refer to actions taken by DTC upon instructions
from its participating organizations for each class of notes of the related
series and all references in this prospectus to distributions, notices, reports
and statements to noteholders refer to distributions, notices, reports and
statements to DTC or its nominee, as the case may be, as the registered holder
of the notes for distribution to noteholders in accordance with DTC's
procedures. SEE "Additional Information Regarding the Securities--Book-Entry
Registration" and "--Definitive Securities" in this prospectus.
PRINCIPAL AND INTEREST ON THE NOTES
For each class of notes of a series, the related prospectus
supplement will describe the timing and priority of payment, seniority,
allocations of losses, interest rate, amount of principal payments or method
for determining them and amount of interest payments or method for
determining them. The right of holders of any class of notes to receive
payments of principal and interest may be senior or subordinate to the
holders of any other class or classes of notes of that series, as described
in the related prospectus supplement. Unless otherwise provided in the
related prospectus supplement, payments of interest on the notes of each
series will be made prior to payments of principal. Each class of notes may
have a different interest rate, which may be a fixed, variable or adjustable
interest rate or any combination of the three. The related prospectus
supplement will specify the interest rate, or the method for determining the
interest rate, for each class of notes of the related series. SEE ALSO
"Additional Information Regarding the Securities--Fixed Rate Securities" and
"--Floating Rate Securities" in this prospectus. One or more classes of the
notes of a series may be redeemable in whole or in part under the
circumstances specified in the related prospectus supplement. Those
circumstances may include the exercise by the seller, or any other party that
the related prospectus supplement may indicate, of an option to purchase the
related student loans.
Unless otherwise specified in the related prospectus supplement, all
classes of notes within a series will have the same priority as to interest
payments. Under certain circumstances, however, the amount available for
interest payments could be less than the amount of interest payable on the notes
on any of the dates specified for payments in the related prospectus supplement
(each, a "distribution date"). In that case, each class of notes will receive
its ratable share of the aggregate amount available for payment of interest on
the notes of that series based upon the aggregate amount of interest due on that
class. SEE "Description of the Transfer and Servicing Agreements--Payments of
Principal and Interest" and "--Credit and Cash Flow Enhancement" in this
prospectus.
In the case of a series which includes two or more classes of
notes, the sequential order and priority of payment of principal and interest,
and any schedule or formula or other provisions determining principal and
interest payments, on each class will be set forth in the related prospectus
supplement. Payments of principal and interest on each class of notes will be
made on a pro rata basis among all the notes of that class.
In the case of a series of notes relating to a trust that has a
Pre-Funding Account or Collateral Reinvestment Account, any amount that remains
on deposit in the applicable account on the distribution date that occurs on or
immediately after the last day of the related Funding Period or Collection
Period, as applicable, after giving effect to all Additional Fundings on or
prior to that date, will be distributed as principal of the notes in an
aggregate principal amount described in the related prospectus supplement.
SEE "Description of the Transfer and Servicing Agreements--Credit and
Cash Flow Enhancement--Reserve Account" in this prospectus for a description of
the reserve account and the distribution of amounts in excess of the "Specified
Reserve Account Balance" as that term is defined in the related prospectus
supplement.
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THE INDENTURE
MODIFICATION OF INDENTURE. If a majority of the holders of the
outstanding notes of a series give their consent, the indenture trustee and
the related trust may execute a supplemental indenture to add to, change or
eliminate any provisions in the indenture relating to the notes and, in so
doing, may modify in any manner the rights of the related noteholders, except
as provided below.
Unless otherwise specified in the related prospectus supplement,
without the consent of the holder of each outstanding note in a series that
would be affected, no supplemental indenture will:
- change the due date of any installment of principal or
interest on that note or reduce its principal amount, interest
rate or redemption price;
- change the place of payment where, or the currency in which,
interest or principal on that note is payable;
- impair the right of the holder of that note to sue to enforce
certain payment provisions of the indenture;
- change the provisions of the indenture regarding how the
trust, the seller, any of their affiliates, or any obligor on
the notes may, as a holder of a note, vote;
- permit the creation of any lien ranking before or on a parity
with the lien of the indenture with respect to any of the
collateral for the notes of that series;
- terminate the lien of the indenture on the collateral; or
- deprive the holder of any note of the security created by the
lien of the indenture.
In addition, holders of certain percentages of the aggregate amount of the
outstanding notes of a given series must:
- approve any supplemental indenture;
- consent to waiving compliance with certain provisions of the
indenture concerning defaults and the consequences of
defaults;
- approve giving direction to the related eligible lender
trustee to sell or liquidate the student loans in the related
trust, if the proceeds of the sale would be insufficient to
pay the principal amount and accrued but unpaid interest on
the outstanding notes of that series; and
- consent to amending sections of the indenture to alter any
percentages required for consent.
Unless otherwise specified in the related prospectus supplement with
respect to a series of notes, without the consent of the holder of each
outstanding note affected, no supplemental indenture will reduce any percentages
required for consent.
Unless otherwise specified in the applicable prospectus supplement, the
related trust and indenture trustee may also enter into supplemental indentures,
without obtaining the consent of noteholders of that series, in order to:
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- add any provisions to or change in any manner or eliminate any
of the provisions of the related indenture; or
- modify in any manner the rights of noteholders of that series,
so long as doing so will not, in the opinion of counsel
satisfactory to the indenture trustee, materially and
adversely affect the interest of any noteholder of that
series.
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT. Each indenture will
list certain "Events of Default" with respect to the notes of the related
series. Events of Default will affect interest and principal payments on those
notes. Unless otherwise specified in the related prospectus supplement, Events
of Default under the indenture will consist of the following:
- a default for five days or more on any interest payment on a
note of that series after the interest payment first becomes
due and payable;
- a default on either the principal payment or an installment of
the principal of a note of that series when it first becomes
due and payable;
- a default in the observance or performance of any covenant or
agreement of the applicable trust made in the related
indenture that continues for 30 days after
- the trust has been notified by the indenture trustee,
or
- the trust and the indenture trustee have been
notified by the holders of at least 25% in principal
amount of the notes then outstanding (if, however,
the trust demonstrates that it is making a good faith
attempt to cure the default, the 30-day period may be
extended to 90 days by the indenture trustee); or
- the discovery that any representation or warranty made by the
applicable trust in the indenture or in any certificate
delivered in connection with the indenture was incorrect in a
material respect as of the time made, if not cured within 30
days after
- the trust has been notified by the indenture trustee,
or
- the trust and indenture trustee have been notified by
the holders of at least 25% in principal amount of
the Notes then outstanding (if, however, the trust
demonstrates that it is making a good faith attempt
to cure such default, the 30-day period may be
extended to 90 days by the indenture trustee); or
- certain events of bankruptcy, insolvency, receivership or
liquidation of the trust.
However, the amount of principal required to be distributed on any
distribution date to noteholders of a series under the related indenture will
generally be limited to amounts available after payment of all prior obligations
of the related trust. Therefore, unless otherwise specified in the related
prospectus supplement, the failure to pay principal on a class of notes
generally will not result in the occurrence of an Event of Default until the
final scheduled distribution date for that class of notes. With respect to any
series of notes, if interest is paid at a variable rate based on an index, the
related prospectus supplement may provide that, if for any distribution date the
interest rate on those notes as calculated based on the index is greater than an
alternate rate calculated for that distribution date based on interest
collections on the student loans (the amount of such difference, the "index
shortfall carryover"), the interest rate for that distribution date will be the
alternate rate and the index shortfall carryover will be payable as described in
the prospectus supplement. Unless otherwise provided in the prospectus
supplement, payment of the index shortfall carryover will be lower in priority
than payment of interest on the notes at their interest rate, whether the
interest rate is based on the index or on the
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alternate rate. Accordingly, the failure to pay the index shortfall carryover on
any distribution date generally shall not constitute a default in the payment of
interest on the notes.
If an Event of Default should occur and be continuing with respect to
the notes of any series, the related indenture trustee, or holders of a majority
in principal amount of the notes of that series then outstanding, may declare
the principal of the notes to be immediately due and payable. Unless otherwise
specified in the related prospectus supplement, the declaration may be rescinded
by the holders of a majority in principal amount of the notes of that series
then outstanding if:
- the eligible lender trustee on behalf of the related trust has
paid (or deposited with the indenture trustee) a sum
sufficient to pay:
- all principal and interest on the notes and all other
amounts that would then be due under the related
indenture or on the notes if the Event of Default
giving rise to the acceleration had not occurred, and
- all sums paid or advanced by the indenture trustee
under the indenture and the reasonable compensation,
expenses, disbursements and advances of the indenture
trustee and its agents and counsel;
and
- all Events of Default, other than failure to pay the principal
of the notes that became due solely as a result of the
acceleration, have been cured or, under the circumstances
described below, have been waived.
If the notes of any series have been declared to be due and payable
following an Event of Default, the related indenture trustee in its discretion
may:
- exercise remedies as a secured party,
- require the related eligible lender trustee to sell the
student loans, or
- elect to have the related eligible lender trustee maintain
possession of the student loans and continue to apply
collections on the student loans as if there had been no
declaration of acceleration.
Unless otherwise specified in the related prospectus supplement, however, the
indenture trustee is prohibited from directing the eligible lender trustee to
sell the student loans in the related trust following an Event of Default, other
than a default in the payment of any principal or a default for five days or
more in the payment of any interest on any note of that series, unless:
- the holders of all the outstanding notes of that series
consent to the sale;
- the proceeds of the sale are sufficient to pay in full the
principal and accrued interest on the outstanding notes at the
date of the sale; or
- the indenture trustee determines that the collections on the
student loans would not be sufficient on an ongoing basis to
make all payments on the notes as they would have become due
if the obligations had not been declared due and payable, and
the indenture trustee obtains the consent of the holders of
66 2/3% of the aggregate principal amount of the notes of that
series then outstanding.
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Subject to the provisions of the applicable indenture relating to the
duties of the indenture trustee, if an Event of Default should occur and be
continuing with respect to a series of notes, the indenture trustee will be
under no obligation to exercise any of the rights or powers under the indenture
at the request or direction of any of the holders of the notes, if the indenture
trustee reasonably believes that it will not be adequately indemnified against
the related costs, expenses and liabilities that it might incur. Subject to the
indemnification provisions and certain limitations contained in the indenture,
the holders of a majority in principal amount of the outstanding notes of a
given series will have the right to direct the time, method and place of
conducting any proceeding or any remedy available to the indenture trustee, and
the holders of a majority in principal amount of the notes of that series then
outstanding may, in certain cases, waive any default with respect to those
notes, EXCEPT:
- a default in the payment of principal or interest, or
- a default in respect of a covenant or provision of the
indenture that cannot be modified without the waiver or
consent of all the holders of the outstanding notes.
Unless otherwise specified in the related prospectus supplement, no
holder of notes of any series will have the right to institute any proceeding
with respect to the related indenture, UNLESS:
- the holder has previously notified the applicable indenture
trustee in writing of a continuing Event of Default;
- the holders of at least 25% in principal amount of the
outstanding notes of that series have requested in writing
that the indenture trustee institute a proceeding in its own
name as indenture trustee;
- the holder or holders have offered the indenture trustee
reasonable indemnity;
- the indenture trustee has for 60 days failed to institute the
proceeding; and
- no direction inconsistent with the written request has been
given to the indenture trustee during the 60-day period by the
holders of a majority in principal amount of the outstanding
notes of that series.
In addition, each indenture trustee and the holders of the related
notes will covenant that they will not at any time institute against the trust
any bankruptcy, reorganization or other proceeding under any federal or state
bankruptcy or similar law.
In the absence of an express agreement to the contrary, none of the
following parties will be personally liable for the payment of principal or
interest on the notes of any series or for the agreements of the trust contained
in the related indenture: the indenture trustee, the seller, the administrator,
the master servicer, the eligible lender trustee in its individual capacity, any
holder of a certificate, or any of their respective owners, beneficiaries,
agents, officers, directors, employees, successors or assigns.
INDENTURE COVENANTS. Each indenture will provide that the related trust
may not consolidate with or merge into any other entity, UNLESS:
- the resulting or surviving entity is organized under the laws
of the United States, any of the several states or the
District of Columbia;
- the resulting or surviving entity expressly assumes the
trust's obligation to make due and punctual payments on the
notes of the related series and to perform every agreement and
covenant of the trust under the indenture;
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- no Event of Default shall have occurred and be continuing
immediately after the merger or consolidation;
- the trust has been advised that the ratings of the notes and
the certificates of that series would not be reduced or
withdrawn by the applicable rating agencies as a result of the
merger or consolidation; and
- the trust has received an opinion of counsel to the effect
that the consolidation or merger would have no material
adverse federal or Rhode Island state tax consequences to the
trust or to the holder of any note or certificate of that
series.
Each trust is prohibited from taking various actions, including the
following:
- to sell, transfer, exchange or otherwise dispose of any of the
assets of the trust except as expressly permitted by the
applicable indenture, the Transfer and Servicing Agreements or
related documents (collectively, the "Related Documents");
- to claim any credit on, or make any deduction from, the
principal and interest payable on the notes of that series
other than amounts withheld under the Internal Revenue Code or
applicable state law, or to assert any claim against any
present or former holder of the notes because of the payment
of taxes levied or assessed upon the trust;
- to dissolve or liquidate in whole or in part except as
contemplated by the Related Documents;
- to permit the validity or effectiveness of the applicable
indenture to be impaired or to permit any person to be
released from any covenants or obligations with respect to the
notes under the indenture except as may be expressly permitted
by the terms of the indenture; or
- to permit any lien, charge, excise, claim, security interest,
mortgage or other encumbrance to be created on, or extend to
or otherwise arise upon or burden, the assets of the trust, or
any interest in those assets or the proceeds of those assets,
except as expressly permitted by the Related Documents.
No trust may engage in any activity other than those specified under
the section of the related prospectus supplement entitled "Formation of the
Trust". No trust will incur, assume or guarantee any indebtedness other than
indebtedness incurred under the notes of the related series and the indenture or
otherwise in accordance with the Related Documents.
ANNUAL COMPLIANCE STATEMENT. Each trust will be required to file
annually with the applicable indenture trustee a written statement that it has
fulfilled its obligations under the related indenture.
INDENTURE TRUSTEE'S ANNUAL REPORT. Each indenture trustee will be
required to mail each year to the related noteholders a brief report about,
among other things, its eligibility and qualification to continue as indenture
trustee under the indenture; any amounts it advanced under the indenture; the
amount, interest rate and maturity date of certain indebtedness that the trust
may owe to the indenture trustee in its individual capacity; the property and
funds physically held by the indenture trustee in its capacity as indenture
trustee; and any action taken that materially affects the notes but has not
previously been reported.
SATISFACTION AND DISCHARGE OF THE INDENTURE. The indenture will be
discharged with respect to the collateral securing the related notes when all
the notes have been delivered to the indenture trustee for cancellation or, with
certain limitations, when funds sufficient to pay the notes in full have been
deposited with the indenture trustee.
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THE INDENTURE TRUSTEE. The indenture trustee for a series of notes will
be specified in the related prospectus supplement. The indenture trustee for any
series may resign at any time, in which event the trust will be obligated to
appoint a successor indenture trustee for that series. A trust may also remove
the indenture trustee if it ceases to be eligible to continue as indenture
trustee under the indenture or if it becomes insolvent. In that event, the trust
must appoint a successor indenture trustee for the notes of that series. Any
resignation or removal of the indenture trustee and appointment of a successor
trustee for any series of notes does not become effective until the successor
indenture trustee has accepted its appointment.
DESCRIPTION OF THE CERTIFICATES
GENERAL
Unless otherwise specified in the related prospectus supplement, each
trust will issue one or more classes of certificates of a given series under a
trust agreement. A form of the trust agreement has been filed as an exhibit to
the Registration Statement of which this prospectus is a part. The following
summarizes important terms of the certificates and the trust agreement. It does
not purport to be complete and is qualified in its entirety by reference to the
actual provisions of the certificates and the trust agreement.
Unless otherwise specified in the related prospectus supplement, each
class of certificates will initially be represented by a single certificate
registered in the name of the Depository, except as set forth below. Unless
otherwise specified in the related prospectus supplement and except for the
certificates of a given series that are purchased by NMF, the certificates will
be available for purchase in book-entry form only in minimum denominations of
$1,000 and integral multiple increments of $1,000.
The seller has been informed by DTC that DTC's nominee will be Cede &
Co., unless another nominee is specified in the related prospectus supplement.
Accordingly, Cede & Co. is expected to be the holder of record of the
certificates of each series except for those purchased by NMF. Unless and until
Definitive Certificates are issued under the limited circumstances described in
this prospectus or in the related prospectus supplement, no certificateholder,
other than NMF, will be entitled to receive a physical certificate representing
a certificate. All references in this prospectus and in the related prospectus
supplement to actions by certificateholders other than NMF refer to actions
taken by DTC upon instructions from its participating organizations and all
references in this prospectus and in the related prospectus supplement to
distributions, notices, reports and statements to certificateholders other than
NMF refer to distributions, notices, reports and statements to DTC or its
nominee, as the case may be, as the registered holder of the certificates, for
distribution to certificateholders in accordance with DTC's procedures. SEE
"Additional Information Regarding the Securities--Book-Entry Registration" and
"--Definitive Securities" in this prospectus.
Unless otherwise specified in the related prospectus supplement,
certificates of a given series that are owned by NMELC or its affiliates will be
entitled to equal and proportionate benefits under the applicable trust
agreement, except that the certificates owned by NMELC and its affiliates will
be deemed not to be outstanding for the purpose of determining whether the
required percentage of certificateholders has given any request, demand,
authorization, direction, notice, consent or other action under the Related
Documents. However, if NMELC or its affiliates own all the certificates of given
series, their certificates will be deemed outstanding for all purposes.
PRINCIPAL AND INTEREST ON THE CERTIFICATES
The related prospectus supplement will describe for each class of
certificates of a given series the timing and priority of distributions,
seniority, allocations of losses, pass-through rate and amount of principal
payments or method for determining them, and amount of interest payments
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or method for determining them. Payments of interest on the certificates will
be made on each distribution date and will be made prior to payments of
principal on the certificates. Each class of certificates may have a
different pass-through rate, which may be a fixed, variable or adjustable
pass-through rate or any combination of the three. The related prospectus
supplement will specify the pass-through rate for each class of certificates
of a given series or the method for determining the pass-through rate. SEE
ALSO "Additional Information Regarding the Securities--Fixed Rate Securities"
and "--Floating Rate Securities" in this prospectus. Unless otherwise
provided in the related prospectus supplement, payments on the certificates
of a given series will be subordinate to payments on the notes of that series
as more fully described in the prospectus supplement. Payments of interest
and principal on each class of certificates will be made on a pro rata basis
among all the certificates of that class.
In the case of a series of certificates that includes two or more
classes, the timing, sequential order, priority of payment or amount of interest
and principal payments, and any schedule or formula or other provisions for
determining principal and interest payments for each class of certificates shall
be set forth in the related prospectus supplement.
SEE "Description of the Transfer and Servicing Agreements--Credit and
Cash Flow Enhancement--RESERVE ACCOUNT" in this prospectus for a description of
the reserve account and the distribution of amounts in excess of the "Specified
Reserve Account Balance" as that term is defined in the related prospectus
supplement.
ADDITIONAL INFORMATION REGARDING THE SECURITIES
FIXED RATE SECURITIES
Each class of securities may be "fixed rate securities" that bear
interest at a fixed rate per year or "floating rate securities" that bear
interest at a variable or adjustable rate per year, as more fully described
below and in the applicable prospectus supplement. Each class of fixed rate
securities will bear interest at the annual interest rate, if a note, or
interest return or pass-through rate, if a certificate, specified in the
applicable prospectus supplement. Unless otherwise set forth in the applicable
prospectus supplement, interest on each class of fixed rate securities will be
computed on the basis of a 360-day year of twelve 30-day months. SEE
"Description of the Notes--Principal and Interest on the Notes" and "Description
of the Certificates--Principal and Interest on the Certificates" in this
prospectus.
FLOATING RATE SECURITIES
Each class of floating rate securities will bear interest during
each interest reset period at an annual rate determined by reference to an
interest rate index, plus or minus the spread, if any, or multiplied by the
spread multiplier, if any, in each case as specified in the related
prospectus supplement. The "spread" is the number of basis points (one basis
point being equal to one one-hundredth of a percentage point), and the
"spread multiplier" is the percentage, that may be specified in the
prospectus supplement for a particular class.
The applicable prospectus supplement will designate the interest
rate index for a given floating rate security based on LIBOR, a commercial
paper rate, federal funds rate, U.S. Treasury securities rate, negotiable
certificates of deposit rate or other rates set forth in the prospectus
supplement.
As specified in the applicable prospectus supplement, floating rate
securities of a given class also may have either or both of the following (in
each case expressed as an annual rate):
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- a maximum limitation, or ceiling, on the rate at which
interest may accrue during any interest accrual period; and
- a minimum limitation, or floor, on the rate at which interest
may accrue during any interest accrual period.
In addition to any maximum interest rate that may be applicable to any class of
floating rate securities, the interest rate applicable to any class of floating
rate securities will not exceed the maximum rate permitted by applicable law.
Each trust that issues a class of floating rate securities will
appoint, and enter into agreements with, a calculation agent to calculate
interest on that class. The applicable prospectus supplement will identify the
calculation agent which may be the administrator, the eligible lender trustee or
the indenture trustee for that series. In the absence of manifest error, all
determinations of interest by the calculation agent shall be conclusive for all
purposes and binding on the holders of the floating rate securities. Unless
otherwise specified in the applicable prospectus supplement, all percentages
resulting from any calculation of the rate of interest on a floating rate
security will be rounded, if necessary, to the nearest 1/100,000 of 1%
(.0000001), with five one-millionths of a percentage point being rounded upward.
BOOK-ENTRY REGISTRATION
DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the Uniform Commercial Code and a "clearing
agency" registered pursuant to Section 17A of the Securities Exchange Act of
1934, as amended. DTC was created to hold securities for its participating
organizations ("Participants") and to facilitate the clearance and settlement of
securities transactions between Participants through electronic book-entries,
thereby eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers, banks, trust companies and clearing
corporations. Indirect access to the DTC system also is available to others such
as banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly
("Indirect Participants").
Securityholders that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or other interests
in, securities held through DTC may do so only through Participants and Indirect
Participants. In addition, securityholders will receive all distributions of
principal and interest from the related indenture trustee or the related
eligible lender trustee, as applicable, through Participants and Indirect
Participants. Under a book-entry format, securityholders may experience some
delay in their receipt of payments, since payments will be forwarded by the
applicable trustee to DTC's nominee. DTC will forward those payments to its
Participants, which thereafter will forward them to Indirect Participants or
securityholders. It is anticipated that, except for NMF, the only
"securityholder", "certificateholder" and "noteholder" with respect to any
series will be DTC's nominee. Securityholders will not be recognized by the
applicable trustee as noteholders or certificateholders under the indenture or
trust agreement, as the case may be, and securityholders will be permitted to
exercise the rights of securityholders only indirectly through DTC and its
Participants.
Under the rules, regulations and procedures creating DTC and affecting
its operations (the "DTC Rules"), DTC is required to make book-entry transfers
of securities among Participants on whose behalf it acts with respect to the
securities and to receive and transmit principal and interest payments on the
securities. Participants and Indirect Participants with which securityholders
have accounts with respect to the securities are likewise required to make
book-entry transfers and receive and transmit payments of principal and interest
on the securities on behalf of their respective securityholders. Accordingly,
although securityholders will not possess securities, the DTC Rules provide a
mechanism by which Participants will receive payments and will be able to
transfer their interests.
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Because DTC can only act on behalf of Participants, which in turn act
on behalf of Indirect Participants and certain banks, the ability of a
securityholder to pledge securities to persons or entities that do not
participate in the DTC system, or to otherwise act with respect to the
securities, may be limited since securityholders will not possess physical
certificates for their securities.
DTC has advised the seller that it will take any action that a
securityholder is permitted to take under the related indenture or trust
agreement, as the case may be, only at the direction of one or more Participants
to whose accounts with DTC the securities are credited. DTC may take conflicting
actions with respect to other undivided interests to the extent that those
actions are taken on behalf of Participants whose holdings include such
undivided interests.
Except as required by law, neither the administrator nor the applicable
trustee for any trust will have any liability for any aspect of the records
relating to payments or the payments themselves, made on account of beneficial
ownership interests of the securities held by DTC's nominee, or for maintaining,
supervising or reviewing any records relating to those beneficial ownership
interests.
DEFINITIVE SECURITIES
Unless otherwise specified in the related prospectus supplement and
except with respect to the certificates of a given series that may be purchased
by the NMF, the notes and the certificates of a given series will be issued in
fully registered, certificated form ("definitive notes" and "definitive
certificates", respectively, and "definitive securities", collectively) to
noteholders or certificateholders or their respective nominees, rather than to
DTC or its nominee, only in any of the following circumstances:
- if the administrator advises the applicable trustee in writing
that DTC is no longer willing or able to discharge properly
its responsibilities as depository for the securities and the
administrator is unable to locate a qualified successor;
- if the administrator, at its option, elects to terminate the
book-entry system through DTC; or
- if after the occurrence of an Event of Default or a Master
Servicer Default (as defined below), securityholders
representing at least a majority of the outstanding principal
amount of the notes or the certificates, as the case may be,
of that series give written notice to the applicable trustee
through DTC that the continuation of a book-entry system for
the notes or certificates through DTC or its successor is no
longer in the best interest of the securityholders.
Upon the occurrence of any event described in the bullet points above,
the applicable trustee will be required to notify all applicable securityholders
through Participants of the availability of definitive securities. When DTC
surrenders the definitive securities, the applicable trustee will reissue to the
securityholders the corresponding securities as definitive securities upon
receipt of instructions for re-registration. From then on, payments of principal
and interest on the definitive securities will be made by the applicable
trustee, in accordance with the procedures set forth in the related indenture or
trust agreement, as the case may be, directly to the holders of definitive
securities in whose names the definitive securities were registered at the close
of business on the applicable record date specified in the related prospectus
supplement. Payments will be made by check mailed to the address of each holder
as it appears on the register maintained by the applicable trustee. However, the
final payment on any definitive security will be made only upon presentation and
surrender of that definitive security at the office or agency specified in the
notice of final distribution.
Definitive securities will be transferable and exchangeable at the
offices of the applicable trustee or of a registrar named in a notice delivered
to the holders of definitive securities. No service charge will be imposed for
any registration of transfer or exchange, but the applicable trustee may require
payment of a sum sufficient to cover any related tax or other governmental
charge that may be imposed.
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LIST OF SECURITYHOLDERS
Unless otherwise specified in the related prospectus supplement,
holders of the notes of a series evidencing at least 25% of the aggregate
outstanding principal amount of those notes may, by written request to the
related indenture trustee, obtain access to the list of all noteholders
maintained by the indenture trustee for the purpose of communicating with other
noteholders with respect to their rights under the indenture or under the notes.
The indenture trustee may elect not to afford the requesting noteholders access
to the list if it agrees to mail the desired communication or proxy, for and at
the expense of the requesting noteholders, to all noteholders of that series.
Unless otherwise specified in the related prospectus supplement, three
or more certificateholders of any series or one or more holders of certificates
of that series evidencing at least 25% of the certificate balance of those
certificates may, by written request to the eligible lender trustee, obtain
access to the list of all certificateholders for the purpose of communicating
with other certificateholders with respect to their rights under the related
trust agreement or under the certificates.
REPORTS TO SECURITYHOLDERS
On each distribution date with respect to each series of securities,
the administrator will provide to securityholders of record as of the related
record date a statement setting forth substantially the same information as is
required to be provided on the periodic report to the indenture trustee and the
trust described under "Description of Transfer and Servicing
Agreements--Statements to the Indenture Trustee and the Trust" in this
prospectus. Those statements will be filed with the SEC during the period
required by Rule 15d-1 under the Securities Exchange Act of 1934, as amended.
The statements provided to securityholders will not constitute financial
statements prepared in accordance with generally accepted accounting principles.
Within the prescribed period of time for tax reporting purposes after
the end of each calendar year during the term of each trust, the applicable
trustee will mail to each person, who at any time during that calendar year was
a holder of securities issued by that trust and received any payment, a
statement containing certain information to enable the securityholder to prepare
its federal income tax return. SEE "U.S. Federal Income Tax Consequences" in
this prospectus.
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
Agreements Covered
In the sections that follow, we have summarized certain terms of the
following agreements (collectively, the "Transfer and Servicing Agreements"):
- the loan sale agreement, under which the related eligible
lender trustee will purchase student loans from the seller on
behalf of the applicable trust;
- the master servicing agreement, under which the master
servicer will service the student loans for the trust;
- the administration agreement, under which the administrator
will undertake certain administrative duties for the trust and
the student loans; and
- the trust agreement, under which a trust will be created and
the related certificates will be issued.
Forms of each of the Transfer and Servicing Agreements have been filed as
exhibits to the Registration Statement of which this prospectus is a part.
However, the following summaries do not purport to be
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complete and are qualified in their entirety by reference to the actual
provisions of the Transfer and Servicing Agreements.
SALE OF STUDENT LOANS; REPRESENTATIONS AND WARRANTIES
On the closing date specified with respect to any given trust in the
related prospectus supplement, the seller will sell and assign to the related
eligible lender trustee on behalf of the trust, without recourse except as
provided in the loan sale agreement, its entire interest in those student
loans as well as in all collections received and to be received on the loans
on and after the cutoff date specified in the related prospectus supplement.
The sale will be effected under the related loan sale agreement. Each student
loan will be identified in a schedule appearing as an exhibit to the loan
sale agreement, which may be in electronic form. Concurrently with the sale
and assignment of the student loans, the eligible lender trustee will
execute, authenticate and deliver the related notes and certificates. The net
proceeds received from the sale of the related notes and certificates by the
trust will be applied to the purchase of the student loans and to make an
initial deposit into the reserve account or Pre-Funding Account, if any.
In each loan sale agreement, the seller will make certain
representations and warranties to the related trust with respect to the student
loans for the benefit of the certificateholders and the noteholders of that
series, including the following:
- Each student loan, on the date it is transferred to the trust,
is free and clear of all security interests, liens, charges
and encumbrances and no offsets, defenses or counterclaims
with respect to any loan have been asserted or threatened.
- The information provided in the loan sale agreement with
respect to the student loans is true and correct as of the
cutoff date.
- Each student loan, at the time it was originated, complied and
at the closing date complies, in all material respects, with
applicable federal and state laws, including the Higher
Education Act and applicable restrictions imposed by the
FFELP, and with the related guarantee agreement.
Unless otherwise provided in the related prospectus supplement,
following the discovery by or notice to the seller of a breach of any
representation or warranty with respect to a student loan that materially and
adversely affects the interests of the related noteholders or certificateholders
in that loan, the seller will repurchase that loan from the eligible lender
trustee unless the breach is cured within 60 days. However, if a breach does not
affect any guarantor's obligation to guarantee payment of that loan, it will be
deemed not to have a material adverse effect on the noteholders' or
certificateholders' interests.
Any required repurchase will be made within 30 days following the end
of the 60-day cure period. The repurchase price will be equal to the unpaid
principal balance of that loan plus accrued and unpaid interest to the day of
repurchase (the "Purchase Amount"). Alternatively, the seller may, at its
option, remit all or a portion of the Purchase Amount by substituting into the
related trust a student loan that meets certain criteria set forth in the loan
sale agreement as a replacement for the student loan as to which the breach
occurred (a "Qualified Substitute Student Loan"). In addition, the seller will
reimburse the related trust for any accrued interest amounts that a guarantor
refuses to pay under its guarantee agreement, or for any interest subsidy
payments and special allowance payments that are lost or that must be repaid to
the Department of Education as a result of a breach of the seller's
representations or warranties with respect to that loan. The repurchase,
substitution and reimbursement obligations of the seller will constitute the
sole remedy available to the trust, the related noteholders and the related
certificateholders for an uncured breach. The seller's repurchase and
reimbursement obligations are contractual obligations under the related loan
sale agreement and they may
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be enforced against the seller. However, a breach of those obligations by the
seller will not constitute an Event of Default.
To assure uniform quality in servicing and to reduce administrative
costs, the applicable eligible lender trustee on behalf of the trust will
appoint the master servicer as custodian of the promissory notes and other
documents related to the student loans. The records and computer systems of
the seller and the master servicer will reflect the sale and assignment by
the seller of the student loans to the related eligible lender trustee on
behalf of the trust. The administrator will file UCC financing statements
reflecting the sale and assignment.
ADDITIONAL FUNDINGS
In the case of a trust that has a Pre-Funding Account or a Collateral
Reinvestment Account, it will use funds on deposit in that account from time to
time during the related Funding Period or Revolving Period, as applicable, for
the following purposes:
(i) to make interest payments to noteholders and
certificateholders in lieu of collections of interest on
certain of the student loans to the extent that interest is
not paid currently but is capitalized and added to the
principal balance of those loans; and
(ii) to fund the addition of student loans to the trust as
described in the related prospectus supplement.
The additional student loans may be purchased by the trust from the seller or
may be originated by the trust, if and to the extent specified in the related
prospectus supplement.
There can be no assurance that substantially all of the amounts on
deposit in any Pre-Funding Account or Collateral Reinvestment Account will be
expended during the related Funding Period or Revolving Period. If the amount
initially deposited into a Pre-Funding Account or a Collateral Reinvestment
Account for a series has not been reduced to zero by the end of the related
Funding Period or Revolving Period, respectively, the amounts remaining on
deposit will be distributed to the related securityholders as described in the
related prospectus supplement.
If and to the extent specified in the related prospectus supplement,
the trust may use payments on the student loans, or may exchange student loans
with the seller, in order to pay for the addition of student loans after any
Funding Period or Revolving Period. If and to the extent specified in the
related prospectus supplement, a trust that does not have a Pre-Funding Account
or a Collateral Account may also use payments on the student loans, or may
exchange student loans with the seller, in order to pay for the addition of
student loans to that trust after the closing date for the securities issued by
that trust.
ACCOUNTS
With respect to each trust, the administrator will establish and
maintain with the applicable indenture trustee one or more accounts
(collectively, the "collection account"). The collection account will be in the
name of the indenture trustee on behalf of the related noteholders and
certificateholders, and all payments made on the related student loans will be
deposited in it. Any other accounts to be established with respect to a trust,
including any reserve account, any Pre-Funding Account and any Collateral
Reinvestment Account, will be described in the related prospectus supplement.
For any series of securities, funds in the collection account, any
reserve account, any Pre-Funding Account, any Collateral Reinvestment Account
and any other accounts identified in the related prospectus supplement
(collectively, the "Issuer Accounts") will be invested in "eligible investments"
as provided in the applicable trust indenture. "Eligible investments"
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are generally limited to investments acceptable to the applicable rating
agencies as being consistent with their ratings of the securities. Except as
described below or in the related prospectus supplement, eligible investments
are limited to financial obligations or instruments that mature not later than
the business day immediately before the next applicable distribution date.
However, to the extent permitted by the rating agencies, funds in any reserve
account may be invested in instruments that will not mature before the next
distribution date and will not be sold to meet any shortfalls. Thus, the amount
of cash in any reserve account at any time may be less than the balance of the
reserve account. If the amount required to be withdrawn from any reserve account
to cover shortfalls in collections on the related student loans, as provided in
the related prospectus supplement, exceeds the amount of cash in the reserve
account, a temporary shortfall in the amounts paid to the related noteholders or
certificateholders could result. Such a shortfall could, in turn, increase the
average lives of the notes or certificates of that series. Except as otherwise
specified in the related prospectus supplement, investment earnings on funds
deposited in the Issuer Accounts, net of losses and investment expenses
(collectively, "Investment Earnings"), will be deposited in the collection
account on each distribution date and will be treated as collections of interest
on the related student loans.
The Issuer Accounts will be maintained as eligible deposit accounts. An
"eligible deposit account" is EITHER:
- a segregated account with an eligible institution,
OR
- a segregated trust account with the corporate trust department
of a depository institution organized under the laws of the
United States, any of the several states or the District of
Columbia or any domestic branch of a foreign bank, having
corporate trust powers and acting as trustee for funds
deposited in that account, so long as any of the securities of
that depository institution have a credit rating from each
applicable rating agency in one of its generic rating
categories that signifies investment grade.
An "eligible institution" is a depository institution organized under the laws
of the United States, any one of the several states or the District of Columbia
or any domestic branch of a foreign bank that meets both the following criteria:
- it has a long-term unsecured debt rating acceptable to the
rating agencies or a short-term unsecured debt rating or
certificate of deposit rating acceptable to the rating
agencies, and
- its deposits are insured by the Federal Deposit Insurance
Corporation.
SERVICING PROCEDURES
Under each master servicing agreement, the master servicer will
agree to service and otherwise manage the student loans acquired from time to
time for the related trust. Each master servicing agreement requires the
master servicer:
- to perform all services and duties customary to the servicing
of student loans, including all collection practices,
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- to service the student loans in the trust using that degree
of skill and attention employed by servicers generally in
servicing student loans comparable to the student loans in
the trust; and
- to comply with all standards and procedures provided for in
the Higher Education Act, the guarantee agreements and all
other applicable federal and state laws.
Without limiting the foregoing, the duties of the master servicer with respect
to each trust under the related master servicing agreement include, but are not
limited to, the following:
- to collect and deposit into the collection account all
payments on the student loans including guarantee payments
(but not to collect interest subsidy payments and special
allowance payments with respect to the loans, which service
the eligible lender trustee will perform);
- to respond to borrower inquiries and investigate
delinquencies; and
- to send out statements and payment coupons.
In addition, the master servicer will keep ongoing collection and other records
with respect to the student loans and will furnish monthly and annual statements
to the administrator, as required in the related master servicing agreement.
The master servicer may from time to time perform its servicing
obligations under any master servicing agreement through subservicing
agreements with affiliated or unrelated third-party loan servicers.
Information with respect to any subservicing agreements and third-party
servicers may be provided in the applicable prospectus supplement.
PAYMENTS ON STUDENT LOANS
With respect to each trust, the master servicer will deposit into the
related collection account, within two business days after receipt and
identification, all payments and other proceeds on the related student loans
that it receives during each Collection Period specified in the related
prospectus supplement. The eligible lender trustee will deposit into the
collection account, within two business days after receipt and identification,
all interest subsidy payments and all special allowance payments for the student
loans received during the related Collection Period.
MASTER SERVICER COVENANTS
With respect to each trust, the master servicer will make the following
covenants in the related master servicing agreement:
- to fulfill all its obligations regarding the student loans;
- to comply in all material respects with all requirements of
law in connection with servicing the student loans, the
failure to comply with which would have a materially adverse
effect on the related noteholders or certificateholders;
- not to permit any student loan to be rescinded or cancelled
except as ordered by a court of competent jurisdiction or
other government authority or as otherwise consented to by the
related eligible lender trustee and any related indenture
trustee;
- to do nothing to impair the rights of the related noteholders
and the related certificateholders in the student loans; and
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- not to reschedule, revise, defer or otherwise compromise
payments due on any student loan except pursuant to any
applicable deferral or forbearance periods or otherwise in
accordance with all applicable standards, guidelines and
requirements with respect to servicing the student loans,
except pursuant to any applicable incentive program
described in the related prospectus supplement.
Unless otherwise specified in the related prospectus supplement, each
master servicing agreement provides that if the administrator or the master
servicer discovers, or receives written notice, that any covenant of the master
servicer set forth above has not been complied with in all material respects
(and the noncompliance has not been cured within 60 days and has a materially
adverse effect on the interests of the noteholders or the certificateholders in
a student loan), the master servicer must arrange for the purchase of that loan
as of the first day following the end of the 60-day period that is the last day
of a Collection Period. In that event, the master servicer will deposit into the
collection account an amount equal to the Purchase Amount of the loan. At the
same time, the trust's interest in the purchased student loan will automatically
be assigned to the master servicer or its designee, which will then be entitled
to all payments made on that loan.
If, because of a breach of the seller's representations and warranties
contained in the loan sale agreement, the seller must repurchase a student loan
that would otherwise have to be purchased by the master servicer in the
circumstances described in the preceding paragraph, the master servicer will not
be required to do so.
MASTER SERVICER COMPENSATION
Unless otherwise specified in the related prospectus supplement, the
master servicer will be entitled to receive a servicing fee for each
Collection Period at the annual percentage (specified in the related
prospectus supplement) of the outstanding principal balance of the student
loans as of the last day of the related Collection Period, together with any
other administrative fees and similar charges specified in the related
prospectus supplement, as compensation for servicing the related student
loans in that trust. Unless otherwise provided in the related prospectus
supplement, the servicing fee (together with any portion of the servicing fee
that remains unpaid from prior distribution dates) will be paid before any
payment on the related securities.
The servicing fee will compensate the master servicer for performing
the functions of a third-party servicer of student loans as an agent for their
beneficial owner. Those functions include collecting and posting all payments,
responding to inquiries of borrowers, investigating delinquencies, pursuing,
filing and directing the payment of any guarantee payments, interest subsidy
payments or special allowance payments, accounting for collections and
furnishing periodic accounting reports to the related administrator.
PAYMENTS OF PRINCIPAL AND INTEREST
With respect to each series of securities, beginning on the
distribution date specified in the related prospectus supplement, payments of
principal and interest on each class of the securities will be made by the
applicable trustee to the noteholders and the certificateholders of that series.
The timing, calculation, allocation, order, source, priorities of and
requirements for all payments to each class of notes and all payments to each
class of certificates of that series will be set forth in the related prospectus
supplement.
With respect to each trust, collections on the related student loans
will be distributed from the collection account on each distribution date to
noteholders and certificateholders to the extent provided in the related
prospectus supplement. Credit and cash flow enhancement, such as a
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reserve account, will be available to cover any shortfalls in the amount
available for payment on that date to the extent specified in the related
prospectus supplement. As more fully described and unless otherwise specified in
the related prospectus supplement, payments of principal and/or interest on a
class of securities of a given series may be subordinate to payments of
interest on one or more other classes of that series, and payments on the
certificates of that series may be subordinate to payments on the notes of that
series.
CREDIT AND CASH FLOW ENHANCEMENT
GENERAL. Each prospectus supplement will specify the amounts and types
of any applicable credit enhancement arrangements and identify any third-party
credit enhancement provider. If and to the extent provided in the related
prospectus supplement, credit enhancement may be in the form of subordination of
one or more classes of securities, reserve accounts, over-collateralization,
letters of credit, credit or liquidity facilities, surety bonds, guaranteed
investment contracts, repurchase obligations, interest rate swaps, interest rate
caps, interest rate floors, currency swaps, other agreements with respect to
third-party payments or other support, cash deposits or any other arrangements
described in the related prospectus supplement or any combination of two or more
of the foregoing. If specified in the applicable prospectus supplement, credit
enhancement for a class of securities may cover one or more other classes of
securities of the same series, and credit enhancement for a series of securities
may cover one or more other series of securities.
The presence of a reserve account and other forms of credit enhancement
for the benefit of any class or series of securities is intended to enhance the
likelihood of receipt by the securityholders of that class or series of the full
amount of principal and interest due them and to decrease the likelihood that
they will experience losses. Unless otherwise specified in the related
prospectus supplement, the credit enhancement for a class or series of
securities will not provide protection against all risks of loss and will not
guarantee repayment of the entire principal balance and related accrued
interest. If losses occur which exceed the amount covered by the credit
enhancement or which are not covered by any credit enhancement, securityholders
of the affected class or series will bear their allocable share of deficiencies,
as described in the related prospectus supplement. In addition, if a form of
credit enhancement covers more than one series of securities, securityholders of
those series will be subject to the risk that the credit enhancement could be
exhausted by the claims of securityholders of the other series.
RESERVE ACCOUNT. If so provided in the related prospectus supplement,
the loan sale agreement will require the seller to establish a reserve account
for a series or class of securities. The reserve account will be maintained in
the name of the applicable indenture trustee. Unless otherwise provided in the
related prospectus supplement, the reserve account will be funded from proceeds
of the sale of the securities on the closing date in the amount stated in the
related prospectus supplement. As further described in the related prospectus
supplement, the amount on deposit in the Reserve Account will be increased on
each subsequent distribution date up to the "Specified Reserve Account Balance"
as that term is defined in the related prospectus supplement, by depositing in
the reserve account the amount of collections on the related student loans
remaining on each distribution date after all other required payments on that
date have been made. Amounts in the reserve account will be available to cover
shortfalls in amounts due to the holders of those classes of securities as
specified in the related prospectus supplement. The related prospectus
supplement will also specify how amounts on deposit in the reserve account in
excess of the Specified Reserve Account Balance, after giving effect to all
other payments required to be made by the applicable trust, will be distributed.
STATEMENTS TO THE INDENTURE TRUSTEE AND THE TRUST
Prior to each distribution date with respect to each series of
securities, the administrator will prepare and provide to the related indenture
trustee and the related eligible lender trustee an information
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statement as of the close of business on the last day of the preceding
Collection Period. The statement will include the following information, and any
other information specified in the related prospectus supplement, for the
related distribution date or the preceding Collection Period, to the extent
applicable:
- the amount of the principal payment on each class of the notes
and the certificates;*
- the amount of the interest payment on each class of the notes
and the certificates, together with the applicable interest
rates;*
- the "Pool Balance", as that term is defined in the prospectus
supplement, as of the close of business on the last day of the
preceding Collection Period;
- the aggregate outstanding principal amount and the note pool
factor of each class of the notes, and the "Certificate
Balance", as that term is defined in the prospectus
supplement, and the certificate pool factor for each class of
the certificates, each after giving effect to principal
payments reported under the first bullet above;
- the amount of the servicing fee paid to the master servicer
and the administration fee paid to the administrator for that
Collection Period;*
- the interest rate for each class of floating rate notes and
the interest return or pass-through rate for each class of
floating rate certificates in effect for the next interest
period;
- the amount of aggregate realized losses, if any, for that
Collection Period;
- the Noteholders' Interest Carryover Shortfall, the
Noteholders' Principal Carryover Shortfall, the
Certificateholders' Return Shortfall and the
Certificateholders' Balance Shortfall, as those
terms are defined in the related prospectus supplement, if
any, in each case as applicable to each class of securities,
and the changes in those amounts from the preceding statement;
- the aggregate Purchase Amounts for any related student loans
that were repurchased in that Collection Period;
- the balance of the reserve account, if any, on that
distribution date, after giving effect to changes on that
date;
- - for each date during the Funding Period, if any, the remaining
Pre-Funding Amount or, for each date during the Revolving Period,
if any, the amount on deposit in the Collateral Reinvestment
Account; and
- - the principal balance and number of student loans conveyed to or
originated by the trust during that Collection Period.
The information for the notes or certificates of any series listed above that
is marked with an asterisk (*) will be expressed as a dollar amount per $1,000
of the initial principal amount of the notes or the initial certificate balance
of the certificates, as applicable.
EVIDENCE AS TO COMPLIANCE
Each master servicing agreement will require that a firm of independent
public accountants, based on their examination of
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certain documents and records and on such accounting and auditing procedures
as they consider appropriate under the circumstances, furnish a statement
annually to the related trust and indenture trustee as to the master
servicer's compliance during the preceding twelve months with all applicable
master servicing standards under the master servicing agreement and as to its
related accounting records and computer files and certain other matters. The
first annual accountants' statement will cover the period beginning on the
applicable closing date. If one or more subservicers are servicing the
student loans on behalf of the master servicer, the accountants' statement
may relate to the subservicer rather than the master servicer.
Each master servicing agreement will also require that a master
servicer certificate be delivered to the related trust and indenture trustee
concurrently with the delivery of each annual accountants' statement of
compliance. The master servicer certificate shall be signed by an officer of
the master servicer in which he will state that, to his knowledge, the master
servicer has fulfilled its obligations under the loan servicing agreement
throughout the preceding twelve months or, if there has been a default in the
fulfillment of any of its obligations, he will describe each default. The
first annual master servicer certificate will cover the period beginning on
the applicable closing date. The amster servicer has agreed to give the
administrator, the related indenture trustee and eligible lender trustee
notice of certain Master Servicer Defaults under each master servicing
agreement.
Copies of the above statements and certificates may be obtained by
securityholders by a request in writing addressed to the applicable trustee.
MATTERS REGARDING THE MASTER SERVICER
Each master servicing agreement will provide that the master
servicer may not resign from its duties as master servicer, except upon
determination that the master servicer is no longer permitted to perform
those duties under applicable law. No resignation of the master servicer will
become effective until the related indenture trustee or a successor servicer
has assumed the master servicer's servicing obligations and duties under the
master servicing agreement.
Each master servicing agreement will further provide that neither
the master servicer nor any of its directors, officers, employees or agents
will be under any liability to the related trust or the related noteholders
or certificateholders for taking any action or for refraining from taking any
action under the master servicing agreement, or for errors in judgment.
Nevertheless, unless otherwise limited in the related prospectus supplement,
neither the master servicer nor any of the foregoing persons will be
protected against any liability that would otherwise be imposed by reason of
willful misfeasance, bad faith or negligence in the performance of the master
servicer's duties or for reckless disregard of its duties. In addition, each
master servicing agreement will provide that the master servicer is under no
obligation to appear in, prosecute or defend any legal action that is not
incidental to its servicing responsibilities under the master servicing
agreement and that, in its opinion, may cause it to incur any expense or
liability. Each master servicing agreement will, however, provide that the
master servicer may undertake any reasonable action that it deems necessary
or desirable in the interests of the securityholders.
Under the circumstances specified in each master servicing
agreement, any entity into which the master servicer may be merged or
consolidated, or any entity resulting from any merger or consolidation to
which the master servicer is a party, or any entity succeeding to the
business of the master servicer will be the successor of the master servicer
under the master servicing agreement so long as that corporation or other
entity assumes the obligations of the master servicer.
MASTER SERVICER DEFAULT
Except as otherwise provided in the related prospectus supplement, a
"Master Servicer Default" will occur under the related master servicing
agreement in the following circumstances:
- if the master servicer fails to deliver to the indenture
trustee for deposit in any of the Issuer Accounts any required
payment, and its failure continues unremedied for three
business days
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after written notice from the indenture trustee or the related
eligible lender trustee is received by the master servicer or
after discovery by the master servicer;
- if the master servicer fails to observe or perform in any
material respect any of its other covenants or agreements
under the master servicing agreement; or
- if an insolvency event with respect to the master servicer
occurs.
An "insolvency event" means, with respect to any person, any of the following:
certain events of insolvency, readjustment of debt, marshaling of assets and
liabilities or similar proceedings with respect to that person and certain
actions by that person indicating its insolvency, reorganization pursuant to
bankruptcy proceedings or inability to pay its obligations.
RIGHTS UPON MASTER SERVICER DEFAULT
Unless otherwise specified in the related prospectus supplement, as
long as a Master Servicer Default under a master servicing agreement remains
unremedied, the related indenture trustee, or holders of notes of the related
series evidencing not less than 75% in principal amount of the then
outstanding notes, may terminate all the rights and obligations of the master
servicer under that master servicing agreement. Thereupon a successor
servicer will be appointed by the related indenture trustee or the indenture
trustee will succeed to all the responsibilities, duties and liabilities of
the master servicer under that agreement, and will be entitled to similar
compensation arrangements. If, however, a bankruptcy trustee or similar
official has been appointed for the master servicer, and no Master Servicer
Default other than the appointment itself has occurred, the bankruptcy
trustee or official may have the power to prevent the indenture trustee or
the noteholders from effecting a transfer. In the event that the indenture
trustee is unwilling or unable to act, it may appoint, or petition a court of
competent jurisdiction to appoint, a successor master servicer whose regular
business includes the servicing of student loans. The indenture trustee may
provide for compensation to be paid but in no event more than the servicing
compensation payable to the master servicer under that master servicing
agreement, unless a greater amount will not result in a downgrading of the
notes and certificates by any applicable rating agency.
In the event a Master Servicer Default occurs and is continuing, the
indenture trustee or the noteholders, as described above, may remove the master
servicer, without the consent of the related eligible lender trustee or any of
the certificateholders of the related series. Moreover, only the indenture
trustee or the noteholders, and not the eligible lender trustee or the
certificateholders, have the ability to remove the master servicer if a Master
Servicer Default occurs and is continuing.
WAIVER OF PAST DEFAULTS
With respect to each trust, unless otherwise specified in the
related prospectus supplement, the holders of notes evidencing at least a
majority in principal amount of the then outstanding notes, or the holders of
certificates evidencing not less than a majority of the outstanding
Certificate Balance in the case of Master Servicer Default which does not
adversely affect the indenture trustee or the noteholders of the related
series, may, on behalf of all the noteholders and certificateholders, waive
any default by the master servicer in the performance of its obligations
under the related master servicing agreement and the consequences of that
default, except a default in making any required deposits to, or payments
from, any of the Issuer Accounts in accordance with the master servicing
agreement. In this way, the noteholders have the ability, except as noted
above, to waive defaults by the master servicer which could materially
adversely affect the related certificateholders. However, no waiver will
impair the noteholders' or the certificateholders' rights with respect to
subsequent defaults.
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AMENDMENT
Unless otherwise provided in the related prospectus supplement, each of
the Transfer and Servicing Agreements may be amended by the parties, without the
consent of the related noteholders or certificateholders, for the purpose of
adding, changing or eliminating any provisions of the Transfer and Servicing
Agreements or modifying any rights of noteholders or certificateholders so long
as that action will not, in the opinion of counsel satisfactory to the indenture
trustee and eligible lender trustee, materially and adversely affect the
interest of any noteholder or certificateholder. Unless otherwise provided in
the related prospectus supplement, each of the Transfer and Servicing Agreements
also may be amended by the seller, the administrator, the master servicer, the
related eligible lender trustee and the related indenture trustee, as
applicable, with the consent of the holders of notes of the related series that
represent at least a majority in principal amount of the then outstanding notes
and the holders of certificates of the related series evidencing at least a
majority of the Certificate Balance for the purpose of adding, changing or
eliminating any provisions of the Transfer and Servicing Agreements or modifying
any rights of the noteholders or certificateholders. Nevertheless, no amendment,
without the consent of the holders of all the outstanding notes and
certificates, may:
- increase or reduce in any manner the amount of, or accelerate
or delay the timing of, collections of payments (including any
guarantee payments) on the student loans or required payments
to the noteholders or certificateholders; or
- reduce the percentage of the notes or certificates which are
required to consent to any amendment.
Each trust agreement will prohibit the related eligible lender trustee
from commencing a voluntary proceeding in bankruptcy relating to that trust
without the unanimous prior approval of all certificateholders of the related
series, including NMF, and the delivery to the eligible lender trustee by each
certificateholder, including NMF, of a certificate certifying that the
certificateholder reasonably believes that the trust is insolvent.
PAYMENT OF NOTES
Upon the payment in full of all the outstanding notes of a given
series and the satisfaction and discharge of the related indenture, the
eligible lender trustee will succeed to all the rights of the indenture
trustee, and the certificateholders of that series will succeed to all the
rights of the noteholders of that series, under the related master servicing
agreement, except as otherwise provided in the applicable prospectus
supplement.
TERMINATION
With respect to each trust, the obligations of the seller, the master
servicer, the administrator, the related eligible lender trustee and the
indenture trustee under the related Transfer and Servicing Agreements will
terminate upon:
- the maturity or other liquidation of the last student loan in
that trust and the disposition of any amount received upon
liquidation of any remaining student loans; and
- the payment to the noteholders and the certificateholders of
the related series of all amounts required to be paid to them
under the Transfer and Servicing Agreements.
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OPTIONAL REDEMPTION
If so specified in the prospectus supplement for a given trust, the
seller or another party will have the option to avoid excessive administrative
expenses by purchasing from the related eligible lender trustee all the
remaining student loans in that trust. The option can only be exercised when, as
of the end of any Collection Period immediately before a distribution date, the
then outstanding pool balance has declined to the level specified in the
prospectus supplement. If the option is exercised, the remaining student loans
will be purchased at a price equal to the aggregate Purchase Amounts of those
loans as of the end of that Collection Period. The funds will be used to retire
the related notes and certificates concurrently with receipt of the funds. Upon
termination of a trust, as more fully described in the related prospectus
supplement, all right, title and interest in the student loans and other funds
of that trust, after giving effect to any final distributions to noteholders and
certificateholders of the related series, will be conveyed and transferred to
the seller or the other party named in the prospectus supplement.
AUCTION OF STUDENT LOANS
If so provided in the related prospectus supplement, all remaining
student loans held by a trust will be offered for sale by the indenture trustee
on any distribution date occurring on or after a date specified in such
prospectus supplement. The seller and unrelated third parties may offer bids for
the student loans. The indenture trustee will accept the highest bid equal to or
greater than the aggregate Purchase Amounts of the student loans as of the end
of the Collection Period immediately preceding the related distribution date.
The proceeds of such sale will be used to redeem all the related notes and to
retire all the related certificates.
ADMINISTRATION AGREEMENT
The administrator will enter into an administration agreement with
each trust and the related indenture trustee under which the administrator
will provide the notices and perform other administrative obligations
required by the related indenture, trust agreement, loan sale agreement and
master servicing agreement. Unless otherwise specified in the related
prospectus supplement with respect to any trust, the administrator will be
entitled to an administration fee as specified in the related prospectus
supplement as compensation for the performance of its obligations under the
administration agreement and as reimbursement for its expenses. Unless
otherwise specified by the related prospectus supplement, the administrator
under each administration agreement will be NMELC.
Except as otherwise provided in the related prospectus supplement, an
"Administrator Default" will occur under an administration agreement in the
following circumstances:
- if the administrator fails to direct the indenture trustee to
make any required distributions from any of the Issuer
Accounts, and the failure continues unremedied for three
business days after the indenture trustee or the eligible
lender trustee has given written notice;
- if the administrator fails to observe or perform in any
material respect any of its other covenants or agreements in
the administration agreement; or
- if an insolvency event occurs with respect to the
administrator.
Unless otherwise specified in the related prospectus supplement, the
procedures for terminating the rights and obligations of the administrator
and appointing a successor administrator following the occurrence of an
Administrator Default under the administration agreement and for waiving
defaults by the administrator under the administration agreement will be
identical to those for replacing the master servicer and appointing a
successor master servicer following the occurrence of a Master Servicer
Default under the master servicing agreement and for waiving defaults by the
master servicer under the master
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servicing agreement, except that those procedures will apply to the
administrator and the administration agreement rather than the master servicer
and the master servicing agreement.
LEGAL ASPECTS OF THE STUDENT LOANS
TRANSFER OF THE STUDENT LOANS
The seller intends that its transfer of the student loans to the
related eligible lender trustee on behalf of the related trust will constitute a
valid sale and assignment of those student loans. Nevertheless, if the transfer
of the student loans is deemed to be an assignment of collateral as security for
the benefit of a trust, a security interest in the student loans may be
perfected under the provisions of 20 U.S.C. Section 1087-2(d)(3), either through
the taking of possession of the student loans or by the filing of notice of the
security interest in the manner provided by the applicable UCC for perfection of
security interests in accounts. One or more financing statements covering the
student loans will be filed under the UCC to protect the interest of the
eligible lender trustee in the event the transfer by the seller is deemed to be
an assignment of collateral as security for the benefit of the trust.
If the transfer of the student loans is deemed to be an assignment as
security for the benefit of a trust, there are certain limited circumstances
under the UCC in which prior or subsequent transferees of student loans coming
into existence after the related closing date could have an interest in the
loans with priority over the interest of the eligible lender trustee. A tax or
other government lien on property of the seller that arises before a student
loan comes into existence may also have priority over the interest of the
related eligible lender trustee in that loan. Under the loan sale agreement,
however, the seller will warrant that it has caused the student loans to be
transferred to the related eligible lender trustee on behalf of the trust free
and clear of the lien of any third party. In addition, the seller will covenant
that it will not sell, pledge, assign, transfer or grant any lien on any student
loan held by a trust, or any interest in a loan held by a trust, other than to
the eligible lender trustee on behalf of that trust, except as provided below.
Under each master servicing agreement, the master servicer, or its
designee, as custodian for the related trust, will have custody of the
promissory notes evidencing the student loans following their sale to the
related eligible lender trustee. Although the accounts and computer records
of the seller and master servicer (and any subservicers) will be marked to
indicate the sale and although the seller will cause UCC financing statements
to be filed with the appropriate authorities, the student loans will not be
physically segregated, stamped or otherwise marked to indicate that they have
been sold to the eligible lender trustee. If, through inadvertence or
otherwise, any of the student loans were to be sold to another party, or a
security interest in them were to be granted to another party, and that party
purchased or took a security interest in the loans in the ordinary course of
its business and took possession of the loans, then the purchaser or secured
party might acquire an interest in those student loans that would be superior
to the interest of the eligible lender trustee, provided that the purchaser
or secured party acquired or took a security interest in the student loans
for new value and without actual knowledge of the interest of the eligible
lender trustee in them. SEE "Description of the Transfer and Servicing
Agreements--Sale of Student Loans; Representations and Warranties" in this
prospectus.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related
regulations impose substantial requirements upon lenders and servicers involved
in consumer finance. Also, some state laws impose finance charge ceilings and
other restrictions on certain consumer transactions and require contract
disclosures in addition to those required under federal law. Those requirements
impose specific statutory liabilities upon lenders who fail to comply with their
provisions. Although those requirements generally do not apply to student
loans, in certain circumstances a trust may be liable for certain violations of
consumer protection laws that may apply to the student loans, either as assignee
or as the party directly responsible for obligations arising after the transfer.
For a discussion of a trust's rights in the event that the student loans were
not originated or serviced in all material respects in compliance with
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applicable laws, SEE "Description of the Transfer and Servicing Agreements--Sale
of Student Loans; Representations and Warranties" and "--Master Servicer
Covenants" in this prospectus.
LOAN ORIGINATION AND SERVICING PROCEDURES APPLICABLE TO STUDENT LOANS
The Higher Education Act, including its implementing regulations,
imposes specific requirements, guidelines and procedures for originating and
servicing student loans. Generally, those procedures require, among other
things, processing of completed loans applications, determining whether an
applicant is an eligible borrower under applicable standards including a
review of a financial need analysis, explaining to the borrower his
responsibilities under the loan, confirming that the related promissory note
is executed by the borrower, and disbursing the loan proceeds. After the loan
is made, the lender must establish repayment terms with the borrower,
properly administer deferrals and forbearances, and credit the borrower for
payments made. If a borrower becomes delinquent, a lender or servicing agent
must perform certain collection procedures primarily by telephone calls and
demand letters, which vary depending upon the length of time the loan is
delinquent. The master servicer has agreed under the master servicing
agreement to perform collection and servicing procedures for the related
trust. However, failure to follow these procedures or failure of the
originator of the loan to follow loan origination procedures could result in
adverse consequences, including the Department of Education's refusal to make
reinsurance payments to the related guarantors or to make interest subsidy
payments and special allowance payments to the eligible lender trustee for
those loans or the guarantors' refusal to honor their guarantee agreements
with the eligible lender trustee for those loans. Failure of the guarantors
to receive reinsurance payments from the Department could adversely affect
their ability or legal obligation to make guarantee payments to the related
eligible lender trustee for those loans.
Loss of any guarantee payments, interest subsidy payments or special
allowance payments could adversely affect the amount of "Available Funds", as
defined in the prospectus supplement, on any distribution date and the
related trust's ability to pay principal and interest on the notes and
certificates of that series. Under certain circumstances, unless otherwise
specified in the related prospectus supplement, the loan sale agreement and
the master servicing agreement grant the related trust the right to cause the
seller to repurchase any student loan, or to cause the master servicer to
arrange for the purchase of any student loan, if a breach of the
representations, warranties or covenants of the seller or the master
servicer, as the case may be, with respect to that loan has a material
adverse effect on the interest of the trust and the breach is not cured
within any applicable cure period. SEE "Description of the Transfer and
Servicing Agreements--Sale of Student Loans; Representations and Warranties"
and "--Master Servicer Covenants" in this prospectus. The failure of the
seller to make a required repurchase, or the failure of the master servicer
to make a required purchase arrangement, would constitute a breach of the
related loan sale agreement or master servicing agreement, as the case may
be, enforceable by the related eligible lender trustee on behalf of the
related trust or by the related indenture trustee on behalf of the
noteholders of that series. However, such a failure would not constitute an
Event of Default under the indenture.
STUDENT LOANS GENERALLY NOT SUBJECT TO DISCHARGE IN BANKRUPTCY
Student loans are generally not dischargeable by a borrower in
bankruptcy pursuant to the U.S. Bankruptcy Code, unless EITHER:
- the loan first became due more than seven years before the
date of the bankruptcy (exclusive of any applicable suspension
of the repayment period),
OR
- excepting the debt from discharge will impose an undue
hardship on the debtor and the debtor's dependents.
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U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is, in the opinion of Brown & Wood LLP ("Federal Tax
Counsel"), special tax counsel to each trust and counsel to the underwriters,
a summary of material U.S. federal income tax consequences of the purchase,
ownership and disposition of the securities. The summary does not purport to
deal with U.S. federal income tax consequences applicable to all categories
of securityholders, some of which may be subject to special rules. For
example, it does not discuss the tax treatment of securityholders that are
insurance companies, regulated investment companies or dealers in securities.
Moreover, there are no cases or Internal Revenue Service rulings on similar
transactions involving debt and/or equity interests issued by a trust with
terms similar to those of the securities. As a result, the IRS may disagree
with all or a part of the discussion below. Each prospective investor should
consult with its tax advisor as to the federal, state, local, foreign and any
other tax consequences of the purchase, ownership and disposition of the
offered securities specific to that prospective investor.
The following summary is based upon current provisions of the
Internal Revenue Code, the Treasury regulations promulgated thereunder and
judicial or ruling authority, all of which are subject to change, which
change may be retroactive. Each trust will be provided with an opinion of
Federal Tax Counsel regarding the U.S. federal income tax matters discussed
below. An opinion of Federal Tax Counsel, however, is not binding on the IRS
or the courts. No ruling on any of the issues discussed below will be sought
from the IRS. For purposes of the following summary, references to the trust,
the securities and related terms, parties and documents shall be deemed to
refer, unless otherwise specified, to each trust and the securities and
related terms, parties and documents applicable to that trust. Taxpayers and
preparers of tax returns (including those filed by any partnership or other
issuer) should be aware that under applicable Treasury regulations a provider
of advice on specific issues of law is not considered an income tax return
preparer unless the advice:
- is given with respect to events that have occurred at the time
the advice is rendered and is not given with respect to the
consequences of contemplated actions, and
- is directly relevant to the determination of an entry on a tax
return.
Accordingly, taxpayers should consult their respective tax advisors and tax
return preparers regarding the preparation of any item on a tax return, even
where the anticipated tax treatment has been discussed herein.
TRUSTS FOR WHICH A PARTNERSHIP ELECTION IS MADE
TAX CHARACTERIZATION OF THE TRUST
Federal Tax Counsel will deliver its opinion to the trust that the
trust will not be an association (or publicly traded partnership) taxable as a
corporation for U.S. federal income tax purposes. This opinion will be based on
the assumption that the terms of the trust agreement and related documents will
be complied with, and on counsel's conclusions that the nature of the income of
the trust will exempt it from the rule that certain publicly traded partnerships
are taxable as corporations.
TAX CONSEQUENCES TO HOLDERS OF DEBT SECURITIES
TREATMENT OF THE SECURITIES AS INDEBTEDNESS. Federal Tax Counsel will
deliver its opinion to the trust that certain classes of securities will qualify
as debt for U.S. federal income tax purposes ("Debt Securities"). The seller
will agree, and the Debt Security holders will agree by their purchase of the
Debt
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Securities, to treat the Debt Securities as debt for U.S. federal income tax
purposes. The discussion below assumes this characterization of the Debt
Securities is correct. If, contrary to the opinion of counsel, the IRS
successfully asserted that any class of Debt Securities is not debt for U.S.
federal income tax purposes, those securities would be equity interests in the
trust ("Equity Securities") and would be treated in the manner described
under "--Tax Consequences to Holders of Equity Securities" below.
ORIGINAL ISSUE DISCOUNT. The following discussion assumes that all
payments on the Debt Securities are denominated in U.S. dollars, that the
interest rate formula for the Debt Securities meets the requirements for
"qualified stated interest" under Treasury regulations (the "OID
regulations") relating to original issue discount ("OID"), and that any OID
on the Debt Securities (I.E., any excess of the stated redemption price at
maturity of the Debt Securities, generally the principal amount of the Debt
Securities, over their issue price) does not exceed a DE MINIMIS amount
(I.E., 1/4% of their principal amount multiplied by the number of full years
included in their term), all within the meaning of the OID regulations. If
these conditions are not satisfied with respect to any given series of Debt
Securities, additional tax considerations with respect to those Debt
Securities will be disclosed in the related prospectus supplement. The Code
requires that a prepayment assumption be used in computing the accrual of
OID. The prepayment assumption is to be determined under Treasury regulations
that have yet to be issued. The legislative history of the OID provisions of
the Code provides, however, that the calculation and accrual of OID should be
based on the prepayment assumption used by the parties in pricing the
transaction. In the event that any of the Debt Securities are issued with
OID, the prepayment assumption will be set forth in the related prospectus
supplement. Furthermore, although premium amortization and accrued market
discount on debt instruments such as the Debt Securities, which are subject
to prepayment based on the payments on other debt instruments, is to be
determined under regulations yet to be issued, the legislative history of
these Code provisions provides that the same prepayment assumption used to
calculate OID, whether or not the debt instrument is issued with OID, should
be used.
INTEREST INCOME ON THE DEBT SECURITIES. Based on the above
assumptions, except as discussed in the following paragraph, the Debt
Securities will not be considered to be issued with OID. While the tax
treatment of interest on the Debt Securities, including, in particular,
interest equal to the interest basis carryover amounts, is not entirely clear
under the regulations, the seller intends to treat stated interest as a
"qualified floating rule" for OID purposes of any interest basis carryover
amounts should not be taxable to holders of Debt Securities as OID or as
contingent interest. The stated interest on a Debt Security will be taxable
to the related Debt Security holder as ordinary interest income when received
or accrued in accordance with the holder's method of tax accounting. Under
the OID regulations, a holder of a Debt Security that was issued with a DE
MINIMIS amount of OID must include such OID in income, on a pro rata basis,
as principal payments are made on the Debt Security. Alternatively, a Debt
Security holder may elect to accrue all interest, discount, including DE
MINIMIS market discount or OID, and premium in income as interest, based on a
constant yield method. If such an election is made with respect to a Debt
Security with market discount, the holder will be deemed to have made an
election to include in income currently market discount with respect to all
debt instruments having market discount that the holder acquires during the
year of the election and thereafter. Similarly, a Debt Security holder that
makes this election for a Debt Security that is acquired at a premium will be
deemed to have made an election to amortize bond premium with respect to all
debt instruments having amortizable bond premium that the holder owns or
acquires. The election to accrue interest, discount and premium under a
constant yield method with respect to a Debt Security is irrevocable. A
purchaser who buys a Debt Security for more or less than its principal amount
will generally be subject, respectively, to the premium amortization or
market discount rules of the Code.
"Qualified Stated Interest", which is taxable in accordance with the
holder's method of accounting, is interest that is unconditionally payable
(I.E., late payments are penalized) at least annually at a single fixed rate.
The trust intends to treat the interest paid on the Debt Securities as Qualified
Stated Interest.
A holder of a Debt Security that has a fixed maturity date of not more
than one year from the issue date of that Debt Security (a "Short-Term
Security") may be subject to special rules. An accrual basis holder of a
Short-Term Security (and certain cash method holders, including regulated
investment companies, banks and securities dealers, as set forth in Section 1281
of the Code) generally will be required to report interest income as interest
accrues on a ratable basis over the term of each interest period or, at the
election of the holder, on a constant yield basis (I.E., treating the instrument
as accruing
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interest at a single rate). In general, cash basis holders of a Short-Term
Security will be required to report interest income as interest is paid or,
if earlier, upon the taxable disposition of the Short-Term Security. However,
a cash basis holder of a Short-Term Security reporting interest income as it
is paid may be required to defer a portion of any interest expense otherwise
deductible on indebtedness incurred to purchase or carry the Short-Term
Security until the taxable disposition of the Short-Term Security. Under
Section 1282 of the Code, a cash basis taxpayer may elect under Section 1282
of the Code to accrue interest income on all nongovernment debt obligations
with a term of one year or less, in which case the taxpayer would include
interest on the Short-Term Security in income as it accrues, but would not be
subject to the interest expense deferral rule referred to in the preceding
sentence. Certain special rules apply if a Short-Term Security is purchased
for more or less than its principal amount.
OPTIONAL ELECTION. As an alternative to the above treatments, accrual
method holders may elect to include in gross income all interest with respect to
a Debt Security, including stated interest, acquisition discount, OID, DE
MINIMIS OID, market discount, DE MINIMIS market discount, and unstated interest,
as adjusted by any amortizable bond premium or acquisition premium, using the
constant yield method described above.
SALE OR OTHER DISPOSITION. If a Debt Security holder sells a Debt
Security, the holder will recognize gain or loss in an amount equal to the
difference between the amount realized on the sale and the holder's adjusted tax
basis in the Debt Security. The adjusted tax basis of a Debt Security to a
particular Debt Security holder will equal the holder's cost for the Debt
Security, increased by any market discount, acquisition discount, OID and gain
previously included by the Debt Security holder in income with respect to the
Debt Security and decreased by the amount of bond premium (if any) previously
amortized and by the amount of principal payments previously received by the
Debt Security holder with respect to the Debt Security. Any such gain or loss
will be capital gain or loss if the Debt Security was held as a capital asset,
except for gain representing accrued interest and accrued market discount not
previously included in income. Capital losses generally may be used only to
offset capital gains.
FOREIGN DEBT SECURITY HOLDERS. Interest paid (or accrued) to a Debt
Security holder who is a nonresident alien, foreign corporation or other
non-U.S. person (a "foreign person") generally will be considered "portfolio
interest", and generally will not be subject to U.S. federal income tax and
withholding tax, PROVIDED that:
- the interest is not effectively connected with the conduct of
a trade or business within the U.S. by the foreign person,
- the foreign person is not actually or constructively a "10
percent shareholder" of the trust, the seller or NMF,
including a holder of 10% of the outstanding Equity Securities
or a "controlled foreign corporation" with respect to which
the trust, the seller or NMF is a "related person" within the
meaning of the Code, and
- the foreign person provides the person who is required to
withhold U.S. tax with respect to the Debt Securities with an
appropriate statement (on Form W-8 or a similar form), signed
under penalties of perjury, certifying that the beneficial
owner of the Debt Security is a foreign person and providing
the foreign person's name and address.
If a Debt Security is held through a securities clearing organization or certain
other financial institutions, the organization or institution may provide the
relevant signed statement to the withholding agent; in that case, however, the
signed statement must be accompanied by a Form W-8 or substitute form provided
by the foreign person that owns the Debt Security . If such interest is not
portfolio interest, then it will be subject to U.S. federal income and
withholding tax at a rate of 30%, unless reduced or eliminated pursuant to an
applicable tax treaty.
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Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Debt Security by a foreign person generally will be
exempt from U.S. federal income and withholding tax, PROVIDED that:
- the gain is not effectively connected with the conduct of a
trade or business in the U.S. by the foreign person, and
- in the case of an individual foreign person, the foreign
person is not present in the U.S. for 183 days or more in the
taxable year.
If the interest, gain or income on a Debt Security held by a foreign
person is effectively connected with the conduct of a trade or business in the
U.S. by the foreign person (although exempt from the withholding tax previously
discussed if the holder provides an appropriate statement), the holder generally
will be subject to U.S. federal income tax on the interest, gain or income at
regular U.S. federal income tax rates. In addition, if the foreign person is a
foreign corporation, it may be subject to a branch profits tax equal to 30% of
its "effectively connected earnings and profits" within the meaning of the Code
for the taxable year, as adjusted for certain items, unless it qualifies for a
lower rate under an applicable tax treaty as modified by the branch profits tax
rules.
Final regulations dealing with backup withholding and information
reporting on income paid to a non-U.S. holder and related matters (the "New
Withholding Regulations") were published in the Federal Register on October 14,
1997. In general, the New Withholding Regulations do not significantly alter the
substantive withholding and information reporting requirements, but do unify
current certification procedures and forms and clarify reliance standards. The
New Withholding Regulations generally will be effective for payments made after
December 31, 2000, subject to certain transaction rules. THE DISCUSSION SET
FORTH ABOVE DOES NOT TAKE THE NEW WITHHOLDING REGULATIONS INTO ACCOUNT.
PROSPECTIVE INVESTORS IN THE DEBT SECURITIES WHO ARE NON-U.S. HOLDERS ARE
STRONGLY URGED TO CONSULT THEIR OWN TAX ADVISOR WITH RESPECT TO THE NEW
WITHHOLDING REGULATIONS.
BACKUP WITHHOLDING. Each holder of a Debt Security, other than an
exempt holder such as a corporation, tax-exempt organization, qualified pension
and profit-sharing trust, individual retirement account or nonresident alien who
provides certification as to status as a nonresident, will be required to
provide, under penalties of perjury, a certificate setting forth the holder's
name, address, correct federal taxpayer identification number and a statement
that the holder is not subject to backup withholding. Should a nonexempt Debt
Security holder fail to provide the required certification, the trust will be
required to withhold 31% of the amount otherwise payable to the holder, and
remit the withheld amount to the IRS as a credit against the holder's U.S.
federal income tax liability.
TAX CONSEQUENCES TO HOLDERS OF EQUITY SECURITIES
The following discussion only applies to securities treated as equity
for U.S. federal income tax purposes and assumes that all payments on the Equity
Securities are denominated in U.S. dollars, that a series of securities includes
a single class of Equity Securities and that any such Equity Securities are sold
to persons other than NMF. If these conditions are not satisfied with respect to
any given series of securities, any additional tax considerations with respect
to such Equity Securities will be disclosed in the applicable prospectus
supplement.
CLASSIFICATION AS A PARTNERSHIP
TREATMENT OF THE TRUST AS A PARTNERSHIP. The seller and the master
servicer will agree, and the Equity Security holders will agree by their
purchase of Equity Securities, to treat the trust as a partnership for purposes
of federal and state income tax, franchise tax and any other tax measured in
whole or in part by income, with the assets of the partnership being the assets
held by the trust, the partners of the partnership being the Equity Security
holders, including NMF in
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its capacity as recipient of distributions from the reserve account, if any, and
certain other securities being treated as debt of the partnership. However, the
proper characterization of the arrangement involving the trust, the Equity
Security holders, the seller and the master servicer is not clear because there
is no authority on transactions comparable to those contemplated in this
prospectus.
Under the provisions of Subchapter K, a partnership is not considered a
separate taxable entity. Instead, partnership income is taxed directly to the
partners and each partner generally is viewed as owning a direct undivided
interest in each partnership asset. The partnership is generally treated as an
entity, however, for computing partnership income, determining the tax
consequences of transactions between a partner and the partnership, and
characterizing the gain on the sale or exchange of a partnership interest. The
following discussion is a summary of some of the material U.S. federal income
tax consequences of classifying the trust as a partnership. Prospective owners
of Equity Securities should consult their own tax advisors regarding the U.S.
federal income tax consequences discussed below, as well as any other material
U.S. federal income tax consequences that may result from applying the
provisions of Subchapter K to the ownership and transfer of a Equity Security.
PARTNERSHIP TAXATION. As a partnership, the trust will not be subject
to U.S. federal income tax. Rather, each Equity Security holder will be required
to take into account separately its allocated share of income, gains, losses,
deductions and credits of the trust. The trust's income will consist primarily
of interest and finance charges earned on the student loans including
appropriate adjustments for market discount, OID and bond premium, investment
income from investments of amounts on deposit in any related trust accounts and
any gain upon collection or disposition of student loans. The trust's deductions
will consist primarily of interest accruing with respect to the Equity
Securities, servicing and other fees, and losses or deductions upon collection
or disposition of student loans.
The tax items of a partnership are allocable to the partners in
accordance with the Code, Treasury regulations and the partnership agreement
(here, the trust agreement and related documents). The trust agreement will
provide, in general, that the Equity Security holders will be allocated taxable
income of the trust for each interest period (as described in the applicable
prospectus supplement) equal to the sum of:
- the interest that accrues on the Equity Securities in
accordance with their terms for that interest period,
including interest accruing at the pass-through rate for that
interest period and interest on amounts previously due on the
Equity Securities but not yet distributed;
- any trust income attributable to discount on the student loans
that corresponds to any excess of the principal amount of the
Equity Securities over their initial issue price; and
- all other amounts of income payable to the Equity Security
holders for that interest period.
All remaining taxable income of the trust will be allocated to NMF.
Based on the economic arrangement of the parties, this approach for
allocating trust income should be permissible under applicable Treasury
regulations, although no assurance can be given that the IRS would not require a
greater amount of income to be allocated to Equity Security holders. Moreover,
even under the foregoing method of allocation, Equity Security holders may be
allocated income equal to the entire amount of interest accruing on the Equity
Securities for an interest period, based on the pass-through rate plus the other
items described above, even though the trust might not have sufficient cash to
make current cash distributions of that amount. Thus, cash basis holders will in
effect be required to report income from the Equity Securities on the accrual
basis and Equity Security holders may become liable for taxes on trust income
even if they have not received cash from the trust to pay such taxes. In
addition, because tax allocations and tax reporting will be done on a uniform
basis for all Equity Security
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holders but Equity Security holders may be purchasing Equity Securities at
different times and at different prices, Equity Security holders may be required
to report on their tax returns taxable income that is greater or less than the
amount reported to them by the applicable trust.
An individual taxpayer's share of expenses of the trust including fees
to the master servicer but not interest expenses are miscellaneous itemized
deductions which are deductible to the extent they exceed two percent of the
individual's adjusted gross income. Accordingly, such deductions might be
disallowed to the individual in whole or in part and might result in the holder
being taxed on an amount of income that exceeds the amount of cash actually
distributed to the holder over the life of the trust.
The trust intends to make all tax calculations relating to income and
allocations to Equity Security holders on an aggregate basis. If the IRS were to
require that such calculations be made separately for each of the student loans,
the trust might be required to incur additional expense, but it is believed that
there would not be a material adverse effect on Equity Security holders.
COMPUTATION OF INCOME. Taxable income of the trust will be computed at
the trust level and then allocated pro rata to the Equity Security holders.
Consequently, the method of accounting for taxable income will be chosen by, and
any elections (such as those described above with respect to the market discount
rules) will be made by, the trust rather than the Equity Security holders. The
trust intends, to the extent possible, to
- have its taxable income computed under the accrual method of
accounting, and
- adopt a calendar-year taxable year for computing its taxable
income.
The tax year of the trust, however, is generally determined by reference to the
tax years of the Equity Security holders. As a result, an owner of an Equity
Security would be required to include its pro rata share of trust income for a
taxable year as determined by the trust in that holder's gross
income for its taxable year in which the trust's taxable year ends.
DETERMINING THE BASES OF TRUST ASSETS. The trust will become a
partnership on the first date when Equity Securities are held by more than
one person. On that date, each of the Equity Security holders should be
treated as having purchased a pro rata share of the assets of the trust,
subject to the liability for the Equity Securities, followed immediately by a
deemed contribution of those assets to the newly formed partnership. The
partnership's basis in the trust's assets would therefore equal the sum of
the Equity Security holders' bases in their respective interests in the
trust's assets immediately prior to the deemed contribution to the
partnership. To the extent that the fair market value of the assets deemed
contributed to the partnership varied from the bases of those assets to the
partnership, the allocation of taxable income to the Equity Security holders
would be adjusted in accordance with Section 704(c) of the Code to account
for the variation.
Under Section 708 of the Code, the trust will be deemed to terminate
for federal income tax purposes if 50% or more of the capital and profits
interests in the trust are sold or exchanged within a 12-month period.
Pursuant to final Treasury regulations issued on May 9, 1997, if such a
termination occurs, the trust will be considered to have contributed the
assets of the trust (the "old partnership") to a new partnership (the "new
partnership") in exchange for interests in that partnership. Those exchanged
interests would be deemed distributed to the partners of the old partnership
as a result of the liquidation of the old partnership, but would not
constitute a sale or exchange.
DISCOUNT AND PREMIUM. To the extent that OID, if any, on the student
loans exceeds a DE MINIMIS amount, the trust will have OID income. As indicated
above, a portion of such OID income may be allocated to the Equity Security
holders.
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Moreover, the purchase price paid by the trust for the student loans
may be greater or less than the remaining principal balance of the student loans
at the time of purchase. If so, the student loans will have been acquired at a
premium or discount, as the case may be. As indicated above, the trust will make
this calculation on an aggregate basis, but may be required to recompute it on
a loan by loan basis.
If the trust acquires the student loans at a market discount or
premium, it will elect to include any such discount in income currently as it
accrues over the life of the student loans or to offset any such premium against
interest income on the student loans. As indicated above, a portion of the
market discount income or premium deduction may be allocated to Equity Security
holders.
DISPOSITION OF EQUITY SECURITIES. Generally, capital gain or loss
will be recognized on a sale of Equity Securities in an amount equal to the
difference between the amount realized and the seller's tax basis in the
Equity Securities sold. To the extent the trust is characterized as a
partnership, an Equity Security holder's tax basis in an Equity Security
generally will equal the holder's cost increased by the holder's share of
trust income includible in gross income and decreased by any distributions
received with respect to the Equity Security. In addition, both the tax basis
in the Equity Security and the amount realized on a sale of the Equity
Security will include the holder's share of the Equity Securities and other
liabilities of the trust. A securityholder acquiring Equity Securities at
different prices may be required to maintain a single aggregate adjusted tax
basis in the Equity Securities and, upon sale or other disposition of some of
the Equity Securities, to allocate a pro rata portion of the aggregate tax
basis to the Equity Securities sold, rather than maintaining a separate tax
basis in each Equity Security for purposes of computing gain or loss on a
sale of that Equity Security.
Any gain on the sale of an Equity Security attributable to the
holder's share of unrecognized accrued market discount on the student loans
generally will be treated as ordinary income to the holder and could give
rise to special tax reporting requirements. The trust does not expect to have
any other assets that will give rise to such special reporting requirements.
If an Equity Security holder is required over the life of the Equity
Securities to recognize an aggregate amount of income and that aggregate
amount, not including income attributable to disallowed itemized deductions
described above, exceeds the aggregate cash distributions on the Equity
Security, the excess generally will give rise to a capital loss upon the
retirement of the Equity Securities.
ALLOCATIONS BETWEEN TRANSFERORS AND TRANSFEREES. In general, the
trust's taxable income and losses will be determined monthly and the tax items
for a particular calendar month will be apportioned among the Equity Security
holders in proportion to the principal amount of Equity Securities owned by
each of them as of the close of the last day of such month. As a result, a
holder purchasing Equity Securities may be allocated tax items attributable
to periods before the related date of purchase.
The use of such a monthly convention may not be permitted by existing
laws and regulations. If a monthly convention is not allowed, which will affect
the tax liability and tax basis of the holder or only applies to transfers of
less than all of the partner's interest, taxable income or losses of the trust
might be reallocated among the Equity Security holders. NMF is authorized to
revise the trust's method of allocation between transferors and transferees to
conform to a method permitted by future laws, regulations or other IRS guidance.
SECTION 754 ELECTION. In the event that an Equity Security holder sells
an Equity Security at a profit or loss, the purchasing Equity Security holder
will have a higher or lower basis in the Equity Security than the selling Equity
Security holder had. The tax basis of the trust's assets will not be adjusted to
reflect that higher or lower basis unless the trust were to file an election
under Section 754 of the Code. In order to avoid the administrative complexities
that would be involved in keeping accurate accounting records, as well as
potentially onerous information reporting requirements, the trust will not make
that election. As a result, Equity Security holders might be allocated a
greater
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or lesser amount of trust income than would be appropriate based on its own
purchase price for Equity Securities.
ADMINISTRATIVE MATTERS. The eligible lender trustee is required to keep
or cause to be kept complete and accurate books of the trust. The trust's
books will be maintained for financial reporting and tax purposes on an
accrual basis and the taxable year of the trust will be the calendar year.
The eligible lender trustee will file a partnership information return (IRS
Form 1065) with the IRS for each taxable year of the trust and will report
each Equity Security holder's allocable share of items of trust income and
expense to holders and the IRS on Schedule K-1. The trust will provide the
Schedule K-1 information to nominees that fail to provide it with the
information statement described below and those nominees will be required to
forward the information to the beneficial owners of the Equity Securities.
Generally, securityholders must file tax returns that are consistent with the
information returns filed by the trust or be subject to penalties unless the
securityholder notifies the IRS of all such inconsistencies.
Under Section 6031 of the Code, any person that holds Equity Securities
as a nominee at any time during a calendar year is required to furnish the trust
with a statement containing information on the nominee, the beneficial owners
and the Equity Securities so held, including:
- the name, address and taxpayer identification number of the
nominee, and
- as to each beneficial owner
- the name, address and identification number of the
beneficial owner,
- whether the beneficial owner is a U.S. person, a
tax-exempt entity or a foreign government, an
international organization, or any wholly owned
agency or instrumentality of either of the foregoing,
and
- certain information with respect to Equity Securities
that were held, bought or sold on behalf of the
beneficial owner throughout the year.
In addition, brokers and financial institutions that hold Equity Securities
through a nominee are required to furnish directly to the trust information as
to themselves and their ownership of Equity Securities. A clearing agency
registered under Section 17A of the Exchange Act that holds Equity Securities as
a nominee is not required to furnish any information statement to the trust.
The information referred to above for any calendar year must be furnished to
the trust on or before the following January 31. Nominees, brokers and
financial institutions that fail to provide the trust with the information
described above may be subject to penalties.
Unless otherwise provided by the Code, applicable Treasury regulations
or other pronouncements, NMF will be designated as the "tax matters partner" in
the related trust agreement and, as such, will be responsible for representing
the Equity Security holders in any dispute with the IRS. The Code provides for
administrative examination of a partnership as if the partnership were a
separate and distinct taxpayer. Generally, the statute of limitations for
partnership items does not expire before three years after the date on which the
partnership information return is filed. Any adverse determination following an
audit of the return of the trust by the appropriate taxing authorities could
result in an adjustment of the returns of the Equity Security holders, and,
under certain circumstances, an Equity Security holder may be precluded from
separately litigating a proposed adjustment to the items of the trust. An
adjustment could also result in an audit of an Equity Security holder's returns
and adjustments of items not related to the income and losses of the trust.
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FOREIGN EQUITY SECURITY HOLDERS. It is not clear whether a trust would
be considered to be engaged in a trade or business in the U.S. for purposes of
U.S. federal withholding taxes with respect to non-U.S. persons because there is
no clear authority dealing with that issue under facts substantially similar to
those described in this prospectus. Although it is not expected that the trust
will be engaged in a trade or business in the U.S. for such purposes, the trust
will withhold as if it were so engaged in order to protect itself from possible
adverse consequences of a failure to withhold. The trust expects to withhold on
the portion of its taxable income that is allocable to foreign Equity Security
holders pursuant to Section 1446 of the Code, as if such income were effectively
connected to a U.S. trade or business, at a rate of 34% for foreign holders that
are taxable as corporations and 39.6% for all other foreign holders. Subsequent
adoption of Treasury regulations or the issuance of other administrative
pronouncements may require a trust to change its withholding procedures. In
determining a holder's withholding status, a trust may rely on IRS Form W-8, IRS
Form W-9 or other forms as specified by applicable Treasury regulations or other
Treasury or IRS pronouncements.
Each foreign holder may be required to file a U.S. individual or
corporate income tax return (including in the case of a corporation, the branch
profits tax) on its share of the trust's income. Each foreign holder of an
Equity Security must obtain a taxpayer identification number from the IRS and
submit that number to the trust on IRS Form W-8 or other applicable form, in
order to assure appropriate crediting of the taxes withheld. A foreign holder
generally will be entitled to file with the IRS a claim for refund with respect
to taxes withheld by the trust, taking the position that no taxes were due
because the trust was not engaged in a U.S. trade or business. However, interest
payments made or accrued to an Equity Security holder who is a foreign person
generally will be considered guaranteed payments to the extent those payments
are determined without regard to the income of the trust. If the interest
payments are properly characterized as guaranteed payments, then the interest
will not be considered "portfolio interest." As a result, Equity Security
holders will be subject to U.S. federal income tax and withholding tax at a
rate of 30 percent, unless reduced or eliminated pursuant to an applicable
treaty. In such case, a foreign holder would only be entitled to claim a
refund for that portion of the taxes in excess of the taxes that should be
withheld with respect to the guaranteed payments.
In general, the New Withholding Regulations do not significantly alter
the substantive withholding and information reporting requirements, but do unify
current certification procedures and forms and clarify reliance standards. The
New Withholding Regulations generally will be effective for payments made after
December 31, 2000, subject to certain transaction rules. THE DISCUSSION SET
FORTH ABOVE DOES NOT TAKE THE NEW WITHHOLDING REGULATIONS INTO ACCOUNT.
PROSPECTIVE INVESTORS IN THE EQUITY SECURITIES WHO ARE NON-U.S. HOLDERS ARE
STRONGLY URGED TO CONSULT THEIR OWN TAX ADVISOR WITH RESPECT TO THE NEW
WITHHOLDING REGULATIONS.
BACKUP WITHHOLDING. Distributions made on the Equity Securities and
proceeds from the sale of the Equity Securities generally will be subject to
a "backup" withholding tax of 31% if the Equity Security holder fails to
comply with certain identification procedures, unless the holder is an exempt
recipient under applicable provisions of the Code.
TRUSTS IN WHICH EQUITY SECURITIES ARE RETAINED BY THE SELLER OR AN
AFFILIATE OF THE SELLER
TAX CHARACTERIZATION OF THE TRUST
Federal Tax Counsel will deliver its opinion that a trust which
issues one or more classes of Debt Securities properly treated as debt for
U.S. federal income tax purposes to investors and all the Equity Securities
of which are retained by the seller or one of its affiliates will not be an
association or publicly traded partnership taxable as a corporation for
federal income tax purposes. This opinion will be based on the assumption
that the terms of the trust agreement and related documents will be complied
with, and on Federal Tax Counsel's conclusions that the trust will constitute
a mere security arrangement for the issuance of debt by the single holder of
an Equity Security.
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TREATMENT OF THE DEBT SECURITIES AS INDEBTEDNESS. The seller will
agree, and the securityholders will agree by their purchase of Debt
Securities, to treat the Debt Securities as debt for U.S. federal income tax
purposes. Federal Tax Counsel will, except as otherwise provided in the
related prospectus supplement, advise the trust that the Debt Securities will
be (or, in certain cases, should be) classified as debt for U.S. federal
income tax purposes. Assuming that the characterization of the Debt
Securities as debt for U.S. federal income tax purposes is correct, the U.S.
federal income tax consequences to Debt Security holders described above
under the heading "Trusts for Which a Partnership Election Is Made--Tax
Consequences to Holders of the Debt Securities" would apply to the Debt
Security holders.
If, contrary to the opinion of Federal Tax Counsel, the IRS
successfully asserted that one or more classes of Debt Securities did not
represent debt for U.S. federal income tax purposes, such class or classes of
Debt Securities might be treated as equity interests in the trust. If so
treated, the trust would, most likely in the view of Federal Tax Counsel, be
treated as a publicly traded partnership that would not be taxable as a
corporation because it would qualify for an applicable "safe harbor" that the
IRS has provided. Therefore, the partnership would not be subject to U.S.
federal income tax. Assuming such characterization of the Debt Securities as
partnership interests in a partnership not treated as a publicly traded
partnership taxable as a corporation is correct, the U.S. federal income tax
consequences to Equity Security holders described above under the heading
"Trusts for Which a Partnership Election Is Made--Tax Consequences to Holders
of the Equity Securities" would apply to the Debt Securities recharacterized
as Equity Securities.
Nonetheless, treatment of securities as equity interests in such a
partnership could have adverse tax consequences to certain holders of such
securities. For example, income to certain tax-exempt entities including pension
funds would be "unrelated business taxable income", income to foreign holders
may be subject to U.S. withholding tax and U.S. tax return filing requirements,
and individual holders might be subject to certain limitations on their ability
to deduct their share of trust expenses.
THE U.S. FEDERAL TAX DISCUSSIONS SET FORTH ABOVE ARE INCLUDED FOR
GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON EACH
SECURITYHOLDER'S PARTICULAR TAX SITUATION. PROSPECTIVE PURCHASERS SHOULD CONSULT
THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE,
OWNERSHIP AND DISPOSITION OF THE SECURITIES, INCLUDING THE TAX CONSEQUENCES
UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF
CHANGES IN FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended, and
the Internal Revenue Code impose certain requirements on:
- employee benefit plans;
- certain other retirement plans and arrangements, including:
- individual retirement accounts and annuities,
- Keogh plans, and
- collective investment funds and separate accounts
and, as applicable, insurance company general
accounts) in which those plans, accounts or
arrangements are invested that are subject to the
fiduciary responsibility provisions of ERISA and
Section 4975 of the Code ; and
- persons who are fiduciaries with respect to the Plans in
connection with the investment of Plan assets.
65
<PAGE>
The term "Plans" includes the plans and arrangements listed in the first two
bullet points above.
Certain employee benefit plans, such as governmental plans (as defined
in ERISA Section 3(32)), and, if no election has been made under Section 410(d)
of the Code, church plans (as defined in Section 3(33) of ERISA), are not
subject to ERISA requirements. Accordingly, assets of plans not subject to ERISA
requirements may be invested in notes without regard to the ERISA considerations
described below, subject to the provisions of other applicable federal and state
law. However, if a plan is not subject to ERISA requirements but is qualified
and exempt from taxation under Sections 401(a) and 501(a) of the Code, the
prohibited transaction rules set forth in Section 503 of the Code will apply.
ERISA generally imposes on Plan fiduciaries certain general fiduciary
requirements, including those of investment prudence and diversification and the
requirement that the Plan's investments be made in accordance with the documents
governing the Plan. In addition, Section 406 of ERISA and Section 4975 of the
Code prohibit a broad range of transactions involving assets of a Plan and
persons (parties in interest under ERISA and disqualified persons under the
Code, collectively, "Parties in Interest") who have certain specified
relationships to the Plan unless a statutory, regulatory or administrative
exemption is available. Certain Parties in Interest that participate in a
prohibited transaction may be subject to an excise tax imposed pursuant to
Section 4975 of the Code or a penalty imposed pursuant to Section 502(i) of
ERISA, unless a statutory or administrative exemption is available. These
prohibited transactions generally are set forth in Section 406 of ERISA and
Section 4975 of the Code.
THE NOTES
Unless otherwise specified in the related prospectus supplement, the
notes of each series may be purchased by a Plan. A trust, the seller, any
underwriter, the eligible lender trustee, the indenture trustee, the master
servicer, the administrator, any provider of credit support or any of their
affiliates may be considered to be or may become Parties in Interest with
respect to certain Plans. Prohibited transactions under Section 406 of ERISA and
Section 4975 of the Code may arise if a note is acquired by a Plan with respect
to which any of the foregoing are Parties in Interest unless the transactions
are subject to one or more statutory or administrative exemptions, such as:
- Prohibited Transaction Class Exemption ("PTCE") 96-23, which
exempts certain transactions effected on behalf of a Plan by
an "in-house asset manager";
- PTCE 90-1, which exempts certain transactions between
insurance company separate accounts and Parties in Interest;
- PTCE 91-38, which exempts certain transactions between bank
collective investment funds and Parties in Interest;
- PTCE 95-60, which exempts certain transactions between
insurance company general accounts and Parties in Interest; or
- PTCE 84-14, which exempts certain transactions effected on
behalf of a Plan by a "qualified professional asset manager".
There can be no assurance that any of these class exemptions will apply
with respect to any particular Plan's investment in notes or, even if it were
deemed to apply, that any exemption would apply to all prohibited transactions
that may occur in connection with the investment. Accordingly, prior to making
an investment in the notes, investing Plans should determine whether the
applicable trust, NMF, any underwriter, the eligible lender trustee, the
indenture trustee, the master servicer, the administrator, or any provider of
credit support or any of their affiliates is a Party in Interest with
66
<PAGE>
respect to that Plan and, if so, whether the transaction is subject to one or
more statutory, regulatory or administrative exemptions.
Any Plan fiduciary considering whether to invest in notes on behalf of
a Plan should consult with its counsel regarding the applicability of the
fiduciary responsibility and prohibited transaction provisions of ERISA and the
Code to the investment. Each Plan fiduciary also should determine whether, under
the general fiduciary standards of investment prudence and diversification, an
investment in the notes is appropriate for the Plan, considering the overall
investment policy of the Plan and the composition of the Plan's investment
portfolio, as well as whether the investment is permitted under the Plan's
governing instruments.
THE CERTIFICATES
Unless otherwise specified in the prospectus supplement, no
certificates of any series may be purchased by a Plan or by any entity whose
underlying assets include Plan assets by reason of a plan's investment in that
entity (each, a "Benefit Plan"). The purchase of an equity interest in a trust
will result in the assets of that trust being deemed assets of a Benefit Plan
for the purposes of ERISA and the Code and certain transactions involving the
trust may then be deemed to constitute prohibited transactions under Section 406
of ERISA and Section 4975 of the Code. A violation of the "prohibited
transaction" rules may result in an excise tax or other penalties and
liabilities under ERISA and the Code.
By its acceptance of a certificate, each certificateholder will be
deemed to have represented and warranted that it is not a Benefit Plan.
If a given series of certificates may be acquired by a Benefit Plan
because of the application of an exception contained in a regulation or
administrative exemption issued by the United States Department of Labor, the
exception will be discussed in the related prospectus supplement.
* * *
A Plan fiduciary considering the purchase of the securities of a given
series should consult its tax and/or legal advisors regarding whether the assets
of the related trust would be considered plan assets, the possibility of
exemptive relief from the prohibited transaction rules and other issues and
their potential consequences.
AVAILABLE INFORMATION
The seller has filed with the SEC a registration statement for the
securities (together with all amendments and related exhibits, the "Registration
Statement") under the Securities Act of 1933, as amended. This prospectus and
the accompanying prospectus supplement, both of which form part of the
Registration Statement, do not contain all the information contained in the
Registration Statement. For further information, you may inspect and copy the
Registration Statement 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.
In addition, copies of the Registration Statement may be obtained from the
Public Reference Branch of the SEC, 450 Fifth Street, N.W., Washington, D.C.
20549 upon payment of certain prescribed fees.
67
<PAGE>
You may obtain information on the operation of the SEC's public
reference facilities by calling the SEC at 1-800-732-0330. In addition, the
Registration Statement may be accessed electronically through the SEC's
Electronic Data Gathering, Analysis and Retrieval system at the SEC's World Wide
Website located at HTTP://WWW.SEC.GOV.
REPORTS TO SECURITYHOLDERS
Unless definitive securities are issued for an series of securities,
periodic unaudited reports as described in the related prospectus supplement
containing information concerning the student loans in the related trust will be
prepared by the administrator on behalf of the trust and sent only to Cede &
Co., as nominee of DTC and registered holder of the securities. Reports will not
be sent to any beneficial holder of the securities. Except as indicated in
the following paragraph, the reports will not constitute financial statements
prepared in accordance with generally accepted accounting principles.
The master servicer will file with the SEC such periodic reports for
each trust as are required under the Securities Exchange Act of 1934, as
amended, and the related rules and regulations. If a trust is organized as a
statutory business trust and not a common law trust, then, unless the SEC
otherwise agrees, for as along as the trust files reports under the Exchange
Act, the reports will include unaudited financial statements on Form 10-Q and
audited annual financial statements on Form 10-K prepared in accordance with
generally accepted accounting principles. Each trust intends to suspend the
filing of reports under the Exchange Act, when and if filing is no longer
required.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by or for a trust, pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended, after the date of this prospectus and before the termination of the
offering of any series of securities shall be deemed to be incorporated by
reference into this prospectus. Any statement contained in this prospectus or in
a document incorporated or deemed to be incorporated by reference shall be
deemed to be modified or superseded for purposes of this prospectus to the
extent that a statement contained in this prospectus or in any subsequently
filed document that also is or is deemed to be incorporated by reference in this
prospectus modifies or supersedes that statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this prospectus.
The administrator will provide without charge to each person to whom a
copy of this prospectus is delivered, on the written or oral request of that
person, a copy of any or all of the documents incorporated in this prospectus by
reference, except the exhibits to such documents (unless the exhibits are
specifically incorporated by reference). Written requests for such copies should
be directed to Nellie Mae Education Loan Corporation, 1240 Pawtucket Avenue,
Rumford, Rhode Island 02916, Attention: Mary Jo Feldman. Telephone requests for
such copies should be directed to (401) 438-4500.
PLAN OF DISTRIBUTION
The seller and the underwriters named in each prospectus supplement
will enter into an underwriting agreement for the notes of the related series
and an underwriting agreement for the certificates of that series. Under the
terms of the underwriting agreements, the seller will agree to cause the related
trust to sell to the underwriters, and each of the underwriters will severally
agree to purchase, the principal amount of each class of notes and certificates,
as the case may be, of the related series set forth in the agreements and in the
prospectus supplement.
In each of the underwriting agreements with respect to any given series
of securities, the several underwriters will agree, subject to the applicable
terms and conditions, to purchase all the notes and certificates, as the case
may be, which are described in the agreements and offered by this prospectus and
the related prospectus supplement if any of notes and certificates, as the case
may be, are purchased.
Each prospectus supplement will either
68
<PAGE>
- set forth the price at which each class of notes and
certificates, as the case may be, being offered will be
offered to the public and any concessions that may be offered
to certain dealers participating in the offering of the notes
and certificates, as the case may be; or
- specify that the notes and certificates, as the case may be,
are to be resold by the underwriters in negotiated
transactions at varying prices to be determined at the time of
sale. After the initial public offering of any the notes and
certificates, as the case may be, the public offering prices
and concessions may be changed.
Until the distribution of the securities is completed, SEC rules may
limit the ability of the underwriters and certain selling group members to bid
for and purchase the securities. As an exception to these rules, the
underwriters are permitted to engage in certain transactions that stabilize the
price of the securities. These consist of bids or purchases for the purpose of
pegging, fixing or maintaining the price of the securities.
If an underwriter creates a short position in the securities in
connection with the offering (I.E., if it sells more securities than are set
forth on the cover page of the related prospectus supplement), the underwriter
may reduce that short position by purchasing securities in the open market.
An underwriter may also impose a penalty bid on certain underwriters
and selling group members. This means that if the underwriter purchases
securities in the open market to reduce the underwriters' short position or to
stabilize the price of the securities, it may reclaim the amount of the selling
concession from the underwriters and selling group members who sold those
securities as part of the offering.
In general, purchases of a security for the purpose of stabilization or
to reduce a short position could cause the price of the security to be higher
than it might be in the absence of those purchases. The imposition of a penalty
bid might also have an effect on the price of a security to the extent that it
discourages resales of the security.
Neither the seller nor the underwriters make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the prices of the securities. In addition, neither
the seller nor the underwriters make any representation that the underwriters
will engage in those transactions or that those transactions, once commenced,
will not be discontinued without notice.
Each underwriting agreement will provide that the seller will indemnify
the underwriters against certain civil liabilities, including liabilities under
the Securities Act of 1933, as amended, or contribute to the payments that the
several underwriters may be required to make.
Each trust may, from time to time, invest the funds in its Issuer
Accounts in eligible investments acquired from the underwriters.
Under each of the underwriting agreements with respect to a given
series of securities, the closing of the sale of any class of securities subject
to either agreement will be conditioned on the closing of the sale of all the
other classes subject to either agreement.
The place and time of delivery of the securities for which this
prospectus is delivered will be set forth in the related prospectus supplement.
LEGAL MATTERS
Ann M. O'Rourke, General Counsel of Nellie Mae, will pass upon certain
legal matters relating to the securities of each series for the related trust,
the seller, the master servicer and the administrator.
69
<PAGE>
Brown & Wood LLP will pass upon federal income tax matters on behalf of
each trust and upon certain legal matters relating to the securities of each
series for the underwriters. From time to time, Brown & Wood llp has provided
and expects to continue to provide legal services to Nellie Mae Corporation and
its affiliates.
70
<PAGE>
Nellie Mae Student Loan
Trust 1999-A
$-----------
Class A-1 Floating Rate
Asset-Backed Notes
$-----------
Class A-2 Floating Rate
Asset-Backed Notes
$-----------
Floating Rate
Asset-Backed Certificates
Nellie Mae Education
Loan Corporation
SELLER AND MASTER SERVICER
PROSPECTUS SUPPLEMENT
[Names of Underwriters]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated expenses in connection
with the offering of $1,000,000,000 of the Asset-Backed Notes and
Asset-Backed Certificates under this Registration Statement, other than
underwriting discounts and commissions:
<TABLE>
<S> <C>
SEC registration fee................................... $ 278,000*
Legal fees and expenses................................ 225,000
Accounting fees and expenses........................... 50,000
Blue Sky fees and expenses............................. 7,500
Rating agency fees..................................... 400,000
Trustee fees and expenses.............................. 50,000
Printing expenses...................................... 50,000
Miscellaneous.......................................... 100,000
----------
Total................................ $1,160,500*
----------
----------
</TABLE>
- -----------------------
* Of which $278 was paid at the time of the initial filing of this
Registration Statement.
Item 15. Indemnification of Directors and Officers.
The By-Laws of Nellie Mae Education Loan Corporation specify that
Nellie Mae Education Loan Corporation shall indemnify any person who was or is a
party or is threatened to be made a party 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 the Corporation) by
reason of the fact that he or she is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or her in connection with such action, suit or proceeding if he
or she acted in good faith and in a manner he or she reasonably believed to be
in or not opposed to the best interests of the Corporation, and, with respect to
any criminal action or proceedings, had no reasonable cause to believe his or
her conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of NOLO CONTENDERE or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he or she reasonably believed to be
in or not opposed to the best interests of the Corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his or
her conduct was unlawful.
The By-Laws of Nellie Mae Education Loan Corporation further specify
that Nellie Mae Education Loan Corporation shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or sit by or in the right of the
II-1
<PAGE>
Corporation to procure a judgment in its favor by reason of the fact that he or
she is or was a director, officer, employee or agent of the Corporation, or is
or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust, or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection with the defense or settlement
of such action or suit if he acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery of the State of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery of the State of Delaware or such other court shall deem proper.
Item 16. Exhibits.
<TABLE>
<S> <C>
1.1 Form of underwriting agreement
3.1 Certificate of Incorporation of the Registrant
3.2 By-laws of the Registrant
3.3 Form of certificate of trust (included as an exhibit to
Exhibit 4.2)
4.1 Form of indenture between the trust and the indenture trustee
(including a form of note as an exhibit to the indenture)
4.2 Form of trust agreement among the Registrant, Nellie Mae
Funding, LLC and the eligible lender trustee (including a
form of certificate as an exhibit to the trust agreement)
4.3 Form of note (included as an exhibit to Exhibit 4.1)
4.4 Form of certificate (included as an exhibit to Exhibit 4.2)
5.1(a) Opinion of Ann M. O'Rourke, General Counsel of Nellie Mae
Corporation, the corporate parent of the Registrant, as to the
legality of the notes and certificates
(b) Opinion of Richards, Layton & Finger with respect to the
subject matter of 5.1(a)
(c) Opinion of Brown & Wood LLP with respect to the subject
matter of 5.1(a)
8.1 Opinion of Brown & Wood LLP with respect to certain tax matters
23.1(a) Consent of Ann M. O'Rourke (included as part of 5.1(a))
(b) Consent of Richards, Layton & Finger (included in 5.1(b))
(c) Consent of Brown & Wood LLP (included in 5.1(c))
23.2 Consent of Brown & Wood LLP (included as part of 8.1)
24.1 Powers of Attorney*
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C>
25.1 Statement of eligibility of the indenture trustee under the
Trust Indenture Act of 1939
99.1 Form of loan sale agreement among the seller, the trust and the
eligible lender trustee
99.2 Form of master servicing agreement among the master servicer,
the trust and the eligible lender trustee
99.3 Form of administration agreement among the trust, the
indenture trustee and the Registrant, as administrator
99.4 Form of Exhibit A to administration agreement
</TABLE>
------------------------------
* Previously filed
Item 17. Undertakings.
(a) AS TO RULE 415:
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made
of the securities registered hereby, 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, as amended;
(ii) to reflect in the prospectus any facts or events
arising after the effective date of this Registration
Statement (or the most recent post-effective
amendment hereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in this Registration Statement;
and
(iii) to include any material information with respect to
the plan of distribution not previously disclosed in
this Registration Statement or any material change to
such information in this Registration Statement;
PROVIDED, HOWEVER, that the undertakings set forth in clauses (i) and (ii) above
do not apply if the information required to be included in a post-effective
amendment by those clauses is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange
Act of 1934, as amended, that are incorporated by reference in this Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, as amended, 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.
II-3
<PAGE>
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) AS TO DOCUMENTS SUBSEQUENTLY FILED THAT ARE INCORPORATED HEREIN BY
REFERENCE:
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended, each
filing of the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934, as amended, that is incorporated
by reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) AS TO THE INDENTURES:
The undersigned Registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreements, Notes and
Certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser.
(d) AS TO INDEMNIFICATION:
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions described under Item 15, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is therefore unenforceable. In the event that a claim
for indemnification against such liabilities (other than payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of such 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, such 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.
(e) AS TO LIABILITY:
(1) For purposes of determining any liability under the Securities Act
of 1933, as amended, the information omitted from the form of prospectus filed
as part of this Registration Statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) under the 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, as amended, each post-effective amendment that contains a form of
prospectus shall be deemed to
II-4
<PAGE>
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.
(f) AS TO THE INDENTURE TRUSTEE:
To file an application for the purpose of determining the eligibility
of the indenture trustee to act under subsection (a) of Section 310 of the Trust
Indenture Act of 1939, as amended, in accordance with the rules and regulations
prescribed by the Commission under Section 305(b)(2) of the Trust Indenture Act
of 1939, as amended.
II-5
<PAGE>
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 (including, without limitation, the security rating
requirement at time of sale) for filing on Form S-3 and has duly caused this
Amendment No. 2 to Registration Statement on Form S-3 to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Rumford, State of
Rhode Island, on the 3rd day of September, 1999.
NELLIE MAE EDUCATION LOAN CORPORATION
(Registrant)
By: *
----------------------
Name: Lawrence W. O'Toole
Title: President
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
- --------- --------
<S> <C>
*
- -------------------- President (and chief executive officer),
Lawrence W. O'Toole Director
*
- -------------------- Treasurer (chief financial officer and chief
John F. Remondi accounting officer), Director
</TABLE>
*By: /s/ Ann M. O'Rourke
---------------------
Ann M. O'Rourke, Attorney-in-Fact
pursuant to previously filed Power of Attorney
Dated: September 3, 1999
II-6
<PAGE>
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NO. DESCRIPTION PAGE NO.
------ ----------- ----------
<S> <C> <C>
1.1 Form of underwriting agreement........................................................
3.1 Certificate of Incorporation of the Registrant........................................
3.2 By-laws of the Registrant.............................................................
3.3 Form of certificate of trust (included as an exhibit to Exhibit 4.2)..................
4.1 Form of indenture between the trust and the indenture trustee (including a form of
note as an exhibit to the indenture)..................................................
4.2 Form of trust agreement among the Registrant, Nellie Mae Funding, LLC and the
eligible lender trustee (including a form of certificate as an exhibit to the
trust agreement)......................................................................
4.3 Form of note (included as an exhibit to Exhibit 4.1)..................................
4.4 Form of certificate (included as an exhibit to Exhibit 4.2)...........................
5.1(a) Opinion of Ann M. O'Rourke, General Counsel of Nellie Mae Corporation, the corporate
parent of the Registrant, as to the legality of the notes and certificates............
(b) Opinion of Richards, Layton & Finger with respect to the subject matter of 5.1(a).....
(c) Opinion of Brown & Wood LLP with respect to the subject matter of 5.1(a)..............
8.1 Opinion of Brown & Wood LLP with respect to certain tax matters.......................
23.1(a) Consent of Ann M. O'Rourke (included as part of 5.1(a))...............................
(b) Opinion of Richards, Layton & Finger (included as part of 5.1(b)).....................
(c) Consent of Brown & Wood LLP (included as part of 5.1(c))..............................
23.2 Consent of Brown & Wood LLP (included as part of 8.1).................................
24.1 Powers of Attorney*...................................................................
25.1 Statement of eligibility of the indenture trustee under the Trust Indenture Act of
1939..................................................................................
99.1 Form of loan sale agreement among the seller, the trust and the eligible lender
trustee...............................................................................
99.2 Form of master servicing agreement among the master servicer, the trust and the
eligible lender trustee...............................................................
99.3 Form of administration agreement among the trust, the indenture trustee and the
Registrant, as administrator..........................................................
99.4 Exhibit A to administration agreement.................................................
</TABLE>
- -----------------------
* Previously filed.
<PAGE>
EXHIBIT 1.1
NELLIE MAE STUDENT LOAN TRUST 1998-A
$
CLASS A-1 FLOATING RATE ASSET-BACKED NOTES
$
CLASS A-2 FLOATING RATE ASSET-BACKED NOTES
$
FLOATING RATE ASSET-BACKED CERTIFICATES
[FORM OF]
UNDERWRITING AGREEMENT
______________, 1999
[Name of Underwriter]
As Representative of the several Underwriters
[Address of Representative]
Ladies and Gentlemen:
1. INTRODUCTORY. Nellie Mae Education Loan Corporation, a Delaware
corporation ("NMELC"), proposes to cause Nellie Mae Student Loan Trust 1999-A
(the "TRUST") to issue and sell $[________] aggregate principal amount of its
Class A-1 Floating Rate Asset-Backed Notes (the "CLASS A-1 NOTES"), $[_______]
aggregate principal amount of its Class A-2 Floating Rate Asset-Backed Notes
(the "CLASS A-2 NOTES" and, together with the Class A-1 Notes, the "NOTES"), and
$[______] aggregate principal amount of its Floating Rate Asset-Backed
Certificates (the "Certificates" and, together with the Notes, the "SECURITIES")
to the underwriters named in Schedule I hereto (the "UNDERWRITERS") for which
[_____________] (the "REPRESENTATIVE") is acting as representative. The assets
of the Trust include, among other things, a pool of student loans (the "INITIAL
TRUST LOANS") and certain monies due thereunder on and after______ __, 1999 (the
"CUTOFF DATE"). Such Initial Trust Loans will be sold to the Eligible Lender
Trustee (as defined below) on behalf of the Trust by NMELC (and, with respect to
legal title to the Trust Loans, by The First National Bank of Chicago, as
trustee for NMELC ("FNBC")) pursuant to a sale agreement, dated as of______ __,
1999 (the "LOAN SALE AGREEMENT") among the Trust, NMELC, FNBC and The First
National Bank of Chicago, a national banking association, as eligible lender
trustee for the Trust (the "ELIGIBLE LENDER TRUSTEE"). Under certain
circumstances after the Closing Date (as defined below), the Eligible
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Lender Trustee, acting on behalf of the Trust, may acquire additional student
loans (the "ADDITIONAL TRUST LOANS", together with the Initial Trust Loans being
referred to herein, collectively, as the "TRUST LOANS"). The Trust Loans are to
be serviced by NMELC, in its capacity as master servicer (in such capacity, the
"MASTER SERVICER") pursuant to a master servicing agreement, dated as of _____
__, 1999 (the "MASTER SERVICING AGREEMENT"), among the Trust, NMELC and the
Eligible Lender Trustee. The Notes will be issued pursuant to an Indenture to be
dated as of ______ _, 1999 (as amended and supplemented from time to time, the
"INDENTURE"), between the Trust and State Street Bank and Trust Company, a
Massachusetts banking corporation, as trustee under the Indenture (the
"INDENTURE TRUSTEE"). The Trust will be formed pursuant to a trust agreement to
be dated as of _______ __, 1999 (the "TRUST AGREEMENT"), among NMELC, as
depositor, Nellie Mae Funding, LLC, a limited purpose Delaware limited liability
company ("NMF"), and the Eligible Lender Trustee. A Delaware banking corporation
will be appointed as a co-trustee under the Trust Agreement pursuant to a
co-trustee agreement, dated as of ______ __, 1999 (the "CO-TRUSTEE AGREEMENT"),
between such corporation and the Eligible Lender Trustee.
Capitalized terms used and not otherwise defined herein shall
have the meanings given them in Appendix A hereto.
NMELC filed with the Securities and Exchange Commission (the
"COMMISSION" on May 18, 1999, a registration statement on Form S-3 (No.
333-78725), including a form of prospectus and prospectus supplement relating to
the Securities, and pursuant to the provisions hereof shall file such
post-effective amendments thereto as may hereafter be required pursuant to the
Securities Act of 1933, as amended (the "1933 ACT"), and the rules and
regulations of the Commission thereunder (the "RULES AND REGULATIONS"). Such
registration statement (as amended) is referred to herein as the "REGISTRATION
STATEMENT"; the prospectus and prospectus supplement relating to the offering of
the Securities constituting a part of the Registration Statement filed or to be
filed by NMELC are collectively referred to herein as the "PROSPECTUS" and each
of the prospectus and prospectus supplement is referred to as the "BASE
PROSPECTUS" and the "PROSPECTUS SUPPLEMENT" respectively; and any reference
herein to any amendment or supplement with respect to the Registration Statement
or the Prospectus shall be deemed to refer to and include any information deemed
to be a part thereof pursuant to Rule 430A under the 1933 Act.
2. REPRESENTATIONS AND WARRANTIES OF NMELC. (a) NMELC represents and
warrants to and agrees with the several Underwriters that:
(i) The Registration Statement has become effective under the
1933 Act. The Registration Statement complies, and all amendments to
the Registration Statement at the time such amended Registration
Statement becomes effective will comply, in all material respects with
the requirements of the 1933 Act and the Rules and Regulations. The
Registration Statement at the time such Registration Statement became
effective did not, and any amendment to the Registration Statement at
the time such amended Registration Statement becomes effective will
not, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make
the statements therein not misleading. The Prospectus as of the date
hereof does, and the Prospectus as amended or supplemented as of the
Closing Date will, comply in all
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material respects with the requirements of the 1933 Act and the Rules
and Regulations. The Prospectus as of the date hereof did not, and the
Prospectus as amended or supplemented as of the Closing Date will 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;
PROVIDED, however, that the representations and warranties in this
subsection shall not apply to statements in, or omissions from, the
Registration Statement or the Prospectus made in reliance upon and in
conformity with information furnished to NMELC in writing by the
Underwriters expressly for use in the Registration Statement or
Prospectus. NMELC acknowledges that the statements set forth under the
caption "UNDERWRITING" in the Prospectus Supplement constitute the only
information furnished in writing by the Underwriters for inclusion in
the Prospectus. The conditions to the use by NMELC of a registration
statement on Form S-3 under the 1933 Act, as set forth in the General
Instructions to Form S-3, have been satisfied with respect to the
Registration Statement and the Prospectus. There are no contracts or
documents of NMELC or its affiliates that are required to be filed as
exhibits to the Registration Statement pursuant to the 1933 Act or the
Rules and Regulations that have not been so filed on or prior to the
effective date of the Registration Statement.
(ii) Since the respective dates as of which information is
given in the Prospectus, or the Prospectus as amended and supplemented
at the Closing Date, there has not been any material adverse change in
the general affairs, management, financial condition or results of
operations of any of the Transaction Parties or of their subsidiaries
or affiliates, otherwise than as set forth in the Prospectus or the
Prospectus as amended and supplemented at the Closing Date.
(iii) NMELC's representations and warranties in the Loan Sale
Agreement, the Administration Agreement and the Trust Agreement will be
true and correct in all material respects as of the Closing Date and
each such representation and warranty will be true and correct in all
material respects on each date thereafter if and to the extent that on
such date such representation and warranty is made again by NMELC
pursuant to the terms of the related agreement.
(iv) This Agreement has been duly authorized, executed and
delivered by NMELC. The execution, delivery and performance of this
Agreement and the issuance and sale of the Securities and compliance
with the terms and provisions hereof will not result in a breach or
violation of any of the terms and provisions of, or constitute a
default under, any agreement or instrument to which NMELC is a party or
by which NMELC is bound or to which any of the properties of NMELC is
subject which could reasonably be expected to have a material adverse
effect on the transactions contemplated herein. NMELC has full power
(corporate and other) and authority to cause the Trust to authorize,
issue and sell the Securities, all as contemplated by this Agreement.
(v) 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 NMELC or any of its affiliates or an
underwriter any brokerage or finder's fee or other fee or commission as
a result of any of the transactions contemplated by this Agreement.
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(vi) All legal or governmental proceedings, contracts or
documents of a character required to be described in the Registration
Statement or the Prospectus or to be filed as an exhibit to the
Registration Statement have been so described or filed as required.
(vii) NMELC's (and, with respect to legal title to the Initial
Trust Loans, FNBC's) assignment and delivery of the Initial Trust Loans
to the Eligible Lender Trustee on behalf of the Trust as of the Closing
Date and of the Additional Trust Loans from time to time thereafter
pursuant to the Loan Sale Agreement will vest in the Eligible Lender
Trustee on behalf of the Trust all NMELC's and FNBC's right, title and
interest therein, subject to no prior lien, mortgage, security
interest, pledge, adverse claim, charge or other encumbrance.
(viii) The Trust's assignment of the Trust Loans to the
Indenture Trustee pursuant to the Indenture will vest in the Indenture
Trustee, for the benefit of the Noteholders, a first priority perfected
security interest therein, subject to no prior lien, mortgage, security
interest, pledge, adverse claim, charge or other encumbrance.
(ix) None of NMELC, NMF or the Trust is, and neither the
issuance and sale of the Securities nor the activities of the Trust
pursuant to the Indenture or the Trust Agreement will cause NMELC, NMF
or the Trust to be, an "investment company" or under the "control" of
an "investment company" as such terms are defined in the Investment
Company Act of 1940, as amended.
(b) NMELC hereby agrees with the Underwriters that, for all
purposes of this Agreement, the only information furnished to NMELC by the
Underwriters through the Representative specifically for use in the Registration
Statement, the Prospectus, or any amendment or supplement thereto, or any
related preliminary prospectus, are the statements under the caption
"Underwriting" in the preliminary prospectus and the Prospectus.
3. PURCHASE, SALE AND DELIVERY OF THE SECURITIES. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, NMELC agrees to cause the Trust to sell
to the Underwriters, and the Underwriters agree, severally and not jointly, to
purchase from the Trust the respective principal amounts of the classes of Notes
and the Certificates set forth opposite their respective names in Schedule I
hereto at the respective purchase prices set forth therein.
NMELC will deliver the Securities to the Representative for
the respective accounts of the Underwriters, against payment of the purchase
price to or upon the order of NMELC by wire transfer or check in Federal (same
day) Funds, at the office of Brown & Wood LLP, One World Trade Center, New York,
New York 10048, at 10:00 a.m. New York time, on _____ __, 1999, or at such other
time not later than seven full business days thereafter as the Representative
and NMELC determine, such time being herein referred to as the "CLOSING DATE".
The Notes and Certificates to be so delivered will initially be represented by
one or more Notes and Certificates, as the case may be, registered in the name
of Cede & Co., the nominee of The Depository Trust Company ("DTC"). The
interests of beneficial owners of the Securities will be represented by book
entries on the records of DTC and participating members thereof.
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Definitive Notes will be available only under the limited circumstances
specified in the Indenture and Definitive Certificates will be available only
under the limited circumstances specified in the Trust Agreement.
4. OFFERING BY THE UNDERWRITERS. It is understood that, after the
Registration Statement becomes effective, the several Underwriters propose to
offer the Securities for sale to the public (which may include selected dealers)
as set forth in the Prospectus.
5. COVENANTS OF NMELC. NMELC covenants and agrees with the several
Underwriters that:
(a) Prior to the termination of the offering of the
Securities, NMELC will not file any amendment of the Registration Statement or
supplement to the Prospectus unless NMELC has furnished the Representative a
copy for its review prior to filing and will not file any such proposed
amendment or supplement to which the Representative reasonably objects. Subject
to the foregoing sentence, if the Registration Statement has become or becomes
effective pursuant to Rule 430A, or filing of the Prospectus is otherwise
required under Rule 424(b), NMELC will file the Prospectus, properly completed,
and any supplement thereto, with the Commission pursuant to and in accordance
with the applicable paragraph of Rule 424(b) within the time period prescribed
and will provide evidence satisfactory to the Representative of such timely
filing.
(b) NMELC will advise the Representative promptly of any
proposal to amend or supplement the registration statement as filed or the
related prospectus or the Registration Statement or the Prospectus and will not
effect such amendment or supplementation without the consent of the
Representative prior to the Closing Date, and thereafter will not effect any
such amendment or supplementation to which the Representative reasonably
objects; NMELC 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 NMELC will also advise
the Representative promptly of the effectiveness of any amendment or supplement
to the Registration Statement or the Prospectus and of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or the institution or threat of any proceeding for that purpose and
NMELC will use its best efforts to prevent the issuance of any such stop order
and to obtain as soon as possible the lifting of any issued stop order.
(c) If, at any time when a prospectus relating to the
Securities is required to be delivered under the Act, any event occurs as a
result of which the Prospectus as then amended or supplemented would contain an
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, or if it is necessary at any time to amend the
Registration Statement or supplement the Prospectus to comply with the Act or
the Exchange Act, NMELC promptly will prepare and file, or cause to be prepared
and filed, with the Commission an amendment or supplement which will correct
such statement or omission, or an amendment or supplement which will effect such
compliance. Neither the consent of the Representative to, nor the delivery by
the several Underwriters of, any such amendment or supplement shall constitute a
waiver of any of the conditions set forth in Section 6 hereof.
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(d) As soon as practicable, but not later than the
Availability Date (as defined below), NMELC will cause the Trust to make
generally available to Securityholders an earnings statement of the Trust
covering a period of at least 12 months beginning after the Effective Date which
will satisfy the provisions of Section 11(a) of the Act and Rule 158 of the
applicable Rules and Regulations. For the purpose of the preceding sentence,
"AVAILABILITY DATE" means the 45th day after the end of the fourth fiscal
quarter following the fiscal quarter that includes the original effective date
of the Registration Statement, except that, if such fourth fiscal quarter is the
last quarter of the Trust's fiscal year, "AVAILABILITY DATE" means the 90th day
after the end of such fourth fiscal quarter.
(e) NMELC will furnish to the Representative copies of the
Registration Statement (two of which will be signed and will include all
exhibits), each related preliminary prospectus, the Prospectus and all
amendments and supplements to such documents, in each case as soon as available
and in such quantities as the Representative reasonably requests.
(f) NMELC will arrange for the qualification of the Securities
for sale under the laws of such states as the several Underwriters may require
and will continue such qualifications in effect so long as required for the
distribution.
(g) For a period from the date of this Agreement until the
retirement of the Securities, or until such time as the several Underwriters
shall cease to maintain a secondary market in the Securities, whichever occurs
first, NMELC will deliver to the Representative the annual statements of
compliance and the annual independent certified public accountants' reports
furnished to the Indenture Trustee or the Eligible Lender Trustee pursuant to
the Master Servicing Agreement as soon as such statements and reports are
furnished to the Indenture Trustee or the Eligible Lender Trustee.
(h) So long as any of the Securities are outstanding, NMELC
will furnish to the Representative (i) as soon as practicable after the end of
the fiscal year all documents required to be distributed to Securityholders or
filed with the Commission on behalf of the Trust pursuant to the Exchange Act or
any order of the Commission thereunder and (ii) from time to time, any other
information concerning NMELC as the Representative may reasonably request.
(i) On or before the Closing Date, NMELC shall mark its
accounting and other records, if any, relating to the Initial Trust Loans and
shall cause FNBC, together with AFSA Data Corporation and USA Group Loan
Services, Inc. (the "SUBSERVICERS"), to mark their computer records relating to
the Initial Trust Loans to show the absolute ownership by the Eligible Lender
Trustee on behalf of the Trust of the Initial Trust Loans, and from and after
the Closing Date NMELC will take, and cause FNBC and the Subservicers to take,
such actions with regard to any Additional Trust Loans at the time of the
conveyance thereof to the Trust; and none of NMELC, FNBC and the Subservicers
shall take any action inconsistent with the ownership by the Eligible Lender
Trustee on behalf of the Trust of the Trust Loans, other than as permitted by
the Loan Sale Agreement or the Master Servicing Agreement.
(j) To the extent, if any, that the ratings provided with
respect to the Securities by the rating agency or agencies (the "RATING
AGENCIES") that initially rate the Securities are conditional upon the
furnishing of documents or the taking of any other actions by NMELC
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<PAGE>
agreed upon on or prior to the Closing Date, NMELC shall furnish or shall cause
to be furnished such documents and take any such other actions. A copy of any
such document shall be provided to the Representative at the time it is
delivered to such rating agency or agencies.
(k) For the period beginning on the date of this Agreement and
ending 60 days after the Closing Date, neither NMELC nor any trust originated,
directly or indirectly, by NMELC will, without the prior written consent of the
Representative, offer to sell or sell notes (other than the Notes)
collateralized by, or certificates evidencing an ownership interest in, student
loans; PROVIDED, HOWEVER, that this shall not be construed to prevent the sale
of student loans by NMELC.
(l) NMELC will apply the net proceeds of the offering and the
sale of the Securities that it receives in the manner set forth in the
Prospectus under the caption "Use of Proceeds".
(m) NMELC will pay all expenses incident to the performance of
its obligations under this Agreement, including (i) the printing and filing of
the documents (including the Registration Statement and Prospectus), (ii) the
preparation, issuance and delivery of the Securities to the Representative,
(iii) the fees and disbursements of NMELC's counsel and accountants, (iv) the
qualification of the Securities under securities laws in accordance with the
provisions of Section 5(f) hereof, including filing fees and the fees and
disbursements of counsel for the Representative in connection therewith and in
connection with the preparation of any "blue sky" or legal investment survey, if
any is requested, (v) the printing and delivery to the Representative of copies
of the Registration Statement as originally filed and of each amendment thereto,
(vi) the printing and delivery to the Representative of copies of any "blue sky"
or legal investment survey prepared in connection with the Securities, (vii) any
fees charged by rating agencies for the ratings of the Securities, (viii) the
fees and expenses, if any, incurred with respect to any filing with the National
Association of Securities Dealers, Inc. and (ix) the fees and expenses of Brown
& Wood LLP in its role as special federal tax counsel to the Trust incurred as a
result of providing the opinions required by Section 6(e) hereof.
6. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. The obligations
of the several Underwriters to purchase and pay for the Securities will be
subject to the accuracy of the representations and warranties on the part of
NMELC herein, to the accuracy of the written statements of officers of NMELC
made pursuant to the provisions of this Section, to the performance by NMELC of
its obligations hereunder and to the following additional conditions precedent:
(a) The Prospectus and any supplements thereto shall have been
filed with the Commission in accordance with the applicable Rules and
Regulations and Section 5(a) hereof. Prior to the Closing Date, no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been instituted or, to the
knowledge of NMELC or the Representative, shall be contemplated by the
Commission.
(b) On or prior to the Closing Date, the Representative shall
have received a letter dated the Closing Date, in form and substance
satisfactory to the Representative and its
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<PAGE>
counsel, from [________] with respect to certain agreed-upon procedures,
substantially in the form of the drafts to which the Representative has
previously agreed and otherwise in form and substance reasonably satisfactory to
the Representative and its counsel.
(c) Subsequent to the execution and delivery of this
Agreement, there shall not have occurred (i) any change, or any development
involving a prospective change, in or affecting particularly the business or
properties of the Trust, NMELC, NMF or Nellie Mae Corporation which, in the
judgment of the Representative, materially impairs the investment quality of the
Securities or makes it impractical or inadvisable to market the Securities; (ii)
any downgrading by any "nationally recognized statistical rating organization"
(as defined for purposes of Rule 436(g) under the Act) of, or any public
announcement that any such organization has under surveillance or review (other
than an announcement with positive implications of a possible upgrading, and no
implication of a possible downgrading), the rating of any debt securities of
NMELC or Nellie Mae Corporation; (iii) any suspension or limitation of trading
in securities generally on the New York Stock Exchange or any setting of minimum
prices for trading on such exchange; (iv) any banking moratorium declared by
federal or New York authorities; or (v) any outbreak or escalation of major
hostilities in which the United States is involved, any declaration of war by
Congress or any other substantial national or international calamity or
emergency if, in the judgment of the Representative, the effect of any such
outbreak, escalation, declaration, calamity or emergency makes it impractical or
inadvisable to proceed with completion of the sale of and payment for the
Securities.
(d) The Representative shall have received an opinion of Ann
M. O'Rourke, General Counsel of Nellie Mae Corporation, as counsel for NMELC,
dated the Closing Date, satisfactory in form and substance to the Representative
and its counsel.
(e) The Representative shall have received an opinion
addressed to the several Underwriters of Brown & Wood LLP, special federal tax
counsel to the Trust, dated the Closing Date, to the effect that the statements
in the Base Prospectus under the heading "U.S. Federal Income Tax Consequences"
and in the Prospects Supplement under the heading "Federal Tax Consequences"
accurately describe the material federal income tax consequences to holders of
the Securities.
(f) The Representative shall have received an opinion
addressed to the several Underwriters of Ann M. O'Rourke, General Counsel of
Nellie Mae Corporation, as counsel for NMELC, NMF and the Trust, dated the
Closing Date, in form and substance satisfactory to the Representative and its
counsel, concerning (i) the true sale of the Trust Loans from NMELC to the Trust
and (ii) the nonconsolidation of NMF with NMELC and NMELC's other affiliates in
the event of a bankruptcy or insolvency of NMELC or NMELC's other affiliates.
(g) The Representative shall have received an opinion of Ann
M. O'Rourke, General Counsel of Nellie Mae Corporation, as counsel for NMELC,
dated the Closing Date and satisfactory in form and substance to the
Representative and its counsel, to the effect that:
(i) NMELC has been duly organized and is validly existing as a
nonprofit Delaware corporation in good standing under the laws thereof
with full power and authority (corporate and other) to own its
properties and conduct its
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business as currently conducted by it, and to enter into and perform
its obligations under the Master Servicing Agreement, and had at all
relevant times, and now has, the power, authority and legal right to
service the Trust Loans consistent with all applicable conditions,
restrictions and limitations of the federal Higher Education Act of
1965, as amended (the "HIGHER EDUCATION ACT").
(ii) The Master Servicing Agreement has been duly authorized,
executed and delivered by NMELC and is the legal, valid and binding
obligation of NMELC enforceable against NMELC in accordance with its
terms, except that (x) the enforceability thereof may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights and (y)
the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be
brought.
(iii) None of the execution and delivery by NMELC of the
Master Servicing Agreement, the consummation by NMELC of the
transactions contemplated therein, or the fulfillment of the terms
thereof by NMELC will conflict with, result in a breach, violation or
acceleration of, or constitute a default under, any term or provision
of the Certificate of Incorporation or Bylaws of NMELC or of any
indenture or other agreement or instrument to which NMELC is a party or
by which NMELC is bound, or result in a violation of or contravene the
terms of any statute, order or regulation applicable to NMELC of any
court, regulatory body, administrative agency or governmental body
having jurisdiction over NMELC.
(iv) There are no actions, proceedings or investigations
pending or, to the best of such counsel's knowledge after due inquiry
and reasonable investigation, threatened against NMELC before or by any
governmental authority that might materially and adversely affect the
performance by NMELC of its obligations under, or the validity or
enforceability of, the Master Servicing Agreement.
(v) Nothing has come to such counsel's attention that would
lead such counsel to believe that the representations and warranties of
the Master Servicer contained in the Master Servicing Agreement are
other than as stated therein.
(h) The Representative shall have received an opinion of
Richards, Layton & Finger and/or [__________], as special Delaware counsel for
the Trust, dated the Closing Date, in form and substance satisfactory to the
Representative and its counsel, to the effect that:
(i) The Trust Agreement constitutes the valid and binding
obligation of the Eligible Lender Trustee, the Delaware Trustee, NMELC
and NMF, enforceable against the Eligible Lender Trustee, the Delaware
Trustee, NMELC and NMF, in accordance with its terms subject to (i)
applicable bankruptcy, insolvency, moratorium, receivership,
reorganization, fraudulent conveyance and
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similar laws relating to and affecting the rights and remedies of
creditors generally, and (ii) principles of equity (regardless of
whether considered and applied in a proceeding in equity or at law).
(ii) The Trust has been duly formed and is validly existing as
a business trust under the Business Trust Act of the State of Delaware
(the "BUSINESS TRUST ACT"). The Trust Agreement authorizes the Trust to
execute and deliver the Trust Agreement, the Indenture, the Master
Servicing Agreement, the Loan Sale Agreement and the Administration
Agreement, and to issue the Notes and the Certificates and to grant the
Trust Estate to the Indenture Trustee as security for the Notes.
(iii) Except for the timely filing in the future of
continuation statements with respect to the financing statements, no
other filing is required in the State of Delaware in order to make
effective the lien of the Indenture. Insofar as Article 9 of the
Delaware Uniform Commercial Code, 6 Del. C. ss.9-101 ET SEQ. (the
"UCC"), applies (without regard to conflict of laws principles) and --
--- assuming that the security interest in that portion of the
Collateral that consists of general intangibles and accounts, as
defined under the UCC, has been duly created and has attached, the
Indenture Trustee has a perfected security interest in such general
intangibles and accounts and the proceeds thereof and, assuming that
the UCC search accurately lists all of the financing statements filed
naming the Trust as debtor and describing any portion of the Collateral
consisting of such general intangibles and accounts and the proceeds
thereof, such security interest of the Indenture Trustee will be prior
to the security interest of all other creditors of the Trust whose
security interests are perfected solely by filing UCC financing
statements in the State of Delaware, excluding purchase money security
interests underss.9-312 of the UCC and temporarily perfected security
interests in proceeds underss.9-306 of the UCC.
(iv) Under ss. 3805(b) of the Business Trust Act, no creditor
of NMF shall have any right to obtain possession of, or otherwise
exercise legal or equitable remedies with respect to, the property of
the Trust except in accordance with the terms of the Trust Agreement.
(v) Under ss. 3805(c) of the Business Trust Act, and assuming
that the Loan Sale Agreement conveys good title to the Initial Trust
Loans to the Trust as a true sale and not as a security arrangement,
the Trust rather than NMELC is the owner of the Initial Trust Loans.
(vi) The Delaware Trustee is not required to hold legal title
to the Trust Estate in order for the Trust to qualify as a business
trust under the Business Trust Act.
(vii) The execution and delivery by the Eligible Lender
Trustee or the Delaware Trustee of the Trust Agreement and, on behalf
of the Trust, of the Trust Agreement, the Indenture, the Master
Servicing Agreement, the Loan Sale
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Agreement and the Administration Agreement do not require any consent,
approval or authorization of, or any registration of filing with, any
governmental authority of the State of Delaware, except for the filing
of the Certificate of Trust with the Secretary of State.
(viii) Neither the consummation by the Eligible Lender Trustee
or the Delaware Trustee of the transactions contemplated in the Trust
Agreement or, on behalf of the Trust, the transactions contemplated in
the Trust Agreement, the Indenture, the Master Servicing Agreement, the
Loan Sale Agreement and the Administration Agreement nor the
fulfillment of the terms thereof by the Eligible Lender Trustee or the
Delaware Trustee will conflict with or result in a breach or violation
of any law of the State of Delaware.
(i) The Representative shall have received an opinion of The
Law Department of The First National Bank of Chicago, counsel to the Eligible
Lender Trustee, dated the Closing Date and satisfactory in form and substance to
the Representative and its counsel, to the effect that:
(i) The Eligible Lender Trustee is a national banking
association duly organized and validly existing under the laws of the
United States.
(ii) The Eligible Lender Trustee has the full corporate trust
power to accept the office of eligible lender trustee under the Trust
Agreement and to enter into and perform its obligations under the Trust
Agreement, the Master Servicing Agreement, the Loan Sale Agreement and
the Co-Trustee Agreement and, on behalf of the Trust, under the
Indenture, the Master Servicing Agreement, the Loan Sale Agreement, the
Administration Agreement and any Guarantee Agreement.
(iii) The execution and delivery of the Trust Agreement, the
Master Servicing Agreement, the Loan Sale Agreement and the Co-Trustee
Agreement by the Eligible Lender Trustee and the Indenture, the Master
Servicing Agreement, the Loan Sale Agreement, the Administration
Agreement and any Guarantee Agreement by the Eligible Lender Trustee on
behalf of the Trust, and the performance by the Eligible Lender Trustee
of its obligations under the Trust Agreement, the Master Servicing
Agreement, the Loan Sale Agreement and the Co-Trustee Agreement, as
well as the performance by the Eligible Lender Trustee of its
obligations on behalf of the Trust under the Indenture, the Master
Servicing Agreement, the Loan Sale Agreement, the Administration
Agreement and any Guarantee Agreement have been duly authorized by all
necessary action of the Eligible Lender Trustee and each has been duly
executed and delivered by the Eligible Lender Trustee.
(iv) The Trust Agreement, the Master Servicing Agreement, the
Loan Sale Agreement and the Co-Trustee Agreement constitute valid and
binding obligations of the Eligible Lender Trustee enforceable against
the Eligible Lender Trustee in accordance with their respective terms,
and the Indenture, the Master
11
<PAGE>
Servicing Agreement, the Loan Sale Agreement, the Administration
Agreement and any Guarantee Agreement constitute the valid and binding
obligations of the Trust enforceable against the Trust in accordance
with their respective terms, except in each case as the enforceability
thereof may be (a) limited by bankruptcy, insolvency, reorganization,
moratorium, liquidation or other similar laws affecting the rights of
creditors generally, and (b) subject to general principals of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(v) The execution and delivery by the Eligible Lender Trustee
of the Trust Agreement, the Master Servicing Agreement, the Loan Sale
Agreement and the Co-Trustee Agreement and by the Eligible Lender
Trustee on behalf of the Trust of the Indenture, the Master Servicing
Agreement, the Loan Sale Agreement, the Administration Agreement and
any Guarantee Agreement do not require any consent, approval or
authorization of, or any registration or filing with, any applicable
governmental authority which has not been obtained or done.
(vi) Each of the Securities has been duly executed and
delivered by the Eligible Lender Trustee on behalf of the Trust.
(vii) None of (x) the consummation by the Eligible Lender
Trustee of the transactions contemplated in the Trust Agreement, the
Master Servicing Agreement, the Loan Sale Agreement or the Co-Trustee
Agreement, (y) the consummation by the Trust of the transactions
contemplated in the Indenture, the Administration Agreement and any
Guarantee Agreement or (z) the fulfillment of the terms thereof by the
Eligible Lender Trustee or the Trust, as the case may be, will conflict
with, result in a breach or violation of, or constitute a default under
any law or the Articles of Association, Bylaws or other organizational
documents of the Eligible Lender Trustee or the terms of any indenture
or other agreement or instrument known to such counsel and to which the
Eligible Lender Trustee or any of its subsidiaries is a party or by
which it or any of them is bound or any judgment, order or decree known
to such counsel to be applicable to the Eligible Lender Trustee or any
of its subsidiaries, of any court, regulatory body, administrative
agency, governmental body or arbitrator having jurisdiction over the
Eligible Lender Trustee or any of its subsidiaries.
(viii) There are no actions, suits or proceedings pending or,
to the best of such counsel's knowledge after due inquiry, threatened
against the Eligible Lender Trustee (as eligible lender trustee under
the Trust Agreement or in its individual capacity) before or by any
governmental authority that might materially and adversely affect the
performance by the Eligible Lender Trustee of its obligations under, or
the validity or enforceability of, the Trust Agreement, the Master
Servicing Agreement, the Loan Sale Agreement or the Co-Trustee
Agreement.
(ix) The execution, delivery and performance by the Eligible
Lender Trustee of the Trust Agreement, the Master Servicing Agreement,
the Loan Sale
12
<PAGE>
Agreement and the Co-Trustee Agreement, and the execution, delivery and
performance by the Eligible Lender Trustee on behalf of the Trust of
the Indenture, the Master Servicing Agreement, the Loan Sale Agreement,
the Administration Agreement and any Guarantee Agreement will not
subject any of the property or assets of the Trust, or any portion
thereof, to any liens created by or arising under the Eligible Lender
Trustee that are unrelated to the transactions contemplated in such
agreements.
(j) The Representative shall have received an opinion of counsel to
FNBC acceptable to the Representative, dated the Closing Date and satisfactory
in form and substance to the Representative and its counsel, to the effect that:
(i) FNBC is a national banking association duly incorporated
or organized and validly existing under the laws of the United States.
(ii) The Loan Sale Agreement has been duly authorized by all
necessary action of FNBC and has been duly executed and delivered by
FNBC.
(iii) The Loan Sale Agreement constitutes a valid and binding
obligation of FNBC enforceable against FNBC in accordance with its
terms, except (x) that enforceability thereof may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights and (y)
the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be
brought.
(iv) The execution and delivery by FNBC of the Loan Sale
Agreement does not require any consent, approval or authorization of,
or any registration or filing with, any governmental authority having
jurisdiction over FNBC.
(v) FNBC is an "eligible lender" as such term is defined in
Section 435(d) of the Higher Education Act for purposes of holding
legal title to the Trust Loans.
(k) The Representative shall have received an opinion of [__________],
counsel to the Indenture Trustee, dated the Closing Date and satisfactory in
form and substance to the Representative and its counsel, to the effect that:
(i) The Indenture Trustee is a banking corporation validly
existing under the laws of the Commonwealth of Massachusetts.
(ii) The Indenture Trustee has the requisite power and
authority to execute, deliver and perform its obligations under the
Indenture and the Administration Agreement and has taken all necessary
action to authorize the execution, delivery and performance by it of
the Indenture and the Administration Agreement.
13
<PAGE>
(iii) Each of the Indenture and the Administration Agreement
has been duly executed and delivered by the Indenture Trustee and
constitutes a legal, valid and binding obligation of the Indenture
Trustee, enforceable against the Indenture Trustee in accordance with
its respective terms, except that such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium, liquidation, or
other similar laws applicable to banking corporations affecting the
enforcement of creditors' rights generally, and by general principles
of equity, including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(iv) The Notes have been duly authenticated by the Indenture
Trustee in accordance with the terms of the Indenture.
(l) The Representative shall have received an opinion of counsel
acceptable to the Representative of each Guarantor, dated the Closing Date, and
in form and substance satisfactory to the Representative and its counsel, to the
effect that:
(i) The Guarantor has been duly incorporated and is validly
existing as a non-profit corporation in good standing under the laws of
the State of its incorporation with full power and authority (corporate
and other) to own its properties and conduct its business, as currently
conducted by it, and to enter into and perform its obligations under
its Guarantee Agreement (and the agreements with the Department under
Section 428 of the Higher Education Act to the extent relevant to its
obligations under such Guarantee Agreement), and had at all relevant
times, and now has, the power, authority and legal right to guarantee
the Trust Loans covered by such Guarantee Agreement and to receive,
subject to compliance with all applicable conditions, restrictions and
limitations of the Higher Education Act and any rules and regulations
thereunder and interpretations thereof, reinsurance payments from the
Department with respect to claims paid by it on such Trust Loans.
(ii) The Guarantor is duly qualified to do business and is in
good standing, and has obtained all necessary licenses and approvals in
each jurisdiction in which failure to qualify or to obtain such license
or approval would render the Guarantor's obligation under its Guarantee
Agreement to guarantee the Trust Loans covered thereby unenforceable by
or on behalf of the Trust.
(iii) The Guarantor's Guarantee Agreement (and its agreements
with the Department under Section 428 of the Higher Education Act to
the extent relevant to the Guarantor's obligations under such Guarantee
Agreement) have been duly authorized, executed and delivered by the
Guarantor and are the legal, valid and binding obligation of the
Guarantor enforceable against the Guarantor in accordance with their
respective terms, except that (x) the enforceability thereof may be
subject to bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
and (y) the remedy of specific performance and injunctive and other
forms of equitable relief
14
<PAGE>
may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
(iv) None of the execution and delivery by the Guarantor of
its Guarantee Agreement, the consummation by the Guarantor of the
transactions contemplated therein, or the fulfillment of the terms
thereof by the Guarantor will conflict with, result in a breach,
violation or acceleration of, or constitute a default under, any terms
or provision of the organizational documents or bylaws of the Guarantor
or of any indenture or other agreement or instrument to which the
Guarantor is a party or by which the Guarantor is bound, or result in a
violation of or contravene the terms of any statute, order or
regulation applicable to the Guarantor of any court, regulatory body,
administrative agency or governmental body having jurisdiction over the
Guarantor.
(v) There are no actions, proceedings or investigations
pending or, to the best of such counsel's knowledge after due inquiry,
threatened against the Guarantor before or by any governmental
authority that might materially and adversely affect the performance by
the Guarantor of its obligations under, or the validity or
enforceability of, its Guarantee Agreement.
(vi) The Guarantor is a "guarantor" covered by the provisions
of Section 432(o) of the Higher Education Act.
(m) The Representative shall have received an opinion of Brown & Wood
LLP, in its capacity as special counsel to the several Underwriters, dated the
Closing Date and addressed to the several Underwriters, with respect to the
validity of the Notes and such other related matters as the Representative shall
reasonably require and NMELC shall have furnished or caused to be furnished to
such counsel such documents as they may reasonably request for the purpose of
enabling them to pass upon such matters.
(n) The Representative shall have received an opinion of Dean, Blakey &
Moskowitz, special student loan counsel to the several Underwriters or, in the
case of (iii) below, special student loan counsel to the Eligible Lender Trustee
and FNBC, dated the Closing Date, and satisfactory in form and substance to the
Representative and its counsel, to the effect that:
(i) The Basic Documents, and the transactions contemplated by
the Basic Documents, conform in all material respects to the applicable
requirements of the Higher Education Act, and that, upon the due
authorization, execution and delivery of the Basic Documents and the
consummation of such transactions, the Trust Loans, legal title to
which will be held by the Eligible Lender Trustee on behalf of the
Trust, will qualify, subject to compliance with all applicable
origination and servicing requirements with respect thereto, to receive
all applicable federal assistance payments, including federal
reinsurance and federal interest subsidies and special allowance
payments, with respect thereto.
(ii) To the extent that the statements in the Prospectus
purport to summarize or describe provisions of the Higher Education
Act, or constitute
15
<PAGE>
statements of matters of law or legal conclusions with respect to the
Higher Education Act, such statements have been prepared or reviewed by
such counsel and accurately describe the material consequences to
holders of the Securities under the Higher Education Act.
(iii) Such counsel has examined the Registration Statement and
the Prospectus, and nothing has come to such counsel's attention that
would lead such counsel to believe that, solely with respect to the
Higher Education Act and the student loan business, the Registration
Statement or the Prospectus or any amendment or supplement thereto as
of the respective dates thereof or on the Closing Date contains an
untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements therein not misleading.
(iv) Each of the Eligible Lender Trustee and the Indenture
Trustee is an "eligible lender" as such term is defined in Section
435(d) of the Higher Education Act for purposes of holding legal title
to the Trust Loans.
(v) Each of the Guarantors is a private non-profit Family
Federal Education Loan Program ("FFELP") guaranty agency (a "GUARANTY
AGENCY") covered by the provisions of Section 432(o) of the Higher
Education Act. In the event that the United States Secretary of
Education (the "SECRETARY") determines that a Guaranty Agency is unable
to meet its insurance obligations under Title IV-B of the Higher
Education Act, the Secretary is required by Section 432(o) of the
Higher Education Act to pay otherwise valid insurance claims submitted
directly to the Secretary by FFELP lenders on loans insured by such
Guaranty Agency in the full amount of the Guaranty Agency's insurance
obligation thereon and in accordance with insurance requirements no
more stringent than those of the Guaranty Agency.
(o) The Representative shall have received certificates dated the
Closing Date of any two of the Chairman of the Board, the President, any
Executive Vice President, Senior Vice President or Vice President, the
Treasurer, any Assistant Treasurer, the Secretary, the Assistant Secretary, the
principal financial officer or the principal accounting officer of NMELC in
which such officers shall state that, to the best of their knowledge after
reasonable investigation, (i) the representations and warranties of NMELC
contained in the Trust Agreement, the Loan Sale Agreement, the Administration
Agreement and the Master Servicing Agreement are true and correct in all
material respects, that each of NMELC has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied under such
agreements at or prior to the Closing Date, that no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been instituted or are contemplated by the Commission, and
(ii) since June 30, 1999, except as may be disclosed in the Prospectus or in
such certificate, no material adverse change, or any development involving a
prospective material adverse change, in or affecting particularly the business
or properties of the Trust, NMF or NMELC, as applicable, has occurred.
(p) The Representative shall have received evidence satisfactory to it
that, on or before the Closing Date, UCC-1 financing statements have been or are
being filed in the offices
16
<PAGE>
of the Secretaries of State of the States of Delaware, Massachusetts and Rhode
Island reflecting the transfer of the interest of NMELC in the Trust Loans to
the Eligible Lender Trustee on behalf of the Trust and the proceeds thereof to
the Trust and the grant of the security interest by the Trust in the Trust Loans
and the proceeds thereof to the Indenture Trustee.
(q) Each class of the Notes shall be rated [______] by the Rating
Agencies and neither Rating Agency shall have placed the Notes or the
Certificates under surveillance or review with possible negative implications.
(r) The issuance of the Notes and the Certificates shall not have
resulted in a reduction or withdrawal by either Rating Agency of the current
rating of any outstanding securities issued or originated by NMELC or any of its
affiliates.
NMELC will provide or cause to be provided to the
Representative such conformed copies of such of the foregoing opinions,
certificates, letters and documents as the Representative reasonably requests.
7. INDEMNIFICATION AND CONTRIBUTION. (a) NMELC and Nellie Mae
Corporation will indemnify and hold each Underwriter harmless against any
losses, claims, damages or liabilities to which such Underwriter may become
subject under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Registration Statement, the preliminary Base Prospectus, the Preliminary
Prospectus Supplement (if any), the Base Prospectus or the Prospectus or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse each Underwriter for any legal or other expenses reasonably incurred
by such Underwriter in connection with investigating or defending any such loss,
claim, damage, liability or action as such expenses are incurred; PROVIDED,
HOWEVER, that NMELC and Nellie Mae Corporation will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement in or omission
or alleged omission from any of such documents in reliance upon and in
conformity with written information furnished to NMELC by any Underwriter
specifically for use therein.
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless NMELC against any losses, claims, damages or liabilities to
which NMELC may become subject under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, the preliminary Base
Prospectus, the Preliminary Prospectus Supplement (if any), the Base Prospectus
or the Prospectus or any amendment or supplement thereto or arise out of or are
based upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information relating to such
Underwriter furnished to NMELC by such Underwriter through the Representative
specifically for use therein, and will reimburse any legal or other expenses
reasonably incurred by NMELC
17
<PAGE>
in connection with investigating or defending any such loss, claim, damage,
liability or action as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under
subsection (a) or (b) above, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under subsection (a) or (b) above. In case any such action is brought against
any indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof and approval by the indemnified party of the counsel appointed
by the indemnifying party, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. In no event shall the
indemnifying party be liable for fees and expenses for more than one counsel
separate from its own counsel for all indemnified parties in connection with any
one action or related actions in the same jurisdiction arising out of the same
general allegations or circumstances unless any such indemnified party shall
have been advised by such counsel that there may be one or more legal defenses
available to it which are different from or additional to or in conflict with
those available to the other indemnified parties and in the reasonable judgment
of such counsel it is advisable for such indemnified party to employ separate
counsel. An indemnifying party will not, without the prior written consent of
the indemnified party, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding.
(d) If the indemnification provided for in this Section is unavailable
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in subsection (a) or (b) above (i) in such proportion as
is appropriate to reflect the relative benefits received by NMELC on the one
hand and the Underwriters on the other from the offering of the Securities 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
NMELC on the one hand and the Underwriters on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities as well as any other relevant equitable considerations. The relative
benefits received by NMELC 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 (before deducting expenses) of the Securities received by NMELC bear to
the total underwriting discounts and commissions applicable to the Securities
18
<PAGE>
received by the Underwriters. The relative fault 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 NMELC or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any action or claim which is
the subject of this subsection (d). Notwithstanding the provisions of this
subsection (d), no Underwriter shall be required to contribute any amount in
excess of the amount by which the underwriting discount or commission applicable
to the Notes underwritten by it exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. The obligations of each of the Underwriters to
contribute are several in proportion to their respective underwriting
obligations and are not joint.
(e) The obligations of NMELC under this Section shall be in addition to
any liability which NMELC may otherwise have and shall extend, upon the same
terms and conditions, to each Person, if any, who controls any Underwriter
within the meaning of the Act or the Exchange Act; and the obligations of the
Underwriters under this Section shall be in addition to any liability which the
respective Underwriters may otherwise have and shall extend, upon the same terms
and conditions, to each director of NMELC, to each officer of NMELC who has
signed the Registration Statement and to each Person, if any, who controls NMELC
within the meaning of the Act or the Exchange Act.
8. DEFAULT OF UNDERWRITERS. If any Underwriter participating in the
offering of the Securities defaults in its obligation hereunder to purchase the
aggregate principal amounts of the Securities set forth in Schedule I hereto and
the aggregate principal amount of such Securities which such defaulting
Underwriter agreed, but failed, to purchase does not exceed 10% of the total
principal amount of the Securities, the Representative may make arrangements
satisfactory to NMELC for the purchase of such Securities by other Persons, but
if no such arrangements are made within a period of 36 hours after the Closing
Date, the non-defaulting Underwriters shall be obligated, in proportion to their
respective total commitment hereunder, to purchase the Securities which such
defaulting Underwriter agreed but failed to purchase. If any Underwriter so
defaults and the aggregate principal amount of Securities with respect to which
such default occurs is more than 10% of the total principal amount of the
Securities and arrangements satisfactory to the Representative and NMELC for the
purchase of such Securities by other Persons are not made within 36 hours after
such default, this Agreement will terminate without liability on the part of the
non-defaulting Underwriters or NMELC, except as provided in Section 9. As used
in this Agreement, the term "Underwriter" includes any Person substituted for
any Underwriter under this Section. Nothing herein will relieve a defaulting
Underwriter from liability for its default.
9. SURVIVAL OF REPRESENTATIONS AND OBLIGATIONS. The respective
indemnities, agreements, representations, warranties and other statements of
NMELC or its officers and of the
19
<PAGE>
several Underwriters set forth in or made pursuant to this Agreement or
contained in certificates of officers of NMELC submitted pursuant hereto shall
remain operative and in full force and effect, regardless of any investigation
or statement as to the results thereof, made by or on behalf of any Underwriter,
NMELC or any of their respective representatives, officers or directors or any
controlling Person, and will survive delivery of and payment for the Securities.
If for any reason the purchase of the Securities by the Underwriters is not
consummated, NMELC shall remain responsible for the expenses to be paid or
reimbursed by NMELC pursuant to Section 5 hereof and the respective obligations
of NMELC and the Underwriters pursuant to Section 7 hereof shall remain in
effect. If for any reason the purchase of the Securities by the Underwriters is
not consummated (other than because of a failure to satisfy the conditions set
forth in items (iii), (v) and (vi) of Section 6(c) hereof), NMELC will reimburse
the Underwriters for all out-of-pocket expenses (including fees and
disbursements of counsel) reasonably incurred by them in connection with the
offering of the Securities.
10. NOTICES. All communications hereunder will be in writing and, if
sent to the Underwriters, will be mailed, delivered or telecopied and confirmed
to the Representative at 388 Greenwich Street, 32nd Floor, New York, New York
10013, Attention: Student Loan Group; if sent to NMELC, will be mailed,
delivered or telecopied, and confirmed to NMELC at Nellie Mae Education Loan
Corporation at 1240 Pawtucket Avenue, Rumford, Rhode Island 02916, with a copy
to the Office of the General Counsel, Nellie Mae Corporation, 50 Braintree Hill
Park, Suite 300, Braintree, Massachusetts 01284, Attention: General Counsel;
PROVIDED, HOWEVER, that any notice to an Underwriter pursuant to Section 7
hereof will be mailed, delivered or telecopied and confirmed to such
Underwriter. Any such notice will take effect at the time of receipt.
11. SUCCESSORS. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling Persons referred to in Section 7 hereof, and no
other Person will have any right or obligations hereunder.
12. REPRESENTATION OF UNDERWRITERS. The Representative shall act for
the several Underwriters in connection with this financing, and any action taken
by the Representative will be binding upon all the Underwriters.
13. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. APPLICABLE LAW. This Agreement will be governed by, and construed
in accordance with, the laws of the State of New York without regard to the
conflicts of law principles thereof.
20
<PAGE>
If the foregoing is in accordance with the Representative's
understanding of our agreement, kindly sign and return to us one of the
counterparts hereof, whereupon it will become a binding agreement between NMELC
and the several Underwriters in accordance with its terms.
Very truly yours,
NELLIE MAE EDUCATION LOAN CORPORATION
By:
------------------------------------------
Name:
Title:
The foregoing Underwriting
Agreement is hereby
confirmed and accepted as
of the date first written
above.
[Name of Representative]
Acting on behalf of itself and as
Representative of the several Underwriters
By:
---------------------------------------
Name:
Title:
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
UNDERWRITER CLASS A-1 NOTES CLASS A-2 NOTES CERTIFICATES
<S> <C> <C> <C>
[Name of Representative]................................. $ $ $
Price to Public.......................................... 100.00% 100.00% 100%
Underwriting Discount and Commissions.................... % % %
Purchase Price........................................... $ $ $
</TABLE>
<PAGE>
APPENDIX A
[See Appendix A to the Administration Agreement]
B-1
<PAGE>
Exhibit 3.1
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "NELLIE MAE EDUCATION LOAN CORPORATION", FILED IN THIS
OFFICE ON THE THIRD DAY OF JUNE, A.D. 1998, AT 9 O'CLOCK A.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS.
[SEAL] /s/ Edward J. Freel
---------------------------------------
Edward J. Freel, Secretary of State
2904058 8100 AUTHENTICATION: 9115294
981213823 DATE: 06-03-98
<PAGE>
CERTIFICATE OF INCORPORATION
OF
NELLIE MAE EDUCATION LOAN CORPORATION
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes
hereinafter stated, under the provisions and subject to the requirements of
the laws of the State of Delaware (particularly Chapter 1, Title 8 of the
Delaware Code and the acts amendatory thereof and supplemental thereto, and
known, identified and referred to as the "General Corporation Law of the
State of Delaware"), hereby certifies that:
FIRST: The name of the corporation (hereinafter called the
"Corporation") is
NELLIE MAE EDUCATION LOAN CORPORATION.
SECOND: The address, including street, number, city, and county, of the
registered office of the Corporation in the state of Delaware is 1013 Centre
Road, City of Wilmington, County of New Castle; and the name of the
registered agent of the Corporation in the State of Delaware is The
Prentice-Hall Corporation System, Inc.
THIRD: The nature of the business to be conducted and the purposes of
the Corporation are:
To maintain and manage the intangible investments of the Corporation and
its affiliates and to collect and distribute the income from such investments;
To make and perform agreements and contracts of every kind and
description; and
Generally to engage in any lawful act or activity or carry out any
business for which corporations may be organized under the Delaware General
Corporation Law or any successor statute.
FOURTH:
The total number of shares of all classes of stock which the Corporation
shall have authority to issue is Three Thousand (3,000), consisting of 3,000
shares of Common Stock, Zero Dollars and One Cent ($0.01) Par Value per share
(the "Common Stock").
<PAGE>
FIFTH: The name and mailing address of the sole incorporator is as
follows:
Name Mailing Address
---- ---------------
Ann M. O'Rourke Nellie Mae Inc.
50 Braintree Hill Park
Braintree, MA 02184
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: For the management of the business and for the conduct of the
affairs of the Corporation, and in further definition and not in limitation
of the powers of the Corporation and of its directors and of its stockholders
or any class thereof, as the case may be, conferred by the State of Delaware,
it is further provided that:
A. The management of the business and the conduct of the affairs of the
Corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be fixed
by, or in the manner provided in, the By-Laws. The phrase "whole Board" and
the phrase "total number of directors" shall be deemed to have the same
meaning, to wit, the total number of directors which the Corporation would
have if there were no vacancies. No election of directors need be by written
ballot.
B. After the original or other By-Laws of the Corporation have been
adopted, amended or repealed, as the case may be, in accordance with the
provisions of Section 109 of the General Corporation Law of the State of
Delaware, and, after the Corporation has received any payment for any of its
stock, the power to adopt, amend, or repeal the By-Laws of the Corporation
may be exercised by the Board of Directors of the Corporation.
C. The books of the Corporation may be kept at such place within or
without the State of Delaware as the By-Laws of the Corporation may provide
or as may be designated from time to time by the Board of Directors of the
Corporation.
EIGHTH: The Corporation shall, to the fullest extent permitted by
Section 145 of the General Corporation Law of the State of Delaware, as the
same may be amended and supplemented from time to time, indemnify and advance
expenses to, (i) its directors and officers, and (ii) any person who at the
request of the Corporation is or was serving as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, from and against any and all of the expenses, liabilities, or
other matters referred to in or covered by said section as amended or
supplemented (or any successor), provided, however, that except with respect
to proceedings to enforce rights to indemnification, the By-Laws of the
Corporation may provide that the Corporation shall indemnify any director,
officer or such person in connection with a proceeding (or part thereof)
initiated by such director, officer or such person only if such proceeding
(or part thereof) was authorized by the Board of Directors of the
Corporation. The Corporation, by action of its Board of Directors,
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may provide indemnification or advance expenses to employees and agents of
the Corporation or other persons only on such terms and conditions and to the
extent determined by the Board of Directors in its sole and absolute
discretion. The indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled
under any By-Law, agreement, vote of stockholders or disinterested directors
or otherwise, both as to action in their official capacity and as to action
in another capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer, employee, or agent and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
NINTH: No director of this Corporation shall be personally liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director except to the extent that exemption from
liability or limitation thereof is not permitted under the General
Corporation Law of the State of Delaware as in effect at the time such
liability or limitation thereof is determined. No amendment, modification or
repeal of this Article shall apply to or have any effect on the liability or
alleged liability of any director of the Corporation for or with respect to
any acts or omissions of such director occurring prior to such amendment,
modification or repeal. If the General Corporation Law of the State of
Delaware is amended after approval by the stockholders of this Article to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the General
Corporation Law of the State of Delaware, as so amended.
TENTH: Whenever a compromise or arrangement is proposed between
this Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction with the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for this Corporation under the provisions of Section 279 of Title 8
of the Delaware Code, order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation, as
the case may be, to be summoned in such manner as the said court directs. If
a majority in number representing three-fourths (3/4) in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to any compromise
or arrangement and to any reorganization of this Corporation as consequence
of such compromise or arrangement, the said compromise or arrangement and the
said reorganization shall, if sanctioned by the court to which the said
application has been made, be binding on all the creditors or class of
creditors, and/or on all the stockholders or class of stockholders, of this
Corporation, as the case may be, and also on this Corporation.
ELEVENTH: From time to time any of the provisions of this
Certificate of Incorporation may be amended, altered or repealed, and other
provisions authorized by the laws of the State of Delaware at the time in
force may be added or inserted in the manner and at the time prescribed by
said laws, and all rights at any time conferred upon the stockholders of the
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Corporation by this Certificate of Incorporation are granted subject to the
provisions of this Article.
I, the undersigned, being the sole incorporator, for the purpose of
forming a Corporation under the laws of the State of Delaware, do make, file
and record this Certificate of Incorporation, to certify that the facts
herein stated are true, and accordingly have hereto set my hand this 2nd day
of June, 1998.
/s/ Ann M. O'Rourke
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Ann M. O'Rourke
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Exhibit 3.2
NELLIE MAE EDUCATION LOAN CORPORATION
BY-LAWS
ARTICLE I--STOCKHOLDERS
SECTION 1. ANNUAL MEETING.
An annual meeting of the stockholders, for the election of directors to
succeed those whose terms expire and for the transaction of such other
business as may properly come before the meeting, shall be held at ten
o'clock a.m. or such other time as is determined by the Board of Directors,
on the fourth Wednesday in March or on such date (other than a Saturday,
Sunday or legal holiday) as is determined by the Board of Directors, which
date shall be within thirteen (13) months subsequent to the later of the date
of incorporation or the last annual meeting of stockholders, and at such
place as the Board of Directors shall each year fix.
SECTION 2. SPECIAL MEETINGS.
Subject to the rights of the holders of any class or series of
preferred stock of the Corporation, special meetings of stockholders of the
Corporation may be called only by the Board of Directors pursuant to a
resolution adopted by a majority of the total number of directors authorized.
Special meetings of the stockholders may be held at such place within or
without the State of Delaware as may be stated in such resolution.
SECTION 3. NOTICE OF MEETINGS.
Written notice of the place, date, and time of all meetings of the
stockholders shall be given, not less than ten (10) nor more than sixty (60)
days before the date on which the meeting is to be held, to each stockholder
entitled to vote at such meeting, except as otherwise provided herein or
required by law (meaning, here and hereinafter, as required from time to time
by the Delaware General Corporation Law or the Certificate of Incorporation).
When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date and time
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than
thirty (30) days after the date for which the meeting was originally noticed,
or if a new record date is fixed for the adjourned meeting, written notice of
the place, date, and time of the adjourned meeting shall be given in
conformity herewith. At any adjourned meeting, any business may be transacted
which might have been transacted at the original meeting.
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SECTION 4. QUORUM.
At any meeting of the stockholders, the holders of a majority of all of
the shares of the stock entitled to vote at the meeting, present in person or
by proxy, shall constitute a quorum for all purposes, unless or except to the
extent that the presence of a larger number may be required by law. Where a
separate vote by a class or classes is required, a majority of the shares of
such class or classes present in person or represented by proxy shall
constitute a quorum entitled to take action with respect to that vote on that
matter.
If a quorum shall fail to attend any meeting, the chairman of the
meeting or the holders of a majority of the shares of stock entitled to vote
who are present, in person or by proxy, may adjourn the meeting to another
place, date, or time.
SECTION 5. ORGANIZATION.
The Chairman of the Board of Directors or, in his or her absence, such
person as the Board of Directors may have designated or, in his or her
absence, the chief executive officer of the Corporation or, in his or her
absence, such person as may be chosen by the holders of a majority of the
shares entitled to vote who are present, in person or by proxy, shall call to
order any meeting of the stockholders and act as chairman of the meeting. In
the absence of the Secretary of the Corporation, the secretary of the meeting
shall be such person as the chairman of the meeting appoints.
SECTION 6. CONDUCT OF BUSINESS.
The Chairman of the Board of Directors or his or her designee or, if
neither the Chairman of the Board nor his or her designee is present at the
meeting, then a person appointed by a majority of the Board of Directors,
shall preside at, and act as chairman of, any meeting of the stockholders.
The chairman of any meeting of stockholders shall determine the order of
business and the procedures at the meeting, including such regulation of the
manner of voting and the conduct of discussion as he or she deems to be
appropriate.
SECTION 7. PROXIES AND VOTING.
At any meeting of the stockholders, every stockholder entitled to vote
may vote in person or by proxy authorized by an instrument in writing filed
in accordance with the procedure established for the meeting.
Each stockholder shall have one (1) vote for every share of stock
entitled to vote which is registered in his or her name on the record date
for the meeting, except as otherwise provided herein or required by law.
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All voting, including on the election of directors but excepting where
otherwise required by law, may be by a voice vote; provided, however, that upon
demand therefor by a stockholder entitled to vote on his or her proxy, a vote
by ballot shall be taken.
Except as otherwise provided in the terms of any class or series of
preferred stock of the Corporation, all elections shall be determined by a
plurality of the votes cast, and except as otherwise required by law, all
other matters shall be determined by a majority of the votes cast.
SECTION 8. ACTION WITHOUT MEETING.
Any action required to be taken at any annual or special meeting of
stockholders, or any action which may be taken at any annual or special
meeting of such stockholders, may be taken without a meeting, without prior
notice or without a vote, if a consent or consents in writing, setting forth
the action so taken, shall be (1) signed and dated by the holders of
outstanding stock having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all
shares entitled to vote thereon were present and voted and (2) delivered to
the Corporation within sixty (60) days of the earliest dated consent by
delivery to its registered office in the State of Delaware (in which case
delivery shall be by hand or by certified or registered mail, return receipt
requested), its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded.
Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing and who, if the action had been taken at a
meeting, would have been entitled to notice of the meeting if the record date
for such meeting had been the date that the written consents signed by a
sufficient number of holders to take the action were delivered to the
Corporation as provided in the Section 8.
SECTION 9. STOCK LIST.
A complete list of stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and
showing the address of each such stockholder and the number of shares
registered in his or her name, shall be open to the examination of any such
stockholder, for any purpose germane to the meeting, during ordinary business
hours for a period of at least ten (10) days prior to the meeting, either at
a place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or if not so specified, at the place
where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during the
whole time thereof and shall be open to the examination of any such
stockholder who is present. Such list shall presumptively determine the
identity of the stockholders entitled to vote at the meeting and the number
of shares held by each of them.
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ARTICLE II--BOARD OF DIRECTORS
SECTION 1. NUMBER, ELECTION, TENURE AND QUALIFICATION.
The number of directors which shall constitute the whole board shall be
determined by resolution of the Board of Directors or by the stockholders at
the annual meeting or at any special meeting of stockholders. A majority of
directors shall be elected by the Senior Preferred stockholders at such time
as the Senior Preferred Stockholders represent a majority of the total issued
and outstanding shares. The directors shall be elected at the annual meeting
or at any special meeting of the stockholders, except as provided in Section
2 of this Article, and each director elected shall hold office until his or
her successor is elected and qualified, unless sooner displaced. Directors
need not be stockholders.
SECTION 2. VACANCIES AND NEWLY CREATED DIRECTORSHIPS.
Subject to the rights of the holders of any class or series of
preferred stock of the Corporation to elect directors, newly created
directorships resulting from any increase in the authorized number of
directors or any vacancies in the Board of Directors resulting from death,
resignation, retirement, disqualification, removal from office or other cause
may be filed only by a majority vote of the directors then in office, though
less than a quorum, or the sole remaining director. No decrease in the number
of authorized directors constituting the Board of Directors shall shorten the
term of any incumbent director.
SECTION 3. RESIGNATION AND REMOVAL.
Any director may resign at any time upon written notice to the
Corporation at its principal place of business or to the chief executive
officer or secretary. Such resignation shall be effective upon receipt unless
it is specified to be effective at some other time or upon the happening of
some other event. Any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of the shares
then entitled to vote at an election of directors, unless otherwise specified
by law or the Certificate of Incorporation.
SECTION 4. REGULAR MEETINGS.
Regular meetings of the Board of Directors shall be held at such place
or places, on such date or dates, and at such time or times as shall have
been established by the Board of Directors and publicized among all
directors. A written notice of each regular meeting shall not be required.
SECTION 5. SPECIAL MEETINGS.
Special meetings of the Board of Directors may be called by the
Chairman of the Board of Directors, if any, the President, the Treasurer, the
Secretary or one or more of the directors then in office and shall be held at
such place, on such date, and at such time as they or he or she shall fix.
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Notice of the place, date, and time of each such special meeting shall be
given each director by whom it is not waived by mailing written notice not
less than three (3) days before the meeting of orally, by telegraph, telex,
cable or telecopy given not less than twenty-four (24) hours before the
meeting. Unless otherwise indicated in the notice thereof, any and all
business may be transacted at a special meeting.
SECTION 6. QUORUM.
At any meeting of the Board of Directors, a majority of the total
number of members of the Board of Directors shall constitute a quorum for all
purposes. If a quorum shall fail to attend any meeting, a majority of those
present may adjourn the meeting to another place, date, or time, without
further notice or waiver thereof.
SECTION 7. ACTION BY CONSENT.
Unless otherwise restricted by the Certificate of Incorporation or
these By-Laws, any action required or permitted to be taken at any meeting of
the Board of Directors or of any committee thereof may be taken without a
meeting, if all members of the Board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committee.
SECTION 8. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE.
Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other and such participation shall
constitute presence in person at such meeting.
SECTION 9. CONDUCT OF BUSINESS.
At any meeting of the Board of Directors, business shall be transacted
in such order and manner as the Board may from time to time determine, and
all matters shall be determined by the vote of a majority of the directors
present, except as otherwise provided herein or required by law.
SECTION 10. EXECUTIVE COMMITTEE.
The Board of Directors may elect from their own number an executive
committee of two (2) members, one of whom shall be the chairman ex officio.
The members of the executive committee shall hold office at the pleasure of
the board, and all vacancies in the executive committee shall be filled by
the Board.
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When the Board of Directors is not in session, the executive committee
shall be vested with all the powers of the Board. The executive committee
shall have no power to elect or remove directors or officers.
A majority of the executive committee shall constitute a quorum for the
transactions of business; but a smaller number may adjourn any meeting from
time to time, and the meeting may be held as adjourned without further
notice. The executive committee may make rules not inconsistent herewith for
the holding and conduct of its meetings, which may be held either within or
without the State of Delaware.
The Board of Directors shall have the power to rescind any vote or
resolution or rule of the executive committee, but no such rescission shall
have retroactive effect.
SECTION 11. POWERS.
The Board of Director may, except as otherwise required by law, exercise
all such powers and do all such acts and things as may be exercised or done
by the Corporation, including, without limiting the generality of the
foregoing, the unqualified power:
(1) To declare dividends from time to time in accordance with law;
(2) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such form as
it may determine, of written obligations of every kind,
negotiable or non-negotiable, secured or unsecured, to borrow
funds and guarantee obligations, and to do all things
necessary in connection therewith;
(4) To remove any officer of the Corporation with or without
cause, and from time to time to devolve the powers and duties
of any officer upon any other person for the time being;
(5) To delegate any of its powers to committees, officers, board
of advisors, attorneys or agents of the corporation, subject
to such limitations as the board of directors may impose.
(6) To confer upon any officer of the Corporation the power to
appoint, remove and suspend, subordinate officers, employees
and agents;
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(7) To adopt from time to time such stock option, stock purchase,
bonus or other compensation plans for directors, officers,
employees and agents of the Corporation and its subsidiaries
as it may determine;
(8) To adopt from time to time such insurance, retirement, and
other benefit plans for directors, officers, employees and
agents of the Corporation and its subsidiaries as it may
determine; and,
(9) To adopt from time to time regulations, not inconsistent with
these By-Laws, for the management of the Corporation's
business and affairs.
SECTION 12. COMPENSATION OF DIRECTORS.
Directors, as such, may receive, pursuant to a resolution of the Board
of Directors, fixed fees and other compensation for their services as
directors including, without limitation, their services as members of
committees of the Board of Directors.
ARTICLE III - COMMITTEES
SECTION 1. COMMITTEES OF THE BOARD OF DIRECTORS.
The Board of Directors, by a vote of a majority of the Board of
Directors, may from time to time designate committees of the Board, with such
lawfully delegable powers and duties as it thereby confers, to serve at the
pleasure of the Board and shall, for those committees and any others provided
for herein, elect a director or directors to serve as the member or members,
designating, if it desires, other directors as alternate members who may
replace any absent or disqualified member at any meeting of the committee.
Any such committee, to the extent provided in the resolution of the Board of
Directors, shall have and may exercise all the powers and authority of the
Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to
all papers which may require it; but no such committee shall have the power
or authority in reference to amending the Certificate of Incorporation,
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, or amending
the By-Laws of the Corporation. Any committee so designated may exercise the
power and authority of the Board of Directors to declare a dividend, to
authorize the issuance of stock or to adopt a certificate of ownership and
merger pursuant to Section 253 of the Delaware General Corporation Law if the
resolution which designates the committee or a supplemental resolution of the
Board of Directors shall so provide. In the absence or disqualification of
any member of any committee and any alternate member in his or her place, the
member or members of the committee present at the meeting and not
disqualified from voting, whether or not he or she or they constitute a
quorum.
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may by unanimous vote appoint another member of the Board of Directors to act
at the meeting in the place of the absent or disqualified member.
SECTION 2. CONDUCT OF BUSINESS.
Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be
made for notice to members of all meetings; one-third (1/3) of the members
shall constitute a quorum; and all matters shall be determined by a majority
vote of the members present. Action may be taken by any committee without a
meeting if all members thereof consent thereto in writing, and the writing or
writings are filed with the minutes of the proceedings of such committee.
ARTICLE IV - OFFICERS
SECTION 1. ENUMERATION.
The officers of the Corporation shall be the President, the Treasurer,
the Secretary and such other officers as the Board of Directors or the
Chairman of the Board may determine, including, but not limited to, the
Chairman of the Board of Directors, one or more Vice Presidents, Assistant
Treasurers and Assistant Secretaries.
SECTION 2. ELECTION.
The Chairman of the Board, if any, the President, the Treasurer and the
Secretary shall be elected annually by the Board of Directors at their first
meeting following the annual meeting of the stockholders. The Board of
Directors or the Chairman of the Board, if any, may, from time to time, elect
or appoint such other officers as it or he or she may determine, including,
but not limited to, one or more Vice Presidents, Assistant Treasurers and
Assistant Secretaries.
SECTION 3. QUALIFICATION.
No officer need be a stockholder. The Chairman of the Board, if any, and
any Vice Chairman appointed to act in the absence of the Chairman, if any,
shall be elected by and from the Board of Directors, but no other officer
need be a director. Two or more offices may be held by any one person. If
required by vote of the Board of Directors, an officer shall give bond to the
Corporation for the faithful performance of his or her duties, in such form
and amount and with such sureties as the Board of Directors may determine.
The premiums for such bonds shall be paid by the Corporation.
SECTION 4. TENURE AND REMOVAL.
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Each officer elected or appointed by the Board of Directors shall hold
office until the first meeting of the Board of Directors following the next
annual meeting of the stockholders and until his or her successor is elected
or appointed and qualified, or until he or she dies, resigns, is removed or
becomes disqualified, unless a shorter term is specified in the vote electing
or appointing said officer. Each officer appointed by the Chairman of the
Board, if any, shall hold office until his or her successor is elected or
appointed and qualified, or until he or she dies, resigns, is removed or
becomes disqualified, unless a shorter term is specified by any agreement or
other instrument appointing such officer. Any officer may resign by giving
written notice of his or her resignation to the Chairman of the Board, if
any, the President, or the Secretary, or to the Board of Directors at a
meeting of the Board, and such resignation shall become effective at the time
specified therein. Any officer elected or appointed by the Board of Directors
may be removed from office with or without cause by vote of a majority of the
directors. Any officer appointed by the Chairman of the Board, if any, may be
removed with or without cause by the Chairman of the Board.
SECTION 5. CHAIRMAN OF THE BOARD.
The Chairman of the Board, if any, shall preside at all meetings of the
Board of Directors and stockholders at which he or she is present and shall
have such authority and perform such duties as may be prescribed by these
By-Laws or from time to time be determined by the Board of Directors. The
Chairman of the Board shall also have the power and authority to determine
the compensation and duties of all officers, employees and agents of the
Corporation.
SECTION 6. PRESIDENT.
The President shall, subject to the control and direction of the Board
of Directors, have and perform such powers and duties as may be prescribed by
these By-Laws or from time to time be determined by the Board of Directors.
SECTION 7. VICE PRESIDENTS.
The Vice Presidents, if any, in the order of their election, or in such
other order as the Board of Directors may determine, shall have and perform
the powers and duties of the President (or such of the powers and duties as
the Board of Directors may determine) whenever the President is absent or
unable to act. The Vice Presidents, if any, shall also have such other powers
and duties as may from time to time be determined by the Board of Directors.
SECTION 8. TREASURER AND ASSISTANT TREASURERS.
The Treasurer shall, subject to the control and direction of the Board
of Directors, have and perform such powers and duties as may be prescribed in
these By-Laws or be determined from time to time by the Board of Directors.
All property of the Corporation in the custody of the Treasurer shall be
subject at all times to the inspection and control of the Board of Directors.
Unless otherwise voted by the Board of Directors, each Assistant Treasurer,
if any, shall have and perform
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the powers and duties of the Treasurer whenever the Treasurer is absent or
unable to act, and may at any time exercise such of the powers of the
Treasurer, and such other powers and duties, as may from time to time be
determined by the Board of Directors.
SECTION 9. SECRETARY AND ASSISTANT SECRETARIES.
The Board of Directors shall appoint a Secretary and, in his or her
absence, an Assistant Secretary. The Secretary or, in his or her absence, any
Assistant Secretary, shall attend all meetings of the directors and shall
record all votes of the Board of Directors and minutes of the proceedings at
such meetings. The Secretary or, in his or her absence, any Assistant
Secretary, shall notify the directors of their meetings, and shall have and
perform such other powers and duties as may from time to time be determined
by the Board of Directors. If the Secretary or an Assistant Secretary is
elected but is absent from any meeting of directors, a temporary secretary
may be appointed by the directors at the meeting.
SECTION 10. BOND.
If required by the Board of Directors, any officer shall give the
Corporation a bond in such sum and with such surety or sureties and upon such
terms and conditions as shall be satisfactory to the Board of Directors,
including without limitation a bond for the faithful performance of the
duties of his office and for the restoration to the Corporation of all
books, papers, vouchers, money and other property of whatever kind in his or
her possession or under his control and belonging to the Corporation.
SECTION 11. ACTION WITH RESPECT TO SECURITIES OF OTHER CORPORATIONS.
Unless otherwise directed by the Board of Directors, the President, the
Treasurer or any officer of the Corporation authorized by the President shall
have power to vote and otherwise act on behalf of the Corporation, in person
or by proxy, at any meeting of stockholders of or with respect to any action
of stockholders of any other corporation in which this Corporation may hold
securities and otherwise to exercise any and all rights and powers which this
Corporation may possess by reason of its ownership of securities in such
other corporation.
ARTICLE V - STOCK
SECTION 1. CERTIFICATES OF STOCK.
Each stockholder shall be entitled to a certificate signed by, or in the
name of the Corporation by the Chairman of the Board of Directors, or the
President or a Vice President, and by the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary, certifying the number
of shares owned by him or her. Any or all of the signatures on the
certificate may be by facsimile.
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SECTION 2. TRANSFERS OF STOCK
Transfers of stock shall be made only upon the transfer books of the
Corporation kept at an office of the Corporation or by transfer agents
designated to transfer shares of the stock of the Corporation. Except where a
certificate is issued in accordance with Section 4 of this Article of these
By-Laws, an outstanding certificate for the number of shares involved shall
be surrendered for cancellation before a new certificate is issued therefor.
SECTION 3. RECORD DATE.
In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders, or to receive payment of
any dividend or other distribution or allotment of any rights or to exercise
any rights in respect of any change, conversion or exchange of stock or for
the purpose of any other lawful action, the Board of Directors may fix a
record date, which record date shall not precede the date on which the
resolution fixing the record date is adopted and which record date shall not
be more than sixty (60) nor less than ten (10) days before the date of any
meeting of stockholders, nor more than sixty (60) days prior to the time for
such other action as hereinbefore described; provided, however, that if no
record date is fixed by the Board of Directors, the record date for
determining stockholders entitled to notice of or to vote as a meeting of
stockholders shall be at the close of business on the day next preceding the
day on which notice is given or, if notice is waived, at the close of
business on the day next preceding the day on which the meeting is held, and,
for determining stockholders entitled to receive payment of any divided or
other distribution or allotment of rights or to exercise any rights of
change, conversion or exchange of stock or for any other purpose, the record
date shall be at the close of business on the day on which the Board of
Directors adopts a resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at the meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
SECTION 4. LOST, STOLEN OR DESTROYED CERTIFICATES.
In the event of the loss, theft or destruction of any certificate of
stock, another may be issued in its place pursuant to such regulations as the
Board of Directors may establish concerning proof of such loss, theft or
destruction and concerning the giving of a satisfactory bond or bonds of
indemnity.
SECTION 5. REGULATIONS.
The issue, transfer, conversion and registration of certificates of
stock shall be governed by such other regulations as the Board of Directors
may establish.
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<PAGE>
SECTION 6. INTERPRETATION.
The Board of Directors shall have the power to interpret all of the
terms and provisions of these By-Laws, which interpretation shall be
conclusive.
ARTICLE VI - NOTICES
SECTION 1. NOTICES.
Except as otherwise specifically provided herein or required by law, all
notices required to be given to any stockholder, director, officer, employee
or agent shall be in writing and may in every instance be effectively given
by hand delivery to the recipient thereof, by depositing such notice in the
mail, postage paid, or by sending such notice by courier service, prepaid
telegram or mailgram, or telecopy, cable, or telex. Any such notice shall be
addressed to such stockholder, director, officer, employee or agent at his or
her last known address as the same appears on the books of the Corporation.
The time when such notice is received, if hand delivered, or dispatched, if
delivered through the mail or by courier, telegram, mailgram, telecopy,
cable, or telex shall be the time of the giving of the notice.
SECTION 2. WAIVER OF NOTICE.
A written waiver of any notice, signed by a stockholder, director,
officer, employee or agent, whether before or after the time of the event for
which notice is to be given, shall be deemed equivalent to the notice
required to be given to such stockholder, director, officer, employee or
agent. Neither the business nor the purpose of any meeting need be specified
in such a waiver. Attendance of a director or stockholder at a meeting
without protesting prior thereto or at its commencement the lack of notice
shall also constitute a waiver of notice by such director or stockholder.
ARTICLE VII - INDEMNIFICATION
SECTION 1. ACTIONS OTHER THAN BY OR IN THE RIGHT OF THE CORPORATION.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party 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 the Corporation) by reason of the
fact that he or she is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred
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<PAGE>
by him or her in connection with such action, suit or proceeding if he or she
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the Corporation, and, with respect to
any criminal action or proceedings, had no reasonable cause to believe his or
her conduct was unlawful. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction, or upon a plea of NOLO CONTENDERE
or its equivalent, shall not, of itself, create a presumption that the person
did not act in good faith and in a manner which he or she reasonably believed
to be in or not opposed to the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had reasonable cause to believe
that his or her conduct was unlawful.
SECTION 2. ACTIONS BY OR IN THE RIGHT OF THE CORPORATION.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the Corporation to procure a judgment in its
favor by reason of the fact that he or she is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him
or her in connection with the defense or settlement of such action or suit
if he acted in good faith and in a manner he or she reasonably believed to be
in or not opposed to the best interests of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of the State of
Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of
Chancery of the State of Delaware or such other court shall deem proper.
SECTION 3. SUCCESS ON THE MERITS.
To the extent that any person described in Section 1 or Section 2 of
this Article has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in said Sections, or in defense of any
claim, issue or matter therein, he or she shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him
or her in connection therewith.
SECTION 4. SPECIFIC AUTHORIZATION.
Any indemnification under Section 1 or Section 2 of this Article (unless
ordered by a court) shall be made by the Corporation only as authorized in
the specific case upon a determination that indemnification of any person
described in said Sections is proper in the circumstances because he or she
has met the applicable standard of conduct set forth in said Sections. Such
determination shall be made (1) by the Board of Directors by a majority vote
of a quorum consisting of directors
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who were not parties to such action, suit or proceeding, or (2) if such a
quorum is not obtainable, or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or
(3) by the stockholders of the Corporation.
SECTION 5. ADVANCE PAYMENT.
Expenses incurred in defending any civil, criminal, administrative, or
investigative action, suit or proceeding may be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of any person described in said
Section to repay such amount if it shall ultimately be determined that he or
she is not entitled to indemnification by the Corporation as authorized in
this Article.
SECTION 6. NON-EXCLUSIVITY.
The indemnification and advancement of expenses provided by, or granted
pursuant to, the other Sections of this Article shall not be deemed exclusive
of any other rights to which those provided indemnification or advancement of
expenses may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office.
SECTION 7. INSURANCE.
The Board of Directors may authorize, by a vote of the majority of the
full board, the Corporation to purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted
against him or her and incurred by him or her in any such capacity, or
arising out of his or her status as such, whether or not the corporation
would have the power to indemnify him or her against such liability under the
provisions of this Article.
SECTION 8. CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF
EXPENSES.
The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article shall continue as to a person who has ceased to be
a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
SECTION 9. SEVERABILITY.
If any word, clause or provision of this Article or any award made
hereunder shall for any reason be determined to be invalid, the provisions
hereof shall not otherwise be affected thereby but shall remain in full force
and effect.
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SECTION 10. INTENT OF ARTICLE.
The intent of this Article is to provide for indemnification and
advancement of expenses to the fullest extent permitted by Section 145 of the
General Corporation Law of Delaware. To the extent that such Section or any
successor section may be amended or supplemented from time to time, this
Article shall be amended automatically and construed so as to permit
indemnification and advancement of expenses to the fullest extent from time
to time permitted by law.
ARTICLE VIII -- CERTAIN TRANSACTIONS
SECTION 1. TRANSACTIONS WITH INTERESTED PARTIES.
No contract or transaction between the Corporation and one or more of
its directors or officers, or between the Corporation and any other
corporation, partnership, association, or other origanization in which one or
more of its directors or officers are directors or officers, or have a
financial interest, shall be void or voidable solely for this reason, or
solely because the director or officer is present at or participates in the
meeting of the Board or committee thereof which authorizes the contract or
transaction or solely because the votes of such director or officer are
counted for such purpose, if:
(a) The material facts as to his or her relationship or interest
and as to the contract or transaction are disclosed or are known to the
Board of Directors or the committee, and the Board or committee in good
faith authorizes the contract or transaction by the affirmative votes of
a majority of the disinterested directors, even though the disinterested
directors be less than a quorum; or
(b) The material facts as to his or her relationship or interest
and as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction
is specifically approved in good faith by vote of the stockholders; or
(c) The contract or transaction is fair as to the Corporation as of
the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof, or the stockholders.
SECTION 2. QUORUM.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
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ARTICLE IX - MISCELLANEOUS
SECTION 1. FACSIMILE SIGNATURES.
In addition to the provisions for use of facsimile signatures elsewhere
specifically authorized in these By-Laws, facsimile signatures of any officer
or officers of the Corporation may be used whenever and as authorized by the
Board of Directors or a committee thereof.
SECTION 2. CORPORATE SEAL.
The Board of Directors may provide a suitable seal, containing the name
of the Corporation, which seal shall be in the charge of the Secretary. If
and when so directed by the Board of Directors or a committee thereof,
duplicates of the seal may be kept and used by the Treasurer or by an
Assistant Secretary or Assistant Treasurer.
SECTION 3. RELIANCE UPON BOOKS, REPORTS AND RECORDS.
Each director, each member of any committee designated by the Board of
Directors, and each officer of the Corporation shall, in the performance of
his or her duties, be fully protected in relying in good faith upon the books
of account or other records of the Corporation and upon such information,
opinions, reports or statements presented to the Corporation by any of its
officers or employees, or committees of the Board of Directors so designated,
or by any other person as to matters which such director or committee member
reasonably believes are within such other person's professional or expert
competence and who has been selected with reasonable care by or on behalf of
the Corporation.
SECTION 4. FISCAL YEAR.
Except as otherwise determined by the Board of Directors from time to
time, the fiscal year of the Corporation shall end on the last day of
December of each year.
SECTION 5. TIME PERIODS.
In applying any provision of these By-Laws which requires that an act be
done or not be done a specified number of days prior to an event or that an
act be done during a period of a specified number of days prior to an event,
calendar days shall be used, the day of the doing of the act shall be
excluded, and the day of the event shall be included.
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ARTICLE X - AMENDMENTS
These By-Laws may be amended, added to, rescinded or repealed by the
stockholders or by the Board of Directors, when such power is conferred upon
the Board of Directors by the Certificate of Incorporation, at any meeting of
the stockholders or of the Board of Directors, provided notice of the
proposed change was given in the notice of the meeting or, in the case of a
meeting of the Board of Directors, in a notice given not less than two (2)
days prior to the meeting.
Adopted: May __, 1998
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Exhibit 4.1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[FORM OF]
INDENTURE
between
NELLIE MAE STUDENT LOAN TRUST 1999-A,
as Issuer
and
STATE STREET BANK AND TRUST COMPANY,
not in its individual capacity but
solely as Indenture Trustee
Dated as of ______ 1, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- -------
<S> <C>
310(a)(1) .......................................................................... 6.11
(a)(2) .......................................................................... 6.11
(a)(3) .......................................................................... 6.10
(a)(4) .......................................................................... N.A.**
(a)(4) .......................................................................... 6.11
(b) .......................................................................... 6.08; 6.10; 6.11
(c) .......................................................................... N.A.
311(a) .......................................................................... 6.11
(b) .......................................................................... 6.11
(c) .......................................................................... N.A.
312(a) .......................................................................... 7.01; 7.02(a)
(b) .......................................................................... 7.02(b)
(c) .......................................................................... 7.02(c)
313(a) .......................................................................... 6.06
(b) .......................................................................... 6.06
(c) .......................................................................... 11.05
(d) .......................................................................... 6.06
314(a) .......................................................................... 3.09; 7.03
(b) .......................................................................... 3.06
(c) .......................................................................... 2.09; 4.01;
11.01
(d) .......................................................................... 2.09; 11.01
(e) .......................................................................... 11.01
(f) .......................................................................... 3.09
315(a) .......................................................................... 6.01
(b) .......................................................................... 6.05
(c) .......................................................................... 6.01
(d) .......................................................................... 6.01
(e) .......................................................................... 5.13
316(a)(1)(A) .......................................................................... 5.11
(a)(1)(B).......................................................................... 5.12
(a)(2) .......................................................................... N.A.
(b) .......................................................................... 5.07
(c) .......................................................................... 1.01
317(a) .......................................................................... 5.03
(b) .......................................................................... 3.03
</TABLE>
* Note: This Cross-Reference Table shall not, for any purpose, be deemed
to be part of the Indenture.
** N.A. means Not Applicable.
<PAGE>
<TABLE>
<S> <C>
318(a) .......................................................................... 11.07
</TABLE>
<PAGE>
TABLE OF CONTENTS
Table of Contents
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ARTICLE I
Definitions and Usage
SECTION 1.01. Definitions and Usage ..................................... 2
SECTION 1.02. Incorporation by Reference of Trust Indenture Act.......... 2
ARTICLE II
The Notes
SECTION 2.01. Form ...................................................... 2
SECTION 2.02. Execution, Authentication and Delivery..................... 3
SECTION 2.03. Temporary Notes ........................................... 3
SECTION 2.04. Registration; Registration of Transfer and Exchange........ 4
SECTION 2.05. Mutilated, Destroyed, Lost or Stolen Notes................. 5
SECTION 2.06. Persons Deemed Owner ...................................... 6
SECTION 2.07. Payment of Principal and Interest; Defaulted Interest;
Noteholders' Interest Basis Carryover..................... 6
SECTION 2.08. Cancellation .............................................. 7
SECTION 2.09. Release of Collateral ..................................... 8
SECTION 2.10. Book-Entry Notes .......................................... 8
SECTION 2.11. Notices to Clearing Agency................................. 9
SECTION 2.12. Definitive Notes .......................................... 9
SECTION 2.13. Tax Treatment ............................................. 9
ARTICLE III
Covenants
SECTION 3.01. Payment to Noteholders .................................... 10
SECTION 3.02. Maintenance of Office or Agency............................ 10
SECTION 3.03. Money for Payments to Be Held in Trust..................... 10
SECTION 3.04. Existence ................................................. 12
SECTION 3.05. Protection of Indenture Trust state........................ 12
SECTION 3.06. Opinions as to Indenture Trust Estate...................... 12
SECTION 3.07. Performance of Obligations; Servicing of Trust Loans....... 13
SECTION 3.08. Negative Covenants ........................................ 15
SECTION 3.09. Annual Statement as to Compliance.......................... 16
SECTION 3.10. Issuer May Consolidate, etc., Only on Certain Terms........ 16
SECTION 3.11. Successor or Transferee ................................... 17
SECTION 3.12. No Other Business ......................................... 18
SECTION 3.13. No Borrowing .............................................. 18
SECTION 3.14. Obligations of Master Servicer and Administrator........... 18
SECTION 3.15. Guarantees, Loans, Advances and Other Liabilities.......... 18
SECTION 3.16. Capital Expenditures ...................................... 18
SECTION 3.17. Restricted Payments ....................................... 18
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SECTION 3.18. Notice of Events of Default................................ 18
SECTION 3.19. Further Instruments and Acts............................... 19
SECTION 3.20. Removal of Administrator................................... 19
ARTICLE IIIA
Calculation of Rates
SECTION 3.01A. Calculation of 3-Month LIBOR, etc.......................... 19
SECTION 3.02A. Related Definitions ....................................... 19
SECTION 3.03A. Notice to Administrator.................................... 20
ARTICLE IV
Satisfaction and Discharge
SECTION 4.01. Satisfaction and Discharge of Indenture.................... 20
SECTION 4.02. Application of Trust Money................................. 21
SECTION 4.03. Repayment of Monies Held by Paying Agent................... 22
SECTION 4.04. Auction of Trust Loans .................................... 22
ARTICLE V
Remedies
SECTION 5.01. Events of Default ......................................... 22
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment......... 23
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee......................................... 24
SECTION 5.04. Remedies; Priorities ...................................... 26
SECTION 5.05. Optional Preservation of the Indenture Trust Estate........ 28
SECTION 5.06. Limitation of Suits ....................................... 28
SECTION 5.07. Unconditional Rights of Noteholders to Receive Principal
and Interest.............................................. 29
SECTION 5.08. Restoration of Rights and Remedies......................... 29
SECTION 5.09. Rights and Remedies Cumulative............................. 29
SECTION 5.10. Delay or Omission Not a Waiver............................. 29
SECTION 5.11. Control by Noteholders .................................... 29
SECTION 5.12. Waiver of Past Defaults ................................... 30
SECTION 5.13. Undertaking for Costs ..................................... 30
SECTION 5.14. Waiver of Stay or Extension Laws........................... 31
SECTION 5.15. Action on Notes ........................................... 31
SECTION 5.16. Performance and Enforcement of Certain Obligations......... 31
ARTICLE VI
The Indenture Trustee
SECTION 6.01. Duties of Indenture Trustee................................ 32
SECTION 6.02. Rights of Indenture Trustee................................ 33
SECTION 6.03. Individual Rights of Indenture Trustee..................... 33
SECTION 6.04. Indenture Trustee's Disclaimer............................. 34
SECTION 6.05. Notice of Defaults ........................................ 34
</TABLE>
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SECTION 6.06. Reports by Indenture Trustee to Noteholders................ 34
SECTION 6.07. Compensation and Indemnity................................. 34
SECTION 6.08. Replacement of Indenture Trustee........................... 35
SECTION 6.09. Successor Indenture Trustee by Merger...................... 36
SECTION 6.10. Appointment of Co-Trustee or Separate Trustee.............. 36
SECTION 6.11. Eligibility; Disqualification.............................. 37
SECTION 6.12. Preferential Collection of Claims Against Issuer........... 38
ARTICLE VII
Noteholders' Lists and Reports
SECTION 7.01. Issuer to Furnish Indenture Trustee Names and Addresses of
Noteholders............................................... 38
SECTION 7.02. Preservation of Information; Communications to
Noteholders............................................... 38
SECTION 7.03. Reports by Issuer ......................................... 38
ARTICLE VIII
Accounts, Disbursements and Releases
SECTION 8.01. Collection of Money ....................................... 39
SECTION 8.02. Trust Accounts ............................................ 39
SECTION 8.03. General Provisions Regarding Accounts...................... 41
SECTION 8.04. Release of Indenture Trust Estate.......................... 42
SECTION 8.05. Opinion of Counsel ........................................ 42
ARTICLE IX
Supplemental Indentures
SECTION 9.01. Supplemental Indentures Without Consent of Noteholders..... 43
SECTION 9.02. Supplemental Indentures with Consent of Noteholders........ 44
SECTION 9.03. Execution of Supplemental Indentures....................... 45
SECTION 9.04. Effect of Supplemental Indenture........................... 45
SECTION 9.05. Conformity with Trust Indenture Act........................ 46
SECTION 9.06. Reference in Notes to Supplemental Indentures.............. 46
ARTICLE X
Redemption of Notes
SECTION 10.01. Redemption ................................................ 46
SECTION 10.02. Form of Redemption Notice.................................. 46
SECTION 10.03. Notes Payable on Redemption Date........................... 47
ARTICLE XI
Miscellaneous
SECTION 11.01. Compliance Certificates and Opinions....................... 47
SECTION 11.02. Form of Documents Delivered to Indenture Trustee........... 49
SECTION 11.03. Acts of Noteholders ....................................... 50
SECTION 11.04. Notices to Indenture Trustee, Issuer and Rating Agencies... 50
SECTION 11.05. Notices to Noteholders; Waiver............................. 51
</TABLE>
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SECTION 11.06. Alternate Payment and Notice Provisions.................... 51
SECTION 11.07. Conflict with Trust Indenture Act.......................... 51
SECTION 11.08. Effect of Headings and Table of Contents................... 52
SECTION 11.09. Successors and Assigns .................................... 52
SECTION 11.10. Separability .............................................. 52
SECTION 11.11. Benefits of Indenture ..................................... 52
SECTION 11.12. Governing Law ............................................. 52
SECTION 11.13. Counterparts .............................................. 52
SECTION 11.14. Recording of Indenture .................................... 52
SECTION 11.15. No Recourse ............................................... 52
SECTION 11.16. No Petition ............................................... 53
SECTION 11.17. Inspection ................................................ 53
SECTION 11.18. Consents .................................................. 53
EXHIBIT A-1 - Form of Class A-1 Note
EXHIBIT A-2 - Form of Class A-2 Note
EXHIBIT B - Note Depository Agreement
</TABLE>
iv
<PAGE>
INDENTURE dated as of _____ 1, 1999, between NELLIE MAE STUDENT LOAN
TRUST 1999-A, a Delaware trust (the "ISSUER"), and STATE STREET BANK AND TRUST
COMPANY, a Massachusetts banking corporation, as trustee and not in its
individual capacity (the "INDENTURE TRUSTEE").
Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the holders of the Issuer's Class A-1 Floating
Rate Asset-Backed Notes (the "CLASS A-1 NOTES") and Class A-2 Floating Rate
Asset-Backed Notes (the "CLASS A-2 NOTES" and, together with the Class A-1
Notes, the "NOTES"):
GRANTING CLAUSE
The Issuer (and, with respect to the Trust Loans, the Eligible Lender
Trustee) hereby Grants to the Indenture Trustee as of the Closing Date, as
trustee for the benefit of the Noteholders, all the Issuer's right, title and,
interest in and to, but none of its obligations under, the following:
(a) the Trust Loans, and all obligations of the Obligors
thereunder including all monies paid thereunder on and after the Cutoff
Date (or, in the case of Serial Loans, on and after the related
Subsequent Cutoff Date; and in the case of Qualified Substitute Student
Loans, on and after the date of assignment thereof to the Issuer);
(b) the Loan Sale Agreement, including the right of the Issuer
to cause the Seller to repurchase or substitute for Trust Loans from the
Issuer under circumstances described therein;
(c) the Master Servicing Agreement, including the right of the
Issuer to cause the Master Servicer to purchase Trust Loans from the
Issuer under the circumstances described therein;
(d) each Guarantee Agreement, including the right of the Issuer
to cause the related Guarantor to make Guarantee Payments in respect of
the Trust Loans;
(e) the Administration Agreement;
(f) all funds on deposit from time to time in the Trust
Accounts, including the Reserve Account Initial Deposit, and in all
investments and proceeds thereof (including all income thereon); and
(g) all present and future claims, demands, causes and choses in
action in respect of any or all of the foregoing and all payments on or
under and all proceeds of every kind and nature whatsoever in respect of
any or all of the foregoing, including all proceeds of the conversion,
voluntary or involuntary, into cash or other liquid property, all cash
proceeds, accounts, accounts receivable, notes, drafts, acceptances,
chattel paper, checks, deposit accounts, insurance proceeds,
condemnation awards, rights to payment of any and every kind and other
forms of obligations and receivables, instruments and other property
which at any time constitute all or part of or are included in the
proceeds of any of the foregoing (collectively, the "COLLATERAL").
<PAGE>
The foregoing Grant is made in trust to secure the payment of principal
of and interest on, and any other amounts owing in respect of, the Notes,
equally and ratably without prejudice, priority or distinction, and to secure
compliance with the provisions of this Indenture, all as provided in this
Indenture.
The Indenture Trustee, as Indenture Trustee on behalf of the
Noteholders, acknowledges such Grant, accepts the trusts under this Indenture in
accordance with the provisions of this Indenture and agrees to perform its
duties required in this Indenture to the best of its ability to the end that the
interests of the Noteholders may be adequately and effectively protected.
ARTICLE I
Definitions and Usage
SECTION 1.01. DEFINITIONS AND USAGE. Except as otherwise specified
herein or as the context may otherwise require, capitalized terms used but not
defined herein are defined in Appendix A to the Administration Agreement, dated
as of _____ 1, 1999, among the Issuer, Nellie Mae Education Loan Corporation, as
Administrator, and the Indenture Trustee, which also contains rules as to usage
that shall be applicable herein.
SECTION 1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"COMMISSION" means the Securities and Exchange Commission.
"INDENTURE SECURITIES" means the Notes.
"INDENTURE SECURITY HOLDER" means a Noteholder.
"INDENTURE TO BE QUALIFIED" means this Indenture.
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Indenture
Trustee.
"OBLIGOR" on the indenture securities means the Issuer and any other
obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule have
the meaning assigned to them by such definitions.
ARTICLE II
The Notes
SECTION 2.01. FORM. The Class A-1 Notes and the Class A-2 Notes,
together with the Indenture Trustee's certificate of authentication, shall be in
substantially the form set forth in
2
<PAGE>
Exhibits A-1 and A-2, respectively, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may, consistently herewith,
be determined by the officers executing such Notes, as evidenced by their
execution of the Notes. Any portion of the text of any Note may be set forth on
the reverse thereof, with an appropriate reference thereto on the face of the
Note.
The Definitive Notes shall be typewritten, printed, lithographed or
engraved or produced by any combination of these methods (with or without steel
engraved borders), all as determined by the officers executing such Notes, as
evidenced by their execution of such Notes.
Each Note shall be dated the date of its authentication. The terms of
the Notes set forth in Exhibits A-1 and A-2 are part of the terms of this
Indenture.
SECTION 2.02. EXECUTION, AUTHENTICATION AND DELIVERY. The Notes shall be
executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be manual or
facsimile.
Notes bearing the manual or facsimile signature of individuals who were
at any time Authorized Officers of the Issuer shall bind the Issuer,
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.
The Indenture Trustee shall upon Issuer Order authenticate and deliver
Class A-1 Notes for original issue in an aggregate principal amount of
$___________ and Class A-2 Notes for original issue in the aggregate principal
amount of $___________. The aggregate principal amount of Class A-1 Notes and
Class A-2 Notes outstanding at any time may not exceed such respective amounts
except as provided in Section 2.05.
Each Note shall be dated the date of its authentication. The Notes shall
be issuable as registered Book-Entry Notes in the minimum denomination of $1,000
and in integral multiples of $1,000 in excess thereof.
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 herein
executed by the Indenture Trustee by the manual signature of one of its
authorized signatories, 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 2.03. TEMPORARY NOTES. Pending the preparation of Definitive
Notes, the Issuer may execute, and upon receipt of an Issuer Order the Indenture
Trustee shall authenticate and deliver, temporary Notes which are printed,
lithographed, typewritten, mimeographed or otherwise produced, of the tenor of
the Definitive Notes in lieu of which they are issued and with such variations
not inconsistent with the terms of this Indenture as the officers executing such
Notes may determine, as evidenced by their execution of such Notes.
If temporary Notes are issued, the Issuer will cause Definitive Notes to
be prepared without unreasonable delay. After the preparation of Definitive
Notes, the temporary Notes shall
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be exchangeable for Definitive Notes upon surrender of the temporary Notes at
the office or agency of the Issuer to be maintained as provided in Section 3.02,
without charge to the Noteholder. Upon surrender for cancellation of any one or
more temporary Notes, the Issuer shall execute and the Indenture Trustee shall
authenticate and deliver in exchange therefor a like principal amount of
Definitive Notes 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 2.04. REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE. The
Issuer shall cause to be kept a register (the "NOTE REGISTER") in which, subject
to such reasonable regulations as it may prescribe, the Issuer shall provide for
the registration of Notes and the registration of transfers of Notes. The
Indenture Trustee shall be "NOTE REGISTRAR" for the purpose of registering Notes
and transfers of Notes as herein provided. Upon any resignation of any Note
Registrar, the Issuer shall promptly appoint a successor or, if it elects not to
make such an appointment, assume the duties of Note Registrar.
If a Person other than the Indenture Trustee is appointed by the Issuer
as Note Registrar, the Issuer will give the Indenture Trustee prompt written
notice of the appointment of such Note Registrar and of the location, and any
change in the location, of the Note Register, and the Indenture Trustee shall
have the right to inspect the Note Register at all reasonable times and to
obtain copies thereof, and the Indenture Trustee shall have the right to rely
upon a certificate executed on behalf of the Note Registrar by an Executive
Officer thereof as to the names and addresses of the Noteholders and the
principal amounts and number of such Notes.
Subject to the restrictions and limitations set forth below, upon
surrender for registration of transfer of any Note at the office or agency of
the Issuer to be maintained as provided in Section 3.02, if the requirements of
Section 8-401(a) of the UCC are met, the Issuer shall execute, and the Indenture
Trustee shall authenticate and the Noteholder shall obtain from the Indenture
Trustee, in the name of the designated transferee or transferees, one or more
new Notes in any authorized denominations, of a like aggregate principal amount.
At the option of the Noteholder, Notes may be exchanged for other Notes
of the same class in any authorized denominations, of a like aggregate principal
amount, upon surrender of the Notes to be exchanged at such office or agency.
Whenever any Notes are so surrendered for exchange, if the requirements of
Section 8-401(a) of the UCC are met, the Issuer shall execute, and the Indenture
Trustee shall authenticate and, the Noteholder shall obtain from the Indenture
Trustee, the Notes which the Noteholder making the exchange is entitled to
receive.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by a written instrument of
transfer in form satisfactory to the Note Registrar duly executed by, the
Noteholder thereof or such Noteholder's attorney duly authorized in writing,
with such signature guaranteed by an "eligible guarantor institution" meeting
the requirements of the Note Registrar, which requirements include membership or
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participation in Securities Transfer Agent's Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Note Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Exchange Act.
No service charge shall be made to a Noteholder for any registration of
transfer or exchange of Notes, but the Indenture Trustee may require payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any registration of transfer or exchange of Notes,
other than exchanges pursuant to Section 2.03 or Section 9.06 not involving any
transfer.
The preceding provisions of this Section notwithstanding, the Issuer
shall not be required to make and the Note Registrar need not register transfers
or exchanges of Notes selected for redemption or of any Note for a period of 15
days preceding the due date for any payment with respect to such Note.
SECTION 2.05. MUTILATED, DESTROYED, LOST OR STOLEN NOTES. If (i) any
mutilated Note is surrendered to the Indenture Trustee, or the Indenture Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Note, and (ii) there is delivered to the Indenture Trustee such security or
indemnity as may be required by it to hold the Issuer and the Indenture Trustee
harmless, then, in the absence of notice to the Issuer, the Note Registrar or
the Indenture Trustee that such Note has been acquired by a bona fide purchaser,
and provided that the requirements of Section 8-405 of the UCC are met, the
Issuer shall execute, and upon its request the Indenture Trustee shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Note, a replacement Note of the same category;
PROVIDED, HOWEVER, that if any such destroyed, lost or stolen Note, but not a
mutilated Note, shall have become or within 15 days shall be due and payable, or
shall have been called for redemption, instead of issuing a replacement Note,
the Issuer may pay such destroyed, lost or stolen Note when so due or payable or
upon the Redemption Date without surrender thereof. If, after the delivery of
such replacement Note or payment of a destroyed, lost or stolen Note pursuant to
the proviso to the preceding sentence, a bona fide purchaser of the original
Note in lieu of which such replacement Note was issued presents for payment such
original Note, the Issuer and the Indenture Trustee shall be entitled to recover
such replacement Note (or such payment) from the Person to whom it was delivered
or any Person taking such replacement Note from such Person to whom such
replacement Note was delivered or any assignee of such Person, except a bona
fide purchaser, and shall be entitled to recover upon the security or indemnity
provided therefor to the extent of any loss, damage, cost or expense incurred by
the Issuer or the Indenture Trustee in connection therewith.
Upon the issuance of any replacement Note under this Section, the Issuer
may require the payment by the Noteholder thereof of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto and
any other reasonable expenses (including the fees and expenses of the Indenture
Trustee) connected therewith.
Every replacement Note issued pursuant to this Section in replacement of
any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time
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enforceable by anyone, and shall be entitled to all the benefits of this
Indenture equally and proportionately with any and all other Notes duly issued
hereunder.
The provisions of this Section 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 2.06. PERSONS DEEMED OWNER. Prior to due presentment for
registration of transfer of any Note, the Issuer, the Indenture Trustee and any
agent of the Issuer or the Indenture Trustee may treat the Person in whose name
any Note is registered (as of the day of determination) as the owner of such
Note for the purpose of receiving payments of principal of, interest (and any
Noteholders' Interest Basis Carryover), if any, on such Note and for all other
purposes whatsoever, whether or not such Note be overdue, and neither the Issuer
nor the Indenture Trustee nor any agent of the Issuer or the Indenture Trustee
shall be affected by notice to the contrary.
SECTION 2.07. PAYMENT OF PRINCIPAL AND INTEREST; DEFAULTED INTEREST;
NOTEHOLDERS' INTEREST BASIS CARRYOVER. (a) The Notes shall accrue interest as
provided in the forms of Class A-1 Note and Class A-2 Note set forth in Exhibits
A-1 and A-2, respectively, and such interest shall be payable on each Quarterly
Payment Date as specified therein, subject, in each case, to Section 3.01. Any
installment of interest (and any Noteholders' Interest Basis Carryover) or
principal, if any, payable on any Note which is punctually paid or duly provided
for by the Issuer on the applicable Quarterly Payment Date shall be paid to the
Person in whose name such Note (or one or more Predecessor Notes) is registered
on the Record Date by wire transfer if such Person holds Notes in an aggregate
original principal amount in excess of $1,000,000 and provides appropriate
written instructions to the Indenture Trustee no later than such Record Date,
and otherwise by check mailed first-class, postage prepaid to such Person's
address as it appears on the Note Register on such Record Date, except that,
unless Definitive Notes have been issued pursuant to Section 2.12, with respect
to Notes registered on the Record Date in the name of the nominee of the
Clearing Agency (initially, such nominee to be Cede & Co.), payment will be made
by wire transfer in immediately available funds to the account designated by
such nominee except for the final installment of principal payable with respect
to such Note on a Quarterly Payment Date or on the Class A-1 Note Final Maturity
Date or the Class A-2 Note Final Maturity Date, as the case may be, which shall
be payable as provided below. The funds represented by any such checks returned
undelivered shall be held in accordance with Section 3.03.
(b) The principal of each Note shall be payable in installments on each
Quarterly Payment Date as provided in the forms of the Class A-1 Notes and Class
A-2 Notes set forth in Exhibits A-1 and A-2, respectively. Notwithstanding the
foregoing, the entire unpaid principal amount of the Notes shall be due and
payable, if not previously paid, on the date on which an Event of Default shall
have occurred, if the Indenture Trustee or the Noteholders of Notes representing
not less than a majority of the Outstanding Amount of the Notes have declared
the Notes to be immediately due and payable in the manner provided in Section
5.02. All principal payments on each class of Notes shall be made PRO RATA to
the Noteholders of such class. The Indenture Trustee shall notify the Person in
whose name a Note is registered at the close of business on the Record Date
preceding the Quarterly Payment Date on which the Issuer
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expects that the final installment of principal of and interest (and any
Noteholders' Interest Basis Carryover) on such Note will be paid. Such notice
shall be mailed or transmitted by facsimile prior to such final Quarterly
Payment Date and shall specify that such final installment will be payable only
upon presentation and surrender of such Note and shall specify the place where
such Note may be presented and surrendered for payment of such installment.
Notices in connection with redemptions of Notes shall be mailed to Noteholders
as provided in Section 10.02.
(c) If the Issuer defaults in a payment of interest on the Notes, the
Issuer shall pay defaulted interest (plus interest on such defaulted interest to
the extent lawful) at the applicable Note Rate in any lawful manner. The Issuer
may pay such defaulted interest to the Persons who are Noteholders on a
subsequent special record date, which date shall be at least five Business Days
prior to the payment date. The Issuer shall fix or cause to be fixed any such
special record date and payment date, and, at least 15 days before any such
special record date, the Issuer shall mail to the Indenture Trustee a notice
which the Indenture Trustee will, as soon as practicable, distribute to each
Noteholder that states the special record date, the payment date and the amount
of defaulted interest to be paid.
(d) The Class A-1 Noteholders' Interest Basis Carryover and the Class
A-2 Noteholders' Interest Basis Carryover on each Quarterly Payment Date,
including all such unpaid carryover from prior Quarterly Payment Dates and
interest accrued thereon at the Class A-1 Note LIBOR Rate or the Class A-2 Note
LIBOR Rate, respectively, for each applicable LIBOR Reset Period, shall be
payable on each Quarterly Payment Date solely to the extent of funds required
and available to be distributed to Noteholders by the Indenture Trustee pursuant
to Section 2(e)(ii)(C) of the Administration Agreement (and shall be allocated
among the classes of Notes as provided in Section 8.02(d)). Any Noteholders'
Interest Basis Carryover for a class of Notes, if any, payable with respect to
such class of Notes on the applicable Quarterly Payment Date shall be paid by
wire transfer to the Person in whose name such Note (or one or more Predecessor
Notes) is registered on the applicable Record Date if such Person holds Notes in
an aggregate original principal amount in excess of $1,000,000 and provides
appropriate written instructions to the Indenture Trustee no later than such
Record Date, and otherwise by check mailed first-class postage prepaid to such
Person's address as it appears on the Note Register on such Record Date, except
that, unless Definitive Notes have been issued pursuant to Section 2.12, with
respect to the Notes registered on the Record Date in the name of the nominee of
the Clearing Agency (initially, such nominee to be Cede & Co.), payment will be
made by wire transfer in immediately available funds to the account designated
by such nominee. The funds represented by any such checks returned undelivered
shall be held in accordance with Section 3.03.
SECTION 2.08. CANCELLATION. All Notes surrendered for payment,
registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Indenture Trustee, be delivered to the Indenture Trustee
and shall be promptly cancelled by the Indenture Trustee. The Issuer may at any
time deliver to the Indenture Trustee for cancellation any Notes previously
authenticated and delivered hereunder which the Issuer may have acquired in any
manner whatsoever, and all Notes so delivered shall be promptly cancelled by the
Indenture Trustee. No Notes shall be authenticated in lieu of or in exchange for
any Notes cancelled as provided in this Section, except as expressly permitted
by this Indenture. All cancelled Notes
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may be held or disposed of by the Indenture Trustee in accordance with its
standard retention or disposal policy as in effect at the time, unless the
Issuer shall direct by an Issuer Order that they be returned to it and so long
as such Issuer Order is timely and the Notes have not been previously disposed
of by the Indenture Trustee.
SECTION 2.09. RELEASE OF COLLATERAL. Subject to Section 11.01 and the
terms of the Basic Documents, the Indenture Trustee shall release property from
the lien of this Indenture only upon receipt by it of an Issuer Request
accompanied by an Officers' Certificate of the Issuer, an Opinion of Counsel and
Independent Certificates in accordance with TIA Sections 314(c) and 314(d)(1) or
an Opinion of Counsel in lieu of such Independent Certificates to the effect
that the TIA does not require any such Independent Certificates.
SECTION 2.10. BOOK-ENTRY NOTES. The Class A-1 and Class A-2 Notes, upon
original issuance, will be issued in the form of typewritten Notes representing
the Book-Entry Notes, to be delivered to The Depository Trust Company, the
initial Clearing Agency, by, or on behalf of, the Issuer. Such Notes shall
initially be registered on the Note Register in the name of Cede & Co., the
nominee of the initial Clearing Agency, and no Note Owner will receive a
Definitive Note (as defined below) representing such Note Owner's interest in
such Book-Entry Note, except as provided in Section 2.12. Unless and until
definitive, fully registered Notes (the "DEFINITIVE NOTES") have been issued to
Note Owners pursuant to Section 2.12:
(i) the provisions of this Section shall be in full force and
effect;
(ii) the Note Registrar and the Indenture Trustee may deal with
the Clearing Agency for all purposes (including the payment of principal
of and interest and other amounts on the Book-Entry Notes) as the
authorized representative of the Note Owners;
(iii) to the extent that the provisions of this Section conflict
with any other provisions of this Indenture, the provisions of this
Section shall control;
(iv) the rights of Note Owners shall be exercised only through
the Clearing Agency and shall be limited to those established by law and
agreements between such Note Owners and the Clearing Agency and/or the
Clearing Agency Participants pursuant to the Note Depository Agreement.
Unless and until Definitive Notes are issued pursuant to Section 2.12,
the initial Clearing Agency will make book-entry transfers among the
Clearing Agency Participants and receive and transmit payments of
principal of and interest and other amounts on the Book-Entry Notes to
such Clearing Agency Participants; and
(v) whenever this Indenture requires or permits actions to be
taken based upon instructions or directions of Noteholders of Notes
evidencing a specified percentage of the Outstanding Amount of the
Notes, the Clearing Agency shall be deemed to represent such percentage
only to the extent that it has received instructions to such effect from
Note Owners and/or Clearing Agency Participants owning or representing,
respectively, such required percentage of the beneficial interest in the
Notes and has delivered such instructions to the Indenture Trustee.
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SECTION 2.11. NOTICES TO CLEARING AGENCY. Whenever a notice or other
communication to the Noteholders is required under this Indenture, unless and
until Definitive Notes shall have been issued to Note Owners pursuant to Section
2.12, the Indenture Trustee shall give to the Clearing Agency all such notices
and communications specified herein to be given to the Noteholders.
SECTION 2.12. DEFINITIVE NOTES. If (i) the Administrator advises the
Indenture Trustee in writing that the Clearing Agency is no longer willing or
able to properly discharge its responsibilities with respect to the Book-Entry
Notes, and the Administrator is unable to locate a qualified successor, (ii) the
Administrator at its option advises the Indenture Trustee in writing that it
elects to terminate the book-entry system through the Clearing Agency or (iii)
after the occurrence of an Event of Default, a Master Servicer Default or an
Administrator Default, Note Owners representing beneficial interests aggregating
at least a majority of the Outstanding Amount of the Book-Entry Notes advise the
Clearing Agency (which shall then notify the Indenture Trustee) in writing that
the continuation of a book-entry system through the Clearing Agency is no longer
in the best interests of the Note Owners, then the Indenture Trustee will cause
the Clearing Agency to notify all Note Owners, through the Clearing Agency, of
the occurrence of any such event and of the availability of Definitive Notes to
Note Owners requesting the same. Upon surrender to the Indenture Trustee of the
typewritten Notes representing the Book-Entry Notes by the Clearing Agency,
accompanied by registration instructions, the Issuer shall execute and the
Indenture Trustee shall authenticate the Definitive Notes in accordance with the
instructions of the Clearing Agency. None of the Issuer, the Note Registrar or
the Indenture Trustee shall be liable for any delay in delivery of such
instructions and may conclusively rely on, and shall be protected in relying on,
such instructions. Upon the issuance of Definitive Notes, the Indenture Trustee
shall recognize the holders of the Definitive Notes as Noteholders.
SECTION 2.13. TAX TREATMENT. It is the intention of the Issuer and the
Noteholders that the Notes will be indebtedness for federal, state and local
income and franchise tax purposes and for purposes of any other tax imposed on
or measured by income. The terms of this Indenture shall be interpreted to
further such intent. The Issuer, the Indenture Trustee and each Noteholder (or
Note Owner) by accepting a Note (or, in the case of a Note Owner, by virtue of
the Note Owner's acquisition of a beneficial interest therein) agree to treat
the Notes (or beneficial interests therein), for purposes of federal, state and
local income or franchise taxes and any other tax imposed on or measured by
income, as indebtedness secured by the Trust Estate and to report the
transactions contemplated by this Indenture on all applicable tax returns in a
manner consistent with such treatment. Each Noteholder agrees that it will
require any Note Owner acquiring an interest in a Note through it to represent
and warrant that such Note Owner will comply with this Indenture as to the
treatment of the Notes as indebtedness for federal, state and local income and
franchise tax purposes and for purposes of any other tax imposed on or measured
by income. The Indenture Trustee will prepare and file all tax reports required
hereunder on behalf of the Trust.
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ARTICLE III
Covenants
SECTION 3.01. PAYMENT TO NOTEHOLDERS. The Issuer will duly and
punctually pay the principal of, and interest, if any, on the Notes and any
Noteholders' Interest Basis Carryover (but only to the extent provided in
Sections 2.07(d) and 8.02(d)) in accordance with the terms of the Notes and this
Indenture. Without limiting the foregoing, subject to Section 8.02(d), the
Issuer will cause to be distributed to the Noteholders in accordance with the
Administration Agreement and Section 8.02 hereof that portion of the amounts on
deposit in the Trust Accounts on a Quarterly Payment Date which the Noteholders
are entitled to receive pursuant to the Administration Agreement. Amounts
properly withheld under the Code by any Person from a payment to any Noteholder
of interest (including any Noteholders' Interest Basis Carryover) and/or
principal shall be considered as having been paid by the Issuer to such
Noteholder for all purposes of this Indenture.
SECTION 3.02. MAINTENANCE OF OFFICE OR AGENCY. The Issuer will maintain
in the Borough of Manhattan, The City of New York, an office or agency where
Notes may be surrendered for registration of transfer or exchange, and where
notices and demands to or upon the Issuer in respect of the Notes and this
Indenture may be served. The Issuer hereby initially appoints the Indenture
Trustee to serve as its agent for the foregoing purposes. The Issuer will give
prompt written notice to the Indenture Trustee of the location, and of any
change in the location, of any such office or agency. If at any time the Issuer
shall fail to maintain any such office or agency or shall fail to furnish the
Indenture Trustee with the address thereof, such surrenders, notices and demands
may be made or served at the Corporate Trust Office, and the Issuer hereby
appoints the Indenture Trustee as its agent to receive all such surrenders,
notices and demands.
SECTION 3.03. MONEY FOR PAYMENTS TO BE HELD IN TRUST. As provided in
Section 8.02, all payments of amounts due and payable with respect to any Notes
that are to be made from amounts distributed from the Collection Account or any
other Trust Account shall be made on behalf of the Issuer by the Indenture
Trustee or by another Paying Agent, and no amounts so distributed for payments
of Notes shall be paid over to the Issuer except as provided in this Section.
On or before the Business Day next preceding each Quarterly Payment Date
and Redemption Date, the Issuer shall distribute or cause to be distributed to
the Indenture Trustee (or any other Paying Agent) an aggregate sum sufficient to
pay the amounts then becoming due under the Notes, such sum to be held in trust
for the benefit of the Persons entitled thereto, and (unless the Paying Agent is
the Indenture Trustee) shall promptly notify the Indenture Trustee of its action
or failure so to act.
The Issuer will cause each Paying Agent other than the Indenture Trustee
to execute and deliver to the Indenture Trustee an instrument in which such
Paying Agent shall agree with the Indenture Trustee (and if the Indenture
Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions of
this Section, that such Paying Agent will:
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(i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise
disposed of as herein provided and pay such sums to such Persons as
herein provided;
(ii) give the Indenture Trustee notice of any default by the
Issuer of which it has actual knowledge (or any other obligor upon the
Notes) in the making of any payment required to be made with respect to
the Notes;
(iii) at any time during the continuance of any such default,
upon the written request of the Indenture Trustee, forthwith pay to the
Indenture Trustee all sums so held in trust by such Paying Agent;
(iv) immediately resign as a Paying Agent and forthwith pay to
the Indenture Trustee all sums held by it in trust for the payment of
Notes if at any time it ceases to meet the standards required to be met
by a Paying Agent at the time of its appointment; and
(v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any applicable
withholding taxes imposed thereon and with respect to any applicable
reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by Issuer
Order direct any Paying Agent to pay to the Indenture Trustee all sums held in
trust by such Paying Agent, such sums to be held by the Indenture Trustee upon
the same trusts as those upon which the sums were held by such Paying Agent; and
upon such payment by any Paying Agent to the Indenture Trustee, such Paying
Agent shall be released from all further liability with respect to such money.
Subject to applicable laws with respect to escheat of funds, any money
held by the Indenture Trustee or any Paying Agent in trust for the payment of
any amount due with respect to any Note and remaining unclaimed for two years
after such amount has become due and payable shall be discharged from such trust
and be paid to the Issuer on Issuer Request; and the Noteholder thereof shall
thereafter, as an unsecured general creditor, look only to the Issuer for
payment thereof (but only to the extent of the amounts so paid to the Issuer),
and all liability of the Indenture Trustee or such Paying Agent with respect to
such trust money shall thereupon cease; PROVIDED, HOWEVER, that the Indenture
Trustee or such Paying Agent, before being required to make any such repayment,
shall at the expense and direction of the Issuer cause to be published once, in
a newspaper published in the English language, customarily published on each
Business Day and of general circulation in The City of New York, notice that
such money remains unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Issuer. The Indenture
Trustee shall also adopt and employ, at the expense of the Issuer, any other
reasonable means of notification of such repayment (including mailing notice of
such repayment to Noteholders whose Notes have been called but have not been
surrendered for redemption or whose right to or interest in monies due and
payable but not claimed is
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determinable from the records of the Indenture Trustee or of any Paying Agent,
at the last address of record for each such Noteholder).
SECTION 3.04. EXISTENCE. The Issuer will keep in full effect its
existence, rights and franchises as a trust under the laws of the State of
Delaware (unless it becomes, or any successor Issuer hereunder is or becomes,
organized under the laws of any other State or of the United States of America,
in which case the Issuer will keep in full effect its existence, rights and
franchises under the laws of such other jurisdiction) and will obtain and
preserve its qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Indenture, the Notes, the Collateral and each other
instrument or agreement included in the Indenture Trust Estate.
SECTION 3.05. PROTECTION OF INDENTURE TRUST ESTATE. The Issuer will from
time to time execute and deliver all such supplements and amendments hereto and
all such financing statements, continuation statements, instruments of further
assurance and other instruments, and will take such other action necessary or
advisable to:
(i) maintain or preserve the lien and security interest (and the
priority thereof) of this Indenture or carry out more effectively the
purposes hereof;
(ii) perfect, publish notice of or protect the validity of any
Grant made or to be made by this Indenture;
(iii) enforce any of the Collateral; or
(iv) preserve and defend title to the Indenture Trust Estate and
the rights of the Indenture Trustee and the Noteholders in such
Indenture Trust Estate against the claims of all persons and parties.
It shall be the responsibility of the Issuer to prepare such instruments.
The Issuer hereby designates the Indenture Trustee its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required to be executed pursuant to this Section.
SECTION 3.06. OPINIONS AS TO INDENTURE TRUST ESTATE. (a) On the Closing
Date, the Issuer shall furnish to the Indenture Trustee an Opinion of Counsel
either stating that, in the opinion of such counsel, such action has been taken
with respect to the recording and filing of this Indenture, any indentures
supplemental hereto, and any other requisite documents, and with respect to the
execution and filing of any financing statements and continuation statements, as
are necessary to perfect and make effective the lien and security interest of
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 March 31 in each calendar year beginning in 2000, with
respect to the immediately preceding calendar year, the Issuer shall furnish to
the Indenture Trustee an Opinion of Counsel either stating that, in the opinion
of such counsel, such action has been taken with respect to the recording,
filing, re-recording and refiling of this Indenture, any
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indentures supplemental hereto and any other requisite documents and with
respect to the execution and filing of any financing statements and continuation
statements as are necessary to maintain the lien and security interest created
by this Indenture and reciting the details of such action or stating that in the
opinion of such counsel no such action is necessary to maintain such lien and
security interest. Such Opinion of Counsel shall also describe the recording,
filing, re-recording and refiling of this Indenture, any indentures supplemental
hereto and any other requisite documents and the execution and filing of any
financing statements and continuation statements that will, in the opinion of
such counsel, be required to maintain the lien and security interest of this
Indenture until December 31 in the following calendar year.
SECTION 3.07. PERFORMANCE OF OBLIGATIONS; SERVICING OF TRUST LOANS. (a)
The Issuer will not take any action and will use its best efforts not to permit
any action to be taken by others that would release any Person from any of such
Person's material covenants or obligations under any instrument or agreement
included in the Indenture Trust Estate or that would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any such instrument or agreement, except as
expressly provided in this Indenture, the Loan Sale Agreement, the Master
Servicing Agreement or such other instrument or agreement.
(b) The Issuer 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 Indenture Trustee in an Officers' Certificate of
the Issuer shall be deemed to be action taken by the Issuer. Initially, the
Issuer has contracted with the Master Servicer and the Administrator to assist
the Issuer in performing its duties under this Indenture.
(c) The Issuer will punctually perform and observe all its obligations
and agreements contained in this Indenture, the other Basic Documents and in the
instruments and agreements included in the Indenture Trust Estate, including
filing or causing to be filed all UCC financing statements and continuation
statements required to be filed by the terms of this Indenture, the Loan Sale
Agreement and the Master Servicing Agreement in accordance with and within the
time periods provided for herein and therein. Except as otherwise expressly
provided therein, the Issuer shall not waive, amend, modify, supplement or
terminate any Basic Document or any provision thereof without the consent of the
Indenture Trustee or the Noteholders of at least a majority of the Outstanding
Amount of the Notes.
(d) If the Issuer shall have knowledge of the occurrence of a Master
Servicer Default under the Master Servicing Agreement or an Administrator
Default under the Administration Agreement, the Issuer shall promptly notify the
Indenture Trustee and the Rating Agencies thereof, and shall specify in such
notice the action, if any, the Issuer is taking with respect to such default. If
a Master Servicer Default shall arise from the failure of the Master Servicer to
perform any of its duties or obligations under the Master Servicing Agreement
with respect to the Trust Loans, the Issuer shall take all reasonable steps
available to it to enforce its rights under the Basic Documents in respect of
such failure.
(e) As promptly as possible after the giving of notice of termination to
the Master Servicer of the Master Servicer's rights and powers pursuant to
Section 6.01 of the Master Servicing Agreement, the Issuer shall appoint a
successor Master Servicer (the
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"SUCCESSOR MASTER SERVICER"), and such Successor Master Servicer shall accept
its appointment by a written assumption in a form acceptable to the Indenture
Trustee. In the event that a Successor Master Servicer has not been appointed
and accepted its appointment at the time when the Master Servicer ceases to act
as Master Servicer, the Indenture Trustee without further action shall
automatically be appointed the Successor Master Servicer. The Indenture Trustee
may resign as the Master Servicer by giving written notice of such resignation
to the Issuer, and in such event will be released from such duties and
obligations, such release not to be effective until the date a new Master
Servicer enters into an agreement with the Issuer as provided below; PROVIDED,
HOWEVER, that nothing herein shall require or permit the Indenture Trustee to
act as Master Servicer, or otherwise service the Trust Loans, in violation of
the Higher Education Act. Upon delivery of any such notice to the Issuer, the
Issuer shall obtain a new Master Servicer as the Successor Master Servicer under
the Master Servicing Agreement. Any Successor Master Servicer other than the
Indenture Trustee shall (i) be an established institution (A) that satisfies any
requirements of the Higher Education Act applicable to master Servicers, (B) the
appointment of which satisfies the Rating Agency Condition and (C) the regular
business includes the master servicing or administration of student loans; and
(ii) enter into a Master Servicing Agreement with the Issuer having
substantially the same provisions as the provisions of the Master Servicing
Agreement applicable to the Master Servicer. If within 60 days after the
delivery of the notice referred to above, the Issuer shall not have obtained
such a new Master Servicer, the Indenture Trustee may appoint, or may petition a
court of competent jurisdiction to appoint, a Successor Master Servicer;
PROVIDED, HOWEVER, that such right to appoint or to petition for the appointment
of any such Successor Master Servicer shall in no event relieve the Indenture
Trustee from any obligations otherwise imposed on it under the Basic Documents
until such Successor Master Servicer has in fact assumed such appointment. In
connection with any such appointment, the Indenture Trustee may make such
arrangements for the compensation of such Successor Master Servicer as it and
such Successor Master Servicer shall agree, subject to the limitations set forth
below and in the Master Servicing Agreement, and in accordance with Section 6.02
of the Master Servicing Agreement, the Issuer or the Indenture Trustee shall
enter into an agreement with such Successor Master Servicer for the servicing of
the Trust Loans (such agreement to be in form and substance satisfactory to the
Indenture Trustee). If the Indenture Trustee shall succeed as provided herein to
the Master Servicer's duties as Master Servicer with respect to the Trust Loans,
it shall do so in its individual capacity and not in its capacity as Indenture
Trustee and, accordingly, the provisions of Article VI hereof shall be
inapplicable to the Indenture Trustee in its duties as the successor to the
Master Servicer and the servicing of the Trust Loans. In case the Indenture
Trustee shall become successor to the Master Servicer under the Master Servicing
Agreement, the Indenture Trustee, shall be entitled to appoint as Master
Servicer any one of its affiliates, provided that such appointment shall not
affect or alter in any way the liability of the Indenture Trustee as a successor
for the performance of the duties and obligations of the Master Servicer in
accordance with the terms hereof.
(f) Upon any termination of the Master Servicer's rights and powers
pursuant to the Master Servicing Agreement, the Issuer shall promptly notify the
Indenture Trustee. As soon as a Successor Master Servicer is appointed, the
Issuer shall notify the Indenture Trustee of such appointment, specifying in
such notice the name and address of such Successor Master Servicer.
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(g) Without derogating from the absolute nature of the assignment
granted to the Indenture Trustee under this Indenture or the rights of the
Indenture Trustee hereunder, the Issuer agrees that it will not, without the
prior written consent of the Indenture Trustee or the Noteholders of at least a
majority in Outstanding Amount of the Notes, amend, modify, waive, supplement,
terminate or surrender, or agree to any amendment, modification, supplement,
termination, waiver or surrender of, the terms of any Collateral or the Basic
Documents, except to the extent otherwise provided in the Master Servicing
Agreement, or waive timely performance or observance by the Master Servicer, the
Seller, the Issuer, the Administrator or the Eligible Lender Trustee under the
Loan Sale Agreement, the Master Servicing Agreement or the Administration
Agreement; PROVIDED, HOWEVER, that no such amendment shall (i) increase or
reduce in any manner the amount of, or accelerate or delay the timing of,
distributions that are required to be made for the benefit of the Noteholders,
or (ii) reduce the aforesaid percentage of the Notes which are required to
consent to any such amendment, without the consent of the Noteholders of all the
Outstanding Notes. If any such amendment, modification, supplement or waiver
shall be so consented to, the Issuer agrees, promptly following a request by the
Indenture Trustee to do so, to execute and deliver, in its own name and at its
own expense, such agreements, instruments, consents and other documents as the
Indenture Trustee may deem necessary or appropriate in the circumstances.
SECTION 3.08. NEGATIVE COVENANTS. So long as any Notes are Outstanding,
the Issuer shall not:
(i) except as expressly permitted by this Indenture or any other
Basic Document, sell, transfer, exchange or otherwise dispose of any of
the properties or assets of the Issuer, including those included in the
Indenture Trust Estate, unless directed to do so by the Indenture
Trustee (which direction the Indenture Trustee shall not give without
the prior written consent of each of the Rating Agencies);
(ii) claim any credit on, or make any deduction from the
principal or interest (including any Noteholders' Interest Basis
Carryover) payable in respect of, the Notes (other than amounts properly
withheld from such payments under the Code or applicable state law) or
assert any claim against any present or former Noteholder by reason of
the payment of the taxes levied or assessed upon any part of the
Indenture Trust Estate; or
(iii) (A) permit the validity or effectiveness of this Indenture
to be impaired, or permit the lien of this Indenture to be amended,
hypothecated, subordinated, terminated or discharged, or permit any
Person to be released from any covenants or obligations with respect to
the Notes under this Indenture except as may be expressly permitted
hereby, (B) permit any lien, charge, excise, claim, security interest,
mortgage or other encumbrance (other than the lien of this Indenture) to
be created on or extend to or otherwise arise upon or burden the
Indenture Trust Estate or any part thereof or any interest therein or
the proceeds thereof (other than tax liens and other liens that arise by
operation of law, in each case arising solely as a result of an action
or omission of the related Obligor, and other than as expressly
permitted by the Basic Documents) or (C) permit the lien of this
Indenture not to constitute a valid first priority (other than with
respect to any such tax or other lien) security interest in the
Indenture Trust Estate.
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SECTION 3.09. ANNUAL STATEMENT AS TO COMPLIANCE. The Issuer will deliver
to the Indenture Trustee, within 120 days after the end of each fiscal year of
the Issuer (commencing with the fiscal year 2000), an Officers' Certificate of
the Issuer stating that:
(i) a review of the activities of the Issuer during such year
and of performance under this Indenture has been made under such
Authorized Officers' supervision; and
(ii) to the best of such Authorized Officers' knowledge, based
on such review, the Issuer has complied with all conditions and
covenants under this Indenture throughout such year, or, if there has
been a default in the compliance of any such condition or covenant,
specifying each such default known to such Authorized Officers and the
nature and status thereof.
SECTION 3.10. ISSUER MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS. (a)
The Issuer shall not consolidate or merge with or into any other Person, unless:
(i) the Person (if other than the Issuer) formed by or surviving
such consolidation or merger shall be a Person organized and existing
under the laws of the United States of America or any State and shall
expressly assume, by an indenture supplemental hereto, executed and
delivered to the Indenture Trustee, in form satisfactory to the
Indenture Trustee, the due and punctual payment of the principal of,
interest on and any Noteholders' Interest Basis Carryover, if any, with
respect to the Notes and the performance or observance of every
agreement and covenant of this Indenture on the part of the Issuer to be
performed or observed, all as provided herein;
(ii) immediately after giving effect to such transaction, no
Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and
shall have delivered copies thereof to the Indenture Trustee) to the
effect that such transaction will not have any material adverse tax
consequence to the Issuer or any Noteholder;
(v) any action as is necessary to maintain the lien and security
interest created by this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officers' Certificate of the Issuer and an Opinion of Counsel each
stating that such consolidation or merger and such supplemental
indenture comply with this Article III and that all conditions precedent
herein provided for relating to such transaction have been complied with
(including any filing required by the Exchange Act).
(b) The Issuer shall not convey or transfer all or substantially
all its properties or assets, including those included in the Indenture
Trust Estate, to any Person, unless:
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(i) the Person that acquires by conveyance or transfer the
properties and assets of the Issuer the conveyance or transfer of which
is hereby restricted shall (A) be a United States citizen or a Person
organized and existing under the laws of the United States of America or
any State, (B) expressly assumes, by an indenture supplemental hereto,
executed and delivered to the Indenture Trustee in form satisfactory to
the Indenture Trustee, the due and punctual payment of the principal of,
interest on and Noteholders' Interest Basis Carryover, if any, with
respect to the Notes and the performance or observance of every
agreement and covenant of this Indenture on the part of the Issuer to be
performed or observed, all as provided herein, (C) expressly agrees by
means of such supplemental indenture that all right, title and interest
so conveyed or transferred shall be subject and subordinate to the
rights of Noteholders, (D) unless otherwise provided in such
supplemental indenture, expressly agrees to indemnify, defend and hold
harmless the Issuer against and from any loss, liability or expense
arising under or related to this Indenture and the Notes and (E)
expressly agrees by means of such supplemental indenture that such
Person (or if a group of Persons, then one specified Person) shall make
all filings with the Commission (and any other appropriate Person)
required by the Exchange Act in connection with the Notes;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and
shall have delivered a copy thereof to the Indenture Trustee) to the
effect that such transaction will not have any material adverse tax
consequence to the Issuer or any Noteholder;
(v) any action as is necessary to maintain the lien and security
interest created by this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Indenture Trustee an
Officers' Certificate of the Issuer and an Opinion of Counsel each
stating that such conveyance or transfer and such supplemental indenture
comply with this Article III and that all conditions precedent herein
provided for relating to such transaction have been complied with
(including any filing required by the Exchange Act).
SECTION 3.11. SUCCESSOR OR TRANSFEREE. (a) Upon any consolidation or
merger of the Issuer in accordance with Section 3.10(a), the Person formed by or
surviving such consolidation or merger (if other than the Issuer) shall succeed
to, and be substituted for, and may exercise every right and power of, the
Issuer under this Indenture with the same effect as if such Person had been
named as the Issuer herein.
(b) Upon a conveyance or transfer of all the assets and properties of
the Issuer pursuant to Section 3.10(b), Nellie Mae Student Loan Trust 1999-A
will be released from every covenant and agreement of this Indenture to be
observed or performed on the part of the Issuer
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with respect to the Notes immediately upon the delivery by the Issuer of written
notice to the Indenture Trustee stating that Nellie Mae Student Loan Trust
1999-A is to be so released.
SECTION 3.12. NO OTHER BUSINESS. Except as contemplated by this
Indenture or the other Basic Documents, the Issuer shall not engage in any
business other than financing, purchasing, owning, selling and managing the
Trust Loans, in the manner contemplated by this Indenture and the other Basic
Documents, and activities incidental thereto.
SECTION 3.13. NO BORROWING. Except as contemplated by this Indenture or
the other Basic Documents, the Issuer shall not issue, incur, assume, guarantee
or otherwise become liable, directly or indirectly, for any indebtedness except
for the Notes.
SECTION 3.14. OBLIGATIONS OF MASTER SERVICER AND ADMINISTRATOR. The
Issuer shall cause the Master Servicer to comply with Sections 3.07, 3.08, 3.09
and 3.10 of the Master Servicing Agreement and shall cause the Administrator to
comply with Section 2(g) of the Administration Agreement.
SECTION 3.15. GUARANTEES, LOANS, ADVANCES AND OTHER LIABILITIES. Except
as contemplated by the Basic Documents or this Indenture, the Issuer shall not
make any loan or advance or credit to, or guarantee (directly or indirectly or
by an instrument having the effect of assuring another's payment or performance
on any obligation or capability of so doing or otherwise), endorse or otherwise
become contingently liable, directly or indirectly, in connection with the
obligations, stocks or dividends of, or own, purchase, repurchase or acquire (or
agree contingently to do so) any stock, obligations, assets or securities of, or
any other interest in, or make any capital contribution to, any other Person.
SECTION 3.16. CAPITAL EXPENDITURES. The Issuer shall not make any
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personalty).
SECTION 3.17. RESTRICTED PAYMENTS. The Issuer shall not, directly or
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Eligible Lender Trustee or any owner of a beneficial interest
in the Issuer or otherwise with respect to any ownership or equity interest
or security in or of the Issuer or to the Master Servicer or the
Administrator, (ii) redeem, purchase, retire or otherwise acquire for value
any such ownership or equity interest or security or (iii) set aside or
otherwise segregate any amounts for any such purpose; PROVIDED, HOWEVER, that
the Issuer may make, or cause to be made, distributions to the Master
Servicer, the Eligible Lender Trustee, the Indenture Trustee, the
Noteholders, the Certificateholders, the Administrator, the Seller and the
Company as contemplated by, and to the extent funds are available for such
purpose under, this Indenture, the Loan Sale Agreement, the Master Servicing
Agreement, the Trust Agreement or the Administration Agreement. The Issuer
will not, directly or indirectly, make payments to or distributions from the
Collection Account except in accordance with this Indenture and the other
Basic Documents.
SECTION 3.18. NOTICE OF EVENTS OF DEFAULT. The Issuer shall give the
Indenture Trustee and the Rating Agencies prompt written notice of each Event of
Default hereunder and each default on the part of the Seller, the Master
Servicer or the Administrator of its obligations
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under the Loan Sale Agreement, the Master Servicing Agreement or the
Administration Agreement. In addition, the Issuer shall deliver to the
Indenture Trustee, within five days after the occurrence thereof, written
notice in the form of an Officers' Certificate of the Issuer of any event
which with the giving of notice and the lapse of time would become an Event
of Default under Section 5.01(iii), its status and what action the Issuer is
taking or proposes to take with respect thereto. The Indenture Trustee shall
provide notice to the Noteholders of each default or other event of which it
receives notice pursuant to this Section 3.18, promptly after receipt of such
Notice.
SECTION 3.19. FURTHER INSTRUMENTS AND ACTS. Upon request of the
Indenture Trustee, the Issuer will execute and deliver such further instruments
and do such further acts as may be reasonably necessary or proper to carry out
more effectively the purpose of this Indenture.
SECTION 3.20. REMOVAL OF ADMINISTRATOR. So long as any Notes are
Outstanding, the Issuer shall not remove the Administrator unless the Rating
Agency Condition shall have been satisfied in connection with such removal.
ARTICLE IIIA
Calculation of Rates
SECTION 3.01A. CALCULATION OF 3-MONTH LIBOR, ETC. For purposes of
calculating the Class A-1 Note LIBOR Rate, the Class A-2 Note LIBOR Rate, the
Certificate LIBOR Rate, the Adjusted Student Loan Rate, the Class A-1 Note Rate,
the Class A-2 Note Rate and the Certificate Rate for each Quarterly Interest
Period, the Indenture Trustee shall calculate 3-Month LIBOR on the related LIBOR
Determination Date.
SECTION 3.02A. RELATED DEFINITIONS.
(a) "LIBOR DETERMINATION DATE" means, with respect to any Quarterly
Interest Period, the day that is the second business day prior to the
commencement of the LIBOR Reset Period within such Quarterly Interest Period
(or, in the case of the initial LIBOR Reset Period, on the second business day
prior to the Closing Date). For purposes of this definition, a business day is
any day in which banks in the City of London and The City of New York are open
for the transaction of international business.
(B) "LIBOR RESET PERIOD" means the 3-month period commencing on the
______th day (or, if any such day is not a Business Day, on the next succeeding
Business Day) of each [January, April, July and October] and ending on the day
immediately preceding the following LIBOR Reset Period; PROVIDED, HOWEVER, that
the initial LIBOR Reset Period will commence on the Closing Date.
(C) "REFERENCE BANKS" means four major banks in the London interbank
market selected by the Indenture Trustee.
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(D) "TELERATE PAGE 3750" means the display page so designated on the
Bridge Telerate, Inc. service (or such other page as may replace that page on
any service for the purpose of displaying comparable rates or prices).
(E) "3-MONTH LIBOR" means, with respect to any LIBOR Reset Period, the
London interbank offered rate for deposits in U.S. dollars having a maturity of
three months commencing on the related LIBOR Determination Date (the "INDEX
MATURITY") which appears on Telerate Page 3750 as of 11:00 a.m. London time, on
such LIBOR Determination Date. If such rate does not appear on Telerate Page
3750, 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 LIBOR Determination Date to prime banks in the London
interbank market by the Reference Banks. The Indenture Trustee will request the
principal London office of each of such Reference Banks to provide a quotation
of its rate. If at least two such quotations are provided, the rate for that day
will be the arithmetic mean of the quotations. If fewer than two quotations are
provided, the rate for that day will be the arithmetic mean of the rates quoted
by major banks in The City of New York, selected by the Indenture Trustee, at
approximately 11:00 a.m., New York time, on such LIBOR 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, 3-Month LIBOR in effect for the applicable LIBOR
Reset Period will be the 3-Month LIBOR in effect for the previous LIBOR Reset
Period.
SECTION 3.03A. NOTICE TO ADMINISTRATOR. On each LIBOR Determination
Date, the Indenture Trustee shall, by facsimile transmission, notify the
Administrator of the Class A-1 Note Rate, the Class A-2 Note Rate and the
Certificate Rate and of such other information necessary for the Administrator
to prepare a Securityholders' Statement on the related Quarterly Payment Date
pursuant to Section 2(g) of the Administration Agreement.
ARTICLE IV
Satisfaction and Discharge
SECTION 4.01. SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture
shall cease to be of further effect with respect to the Notes except as to (i)
rights of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal thereof and interest (including any Noteholders' Interest Basis
Carryover) thereon, (iv) Sections 3.03, 3.04, 3.05, 3.08, 3.10, 3.12, 3.13,
3.15, 3.16 and 3.17, (v) the rights, obligations and immunities of the Indenture
Trustee hereunder (including the rights of the Indenture Trustee under Section
6.07 and the obligations of the Indenture Trustee under Section 4.02) and (vi)
the rights of Noteholders as beneficiaries hereof with respect to the property
so deposited with the Indenture Trustee payable to all or any of them, and the
Indenture Trustee, on demand of and at the expense of the Issuer, shall execute
proper instruments acknowledging satisfaction and discharge of this Indenture
with respect to the Notes, when:
(A) either
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(1) all Notes theretofore authenticated and delivered (other
than (i) Notes that have been destroyed, lost or stolen and
that have been replaced or paid as provided in Section 2.05
and (ii) Notes for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the
Issuer and thereafter repaid to the Issuer or discharged
from such trust, as provided in Section 3.03) have been
delivered to the Indenture Trustee for cancellation;
or
(2) all Notes not theretofore delivered to the Indenture Trustee
for cancellation
(i) have become due and payable,
(ii) will become due and payable at the Class A-1 Note Final
Maturity Date or the Class A-2 Note Final Maturity
Date, as the case may be, within one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Indenture Trustee for
the giving of notice of redemption by the Indenture
Trustee in the name, and at the expense, of the Issuer,
and the Issuer, in the case of subclauses (i), (ii) or (iii)
above, has irrevocably deposited or caused to be irrevocably
deposited with the Indenture Trustee cash or direct
obligations of or obligations guaranteed by the United
States of America (which will mature prior to the date such
amounts are payable), in trust for such purpose, in an
amount sufficient to pay and discharge the entire
indebtedness on such Notes not theretofore delivered to the
Indenture Trustee for cancellation as of such day of
discharge or when due on the Class A-1 Note Final Maturity
Date or the Class A-2 Note Final Maturity Date, as the case
may be;
(B) the Issuer has paid or caused to be paid all other sums payable
hereunder by the Issuer; and
(C) the Issuer has delivered to the Indenture Trustee an Officers'
Certificate of the Issuer, an Opinion of Counsel and (if required
by the TIA or the Indenture Trustee) an Independent Certificate
from a firm of certified public accountants, each meeting the
applicable requirements of Section 11.01(a) and, subject to
Section 11.02, each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
SECTION 4.02. APPLICATION OF TRUST MONEY. All monies deposited with the
Indenture Trustee pursuant to Section 4.01 hereof shall be held in trust and
applied by it, in accordance
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with the provisions of the Notes and this Indenture, to the payment, either
directly or through any Paying Agent, as the Indenture Trustee may determine, to
the Noteholders of the particular Notes for the payment or redemption of which
such monies have been deposited with the Indenture Trustee, of all sums due and
to become due thereon for principal and interest (including any Noteholders'
Interest Basis Carryover); but such monies need not be segregated from other
funds except to the extent required herein, in the Master Servicing Agreement or
the Administration Agreement or required by law.
SECTION 4.03. REPAYMENT OF MONIES HELD BY PAYING AGENT. In connection
with the satisfaction and discharge of this Indenture with respect to the Notes,
all monies then held by any Paying Agent other than the Indenture Trustee under
the provisions of this Indenture with respect to such Notes shall, upon demand
of the Issuer, be paid to the Indenture Trustee to be held and applied according
to Section 3.03 and thereupon such Paying Agent shall be released from all
further liability with respect to such monies.
SECTION 4.04. AUCTION OF TRUST LOANS. The Indenture Trustee shall offer
the Trust Loans for sale as of the last day of the Collection Period that ends
in ______ 20__ and shall accept bids on behalf of the Issuer for such purpose,
unless as of such date the Notes are no longer Outstanding. If with respect to
the last date of such Collection Period, the Indenture Trustee receives no bid
to purchase the Trust Loans, or no bid that it may, as specified below, accept,
the Indenture Trustee may at its discretion, but shall not be obligated to,
offer the Trust Loans for sale as of the last day of each, or any, of the
succeeding Collection Periods until a bid is received that may, as specified
below, be accepted by the Indenture Trustee. With respect to any attempt to
arrange for the purchase of the highest bid submitted so long as (i) at least
two bids (one of which is from a Person that is not the Seller or an Affiliate
of the Seller) to purchase the Trust Loans as of the last day of the applicable
Collection Period are received and (ii) the highest such bid is at least equal
to the Minimum Purchase Price as of the last day of the applicable Collection
Period. Any attempt to arrange for the purchase of the Trust Loans and the
consummation of any such sale shall be conducted by the Indenture Trustee in a
commercially reasonable manner. The Indenture Trustee shall provide notice of
any such attempt at least 60 days prior to the last day of the related
Collection Period to the Seller, NMF, the Master Servicer, the Eligible Lender
Trustee, the Rating Agencies and each Noteholder, and any such Person or their
respective Affiliates or any other Person may submit a timely bid for the
purchase of the Trust Loans.
ARTICLE V
Remedies
SECTION 5.01. EVENTS OF DEFAULT. "EVENT OF DEFAULT", wherever used
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
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(i) default in the payment by the Issuer of any interest
(including, subject to the limitations of Sections 2.07(d) and 8.02,
any Noteholders' Interest Basis Carryover) on any Note when the same
becomes due and payable, and such default shall continue for a period
of five days; or
(ii) default in the payment by the Issuer of the principal of
any Note when the same becomes due and payable; or
(iii) default in the observance or performance of any covenant
or agreement of the Issuer made in this Indenture (other than a
covenant or agreement, a default in the observance or performance of
which is elsewhere in this Section specifically dealt with), or any
representation or warranty of the Issuer made in this Indenture or in
any certificate or other writing delivered pursuant hereto or in
connection herewith proving to have been incorrect in any material
respect as of the time when the same shall have been made, and such
default shall continue or not be cured, or the circumstance or
condition in respect of which such misrepresentation or warranty was
incorrect shall not have been eliminated or otherwise cured, for a
period of 30 (or, in the circumstances provided below, 90) days after
there shall have been given, by registered or certified mail, to the
Issuer by the Indenture Trustee or to the Issuer and the Indenture
Trustee by the Noteholders of at least 25% of the Outstanding Amount of
the Notes, a written notice specifying such default or incorrect
representation or warranty and requiring it to be remedied and stating
that such notice is a notice of Default hereunder; PROVIDED, HOWEVER,
that, if at the end of such 30-day period, the Indenture Trustee
determines that a good faith effort to cure or eliminate the Default
has commenced, the Indenture Trustee may extend such 30-day period to
90 days; or
(iv) the filing of a decree or order for relief by a court
having jurisdiction in the premises in respect of the Issuer or any
substantial part of the Indenture Trust Estate in an involuntary case
under any applicable federal or state bankruptcy, insolvency or other
similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar
official of the Issuer or for any substantial part of the Indenture
Trust Estate, or ordering the winding-up or liquidation of the Issuer's
affairs, and such decree or order shall remain unstayed and in effect
for a period of 60 consecutive days; or
(v) the commencement by the Issuer of a voluntary case under
any applicable federal or state bankruptcy, insolvency or other similar
law now or hereafter in effect, or the consent by the Issuer to the
entry of an order for relief in an involuntary case under any such law,
or the consent by the Issuer to the appointment or taking possession by
a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Issuer or for any substantial part of the
Indenture Trust Estate, or the making by the Issuer of any general
assignment for the benefit of creditors, or the failure by the Issuer
generally to pay its debts as such debts become due, or the taking of
action by the Issuer in furtherance of any of the foregoing.
SECTION 5.02. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. If an
Event of Default should occur, then and in every such case the Indenture Trustee
or the Noteholders of
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Notes representing not less than a majority of the Outstanding Amount of the
Notes may declare all the Notes to be immediately due and payable, by a notice
in writing to the Issuer (and to the Indenture Trustee if given by Noteholders),
and upon any such declaration the unpaid principal amount of such Notes,
together with accrued and unpaid interest thereon through the date of
acceleration, shall become immediately due and payable.
At any time after such declaration of acceleration of maturity has been
made and before a judgment or decree for payment of the money due has been
obtained by the Indenture Trustee as hereinafter in this Article V provided, the
Noteholders of Notes representing a majority of the Outstanding Amount of the
Notes, by written notice to the Issuer and the Indenture Trustee, may rescind
and annul such declaration and its consequences if:
(i) the Issuer has paid or deposited with the Indenture
Trustee a sum sufficient to pay:
(A) all payments of principal of and interest on all
Notes and all other amounts that would then be due hereunder
or upon such Notes if the Event of Default giving rise to such
acceleration had not occurred; and
(B) all sums paid or advanced by the Indenture
Trustee hereunder and the reasonable compensation, expenses,
disbursements and advances of the Indenture Trustee and its
agents and counsel; and
(ii) all Events of Default, other than the nonpayment of the
principal of the Notes that has become due solely by such acceleration,
have been cured or waived as provided in Section 5.12.
No such rescission shall affect any subsequent default or impair any right
consequent thereto.
SECTION 5.03. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
INDENTURE TRUSTEE. (a) The Issuer covenants that if (i) default is made in the
payment of any interest (including, subject to the limitations of Sections
2.07(d) and 8.02, any Noteholders' Interest Basis Carryover) on any Note when
the same becomes due and payable, and such default continues for a period of
five days, or (ii) default is made in the payment of the principal of or any
installment of the principal of any Note when the same becomes due and payable,
the Issuer will, upon demand of the Indenture Trustee, pay to it, for the
benefit of the Noteholders, the whole amount then due and payable on such Notes
for principal and interest (and any Noteholders' Interest Basis Carryover), with
interest upon the overdue principal, and, to the extent payment at such rate of
interest shall be legally enforceable, upon overdue installments of interest
(and any Noteholders' Interest Basis Carryover), at the rate specified in
Section 2.07 and in addition thereto such further amount as shall be sufficient
to cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Indenture Trustee and
its agents and counsel.
(b) In case the Issuer shall fail forthwith to pay such amounts upon
such demand, the Indenture Trustee, in its own name and as trustee of an express
trust, may institute a Proceeding for the collection of the sums so due and
unpaid, and may prosecute such Proceeding to judgment or final decree, and may
enforce the same against the Issuer or other obligor upon
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such Notes and collect in the manner provided by law out of the property of the
Issuer or other obligor upon such Notes, wherever situated, the monies adjudged
or decreed to be payable.
(c) If an Event of Default occurs and is continuing, the Indenture
Trustee may, as more particularly provided in Section 5.04, in its discretion,
proceed to protect and enforce its rights and the rights of the Noteholders by
such appropriate Proceedings as the Indenture Trustee shall deem most effective
to protect and enforce any such rights, whether for the specific enforcement of
any covenant or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy or legal or
equitable right vested in the Indenture Trustee by this Indenture or by law.
(d) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes or any Person having or claiming an ownership interest in
the Indenture Trust Estate, Proceedings under Title 11 of the United States Code
or any other applicable federal or state bankruptcy, insolvency or other similar
law, or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer or its property or such other obligor or Person,
or in case of any other comparable judicial Proceeding relative to the Issuer or
other obligor upon the Notes, or to the creditors or property of the Issuer or
such other obligor, the Indenture Trustee, irrespective of whether the principal
of any Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Indenture Trustee shall
have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered to, and shall by intervention in such proceedings or
otherwise:
(i) file and prove a claim or claims for the whole amount of
principal and interest (including any Noteholders' Interest Basis
Carryover) owing and unpaid in respect of the Notes and file such other
papers or documents as may be necessary or advisable in order to have
the claims of the Indenture Trustee (including any claim for reasonable
compensation to the Indenture Trustee and each predecessor Indenture
Trustee, and their respective agents, attorneys and counsel, and for
reimbursement of all expenses and liabilities incurred, and all
advances made, by the Indenture Trustee and each predecessor Indenture
Trustee, except as a result of negligence or bad faith) and of the
Noteholders allowed in such Proceeding;
(ii) unless prohibited by applicable law and regulations, vote
on behalf of the Noteholders in any election of a trustee, a standby
trustee or Person performing similar functions in any such Proceeding;
(iii) collect and receive any monies or other property payable
or deliverable on any such claims and to distribute all amounts
received with respect to the claims of the Noteholders and the
Indenture Trustee on their behalf; and
(iv) file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the
Indenture Trustee or the Noteholders allowed in any judicial Proceeding
relative to the Issuer, its creditors and its property;
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and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Noteholders to make
payments to the Indenture Trustee, and, in the event that the Indenture Trustee
shall consent to the making of payments directly to such Noteholders, to pay to
the Indenture Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Indenture Trustee, each predecessor Indenture Trustee and
their respective agents, attorneys and counsel, and all other expenses and
liabilities incurred, and all advances made, by the Indenture Trustee and each
predecessor Indenture Trustee except as a result of negligence or bad faith.
(e) Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Noteholder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any
Noteholder in any such proceeding except, as aforesaid, to vote for the election
of a trustee in bankruptcy or similar Person.
(f) All rights of action and of asserting claims under this Indenture,
or under any of the Notes, may be enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any trial or other
Proceeding relative thereto, and any such action or Proceeding instituted by the
Indenture Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment, subject to the payment of the expenses,
disbursements and compensation of the Indenture Trustee, each predecessor
Indenture Trustee and their respective agents and attorneys, shall be for the
benefit of the Noteholders.
(g) In any Proceeding brought by the Indenture Trustee (and also any
Proceeding involving the interpretation of any provision of this Indenture to
which the Indenture Trustee shall be a party), the Indenture Trustee shall be
held to represent all the Noteholders, and it shall not be necessary to make any
Noteholder a party to any such Proceeding.
SECTION 5.04. REMEDIES; PRIORITIES. (a) If an Event of Default shall
have occurred, the Indenture Trustee may do one or more of the following
(subject to Section 5.05):
(i) institute Proceedings in its own name and as trustee of an
express trust for the collection of all amounts then payable on the
Notes or under this Indenture with respect thereto, whether by
declaration or otherwise, enforce any judgment obtained, and collect
from the Issuer and any other obligor upon such Notes monies adjudged
due;
(ii) institute Proceedings from time to time for the complete
or partial foreclosure of this Indenture with respect to the Indenture
Trust Estate;
(iii) exercise any remedies of a secured party under the UCC
and take any other appropriate action to protect and enforce the rights
and remedies of the Indenture Trustee and the Noteholders; and
(iv) sell the Indenture Trust Estate or any portion thereof or
rights or interests therein, at one or more public or private sales
called and conducted in any manner permitted by law;
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PROVIDED, HOWEVER, that the Indenture Trustee may not sell or otherwise
liquidate the Indenture Trust Estate following an Event of Default, other than
an Event of Default described in Section 5.01(i) or (ii), unless (A) the
Noteholders of 100% of the Outstanding Amount of the Notes consent thereto, (B)
the proceeds of such sale or liquidation distributable to the Noteholders are
sufficient to discharge in full all amounts then due and unpaid upon such Notes
for principal and interest or (C) the Indenture Trustee determines that the
Indenture Trust Estate will not continue to provide sufficient funds for the
payment of principal of and interest on the Notes as they would have become due
if the Notes had not been declared due and payable, and the Indenture Trustee
obtains the consent of Noteholders of 66-2/3% of the Outstanding Amount of the
Notes. In determining such sufficiency or insufficiency with respect to clauses
(B) and (C), the Indenture Trustee may, but need not, obtain and rely upon an
opinion of an Independent investment banking or accounting firm of national
reputation as to the feasibility of such proposed action and as to the
sufficiency of the Indenture Trust Estate for such purpose.
(b) If the Indenture Trustee collects any money or property pursuant to
this Article V, it shall pay out the money or property in the following order:
FIRST: to the Indenture Trustee for amounts due under Section
6.07;
SECOND: to the Class A-1 Noteholders and the Class A-2
Noteholders for amounts due and unpaid on the Notes for interest (other
than any Noteholders' Interest Basis Carryover), ratably, without
preference or priority of any kind, according to the respective amounts
due and payable on the Notes for interest;
THIRD: to the Certificateholders for amounts due and unpaid on
the Certificates for interest return (other than any
Certificateholders' Return Carryover), ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Certificates for interest return;
FOURTH: to the Class A-1 Noteholders and the Class A-2
Noteholders for amounts due and unpaid on the Notes for principal,
ratably, without preference or priority of any kind, according to the
amounts due and payable on the Notes for principal;
FIFTH: to the Certificateholders for amounts due and unpaid on
the Certificates for principal, ratably, without preference or priority
of any kind, according to the amounts due and payable on the
Certificates for principal;
SIXTH: to the Master Servicer for due and unpaid Master
Servicing Fees;
SEVENTH: to the Class A-1 Noteholders and the Class A-2
Noteholders for any unpaid Noteholders' Interest Basis Carryover,
ratably, without preference or priority of any kind, according to the
amounts due and payable on the Notes for such Noteholders' Interest
Basis Carryover;
EIGHTH: to Certificateholders for any unpaid
Certificateholders' Return Carryover; and
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NINTH: to the Issuer, for distribution in accordance with the
terms of the Administration Agreement.
The Indenture Trustee may fix a record date and payment date for any
payment to Noteholders pursuant to this Section. At least 15 days before such
record date, the Issuer shall mail to each Noteholder and the Indenture Trustee
a notice that states the record date, the payment date and the amount to be
paid.
SECTION 5.05. OPTIONAL PRESERVATION OF THE INDENTURE TRUST ESTATE. If
the Notes have been declared to be due and payable under Section 5.02 following
an Event of Default and such declaration and its consequences have not been
rescinded and annulled, the Indenture Trustee may, but need not, elect to
maintain possession of the Indenture Trust Estate. It is the desire of the
parties hereto and the Noteholders that there be at all times sufficient funds
for the payment of principal of and interest (including any Noteholders'
Interest Basis Carryover) on the Notes, and the Indenture Trustee shall take
such desire into account when determining whether to maintain possession of the
Indenture Trust Estate. In determining whether to maintain possession of the
Indenture Trust Estate, the Indenture Trustee may, but need not, obtain and rely
upon an opinion (which shall be obtained at the expense of the Issuer) of an
Independent investment banking or accounting firm of national reputation as to
the feasibility of such proposed action and as to the sufficiency of the
Indenture Trust Estate for such purpose.
SECTION 5.06. LIMITATION OF SUITS. No Noteholder shall have any right
to institute any Proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:
(i) such Noteholder has previously given written notice to the
Indenture Trustee of a continuing Event of Default;
(ii) the Noteholders of not less than 25% of the Outstanding
Amount of the Notes have made written request to the Indenture Trustee
to institute such Proceeding in respect of such Event of Default in its
own name as Indenture Trustee hereunder;
(iii) such Noteholder or Noteholders have offered to the
Indenture Trustee reasonable indemnity against the costs, expenses and
liabilities to be incurred in complying with such request;
(iv) the Indenture Trustee for 60 days after its receipt of
such notice, request and offer of indemnity has failed to institute
such Proceeding; and
(v) no direction inconsistent with such written request has
been given to the Indenture Trustee during such 60-day period by the
Noteholders of a majority of the Outstanding Amount of the Notes;
it being understood and intended that no one or more Noteholders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other
Noteholders or to obtain or to seek to obtain priority or preference over any
other Noteholders or to enforce any right under this Indenture, except in the
manner herein provided.
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In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Noteholders
pursuant to this Section 5.06, each representing less than a majority of the
Outstanding Amount of the Notes, the Indenture Trustee in its sole discretion
may determine what action, if any, shall be taken, notwithstanding any other
provisions of this Indenture.
SECTION 5.07. UNCONDITIONAL RIGHTS OF NOTEHOLDERS TO RECEIVE PRINCIPAL
AND INTEREST. Notwithstanding any other provisions in this Indenture, any
Noteholder shall have the right, which is absolute and unconditional, to receive
payment of the principal of and interest, if any, on such Note on or after the
respective due dates thereof expressed in such Note or in this Indenture (or, in
the case of redemption, on or after the Redemption Date) and to institute suit
for the enforcement of any such payment, and such right shall not be impaired
without the consent of such Noteholder.
SECTION 5.08. RESTORATION OF RIGHTS AND REMEDIES. If the Indenture
Trustee or any Noteholder has instituted any Proceeding to enforce any right or
remedy under this Indenture and such Proceeding has been discontinued or
abandoned for any reason or has been determined adversely to the Indenture
Trustee or to such Noteholder, then and in every such case the Issuer, the
Indenture Trustee and the Noteholders shall, subject to any determination in
such Proceeding, be restored severally and respectively to their former
positions hereunder, and thereafter all rights and remedies of the Indenture
Trustee and the Noteholders shall continue as though no such Proceeding had been
instituted.
SECTION 5.09. RIGHTS AND REMEDIES CUMULATIVE. No right or remedy herein
conferred upon or reserved to the Indenture Trustee or to the Noteholders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 5.10. DELAY OR OMISSION NOT A WAIVER. No delay or omission of
the Indenture Trustee or any Noteholder to exercise any right or remedy accruing
upon any Default or Event of Default shall impair any such right or remedy or
constitute a waiver of any such Default or Event of Default or an acquiescence
therein. Every right and remedy given by this Article V or by law to the
Indenture Trustee or to the Noteholders may be exercised from time to time, and
as often as may be deemed expedient, by the Indenture Trustee or the
Noteholders, as the case may be.
SECTION 5.11. CONTROL BY NOTEHOLDERS. The Noteholders of a majority of
the Outstanding Amount of the Notes shall have the right to direct the time,
method and place of conducting any Proceeding for any remedy available to the
Indenture Trustee with respect to the Notes or exercising any trust or power
conferred on the Indenture Trustee; PROVIDED, HOWEVER, that
(i) such direction shall not be in conflict with any rule of
law or with this Indenture;
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(ii) subject to the express terms of Section 5.04, any
direction to the Indenture Trustee to sell or liquidate the Indenture
Trust Estate shall be by the Noteholders of 100% of the Outstanding
Amount of the Notes;
(iii) if the conditions set forth in Section 5.05 have been
satisfied and the Indenture Trustee elects to retain the Indenture
Trust Estate pursuant to such Section, then any direction to the
Indenture Trustee by Noteholders of less than 100% of the Outstanding
Amount of the Notes to sell or liquidate the Indenture Trust Estate
shall be of no force and effect; and
(iv) the Indenture Trustee may take any other action deemed
proper by the Indenture Trustee that is not inconsistent with such
direction;
and PROVIDED, FURTHER, that, subject to Section 6.01, the Indenture Trustee need
not take any action that it determines might involve it in liability or might
materially adversely affect the rights of any Noteholders not consenting to such
action.
SECTION 5.12. WAIVER OF PAST DEFAULTS. Prior to the time a judgment or
decree for payment of money due has been obtained as described in Section 5.02,
the Noteholders of not less than a majority of the Outstanding Amount of the
Notes may waive any past Default or Event of Default and its consequences except
a Default or Event of Default (a) in payment when due of principal of or
interest (including, subject to the limitations of Sections 2.07(d) and 8.02,
any Noteholders' Interest Basis Carryover) on any of the Notes or (b) in respect
of a covenant or provision hereof which cannot be modified or amended without
the consent of each Noteholder; PROVIDED, HOWEVER, that all Noteholders may
waive events described in clauses (a) and (b) hereof. In the case of any such
waiver, the Issuer, the Indenture Trustee and the Noteholders shall be restored
to their former positions and rights hereunder, respectively; but no such waiver
shall extend to any subsequent or other Default or Event of Default or impair
any right consequent thereto.
Upon any such waiver, such Default shall cease to exist and be deemed
to have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to be cured and not to have occurred, for every
purpose of this Indenture to the extent specified in such waiver but no such
waiver shall extend to any subsequent or other Default or Event of Default or
impair any right consequent thereto.
SECTION 5.13. UNDERTAKING FOR COSTS. All parties to this Indenture
agree, and each Noteholder by such Noteholder's acceptance of any Note shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture, or in any suit
against the Indenture Trustee for any action taken, suffered or omitted by it as
Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to (a) any suit instituted by the
Indenture Trustee, (b) any suit instituted by any Noteholder, or group of
Noteholders, in each case holding in the aggregate more than 10% of the
Outstanding Amount of the Notes or (c) any suit instituted by
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any Noteholder for the enforcement of the payment of principal of or interest
(including any Noteholders' Interest Basis Carryover) on any Note on or after
the respective due dates expressed in such Note and in this Indenture (or, in
the case of redemption, on or after the Redemption Date).
SECTION 5.14. WAIVER OF STAY OR EXTENSION LAWS. The Issuer covenants
(to the extent that it may lawfully do so) that it will not at any time insist
upon, or plead or in any manner whatsoever, claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, that may affect the covenants or the performance of this
Indenture; and the Issuer (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Indenture Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.
SECTION 5.15. ACTION ON NOTES. The Indenture Trustee's right to seek
and recover judgment on the Notes or under this Indenture shall not be affected
by the seeking, obtaining or application of any other relief under or with
respect to this Indenture. Neither the lien of this Indenture nor any rights or
remedies of the Indenture Trustee or the Noteholders shall be impaired by the
recovery of any judgment by the Indenture Trustee against the Issuer or by the
levy of any execution under such judgment upon any portion of the Indenture
Trust Estate or upon any of the assets of the Issuer. Any money or property
collected by the Indenture Trustee shall be applied in accordance with Section
5.04(b).
SECTION 5.16. PERFORMANCE AND ENFORCEMENT OF CERTAIN OBLIGATIONS. (a)
Promptly following a request from the Indenture Trustee to do so and at the
Administrator's expense, the Issuer shall take all such lawful action as the
Indenture Trustee may request to compel or secure the performance and observance
by the Seller, the Master Servicer and the Administrator, as applicable, of each
of their obligations to the Issuer under or in connection with the Loan Sale
Agreement, the Master Servicing Agreement and the Administration Agreement and
to exercise any and all rights, remedies, powers and privileges lawfully
available to the Issuer under or in connection with the Loan Sale Agreement, the
Master Servicing Agreement and the Administration Agreement to the extent and in
the manner directed by the Indenture Trustee, including the transmission of
notices of default on the part of the Seller, the Master Servicer or the
Administrator thereunder and the institution of legal or administrative actions
or proceedings to compel or secure performance by the Seller, the Master
Servicer or the Administrator of each of their obligations under the Loan Sale
Agreement, the Master Servicing Agreement or the Administration Agreement.
(b) If an Event of Default has occurred, the Indenture Trustee may, and
at the direction (which direction shall be in writing or by telephone (confirmed
in writing promptly thereafter)) of the Noteholders of 66-2/3% of the
Outstanding Amount of the Notes, shall, exercise all rights, remedies, powers,
privileges and claims of the Issuer against the Seller, the Master Servicer or
the Administrator under or in connection with the Loan Sale Agreement, the
Master Servicing Agreement or the Administration Agreement, including the right
or power to take any action to compel or secure performance or observance by the
Seller, the Master Servicer or the Administrator of each of their obligations to
the Issuer thereunder and to give any consent, request, notice, direction,
approval, extension or waiver under the Loan Sale Agreement, the
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Master Servicing Agreement or the Administration Agreement and any right of the
Issuer to take such action shall be suspended.
ARTICLE VI
The Indenture Trustee
SECTION 6.01. DUTIES OF INDENTURE TRUSTEE. (a) If an Event of Default
has occurred and is continuing, the Indenture Trustee shall exercise the rights
and powers vested in it by this Indenture and use the same degree of care and
skill in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such duties
and only such duties as are specifically set forth in this Indenture
and no implied covenants or obligations shall be read into this
Indenture against the Indenture Trustee; and
(ii) in the absence of bad faith on its part, the Indenture
Trustee may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Indenture Trustee and conforming to the
requirements of this Indenture; PROVIDED, HOWEVER, that the Indenture
Trustee shall examine such certificates and opinions to determine
whether they conform to the requirements of this Indenture.
(c) The Indenture Trustee may not be relieved from liability
for its own negligent action, its own negligent failure to act or its own
willful misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section;
(ii) the Indenture Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer unless it is
proved that the Indenture Trustee was negligent in ascertaining the
pertinent facts; and
(iii) the Indenture Trustee shall not be liable with respect
to any action it takes or omits to take in good faith in accordance
with a direction received by it pursuant to Sections 5.02, 5.11, 5.12
and 5.16.
(d) Every provision of this Indenture that in any way relates
to the Indenture Trustee is subject to paragraphs (a), (b), (c) and (g) of this
Section.
(e) The Indenture Trustee shall not be liable for interest on
any money received by it except as the Indenture Trustee may agree in writing
with the Issuer.
(f) Money held in trust by the Indenture Trustee need not be
segregated from other funds except to the extent required by law or the terms of
this Indenture or the Master Servicing Agreement.
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(g) No provision of this Indenture shall require the Indenture
Trustee to expend or risk its own funds or otherwise incur financial liability
in the performance of any of its duties hereunder or in the exercise of any of
its rights or powers, if it shall have reasonable grounds to believe that
repayments of such funds or adequate indemnity satisfactory to it against any
loss, liability or expense is not reasonably assured to it.
(h) Except as expressly provided in the Basic Documents, the
Indenture Trustee shall have no obligation to administer, service or collect the
Trust Loans or to maintain, monitor or otherwise supervise the administration,
servicing or collection of the Trust Loans.
In the event that the Indenture Trustee is the Paying Agent or
the Note Registrar, the rights and protections afforded to the Indenture Trustee
pursuant to this Indenture shall also be afforded to
the Indenture Trustee in its capacity as Paying Agent or Note Registrar.
(i) Every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Indenture Trustee
shall be subject to the provisions of this Section and to the provisions of the
TIA.
SECTION 6.02. RIGHTS OF INDENTURE TRUSTEE. (a) The Indenture Trustee
may rely on any document believed by it to be genuine and to have been signed or
presented by the proper Person. The Indenture Trustee need not investigate any
fact or matter stated in such document.
(b) Before the Indenture Trustee acts or refrains from acting
in connection with any matter contemplated by this Indenture or other Basic
Documents, it may require an Officers' Certificate of the Issuer or an Opinion
of Counsel from the appropriate party. The Indenture Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on such
Officers' Certificate or Opinion of Counsel from the appropriate party.
(c) The Indenture Trustee may exercise any of the trusts and
powers hereunder or perform any duties hereunder either directly or by or
through agents or attorneys or a custodian or nominee appointed with due care by
it hereunder.
(d) The Indenture Trustee shall not be liable for any action
it takes or omits to take in good faith which it believes to be authorized or
within its rights or powers; PROVIDED, HOWEVER, that the Indenture Trustee's
conduct does not constitute willful misconduct, negligence or bad faith.
(e) The Indenture Trustee may consult with counsel, and the
written advice or opinion of counsel with respect to legal matters relating to
this Indenture and the other Basic Documents and the Notes shall be full and
complete authorization and protection from liability in respect to any action
taken, omitted or suffered by it hereunder in good faith and in accordance with
the advice or opinion of such counsel.
SECTION 6.03. INDIVIDUAL RIGHTS OF INDENTURE TRUSTEE. The Indenture
Trustee in its individual or any other capacity may become the owner or pledgee
of Notes and may otherwise deal with the Issuer or its Affiliates with the same
rights it would have if it were not Indenture Trustee. Any Paying Agent, Note
Registrar, co-registrar or co-paying agent may do the same with like rights.
However, the Indenture Trustee must comply with Sections 6.11 and 6.12.
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SECTION 6.04. INDENTURE TRUSTEE'S DISCLAIMER. The Indenture Trustee
shall not be responsible for and makes no representation as to the validity or
adequacy of this Indenture or the Notes, it shall not be accountable for the
Issuer's use of the proceeds from the Notes, and it shall not be responsible for
any statement of the Issuer in the Indenture or in any document issued in
connection with the sale of the Notes or in the Notes other than the Indenture
Trustee's certificate of authentication.
SECTION 6.05. NOTICE OF DEFAULTS. If a Default occurs and if it is
actually known by, or written notice of the existence thereof has been delivered
to, a Responsible Officer of the Indenture Trustee, the Indenture Trustee shall
mail notice of the Default to each Noteholder and the Rating Agencies promptly
after the Indenture Trustee obtains such knowledge or receives such notice of
the Default. Except in the case of a Default in payment of principal of or
interest (including any Noteholders' Interest Basis Carryover) on any Note
(including payments pursuant to the mandatory redemption provisions of such
Note), the Indenture Trustee may withhold the notice to the Noteholders if and
so long as a committee of its Responsible Officers in good faith determines that
withholding the notice is in the interests of Noteholders.
SECTION 6.06. REPORTS BY INDENTURE TRUSTEE TO NOTEHOLDERS. The Paying
Agent shall deliver to each Noteholder (and to each Person who was a Noteholder
at any time during the applicable calendar year) such information as may be
required to enable such holder to prepare its federal and state income tax
returns. Within 60 days after each December 31 beginning with the December 31
following the date of this Indenture, the Indenture Trustee shall mail to each
Noteholder a brief report as of such December 31 that complies with TIA Section
313(a) if required by said section. The Indenture Trustee shall also comply with
TIA Section 313(b). A copy of each such report required pursuant to TIA Section
313(a) or (b) shall, at the time of such transmission to Noteholders, be filed
by the Indenture Trustee with the Commission and with each securities exchange,
if any, upon which the Notes are listed, provided that the Issuer has previously
notified the Indenture Trustee of such listing.
SECTION 6.07. COMPENSATION AND INDEMNITY. The Issuer shall cause the
Administrator to pay to the Indenture Trustee from time to time reasonable
compensation for its services and shall cause the Administrator to reimburse the
Indenture Trustee for all reasonable out-of-pocket expenses incurred or made by
it, including costs of collection, in addition to the compensation for its
services. Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Indenture Trustee's agents, counsel,
accountants and experts. The Indenture Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The Issuer
shall cause the Administrator to indemnify the Indenture Trustee, its officers,
directors, employees and agents against any and all loss, liability or expense
(including attorneys' fees and expenses) incurred by it in connection with the
administration of this trust and the performance of its duties hereunder and
under the other Basic Documents. The Indenture Trustee shall notify the Issuer
and the Administrator promptly of any claim for which it may seek indemnity.
Failure by the Indenture Trustee to so notify the Issuer and the Administrator
shall not relieve the Issuer or the Administrator of its obligations hereunder
and under the other Basic Documents. The Issuer shall cause the Administrator to
defend the claim and the Administrator shall not be liable for any additional
legal fees and expenses of the Indenture Trustee after it has assumed such
defense; PROVIDED, HOWEVER, that, in the event that there may be a conflict
between the positions of the Indenture Trustee and the Administrator in
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conducting the defense of such claim, the Indenture Trustee shall be entitled to
separate counsel the fees and expenses of which shall be paid by the
Administrator on behalf of the Issuer. Neither the Issuer nor the Administrator
need reimburse any expense or indemnify against any loss, liability or expense
incurred by the Indenture Trustee through the Indenture Trustee's own willful
misconduct, negligence or bad faith.
All amounts payable to the Indenture Trustee under this Section 6.07
shall be payable solely by the Administrator. The Indenture Trustee agrees to
continue to perform its obligations under the Basic Documents notwithstanding
any failure of the Administrator to pay any amounts owed to the Indenture
Trustee.
The Issuer's and Administrator's payment obligations to the Indenture
Trustee pursuant to this Section shall survive the discharge of this Indenture.
When the Indenture Trustee incurs expenses after the occurrence of a Default
specified in Section 5.01(iv) or (v) with respect to the Issuer, the expenses
are intended to constitute expenses of administration under Title 11 of the
United States Code or any other applicable federal or state bankruptcy,
insolvency or similar law.
SECTION 6.08. REPLACEMENT OF INDENTURE TRUSTEE. No resignation or
removal of the Indenture Trustee and no appointment of a successor Indenture
Trustee shall become effective until the acceptance of appointment by the
successor Indenture Trustee pursuant to this Section 6.08. The Indenture Trustee
may resign at any time by so notifying the Issuer. The Noteholders of a majority
in Outstanding Amount of the Notes may remove the Indenture Trustee by so
notifying the Indenture Trustee and may appoint a successor Indenture Trustee.
The Issuer shall remove the Indenture Trustee if:
(i) the Indenture Trustee fails to comply with Section 6.11;
(ii) an Insolvency Event occurs with respect to the Indenture
Trustee;
(iii) a receiver or other public officer takes charge of the
Indenture Trustee or its property;
(iv) the Indenture Trustee otherwise becomes incapable of
acting; or
(v) the Indenture Trustee is in breach of any representation,
warranty, covenant or other material obligations of the Indenture
Trustee under any Basic Document.
If the Indenture Trustee resigns or is removed or if a vacancy exists
in the office of Indenture Trustee for any reason (the Indenture Trustee in such
event being referred to herein as the retiring Indenture Trustee), the Issuer
shall promptly appoint a successor Indenture Trustee. A former Indenture Trustee
shall not be liable for any acts or omissions of any successor Indenture
Trustee.
A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee and the Issuer shall notify the
Rating Agencies in writing of such acceptance. Thereupon the resignation or
removal of the retiring Indenture Trustee shall become effective, and the
successor Indenture Trustee shall have all the rights, powers and duties of the
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Indenture Trustee under this Indenture. The successor Indenture Trustee shall
mail a notice of its succession to Noteholders. The retiring Indenture Trustee
shall promptly transfer all property held by it as Indenture Trustee to the
successor Indenture Trustee.
If a successor Indenture Trustee does not take office within 60 days
after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Issuer or the Noteholders of a majority in Outstanding
Amount of the Notes may petition any court of competent jurisdiction for the
appointment of a successor Indenture Trustee.
If the Indenture Trustee fails to comply with Section 6.11, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Indenture Trustee and the appointment of a successor Indenture Trustee.
Notwithstanding the replacement of the Indenture Trustee pursuant to
this Section, the Issuer's and the Administrator's obligations under Section
6.07 shall continue for the benefit of the retiring Indenture Trustee.
SECTION 6.09. SUCCESSOR INDENTURE TRUSTEE BY MERGER. If the Indenture
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another corporation
or banking association, the resulting, surviving or transferee corporation or
banking association without any further act shall be the successor Indenture
Trustee; PROVIDED, HOWEVER, that such corporation or banking association shall
be otherwise qualified and eligible under Section 6.11. The Indenture Trustee
shall provide the Rating Agencies prior written notice of any such transaction.
In case at the time such successor or successors by merger, conversion
or consolidation to the Indenture Trustee shall succeed to the trusts created by
this Indenture any of the Notes shall have been authenticated but not delivered,
any such successor to the Indenture Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.
SECTION 6.10. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE. (a)
Notwithstanding any other provisions of this Indenture, at any time, for the
purpose of meeting any legal requirement of any jurisdiction in which any part
of the Indenture Trust Estate may at the time be located, the Indenture Trustee
shall have the power and may execute and deliver all instruments to appoint one
or more Persons to act as a co-trustee or co-trustees, or separate trustee or
separate trustees, of all or any part of the Indenture Trust Estate, and to vest
in such Person or Persons, in such capacity and for the benefit of the
Noteholders, such title to the Indenture Trust Estate, or any part hereof, and,
subject to the other provisions of this Section, such powers, duties,
obligations, rights and trusts as the Indenture Trustee may consider necessary
or desirable. No co-trustee or separate trustee hereunder shall be required to
meet the terms of eligibility as a successor trustee under Section 6.11 and no
notice to Noteholders of the appointment of any
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co-trustee or separate trustee shall be required under Section 6.08 hereof. The
Indenture Trustee shall notify the Rating Agencies of any appointment of a
co-trustee or separate trustee hereunder.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Indenture Trustee shall be conferred or imposed upon
and exercised or performed by the Indenture Trustee and such separate
trustee or co-trustee jointly (it being understood that such separate
trustee or co-trustee is not authorized to act separately without the
Indenture Trustee joining in such act), except to the extent that under
any law of any jurisdiction in which any particular act or acts are to
be performed the Indenture Trustee shall be incompetent or unqualified
to perform such act or acts, in which event such rights, powers, duties
and obligations (including the holding of title to the Indenture Trust
Estate or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate trustee or co-trustee,
but solely at the direction of the Indenture Trustee;
(ii) no trustee hereunder shall be personally liable by reason
of any act or omission of any other trustee hereunder; and
(iii) the Indenture Trustee may at any time accept the
resignation of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the
Indenture Trustee shall be deemed to have been given to each of the then
separate trustees and co-trustees, as effectively as if given to each of them.
Every instrument appointing any separate trustee or co-trustee shall refer to
this Indenture and the conditions of this Article VI. Each separate trustee and
co-trustee, upon its acceptance of the trusts conferred, shall be vested with
the estates or property specified in its instrument of appointment, either
jointly with the Indenture Trustee or separately, as may be provided therein,
subject to all the provisions of this Indenture, specifically including every
provision of this Indenture relating to the conduct of, affecting the liability
of, or affording protection to, the Indenture Trustee. Every such instrument
shall be filed with the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time
constitute the Indenture Trustee, its agent or attorney-in-fact with full power
and authority, to the extent not prohibited by law, to do any lawful act under
or in respect of this Indenture on its behalf and in its name. If any separate
trustee or co-trustee shall die, become incapable of acting, resign or be
removed, all its estates, properties, rights, remedies and trusts shall vest in
and be exercised by the Indenture Trustee, to the extent permitted by law,
without the appointment of a new or successor trustee.
SECTION 6.11. ELIGIBILITY; DISQUALIFICATION. The Indenture Trustee
shall at all times satisfy the requirements of TIA Section 310(a). The Indenture
Trustee shall have a combined capital and surplus of at least $50,000,000 as set
forth in its most recent published annual report of condition and it shall have
a long term debt rating of not less than investment grade by any of the Rating
Agencies. The Indenture Trustee shall comply with TIA Section 310(b), including
the optional
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provision permitted by the second sentence of TIA Section 310(b)(9); provided,
however, that there shall be excluded from the operation of TIA Section
310(b)(1) any indenture or indentures under which other securities of the Issuer
are outstanding if the requirements for such exclusion set forth in TIA Section
310(b)(1) are met.
SECTION 6.12. PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER. The
Indenture Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). An Indenture Trustee that has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated.
ARTICLE VII
Noteholders' Lists and Reports
SECTION 7.01. ISSUER TO FURNISH INDENTURE TRUSTEE NAMES AND ADDRESSES
OF NOTEHOLDERS. The Issuer will furnish or cause to be furnished to the
Indenture Trustee (a) not more than five days after the earlier of (i) each
Record Date and (ii) three months after the last Record Date, a list, in such
form as the Indenture Trustee may reasonably require, of the names and addresses
of the Noteholders as of such Record Date, and (b) at such other times as the
Indenture Trustee may request in writing, within ten days after receipt by the
Issuer of any such request, a list of similar form and content as of a date not
more than ten days prior to the time such list is furnished; PROVIDED, HOWEVER,
that so long as the Indenture Trustee is the Note Registrar, no such list shall
be required to be furnished.
SECTION 7.02. PRESERVATION OF INFORMATION; COMMUNICATIONS TO
NOTEHOLDERS. (a) The Indenture Trustee shall preserve, in as current a form as
is reasonably practicable, the names and addresses of the Noteholders contained
in the most recent list furnished to the Indenture Trustee as provided in
Section 7.01 and the names and addresses of Noteholders received by the
Indenture Trustee in its capacity as Note Registrar. The Indenture Trustee may
destroy any list furnished to it as provided in such Section 7.01 upon receipt
of a new list so furnished.
(b) Noteholders may communicate pursuant to TIA Section 312(b)
with other Noteholders with respect to their rights under this Indenture or
under the Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar
shall have the protection of TIA Section 312(c).
(d) The Indenture Trustee shall furnish to the Noteholders,
promptly upon receipt of a written request therefor, duplicates or copies of all
reports, notices, requests, demands, certificates, financial statements and any
other instruments furnished to the Indenture Trustee under the Basic Documents.
(e) The Indenture Trustee shall provide notice to the
Noteholders of any amendment or supplement to the Trust Agreement as provided in
Section 11.01 of the Trust Agreement.
SECTION 7.03. REPORTS BY ISSUER. (a) The Issuer shall:
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(i) file with the Indenture Trustee, within 15 days after the Issuer
is required to file the same with the Commission, copies of the annual
reports and of the information, documents and other reports (or copies of
such portions of any of the foregoing as the Commission may from time to
time by rules and regulations prescribe) which the Issuer may be required
to file with the Commission pursuant to Section 13 or 15(d) of the Exchange
Act;
(ii) file with the Indenture Trustee and the Commission in accordance
with rules and regulations prescribed from time to time by the Commission
such additional information, documents and reports with respect to
compliance by the Issuer with the conditions and covenants of this
Indenture as may be required from time to time by such rules and
regulations; and
(iii) supply to the Indenture Trustee (and the Indenture Trustee shall
transmit by mail to all Noteholders described in TIA ss. 313(c)) such
summaries of any information, documents and reports required to be filed by
the Issuer pursuant to clauses (i) and (ii) of this Section 7.03(a) as may
be required by rules and regulations prescribed from time to time by the
Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of
the Issuer shall end on December 31 of each year.
ARTICLE VIII
Accounts, Disbursements and Releases
SECTION 8.01. COLLECTION OF MONEY. Except as otherwise expressly
provided herein, the Indenture Trustee may demand payment or delivery of, and
shall receive and collect, directly and without intervention or assistance of
any fiscal agent or other intermediary, all money and other property payable
to or receivable by the Indenture Trustee pursuant to this Indenture. The
Indenture Trustee shall apply all such money received by it on behalf of
itself and the Noteholders pursuant to the Loan Sale Agreement, the Master
Servicing Agreement or the Administration Agreement as provided in this
Indenture. Except as otherwise expressly provided in this Indenture, if any
default occurs in the making of any payment or performance under any
agreement or instrument that is part of the Indenture Trust Estate, the
Indenture Trustee may take such action as may be appropriate to enforce such
payment or performance, including the institution and prosecution of
appropriate Proceedings. Any such action shall be without prejudice to any
right to claim a Default or Event of Default under this Indenture and any
right to proceed thereafter as provided in Article V.
SECTION 8.02. TRUST ACCOUNTS. (a) On or prior to the Closing Date, the
Issuer shall cause the Administrator to establish and maintain, in the name of
the Indenture Trustee, for the benefit of the Noteholders, the Trust Accounts as
provided in Section 2(c) of the Administration Agreement.
(b) All Monthly Available Funds with respect to the preceding
Monthly Collection Period (or in the case of a Quarterly Payment Date,
Available Funds with respect to
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the preceding Collection Period) will be deposited in the Collection Account as
provided in Section 4.01 of the Master Servicing Agreement. On each Quarterly
Payment Date, the Noteholders' Distribution Amount with respect to such
Quarterly Payment Date will be distributed from the Collection Account and from
the Reserve Account to the Indenture Trustee (or other Paying Agent) on behalf
of the Noteholders as provided in Sections 2(d)(iii)(C) and (E) and 2(e)(iv)(C)
of the Administration Agreement. On each Quarterly Payment Date, the Reserve
Account Excess for such Quarterly Payment Date will be distributed to the
Indenture Trustee (or other Paying Agent) on behalf of the Noteholders as
provided in clauses (B) and (C) of Section 2(e)(ii) of the Administration
Agreement.
(c) On each Quarterly Payment Date, the Indenture Trustee (or
any other Paying Agent) shall distribute all amounts received by it from the
Collection Account and the Reserve Account pursuant to the second sentence of
paragraph (b) above to Noteholders in respect of the Notes to the extent of
amounts due and unpaid on the Notes for principal and interest (but not for any
Noteholders' Interest Basis Carryover) in the following amounts and in the
following order of priority:
(i) the Class A-1 Noteholders' Interest Distribution Amount and the
Class A-2 Noteholders' Interest Distribution Amount, to the Class A-1
Noteholders and the Class A-2 Noteholders, respectively; PROVIDED, HOWEVER,
that if there are not sufficient funds to pay the Class A-1 Noteholders'
Interest Distribution Amount and the Class A-2 Noteholders' Interest
Distribution Amount, the amounts so received shall be applied to the
payment of the Class A-1 Noteholders' Interest Distribution Amount and the
Class A-2 Noteholders' Interest Distribution Amount, on a PRO RATA basis
based on the ratio of each such amount to the total of such amounts;
(ii) the Certificateholders' Return Distribution Amount, to the
Certificateholders;
(iii) the Noteholders' Principal Distribution Amount, to the
Noteholders (such amount to be allocated among the Noteholders as provided
in Section 8.02(f)) until the Outstanding Amount of the Notes is reduced to
zero; and
(iv) after the Outstanding Amount of the Notes is reduced to zero, the
Certificateholders' Balance Distribution Amount to the Certificateholders
until the Certificate Balance of the Certificates is reduced to zero.
(d) On each Quarterly Payment Date, the Indenture Trustee (or
any Paying Agent) shall distribute all amounts received by it on behalf of
Noteholders in respect of Reserve Account Excess pursuant to the second to
the last sentence of paragraph (b) above in the following amounts and order
of priority:
(i) any remaining such amounts to the Noteholders (such amounts to be
allocated among the Noteholders as provided in Section 8.02(f)) until the
sum of (A) the Outstanding Amount of the Notes and (B) the Certificate
Balance of the Certificates is equal to the sum of (C) the Pool Balance as
of the close of business on the last day of the related Collection Period
and (D) the amount on deposit in the Reserve Account on such date, and
until the Outstanding Amount of the Notes is reduced to zero;
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(ii) any remaining such amounts, after the Outstanding Amount of the
Notes is reduced to zero, to the Certificateholders until the Certificate
Balance of the Certificates is equal to the sum of (A) the Pool Balance as
of the close of business on the last day of the related Collection Period
and (B) the amount on deposit in the Reserve Account on such date;
(iii) the Noteholders' Interest Basis Carryover, if any, to the
Noteholders; PROVIDED, HOWEVER, that if insufficient funds are received to
pay the entire Noteholders' Interest Basis Carryover, the amounts so
received shall be applied to the payment of the Class A-1 Noteholders'
Interest Basis Carryover and the Class A-2 Noteholders' Interest Basis
Carryover on a PRO RATA basis based on the ratio of each such amount to the
total of such amounts; and
(iv) the Certificateholders' Return Carryover, if any, to the
Certificateholders.
(e) [Reserved]
(f) Amounts payable to the Noteholders as provided in Sections
8.02(c)(iii) and 8.02(d)(i) shall be payable in the following amounts and order
of priority:
(i) to the Class A-1 Noteholders in an amount necessary to reduce the
Outstanding principal amount of the Class A-1 Notes to zero; and
(ii) after the Outstanding principal amount of the Class A-1 Notes is
reduced to zero, to the Class A-2 Noteholders until the Outstanding
principal amount of the Class A-2 Notes is reduced to zero;
PROVIDED, HOWEVER, that from and after any acceleration of the Notes following
an Event of Default, such amounts shall be payable to the Class A-1 Noteholders
and the Class A-2 Noteholders PRO RATA, based on the ratio of the aggregate
principal amount of each of the Class A-1 Notes and the Class A-2 Notes to the
aggregate principal balance of all the Notes, until the principal of the Notes
has been reduced to zero.
SECTION 8.03. GENERAL PROVISIONS REGARDING ACCOUNTS. (a) So long as no
Default or Event of Default shall have occurred and be continuing, all or a
portion of the funds in the Trust Accounts shall be invested in Eligible
Investments and reinvested by the Indenture Trustee upon Issuer Order,
subject to the provisions of Section 2(c) of the Administration Agreement.
All income or other gain from investments of monies deposited in the Trust
Accounts shall be deposited by the Indenture Trustee in the Collection
Account, and any loss resulting from such investments shall be charged to
such Trust Account. The Issuer will not direct the Indenture Trustee to make
any investment of any funds or to sell any investment held in any of the
Trust Accounts unless the security interest granted and perfected in such
account will continue to be perfected in such investment or the proceeds of
such sale, in either case without any further action by any Person, and, in
connection with any direction to the Indenture Trustee to make any such
investment or sale, if requested by the Indenture Trustee, the Issuer shall
deliver to the Indenture Trustee an Opinion of Counsel, acceptable to the
Indenture Trustee, to such effect. All Eligible Investments shall mature on
the Business Day prior to the Monthly Payment Date or Quarterly Payment Date,
as applicable.
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(b) Subject to Section 6.01(c), the Indenture Trustee shall
not in any way be held liable by reason of any insufficiency in any of the
Trust Accounts resulting from any loss on any Eligible Investment included
therein except for losses attributable to the Indenture Trustee's failure to
make payments on such Eligible Investments issued by the Indenture Trustee,
in its commercial capacity as principal obligor and not as trustee, in
accordance with their terms.
(c) If (i) the Issuer (or the Administrator pursuant to
Section 2(a)(U) of the Administration Agreement) shall have failed to give
investment directions for any funds on deposit in the Trust Accounts to the
Indenture Trustee by 10:00 a.m. New York time (or such other time as may be
agreed by the Issuer and Indenture Trustee) on any Business Day; or (ii) a
Default or an Event of Default shall have occurred and be continuing with
respect to the Notes but the Notes shall not have been declared due and
payable pursuant to Section 5.02, or, if such Notes shall have been declared
due and payable following an Event of Default, amounts collected or
receivable from the Indenture Trust Estate are being applied in accordance
with Section 5.05 as if there had not been such a declaration, then the
Indenture Trustee shall, to the fullest extent practicable, invest and
reinvest funds in the Trust Accounts in one or more Eligible Investments
which mature prior to the next Monthly Payment Date or Quarterly Payment
Date, as applicable, and are not sold prior to their maturity.
SECTION 8.04. RELEASE OF INDENTURE TRUST ESTATE. (a) Subject to the
payment of its fees and expenses pursuant to Section 6.07, the Indenture
Trustee may, and when required by the provisions of this Indenture shall,
execute instruments to release property from the lien of this Indenture, or
convey the Indenture Trustee's interest in the same, in a manner and under
circumstances that are not inconsistent with the provisions of this
Indenture. No party relying upon an instrument executed by the Indenture
Trustee as provided in this Article VIII shall be bound to ascertain the
Indenture Trustee's authority, inquire into the satisfaction of any
conditions precedent or see to the application of any monies.
(b) The Indenture Trustee shall, at such time as there are no
Notes Outstanding and all sums due the Indenture Trustee pursuant to Section
6.07 have been paid, release any remaining portion of the Indenture Trust
Estate that secured the Notes from the lien of this Indenture and release to
the Issuer or any other Person entitled thereto any funds then on deposit in
the Trust Accounts. The Indenture Trustee shall release property from the
lien of this Indenture pursuant to this Section 8.04(b) only upon receipt by
it of an Issuer Request accompanied by an Officers' Certificate of the
Issuer, an Opinion of Counsel and (if required by the TIA) Independent
Certificates in accordance with TIA ss.ss. 314(c) and 314(d)(1) meeting the
applicable requirements of Section 11.01.
SECTION 8.05. OPINION OF COUNSEL. The Indenture Trustee shall receive
at least seven days' notice when requested by the Issuer to take any action
pursuant to Section 8.04(a), accompanied by copies of any instruments
involved, and the Indenture Trustee shall also require, as a condition to
such action, an Opinion of Counsel, in form and substance satisfactory to the
Indenture Trustee, stating the legal effect of any such action, outlining the
steps required to complete the same, and concluding that all conditions
precedent to the taking of such action have been complied with and such
action will not materially and adversely impair the security for the Notes or
the rights of the Noteholders in contravention of the provisions of this
Indenture; PROVIDED, HOWEVER, that such Opinion of Counsel shall not be
required to express an opinion as
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to the fair value of the Indenture Trust Estate. Counsel rendering any such
opinion may rely, with respect to factual matters without independent
investigation thereof, on the accuracy and validity of any certificate or other
instrument delivered to the Indenture Trustee in connection with any such
action.
ARTICLE IX
Supplemental Indentures
SECTION 9.01. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF NOTEHOLDERS.
(a) Without the consent of any Noteholders but with prior notice to the
Rating Agencies, the Issuer and the Indenture Trustee, when authorized by an
Issuer Order, at any time and from time to time, may enter into one or more
indentures supplemental hereto (which shall conform to the provisions of the
Trust Indenture Act as in force at the date of the execution thereof), in
form satisfactory to the Indenture Trustee, for any of the following purposes:
(i) to correct or amplify the description of any property at any time
subject to the lien of this Indenture, or, better to assure, convey and
confirm unto the Indenture Trustee any property subject or required to be
subjected to the lien of this Indenture, or to subject to the lien of this
Indenture additional property;
(ii) to evidence the succession, in compliance with the applicable
provisions hereof, of another Person to the Issuer, and the assumption by
any such successor of the covenants of the Issuer herein and in the Notes
contained;
(iii) to add to the covenants of the Issuer, for the benefit of the
Noteholders, or to surrender any right or power herein conferred upon the
Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any property to
or with the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement any provision
herein or in any supplemental indenture which may be inconsistent with any
other provision herein or in any supplemental indenture or to make any
other provisions with respect to matters or questions arising under this
Indenture or in any supplemental indenture; PROVIDED, HOWEVER, that such
action shall not materially adversely affect the interests of the
Noteholders;
(vi) to evidence and provide for the acceptance of the appointment
hereunder by a successor trustee with respect to the Notes and to add to or
change any of the provisions of this Indenture as shall be necessary to
facilitate the administration of the trusts hereunder by more than one
trustee, pursuant to the requirements of Article VI; or
(vii) to modify, eliminate or add to the provisions of this Indenture
to such extent as shall be necessary to effect the qualification of this
Indenture under the TIA or under any similar federal statute hereafter
enacted and to add to this Indenture such other provisions as may be
expressly required by the TIA.
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The Indenture Trustee is hereby authorized to join in the execution of any
such supplemental indenture and to make any further appropriate agreements and
stipulations that may be therein contained.
(b) The Issuer and the Indenture Trustee, when authorized by
an Issuer Order, may also, without the consent of any of the Noteholders but
with prior notice to the Rating Agencies, enter into an indenture or
indentures supplemental hereto for the purpose of adding any provisions to,
or changing in any manner or eliminating any of the provisions of, this
Indenture or of modifying in any manner the rights of the Noteholders under
this Indenture; PROVIDED, HOWEVER, that such action shall not, as evidenced
by an Opinion of Counsel, adversely affect in any material respect the
interests of any Noteholder.
SECTION 9.02. SUPPLEMENTAL INDENTURES WITH CONSENT OF NOTEHOLDERS. The
Issuer and the Indenture Trustee, when authorized by an Issuer Order, also may,
with prior notice to the Rating Agencies and with the written consent of the
Noteholders of not less than a majority of the Outstanding Amount of the Notes,
by Act of such Noteholders delivered to the Issuer and the Indenture Trustee,
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to, or changing in any manner or eliminating any of the
provisions of, this Indenture or of modifying in any manner the rights of the
Noteholders under this Indenture; PROVIDED, HOWEVER, that no such supplemental
indenture shall, without the consent of the Noteholder of each Outstanding Note
affected thereby:
(i) change the date of payment of any installment of principal of or
interest (including any Noteholders' Interest Basis Carryover) on any Note,
or reduce the principal amount thereof, the interest rate thereon or the
Redemption Price with respect thereto, change the provisions of this
Indenture relating to the application of collections on, or the proceeds of
the sale of, the Indenture Trust Estate to payment of principal of or
interest (including any Noteholders' Interest Basis Carryover) on the
Notes, or change any place of payment where, or the coin or currency in
which, any Note or the interest thereon is payable, or impair the right to
institute suit for the enforcement of the provisions of this Indenture
requiring the application of funds available therefor, as provided in
Article V, to the payment of any such amount due on the Notes on or after
the respective due dates thereof (or, in the case of redemption, on or
after the Redemption Date);
(ii) reduce the percentage of the Outstanding Amount of the Notes, the
consent of the Noteholders of which is required for any such supplemental
indenture, or the consent of the Noteholders of which is required for any
waiver of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences provided for in this Indenture;
(iii) modify or alter the provisions of the proviso to the definition
of the term "Outstanding";
(iv) reduce the percentage of the Outstanding Amount of the Notes
required to direct the Indenture Trustee to direct the Issuer to sell or
liquidate the Indenture Trust Estate pursuant to Section 5.04;
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(v) modify any provision of this Section except to increase any
percentage specified herein or to provide that certain additional
provisions of this Indenture or the other Basic Documents cannot be
modified or waived without the consent of the Noteholder of each
Outstanding Note affected thereby;
(vi) modify any of the provisions of this Indenture in such manner as
to affect the calculation of the amount of any payment of interest
(including any Noteholders' Interest Basis Carryover) or principal due on
any Note on any Quarterly Payment Date (including the calculation of any of
the individual components of such calculation) or to affect the rights of
the Noteholders to the benefit of any provisions for the mandatory
redemption of the Notes contained herein; or
(vii) permit the creation of any lien ranking prior to or on a parity
with the lien of this Indenture with respect to any part of the Indenture
Trust Estate or, except as otherwise permitted or contemplated herein,
terminate the lien of this Indenture on any property at any time subject
hereto or deprive any Noteholder of any Note of the security provided by
the lien of this Indenture.
The Indenture Trustee may in its discretion determine whether or not any
Notes would be affected by any supplemental indenture and any such determination
shall be conclusive upon the Noteholders of all Notes whether theretofore or
thereafter authenticated and delivered hereunder. The Indenture Trustee shall
not be liable for any such determination made in good faith.
It shall not be necessary for any Act of Noteholders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Indenture Trustee of any
supplemental indenture pursuant to this Section, the Indenture Trustee shall
mail to the Noteholders of the Notes to which such amendment or supplemental
indenture relates and to the Rating Agencies a notice setting forth in general
terms the substance of such supplemental indenture. Any failure of the Indenture
Trustee to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture.
SECTION 9.03. EXECUTION OF SUPPLEMENTAL INDENTURES. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modifications thereby of the trusts created
by this Indenture, the Indenture Trustee shall receive, and subject to Sections
6.01 and 6.02, shall be fully protected in relying upon, an Opinion of Counsel
stating that the execution of such supplemental indenture is authorized or
permitted by this Indenture. The Indenture Trustee may, but shall not be
obligated to, enter into any such supplemental indenture that affects the
Indenture Trustee's own rights, duties, liabilities or immunities under this
Indenture or otherwise. The Indenture Trustee shall provide a fully executed
copy of any supplemental indentures to the Indenture to each Rating Agency.
SECTION 9.04. EFFECT OF SUPPLEMENTAL INDENTURE. Upon the execution of
any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and be deemed to be modified and amended in accordance therewith
with respect to the Notes affected thereby,
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and the respective rights, limitations of rights, obligations, duties,
liabilities and immunities under this Indenture of the Indenture Trustee, the
Issuer and the Noteholders shall thereafter be determined, exercised and
enforced hereunder subject in all respects to such modifications and amendments,
and all the terms and conditions of any such supplemental indenture shall be and
are deemed to be part of the terms and conditions of this Indenture for any and
all purposes.
SECTION 9.05. CONFORMITY WITH TRUST INDENTURE ACT. Every amendment of
this Indenture and every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the Trust Indenture Act as
then in effect so long as this Indenture shall then be qualified under the
Trust Indenture Act.
SECTION 9.06. REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee shall,
bear a notation in form approved by the Indenture Trustee as to any matter
provided for in such supplemental indenture. If the Issuer or the Indenture
Trustee shall so determine, new Notes so modified as to conform, in the opinion
of the Indenture Trustee and the Issuer, to any such supplemental indenture may
be prepared and executed by the Issuer and authenticated and delivered by the
Indenture Trustee in exchange for Outstanding Notes.
ARTICLE X
Redemption of Notes
SECTION 10.01. REDEMPTION. (a) In the event that the Trust Loans are
sold pursuant to Section 4.04 hereof, that portion of the amounts on deposit
in the Trust Accounts to be distributed to the Noteholders shall be paid to
the Noteholders up to the Outstanding Amount of the Notes and all accrued and
unpaid interest thereon and any accrued Noteholders' Interest Basis Carryover
with respect thereto (but only to the extent provided by Sections 2.07(d) and
8.02 hereof). If amounts are to be paid to Noteholders pursuant to this
Section 10.01(a), the Administrator or the Issuer shall, to the extent
practicable, furnish notice of such Event to the Indenture Trustee not later
than 25 days prior to the Redemption Date whereupon all such amounts shall be
payable on the Redemption Date.
(b) The Notes are subject to redemption in whole, but not in
part, on any Quarterly Payment Date on which the Company exercises its option
to purchase the Trust Estate pursuant to Section 5.01(a) of the Loan Sale
Agreement. If the Notes are to be redeemed pursuant to this Section 10.01(b),
the Company shall furnish notice of such election to the Indenture Trustee
not later than 20 days prior to the Redemption Date and the Issuer shall
deposit by 10:00 a.m. New York time on the Redemption Date with the Indenture
Trustee in the Collection Account the Redemption Price for the Notes,
whereupon the Notes shall be due and payable on the Redemption Date upon
furnishing a notice complying with Section 10.02 to each Noteholder.
SECTION 10.02. FORM OF REDEMPTION NOTICE. Notice of redemption under
Section 10.01 shall be given by the Indenture Trustee by first-class mail,
postage prepaid, or by
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facsimile, mailed or transmitted on or prior to the applicable Redemption Date
to each Noteholder, as of the close of business on the Record Date preceding the
applicable Redemption Date, at such Noteholder's address or facsimile number
appearing in the Note Register.
All notices of redemption shall state:
(i) the Redemption Date,
(ii) the Redemption Price for the Notes and
(iii) the place where such Notes are to be surrendered for payment of
the Redemption Price (which shall be the office or agency of the Issuer to
be maintained as provided in Section 3.02).
Notice of redemption of the Notes shall be given by the Indenture
Trustee in the name and at the expense of the Issuer. Failure to give notice of
redemption, or any defect therein, to any Noteholder of any Note shall not
impair or affect the validity of the redemption of any other Note.
SECTION 10.03. NOTES PAYABLE ON REDEMPTION DATE. The Notes to be
redeemed shall on the Redemption Date become due and payable at the
Redemption Price and (unless the Issuer shall default in the payment of the
Redemption Price) no interest shall accrue on the Redemption Price for any
period after the date to which accrued interest is calculated for purposes of
calculating the Redemption Price.
ARTICLE XI
Miscellaneous
SECTION 11.01. COMPLIANCE CERTIFICATES AND OPINIONS. (a) Upon any
application or request by the Issuer to the Indenture Trustee to take any action
under any provision of this Indenture, the Issuer shall furnish to the Indenture
Trustee (i) an Officers' Certificate of the Issuer stating that all conditions
precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with, (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 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 Collateral or other
property or securities with the Indenture Trustee that is to be made the
basis for the release of any property or securities subject to the lien of
this Indenture, the Issuer shall, in addition to any obligation imposed in
Section 11.01(a) or elsewhere in this Indenture, furnish to the Indenture
Trustee an Officers' Certificate of the Issuer certifying or stating the
opinion of each person signing such certificate as to the fair value (within
90 days of such deposit) to the Issuer of the Collateral or other property or
securities to be so deposited.
(ii) Whenever the Issuer is required to furnish to the Indenture
Trustee an Officers' Certificate of the Issuer certifying or stating the
opinion of any signer thereof as to the matters described in clause (i)
above, the Issuer shall also deliver to the Indenture Trustee an
Independent Certificate as to the same matters, if the fair value to the
Issuer of the securities to be so deposited and of all other such
securities made the basis of any such withdrawal or release since the
commencement of the then current fiscal year of the Issuer, as set forth in
the certificates delivered pursuant to clause (i) above and this clause
(ii), is 10% or more of the Outstanding Amount of the Notes, but such a
certificate need not be furnished with respect to any securities so
deposited, if the fair value thereof to the Issuer as set forth in the
related Officers' Certificate is less than $25,000 or less than one percent
of the Outstanding Amount of the Notes.
(iii) Other than any property released as contemplated by clause (v)
below, whenever any property or securities are to be released from the lien
of this Indenture, the Issuer shall also furnish to the Indenture Trustee
an Officers' Certificate of the Issuer certifying or stating the opinion of
each person signing such certificate as to the fair value (within 90 days
of such release) of the property or securities proposed to be released and
stating that in the opinion of each such person the proposed release will
not impair the security under this Indenture in contravention of the
provisions hereof.
(iv) Whenever the Issuer is required to furnish to the Indenture
Trustee an Officers' Certificate of the Issuer certifying or stating the
opinion of any signer thereof as to the matters described in clause (iii)
above, the Issuer shall also furnish to the Indenture Trustee an
Independent Certificate as to the same matters if the fair value of the
property or Securities and of all other property, other than property as
contemplated by clause (v) below, or securities released from the lien of
this Indenture since the commencement of the then-current calendar year, as
set forth in the certificates required by clause (iii) above
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and this clause (iv), equals 10% or more of the Outstanding Amount of the
Notes, but such certificate need not be furnished in the case of any
release of property or securities if the fair value thereof as set forth in
the related Officers' Certificate is less than $25,000 or less than one
percent of the then Outstanding Amount of the Notes.
(v) Notwithstanding Section 2.09 or any other provision of this
Section, the Issuer may, without compliance with the requirements of the
other provisions of this Section, (A) collect, liquidate, sell or otherwise
dispose of the Trust Loans as and to the extent permitted or required by
the Basic Documents and (B) make cash payments out of the Trust Accounts as
and to the extent permitted or required by the Basic Documents, so long as
the Issuer shall deliver to the Indenture Trustee every three months,
commencing ____ __, 2000, an Officers' Certificate of the Issuer stating
that all the dispositions of Collateral described in clauses (A) and (B)
above that occurred during the immediately preceding three calendar months
(or the period from the Closing Date in the case of the ____ __, 2000
Officers' Certificate) were in the ordinary course of the Issuer's business
and that the proceeds thereof were applied in accordance with the Basic
Documents.
SECTION 11.02. FORM OF DOCUMENTS DELIVERED TO INDENTURE TRUSTEE. In
any case where several matters are required to be certified by, or covered by
an opinion of, any specified Person, it is not necessary that all such
matters be certified by, or covered by the opinion of, only one such Person,
or that they be so certified or covered by only one document, but one such
Person may certify or give an opinion with respect to some matters and one or
more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate of an Authorized Officer or
Opinion of Counsel may be based, insofar as it relates to factual matters, upon
a certificate or opinion of, or representations by, an officer or officers of
the Master Servicer, the Seller, the Issuer or the Administrator, stating that
the information with respect to such factual matters is in the possession of the
Master Servicer, the Seller, the Issuer or the Administrator, unless such
counsel knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to such matters are
erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such
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application or at the effective date of such certificate or report (as the case
may be), of the facts and opinions stated in such document shall in such case be
conditions precedent to the right of the Issuer to have such application granted
or to the sufficiency of such certificate or report. The foregoing shall not,
however, be construed to affect the Indenture Trustee's right to rely upon the
truth and accuracy of any statement or opinion contained in any such document as
provided in Article VI.
SECTION 11.03. ACTS OF NOTEHOLDERS. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Noteholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Noteholders in person or by agents duly appointed in writing; and except
as herein otherwise expressly provided such action shall become effective
when such instrument or instruments are delivered to the Indenture Trustee,
and, where it is hereby expressly required, to the Issuer. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are
herein sometimes referred to as the "Act" of the Noteholders signing such
instrument or instruments. Proof of execution of any such instrument or of a
writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 6.01) conclusive in favor of the Indenture
Trustee and the Issuer, if made in the manner provided in this Section.
(b) The fact and date of the execution by any person of any
such instrument or writing may be proved in any manner that the Indenture
Trustee deems sufficient.
(c) The ownership of Notes shall be proved by the Note
Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Noteholder of any Notes shall bind the
Noteholder of every Note issued upon the registration thereof or in exchange
therefor or in lieu thereof, in respect of anything done, omitted or suffered
to be done by the Indenture Trustee or the Issuer in reliance thereon,
whether or not notation of such action is made upon such Note.
SECTION 11.04. NOTICES TO INDENTURE TRUSTEE, ISSUER AND RATING
AGENCIES. Any request, demand, authorization, direction, notice, consent,
waiver or act of Noteholders or other documents provided or permitted by this
Indenture shall be in writing and if such request, demand, authorization,
direction, notice, consent, waiver or act of Noteholders is to be made upon,
given or furnished to or filed with:
(a) the Indenture Trustee by any Noteholder or by the Issuer,
it shall be sufficient for every purpose hereunder if made, given, furnished
or filed in writing to or with the Indenture Trustee at its Corporate Trust
Office; or
(b) the Issuer by the Indenture Trustee or by any Noteholder,
it shall be sufficient for every purpose hereunder if in writing and mailed,
first-class, postage prepaid, to the Issuer addressed to: Nellie Mae Student
Loan Trust 1999-A, in care of First Chicago Delaware, Inc., as Trustee, FCC
National Bank, 300 King Street, Wilmington, Delaware 19801, with a copy to
the Eligible Lender Trustee at the Corporate Trust Office of the Eligible
Lender Trustee, or at any other address previously furnished in writing to
the Indenture Trustee by the Issuer.
The Issuer shall promptly transmit any notice received by it from the
Noteholders to the Indenture Trustee.
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Notices required to be given to the Rating Agencies by the Issuer, the
Indenture Trustee or the Eligible Lender Trustee shall be in writing, personally
delivered or mailed by certified mail, return receipt requested, to the
following address: (i) ________, at the following address:
_____________________, Attention of ________________ and (ii) in the case of
________________, at the following address: ________________; Attention of
________________; or as to each of the foregoing, at such other address as shall
be designated by written notice to the other parties.
SECTION 11.05. NOTICES TO NOTEHOLDERS; WAIVER. Where this Indenture
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at his address as it appears on the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the giving
of such notice. In any case where notice to Noteholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in the manner herein
provided shall conclusively be presumed to have been duly given.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Indenture
Trustee but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Noteholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Indenture Trustee shall be deemed to
be a sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies,
failure to give such notice shall not affect any other rights or obligations
created hereunder, and shall not under any circumstance constitute a Default or
an Event of Default.
SECTION 11.06. ALTERNATE PAYMENT AND NOTICE PROVISIONS.
Notwithstanding any provision of this Indenture or any of the Notes to the
contrary, the Issuer may enter into any agreement with any Noteholder
providing for a method of payment, or notice by the Indenture Trustee or any
Paying Agent to such Noteholder, that is different from the methods provided
for in this Indenture for such payments or notices, provided that such
agreement is reasonably acceptable to the Indenture Trustee. The Issuer will
furnish to the Indenture Trustee a copy of each such agreement and the
Indenture Trustee will cause payments to be made and notices to be given in
accordance with such agreements.
SECTION 11.07. CONFLICT WITH TRUST INDENTURE ACT. If any provision
hereof limits, qualifies or conflicts with another provision hereof that is
required to be included in this Indenture by any of the provisions of the
Trust Indenture Act, such required provision shall control.
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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 11.08. EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
SECTION 11.09. SUCCESSORS AND ASSIGNS. All covenants and agreements in
this Indenture and the Notes by the Issuer shall bind its successors and
assigns, whether so expressed or not. All agreements of the Indenture Trustee
in this Indenture shall bind the successors, co-trustees and agents
(excluding any legal representatives or accountants) of the Indenture Trustee.
SECTION 11.10. SEPARABILITY. In case any provision in this Indenture
or in the Notes shall be invalid, illegal or unenforceable, the validity,
legality, and enforceability of the remaining provisions shall not in any way
be affected or impaired thereby.
SECTION 11.11. BENEFITS OF INDENTURE. Nothing in this Indenture or in
the Notes, express or implied, shall give to any Person, other than the
parties hereto and their successors hereunder, and the Noteholders, and any
other party secured hereunder, and any other Person with an ownership
interest in any part of the Indenture Trust Estate, any benefit or any legal
or equitable right, remedy or claim under this Indenture.
SECTION 11.12. GOVERNING LAW. This Indenture shall be construed in
accordance with the laws of the State of New York, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 11.13. COUNTERPARTS. This Indenture may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
SECTION 11.14. RECORDING OF INDENTURE. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense and shall be accompanied by an Opinion
of Counsel (which may be counsel to the Indenture Trustee or any other counsel
reasonably acceptable to the Indenture Trustee) to the effect that such
recording is necessary either for the protection of the Noteholders or any other
Person secured hereunder or for the enforcement of any right or remedy granted
to the Indenture Trustee under this Indenture.
SECTION 11.15. NO RECOURSE. Anything herein to the contrary
notwithstanding, except as expressly provided in the other Basic Documents, none
of State Street Bank and Trust Company in its individual capacity, The First
National Bank of Chicago in its individual capacity, any owner of a beneficial
interest in the Issuer, or any of their respective partners, beneficiaries,
agents, officers, directors, employees or successors or assigns shall be
personally liable for, nor shall recourse be had to any of them for, the payment
of principal of or interest on the Notes, or for the performance of, or omission
to perform, any of the covenants, obligations or
52
<PAGE>
indemnifications contained in this Indenture or the Notes; it being expressly
understood that said covenants, obligations and indemnifications have been made
by the Eligible Lender Trustee for the sole purpose of binding the interests of
the Eligible Lender Trustee in the assets of the Issuer. Nothing contained
herein shall be taken to prevent recourse to, and enforcement against, the
assets of the Issuer for any and all liabilities, obligations and undertakings
contained in this Indenture or in the Notes.
SECTION 11.16. NO PETITION. The Indenture Trustee, by entering into
this Indenture, and each Noteholder, by accepting a Note, hereby covenant and
agree that they will not at any time institute against the Seller, the
Company or the Issuer, or join in any institution against the Seller, the
Company or the Issuer of, any bankruptcy, reorganization, arrangement,
insolvency, receivership or liquidation proceedings, or other proceedings
under any United States federal or state bankruptcy or similar law in
connection with any obligations relating to the Notes, this Indenture or any
of the other Basic Documents.
SECTION 11.17. INSPECTION. The Issuer agrees that, on reasonable prior
notice, it will permit any representative of the Indenture Trustee, during the
Issuer's normal business hours, to examine all the books of account, records,
reports, and other papers of the Issuer, to make copies and extracts therefrom,
to cause such books to be audited by Independent certified public accountants,
and to discuss the Issuer' affairs, finances and accounts with the Issuer's
officers, employees, and Independent certified public accountants, all at such
reasonable times and as often as may be reasonably requested. The Indenture
Trustee shall and shall cause its representatives to hold in confidence all such
information obtained from such examination or inspection except to the extent
disclosure may be required by law (and all reasonable applications for
confidential treatment are unavailing) and except to the extent that the
Indenture Trustee may reasonably determine that such disclosure is consistent
with its obligations hereunder.
SECTION 11.18. CONSENTS. With respect to any action to be taken
hereunder that requires the consent of a party hereto or of the Eligible
Lender Trustee, such consent shall not be unreasonably withheld, delayed or
conditioned.
53
<PAGE>
IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused
this Indenture to be duly executed by their respective officers, thereunto duly
authorized and duly attested, all as of the day and year first above written.
NELLIE MAE STUDENT LOAN TRUST
1999-A
By: THE FIRST NATIONAL BANK
OF CHICAGO, not in its individual
capacity but solely as Eligible
Lender Trustee
By:
----------------------------------------
Name:
Title:
STATE STREET BANK AND TRUST COMPANY,
not in its individual capacity but solely
as Indenture Trustee
By:
----------------------------------------
Name:
Title:
Acknowledged and accepted as
to the Granting Clause as of
the day and year first above
written:
THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual capacity but
solely as Eligible Lender Trustee
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
54
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared ______________________, known
to me to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of the said NELLIE
MAE STUDENT LOAN TRUST 1999-A, a Delaware trust, and that such person executed
the same as the act of said trust for the purpose and consideration therein
expressed, and in the capacities therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the ____ day of ______,
1999.
-------------------------
Notary Public in and for
the State of New York
[Seal]
My commission expires:
- ---------------------
55
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
BEFORE ME, the undersigned authority, a Notary Public in and for said
county and state, on this day personally appeared ______________________, known
to me to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of the said State
Street Bank and Trust Company, a Massachusetts banking corporation, and that
such person executed the same as the act of said corporation for the purpose and
consideration therein expressed, and in the capacities therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the ____ day of _____,
1999.
-------------------------
Notary Public in and for
the State of New York
[Seal]
My commission expires:
- ----------------------
56
<PAGE>
EXHIBIT A-1
TO THE INDENTURE
[FORM OF CLASS A-1 NOTE]
CLASS A-1 NOTE
SEE REVERSE FOR CERTAIN DEFINITIONS
Unless this Note is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer (as
defined below) or its agent for registration of transfer, exchange or payment,
and any Note issued is registered in the name of Cede & Co. or in such other
name as is requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME
MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. THIS NOTE IS NOT
GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY.
REGISTERED $___________________________
No. R- CUSIP NO. __________________
NELLIE MAE STUDENT LOAN TRUST 1999-A
CLASS A-1 FLOATING RATE ASSET-BACKED NOTES
Nellie Mae Student Loan Trust 1999-A, a trust organized and existing
under the laws of the State of Delaware (herein referred to as the "ISSUER"),
for value received, hereby promises to pay to ______________________________, or
registered assigns, the principal sum of __________________________________
DOLLARS payable on each Quarterly Payment Date in an amount equal to the result
obtained by multiplying (i) a fraction the numerator of which is $___________
and the denominator of which is $_________ by (ii) the aggregate amount, if any,
payable to Noteholders on such Quarterly Payment Date in respect of principal of
the Class A-1 Notes pursuant to Section 3.01 of the Indenture dated as of _____
1, 1999 (the "INDENTURE"), between the Issuer and State Street Bank and Trust
Company, a Massachusetts banking corporation, as Indenture Trustee (the
"INDENTURE TRUSTEE") (capitalized terms used but not defined herein shall have
the meanings ascribed thereto in the Indenture, which also
A-1-1
<PAGE>
references rules as to usage that shall be applicable herein); PROVIDED,
HOWEVER, that the entire unpaid principal amount of this Note shall be due and
payable on the _____ 20__ Quarterly Payment Date (the "CLASS A-1 NOTE FINAL
MATURITY DATE") and the Redemption Date, if any, pursuant to Section 10.01(a) or
10.01(b) of the Indenture.
The Issuer will pay interest on this Note, at the rate per annum equal
to the Class A-1 Note Rate (defined on the reverse hereof), on each Quarterly
Payment Date until the principal of this Note is paid or made available for
payment, on the principal amount of this Note outstanding on the preceding
Quarterly Payment Date, after giving effect to all payments of principal made on
the preceding Quarterly Payment Date (or, in the case of the first Quarterly
Payment Date, on the Closing Date), subject to certain limitations contained in
Section 3.01 of the Indenture. Interest on this Note will accrue for each
Quarterly Payment Date from the most recent Quarterly Payment Date on which
interest has been paid to but excluding such Quarterly Payment Date or, if no
interest has yet been paid, from _______ __, 1999 (each, a "QUARTERLY INTEREST
PERIOD"). Interest on this Note will be computed on the basis of the actual
number of days elapsed in each Quarterly Interest Period and a 360-day year.
Such principal of and interest on this Note shall be paid in the manner
specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set
forth on the reverse hereof, which shall have the same effect as though fully
set forth on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Indenture Trustee whose name appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture referred to on the
reverse hereof, or be valid or obligatory for any purpose.
A-1-2
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed, manually or in facsimile, as of the date set forth below.
NELLIE MAE STUDENT LOAN TRUST 1999-A
By: THE FIRST NATIONAL BANK OF
CHICAGO, not in its individual capacity
but solely as Eligible Lender Trustee
under the Trust Agreement
By:
------------------------------------
Authorized Signatory
Date:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY, not in its individual capacity but
solely as Indenture Trustee
By:
-------------------------------------------
Authorized Signatory
Date:
A-1-3
<PAGE>
REVERSE OF NOTE
This Note is one of a duly authorized issue of Notes of the Issuer
designated as its Class A-1 Floating Rate Asset-Backed Notes (herein called the
"CLASS A-1 NOTES"), which, together with the Class A-2 Floating Rate
Asset-Backed Notes (the "CLASS A-2 NOTES" and, together with the Class A-1
Notes, the "NOTES") are issued under the Indenture, to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Noteholders. The Class A-1 Notes are subject to all terms of the
Indenture.
The Class A-1 Notes are and will be equally and ratably secured by the
collateral pledged as security therefor as provided in the Indenture.
Allocations of principal will be made among the Class A-1 Notes, the Class A-2
Notes and the Certificates as provided in the Indenture. The Notes collectively
are senior in right of payment to the Certificates, all as and to the extent
provided in the Indenture.
Principal of the Class A-1 Notes will be payable on each Quarterly
Payment Date in an amount described in the Indenture. "QUARTERLY PAYMENT DATE"
means the _____th day of each [January, April, July and October], or, if any
such date is not a Business Day, the next succeeding Business Day, commencing
_______ __, 1999.
As described on the face hereof, the entire unpaid principal amount of
this Note shall be due and payable on the Class A-1 Note Final Maturity Date and
the Redemption Date, if any, pursuant to Section 10.01(a) or 10.01(b) of the
Indenture. Notwithstanding the foregoing, the entire unpaid principal amount of
the Notes shall be due and payable on the date on which (i) an Event of Default
shall have occurred and be continuing and (ii) the Indenture Trustee or the
Noteholders representing not less than a majority of the Outstanding Amount of
the Notes shall have declared the Notes to be immediately due and payable in the
manner provided in Section 5.02 of the Indenture. All principal payments of the
Class A-1 Notes shall be made PRO RATA to the Class A-1 Noteholders entitled
thereto.
Interest on the Class A-1 Notes will be payable on each Quarterly
Payment Date, commencing _______ __, 1999, on the principal amount outstanding
of such Notes until the principal amount thereof is paid in full, at a rate per
annum equal to the Class A-1 Note Rate. The "CLASS A-1 NOTE RATE" for each
Quarterly Payment Date and the related LIBOR Reset Period shall be equal to the
lesser of (i) 3-Month LIBOR for the related LIBOR Reset Period plus ___% (the
"CLASS A-1 NOTE LIBOR RATE") and (ii) the Adjusted Student Loan Rate for such
Quarterly Interest Period. The "ADJUSTED STUDENT LOAN RATE" for any Quarterly
Interest Period will equal the product of (a) the quotient obtained by dividing
(i) 365 (366 in the case of a leap year) by (ii) the actual number of days
elapsed in such Quarterly Interest Period and (b) the percentage equivalent of a
fraction (i) the numerator of which is equal to the sum of the Expected Interest
Collections for such Quarterly Interest Period less the sum of the Master
Servicing Fee and the Administration Fee with respect to such Quarterly Interest
Period and the denominator of which is the sum of (A) the Outstanding Amount of
the Notes as of the last day of such Quarterly Interest Period and (B) the
Certificate Balance of the Certificates as of such date.
A-1-4
<PAGE>
Pursuant to the Indenture, the Indenture Trustee will determine 3-Month
LIBOR for purposes of calculating the Class A-1 Note LIBOR Rate for each
Quarterly Interest Period on the second business day prior to the commencement
of each LIBOR Reset Period within such Quarterly Interest Period (or, in the
case of the initial LIBOR Reset Period, on the second business day prior the
Closing Date) (each, a "LIBOR DETERMINATION DATE"). For purposes of calculating
3-Month LIBOR, a business day is any day on which banks in The City of New York
and the City of London are open for the transaction of international business.
Interest due for any Quarterly Interest Period will be determined based on the
actual number of days in such Quarterly Interest Period over a 360-day year.
"3-MONTH LIBOR" means, with respect to any LIBOR Reset Period, the
London interbank offered rate for deposits in U.S. dollars having a maturity of
three months commencing on the related LIBOR Determination Date (the "INDEX
MATURITY") which appears on Telerate Page 3750 as of 11:00 a.m. London time, on
such LIBOR Determination Date. If such rate does not appear on Telerate Page
3750, 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 LIBOR Determination Date to prime banks in the London
interbank market by the Reference Banks. The Indenture Trustee will request the
principal London office of each such Reference Bank to provide a quotation of
its rate. If at least two such quotations are provided, the rate for that day
will be the arithmetic mean of the quotations. If fewer than two quotations are
provided, the rate for that day will be the arithmetic mean of the rates quoted
by major banks in The City of New York, selected by the Indenture Trustee, at
approximately 11:00 a.m. New York time, on such LIBOR 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, 3-Month LIBOR in effect for the applicable LIBOR
Reset Period will be 3-Month LIBOR in effect for the previous LIBOR Reset
Period.
"LIBOR RESET PERIOD" means the three-month period commencing on the
__th day (or, if any such date is not a business day, on the next succeeding
business day) of each [January, April, July and October] and ending on the day
immediately preceding the following LIBOR Reset Period; PROVIDED, HOWEVER, that
the initial LIBOR Reset Period will commence on the Closing Date.
"TELERATE PAGE 3750" means the display page so designated on the Bridge
Telerate, Inc. service (or such other page as may replace that page on that
service for the purpose of displaying comparable rates or prices).
"REFERENCE BANKS" means four major banks in the London interbank market
selected by the Indenture Trustee.
Any Class A-1 Noteholders' Interest Carryover that may exist on any
Quarterly Payment Date shall be payable to the Class A-1 Noteholders on that
Quarterly Payment Date and any succeeding Quarterly Payment Dates solely out of
the funds available and required to be applied thereto pursuant to the
Administration Agreement.
A-1-5
<PAGE>
Payments of interest on this Note due and payable on each Quarterly
Payment Date, and payments of interest together with the installment of
principal, if any, due and payable on each Quarterly Payment Date, to the extent
not in full payment of this Note, shall be made by wire transfer or check mailed
to the Person whose name appears as the registered holder of this Note (or one
or more Predecessor Notes) on the Note Register on the Record Date, except that
with respect to Notes registered on the Record Date in the name of the nominee
of the Clearing Agency (initially, such nominee to be Cede & Co.), unless
Definitive Notes have been issued payments will be made by wire transfer in
immediately available funds to the account designated by such nominee. Such
checks shall be mailed to the Person entitled thereto at the address of such
Person as it appears on the Note Register as of the applicable Record Date
without requiring that this Note be submitted for notation of payment, and the
mailing of such check shall constitute payment of the amount thereof regardless
of whether such check is returned undelivered. Any reduction in the principal
amount of this Note (or any one or more Predecessor Notes) effected by any
payments made on any Quarterly Payment Date shall be binding upon all future
Noteholders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof, whether or not noted
hereon. If funds are expected to be available, as provided in the Indenture, for
payment in full of the then remaining unpaid principal amount of this Note on a
Quarterly Payment Date, then the Indenture Trustee, in the name of and on behalf
of the Issuer, will notify the Person who was the Noteholder hereof as of the
Record Date preceding such Quarterly Payment Date by notice mailed no later than
five days prior to such Quarterly Payment Date and the amount then due and
payable shall be payable only upon presentation and surrender of this Note at
the Indenture Trustee's Corporate Trust Office or at the office of the Indenture
Trustee's agent appointed for such purposes located in the Borough of Manhattan,
The City of New York.
The Issuer shall pay interest on overdue installments of interest at
the Class A-1 Note Rate to the extent lawful.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Noteholder hereof or his attorney duly
authorized in writing, with such signature guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar, which requirements
include membership or participation in Securities Transfer Agent's Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP
(all in accordance with the Exchange Act), and such other documents as the
Indenture Trustee may require, and thereupon one or more new Notes of authorized
denominations and in the same aggregate principal amount will be issued to the
designated transferee or transferees. No service charge will be charged for any
registration of transfer or exchange of this Note, but the transferor may be
required to pay a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any such registration of transfer or
exchange.
Each Noteholder or Note Owner, by its acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, covenants and agrees that
by accepting the benefits of the Indenture that such Noteholder or Note Owner
will not at any time institute against the Seller,
A-1-6
<PAGE>
the Company or the Issuer, or join in any institution against the Seller, the
Company or the Issuer of, any bankruptcy, reorganization, arrangement,
insolvency, receivership or liquidation proceedings or other proceedings under
any United States federal or state bankruptcy or similar law in connection with
any obligations relating to the Notes, the Indenture or the other Basic
Documents.
The Issuer has entered into the Indenture and this Note is issued with
the intention that, for federal, state, foreign and local income and franchise
tax and usury purposes, this Note will be treated as indebtedness of the Company
secured by the Trust Estate. Each Noteholder, by its acceptance of a Note (and
each Note Owner by its acceptance of a beneficial interest in a Note) agrees to
treat this Note for federal, state, foreign and local income and franchise tax
and usury purposes as indebtedness of the Company secured by the Trust Estate.
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes whether or not this Note be
overdue, and neither the Issuer, the Indenture Trustee nor any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Noteholders under the Indenture at any time by the
Issuer with the prior written consent of Noteholders representing a majority of
the Outstanding Amount of all Notes at the time outstanding. The Indenture also
contains provisions permitting the Noteholders representing specified
percentages of the Outstanding Amount of the Notes, on behalf of all the
Noteholders, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the holder of this Note (or any one or more
Predecessor Notes) shall be conclusive and binding upon such holder and upon all
future holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent or waiver is made upon this Note. The Indenture also permits the
Indenture Trustee to amend or waive certain terms and conditions set forth in
the Indenture without the consent of holders of the Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Indenture Trustee and the
Noteholders under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
A-1-7
<PAGE>
This Note shall be construed in accordance with the laws of the State
of New York, without reference to its conflict of law provisions, and the
obligations, rights and remedies of the parties hereunder and thereunder shall
be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency, herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of State Street Bank and Trust Company in
its individual capacity, The First National Bank of Chicago in its individual
capacity, any owner of a beneficial interest in the Issuer, or any of their
respective partners, beneficiaries, agents, officers, directors, employees or
successors or assigns shall be personally liable for, nor shall recourse be had
to any of them for, the payment of principal of or interest on, or performance
of, or omission to perform, any of the covenants, obligations or
indemnifications contained in this Note or the Indenture; it being expressly
understood that said covenants, obligations and indemnifications have been made
by the Eligible Lender Trustee for the sole purpose of binding the interests of
the Eligible Lender Trustee in the assets of the Issuer. The Noteholder of this
Note by the acceptance hereof agrees that, except as expressly provided in the
Basic Documents, in the case of an Event of Default under the Indenture, the
Noteholder shall have no claim against any of the foregoing for any deficiency,
loss or claim therefrom; PROVIDED, HOWEVER, that nothing contained herein shall
be taken to prevent recourse to, and enforcement against, the assets of the
Issuer for any and all liabilities, obligations and undertakings contained in
the Indenture or in this Note.
A-1-8
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto __________________________________________________________________________
_______________________________________________________________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints ______________________, attorney, to transfer said Note on the
books kept for registration thereof, with full power of substitution in the
premises.
Dated:__________________________
*/
-------------------------------
Signature Guaranteed:
*/
-------------------------------
- ---------------------
*/ NOTICE: The signature to this assignment must correspond with the name
of the registered owner as it appears on the face of the within Note in
every particular, without alteration, enlargement or any change
whatever. Such signature must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in STAMP or such other
"signature guarantee program" as may be determined by the Note
Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.
A-1-9
<PAGE>
EXHIBIT A-2
TO THE INDENTURE
[FORM OF CLASS A-2 NOTE]
CLASS A-2 NOTE
SEE REVERSE FOR CERTAIN DEFINITIONS
Unless this Note is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer (as
defined below) or its agent for registration of transfer, exchange or payment,
and any Note issued is registered in the name of Cede & Co. or in such other
name as is requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME
MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. THIS NOTE IS NOT
GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY.
REGISTERED $__________________________________
No. R- CUSIP NO.__________________________
NELLIE MAE STUDENT LOAN TRUST 1999-A
CLASS A-2 FLOATING RATE ASSET-BACKED NOTES
Nellie Mae Student Loan Trust 1999-A, a trust organized and existing
under the laws of the State of Delaware (herein referred to as the "ISSUER"),
for value received, hereby promises to pay to ______________________________, or
registered assigns, the principal sum of __________________________________
DOLLARS payable on each Quarterly Payment Date in an amount equal to the result
obtained by multiplying (i) a fraction the numerator of which is $___________
and the denominator of which is $________ by (ii) the aggregate amount, if any,
payable to Noteholders on such Quarterly Payment Date in respect of principal of
the Class A-2 Notes pursuant to Section 3.01 of the Indenture dated as of _____
1, 1999 (the "INDENTURE"), between the Issuer and State Street Bank and Trust
Company, a Massachusetts banking corporation, as Indenture Trustee (the
"INDENTURE TRUSTEE") (capitalized terms used but not defined herein shall have
the meanings ascribed thereto in the Indenture, which also references rules as
to usage that shall be applicable herein); PROVIDED, HOWEVER, that the entire
unpaid
A-2-1
<PAGE>
principal amount of this Note shall be due and payable on the ________ 20__
Quarterly Payment Date (the "CLASS A-2 NOTE FINAL MATURITY DATE") and the
Redemption Date, if any, pursuant to Section 10.01(a) or 10.01(b) of the
Indenture.
The Issuer will pay interest on this Note, at the rate per annum equal
to the Class A-2 Note Rate (defined on the reverse hereof), on each Quarterly
Payment Date until the principal of this Note is paid or made available for
payment, on the principal amount of this Note outstanding on the preceding
Quarterly Payment Date, after giving effect to all payments of principal made on
the preceding Quarterly Payment Date (or, in the case of the first Quarterly
Payment Date, on the Closing Date), subject to certain limitations contained in
Section 3.01 of the Indenture. Interest on this Note will accrue for each
Quarterly Payment Date from the most recent Quarterly Payment Date on which
interest has been paid to but excluding such Quarterly Payment Date or, if no
interest has yet been paid, from ______ __, 1999 (each, a "QUARTERLY INTEREST
PERIOD"). Interest on this Note will be computed on the basis of the actual
number of days elapsed in each Quarterly Interest Period and a 360-day year.
Such principal of and interest on this Note shall be paid in the manner
specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Indenture Trustee whose name appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture referred to on the
reverse hereof, or be valid or obligatory for any purpose.
A-2-2
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed, manually or in facsimile, as of the date set forth below.
NELLIE MAE STUDENT LOAN TRUST 1999-A
By: THE FIRST NATIONAL BANK OF
CHICAGO, not in its individual
capacity but solely as Eligible
Lender Trustee under the Trust
Agreement
By:
----------------------------
Authorized Signatory
Date:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in
the within-mentioned Indenture.
STATE STREET BANK AND TRUST COMPANY,
not in its individual capacity
but solely as Indenture Trustee
By:
---------------------------------
Authorized Signatory
Date:
A-2-3
<PAGE>
REVERSE OF NOTE
This Note is one of a duly authorized issue of Notes of the Issuer
designated as its Class A-2 Floating Rate Asset-Backed Notes (herein called the
"CLASS A-2 NOTES"), which, together with the Class A-1 Floating Rate
Asset-Backed Notes (the "CLASS A-1 NOTES" and, together with the Class A-2
Notes, the "NOTES") are issued under the Indenture, to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Issuer, the Indenture
Trustee and the Noteholders. The Class A-2 Notes are subject to all terms of the
Indenture.
The Class A-2 Notes are and will be equally and ratably secured by the
collateral pledged as security therefor as provided in the Indenture.
Allocations of principal will be made among the Class A-1 Notes, the Class A-2
Notes and the Certificates as provided in the Indenture. The Notes collectively
are senior in right of payment to the Certificates, all as and to the extent
provided in the Indenture.
Principal of the Class A-2 Notes will be payable on each Quarterly
Payment Date in the amount described in the Indenture. "QUARTERLY PAYMENT DATE"
means the __th day of each [January, April, July and October], or, if any such
date is not a Business Day, the next succeeding Business Day, commencing ______
__, 1999.
As described on the face hereof, the entire unpaid principal amount of
this Note shall be due and payable on the Class A-2 Note Final Maturity Date and
the Redemption Date, if any, pursuant to Section 10.01(a) or 10.01(b) of the
Indenture. Notwithstanding the foregoing, the entire unpaid principal amount of
the Notes shall be due and payable on the date on which (i) an Event of Default
shall have occurred and be continuing and (ii) the Indenture Trustee or the
Noteholders representing not less than a majority of the Outstanding Amount of
the Notes shall have declared the Notes to be immediately due and payable in the
manner provided in Section 5.02 of the Indenture. All principal payments of the
Class A-2 Notes shall be made PRO RATA to the Class A-2 Noteholders entitled
thereto.
Interest on the Class A-2 Notes will be payable on each Quarterly
Payment Date, commencing ______ __, 1999 on the principal amount outstanding of
such Notes until the principal amount thereof is paid in full, at a rate per
annum equal to the Class A-2 Note Rate. The "CLASS A-2 NOTE RATE" for each
Quarterly Payment Date and the related LIBOR Reset Period shall be equal to the
lesser of (i) 3-Month LIBOR for the related LIBOR Reset Period plus ___% (the
"CLASS A-2 NOTE LIBOR RATE") and (ii) the Adjusted Student Loan Rate for such
Quarterly Interest Period. The "ADJUSTED STUDENT LOAN RATE" for any Quarterly
Interest Period will equal the product of (a) the quotient obtained by dividing
(i) 365 (366 in the case of a leap year) by (ii) the actual number of days
elapsed in such Quarterly Interest Period and (b) the percentage equivalent of a
fraction, (i) the numerator of which is equal to the sum of Expected Interest
Collections for such Quarterly Interest Period less the sum of the Master
Servicing Fee and the Administration Fee with respect to such Quarterly Interest
Period and (ii) the denominator of which is the sum of (A) the Outstanding
Amount of the Notes as of the last day of such Quarterly Interest Period and (B)
the Certificate Balance of the Certificates as of such date.
A-2-4
<PAGE>
Pursuant to the Indenture, the Indenture Trustee will determine 3-Month
LIBOR for purposes of calculating the Class A-2 Note LIBOR Rate for each
Quarterly Interest Period on the second business day prior to the commencement
of each LIBOR Reset Period within such Quarterly Interest Period (or, in the
case of the initial LIBOR Reset Period, on the second business day prior the
Closing Date) (each, a "LIBOR DETERMINATION DATE"). For purposes of calculating
3-Month LIBOR, a business day is any day on which banks in The City of New York
and the City of London are open for the transaction of international business.
Interest due for any Quarterly Interest Period will be determined based on the
actual number of days in such Quarterly Interest Period over a 360-day year.
"3-MONTH LIBOR" means, with respect to any LIBOR Reset Period, the
London interbank offered rate for deposits in U.S. dollars having a maturity of
three months commencing on the related LIBOR Determination Date (the "INDEX
MATURITY") which appears on Telerate Page 3750 as of 11:00 a.m. London time, on
such LIBOR Determination Date. If such rate does not appear on Telerate Page
3750, 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 LIBOR Determination Date to prime banks in the London
interbank market by the Reference Banks. The Indenture Trustee will request the
principal London office of each such Reference Bank to provide a quotation of
its rate. If at least two such quotations are provided, the rate for that day
will be the arithmetic mean of the quotations. If fewer than two quotations are
provided, the rate for that day will be the arithmetic mean of the rates quoted
by major banks in The City of New York, selected by the Indenture Trustee, at
approximately 11:00 a.m. New York time, on such LIBOR 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, 3-Month LIBOR in effect for the applicable LIBOR
Reset Period will be 3-Month LIBOR in effect for the previous LIBOR Reset
Period.
"LIBOR RESET PERIOD" means the three-month period commencing on the
__th day (or, if any such date is not a business day, on the next succeeding
business day) of each [January, April, July and October] and ending on the day
immediately preceding the following LIBOR Reset Period; PROVIDED, HOWEVER, that
the initial LIBOR Reset Period will commence on the Closing Date.
"TELERATE PAGE 3750" means the display page so designated on the Bridge
Telerate, Inc. service (or such other page as may replace that page on that
service for the purpose of displaying comparable rates or prices).
"REFERENCE BANKS" means four major banks in the London interbank market
selected by the Indenture Trustee.
Any Class A-2 Noteholders' Interest Basis Carryover that may exist on
any Quarterly Payment Date shall be payable to the Class A-2 Noteholders on that
Quarterly Payment Date and any succeeding Quarterly Payment Dates solely out of
the funds available and required to be applied thereto pursuant to the
Administration Agreement.
A-2-5
<PAGE>
Payments of interest on this Note due and payable on each Quarterly
Payment Date, and payments of interest together with the installment of
principal, if any, due and payable on each Quarterly Payment Date, to the extent
not in full payment of this Note, shall be made by wire transfer or check mailed
to the Person whose name appears as the registered holder of this Note (or one
or more Predecessor Notes) on the Note Register on the Record Date, except that
with respect to Notes registered on the Record Date in the name of the nominee
of the Clearing Agency (initially, such nominee to be Cede & Co.), unless
Definitive Notes have been issued, payments will be made by wire transfer in
immediately available funds to the account designated by such nominee. Such
checks shall be mailed to the Person entitled thereto at the address of such
Person as it appears on the Note Register as of the applicable Record Date
without requiring that this Note be submitted for notation of payment, and the
mailing of such check shall constitute payment of the amount thereof regardless
of whether such check is returned undelivered. Any reduction in the principal
amount of this Note (or any one or more Predecessor Notes) effected by any
payments made on any Quarterly Payment Date shall be binding upon all future
Noteholders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof, whether or not noted
hereon. If funds are expected to be available, as provided in the Indenture, for
payment in full of the then remaining unpaid principal amount of this Note on a
Quarterly Payment Date, then the Indenture Trustee, in the name of and on behalf
of the Issuer, will notify the Person who was the Noteholder hereof as of the
Record Date preceding such Quarterly Payment Date by notice mailed no later than
five days prior to such Quarterly Payment Date and the amount then due and
payable shall be payable only upon presentation and surrender of this Note at
the Indenture Trustee's Corporate Trust Office or at the office of the Indenture
Trustee's agent appointed for such purposes located in the Borough of Manhattan,
The City of New York.
The Issuer shall pay interest on overdue installments of interest at
the Class A-2 Note Rate to the extent lawful.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Noteholder hereof or his attorney duly
authorized in writing, with such signature guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar, which requirements
include membership or participation in Securities Transfer Agent's Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Note Registrar in addition to, or in substitution for, STAMP
(all in accordance with the Exchange Act), and such other documents as the
Indenture Trustee may require, and thereupon one or more new Notes of authorized
denominations and in the same aggregate principal amount will be issued to the
designated transferee or transferees. No service charge will be charged for any
registration of transfer or exchange of this Note, but the transferor may be
required to pay a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any such registration of transfer or
exchange.
Each Noteholder or Note Owner, by its acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, covenants and agrees that
by accepting the benefits of the Indenture that such Noteholder or Note Owner
will not at any time institute against the Seller,
A-2-6
<PAGE>
the Company or the Issuer, or join in any institution against the Seller, the
Company or the Issuer of, any bankruptcy, reorganization, arrangement,
insolvency, receivership or liquidation proceedings or other proceedings under
any United States federal or state bankruptcy or similar law in connection with
any obligations relating to the Notes, the Indenture or the other Basic
Documents.
The Issuer has entered into the Indenture and this Note is issued with
the intention that, for federal, state, foreign and local income and franchise
tax and usury purposes, this Note will be treated as indebtedness of the Company
secured by the Trust Estate. Each Noteholder, by its acceptance of a Note (and
each Note Owner by its acceptance of a beneficial interest in a Note) agrees to
treat this Note for federal, state, foreign and local income and franchise tax
and usury purposes as indebtedness of the Company secured by the Trust Estate.
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture
Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes whether or not this Note be
overdue, and neither the Issuer, the Indenture Trustee nor any such agent shall
be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Noteholders under the Indenture at any time by the
Issuer with the prior written consent of Noteholders representing a majority of
the Outstanding Amount of all Notes at the time outstanding. The Indenture also
contains provisions permitting the Noteholders representing specified
percentages of the Outstanding Amount of the Notes, on behalf of all the
Noteholders, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the holder of this Note (or any one or more
Predecessor Notes) shall be conclusive and binding upon such holder and upon all
future holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent or waiver is made upon this Note. The Indenture also permits the
Indenture Trustee to amend or waive certain terms and conditions set forth in
the Indenture without the consent of holders of the Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Indenture Trustee and the
Noteholders under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
A-2-7
<PAGE>
This Note shall be construed in accordance with the laws of the State
of New York, without reference to its conflict of law provisions, and the
obligations, rights and remedies of the parties hereunder and thereunder shall
be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency, herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, none of State Street Bank and Trust Company in
its individual capacity, The First National Bank of Chicago in its individual
capacity, any owner of a beneficial interest in the Issuer, or any of their
respective partners, beneficiaries, agents, officers, directors, employees or
successors or assigns shall be personally liable for, nor shall recourse be had
to any of them for, the payment of principal of or interest on, or performance
of, or omission to perform, any of the covenants, obligations or
indemnifications contained in this Note or the Indenture; it being expressly
understood that said covenants, obligations and indemnifications have been made
by the Eligible Lender Trustee for the sole purpose of binding the interests of
the Eligible Lender Trustee in the assets of the Issuer. The Noteholder of this
Note by the acceptance hereof agrees that, except as expressly provided in the
Basic Documents, in the case of an Event of Default under the Indenture, the
Noteholder shall have no claim against any of the foregoing for any deficiency,
loss or claim therefrom; PROVIDED, HOWEVER, that nothing contained herein shall
be taken to prevent recourse to, and enforcement against, the assets of the
Issuer for any and all liabilities, obligations and undertakings contained in
the Indenture or in this Note.
A-2-8
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto____________________________________________________________________________
________________________________________________________________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints ______________________, attorney, to transfer said Note on the
books kept for registration thereof, with full power of substitution in the
premises.
Dated:
------------------
*/
---------------------------
Signature Guaranteed:
*/
---------------------------
- -----------------
*/ NOTICE: The signature to this assignment must correspond with the name
of the registered owner as it appears on the face of the within Note in
every particular, without alteration, enlargement or any change
whatever. Such signature must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar, which
requirements include membership or participation in STAMP or such other
"signature guarantee program" as may be determined by the Note
Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.
A-2-9
<PAGE>
EXHIBIT B TO THE INDENTURE
NOTE DEPOSITORY AGREEMENT
B-1
<PAGE>
Exhibit 4.2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[FORM OF]
TRUST AGREEMENT
among
NELLIE MAE EDUCATION LOAN CORPORATION,
as depositor,
NELLIE MAE FUNDING, LLC
and
THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual capacity but solely
as eligible lender trustee
for the Trust created hereby
Dated as of _____ 1, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I
Definitions and Usage
ARTICLE II
Organization
SECTION 2.01. Name............................................................................1
SECTION 2.02. Office..........................................................................1
SECTION 2.03. Purposes and Powers.............................................................1
SECTION 2.04. Appointment of Eligible Lender Trustee..........................................2
SECTION 2.05. Initial Capital Contribution of Trust Estate....................................2
SECTION 2.06. Declaration of Trust............................................................2
SECTION 2.07. [Reserved]......................................................................2
SECTION 2.08. Title to Trust Property.........................................................2
SECTION 2.09. Representations and Warranties of the Depositor and the Company.................3
SECTION 2.10. Tax Treatment...................................................................4
SECTION 2.11. Liability of Securityholders....................................................4
ARTICLE III
Certificates and Transfer of Interests
SECTION 3.01. Initial Beneficial Ownership....................................................4
SECTION 3.02. The Certificates................................................................4
SECTION 3.03. Authentication of Certificates..................................................5
SECTION 3.04. Registration of Transfer and Exchange of Certificates...........................5
SECTION 3.05. Mutilated, Destroyed, Lost or Stolen Certificates...............................6
SECTION 3.06. Persons Deemed Owners...........................................................6
SECTION 3.07. Access to List of Certificateholders' Names and Addresses.......................6
SECTION 3.08. Maintenance of Office or Agency.................................................7
SECTION 3.09. Appointment of Certificate Paying Agent.........................................7
SECTION 3.10. Book-Entry Certificates.........................................................8
SECTION 3.11. Notices to Clearing Agency......................................................8
SECTION 3.12. Definitive Certificates.........................................................9
ARTICLE IV
Actions by Eligible Lender Trustee
SECTION 4.01. Prior Notice to Certificateholders with Respect to Certain
Matters.........................................................................9
SECTION 4.02. Action by Certificateholders with Respect to Certain Matters...................11
SECTION 4.03. Action by Securityholder with Respect to Bankruptcy............................11
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 4.04. Restrictions on Certificateholders' Power......................................11
SECTION 4.05. Majority Control...............................................................12
ARTICLE V
Application of Trust Funds; Certain Duties
SECTION 5.01. Application of Trust Funds.....................................................12
SECTION 5.02. Method of Payment..............................................................12
SECTION 5.03. No Segregation of Monies; No Interest..........................................13
SECTION 5.04. Accounting and Reports to the Certificateholders, Certificate
Owners, the Internal Revenue Service and Others................................13
SECTION 5.05. Incentive Programs.............................................................14
ARTICLE VI
Authority and Duties of Eligible Lender Trustee
SECTION 6.01. General Authority..............................................................14
SECTION 6.02. General Duties.................................................................14
SECTION 6.03. Action upon Instruction........................................................15
SECTION 6.04. No Duties Except as Specified in This Agreement, the Loan Sale
Agreement, the Master Servicing Agreement, the Administration
Agreement or in Instructions...................................................16
SECTION 6.05. No Action Except Under Specified Documents or Instructions.....................16
SECTION 6.06. Restrictions...................................................................16
ARTICLE VII
Concerning the Eligible Lender Trustee
SECTION 7.01. Acceptance of Trusts and Duties................................................16
SECTION 7.02. Furnishing of Documents........................................................18
SECTION 7.03. Representations and Warranties.................................................18
SECTION 7.04. Reliance; Advice of Counsel....................................................18
SECTION 7.05. Not Acting in Individual Capacity..............................................19
SECTION 7.06. Eligible Lender Trustee Not Liable for Notes, Certificates or
Trust Loans....................................................................19
SECTION 7.07. Eligible Lender Trustee May Own Certificates and Notes.........................20
SECTION 7.08. Licenses.......................................................................20
ARTICLE VIII
Compensation of Eligible Lender Trustee
SECTION 8.01. Eligible Lender Trustee's Fees and Expenses....................................20
SECTION 8.02. Payments to the Eligible Lender Trustee........................................20
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE VIII
A Auction of Trust Loans and Redemption of Certificates
SECTION 8.01A. Auction of Trust Loans.........................................................20
SECTION 8.02A. Redemption.....................................................................21
SECTION 8.03A. Form of Redemption Notice......................................................21
SECTION 8.04A. Certificates Payable on Redemption Date........................................22
ARTICLE IX
Termination of Trust Agreement
SECTION 9.01. Termination of Trust Agreement.................................................22
ARTICLE X
Successor Eligible Lender Trustees and
SECTION 10.01. Eligibility Requirements for Eligible Lender Trustee...........................23
SECTION 10.02. Resignation or Removal of Eligible Lender Trustee..............................23
SECTION 10.03. Successor Eligible Lender Trustee..............................................24
SECTION 10.04. Merger or Consolidation of Eligible Lender Trustee.............................25
SECTION 10.05. Appointment of Co-Eligible Lender Trustee or Separate Eligible
Lender Trustee.................................................................25
ARTICLE XI
Miscellaneous
SECTION 11.01. Supplements and Amendments.....................................................26
SECTION 11.02. No Legal Title to Trust Estate in Certificateholders...........................27
SECTION 11.03. Limitations on Rights of Others................................................28
SECTION 11.04. Notices........................................................................28
SECTION 11.05. Severability...................................................................28
SECTION 11.06. Separate Counterparts..........................................................28
SECTION 11.07. Successors and Assigns.........................................................28
SECTION 11.08. No Petition....................................................................29
SECTION 11.09. No Recourse....................................................................29
SECTION 11.10. Headings.......................................................................29
SECTION 11.11. Governing Law..................................................................29
SECTION 11.12. Responsibility to Secretary and Guarantors.....................................29
SECTION 11.13. Consents.......................................................................29
</TABLE>
iii
<PAGE>
EXHIBIT A Form of Certificate
EXHIBIT B Certificate Depository Agreement
EXHIBIT C Certificate of Trust of Nellie Mae Student Loan Trust 1999-A
iv
<PAGE>
TRUST AGREEMENT dated as of _____ 1, 1999, among NELLIE MAE
EDUCATION LOAN CORPORATION, a Delaware non-profit corporation, as depositor (the
"DEPOSITOR" or "NMELC"), NELLIE MAE FUNDING, LLC, a Delaware limited liability
company (the "COMPANY"), and THE FIRST NATIONAL BANK OF CHICAGO, a national
banking association, not in its individual capacity but solely as eligible
lender trustee for the Trust created hereby (the "ELIGIBLE LENDER TRUSTEE").
The Depositor, the Company and the Eligible Lender Trustee
hereby agree as follows:
ARTICLE I
DEFINITIONS AND USAGE
Capitalized terms used but not defined herein are defined in
Appendix A to the Administration Agreement, dated as of _____ 1, 1999, among the
Nellie Mae Student Loan Trust 1999-A, as Issuer, the Depositor, as
Administrator, and State Street Bank and Trust Company, as Indenture Trustee,
which also contains rules as to construction and usage that shall be applicable
herein.
ARTICLE II
ORGANIZATION
SECTION 2.01. NAME. The Trust created hereby shall be known as
"Nellie Mae Student Loan Trust 1999-A", in which name the Eligible Lender
Trustee may conduct the business of the Trust, make and execute contracts and
other instruments on behalf of the Trust and sue and be sued.
SECTION 2.02. OFFICE. The office of the Trust shall be in care
of the Eligible Lender Trustee at its Corporate Trust Office or at such other
address as the Eligible Lender Trustee may designate by written notice to the
Depositor.
SECTION 2.03. PURPOSES AND POWERS. The purpose of the Trust is
to engage in the following activities:
(i) to issue the Notes pursuant to the Indenture and the
Certificates pursuant to this Agreement and to sell the Notes and the
Certificates in one or more transactions;
(ii) with the proceeds of the sale of the Notes and the
Certificates, to purchase the Initial Trust Loans and to pay the
organizational, start-up and transactional expenses of the Trust and to
pay the balance to the Depositor pursuant to the Loan Sale Agreement;
(iii) to acquire and hold any Serial Loans conveyed by the
Depositor to the Trust after the Closing Date pursuant to the Loan Sale
Agreement;
(iv) to assign, grant, transfer, pledge, mortgage and convey
the Trust Estate pursuant to the Indenture;
1
<PAGE>
(v) to enter into and perform its obligations under the Basic
Documents to which it is to be a party;
(vi) to engage in those activities, including entering into
agreements, that are necessary, suitable or convenient to accomplish
the foregoing or are incidental thereto or connected therewith; and
(vii) subject to compliance with the Basic Documents, to
engage in such other activities as may be required in connection with
conservation of the Trust Estate and the making of distributions to the
Securityholders and the others specified in Section 2(d) of the
Administration Agreement.
The Trust shall not engage in any activity other than in connection with the
foregoing or other than as required or authorized by the terms of this Agreement
or the other Basic Documents.
SECTION 2.04. APPOINTMENT OF ELIGIBLE LENDER TRUSTEE. The
Depositor hereby appoints the Eligible Lender Trustee as trustee of the Trust
effective as of the date hereof to have all of the rights, powers and duties set
forth herein.
SECTION 2.05. INITIAL CAPITAL CONTRIBUTION OF TRUST ESTATE.
The Depositor hereby sells, assigns, transfers, conveys and sets over to the
Eligible Lender Trustee, as of the date hereof, the sum of $1.00. The Eligible
Lender Trustee hereby acknowledges receipt in trust from the Depositor, as of
the date hereof, of the foregoing contribution, which shall constitute the
initial Trust Estate and shall be deposited in the Collection Account. The
Depositor shall pay the organizational expenses of the Trust as they may arise
or shall, upon the request of the Eligible Lender Trustee, promptly reimburse
the Eligible Lender Trustee for any such expenses paid by the Eligible Lender
Trustee.
SECTION 2.06. DECLARATION OF TRUST. The Eligible Lender
Trustee hereby declares that it will hold the Trust Estate in trust upon and
subject to the conditions set forth herein for the use and benefit of the
Securityholders, subject to the obligations of the Trust under the other Basic
Documents. It is the intention of the parties hereto that the Trust constitute a
trust under the Business Trust Statute and that this Agreement constitute the
governing instrument of such trust. It is the intention of the parties hereto
that, for income tax purposes, the Trust shall be treated as a partnership, with
the assets of the partnership being the Trust Loans, and the partners of the
partnership being the Certificateholders. The parties agree that the Trust will
file or cause to be filed annual or other necessary returns (including K-1s)
consistent with the characterization of the Trust as a partnership. Effective as
of the date hereof, the Eligible Lender Trustee shall have all rights, powers
and duties set forth herein and in the Business Trust Statute with respect to
accomplishing the purposes of the Trust. The Eligible Lender Trustee and the
Delaware Trustee shall file the Certificate of Trust with the Secretary of State
of the State of Delaware pursuant to ss. 3801 of the Business Trust Statute on
or before the Closing Date.
SECTION 2.07. [RESERVED]
SECTION 2.08. TITLE TO TRUST PROPERTY. Subject to the
Indenture, legal title to the Trust Estate shall be vested at all times in the
Trust as a separate legal entity except where applicable law in any jurisdiction
requires title to any part of the Trust Estate to be vested in a
2
<PAGE>
trustee or trustees, in which case title shall be deemed to be vested in the
Eligible Lender Trustee, a co-trustee and/or a separate trustee, as the case may
be; PROVIDED, HOWEVER, that legal title to the Trust Loans shall be vested at
all times in the Eligible Lender Trustee on behalf of the Trust.
SECTION 2.09. REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR
AND THE COMPANY. (a) Each of the Company and the DEPOSITOR hereby represents and
warrants, as to itself, to the Eligible Lender Trustee that:
(i) In the case of the DEPOSITOR, it is duly organized and
validly existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, with power and authority to own
its properties and to conduct its business as such properties are
currently owned and such business is currently conducted (subject, with
respect to the DEPOSITOR and its Student Loans, to the vesting of legal
title thereto in FNBC or another eligible lender, as trustee for the
DEPOSITOR); and in the case of the Company, it is duly organized and
validly existing as a limited liability company in good standing under
the laws of the jurisdiction of its organization, with power and
authority to own its properties and to conduct its business as such
properties are currently owned and such business is currently
conducted.
(ii) It is duly qualified to do business as a foreign
corporation in the case of the DEPOSITOR, or as a foreign company in
the case of the Company, in good standing, and has obtained all
necessary licenses and approvals in all jurisdictions in which the
ownership or lease of property or the conduct of its business shall
require such qualifications except where failure to do so (both singly
and in the aggregate) will not have a material adverse effect on the
conduct of its business, operations or financial condition.
(iii) It has the power and authority to execute and deliver
this Agreement and to carry out its terms; and the execution, delivery
and performance of this Agreement have been duly authorized by it by
all necessary action; the DEPOSITOR has full power and authority to
transfer and assign the property to be transferred and assigned to, and
to be deposited with, the Eligible Lender Trustee; and the DEPOSITOR
has duly authorized such transfer and assignment to the Trust by all
necessary action.
(iv) This Agreement constitutes its legal, valid and binding
obligation enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization and similar laws
relating to creditors' rights generally and subject to general
principles of equity.
(v) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time or both) a default
under, its certificate of incorporation or organization or its by-laws,
or any indenture, agreement or other instrument to which it is a party
or by which it is bound; nor result in the creation or imposition of
any Lien upon any of its properties pursuant to the terms of any such
indenture, agreement or other instrument (other than pursuant to the
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Basic Documents); nor violate any law or, to the best of its knowledge,
any order, rule or regulation applicable to it of any court or of any
federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over it or its
properties.
(vi) There are no proceedings or investigations pending or, to
its best knowledge, threatened before any court, regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the DEPOSITOR or its properties: (A) asserting the
invalidity of this Agreement, (B) seeking to prevent the consummation
of any of the transactions contemplated by this Agreement or (C)
seeking any determination or ruling that might materially and adversely
affect the performance by it of its obligations under, or the validity
or enforceability of, this Agreement.
SECTION 2.10. TAX TREATMENT. The DEPOSITOR and the Company
have entered into this Agreement, and the Certificates will be issued to and
acquired by the Certificateholders, with the intention that, for federal, state,
foreign and local income and franchise tax and usury law purposes, the
Certificates will be partnership interests in a tax partnership. Each of the
DEPOSITOR and the Company, by entering into this Agreement, and each
Certificateholder, by the acceptance of its Certificate, agrees to treat the
Certificates for purposes of federal, state and local income and franchise taxes
and for any other tax imposed on or measured by income and usury law purposes as
partnership interests. In accordance with the foregoing, the Eligible Lender
Trustee hereby agrees to treat the Trust as a partnership, and shall file all
necessary partnership tax returns (including K-1's) and obtain an employer
identification number, all on behalf of the Trust.
SECTION 2.11. LIABILITY OF SECURITYHOLDERS. No Securityholder
shall have any personal liability or obligation to or for the Trust and the
Certificate of Trust shall be fully paid and nonassessable.
ARTICLE III
CERTIFICATES AND TRANSFER OF INTERESTS
SECTION 3.01. INITIAL BENEFICIAL OWNERSHIP. Upon the formation
of the Trust by the contribution by the Depositor pursuant to Section 2.05 and
until the issuance of the Certificates, the Depositor shall be the sole
beneficial owner of the Trust.
SECTION 3.02. THE CERTIFICATES. The Certificates shall be
issued in denominations of $1,000 or in integral multiples of $1,000 in excess
thereof; PROVIDED, HOWEVER, that the Certificates issued to the Company pursuant
to Section 3.10 may be issued in such denomination as to include any residual
amount. The Certificates shall be executed on behalf of the Trust by manual or
facsimile signature of an authorized officer of the Eligible Lender Trustee.
Certificates bearing the manual or facsimile signatures of individuals who were,
at the time when such signatures shall have been affixed, authorized to sign on
behalf of the Trust, shall be validly issued by the Trust and entitled to the
benefits of this Agreement, notwithstanding that such individuals or any of them
shall have ceased to be so authorized prior
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to the authentication and delivery of such Certificates or did not hold such
offices at the date of authentication and delivery of such Certificates.
A transferee of a Certificate shall become a
Certificateholder, and shall be entitled to the rights and subject to the
obligations of a Certificateholder hereunder, upon such transferee's acceptance
of a Certificate duly registered in such transferee's name pursuant to Section
3.04.
SECTION 3.03. AUTHENTICATION OF CERTIFICATES. Concurrently
with the sale of the Initial Trust Loans to the Trust pursuant to the Loan Sale
Agreement, the Eligible Lender Trustee shall cause the Certificates in an
aggregate principal amount equal to the Initial Certificate Balance to be
executed on behalf of the Trust, duly authenticated and delivered hereunder. No
Certificate shall entitle its holder to any benefit under this Agreement, or
shall be valid for any purpose, unless there shall appear on such Certificate a
certificate of authentication substantially in the form set forth in Exhibit A,
executed by the Eligible Lender Trustee or First Chicago Trust Company of New
York, as the Eligible Lender Trustee's authenticating agent, by manual
signature; such authentication shall constitute conclusive evidence that such
Certificate shall have been duly authenticated and delivered hereunder. All
Certificates shall be dated the date of their authentication.
SECTION 3.04. REGISTRATION OF TRANSFER AND EXCHANGE OF
CERTIFICATES. The Certificate Registrar shall keep or cause to be kept, at the
office or agency maintained pursuant to Section 3.08, a Certificate Register in
which, subject to such reasonable regulations as it may prescribe, the Eligible
Lender Trustee shall provide for the registration of the Certificates and of
transfers and exchanges of Certificates as herein provided. The Eligible Lender
Trustee shall be the initial Certificate Registrar.
Upon surrender for registration of transfer of any Certificate
at the office or agency maintained pursuant to Section 3.08, the Eligible Lender
Trustee shall execute, authenticate and deliver (or shall cause First Chicago
Trust Company of New York as its authenticating agent to authenticate and
deliver), in the name of the designated transferee or transferees, one or more
new Certificates in authorized denominations of a like aggregate amount dated
the date of authentication by the Eligible Lender Trustee or any authenticating
agent. At the option of a Certificateholder , Certificates may be exchanged for
other Certificates of authorized denominations of a like aggregate amount upon
surrender of the Certificates to be exchanged at the office or agency maintained
pursuant to Section 3.08.
Every Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer in
form satisfactory to the Eligible Lender Trustee and the Certificateholder or
his attorney duly authorized in writing, with such signature guaranteed by an
"eligible guarantor institution" meeting the requirements of the Certificate
Registrar, which requirements include membership or participation in Securities
Transfer Agents' Medallion Program ("STAMP") or such other "signature guarantee
program" as may be determined by the Certificate Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Exchange Act. Each
Certificate surrendered for registration of transfer or exchange shall be
canceled and subsequently disposed of by the Eligible Lender Trustee in
accordance with its customary practice.
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No service charge shall be made for any registration of
transfer or exchange of Certificates, but the Eligible Lender Trustee or the
Certificate Registrar may require payment of a sum sufficient to cover any tax
or governmental charge that may be imposed in connection with any transfer or
exchange of Certificates.
The preceding provisions of this Section notwithstanding, the
Eligible Lender Trustee shall not be required to make and the Certificate
Registrar need not register transfers or exchanges of Certificates for a period
of 15 days preceding any Quarterly Payment Date with respect to the
Certificates.
The Certificates and any beneficial interest in such
Certificates may not be acquired by (a) an employee benefit plan (as defined in
Section 3(3) of ERISA) that is subject to the provisions of Title I of ERISA,
(b) a plan described in Section 4975(e)(1) of the Code or (c) any entity whose
underlying assets include plan assets by reason of a plan's investment in the
entity (each, a "BENEFIT PLAN"). By accepting and holding a Certificate or an
interest therein, the Certificateholder thereof shall be deemed to have
represented and warranted that it is not a Benefit Plan.
SECTION 3.05. MUTILATED, DESTROYED, LOST OR STOLEN
CERTIFICATES. If (a) any mutilated Certificate shall be surrendered to the
Certificate Registrar, or if the Certificate Registrar shall receive evidence to
its satisfaction of the destruction, loss or theft of any Certificate, and (b)
there shall be delivered to the Certificate Registrar and the Eligible Lender
Trustee such security or indemnity as may be required by them to save each of
them harmless, then in the absence of notice that such Certificate shall have
been acquired by a bona fide purchaser, the Eligible Lender Trustee on behalf of
the Trust shall execute and the Eligible Lender Trustee, or First Chicago Trust
Company of New York as the Eligible Lender Trustee's authenticating agent, shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Certificate, a new Certificate of like tenor and
denomination. Any duplicate Certificate issued pursuant to this Section shall
constitute conclusive evidence of ownership in the Trust, as if originally
issued, whether or not the lost, stolen or destroyed Certificate shall be found
at any time.
SECTION 3.06. PERSONS DEEMED OWNERS. Prior to due presentation
of a Certificate for registration of transfer, the Eligible Lender Trustee, the
Certificate Registrar and any agent of any thereof may treat the Person in whose
name any Trust Certificate shall be registered in the Certificate Register as
the owner of such Certificate for the purpose of receiving distributions
pursuant to Section 5.01 and for all other purposes whatsoever, and neither the
Eligible Lender Trustee nor the Certificate Registrar nor any agent of either of
them shall be bound by any notice to the contrary.
SECTION 3.07. ACCESS TO LIST OF CERTIFICATEHOLDERS' NAMES AND
ADDRESSES. The Eligible Lender Trustee shall furnish or cause to be furnished to
the Depositor, within 15 days after receipt by the Eligible Lender Trustee of a
request therefor from the Depositor in writing, a list, in such form as the
Depositor may reasonably require, of the names and addresses of the
Certificateholders as of the most recent Record Date. If three or more
Certificateholders, or one or more Certificateholders evidencing not less than
25% of the Certificate Balance, apply in writing to the Eligible Lender Trustee,
and such application states that the applicants desire to
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communicate with other Certificateholders with respect to their rights under
this Agreement or under the Certificates and such application is accompanied by
a copy of the communication that such applicants propose to transmit, then the
Eligible Lender Trustee shall, within five Business Days after the receipt of
such application, afford such applicants access during normal business hours to
the current list of Certificateholders. Upon receipt of any such application,
the Eligible Lender Trustee will promptly notify the Depositor by providing a
copy of such application and a copy of the list of Certificateholders produced
in response thereto. Each Certificateholder, by receiving and holding a
Certificate, shall be deemed to have agreed not to hold any of the Depositor,
the Certificate Registrar or the Eligible Lender Trustee accountable by reason
of the disclosure of its name and address, regardless of the source from which
such information was derived.
SECTION 3.08. MAINTENANCE OF OFFICE OR AGENCY. The Eligible
Lender Trustee shall maintain in the Borough of Manhattan, The City of New York,
an office or offices or agency or agencies where Certificates may be surrendered
for registration of transfer or exchange and where notices and demands to or
upon the Eligible Lender Trustee in respect of the Certificates and the other
Basic Documents may be served. The Eligible Lender Trustee initially designates
One First National Plaza, Suite 0126, Chicago, Illinois 60670-0126 as its
principal Corporate Trust Office. The Eligible Lender Trustee's New York office
and its authenticating agent's office are located at First Chicago Trust Company
of New York, 14 Wall Street, 8th Floor, New York, New York 10005, Attention:
Corporate Trust Administration. The Eligible Lender Trustee shall give prompt
written notice to the Depositor and to the Certificateholders of any change in
the location of the Certificate Register or any such office or agency.
SECTION 3.09. APPOINTMENT OF CERTIFICATE PAYING AGENT. The
Certificate Paying Agent shall make distributions to Certificateholders from the
amounts received from the Indenture Trustee out of the Trust Accounts pursuant
to Section 5.01 and shall report the amounts of such distributions to the
Eligible Lender Trustee. Any Certificate Paying Agent shall have the revocable
power to receive such funds from the Indenture Trustee for the purpose of making
the distributions referred to above. For so long as any Notes remain
outstanding, the Certificate Paying Agent shall be the Indenture Trustee.
Thereafter, the Certificate Paying Agent shall be the Eligible Lender Trustee
and any co-paying agent chosen by the Eligible Lender Trustee, and acceptable to
the Administrator, and any such Certificate Paying Agent shall be permitted to
resign as Certificate Paying Agent upon 30 days' written notice to the Eligible
Lender Trustee. In the event that, after the Notes have been paid in full, the
Eligible Lender Trustee shall no longer be the Certificate Paying Agent, the
Eligible Lender Trustee shall appoint a successor to act as Certificate Paying
Agent (which shall be a bank or trust company). The Eligible Lender Trustee
shall cause such successor Certificate Paying Agent or any additional
Certificate Paying Agent appointed by the Eligible Lender Trustee to execute and
deliver to the Eligible Lender Trustee an instrument in which such successor
Certificate Paying Agent or additional Certificate Paying Agent shall agree with
the Eligible Lender Trustee that as Certificate Paying Agent, such successor
Certificate Paying Agent or additional Certificate Paying Agent will hold sums,
if any, held by it for payment to the Certificateholders in trust for the
benefit of the Certificateholders entitled thereto until such sums shall be paid
to such Certificateholders. The Certificate Paying Agent shall return all
unclaimed funds to the Eligible Lender Trustee and upon removal of a Certificate
Paying Agent such Certificate Paying Agent shall also return all funds in its
possession to the Eligible Lender Trustee. The provisions of
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Sections 7.01, 7.03, 7.04, 7.05 and 8.01 shall apply to the Indenture Trustee
also in its role as Certificate Paying Agent and, to the extent applicable, to
any other paying agent appointed hereunder. Any reference in this Agreement to
the Certificate Paying Agent shall include any co-paying agent unless the
context requires otherwise.
SECTION 3.10. BOOK-ENTRY CERTIFICATES. The Certificates, upon
original issuance, will be issued in the form of typewritten Certificates
representing the Book-Entry Certificates, to be delivered to The Depository
Trust Company, the initial Clearing Agency, by, or on behalf of, the Trust .
Such Certificates shall initially be registered on the Certificate Register in
the name of Cede & Co., the nominee of the initial Clearing Agency, and no
Certificate Owner will receive a Definitive Certificate (as defined below)
representing such Certificate Owner's interest in such Book-Entry Certificate,
except as provided in Section 2.12. Unless and until definitive, fully
registered Certificates (the "DEFINITIVE CERTIFICATES") have been issued to
Certificate Owners pursuant to Section 3.12:
(i) the provisions of this Section shall be in full force and
effect;
(ii) the Certificate Registrar, the Indenture Trustee (if any
Notes remain Outstanding) and the Eligible Lender Trustee may deal with
the Clearing Agency for all purposes (including the payment of
principal of and interest return and other amounts on the Book-Entry
Certificates) as the authorized representative of the Certificate
Owners;
(iii) to the extent that the provisions of this Section
conflict with any other provisions of this Agreement, the provisions of
this Section shall control;
(iv) the rights of Certificate Owners shall be exercised only
through the Clearing Agency and shall be limited to those established
by law and agreements between such Certificate Owners and the Clearing
Agency and/or the Clearing Agency Participants pursuant to the
Certificate Depository Agreement. Unless and until Definitive
Certificates are issued pursuant to Section 3.12, the initial Clearing
Agency will make book-entry transfers among the Clearing Agency
Participants and receive and transmit payments of principal of and
interest return and other amounts on the Book-Entry Certificates to
such Clearing Agency Participants; and
(v) whenever this Trust Agreement requires or permits actions
to be taken based upon instructions or directions of Certificateholders
of Outstanding Certificates evidencing a specified percentage of the
Certificate Balance, the Clearing Agency shall be deemed to represent
such percentage only to the extent that it has received instructions to
such effect from Certificate Owners and/or Clearing Agency Participants
owning or representing, respectively, such required percentage of the
beneficial interest in the Certificates and has delivered such
instructions to the Eligible Lender Trustee.
SECTION 3.11. NOTICES TO CLEARING AGENCY. Whenever a notice or
other communication to the Certificateholders is required under this Agreement,
unless and until Definitive Certificates shall have been issued to Certificate
Owners pursuant to Section 3.12, the Indenture Trustee shall give to the
Clearing Agency all such notices and communications specified herein to be given
to the Certificateholders.
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SECTION 3.12. DEFINITIVE CERTIFICATES. If (i) the
Administrator advises the Eligible Lender Trustee in writing that the Clearing
Agency is no longer willing or able to properly discharge its responsibilities
with respect to the Book-Entry Certificates, and the Administrator is unable to
locate a qualified successor, (ii) the Administrator at its option advises the
Eligible Lender Trustee in writing that it elects to terminate the book-entry
system through the Clearing Agency or (iii) after the occurrence of an Event of
Default, a Master Servicer Default or an Administrator Default, Certificate
Owners representing beneficial interests aggregating at least a majority of the
Certificate Balance of the Book-Entry Certificates advise the Clearing Agency
(which shall then notify the Eligible Lender Trustee) in writing that the
continuation of a book-entry system through the Clearing Agency is no longer in
the best interests of the Certificate Owners, then the Eligible Lender Trustee
will cause the Clearing Agency to notify all Certificate Owners, through the
Clearing Agency, of the occurrence of any such event and of the availability of
Definitive Certificates to Certificate Owners requesting the same. Upon
surrender to the Eligible Lender Trustee of the typewritten Certificates
representing the Book-Entry Certificates by the Clearing Agency, accompanied by
registration instructions, the Trust shall execute and the Eligible Lender
Trustee shall authenticate the Definitive Certificates in accordance with the
instructions of the Clearing Agency. None of the Trust, the Certificate
Registrar or the Eligible Lender Trustee shall be liable for any delay in
delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions. Upon the issuance of Definitive
Certificates, the Indenture Trustee (if any Notes remain Outstanding) and the
Eligible Lender Trustee shall recognize the holders of the Definitive
Certificates as Certificateholders.
ARTICLE IV
ACTIONS BY ELIGIBLE LENDER TRUSTEE
SECTION 4.01. PRIOR NOTICE TO CERTIFICATEHOLDERS WITH RESPECT
TO CERTAIN MATTERS. With respect to the following matters, neither the Eligible
Lender Trustee nor the Delaware Trustee shall take any action unless at least 30
days before the taking of such action, the Eligible Lender Trustee or the
Delaware Trustee shall have notified the Certificateholders and the Rating
Agencies in writing of the proposed action and the Certificateholders shall not
have notified the Eligible Lender Trustee in writing prior to the 30th day after
such notice is given that such Certificateholders have withheld consent or has
provided alternative direction:
(a) the initiation of any material claim or lawsuit by the
Trust (except claims or lawsuits brought in connection with the
collection of the Trust Loans) and the compromise of any material
action, claim or lawsuit brought by or against the Trust (except with
respect to the aforementioned claims or lawsuits for collection of
Trust Loans);
(b) the election by the Trust to file an amendment to the
Certificate of Trust;
(c) the amendment of the Indenture by a supplemental indenture
in circumstances where the consent of any Noteholder is required;
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(d) the amendment of the Indenture by a supplemental indenture
in circumstances where the consent of any Noteholder is not required
and such amendment materially adversely affects the interests of the
Certificateholders;
(e) the amendment, change or modification of the
Administration Agreement, except to cure any ambiguity or to amend or
supplement any provision in a manner or add any provision that would
not materially adversely affect the interests of the
Certificateholders;
(f) the appointment pursuant to the Indenture of a successor
Note Registrar, Certificate Paying Agent or Indenture Trustee, or
pursuant to this Agreement of a successor Certificate Registrar, or the
consent to the assignment by the Note Registrar, Certificate Paying
Agent or Indenture Trustee or Certificate Registrar of its obligations
under the Indenture or this Agreement, as applicable;
(g) the consent to the calling or waiver of any default under
any Basic Document;
(h) the consent to the assignment by the Indenture Trustee or
the Master Servicer of their respective obligations under any Basic
Document;
(i) except as provided in Article IX hereof, dissolution,
termination or liquidation of the Trust in whole or in part;
(j) merger or consolidation of the Trust with or into any
other entity, or conveyance or transfer all or substantially all of the
Trust's assets to any other entity;
(k) causing the Trust to incur, assume or guaranty any
indebtedness other than as set forth in this Agreement or the other
Basic Documents;
(l) doing any act that conflicts with any other Basic
Document;
(m) doing any act which would make it impossible to carry on
the ordinary business of the Trust as described in Section 2.03 hereof;
(n) confession of a judgment against the Trust;
(o) possession of Trust assets, or assignment of the Trust's
right to property, for other than a Trust purpose;
(p) causing the Trust to lend any funds to any entity; or
(q) changing the Trust's purpose and powers from those set
forth in this Agreement.
In addition the Trust shall not commingle its assets with
those of any other entity. The Trust shall maintain its financial and accounting
books and records separate from those of any other entity. Except as expressly
set forth herein, the Trust shall pay its indebtedness,
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operating expenses and liabilities from its own funds, and the Trust shall not
pay the indebtedness, operating expenses and liabilities of any other entity.
The Trust shall maintain appropriate minutes or other records of all appropriate
actions and shall maintain its office separate from the offices of the
DEPOSITOR, the Company and the Master Servicer.
Neither the Eligible Lender Trustee nor the Delaware Trustee
shall have the power, except upon the direction of the Certificateholders, and
to the extent otherwise consistent with the Basic Documents, to (i) remove or
replace the Master Servicer or the Indenture Trustee, (ii) institute proceedings
to have the Trust declared or adjudicated a bankrupt or insolvent, (iii) consent
to the institution of bankruptcy or insolvency proceedings against the Trust,
(iv) file a petition or consent to a petition seeking reorganization or relief
on behalf of the Trust under any applicable federal or state law relating to
bankruptcy, (v) consent to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or any similar official) of the Trust or a substantial
portion of the property of the Trust, (vi) make any assignment for the benefit
of the Trust's creditors, (vii) cause the Trust to admit in writing its
inability to pay its debts generally as they become due, or (viii) take any
action, or cause the Trust to take any action, in furtherance of any of the
foregoing (any of the above, a "BANKRUPTCY ACTION"). So long as any Securities
remain Outstanding, the Company shall not have the power to take, and shall not
take, any Bankruptcy Action with respect to the Trust or direct the Eligible
Lender Trustee to take any Bankruptcy Action with respect to the Trust.
SECTION 4.02. ACTION BY CERTIFICATEHOLDERS WITH RESPECT TO
CERTAIN MATTERS. The Eligible Lender Trustee shall not have the power, except
upon the direction of the Certificateholders, to (a) remove the Administrator
under the Administration Agreement pursuant to Section 12 thereof, (b) appoint a
successor Administrator pursuant to Section 13 of the Administration Agreement,
(c) remove the Master Servicer under the Master Servicing Agreement pursuant to
Section 6.01 thereof, (d) appoint a successor Master Servicer pursuant to
Section 6.02 of the Master Servicing Agreement or (e) except as expressly
provided in the Basic Documents, sell the Trust Loans after the termination of
the Indenture. The Eligible Lender Trustee shall take the actions referred to in
the preceding sentence only upon written instructions signed by the
Certificateholders.
SECTION 4.03. ACTION BY SECURITYHOLDER WITH RESPECT TO
BANKRUPTCY. The Eligible Lender Trustee shall not have the power to commence a
voluntary proceeding in bankruptcy relating to the Trust without the unanimous
prior approval of all Securityholders and the delivery to the Eligible Lender
Trustee by each Securityholder of a certificate certifying that such
Securityholder reasonably believes that the Trust is insolvent.
SECTION 4.04. RESTRICTIONS ON CERTIFICATEHOLDERS' POWER. The
Certificateholders shall not direct the Eligible Lender Trustee to take or
refrain from taking any action if such action or inaction would be contrary to
any obligation of the Trust or the Eligible Lender Trustee under this Agreement
or any of the other Basic Documents or would be contrary to Section 2.03 nor
shall the Eligible Lender Trustee be permitted to follow any such direction, if
given.
SECTION 4.05. MAJORITY CONTROL. Except as expressly provided
herein, any action that may be taken by the
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Certificateholders under this Agreement may be taken by the Certificateholders
of Certificates evidencing not less than a majority of the Certificate Balance.
Except as expressly provided herein, any written notice of the
Certificateholders delivered pursuant to this Agreement shall be effective if
signed by Certificateholders of Certificates evidencing not less than a majority
of the Certificate Balance at the time of the delivery of such notice.
ARTICLE V
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
SECTION 5.01. APPLICATION OF TRUST FUNDS. (a) On each
Quarterly Payment Date, the Eligible Lender Trustee will distribute or cause the
Certificate Paying Agent to distribute to Certificateholders, on a pro rata
basis, amounts received from the Indenture Trustee for distribution to the
Certificateholders pursuant to Sections 2(d) and 2(e) of the Administration
Agreement on such Quarterly Payment Date.
(b) On each Quarterly Payment Date, the Eligible Lender
Trustee shall send to each Certificateholder the statement provided to the
Eligible Lender Trustee by the Administrator pursuant to Section 2(g) of the
Administration Agreement on such Quarterly Payment Date.
(c) In the event that any withholding tax is imposed on the
Trust's payment (or allocations of income) to a Certificateholder, such tax
shall reduce the amount otherwise distributable to the Certificateholder in
accordance with this Section. The Eligible Lender Trustee is hereby authorized
and directed to retain from amounts otherwise distributable to the
Certificateholders sufficient funds for the payment of any tax that is legally
owed by the Trust (and such authorization shall not prevent the Eligible Lender
Trustee from contesting any such tax in appropriate proceedings, and withholding
payment of such tax, if permitted by law, pending the outcome of such
proceedings). The amount of any withholding tax imposed with respect to a
Certificateholder shall be treated as cash distributed to such Certificateholder
at the time it is withheld by the Trust to be remitted to the appropriate taxing
authority. If there is a possibility that withholding tax is payable with
respect to a distribution (such as a distribution to a non-U.S.
Certificateholder), the Eligible Lender Trustee in its sole discretion may (but
unless otherwise required by law shall not be obligated to) withhold such
amounts in accordance with this Section 5.01(c). In the event that a
Certificateholder wishes to apply for a refund of any such withholding tax, the
Eligible Lender Trustee shall reasonably cooperate with such Certificateholder
in making such claim so long as such Certificateholder agrees to reimburse the
Eligible Lender Trustee for any out-of-pocket expenses incurred.
SECTION 5.02. METHOD OF PAYMENT. Subject to Section 9.01(c),
distributions required to be made to Certificateholders on any Quarterly Payment
Date shall be made to each Certificateholder of record on the preceding Record
Date either by wire transfer, in immediately available funds, to the account of
such Certificateholder at a bank or other entity having appropriate facilities
therefor, if such Certificateholder shall have provided to the Certificate
Registrar appropriate written instructions signed by two authorized officers, if
any, at least five Business Days prior to such Quarterly Payment Date and such
Certificateholder's Certificates in the aggregate evidence a denomination of not
less than $1,000,000, or, if not, by check mailed to
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such Certificateholder at the address of such Certificateholder appearing in the
Certificate Register; PROVIDED, HOWEVER, that with respect to Certificates
registered on such Record Date in the name of the nominee of the Clearing Agency
(initially, such nominee to be Cede & Co.), unless Definitive Certificates have
been issued, payments will be made by wire transfer in immediately available
funds to the account designated by such nominee. Notwithstanding the foregoing,
the final distribution in respect of any Certificate (whether on the Certificate
Final Distribution Date or otherwise) will be payable only upon presentation and
surrender of such Certificate at the Corporate Trust Office of the Eligible
Lender Trustee or such other location specified in writing to the
Certificateholder thereof.
SECTION 5.03. NO SEGREGATION OF MONIES; NO INTEREST. Subject
to Section 5.01, monies received by the Eligible Lender Trustee hereunder need
not be segregated in any manner except to the extent required by law or the
Basic Documents and may be deposited under such general conditions as may be
prescribed by law, and the Eligible Lender Trustee shall not be liable for any
interest thereon.
SECTION 5.04. ACCOUNTING AND REPORTS TO CERTIFICATEHOLDER,
CERTIFICATE OWNERS, THE INTERNAL REVENUE SERVICE AND OTHERS. The Eligible Lender
Trustee shall deliver or cause to be delivered to each Certificateholder, as may
be required by the Code and applicable Treasury Regulations, or as may be
requested by such Certificateholder, such information, reports or statements as
may be necessary to enable each Certificateholder and Certificate Owner to
prepare its federal and state income tax returns. Consistent with the Trust's
characterization for tax purposes as a security arrangement for the issuance of
non-recourse debt so long as the Depositor or any other Person is the sole
Certificateholder, no federal income tax return shall be filed on behalf of the
Trust unless either (i) the Eligible Lender Trustee shall receive an Opinion of
Counsel that, based on a change in applicable law occurring after the date
hereof, or as a result of a transfer by the Depositor permitted by Section 3.04,
the Code requires such a filing or (ii) the Internal Revenue Service shall
determine that the Trust is required to file such a return. In the event that
there shall be two or more Certificateholders of the Trust, (x) the Eligible
Lender Trustee shall prepare or shall cause to be prepared federal and, if
applicable, state or local partnership tax returns required to be filed by the
Trust and shall remit such returns to the Depositor (or if the Depositor no
longer owns any Certificates, the Certificateholder designated for such purpose
by the Depositor to the Eligible Lender Trustee in writing) at least five (5)
days before such returns are due to be filed and (y) capital accounts shall be
maintained for each Certificateholder in accordance with the Treasury
Regulations under Section 704(b) of the Code reflecting each such
Certificateholder's pro rata share of the income, gains, deductions and losses
of the Trust and contributions to and distributions from, the Trust. The
Depositor (or such designee Certificateholder, as applicable) shall promptly
sign such returns and deliver such returns after signature to the Eligible
Lender Trustee and such returns shall be filed or cause to be filed by the
Eligible Lender Trustee with the appropriate tax authorities. In the event that
a "tax matters partner" (within the meaning of Code Section 6231(a)(7) is
required to be appointed with respect to the Trust, the Depositor is hereby
designated as tax matters partner or, if the Depositor is not a
Certificateholder, the Certificateholder selected by Certificate Owners holding
a majority of the then Outstanding Certificate Balance shall be designated as
tax matters partner. In no event shall the Eligible Lender Trustee or the
Depositor (or such designee Certificateholder, as applicable) be liable for any
liabilities, costs or expenses of the Trust or the Noteholders arising out of
the application of any tax law, including federal, state, foreign or local
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income or excise taxes or any other tax imposed on or measured by income (or any
interest, penalty or addition with respect thereto or arising from a failure to
comply therewith) except for any such liability, cost or expense attributable to
any act or omission by the Eligible Lender Trustee or the Depositor (or such
designee Certificateholder, as applicable), as the case may be, in breach of
their obligations under this Agreement.
SECTION 5.05. INCENTIVE PROGRAMS. Subject to compliance by the
Administrator with Section 2(i) of the Administration Agreement, the Trust shall
offer the Incentive Program to eligible Borrowers except any Incentive Program
which the Administrator terminates pursuant to Section 2(i) of the
Administration Agreement. Upon the effective date specified in the notice of
termination required by Section 2(i) of the Administration Agreement, the Trust
shall cease offering the terminated Incentive Program to Borrowers affected by
the termination.
ARTICLE VI
AUTHORITY AND DUTIES OF ELIGIBLE LENDER TRUSTEE
SECTION 6.01. GENERAL AUTHORITY. The Eligible Lender Trustee
is authorized and directed to execute and deliver the Basic Documents to which
the Trust is to be a party and each certificate or other document attached as an
exhibit to or contemplated by the Basic Documents to which the Trust is to be a
party, in each case, in such form as the DEPOSITOR shall approve as evidenced
conclusively by the Eligible Lender Trustee's execution thereof, and, on behalf
of the Trust, to direct the Indenture Trustee to authenticate and deliver Class
A-1 Notes in the aggregate principal amount of $__________ and Class A-2 Notes
in the aggregate principal amount of $_________. The Eligible Lender Trustee is
also authorized and directed on behalf of the Trust (i) to acquire and hold
legal title to the Trust Loans from the DEPOSITOR and (ii) to take all actions
required pursuant to Section 3.02(c) of the Master Servicing Agreement, and
otherwise follow the direction of and cooperate with the Master Servicer in
submitting, pursuing and collecting any claims to and with the Department with
respect to any Interest Subsidy Payments and Special Allowance Payments relating
to the Trust Loans.
In addition to the foregoing, the Eligible Lender Trustee is
authorized to take all actions required of the Trust pursuant to the Basic
Documents. The Eligible Lender Trustee is further authorized from time to time
to take such action as the Administrator directs or instructs with respect to
the Basic Documents and is directed to take such action to the extent that the
Administrator is expressly required pursuant to the Basic Documents to cause the
Eligible Lender Trustee to act.
SECTION 6.02. GENERAL DUTIES. It shall be the duty of the
Eligible Lender Trustee to discharge (or cause to be discharged) all its
responsibilities pursuant to the terms of this Agreement and the other Basic
Documents to which the Trust is a party and to administer the Trust in the
interests of the Certificateholders, subject to and in accordance with the
provisions of this Agreement and the other Basic Documents. Without limiting the
foregoing, the Eligible Lender Trustee shall on behalf of the Trust file and
prove any claim or claims that may exist on behalf of the Trust against the
Depositor in connection with any claims-paying procedure as part of an
insolvency or a bankruptcy proceeding involving the Depositor.
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Notwithstanding the foregoing, the Eligible Lender Trustee shall be deemed to
have discharged its duties and responsibilities hereunder and under the other
Basic Documents to the extent the Administrator has agreed in the Administration
Agreement to perform any act or to discharge any duty of the Eligible Lender
Trustee hereunder or under any other Basic Document, and the Eligible Lender
Trustee shall not be held liable for the default or failure of the Administrator
to carry out its obligations under the Administration Agreement. Except as
expressly provided in the Basic Documents, the Eligible Lender Trustee shall
have no obligation to administer, service or collect the Trust Loans or to
maintain, monitor or otherwise supervise the administration, servicing or
collection of the Trust Loans.
SECTION 6.03. ACTION UPON INSTRUCTION. (a) Subject to Article
IV, Section 7.01 and in accordance with the terms of the Basic Documents, the
Certificateholders may by written instruction direct the Eligible Lender Trustee
in the management of the Trust. Such direction may be exercised at any time by
written instruction of the Certificateholders pursuant to Article IV.
(b) The Eligible Lender Trustee shall not be required to take
any action hereunder or under any other Basic Document if the Eligible Lender
Trustee shall have reasonably determined, or shall have been advised by counsel,
that such action is likely to result in liability on the part of the Eligible
Lender Trustee or is contrary to the terms hereof or of any other Basic Document
or is otherwise contrary to law.
(c) Whenever the Eligible Lender Trustee is unable to
determine the appropriate course of action between alternative courses of action
permitted or required by the terms of this Agreement or under any other Basic
Document, the Eligible Lender Trustee shall promptly give notice (in such form
as shall be appropriate under the circumstances) to the Certificateholders
requesting instruction as to the course of action to be adopted, and to the
extent the Eligible Lender Trustee acts in good faith in accordance with any
written instruction of the Certificateholders received, the Eligible Lender
Trustee shall not be liable on account of such action to any Person. If the
Eligible Lender Trustee shall not have received appropriate instruction within
10 days of such notice (or within such shorter period of time as reasonably may
be specified in such notice or may be necessary under the circumstances) it may,
but shall be under no duty to, take or refrain from taking such action, not
inconsistent with this Agreement or the other Basic Documents, as it shall deem
to be in the best interests of the Certificateholders, and shall have no
liability to any Person for such action or inaction.
(d) In the event that the Eligible Lender Trustee is unsure as
to the application of any provision of this Agreement or any other Basic
Document or any such provision is ambiguous as to its application, or is, or
appears to be, in conflict with any other applicable provision, or in the event
that this Agreement permits any determination by the Eligible Lender Trustee or
is silent or is incomplete as to the course of action that the Eligible Lender
Trustee is required to take with respect to a particular set of facts, the
Eligible Lender Trustee may give notice (in such form as shall be appropriate
under the circumstances) to the Certificateholders requesting instruction from
the Certificateholders and, to the extent that the Eligible Lender Trustee acts
or refrains from acting in good faith in accordance with any such instruction
received, the Eligible Lender Trustee shall not be liable, on account of such
action or inaction, to any Person. If the Eligible Lender Trustee shall not have
received appropriate instruction within
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10 days of such notice (or within such shorter period of time as reasonably may
be specified in such notice or may be necessary under the circumstances) it may,
but shall be under no duty to, take or refrain from taking such action, not
inconsistent with this Agreement or the other Basic Documents, as it shall deem
to be in the best interests of the Certificateholders and shall have no
liability to any Person for such action or inaction.
SECTION 6.04. NO DUTIES EXCEPT AS SPECIFIED IN THIS AGREEMENT,
THE LOAN SALE AGREEMENT, THE MASTER SERVICING AGREEMENT, THE ADMINISTRATION
AGREEMENT OR IN INSTRUCTIONS. The Eligible Lender Trustee shall not have any
duty or obligation to manage, make any payment with respect to, register,
record, sell, service, dispose of or otherwise deal with the Trust Estate, or to
otherwise take or refrain from taking any action under, or in connection with,
any document contemplated hereby to which the Eligible Lender Trustee is a
party, except as expressly provided by the terms of this Agreement, the Loan
Sale Agreement, the Master Servicing Agreement, the Administration Agreement or
in any document or written instruction received by the Eligible Lender Trustee
pursuant to Section 6.03; and no implied duties or obligations shall be read
into this Agreement or any other Basic Document against the Eligible Lender
Trustee. The Eligible Lender Trustee shall have no responsibility for filing any
financing or continuation statement in any public office at any time or to
otherwise perfect or maintain the perfection of any security interest or lien
granted to it hereunder or to prepare or file any Commission filing for the
Trust or to record this Agreement or any other Basic Document. The Eligible
Lender Trustee nevertheless agrees that it will, at its own cost and expense,
promptly take all action as may be necessary to discharge any liens on any part
of the Trust Estate that result from actions by, or claims against, The First
National Bank of Chicago in its individual capacity or as the Eligible Lender
Trustee that are not related to the ownership or the administration of the Trust
Estate.
SECTION 6.05. NO ACTION EXCEPT UNDER SPECIFIED DOCUMENTS OR
INSTRUCTIONS. The Eligible Lender Trustee shall not manage, control, use, sell,
service, dispose of or otherwise deal with any part of the Trust Estate except
(i) in accordance with the powers granted to and the authority conferred upon
the Eligible Lender Trustee pursuant to this Agreement, (ii) in accordance with
the other Basic Documents to which it is a party and (iii) in accordance with
any document or instruction delivered to the Eligible Lender Trustee pursuant to
Section 6.03.
SECTION 6.06. RESTRICTIONS. The Eligible Lender Trustee shall
not take any action (a) that is inconsistent with the purposes of the Trust set
forth in Section 2.03 or (b) that, to the actual knowledge of the Eligible
Lender Trustee, would result in the Trust's becoming taxable as a corporation
for federal income tax purposes. The Certificateholders shall not direct the
Eligible Lender Trustee to take action that would violate the provisions of this
Section.
ARTICLE VII
CONCERNING THE ELIGIBLE LENDER TRUSTEE
SECTION 7.01. ACCEPTANCE OF TRUSTS AND DUTIES. The Eligible
Lender Trustee accepts the trusts hereby created and agrees to perform its
duties hereunder with respect to such trusts but only upon the terms of
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this Agreement. The Eligible Lender Trustee also agrees to disburse all monies
actually received by it constituting part of the Trust Estate upon the terms of
this Agreement and the other Basic Documents. The Eligible Lender Trustee shall
not be answerable or accountable hereunder or under any other Basic Document
under any circumstances, except (i) for its own willful misconduct or negligence
or (ii) in the case of the inaccuracy of any representation or warranty
contained in Section 7.03 expressly made by the Eligible Lender Trustee. In
particular, but not by way of limitation (and subject to the exceptions set
forth in the preceding sentence):
(a) the Eligible Lender Trustee shall not be liable for any
error of judgment made by a responsible officer of the Eligible Lender
Trustee;
(b) the Eligible Lender Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in accordance
with the direction or instructions of the Administrator or any
Certificateholder;
(c) no provision of this Agreement or any other Basic Document
shall require the Eligible Lender Trustee to expend or risk funds or
otherwise incur any financial liability in the performance of any of
its rights or powers hereunder or under any other Basic Document, if
the Eligible Lender Trustee shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured or provided to it;
(d) under no circumstances shall the Eligible Lender Trustee
be liable for indebtedness evidenced by or arising under any of the
Basic Documents, including the principal of and interest on the
Securities;
(e) the Eligible Lender Trustee shall not be responsible for
or in respect of the validity or sufficiency of this Agreement or for
the due execution hereof by the DEPOSITOR or for the form, character,
genuineness, sufficiency, value or validity of any of the Trust Estate
or for or in respect of the validity or sufficiency of the Basic
Documents (other than the certificate of authentication or the
Certificates), and the Eligible Lender Trustee shall in no event assume
or incur any liability, duty, or obligation to any Noteholder or to any
Certificateholder, other than as expressly provided for herein and in
the other Basic Documents;
(f) the Eligible Lender Trustee shall not be liable for the
action or inaction, default or misconduct of the Administrator, the
DEPOSITOR, the Indenture Trustee or the Master Servicer under any of
the other Basic Documents or otherwise and the Eligible Lender Trustee
shall have no obligation or liability to perform the obligations of the
Trust under this Agreement or the other Basic Documents that are
required to be performed by the Administrator under the Administration
Agreement, the Indenture Trustee under the Indenture or the Master
Servicer under the Master Servicing Agreement; and
(g) the Eligible Lender Trustee shall be under no obligation
to exercise any of the rights or powers vested in it by this Agreement,
or to institute, conduct or defend any litigation under this Agreement
or otherwise or in relation to this Agreement or any other Basic
Document, at the request, order or direction of any of the
Certificateholders, unless such Certificateholders have offered to the
Eligible Lender Trustee security or indemnity
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satisfactory to it against the costs, expenses and liabilities that may
be incurred by the Eligible Lender Trustee therein or thereby. The
right of the Eligible Lender Trustee to perform any discretionary act
enumerated in this Agreement or in any other Basic Document shall not
be construed as a duty, and the Eligible Lender Trustee shall not be
answerable for other than its negligence or willful misconduct in the
performance of any such act.
SECTION 7.02. FURNISHING OF DOCUMENTS. The Eligible Lender
Trustee shall furnish to the Certificateholders, promptly upon receipt of a
written request therefor, duplicates or copies of all reports, notices,
requests, demands, certificates, financial statements and any other instruments
furnished to the Eligible Lender Trustee under the Basic Documents.
SECTION 7.03. REPRESENTATIONS AND WARRANTIES. The Eligible
Lender Trustee hereby represents and warrants of the Depositor for the benefit
of the Certificateholders that:
(a) It is a national banking association duly organized and
validly existing in good standing under the laws of the United States.
It has all requisite corporate power and authority to execute, deliver
and perform its obligations under this Agreement.
(b) It has taken all corporate action necessary to authorize
the execution and delivery by it of this Agreement, and this Agreement
will be executed and delivered by one of its officers who is duly
authorized to execute and deliver this Agreement on its behalf.
(c) Neither the execution nor the delivery by it of this
Agreement, nor the consummation by it of the transactions contemplated
hereby nor compliance by it with any of the terms or provisions hereof
will contravene any federal or state law, governmental rule or
regulation governing the banking or trust powers of the Eligible Lender
Trustee or any judgment or order binding on it, or constitute any
default under its charter documents or by-laws or any indenture,
mortgage, contract, agreement or instrument to which it is a party or
by which any of its properties may be bound.
(d) It is an "eligible lender" as such term is defined in
Section 435(d) of the Higher Education Act, for purposes of holding
legal title to the Trust Loans as contemplated by this Agreement and
the other Basic Documents, has obtained a lender identification number
with respect to the Trust from the Department, has in effect a
Guarantee Agreement with each of the Initial Guarantors with respect to
the related Initial Trust Loans and will have the requisite power and
authority to enter into Guarantee Agreements with Additional
Guarantors, if any.
SECTION 7.04. RELIANCE; ADVICE OF COUNSEL. (a) The Eligible
Lender Trustee shall incur no liability to anyone in acting upon any signature,
instrument, direction, notice, resolution, request, consent, order, certificate,
report, opinion, bond, or other document or paper believed by it to be genuine
and believed by it to be signed by the proper party or parties. The Eligible
Lender Trustee may accept a certified copy of a resolution of the board of
directors or other governing body of any corporate party as conclusive evidence
that such resolution has been duly adopted by such body and that the same is in
full force and effect. As to any fact or matter
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the method of the determination of which is not specifically prescribed herein,
the Eligible Lender Trustee may for all purposes hereof rely on a certificate,
signed by the president or any vice president or by the treasurer or other
authorized officers of the relevant party, as to such fact or matter and such
certificate shall constitute full protection to the Eligible Lender Trustee for
any action taken or omitted to be taken by it in good faith in reliance thereon.
(b) In the exercise or administration of the trusts hereunder
and in the performance of its duties and obligations under this Agreement or the
other Basic Documents, the Eligible Lender Trustee (i) may act directly or
through its agents or attorneys pursuant to agreements entered into with any of
them, and the Eligible Lender Trustee shall not be liable for the conduct or
misconduct of such agents or attorneys if such agents or attorneys shall have
been selected by the Eligible Lender Trustee with reasonable care, and (ii) may
consult with counsel, accountants and other skilled persons to be selected with
reasonable care and employed by it. The Eligible Lender Trustee shall not be
liable for anything done, suffered or omitted in good faith by it in accordance
with the written opinion or advice of any such counsel, accountants or other
such persons and not contrary to this Agreement or any other Basic Document.
SECTION 7.05. NOT ACTING IN INDIVIDUAL CAPACITY. Except as
provided in this Article VII, in accepting the trusts hereby created, The First
National Bank of Chicago acts solely as Eligible Lender Trustee hereunder and
not in its individual capacity and all Persons having any claim against the
Eligible Lender Trustee by reason of the transactions contemplated by this
Agreement or any other Basic Document shall look only to the Trust Estate for
payment or satisfaction thereof.
SECTION 7.06. ELIGIBLE LENDER TRUSTEE NOT LIABLE FOR NOTES,
CERTIFICATES OR TRUST LOANS. The recitals contained herein and in the
Certificates (other than the signature and countersignature of the Eligible
Lender Trustee on the Certificates and its representations and warranties in
Section 7.03) shall be taken as the statements of the Depositor, and the
Eligible Lender Trustee assumes no responsibility for the correctness thereof.
The Eligible Lender Trustee makes no representations as to the validity or
sufficiency of this Agreement, the Certificates (other than the signature and
countersignature of the Eligible Lender Trustee on the Certificates) or any
other Basic Document or the Notes, or of any Trust Loan or related documents.
The Eligible Lender Trustee shall at no time have any responsibility or
liability (except for willfully or negligently terminating or allowing to be
terminated any of the Guarantee Agreements, in a case where the Eligible Lender
Trustee knows of any facts or circumstances which will or could reasonably be
expected to result in any such termination) for or with respect to the legality,
validity, enforceability and eligibility for Guarantee Payments, Interest
Subsidy Payments or Special Allowance Payments, as applicable, of any Trust
Loan, or for or with respect to the sufficiency of the Trust Estate or its
ability to generate the payments to be distributed to the Noteholders under the
Indenture or to the Certificateholders under this Agreement, including: the
existence and contents of any computer or other record of any Trust Loan; the
validity of the assignment of any Trust Loan to the Trust; the completeness of
any Trust Loan; the performance or enforcement (except as expressly set forth in
any Basic Document) of any Trust Loan; the compliance by the Depositor or the
Master Servicer with any warranty or representation made under any Basic
Document or in any related document or the accuracy of any such warranty or
representation or any action or inaction of the Administrator,
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the Indenture Trustee or the Master Servicer or any subservicer taken in the
name of the Eligible Lender Trustee.
SECTION 7.07. ELIGIBLE LENDER TRUSTEE MAY OWN CERTIFICATES AND
NOTES. The Eligible Lender Trustee in its individual or any other capacity may
become the owner or pledgee of Certificates and Notes and may deal with the
DEPOSITOR, the Administrator, the Indenture Trustee and the Master Servicer in
banking transactions with the same rights as it would have if it were not the
Eligible Lender Trustee.
SECTION 7.08. LICENSES. The Eligible Lender Trustee shall
cause the Trust to use its best efforts to obtain and maintain the effectiveness
of any licenses required in connection with this Agreement and the other Basic
Documents and the transactions contemplated hereby and thereby until such time
as the Trust shall terminate in accordance with the terms hereof. The Eligible
Lender Trustee shall receive from the Administrator the information necessary to
comply with this Section.
ARTICLE VIII
COMPENSATION OF ELIGIBLE LENDER TRUSTEE
SECTION 8.01. ELIGIBLE LENDER TRUSTEE'S FEES AND EXPENSES. The
Eligible Lender Trustee shall receive as compensation for its services hereunder
such fees as have been separately agreed upon before the date hereof between the
DEPOSITOR and the Eligible Lender Trustee, and the Eligible Lender Trustee shall
be entitled to be reimbursed by the DEPOSITOR for its other reasonable expenses
hereunder, including the reasonable compensation, expenses and disbursements of
such agents, representatives, experts and counsel as the Eligible Lender Trustee
may employ in connection with the exercise and performance of its rights and
duties hereunder. The Eligible Lender Trustee shall have no recourse to the
Issuer for its fees and expenses hereunder.
SECTION 8.02. PAYMENTS TO THE ELIGIBLE LENDER TRUSTEE. Any
amounts paid to the Eligible Lender Trustee pursuant to Section 8.01 hereof or
pursuant to Section 4.03 of the Loan Sale Agreement or pursuant to Section 24 of
the Administration Agreement shall be deemed not to be a part of the Trust
Estate immediately after such payment.
ARTICLE VIII A
AUCTION OF TRUST LOANS AND REDEMPTION OF CERTIFICATES
SECTION 8.01A. AUCTION OF TRUST LOANS. The Eligible Lender
Trustee shall offer the Trust Loans for sale as of the last day of the
Collection Period that ends in ______ 20__ and shall accept bids on behalf of
the Issuer for such purpose, provided that as of such date the Notes are no
longer Outstanding. If with respect to the last date of such Collection Period,
the Eligible Lender Trustee receives no bid to purchase the Trust Loans, or no
bid that it may, as specified below, accept, the Eligible Lender Trustee may at
its discretion, but shall not be obligated to, offer the Trust Loans for sale as
of the last day of each, or any, of the succeeding
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Collection Periods until a bid is received that may, as specified below, be
accepted by the Eligible Lender Trustee. With respect to any attempt to arrange
for the purchase of the highest bid submitted so long as (i) at least two bids
(one of which is from a Person that is not the DEPOSITOR or an Affiliate of the
DEPOSITOR) to purchase the Trust Loans as of the last day of the applicable
Collection Period are received and (ii) the highest such bid is at least equal
to the Minimum Purchase Price as of the last day of the applicable Collection
Period. Any attempt to arrange for the purchase of the Trust Loans and the
consummation of any such sale shall be conducted by the Eligible Lender Trustee
in a commercially reasonable manner. The Eligible Lender Trustee shall provide
notice of any such attempt at least 60 days prior to the last day of the related
Collection Period to the Depositor, NMF, the Master Servicer, the Eligible
Lender Trustee, the Rating Agencies and each Certificateholder, and any such
Person or their respective Affiliates or any other Person may submit a timely
bid for the purchase of the Trust Loans.
SECTION 8.02A. REDEMPTION. (a) In the event that the Trust
Loans are sold pursuant to Section 4.04 of the Indenture or Section 8.01A
hereof, the Redemption Price for the Certificates on deposit in the Trust
Accounts shall be paid to the Certificateholders. If amounts are to be paid to
Certificateholders pursuant to this Section 8.02A, the Administrator or the
Trust shall, to the extent practicable, furnish notice of such Event to the
Eligible Lender Trustee not later than 25 days prior to the Redemption Date
whereupon all such amounts shall be payable on the Redemption Date.
(b) The Certificates are subject to redemption in whole, but
not in part, on any Quarterly Payment Date on which the Company exercises its
option to purchase the Trust Estate pursuant to Section 5.01(a) of the Loan Sale
Agreement. If the Certificates are to be redeemed pursuant to this Section
8.02A, the Company shall furnish notice of such election to the Indenture
Trustee (if any Notes remain Outstanding) or to the Eligible Lender Trustee
(after the Notes have been paid in full) not later than 20 days prior to the
Redemption Date and the Trust shall deposit by 10:00 a.m. New York time on the
Redemption Date in the Collection Account the Redemption Price for the
Certificates, whereupon the Certificates shall be due and payable on the
Redemption Date upon furnishing a notice complying with Section 8.03A to each
Certificateholder.
SECTION 8.03A. FORM OF REDEMPTION NOTICE. Notice of redemption
under Section 8.02A shall be given by the Eligible Lender Trustee by first-class
mail, postage prepaid, or by facsimile, mailed or transmitted on or prior to the
applicable Redemption Date to each Certificateholder, as of the close of
business on the Record Date preceding the Redemption Date, at such
Certificateholder's address or facsimile number appearing in the Certificate
Register.
All notices of redemption shall state:
(i) the Redemption Date,
(ii) the Redemption Price and
(iii) the place where such Certificates are to be surrendered
for payment of the Redemption Price (which shall be the office or
agency of the Trust to be maintained as provided in Section 2.02).
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Notice of redemption of the Certificates shall be given by the
Eligible Lender Trustee in the name and at the expense of the Trust. Failure to
give notice of redemption, or any defect therein, to any Certificateholder of
Certificate shall not impair or affect the validity of the redemption of any
other Certificate.
SECTION 8.04A. CERTIFICATES PAYABLE ON REDEMPTION DATE. The
Certificates to be redeemed shall on the Redemption Date become due and payable
at the Redemption Price for the Certificates and (unless the Trust shall default
in the payment of such Redemption Price) no interest shall accrue on the
Redemption Price for any period after the date to which accrued interest is
calculated for purposes of calculating the Redemption Price.
ARTICLE IX
TERMINATION OF TRUST AGREEMENT
SECTION 9.01. TERMINATION OF TRUST AGREEMENT. (a) This
Agreement (other than Article VIII) and the Trust shall terminate and be of no
further force or effect upon the earliest of (i) the final distribution by the
Eligible Lender Trustee of all monies or other property or proceeds of the Trust
Estate in accordance with the terms of the Basic Documents, (ii) the expiration
of 21 years from the death of the last survivor of the descendants of Joseph P.
Kennedy, the late Ambassador of the United States to the Court of St. James's,
living on the date hereof, and (iii) the time provided in Section 9.02. The
bankruptcy, liquidation dissolution, death or incapacity of any
Certificateholder shall not (x) operate to terminate this Agreement or the
Trust, or (y) entitle such Certificateholder's legal representatives or heirs to
claim an accounting or to take any action or proceeding in any court for a
partition or winding up of all or any part of the Trust or Trust Estate or (z)
otherwise affect the rights, obligations and liabilities of the parties hereto.
(b) Except as provided in Section 9.01(a), none of the
Depositor, the Company or any Certificateholder shall be entitled to revoke or
terminate the Trust.
(c) Notice of any termination of the Trust, specifying the
Quarterly Payment Date upon which the Certificateholders shall surrender their
Certificates to the Certificate Paying Agent for payment of the final
distribution and cancellation, shall be given promptly by the Eligible Lender
Trustee by letter to Certificateholders mailed within five Business Days of
receipt of notice of such termination from the Administrator given pursuant to
Section 2(b) (vii) of the Administration Agreement, stating (i) the Quarterly
Payment Date upon which final payment of the Certificates shall be made upon
presentation and surrender of the Certificates at the office of the Certificate
Paying Agent therein designated, (ii) the amount of any such final payment and
(iii) that the Record Date otherwise applicable to such Quarterly Payment Date
is not applicable, payments being made only upon presentation and surrender of
the Certificates at the office of the Certificate Paying Agent therein
specified. The Eligible Lender Trustee shall give such notice to the Certificate
Registrar (if other than the Eligible Lender Trustee) and the Certificate Paying
Agent at the time such notice is given to Certificateholders. Upon presentation
and surrender of the Certificates, the Certificate Paying Agent shall cause to
be
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distributed to Certificateholders amounts distributable on such Quarterly
Payment Date pursuant to Section 5.01.
In the event that all the Certificateholders shall not
surrender their Certificateholders for cancellation within six months after the
date specified in the above-mentioned written notice, the Eligible Lender
Trustee shall give a second written notice to the remaining Certificateholders
to surrender their Certificates for cancellation and receive the final
distribution with respect thereto. If within one year after the second notice
all the Certificates shall not have been surrendered for cancellation, the
Eligible Lender Trustee may take appropriate steps to contact the remaining
Certificateholders concerning surrender of their Certificates, and the cost
thereof shall be paid out of the funds and other assets that shall remain
subject to this Agreement. Any funds remaining in the Trust after exhaustion of
such remedies and no later than five years after the first such notice shall be
distributed by the Eligible Lender Trustee to the Depositor.
(d) Upon the winding up of the Trust and its termination, the
Eligible Lender Trustee shall cause the Certificate of Trust to be canceled by
filing a certificate of cancellation with the Secretary of State of the State of
Delaware in accordance with the provisions of Section 3810 of the Business Trust
Statute.
ARTICLE X
SUCCESSOR ELIGIBLE LENDER TRUSTEES AND
ADDITIONAL ELIGIBLE LENDER TRUSTEES
SECTION 10.01. ELIGIBILITY REQUIREMENTS FOR ELIGIBLE LENDER
TRUSTEE. The Eligible Lender Trustee shall at all times be a corporation or
association (i) qualifying as an "eligible lender" as such term is defined in
Section 435(d) of the Higher Education Act for purposes of holding legal title
to the Trust Loans on behalf of the Trust, with a valid lender identification
number with respect to the Trust from the Department; (ii) being authorized to
exercise corporate trust powers and hold legal title to the Trust Loans; (iii)
having in effect Guarantee Agreements with the Initial Guarantors and any
Additional Guarantors; (iv) having a combined capital and surplus of at least
$50,000,000 and being subject to supervision or examination by federal or state
authorities; and (v) having (or having a parent which has) a rating of at least
"Baa3" by Moody's, "BBB" by Standard & Poor's and "BBB" by Fitch, if rated by
Fitch. If the Eligible Lender Trustee shall publish reports of condition at
least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purpose of this Section, the
combined capital and surplus of the Eligible Lender Trustee shall be deemed to
be its combined capital and surplus as set forth in its most recent report of
condition so published. In case at any time the Eligible Lender Trustee shall
cease to be eligible in accordance with the provisions of this Section, the
Eligible Lender Trustee shall resign immediately in the manner and with the
effect specified in Section 10.02. In addition, at all times the Eligible Lender
Trustee or a co-trustee shall be a Person that satisfies the requirements of
Section 3807(a) of the Business Trust Statute (the "DELAWARE TRUSTEE").
SECTION 10.02. RESIGNATION OR REMOVAL OF ELIGIBLE LENDER
TRUSTEE. The Eligible Lender Trustee may at any time resign and be discharged
from the trusts hereby created
23
<PAGE>
by giving written notice thereof to the Administrator. Upon receiving such
notice of resignation, the Administrator shall promptly appoint a successor
Eligible Lender Trustee meeting the eligibility requirements of Section 10.01 by
written instrument, in duplicate, one copy of which instrument shall be
delivered to the resigning Eligible Lender Trustee and one copy to the successor
Eligible Lender Trustee. If no successor Eligible Lender Trustee shall have been
so appointed and have accepted appointment within 30 days after the giving of
such notice of resignation, the resigning Eligible Lender Trustee may petition
any court of competent jurisdiction for the appointment of a successor Eligible
Lender Trustee; PROVIDED, HOWEVER, that such right to appoint or to petition for
the appointment of any such successor shall in no event relieve the resigning
Eligible Lender Trustee from any obligations otherwise imposed on it under the
Basic Documents until such successor has in fact assumed such appointment.
If at any time the Eligible Lender Trustee shall cease to be
eligible in accordance with the provisions of Section 10.01 and shall fail to
resign after written request therefor by the Administrator, or if at any time
the Eligible Lender Trustee shall be legally unable to act, or an Insolvency
Event with respect to the Eligible Lender Trustee shall have occurred and be
continuing, then the Administrator may remove the Eligible Lender Trustee. If
the Administrator shall remove the Eligible Lender Trustee under the authority
of the immediately preceding sentence, the Administrator shall promptly appoint
a successor Eligible Lender Trustee by written instrument, in duplicate, one
copy of which instrument shall be delivered to the outgoing Eligible Lender
Trustee so removed and one copy to the successor Eligible Lender Trustee and all
fees owed to the outgoing Eligible Lender Trustee shall be paid.
Any resignation or removal of the Eligible Lender Trustee and
appointment of a successor Eligible Lender Trustee pursuant to any of the
provisions of this Section shall not become effective until acceptance of its
appointment by the successor Eligible Lender Trustee pursuant to Section 10.03
and payment of all fees and expenses owed to the outgoing Eligible Lender
Trustee. The Administrator shall provide notice of such resignation or removal
of the Eligible Lender Trustee to each of the Rating Agencies.
SECTION 10.03. SUCCESSOR ELIGIBLE LENDER TRUSTEE. Any
successor Eligible Lender Trustee appointed pursuant to Section 10.02 shall
execute, acknowledge and deliver to the Administrator and to its predecessor
Eligible Lender Trustee an instrument accepting such appointment under this
Agreement, and thereupon the resignation or removal of the predecessor Eligible
Lender Trustee shall become effective and such successor Eligible Lender
Trustee, without any further act, deed or conveyance, shall become fully vested
with all the rights, powers, duties and obligations of its predecessor under
this Agreement, with like effect as if originally named as Eligible Lender
Trustee. The predecessor Eligible Lender Trustee shall, upon payment of its fees
and expenses, deliver to the successor Eligible Lender Trustee all documents,
statements, monies and properties held by it under this Agreement and shall
assign, if permissible, to the successor Eligible Lender Trustee the lender
identification number obtained from the Department on behalf of the Trust; and
the Administrator and the predecessor Eligible Lender Trustee shall execute and
deliver such instruments and do such other things as may reasonably be required
for fully and certainly vesting and confirming in the successor Eligible Lender
Trustee all such rights, powers, duties and obligations.
24
<PAGE>
No successor Eligible Lender Trustee shall accept appointment
as provided in this Section unless at the time of such acceptance such successor
Eligible Lender Trustee shall be eligible pursuant to Section 10.01.
Upon acceptance of appointment by a successor Eligible Lender
Trustee pursuant to this Section, the Administrator shall mail notice of the
successor of such Eligible Lender Trustee to all Certificateholders, the
Indenture Trustee, the Noteholders and the Rating Agencies. If the Administrator
shall fail to mail such notice within 10 days after acceptance of appointment by
the successor Eligible Lender Trustee, the successor Eligible Lender Trustee
shall cause such notice to be mailed at the expense of the Administrator.
SECTION 10.04. MERGER OR CONSOLIDATION OF ELIGIBLE LENDER
TRUSTEE. Any corporation into which the Eligible Lender Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Eligible Lender
Trustee shall be a party, or any corporation succeeding to all or substantially
all the corporate trust business of the Eligible Lender Trustee, shall, without
the execution or filing of any instrument or any further act on the part of any
of the parties hereto, anything herein to the contrary notwithstanding, be the
successor of the Eligible Lender Trustee hereunder; PROVIDED, HOWEVER, that such
corporation shall be eligible pursuant to Section 10.01; and PROVIDED, FURTHER,
that the Eligible Lender Trustee shall mail notice of such merger or
consolidation to the Rating Agencies not less than 10 Business Days prior to the
closing date of such merger or consolidation.
SECTION 10.05. APPOINTMENT OF CO-ELIGIBLE LENDER TRUSTEE OR
SEPARATE ELIGIBLE LENDER TRUSTEE. Notwithstanding any other provisions of this
Agreement, at any time, for the purpose of meeting any legal requirements of any
jurisdiction in which any part of the Trust may at the time be located, the
Administrator and the Eligible Lender Trustee acting jointly shall have the
power and shall execute and deliver all instruments to appoint one or more
Persons approved by the Eligible Lender Trustee, which, except in the case of
any Delaware Trustee, shall meet the eligibility requirements of clauses (i)
through (iii) of Section 10.01, to act as co-trustee, jointly with the Eligible
Lender Trustee, or separate trustee or separate trustees, of all or any part of
the Trust Estate, and to vest in such Person, in such capacity, such title to
the Trust Estate, or any part thereof, and, subject to the other provisions of
this Section, such powers, duties, obligations, rights and trusts as the
Administrator and the Eligible Lender Trustee may consider necessary or
desirable. If the Administrator shall not have joined in such appointment within
15 days after the receipt by it of a request so to do, the Eligible Lender
Trustee alone shall have the power to make such appointment. Pursuant to the
Co-Trustee Agreement, dated as of _____ 1, 1999 between The First National Bank
of Chicago and First Chicago Delaware Inc., the Eligible Lender Trustee shall
appoint First Chicago Delaware Inc. as a co-trustee hereunder for the purpose of
its acting as Delaware Trustee and such agreement is hereby incorporated herein
by reference. If the Delaware Trustee shall become incapable of acting, resign
or be removed, unless the Trustee is qualified to act as Delaware Trustee, a
successor co-trustee shall promptly be appointed in the manner specified in this
Section 10.05 to act as Delaware Trustee. No co-trustee or separate trustee
under this Agreement shall be required to meet the terms of eligibility as a
successor trustee pursuant to clauses (iv) and (v) of Section 10.01 and no
notice of the appointment of any co-trustee or separate trustee shall be
required pursuant to Section 10.03.
25
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Each separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties, and obligations conferred or
imposed upon the Eligible Lender Trustee shall be conferred upon and
exercised or performed by the Eligible Lender Trustee and such separate
trustee or co-trustee jointly (it being understood that such separate
trustee or co-trustee is not authorized to act separately without the
Eligible Lender Trustee joining in such act), except to the extent that
under any law of any jurisdiction in which any particular act or acts
are to be performed, the Eligible Lender Trustee shall be incompetent
or unqualified to perform such act or acts, in which event such rights,
powers, duties, and obligations (including the holding of title to the
Trust or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate trustee or co-trustee,
solely at the direction of the Eligible Lender Trustee;
(ii) no trustee under this Agreement shall be personally
liable by reason of any act or omission of any other trustee under this
Agreement; and
(iii) the Administrator and the Eligible Lender Trustee acting
jointly may at any time accept the resignation of or remove any
separate trustee or co-trustee.
Any notice, request or other writing given to the Eligible
Lender Trustee shall be deemed to have been given to each of the then separate
trustees and co-trustees, as effectively as if given to each of them. Every
instrument appointing any separate trustee or co-trustee shall refer to this
Agreement and the conditions of this Article. Each separate trustee and
co-trustee, upon its acceptance of the trusts conferred, shall be vested with
the estates or property specified in its instrument of appointment, either
jointly with the Eligible Lender Trustee or separately, as may be provided
therein, subject to all the provisions of this Agreement, specifically including
every provision of this Agreement relating to the conduct of, affecting the
liability of, or affording protection to, the Eligible Lender Trustee. Each such
instrument shall be filed with the Eligible Lender Trustee and a copy thereof
given to the Administrator.
Any separate trustee or co-trustee may at any time appoint the
Eligible Lender Trustee as its agent or attorney-in-fact with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect of this Agreement on its behalf and in its name. If any separate trustee
or co-trustee shall die, become incapable of acting, resign or be removed, all
its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Eligible Lender Trustee, to the extent permitted by law,
without the appointment of a new or successor trustee, except as otherwise
provided in this Section 10.05 in regard to the Delaware Trustee.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. SUPPLEMENTS AND AMENDMENTS. This Agreement may
be amended by the Depositor, the Company and the Eligible Lender Trustee, with
prior written notice to the Rating Agencies, without the consent of any of the
Noteholders or the
26
<PAGE>
Certificateholders, to cure any ambiguity, to correct or supplement any
provisions in this Agreement or for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions in this Agreement or
of modifying in any manner the rights of the Noteholders or the
Certificateholders; PROVIDED, HOWEVER, that such action shall not, as evidenced
by an Opinion of Counsel, adversely affect in any material respect the interests
of any Noteholder or Certificateholder.
This Agreement may also be amended from time to time by the
Depositor, the Company and the Eligible Lender Trustee, with prior written
notice to the Rating Agencies, with the consent of (i) the Noteholders of Notes
evidencing not less than a majority of the Outstanding Amount of the Notes and
(ii) the Certificateholders of Certificates evidencing not less than a majority
of the Certificate Balance, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement or
of modifying in any manner the rights of the Noteholders or the
Certificateholders; PROVIDED, HOWEVER, that no such amendment shall (a) increase
or reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on the Trust Loans or distributions that shall be
required to be made for the benefit of the Noteholders or the Certificateholders
or (b) reduce the aforesaid percentage of the Outstanding Amount of the Notes
and the Certificate Balance of the Certificates required to consent to any such
amendment, without the consent of all the outstanding Noteholders and
Certificateholders.
The Eligible Lender Trustee shall furnish 10 Business Days'
prior written notification of the substance of any such amendment or consent to
each Certificateholder, the Indenture Trustee and each of the Rating Agencies.
It shall not be necessary for the consent of the Noteholders,
the Certificateholders or the Indenture Trustee pursuant to this Section to
approve the particular form of any proposed amendment or consent, but it shall
be sufficient if such consent shall approve the substance thereof. The manner of
obtaining such consents (and any other consents of Certificateholders provided
for in this Agreement or in any other Basic Document) and of evidencing the
authorization of the execution thereof by Certificateholders shall be subject to
such reasonable requirements as the Eligible Lender Trustee may prescribe.
Promptly after the execution of any amendment to the
Certificate of Trust, the Eligible Lender Trustee shall cause the filing of such
amendment with the Secretary of State of the State of Delaware. The Eligible
Lender Trustee shall furnish the Rating Agencies with ten Business Days' prior
written notice of any amendment to the Certificate of Trust.
Prior to the execution of any amendment to this Agreement, the
Eligible Lender Trustee shall be entitled to receive and rely upon an Opinion of
Counsel stating that the execution of such amendment is authorized or permitted
by this Agreement. The Eligible Lender Trustee may, but shall not be obligated
to, enter into any such amendment which affects the Eligible Lender Trustee's
own rights, duties or immunities under this Agreement or otherwise.
SECTION 11.02. NO LEGAL TITLE TO TRUST ESTATE IN
CERTIFICATEHOLDERS. The Company shall not have legal title to any part of the
Trust Estate. The Certificateholders shall be entitled to receive distributions
with respect to their undivided beneficial ownership interest
27
<PAGE>
therein only in accordance with Articles V and IX hereof. No transfer, by
operation of law or otherwise, of any right, title, or interest of the
Certificateholders to and in their beneficial ownership interest in the Trust
Estate shall operate to terminate this Agreement or the trusts hereunder or
entitle any transferee to an accounting or to the transfer to it of legal title
to any part of the Trust Estate.
SECTION 11.03. LIMITATIONS ON RIGHTS OF OTHERS. Except for
Section 2.07, the provisions of this Agreement are solely for the benefit of the
Eligible Lender Trustee, the Depositor, the Company, the Certificateholders, the
Administrator and, to the extent expressly provided herein, the Indenture
Trustee and the Noteholders, and nothing in this Agreement, whether express or
implied, shall be construed to give to any other Person any legal or equitable
right, remedy or claim in the Trust Estate or under or in respect of this
Agreement or any covenants, conditions or provisions contained herein.
SECTION 11.04. NOTICES. (a) Unless otherwise expressly
specified or permitted by the terms hereof, all notices shall be in writing (or
in the form of facsimile notice, followed by written notice) and shall be deemed
given upon receipt by the intended recipient, if to the Eligible Lender Trustee,
addressed to its Corporate Trust Office; if to the Depositor, addressed to
Nellie Mae Education Loan Corporation, 1240 Pawtucket Avenue, Rumford, Rhode
Island 02916, Attention: Secretary (telephone: 781-849-2121, facsimile:
781-380-3915); and if to the Company, addressed to Nellie Mae Funding LLC,
[address] (telephone: __________; facsimile: ________); or, as to each party, at
such other address as shall be designated by such party in a written notice to
each other party.
(b) Any notice required or permitted to be given to a
Certificateholder shall be given by first-class mail, postage prepaid, at the
address of such Certificateholder as shown in the Certificate Register. Any
notice so mailed within the time prescribed in this Agreement shall be
conclusively presumed to have been duly given, whether or not the
Certificateholder receives such notice.
SECTION 11.05. SEVERABILITY. Any provision of this Agreement
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
SECTION 11.06. SEPARATE COUNTERPARTS. This Agreement may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
SECTION 11.07. SUCCESSORS AND ASSIGNS. All covenants and
agreements contained herein shall be binding upon, and inure to the benefit of,
the Depositor, the Company, the Eligible Lender Trustee and their respective
successors and permitted assigns and each Certificateholder and its successor
and assigns, all as herein provided.
28
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SECTION 11.08. NO PETITION. (a) The Depositor will not at any
time institute against the Trust or the Company any bankruptcy proceedings under
any United States federal or state bankruptcy or similar law in connection with
any obligations relating to the Certificates, the Notes, this Agreement or any
of the other Basic Documents.
(b) The Eligible Lender Trustee by entering into this
Agreement, each Certificateholder by accepting a Certificate, and the Indenture
Trustee and each Noteholder by accepting the benefits of this Agreement, hereby
covenant and agree that they will not at any time institute against the
Depositor, the Company or the Trust, or join in any institution against the
Depositor, the Company or the Trust of, any bankruptcy, reorganization,
arrangement, insolvency, receivership or liquidation proceedings, or other
proceedings under any United States federal or state bankruptcy or similar law
in connection with any obligations relating to the Certificates, the Notes, this
Agreement or any of the other Basic Documents.
(c) The Company will not at any time institute against the
Trust or the Depositor any bankruptcy proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Certificates, the Notes, this Agreement or any of the other
Basic Documents.
SECTION 11.09. NO RECOURSE. Each Certificateholder by
accepting a Certificate acknowledges that such Certificateholder's Certificates
represent beneficial interests in the Trust only and does not represent an
interest in or obligation of the Depositor, the Master Servicer, the Depositor,
the Company, the Administrator, the Eligible Lender Trustee, the Indenture
Trustee or any Affiliate thereof or any officer, director or employee of any
thereof and no recourse may be had against such parties or their assets, except
as may be expressly set forth or contemplated in this Agreement, the
Certificates or the other Basic Documents.
SECTION 11.10. HEADINGS. The headings of the various Articles
and Sections herein are for convenience of reference only and shall not define
or limit any of the terms or provisions hereof.
SECTION 11.11. GOVERNING LAW. This Agreement shall be
construed in accordance with the laws of the State of New York, without
reference to its conflict of law provisions, and the obligations, rights and
remedies of the parties hereunder shall be determined in accordance with such
laws.
SECTION 11.12. RESPONSIBILITY TO SECRETARY AND GUARANTORS.
Notwithstanding any other provision in this Agreement or the other Basic
Documents, nothing in this Agreement or the other Basic Documents shall be
construed to limit the legal responsibility of the Eligible Lender Trustee in
its capacity as Eligible Lender Trustee to the U.S. Secretary of Education or a
Guarantor for any violations of statutory or regulatory requirements that may
occur with respect to loans held in the Trust, pursuant to 34 CFR 682.203(b) or
any successor provision thereto.
SECTION 11.13. CONSENTS. With respect to any action to be
taken hereunder that requires the consent of a party hereto or of the Indenture
Trustee, such consent shall not be unreasonably withheld, delayed or
conditioned.
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IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed by their respective officers hereunto duly
authorized, as of the day and year first above written.
THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual capacity but solely
as Eligible Lender Trustee
By:
------------------------------------
Name:
Title:
NELLIE MAE EDUCATION CORPORATION,
as Depositor
By:
------------------------------------
Name:
Title:
NELLIE MAE FUNDING, LLC
By:
------------------------------------
Name:
Title:
30
<PAGE>
EXHIBIT A
TO THE TRUST AGREEMENT
[FORM OF CERTIFICATE]
SEE REVERSE FOR CERTAIN DEFINITIONS
Unless this Certificate is presented by an authorized representative of
The Depository Trust Company, a New York Corporation ("DTC"), to the Issuer (as
defined below) or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
THIS CERTIFICATE MAY NOT BE ACQUIRED BY OR FOR THE ACCOUNT OF A BENEFIT
PLAN (AS DEFINED BELOW). THIS CERTIFICATE IS NOT GUARANTEED OR INSURED BY ANY
GOVERNMENTAL AGENCY.
REGISTERED $
--------------------------------
NO. R- CUSIP NO.
------------------------
NELLIE MAE STUDENT LOAN TRUST 1999-A
FLOATING RATE ASSET-BACKED CERTIFICATE
evidencing a fractional undivided interest in the Trust, as defined
below, the property of which includes a pool of student loans sold to
the Trust by Nellie Mae Education Loan Corporation.
(This Certificate does not represent an interest in or obligation of
Nellie Mae Education Loan Corporation, the Company (as defined below),
the Master Servicer (as defined below), the Eligible Lender Trustee (as
defined below) or any of their respective Affiliates, except to the
extent described below.)
A-1
<PAGE>
THIS CERTIFIES THAT is the registered owner of dollars
non-assessable, fully-paid, fractional undivided interest in the Nellie Mae
Student Loan Trust 1999-A (the "Trust"), a trust formed under the laws of the
State of Delaware by Nellie Mae Education Loan Corporation, a Delaware
corporation ("NMELC"). The Trust was created pursuant to a Trust Agreement dated
as of ________ __, 1999 (the "Trust Agreement"), among NMELC, as depositor (the
"Depositor"), Nellie Mae Funding, LLC, a Delaware limited liability company (the
"Company"), and The First National Bank of Chicago, a national banking
association, not in its individual capacity but solely as eligible lender
trustee on behalf of the Trust (the "Eligible Lender Trustee"), a summary of
certain of the pertinent provisions of which is set forth below. To the extent
not otherwise defined herein, the capitalized terms used herein have the
meanings assigned to them in Appendix A to the Administration Agreement (the
"Administration Agreement") dated as of _______ __, 1999, among the Trust,
NMELC, as Administrator, and State Street Bank and Trust Company, as Indenture
Trustee; such Appendix A also contains rules as to usage that shall be
applicable herein.
This Certificate is one of the duly authorized Certificates designated
as "Floating Rate Asset-Backed Certificates" herein called the "Certificates").
Issued under the Indenture dated as of _______ __, 1999, between the Trust and
State Street Bank and Trust Company, a Massachusetts banking corporation, as
Indenture Trustee, are Notes designated as "Floating Rate Asset-Backed Notes"
(the "Notes"). This Certificate is issued under and is subject to the terms,
provisions and conditions of the Trust Agreement, to which Trust Agreement the
holder of this Certificate by virtue of the acceptance hereof assents and by
which such holder is bound. The property of the Trust includes a pool of student
loans (the "Trust Loans"), all moneys received thereunder on or after the Cutoff
Date, certain bank accounts and the proceeds thereof and certain other rights
under the Trust Agreement, the Loan Sale Agreement and the Master Servicing
Agreement and all proceeds of the foregoing. The rights of the holders of the
Certificates to the assets of the Trust are subordinated to the rights of the
holders of the Notes, as set forth in the Administration Agreement, the
Indenture and the other Basic Documents.
Under the Trust Agreement, there will be distributed on the __th day of
each [January, April, July and October] or, if any such date is not a Business
Day, on the next succeeding Business Day (each a "Quarterly Payment Date"),
commencing on ______ __, 1999, to the Person in whose name this Certificate is
registered at the close of business on the __th day of the calendar month in
which such Quarterly Payment Date occurs (the "Record Date") such
Certificateholder's fractional undivided interest in the amount to be
distributed to Certificateholders on such Quarterly Payment Date pursuant to the
Administration Agreement.
Each holder of this Certificate acknowledges and agrees that its rights
to receive distributions in respect of this Certificate from Available Funds and
amounts on deposit in the Reserve Account are subordinated to the rights of the
Noteholders as described in the Administration Agreement, the Indenture and the
other Basic Documents.
It is the intent of the Depositor, the Master Servicer, the Company,
the Administrator, the Certificateholders and the Certificate Owners that, for
purposes of federal income, state and local income and franchise and any other
income taxes, the Trust will be treated as a security device only. The
Certificateholders by acceptance of a Certificate (and the Certificate Owners by
A-2
<PAGE>
acceptance of a beneficial interest in a Certificate) agree to treat, and to
take no action inconsistent with the treatment of, the Certificates for such tax
purposes as indebtedness of the Company secured by the Trust Estate.
Each Certificateholder or Certificate Owner, by its acceptance of a
Certificate or, in the case of a Certificate Owner, a beneficial interest in a
Certificate, covenants and agrees that such Certificateholder or Certificate
Owner, as the case may be, will not at any time institute against the Depositor,
the Company or the Trust, or join in any institution against the Depositor, the
Company or the Trust of, any bankruptcy, reorganization, arrangement,
insolvency, receivership or liquidation proceedings, or other proceedings under
any United States federal or state bankruptcy or similar law in connection with
any obligations relating to the Certificates, the Notes, the Indenture, the
Trust Agreement or any of the other Basic Documents.
Distributions on this Certificate will be made as provided in the Trust
Agreement by the Eligible Lender Trustee by wire transfer or by check mailed to
the Certificateholder of record in the Certificate Register without the
presentation or surrender of this Certificate or the making of any notation
hereon, except that with respect to Certificates registered on the Record Date
in the name of the nominee of the Clearing Agency (initially, such nominee to be
Cede & Co.), unless Definitive Certificates have been issued, payments will be
made by wire transfer in immediately available funds to the account designated
by such nominee. Except as otherwise provided in the Trust Agreement and
notwithstanding the above, the final distribution on this Certificate will be
made after due notice by the Eligible Lender Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency maintained for the purpose by the Eligible Lender Trustee in
the Borough of Manhattan, The City of New York.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Eligible Lender Trustee or its
authenticating agent, by manual signature, this Certificate shall not entitle
the holder hereof to any benefit under the Trust Agreement, the Loan Sale
Agreement, the Master Servicing Agreement or the Administration Agreement or be
valid for any purpose.
A-3
<PAGE>
IN WITNESS WHEREOF, the Eligible Lender Trustee on behalf of the Trust
and not in its individual capacity has caused this Certificate to be duly
executed as of the date set forth below.
NELLIE MAE STUDENT LOAN TRUST 1999-A
By: THE FIRST NATIONAL BANK OF CHICAGO, not in its
individual capacity but solely as Eligible Lender
Trustee,
By:
-------------------------------------------
Authorized Signatory
Date: _______ __, 1999
A-4
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned Trust
Agreement.
THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual capacity but
solely as Eligible Lender
Trustee
By:
-------------------------------------
Authorized Signatory
OR
THE FIRST NATIONAL BANK OF CHICAGO, not
in its individual capacity but
solely as Eligible Lender
Trustee
By: FIRST CHICAGO TRUST COMPANY OF
NEW YORK, as Authenticating Agent
By:
------------------------------
Authorized Signatory
Date: _________________ __, 1999
A-5
<PAGE>
[Reverse of Certificate]
The Certificates do not represent an obligation of, or an interest in,
the Depositor, the Master Servicer, the Company, the Administrator, the Eligible
Lender Trustee or any Affiliates of any of them, and no recourse may be had
against such parties or their assets, except as may be expressly set forth or
contemplated herein, in the Trust Agreement or in the other Basic Documents. In
addition, this Certificate is not guaranteed by any governmental agency or
instrumentality and is limited in right of payment to certain collections with
respect to the Trust Loans (and certain other amounts), all as more specifically
set forth in the Master Servicing Agreement and the Administration Agreement. A
copy of each of the Master Servicing Agreement, the Administration Agreement,
the Loan Sale Agreement and the Trust Agreement may be examined during normal
business hours at the principal office of the Depositor, and at such other
places, if any, designated by the Depositor, by any Certificateholder upon
request.
The Trust Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations of the
Depositor and the Company and the rights of the Certificateholders under the
Trust Agreement at any time by the Depositor, the Company and the Eligible
Lender Trustee with the consent of the holders of the Notes and the Certificates
each voting as a class evidencing not less than a majority of the Outstanding
Amount of the Notes and of the Certificate Balance of the Certificates. Any such
consent by the holder of this Certificate shall be conclusive and binding on
such holder and on all future holders of this Certificate and of any Certificate
issued upon the transfer hereof or in exchange herefor or in lieu hereof whether
or not notation of such consent is made upon this Certificate. The Trust
Agreement also permits the amendment thereof, in certain limited circumstances,
without the consent of the holders of any of the Certificates.
As provided in the Trust Agreement and subject to certain limitations
therein set forth, the transfer of this Trust Certificate is registerable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies maintained by The First National Bank of
Chicago in its capacity as Certificate Registrar, or by any successor
Certificate Registrar, in the Borough of Manhattan, The City of New York,
accompanied by a written instrument of transfer in form satisfactory to the
Eligible Lender Trustee and the Certificate Registrar duly executed by the
holder hereof or such holder's attorney duly authorized in writing, and
thereupon one or more new Certificates of authorized denominations evidencing
the same aggregate interest in the Trust will be issued to the designated
transferee.
The Certificates are issuable only as registered Certificates without
coupons in denominations of $1,000 or in integral multiples of $1,000 in excess
thereof; PROVIDED, HOWEVER, that the Certificates issued to the Company may be
issued in such denominations as to include any residual amount of the
Certificate Balance. As provided in the Trust Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of authorized denominations evidencing the same aggregate
denomination, as requested by the holder surrendering the same. No service
charge will be made for any such registration of transfer or exchange, but the
Eligible Lender Trustee or the Certificate Registrar may require payment of a
sum sufficient to cover any tax or governmental charge payable in connection.
therewith.
A-6
<PAGE>
The Eligible Lender Trustee, the Certificate Registrar and any agent of
the Eligible Lender Trustee or the Certificate Registrar may treat the person in
whose name this Certificate is registered as the owner hereof for all purposes,
and neither the Eligible Lender Trustee nor the Certificate Registrar or any
such agent shall be affected by any notice to the contrary.
The Certificates (including any beneficial interests therein) may not
be acquired by or for the account of (i) an employee benefit plan (as defined in
Section 3(3) of ERISA) that is subject to the provisions of Title I of ERISA,
(ii) a plan described in Section 4975(e)(1) of the Internal Revenue Code of
1986, as amended, or (iii) any entity whose underlying assets include plan
assets by reason of a plan's investment in the entity (a "Benefit Plan"). By
accepting and holding this Certificate, the Certificateholder and Certificate
Owner hereof shall be deemed to have represented and warranted that it is not a
Benefit Plan.
The obligations and responsibilities created by the Trust Agreement and
the Trust created thereby shall terminate upon the payment to Certificateholders
of all amounts required to be paid to them pursuant to the Trust Agreement, the
Administration Agreement and the Master Servicing Agreement and the disposition
of all property held as part of the Trust. The Depositor may at its option
purchase the corpus of the Trust at a price specified in the Loan Sale
Agreement, and such purchase of the Trust Loans and other property of the Trust
will effect early retirement of the Certificates; however, such right of
purchase is exercisable only as of any Quarterly Payment Date on or after which
the Pool Balance is equal to 10% or less of the Initial Pool Balance. In
addition, the Trust Loans remaining in the Trust as of the end of the Collection
Period immediately preceding the Trust Auction Date will be offered for sale by
the Indenture Trustee if any Notes are then Outstanding, or by the Eligible
Lender Trustee if the Notes have been paid in full, by auction in accordance
with the procedure described in the Indenture or the Trust Agreement, as the
case may be, and the proceeds of any such auction will be applied to effect
early retirement of the Notes and the Certificates. No assurance can be given as
to whether the Trust Loans will be sold successfully in an auction on the Trust
Auction Date or any subsequent date.
This Certificate shall be construed in accordance with the laws of the
State of Delaware, without reference to its conflict of law provisions, and the
obligations, rights and remedies of the parties hereunder shall be determined in
accordance with such laws.
A-7
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
- --------------------------------------------------------------------------------
(Please print or type name and address, including postal ZIP code, of assignee)
- --------------------------------------------------------------------------------
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
Attorney
- -----------------------------------------------------------------
to transfer said Certificate on the books of the Certificate Registrar, with
full power of substitution in the premises.
Dated
*
----------------------------------------
Signature Guaranteed:
*
----------------------------------------
* NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial bank
or trust company.
A-8
<PAGE>
EXHIBIT B
TO THE TRUST AGREEMENT
CERTIFICATE DEPOSITORY AGREEMENT
B-1
<PAGE>
EXHIBIT C
TO THE TRUST AGREEMENT
CERTIFICATE OF TRUST OF
NELLIE MAE STUDENT LOAN TRUST 1999-A
THIS Certificate of Trust of Nellie Mae Student Loan Trust 1999-A (the
"Trust"), dated as of ________ __, 1999, is being duly executed and filed by The
First National Bank of Chicago, a national banking association, and First
Chicago Delaware Inc., a Delaware banking corporation, as trustees, to form a
business trust under the Delaware Business Trust Act (12 DEL. CODE,
Section 3801 ET Seq.).
1. NAME. The name of the business trust formed hereby is Nellie Mae
Student Loan Trust 1999-A.
2. DELAWARE TRUSTEE. The name and business address of the trustee of
the Trust resident in the State of Delaware is First Chicago Delaware Inc., c/o
FCC National Bank, 300 King Street, Wilmington, Delaware 19801.
3. This Certificate of Trust will be effective _____ __, 1999.
C-1
<PAGE>
IN WITNESS WHEREOF, the undersigned, being the sole trustees of the
Trust, have executed this Certificate of Trust as of the date first above
written.
THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual capacity but solely
as trustee of the Trust
By:
---------------------------------
Name:
Title:
FIRST CHICAGO DELAWARE INC.,
not in its individual capacity but solely as
trustee
By:
---------------------------------
Name:
Title:
C-2
<PAGE>
Exhibit 5.1(a)
Nellie Mae Education Loan Corporation
1240 Pawtucket Avenue
Rumford, Rhode Island 02916
September 3, 1999
Nellie Mae Education Loan Corporation
1240 Pawtucket Avenue
Rumford, Rhode Island 02916
Re: Nellie Mae Education Loan Corporation
Registration Statement on Form S-3
File No. 333-78725
Ladies and Gentlemen:
I have acted as counsel to Nellie Mae Education Loan Corporation, a
Delaware corporation (the "Registrant"), in connection with the Registrant's
registration statement on Form S-3 (the "Registration Statement") filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended,
with respect to the Asset-Backed Notes (the "Notes") and Asset-Backed
Certificates (the "Certificates" and, together with the Notes, the "Securities")
to be issued from time to time by separate Delaware trusts established by the
Registrant (each, an "Issuer"). Capitalized term used but not defined herein
shall have the definitions assigned to such terms in the Registration Statement.
The Notes will be issued from time to time pursuant to Indentures to be entered
into from time to time between the applicable Issuer and an Indenture Trustee;
and the Certificates will be issued from time to time pursuant to a Trust
Agreement establishing each Issuer. The Indentures and the Trust Agreements are
referred to herein as the "Agreements."
I have examined copies of the forms of each Agreement, as filed as
exhibits to the Registration Statement, and the forms of Securities included in
any Agreement so filed in the Registration Statement and such other records,
documents and statutes as I have deemed necessary for purposes of this opinion.
Based upon the foregoing examinations and assumptions and subject to
the further assumptions, exceptions and qualifications set forth below, it is my
opinion that when the Securities have been validly authorized and executed by or
on behalf of the applicable Issuer, issued and authenticated in accordance with
the provisions of the applicable Agreement and issued, delivered to and paid for
by the purchasers thereof in accordance with the provisions of the applicable
underwriting agreement, the Securities will be legally and validly issued, fully
paid and nonassessable, and the holders thereof will be entitled to the benefit
of the related
<PAGE>
Agreement (subject to any obligation of the Company or the Certificateholders to
make payment or provide indemnity or security as set forth in the Trust
Agreement).
This opinion is provided as a legal opinion only. No opinion may be
inferred or implied beyond the matters expressly stated herein.
I am a member of the Bar of the Commonwealth of Massachusetts and I
express no opinion as to matters covered by laws other than those of the
Commonwealth of Massachusetts and the federal laws of the United States. With
respect to matters of New York law affecting this opinion, I have relied on the
opinion of Brown & Wood LLP filed as an exhibit to the Registration Statement.
With respect to matter of Delaware law affecting this opinion, I have relied on
the opinion of Richards, Layton & Finger filed as an exhibit to the Registration
Statement
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to me under the caption "Legal
Matters" in the Prospectus and supplement constituting a part of the
Registration Statement. In giving this consent, I do not admit that I am within
the category of persons whose consent is required by Section 7 of the Securities
Act of 1933, as amended, or the rules and regulations promulgated thereunder by
the Securities and Exchange Commission.
Very truly yours,
/s/ Ann M. O'Rourke
<PAGE>
Exhibit 5.1(b)
RICHARDS, LAYTON & FINGER
One Rodney Square, P.O. Box 551
Wilmington, Delaware 19899
September 3, 1999
Nellie Mae Education Loan Corporation
1240 Pawtucket Avenue
Rumford, Rhode Island 02916
Re: Nellie Mae Education Loan Corporation
Registration Statement on Form S-3
(Registration No. 333-78725)
--------------------------------------------
Ladies and Gentlemen:
We have acted as special Delaware counsel to Nellie Mae Education Loan
Corporation, a Delaware corporation (the "Seller"), in connection with the
above-captioned Registration Statement (such registration statement together
with the exhibits and any amendments thereto, the "Registration Statement"),
filed by the Seller with the Securities and Exchange Commission in connection
with the registration by the Seller of Asset Backed Notes (the "Notes") and
Asset Backed Certificates (the "Certificates").
As described in the Registration Statement, the Notes and the
Certificates will be issued from time to time in series, with each series to be
issued by a Delaware business trust (each, a "Trust") to be formed by the Seller
pursuant to a Trust Agreement (each, a "Trust Agreement") among the Seller,
Nellie Mae Funding, LLC, a Delaware limited liability company (the "Company"),
and The First National Bank of Chicago, a national banking association, not in
its individual capacity but solely as eligible lender trustee (the "Eligible
Lender Trustee"). With respect to each series, the Certificates will be issued
pursuant to a Trust Agreement, the Notes will be issued pursuant to an Indenture
(each, an "Indenture") between the related Trust and an Indenture Trustee and
the Notes and Certificates will be sold from time to time pursuant to certain
underwriting agreements (the "Underwriting Agreements") between the Seller and
the various underwriters named therein. At your request, this opinion is being
furnished to you.
For purposes of giving the opinions hereinafter set forth, we have
examined and relied upon the Registration Statement and, in each case as filed
with the Registration Statement, the form of Master Servicing Agreement among a
Trust, the Eligible Lender Trustee and the Master
<PAGE>
Nellie Mae Education Loan Corporation
September 2, 1999
Page 2
Servicer, the form of Indenture (including forms of Notes included as exhibits
thereto), the form of Trust Agreement (including the form of Certificate of
Trust to be filed pursuant to the Delaware Business Trust Act and the form of
Certificate filed as an exhibit thereto) and the form of Underwriting Agreement
for the Notes and the Certificates (the "Operative Documents"). Terms used
herein without definition have the meanings given to such terms in the
Registration Statement.
For purposes of this opinion, we have not reviewed any documents other
than the documents listed above, which we believe are all the documents
reasonably necessary for us to have considered for purposes of rendering the
opinions stated herein. We have conducted no independent factual investigation
of our own but rather have relied solely upon the foregoing documents, the
statements and information set forth therein and the additional matters recited
or assumed herein, all of which we assume to be true, complete and accurate in
all material respects.
Based upon the foregoing, and upon our examination of such questions of
law and statutes of the State of Delaware as we have considered necessary or
appropriate, and subject to the assumptions, qualifications, limitations and
exceptions set forth herein, we are of the opinion that, with respect to the
Certificates of any series, when (i) the final terms of such Certificates have
been duly established and approved by or pursuant to authorization of the Board
of Directors of the Seller, (ii) the Operative Documents relating to such series
have each been duly completed, executed and delivered by the parties thereto
substantially in the form filed as an exhibit to the Registration Statement
reflecting the terms established as described above, (iii) the Certificate of
Trust for the related Trust has been duly executed by the Eligible Lender
Trustee and the Delaware Trustee (as defined in the Trust Agreement) and filed
with the Secretary of State of the State of Delaware, and (iv) such Certificates
have been duly authorized, executed and issued by the related Trust and
authenticated by the Eligible Lender Trustee, and delivered to and paid for by
the purchasers thereof, all in accordance with the terms and conditions of the
related Operative Documents and in the manner described in the Registration
Statement, such Certificates will be valid, fully paid and nonassessable
beneficial interests in the Trust (subject to any obligation of the Company or
the Certificateholders to make payment or provide indemnity or security as set
forth in the Trust Agreement).
The foregoing opinion is subject to the following exceptions,
qualifications, limitations and assumptions:
A. This opinion is limited to the laws of the State of Delaware
(excluding the securities laws of the State of Delaware), and we have not
considered and express no opinion on the laws of any other jurisdiction,
including federal laws and rules and regulations relating thereto. Our opinions
are rendered only with respect to Delaware laws and rules, regulations and
orders thereunder which are currently in effect.
<PAGE>
Nellie Mae Education Loan Corporation
September 2, 1999
Page 3
B. We have not participated in the preparation of the Registration
Statement (other than Exhibits 5.1(b) and 23.1(b) thereto) or any offering
materials with respect to the Certificates and assume no responsibility for
their contents (other than Exhibits 5.1(b) and 23.1(b) thereto).
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement. In giving the foregoing consent, we do not thereby admit
that we come within the category of Persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder. Except as
stated above, without our prior written consent, this opinion may not be
furnished or quoted to, or relied upon by, any other Person or for any other
purpose.
Very truly yours,
/s/ Richards, Layton & Finger
MIL/TJH/gmh
<PAGE>
Exhibit 5.1(c)
[LETTERHEAD OF BROWN & WOOD LLP]
September 3, 1999
Nellie Mae Education Loan Corporation
1240 Pawtucket Avenue
Rumford, Rhode Island 02916
Re: Nellie Mae Education Loan Corporation
Registration Statement on Form S-3
File No. 333-78725
-------------------------------------
Ladies and Gentlemen:
We have acted as special New York counsel to Nellie Mae Education Loan
Corporation, a Delaware corporation (the "Registrant"), in connection with the
Registrant's registration statement on Form S-3 (the "Registration Statement")
filed with the Securities and Exchange Commission under the Securities Act of
1933, as amended, with respect to the Asset-Backed Notes (the "Notes") and
Asset-Backed Certificates (the "Certificates" and, together with the Notes, the
"Securities") to be issued from time to time by separate Delaware trusts
established by the Registrant (each, an "Issuer"). Capitalized term used but not
defined herein shall have the definitions assigned to such terms in the
Registration Statement. The Notes will be issued from time to time pursuant to
Indentures to be entered into from time to time between the applicable Issuer
and an Indenture Trustee; and the Certificates will be issued from time to time
pursuant to a Trust Agreement establishing each Issuer. The Indentures and the
Trust Agreements are referred to herein as the "Agreements."
We have examined copies of the form of each Agreement, as filed as an
exhibit to the Registration Statement, and the form of the Notes included in the
form of Indenture so filed in the Registration Statement and such other records,
documents and statutes as we have deemed necessary for purposes of this opinion.
Based upon the foregoing examinations and assumptions and subject to
the further assumptions, exceptions and qualifications set forth below, it is
our opinion that when the Notes have been validly authorized and executed by or
on behalf of the applicable Issuer, issued and
<PAGE>
authenticated in accordance with the provisions of the applicable Indenture and
issued, delivered to and paid for by the purchasers thereof in accordance with
the provisions of the applicable underwriting agreement, the Notes will be
legally and validly issued, fully paid and nonassessable and the holders hereof
will be entitled to the benefit of the related Indenture.
This opinion is provided as a legal opinion only. No opinion may be
inferred or implied beyond the matters expressly stated herein.
We are members of the Bar of the State of New York and we express no
opinion as to matters covered by laws other than those of the State of New York,
and the federal laws of the United States.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the caption "Legal
Matters" in the Prospectus and supplement constituting a part of the
Registration Statement. In giving this consent, we do not admit that we are
within the category of persons whose consent is required by Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations promulgated
thereunder by the Securities and Exchange Commission.
Very truly yours,
/s/ Brown & Wood LLP
<PAGE>
Exhibit 8.1
[LETTERHEAD OF BROWN & WOOD LLP]
September 3, 1999
Nellie Mae Education Loan Corporation
1240 Pawtucket Avenue
Rumford, Rhode Island 02916
Re: Nellie Mae Education Loan Corporation
Registration Statement on Form S-3
File No. 333-78725
-------------------------------------
Ladies and Gentlemen:
We have acted as special tax counsel to Nellie Mae Education Loan
Corporation, a Delaware corporation (the "Registrant"), in connection with the
preparation of a registration statement on Form S-3 (No. 333-78725) (the
"Registration Statement"), which was filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Act"), for the
registration under the Act of $1,000,000,000 of Asset-Backed Notes (the "Notes")
and Asset-Backed Certificates (the "Certificates" and, together with the Notes,
the "Securities"). As set forth in the Registration Statement, each series (a
"Series") of Notes will be issued under and pursuant to an indenture (the
"Indenture") between an indenture trustee to be named therein (the "Indenture
Trustee") and a trust ("Trust") established pursuant to a trust agreement (the
"Trust Agreement") among the Registrant, an eligible lender trustee named
therein (the "Eligible Lender Trustee") and Nellie Mae Funding, LLC, a Delaware
limited liability company and wholly-owned subsidiary of the Registrant.
We have examined the form of our prospectus and prospectus supplement
contained in the Registration Statement. In addition, we have reviewed:
(i) the form of the Trust Agreement, including the form of
Certificates attached as an exhibit thereto;
(ii) the form of the Indenture, including the forms of Notes
attached as exhibits thereto;
(iii) the form of Administration Agreement among the Trust,
the Registrant, as administrator, and the Indenture Trustee;
(iv) the form of the Loan Sale Agreement among the Registrant,
as seller, the Trust and the Eligible Lender Trustee;
<PAGE>
(v) the form of the Master Servicing Agreement among the
Registrant, as master servicer, the Trust and the Eligible Lender
Trustee; and
(vi) such other documents as we have deemed necessary or
appropriate as the basis for the opinion set forth below.
In arriving at the opinions expressed below, we have assumed that each
of the aforementioned agreements (the "Agreements") will be duly authorized by
all necessary corporate action on the part of the parties thereto for such
Series of Securities and will be duly executed and delivered by the parties
thereto substantially in the applicable form filed or incorporated by reference
as an exhibit to the Registration Statement, that each Series of Securities will
be duly executed and delivered in substantially the forms set forth in the
related Agreements filed or incorporated by reference as exhibits to the
Registration Statement, that Securities will be sold as described in the
Registration Statement, and that the parties to the transactions involving the
issuance of Securities comply (without waiver) with all of the provisions of the
related Agreements and the other documents prepared and executed in connection
with such transactions.
As special tax counsel to the Registrant, we have considered certain
federal income tax aspects of the proposed issuance of the Securities of each
Series. In particular, we have considered the material federal income tax
consequences for holders of the Securities and have reviewed the description of
the material federal income tax consequences for holders of the Securities that
appears in the form of prospectus under the caption "U.S. Federal Income Tax
Consequences" and in the form of prospectus supplement under the caption
"Federal Income Tax Consequences," each forming a part of the Registration
Statement. Such description does not purport to discuss all possible federal
income tax ramifications of the proposed issuance of the Securities, but, with
respect to those federal income tax consequences that are discussed, in our
opinion, the description is accurate in all material respects, and we hereby
confirm that the discussion under the aforesaid captions is the opinion of Brown
& Wood LLP as to the material federal income tax consequences associated with
the purchase, ownership and disposition of the Securities and that we are
rendering such opinion. You should be aware that this opinion represents our
conclusions as to the application of existing law to the purchase, ownership and
disposition of the Securities. This opinion is effective as of the date of sale
of any Series of Securities, subject to the limitation set forth herein
regarding our participation as special tax counsel to the Registrant, provided
that a new opinion will be rendered by us upon any material change in law, or
material changes in the facts or circumstances from those described in the
Registration Statement, prior to the sale of Securities for which we act as
special tax counsel to the Registrant, and such new opinion and a related
counsel's consent must be filed as an exhibit to the Registration Statement in a
post-effective amendment thereto or by the Registrant under cover of Form 8-K.
There can be no assurance that contrary positions will not be taken by the
Internal Revenue Service or that the law will not change.
This opinion is based on the facts and circumstances set forth in the
Registration Statement, including the form of prospectus and prospectus
supplement, and in the other documents reviewed by us. Our opinion as to the
matters set forth herein could change with respect to a particular Series of
Securities as a result of changes in law subsequent to the date
<PAGE>
hereof. Furthermore, we express no opinion with respect to any Series of
Securities for which we do not act as tax counsel to the Registrant.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. We also consent to the references to Brown & Wood LLP
under the caption "U.S. Federal Income Tax Consequences" in the form of
prospectus and under the caption "Federal Income Tax Consequences" in the form
of prospectus supplement contained in the Registration Statement. In giving this
consent, we do not admit that we are in the category of persons whose consent is
required by Section 7 of the Act or the rules and regulations promulgated
thereunder by the Securities and Exchange Commission.
No opinion has been sought and none has been given concerning the tax
treatment of the issuance and sale of the Securities under the laws of New York
or any other state.
Very truly yours,
/s/ Brown & Wood LLP
<PAGE>
Exhibit 25.1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
---------------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2)
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
<TABLE>
<S> <C>
MASSACHUSETTS 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national Identification
bank) No.)
</TABLE>
<TABLE>
<S> <C>
225 FRANKLIN STREET, BOSTON, 02110
MASSACHUSETTS
(Address of principal executive (Zip Code)
offices)
</TABLE>
Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
NELLIE MAE EDUCATION LOAN CORPORATION
(Exact name of obligor as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 04-3423352
(State or other (I.R.S. Employer
jurisdiction of Identification
incorporation or No.)
organization)
</TABLE>
1240 PAWTUCKET AVENUE
RUMFORD, RHODE ISLAND 02916
(Address of principal executive offices) (Zip Code)
ASSET-BACKED NOTES AND CERTIFICATES
(Title of indenture securities)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) Name and address of each examining or supervisory authority to which it
is subject.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington, D.C.,
Federal Deposit Insurance Corporation, Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its parent,
State Street Corporation.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN EFFECT.
A copy of the Articles of Association of the trustee, as now in
effect, is on file with the Securities and Exchange Commission as
Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the Registration
Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated
herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of Massachusetts
that no certificate of authority for the trustee to commence business
was necessary or issued is on file with the Securities and Exchange
Commission as Exhibit 2 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with the
Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is
incorporated herein by reference thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE TRUST
POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS SPECIFIED IN
PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise corporate
trust powers is on file with the Securities and Exchange Commission
as Exhibit 3 to Amendment No. 1 to the
1
<PAGE>
Statement of Eligibility and Qualification of Trustee (Form T-1)
filed with the Registration Statement of Morse Shoe, Inc. (File No.
22-17940) and is incorporated herein by reference thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is on file
with the Securities and Exchange Commission as Exhibit 4 to the
Statement of Eligibility and Qualification of Trustee (Form T-1)
filed with the Registration Statement of Eastern Edison Company (File
No. 33-37823) and is incorporated herein by reference thereto.
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN
DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY SECTION
321(B) OF THE ACT.
The consent of the trustee required by Section 321(b) of the Act is
annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING
AUTHORITY.
A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority is annexed hereto as Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended,
the trustee, State Street Bank and Trust Company, a corporation organized and
existing under the laws of The Commonwealth of Massachusetts, has duly caused
this statement of eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Boston and The Commonwealth of
Massachusetts, on the 27(TH) of August 1999.
STATE STREET BANK AND TRUST COMPANY
By: /s/ JULIE BALERNA
----------------------------------------
NAME: JULIE BALERNA
TITLE: ASSISTANT VICE PRESIDENT
2
<PAGE>
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of
1939, as amended, in connection with the proposed issuance by NELLIE MAE
EDUCATION LOAN CORPORATION of its ASSET-BACKED NOTES AND CERTIFICATES, we hereby
consent that reports of examination by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon request therefor.
<TABLE>
<S> <C> <C>
STATE STREET BANK AND TRUST COMPANY
BY: /S/ JULIE BALERNA
-----------------------------------------
NAME: JULIE BALERNA
TITLE: ASSISTANT VICE PRESIDENT
DATED: AUGUST 27, 1999
</TABLE>
3
<PAGE>
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business March 31, 1999,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act and in accordance
with a call made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
<TABLE>
<CAPTION>
THOUSANDS OF
DOLLARS
------------
<S> <C>
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin.............................................. 1,249,670
Interest-bearing balances....................................................................... 13,236,699
Securities.......................................................................................... 10,970,415
Federal funds sold and securities purchased under agreements to resell in domestic offices of the
bank and its Edge subsidiary...................................................................... 9,561,556
Loans and lease financing receivables:
Loans and leases, net of unearned income............................................................ 7,053,580
Allowance for loan and lease losses................................................................. 85,416
Allocated transfer risk reserve..................................................................... 0
Loans and leases, net of unearned income and allowances............................................. 6,968,164
Assets held in trading accounts..................................................................... 1, 553,354
Premises and fixed assets........................................................................... 536,535
Other real estate owned............................................................................. 0
Investments in unconsolidated subsidiaries.......................................................... 606
Customers' liability to this bank on acceptances outstanding........................................ 71,273
Intangible assets................................................................................... 207,323
Other assets........................................................................................ 1,371,043
------------
Total assets........................................................................................ 45,726,638
------------
------------
LIABILITIES
Deposits:
In domestic offices............................................................................... 10,101,297
Noninterest-bearing............................................................................. 6,932,549
Interest-bearing................................................................................ 3,168,748
In foreign offices and Edge subsidiary............................................................ 18,061,721
Noninterest-bearing............................................................................. 54,654
Interest-bearing................................................................................ 18,007,067
Federal funds purchased and securities sold under agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary............................................................... 12,063,069
Demand notes issued to the U.S. Treasury............................................................ 149,322
Trading liabilities............................................................................... 1,140,080
Other borrowed money................................................................................ 285,027
Subordinated notes and debentures................................................................... 0
Bank's liability on acceptances executed and outstanding............................................ 71,273
Other liabilities................................................................................... 1,079,470
Total liabilities................................................................................... 42,951,259
------------
EQUITY CAPITAL
Perpetual preferred stock and related surplus....................................................... 0
Common stock........................................................................................ 29,931
Surplus............................................................................................. 480,330
Undivided profits and capital reserves/Net unrealized holding gains (losses)........................ 2,258,177
Net unrealized holding gains (losses) on available-for-sale securities............................ 15,937
Cumulative foreign currency translation adjustments................................................. (8,996)
Total equity capital................................................................................ 2,775,379
Total liabilities and equity capital................................................................ 45,726,638
------------
------------
</TABLE>
4
<PAGE>
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Truman S. Casner
5
<PAGE>
Exhibit 99.1
[FORM OF]
LOAN SALE AGREEMENT
among
NELLIE MAE STUDENT LOAN TRUST 1999-A,
as Issuer,
NELLIE MAE EDUCATION LOAN CORPORATION,
as Seller,
THE FIRST NATIONAL BANK OF CHICAGO, not in its individual capacity
but solely as eligible lender trustee for the Seller,
and
THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual capacity but solely
as Eligible Lender Trustee for the Issuer
Dated as of ___ 1, 1999
<PAGE>
LOAN SALE AGREEMENT dated as of ____ 1, 1999, among NELLIE MAE STUDENT
LOAN TRUST 1999-A, a Delaware trust (the "ISSUER"), NELLIE MAE EDUCATION LOAN
CORPORATION, a Delaware non-profit corporation, as seller (the "SELLER"), THE
FIRST NATIONAL BANK OF CHICAGO, a national banking association, not in its
individual capacity but solely as eligible lender trustee for the Seller
("FNBC"), and THE FIRST NATIONAL BANK OF CHICAGO, not in its individual capacity
but solely as eligible lender trustee for the Issuer (the "ELIGIBLE LENDER
Trustee").
WHEREAS the Issuer desires to purchase from the Seller a portfolio of
federally reinsured student loans purchased in the ordinary course of business
by the Seller; and
WHEREAS in order to comply with the requirements of the Higher
Education Act of 1965, as amended, legal title to the Seller's student loan
portfolio is vested in FNBC, as eligible lender trustee on behalf of the Seller
as the sole beneficiary; and
WHEREAS the Seller is willing to sell such student loans to the
Eligible Lender Trustee on behalf of the Issuer; and
WHEREAS the Eligible Lender Trustee is willing to hold legal title to,
and serve as eligible lender trustee with respect to, such student loans on
behalf of the Issuer.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND USAGE
Capitalized terms used but not defined herein are defined in Appendix A
to the Administration Agreement, dated as of ____ 1, 1999, among the Issuer, the
Seller, as Administrator, and State Street Bank and Trust Company, as Indenture
Trustee, which also contains rules as to usage and construction that shall be
applicable herein.
ARTICLE II
CONVEYANCE OF TRUST LOANS
SECTION 2.01. CONVEYANCE OF INITIAL TRUST LOANS. (a) In consideration
of:
O the Eligible Lender Trustee, on behalf of the Issuer, making the
Reserve Account Initial Deposit into the Reserve Account on the Closing
Date,
O the Eligible Lender Trustee, on behalf of the Issuer, funding the
costs of issuing the Securities on the Closing Date, and
<PAGE>
O the Eligible Lender Trustee, on behalf of the Issuer, delivering to
or upon the order of the Seller on the Closing Date the net proceeds
from the sale of the Notes and the Certificates and the other amounts
to be distributed from time to time to the Seller in accordance with
the terms of this Agreement;
the Seller (and, with respect to legal title to the Initial Trust Loans, FNBC as
trustee on behalf of the Seller) does hereby, as evidenced by a duly executed
Bill of Sale in the form of Exhibit A hereto, sell, assign, and otherwise convey
to the Issuer (and, with respect to legal title to the Initial Trust Loans, to
the Eligible Lender Trustee on behalf of the Issuer), without recourse except as
may be provided herein, (i) all right, title and interest in and to the Initial
Trust Loans, and all obligations of the Obligors thereunder, together with all
documents, the related Student Loan Files and all rights and privileges relating
thereto; (ii) all payments thereon or collections received thereunder on and
after the Cutoff Date, including without limitation, Liquidation Proceeds and
Recoveries; (iii) all of its right, title and interest in all funds on deposit
from time to time in the Trust Accounts, including the Reserve Account Initial
Deposit, and in all investments and proceeds thereof (including all income
thereon); and (iv) all proceeds of any and all of the foregoing.
(b) On the Closing Date, the Seller will deposit, or cause to be
deposited, into the Collection Account all amounts or collections received under
the Initial Trust Loans on and after the Cutoff Date.
SECTION 2.02. CONVEYANCE OF SERIAL LOANS TO THE ELIGIBLE LENDER TRUSTEE
ON BEHALF OF THE TRUST. (a) Subject to the conditions set forth in paragraph (c)
below, in consideration of the Issuer's delivery on the related Transfer Date to
or upon the order of the Seller of the Loan Purchase Amount for each such Serial
Loan to be delivered by the Seller, the Seller does hereby sell, transfer,
assign, set over and otherwise convey to the Issuer, and with respect to legal
title the Serial Loans to the Eligible Lender Trustee on behalf of the Issuer,
without recourse except as may be provided herein, (i) all right, title and
interest of the Seller in and to each Serial Loan selected by the Seller for
sale to the Issuer and all obligations of the Obligors thereunder, together with
all documents, the related Student Loan Files and all rights and privileges
relating thereto, (ii) all payments on or collections received thereunder on and
after the related Subsequent Cutoff Date and (iii) all proceeds of any and all
of the foregoing.
(b) Upon the tender of Serial Loans by the Seller on the related
Transfer Date and the satisfaction of the conditions set forth in subsection (c)
of this Section 2.02, the Eligible Lender Trustee will so inform the
Administrator and the Indenture Trustee, and that component of the Loan Purchase
Amount for such Serial Loans represented by the Purchase Collateral Balance
thereof will be withdrawn from amounts on deposit in the Collection Account, as
provided in Section 2(d) of the Administration Agreement, and will be remitted
as provided therein to or upon the order of the Seller; PROVIDED, HOWEVER, that
the component of the Loan Purchase Amount represented by the Purchase Premium
Amounts shall be payable on a deferred basis pursuant to the next sentence of
this paragraph. Any Purchase Premium Amounts for Serial Loans conveyed to the
Trust will be payable on Quarterly Payment Dates out of Reserve Account Excess
pursuant to Section 2(e) of the Administration Agreement and such Purchase
Premium Amounts will accrue no interest or yield but will be paid on each
Quarterly Payment
2
<PAGE>
Date to the extent such excess is available in the aggregate amount of such
premiums incurred but unpaid up to the end of the related Collection Period.
(c) The Seller (and with respect to legal title to the Serial Loans,
FNBC as trustee on behalf of the Seller) shall transfer to the Issuer the Serial
Loans for a given Transfer Date and the other property and rights related
thereto described in paragraph (a) above only upon the satisfaction of each of
the following conditions on or prior to such Transfer Date:
(i) the Seller (and with respect to legal title to the Serial Loans,
FNBC as trustee on behalf of the Seller) shall have delivered to the
Eligible Lender Trustee and the Indenture Trustee a duly executed written
assignment (including an acceptance by the Eligible Lender Trustee and the
Indenture Trustee) in substantially the form of Exhibit B hereto (each, a
"TRANSFER AGREEMENT"), which shall include supplements to Schedule A
hereto, listing such Serial Loans;
(ii) the Seller shall have deposited in the Collection Account all
amounts on or collections received in respect of the Serial Loans on and
after each applicable Subsequent Cutoff Date;
(iii) as of the Transfer Date, the Seller was not insolvent nor will
it have been made insolvent by such transfer nor is it aware of any pending
insolvency;
(iv) such addition will not result in a material adverse federal or
state tax consequence to the Issuer or the Securityholders;
(v) the Seller shall have delivered to the Indenture Trustee and the
Eligible Lender Trustee an Officers' Certificate confirming the
satisfaction of each condition precedent specified in this paragraph (c);
(vi) the Seller shall have delivered to the Rating Agencies, the
Eligible Lender Trustee and the Indenture Trustee the Opinion of Counsel as
required by Section 6.02(f)(1) hereof; PROVIDED, HOWEVER, that,
notwithstanding the foregoing, no opinion shall be required unless the
Seller, the Eligible Lender Trustee or the Indenture Trustee determines
that, with regard to the most recent opinion that was delivered with
respect to the Trust Loans (whether on the Closing Date or thereafter under
this subsection or under another provision of the Basic Documents), the
conclusion of, or the reasoning underlying, such opinion is no longer
correct in all material respects due to a change in law or regulations or
the ruling of a court, an administrative tribunal or a regulatory or other
governmental authority; upon making any such determination, whichever of
the Seller, the Eligible Lender Trustee and the Indenture Trustee makes
such determination shall notify the others and the Rating Agencies; and
PROVIDED, FURTHER, that neither the Eligible Lender Trustee nor the
Indenture Trustee shall have any obligation to monitor changes in laws or
regulations or the rulings of courts or other governmental agencies for the
purpose of making any determination described in the preceding proviso;
(vii) with respect to any Serial Loan which is guaranteed by an
Additional Guarantor, such Additional Guarantor shall have entered into a
Guarantee Agreement
3
<PAGE>
with the Eligible Lender Trustee which guarantees such Serial Loan in
substantially the form of the Guarantee Agreements between the Initial
Guarantors and the Eligible Lender Trustee;
(viii) the Seller shall have taken any action required to maintain the
first perfected ownership interest of the Issuer in the Trust Estate and
the first perfected security interest of the Indenture Trustee in the
Collateral;
(ix) no selection procedures believed by the Seller to be adverse to
the interests of the Securityholders shall have been utilized in selecting
the Serial Loans;
(x) no Default or Event of Default shall have occurred under the
Indenture, no Master Servicer Default shall have occurred under the Master
Servicing Agreement and no Administrator Default shall have occurred under
the Administration Agreement;
(xi) for each Transfer Date, after giving effect to the conveyance of
Serial Loans on such Transfer Date, the amount of funds remitted for the
purchase of Serial Loans on such Transfer Date, and on each Transfer Date
since the preceding Quarterly Payment Date, shall not exceed the Net
Principal Cash Flow Amount for such Transfer Date; and
(xii) the sum of (a) the principal amount of such Serial Loans to be
transferred to the Trust on such Transfer Date and (b) the principal amount
of Serial Loans transferred to the Trust on all previous Transfer Dates
does not exceed 5% of the Initial Pool Balance;
PROVIDED, HOWEVER, that the Seller shall not incur any liability as a result of
transferring Serial Loans on any Transfer Date at a time when the condition set
forth in clause (iv) was not satisfied, if at the time of such transfer the
Authorized Officers of the Seller, after reasonable inquiry of counsel to the
Seller, were not aware of any fact that would reasonably suggest that such
condition would not be satisfied as of such date.
SECTION 2.03. TREATMENT AS A SECURITY AGREEMENT. The parties intend that the
conveyance of the Seller's (and, with respect to legal title to the loans,
FNBC's) right, title and interest in and to the Initial Trust Loans pursuant to
this Agreement and any Serial Loans pursuant to the applicable Transfer
Agreement shall constitute a valid purchase and sale and not a loan. If such
conveyance is deemed to be a loan and not a sale, then the parties also intend
and agree that the Seller (and, with respect to legal title to the loans, FNBC)
shall be deemed to have granted, and in such event do hereby grant to the
Issuer, a first priority security interest in all of the Seller's and FNBC's
right, title and interest in, to and under the Initial Trust Loans and any
Serial Loans and the other items specified in Sections 2.01 and 2.02, and that
this Agreement with respect to the Initial Trust Loans and any applicable
Transfer Agreement with respect to the Serial Loans transferred thereby shall
constitute a security agreement under applicable law with respect to such loans.
If such conveyance is deemed to be a loan and not a sale, the Issuer may, to
secure the Issuer's own borrowings under the Indenture, repledge all or any
portion of such loans and the other items specified in Sections 2.01 and 2.02
hereof pledged to the Issuer and not released from the security interest of this
Agreement at the time of such pledge. Such a repledge
4
<PAGE>
may be made by the Issuer with or without a repledge by the Issuer of its rights
under this Agreement, and without further notice to or acknowledgement from the
Seller or FNBC. Each of the Seller and FNBC waives, to the extent permitted by
applicable law, all claims, causes of action and remedies whether legal or
equitable (including any rights of set-off) against the Issuer or any assignee
of the Issuer relating to such action by the Issuer in connection with the
transactions contemplated by this Agreement and the other Basic Documents.
SECTION 2.04. ENDORSEMENT. The Seller (and, with respect to legal
title to the Trust Loans, FNBC as trustee on behalf of the Seller) hereby
appoint each of the Eligible Lender Trustee and the Indenture Trustee as the
Seller's (and FNBC's) true and lawful attorney-in-fact with full power of
substitution to endorse the Seller's (and FNBC's) name on any promissory note
evidencing the Initial Trust Loans and any Serial Loans transferred to the
Eligible Lender Trustee on behalf of the Trust pursuant to Sections 2.01 and
2.02. The Seller (and, with respect to legal title to the Trust Loans, FNBC as
trustee on behalf of the Seller) acknowledge and agree that this power of
attorney shall be construed as a power coupled with an interest, shall be
irrevocable as long as the Trust Agreement remains in effect and shall continue
in effect until the Trust Agreement terminates.
ARTICLE III
THE TRUST LOANS
SECTION 3.01. REPRESENTATIONS AND WARRANTIES OF SELLER WITH RESPECT TO
THE TRUST LOANS. The Seller represents and warrants with respect to the Trust
Loans as set forth in Exhibit C hereto. Such representations and warranties
speak as of the execution and delivery of this Agreement and as of the Closing
Date in the case of the Initial Trust Loans, as of the applicable Transfer Date
in the case of any Serial Loan, and as of the date of the relevant Assignment in
the case of any Qualified Substitute Student Loan, but shall survive the sale,
transfer and assignment of the Trust Loans to the Eligible Lender Trustee on
behalf of the Issuer and the pledge thereof to the Indenture Trustee pursuant to
the Indenture.
SECTION 3.02. REPURCHASE; REIMBURSEMENT. (a) Upon discovery by the
Seller, FNBC, the Master Servicer, the Eligible Lender Trustee or the Indenture
Trustee of any breach of the Seller's representations and warranties made by the
Seller pursuant to Section 3.01 or Section 4.01, the party discovering the
breach shall give prompt written notice to the others. Unless any such breach
shall have been cured within sixty (60) days after the Seller becomes aware or
receives written notice (whichever is earlier) of such breach, the Seller shall
be obligated to either (i) repurchase any Trust Loan in which the interests of
the Noteholders or the Certificateholders are materially and adversely affected
by any such breach as of the first day succeeding the end of such 60-day period
that is the last day of a Monthly Collection Period or (ii) substitute a
Qualified Substitute Student Loan in the manner specified in this Section;
PROVIDED, HOWEVER, that it is understood that any such breach that does not
affect the related Guarantor's obligation to guarantee payment of such Trust
Loan to the Eligible Lender Trustee will not be considered to have a material
adverse effect for this purpose and it is further understood that any dispute as
to whether such Guarantor's obligation has been so affected will be resolved by
the decision of the Indenture Trustee for so long as Notes are Outstanding and
thereafter by the Eligible Lender Trustee. In addition, if any such breach by
the Seller does not
5
<PAGE>
trigger such a repurchase obligation but does result in the refusal by such
Guarantor to guarantee all or a portion of the accrued interest, or the loss
(including any obligation of the Issuer to repay the Department) of certain
Interest Subsidy Payments and Special Allowance Payments, then, unless such
breach, if curable, is cured within sixty (60) days, the Seller shall reimburse
the Issuer by remitting an amount equal to all such non-guaranteed interest
amounts and such forfeited Interest Payments and Special Allowance Payments in
the manner specified in Section 3.03. Subject to the provisions of Section 4.03,
the sole remedy of the Issuer, the Eligible Lender Trustee, the Indenture
Trustee, the Noteholders or the Certificateholders with respect to a breach of
representations and warranties pursuant to Section 3.01, and the agreement
contained in this Section, shall be to require the Seller to repurchase or
substitute for the affected Trust Loans or to reimburse the Issuer as provided
above pursuant to this Section, subject to the conditions contained herein.
(b) The Seller may, at its option, repurchase a Trust Loan as of the
last day of a Monthly Collection Period if there is a dispute with the related
Borrower during such Monthly Collection Period which in the Master Servicer's
reasonable judgment would call into question whether such Trust Loan will be
repaid by the Borrower; PROVIDED, HOWEVER, that the aggregate principal balance
of the Trust Loans purchased pursuant to this subsection (b) shall not exceed,
in aggregate, 1% of the Initial Pool Balance.
(c) In consideration of and simultaneously with the repurchase of a
Trust Loan, the Seller shall remit the Purchase Amount therefor, in the manner
specified in Section 3.03, and the Issuer shall execute such assignments and
other documents reasonably requested by the Seller in order to effect such
transfer. Upon any such transfer of a Trust Loan, legal title to, and beneficial
ownership and control of, the related Student Loan File will thereafter belong
to the Seller or in the case of legal title thereto an eligible lender under the
Higher Education Act designated by the Seller.
With respect to any Qualified Substitute Student Loan or Loans, the
Seller shall deliver to the Eligible Lender Trustee for the benefit of the
Indenture Trustee such documents and agreements together with a duly executed
Assignment in the form of Exhibit F hereto. No substitution is permitted to be
made during the period beginning on the day after each Determination Date and
ending on the last day of the calendar month of such Determination Date.
Payments due with respect to Qualified Substitute Student Loans shall be part of
the Trust Estate on and after the date of such Assignment. Upon such
substitution, the Qualified Substitute Student Loan or Loans shall be subject to
the terms of this Agreement in all respects, and the Seller shall be deemed to
have made with respect to such Qualified Substitute Student Loan or Loans, as of
the date of substitution, the representations and warranties made pursuant to
Section 3.01 with respect to any such Student Loan. In addition, any such
substitution shall occur only upon satisfaction of each of the following
conditions on or prior to the date of the related Assignment:
(i) the Seller shall have deposited in the Collection Account all
collections in respect of the Qualified Substitute Student Loans on and
after each applicable date of Assignment;
6
<PAGE>
(ii) as of the date of the related Assignment, the Seller shall not
have been insolvent nor will it have been made insolvent by such transfer
nor is it aware of any pending insolvency;
(iii) such addition will not result in a material adverse federal or
state tax consequence to the Issuer, the Noteholders or the
Certificateholders;
(iv) the Seller shall have delivered (A) to the Rating Agencies an
Opinion of Counsel with respect to each transfer of Qualified Substitute
Student Loans, substantially in the form of the Opinion of Counsel
delivered to the Rating Agencies on the Closing Date, and (B) to the
Eligible Lender Trustee and the Indenture Trustee the Opinion of Counsel
required by Section 6.02(f)(1) hereof; PROVIDED, HOWEVER, that no opinion
shall be required under either subclause (A) or (B) unless the Seller, the
Eligible Lender Trustee or the Indenture Trustee determines that, with
regard to the most recent opinion on the matters described in either such
subclause that was delivered with respect to the Trust Loans (whether on
the Closing Date or thereafter under this subsection or under another
provision of the Basic Documents), the conclusion of, or the reasoning
underlying, such opinion is no longer correct in all material respects due
to a change in law or regulations or the ruling of a court, an
administrative tribunal or a regulatory or other governmental authority;
upon making any such determination, whichever of the Seller, the Eligible
Lender Trustee and the Indenture Trustee makes such determination shall
notify the others and the Rating Agencies; and PROVIDED, FURTHER, that
neither the Eligible Lender Trustee nor the Indenture Trustee shall have
any obligation to monitor changes in laws or regulations or the rulings of
courts or other governmental agencies for the purpose of making any
determination described in this clause (iv);
(v) the Seller shall have taken any action required to maintain the
first perfected ownership interest of the Issuer in the Trust Estate and
the first perfected security interest of the Indenture Trustee in the
Collateral;
(vi) no selection procedures believed by the Seller to be adverse to
the interests of the Noteholders or the Certificateholders shall have been
utilized in selecting the Qualified Substitute Student Loans; and
(vii) no Default or Event of Default shall have occurred under the
Indenture, no Master Servicer Default shall have occurred under the Master
Servicing Agreement and no Administrator Default shall have occurred under
the Administration Agreement.
Upon any such substitution and the deposit to the Collection Account
of the amount required to be deposited therein in connection with such
substitution as described in the following paragraph, the Eligible Lender
Trustee shall release any documentation held with respect to the Trust Loan
being substituted for (the "DELETED STUDENT LOAN") to the Seller and shall
execute and deliver at the Seller's direction such instruments of transfer or
assignment prepared by the Seller, in each case without recourse, as shall be
necessary to vest in the Seller, or (in the case of legal title thereto an
eligible lender under the Higher Education Act designated by the Seller), the
Eligible Lender Trustee's interest in any Deleted Student Loan substituted for
pursuant to this Section 3.02.
7
<PAGE>
For any month in which the Seller substitutes one or more Qualified
Substitute Student Loans for one or more Deleted Student Loans, the Master
Servicer will determine the amount (if any) by which as of the date of the
relevant Assignment the aggregate principal balance of all such Qualified
Substitute Student Loans is less than the aggregate principal balance of all
such Deleted Student Loans. The amount of such shortage (the "SUBSTITUTION
ADJUSTMENT AMOUNT") shall be deposited in the Collection Account by the Seller
on or before the date of the relevant Assignment.
SECTION 3.03. REPURCHASE DEPOSITS. The Seller shall deposit or cause to be
deposited in the Collection Account the aggregate Purchase Amount with respect
to Purchased Student Loans and all other amounts to be paid by the Seller under
Section 3.02 and Section 5.01 when such amounts are due.
ARTICLE IV
THE SELLER
SECTION 4.01. REPRESENTATIONS OF SELLER AND FNBC. The Seller represents
as set forth in Exhibit D hereto and FNBC represents as set forth in Exhibit E
hereto. Such representations speak as of the execution and delivery of this
Agreement and as of the Closing Date in the case of the Initial Trust Loans, as
of the applicable Transfer Date in the case of any Serial Loans, and as of the
date of the relevant Assignment in the case of any Qualified Substitute Student
Loans, but shall survive the sale, transfer and assignment of the Trust Loans to
the Eligible Lender Trustee on behalf of the Issuer and the pledge thereof to
the Indenture Trustee pursuant to the Indenture.
SECTION 4.02. EXISTENCE. During the term of this Agreement, the Seller
will keep in full force and effect its existence, rights and franchises as a
corporation under the laws of the jurisdiction of its incorporation and will
obtain and preserve its qualification to do business in each jurisdiction in
which such qualification is or shall be necessary to protect the validity and
enforceability of this Agreement, the other Basic Documents and each other
instrument or agreement necessary or appropriate to the proper administration of
this Agreement and the transactions contemplated hereby. In addition, all
transactions between the Seller and its Affiliates will be conducted on an
arm's-length basis. During the term of this Agreement, for so long as the Seller
shall not be an eligible lender under the Higher Education Act with respect to
federal Student Loans, the Seller agrees to keep in full force and effect an
agreement with FNBC or another eligible lender under the Higher Education Act
providing for such eligible lender meeting the requirements set forth in the
following sentence to hold title to the Seller's Student Loans in trust for and
on behalf of the Seller. The Seller shall not convey any Serial Loan or
Qualified Substitute Student Loan if the eligible lender holding legal title to
such loan is other than FNBC unless, prior to such conveyance, such other
eligible lender shall agree in writing to be bound, in the conveyance of each
such loan for which it acts as eligible lender, by the provisions of this
Agreement that are applicable to FNBC, to the same extent as if it were named
separately from FNBC in each of such provisions.
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SECTION 4.03. LIABILITY OF SELLER; INDEMNITIES. The Seller shall be
liable in accordance herewith only to the extent of the obligations specifically
undertaken by the Seller under this Agreement.
(a) The Seller shall indemnify, defend and hold harmless the Issuer,
the Eligible Lender Trustee, the Indenture Trustee and their officers,
directors, employees and agents from and against any taxes that may at any time
be asserted against any such Person with respect to the transactions
contemplated herein and in the other Basic Documents (except any such income
taxes arising out of fees paid to the Eligible Lender Trustee or the Indenture
Trustee), including any sales, gross receipts, general corporation, tangible
personal property, privilege or license taxes (but, in the case of the Issuer,
not including taxes in connection with the issuance and original sale of the
Notes and the Certificates or asserted with respect to ownership of the Trust
Loans or federal or other income taxes arising out of payments on the Notes and
the Certificates) and costs and expenses in defending against the same.
(b) The Seller shall indemnify, defend and hold harmless the Issuer,
the Eligible Lender Trustee, the Indenture Trustee and the Noteholders, the
Certificateholders and the officers, directors, employees and agents of the
Issuer, the Eligible Lender Trustee and the Indenture Trustee from and against
any and all costs, expenses, losses, claims, damages and liabilities arising out
of, or imposed upon such Person through, the Seller's willful misfeasance, bad
faith or negligence in the performance of its duties under this Agreement, or by
reason of reckless disregard of its obligations and duties under this Agreement
and (ii) the Seller's or the Issuer's violation of federal or state securities
laws in connection with the offering and sale of the Notes and the Certificates.
(c) The Seller shall be liable as primary obligor for, and shall
indemnify, defend and hold harmless the Eligible Lender Trustee and its
officers, directors, employees and agents from and against, all costs, expenses,
losses, claims, damages, obligations and liabilities arising out of, incurred in
connection with or relating to the Trust Agreement, the other Basic Documents,
the Trust Estate, the acceptance or performance of the trusts and duties set
forth herein and in the Trust Agreement or the action or the inaction of the
Eligible Lender Trustee hereunder and under the Trust Agreement, except to the
extent that such cost, expense, loss, claim damage, obligation or liability: (i)
shall be due to the willful misfeasance, bad faith or negligence (except for
errors in judgment) of the Eligible Lender Trustee , (ii) shall arise from any
breach by the Eligible Lender Trustee of its covenants under any of the Basic
Documents; or (iii) shall arise from the breach by the Eligible Lender Trustee
of any of its representations or warranties set forth in Section 7.03 of the
Trust Agreement. In the event of any claim, action or proceeding for which
indemnity will be sought pursuant to this paragraph, the Eligible Lender
Trustee's choice of legal counsel shall be subject to the approval of the
Seller, which approval shall not be unreasonably withheld.
(d) The Seller shall pay any and all taxes levied or assessed upon all
or any part of the Trust Estate (other than those taxes expressly excluded from
the Seller's responsibilities pursuant to the parentheticals in paragraph (a)
above).
Indemnification under this Section shall survive the resignation or
removal of the Eligible Lender Trustee or the Indenture Trustee and the
termination of this Agreement or the
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Indenture or the Trust Agreement, as applicable, and shall include reasonable
fees and expenses of counsel and expenses of litigation. If the Seller shall
have made any indemnity payments pursuant to this Section and the Person to or
on behalf of whom such payments are made thereafter shall collect any of such
amounts from others, such Person shall promptly repay such amounts to the
Seller, without interest.
SECTION 4.04. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, SELLER OR FNBC. Any person (a) into which the Seller or FNBC may
be merged or consolidated, (b) which may result from any merger or consolidation
to which the Seller or FNBC shall be a party or (c) which may succeed to the
properties and assets of the Seller or FNBC substantially as a whole, shall be
the successor to the Seller or FNBC, respectively, without the execution or
filing of any document or any further act by any of the parties to this
Agreement; PROVIDED, HOWEVER, that the Seller hereby covenants that it will not
consummate any of the foregoing transactions except upon satisfaction of the
following: (i) the surviving Seller, if other than Nellie Mae Education Loan
Corporation, executes an agreement of assumption to perform every obligation of
the Seller under this Agreement, (ii) immediately after giving effect to such
transaction, no representation or warranty made pursuant to Section 3.01 or 4.01
shall have been breached and no Master Servicer Default, Event of Default or
Administrator Default and no event that, after notice or lapse of time, or both,
would become a Master Servicer Default, Event of Default or Administrator
Default shall have occurred and be continuing, (iii) the Seller shall have
delivered to the Eligible Lender Trustee and the Indenture Trustee an Officers'
Certificate and an Opinion of Counsel each stating that such consolidation,
merger or succession and such agreement of assumption comply with this Section
and that all conditions precedent, if any, provided for in this Agreement
relating to such transaction have been complied with, and that the Rating Agency
Condition shall have been satisfied with respect to such transaction, (iv) the
surviving Seller shall have a consolidated net worth at least equal to that of
the predecessor Seller, (v) such transaction will not result in a material
adverse federal or state tax consequence to the Issuer, the Noteholders or the
Certificateholders and (vi) unless Nellie Mae Education Loan Corporation is the
surviving entity, the Seller shall have delivered to the Eligible Lender Trustee
and the Indenture Trustee an Opinion of Counsel either (A) stating that, in the
opinion of such counsel, all financing statements and continuation statements
and amendments thereto have been executed and filed that are necessary fully to
preserve and protect the interest of the Eligible Lender Trustee and the
Indenture Trustee, respectively, in the Trust Loans and reciting the details of
such filings, or (B) stating that, in the opinion of such counsel, no such
action shall be necessary to preserve and protect such interests; and PROVIDED,
FURTHER, that FNBC hereby covenants that, unless FNBC is the surviving entity,
it will not consummate any of the foregoing transactions unless FNBC shall have
delivered to the Eligible Lender Trustee and the Indenture Trustee an Opinion of
Counsel either (A) stating that, in the opinion of such counsel, all financing
statements and continuation statements and amendments thereto have been executed
and filed that are necessary fully to preserve and protect the interest of the
Eligible Lender Trustee and Indenture Trustee, respectively, in the Trust Loans
and reciting the details of such filings, or (B) stating that, in the opinion of
such counsel, no such action shall be necessary to preserve and protect such
interests.
SECTION 4.05. LIMITATION ON LIABILITIES OF SELLER, FNBC AND OTHERS. The
Seller, FNBC and any director or officer or employee or agent of the Seller or
FNBC may rely in good faith on the advice of counsel or on any document of any
kind, PRIMA FACIE properly
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executed and submitted by any Person respecting any matters arising hereunder;
PROVIDED, HOWEVER, that such reliance shall not limit in any way the Seller's
obligations under Section 3.02. Neither the Seller nor FNBC shall be under any
obligation to appear in, prosecute or defend any legal action that shall not be
incidental to its respective obligations under this Agreement and that, in its
opinion, may involve it in any expense or liability.
SECTION 4.06. SELLER AND FNBC MAY OWN NOTES AND CERTIFICATES. The Seller, FNBC
and any Affiliate of either may in its individual or any other capacity become
the owner or pledgee of Notes and Certificates with the same rights as it would
have if it were not the Seller or FNBC or an Affiliate of either, as the case
may be, except as expressly provided herein or in any other Basic Document.
ARTICLE V
TERMINATION
SECTION 5.01. OPTIONAL PURCHASE OF ALL TRUST LOANS. As of the last day
of any Collection Period immediately preceding a Quarterly Payment Date as of
which the then outstanding Pool Balance is 10% or less of the Initial Pool
Balance, the Company or its designee shall have the option to purchase the Trust
Estate, other than the Trust Accounts. To exercise such option, the Company or
its designee shall deposit in the Collection Account an amount (the "MINIMUM
PURCHASE PRICE") equal to the greater of (i) the aggregate Purchase Amounts for
the Trust Loans as of the Collection Period immediately preceding such Quarterly
Payment Date and (ii) an amount that would be sufficient to (a) reduce the
outstanding principal amount of the Notes on such Quarterly Payment Date to
zero, (b) pay to the Noteholders the Noteholders' Interest Distribution Amount
payable on such Quarterly Payment Date, (c) reduce the Certificate Balance on
such Quarterly Payment Date to zero, (d) pay to the Certificateholders the
Certificateholders' Return Distribution Amount payable on such Quarterly Payment
Date and (e) pay to the Administrator and the Master Servicer all amounts owed
to them under the Basic Documents; and the related rights with respect thereto,
plus the appraised value of any such other property held by the Trust other than
the Trust Accounts, such value to be determined by an appraiser mutually agreed
upon by the Master Servicer, the Eligible Lender Trustee and the Indenture
Trustee, and shall succeed to all interests in and to the Trust; PROVIDED,
HOWEVER, that the Company or its designee may not effect such purchase if the
aggregate Purchase Amount to be so deposited in the Collection Account does not
equal or exceed an amount equal to the unpaid principal balance of the Notes,
plus accrued and unpaid interest thereon at the applicable Note Interest Rate to
the date of exercise, and the amount of unpaid Class A-1 Noteholders' Interest
Basis Carryover and Class A-2 Noteholders' Interest Basis Carryover, an amount
equal to the Certificate Balance, plus accrued and unpaid interest thereon at
the Certificate Interest Rate to the date of exercise, and the amount of unpaid
Certificateholders' Return Carryover.
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ARTICLE VI
Miscellaneous
SECTION 6.01. AMENDMENT. This Agreement may be amended by the Seller,
FNBC and the Eligible Lender Trustee, with the consent of the Indenture Trustee,
but without the consent of any of the Noteholders or the Certificateholders, to
cure any ambiguity, to correct or supplement any provisions in this Agreement or
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions in this Agreement or of modifying in any
manner the rights of the Noteholders or the Certificateholders; PROVIDED,
HOWEVER, that such action shall not, as evidenced by an Opinion of Counsel
delivered to the Eligible Lender Trustee and the Indenture Trustee, adversely
affect in any material respect the interests of any Securityholder.
This Agreement may also be amended from time to time by the Seller and
the Eligible Lender Trustee, with the consent of FNBC, the Indenture Trustee,
the Noteholders of Notes evidencing not less than a majority of the Outstanding
Amount of the Notes and the Certificateholders of Certificates evidencing not
less than a majority of the Certificate Balance, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of the Noteholders or
the Certificateholders; PROVIDED, HOWEVER, that no such amendment shall (a)
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments with respect to the Trust Loans or
distributions that shall be required to be made for the benefit of the
Noteholders or the Certificateholders or (b) reduce the aforesaid percentage of
the Outstanding Amount of the Notes or the Certificate Balance, the Noteholders
or the Certificateholders of which are required to consent to any such
amendment, without the consent of all Noteholders of Outstanding Notes and all
Certificateholders of Outstanding Certificates.
Promptly after the execution of any such amendment or consent (or, in
the case of the Rating Agencies, five Business Days prior thereto), the Eligible
Lender Trustee shall furnish written notification of the substance of such
amendment or consent to FNBC, the Seller, the Administrator, each Noteholder,
each Certificateholder, the Indenture Trustee and the Master Servicer.
It shall not be necessary for the consent of Noteholders or
Certificateholders pursuant to this Section to approve the particular form of
any proposed amendment or consent, but it shall be sufficient if such consent
shall approve the substance thereof.
Prior to the execution of any amendment to this Agreement, the Eligible
Lender Trustee and the Indenture Trustee shall receive upon request and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement and the Opinion of Counsel referred to
in Section 6.02(f). The Eligible Lender Trustee and the Indenture Trustee may,
but shall not be obligated to, enter into any such amendment which affects the
Eligible Lender Trustee's or the Indenture Trustee's, as applicable, own rights,
duties or immunities under this Agreement or otherwise.
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SECTION 6.02. PROTECTION OF INTERESTS IN TRUST. (a) Each of the Seller
and FNBC shall execute and file such financing statements and cause to be
executed and filed such continuation statements, all in such manner and in such
places as may be required by law fully to preserve, maintain, and protect the
interest of the Issuer, the Eligible Lender Trustee and the Indenture Trustee in
the Trust Loans and in the proceeds thereof. Each of the Seller and FNBC shall
deliver (or cause to be delivered) to the Eligible Lender Trustee and the
Indenture Trustee file-stamped copies of, or filing receipts for, any document
filed as provided above, as soon as available following such filing.
(b) Neither the Seller nor FNBC shall change its name, identity or
corporate structure in any manner that would, could, or might make any financing
statement or continuation statement filed in accordance with paragraph (a) above
seriously misleading within the meaning of ss.9-402(7) of the UCC, unless it
shall have given the Eligible Lender Trustee and the Indenture Trustee at least
five (5) days' prior written notice thereof and shall have promptly filed
appropriate amendments to all previously filed financing statements or
continuation statements.
(c) Each of the Seller and FNBC shall have an obligation to give the
Eligible Lender Trustee, the Indenture Trustee and the Rating Agencies at least
sixty (60) days prior written notice of any relocation of its principal
executive office if, as a result of such relocation, the applicable provisions
of the UCC would require the filing of any amendment of any previously filed
financing or continuation statement or of any new financing statement and shall
promptly file any such amendment.
(d) If at any time the Seller or FNBC shall propose to sell, grant a
security interest in, or otherwise transfer any interest in student loans to any
prospective purchaser, lender or other transferee, the Seller or FNBC, as the
case may be, shall give to such prospective purchaser, lender or other
transferee computer tapes, records or printouts (including any restored from
backup archives) that, if they shall refer in any manner whatsoever to any Trust
Loan, shall indicate clearly that such Trust Loan has been sold and is owned by
the Issuer (and, with respect to legal title thereto, by the Eligible Lender
Trustee on behalf of the Issuer) and has been pledged to the Indenture Trustee.
(e) The Seller shall, to the extent required by applicable law, cause
the Notes to be registered with the Commission pursuant to Section 12(b) or
Section 12(g) of the Exchange Act within the time periods specified in such
sections.
(f) The Seller shall deliver to the Eligible Lender Trustee and the
Indenture Trustee:
(1) promptly after the execution and delivery of this Agreement and of
each amendment thereto, on each Transfer Date as set forth in Section 2.02
and on the date of each Assignment as set forth in Section 3.02, an Opinion
of Counsel either (A) stating that, in the opinion of such counsel, all
financing statements and continuation statements have been executed and
filed that are necessary fully to preserve and protect the interest of the
Eligible Lender Trustee and the Indenture Trustee in the Trust Loans, and
reciting the details of such filings or referring to prior Opinions of
Counsel in which such details
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are given, or (B) stating that, in the opinion of such counsel, no such
action shall be necessary to preserve and protect such interest; and
(2) within 120 days after the beginning of each calendar year beginning
with the first calendar year beginning more than three months after the
Cutoff Date, an Opinion of Counsel, dated as of a date during such 120-day
period, either (A) stating that, in the opinion of such counsel, all
financing statements and continuation statements have been executed and
filed that are necessary fully to preserve and protect the interest of the
Eligible Lender Trustee and the Indenture Trustee in the Trust Loans, and
reciting the details of such filings or referring to prior Opinions of
Counsel in which such details are given, or (B) stating that, in the
opinion of such counsel, no such action shall be necessary to preserve and
protect such interest; PROVIDED, HOWEVER, that a single Opinion of Counsel
may be delivered in satisfaction of the foregoing requirement and that of
Section 3.06(b) of the Indenture.
Each Opinion of Counsel referred to in clause (1) or (2) above shall
specify (as of the date of such opinion and given all applicable laws as in
effect on such date) any action necessary to be taken in the following year to
preserve and protect such interest.
SECTION 6.03. NOTICES. Unless otherwise agreed by the recipient, all
demands, notices and communications upon or to the Seller, FNBC, the Master
Servicer, the Issuer, the Eligible Lender Trustee, the Indenture Trustee, the
Administrator or the Rating Agencies under this Agreement shall be in writing,
personally delivered or mailed by certified mail, return receipt requested (or
in the form of telex or facsimile notice, followed by written notice delivered
as aforesaid or postage prepaid, first class mail), and shall be deemed to have
been duly given upon receipt;
(a) in the case of the Seller, to
Nellie Mae Education Loan Corporation
1240 Pawtucket Avenue
Rumford, Rhode Island 02916
Attention: Secretary
Telephone: 401-438-4500
Telecopy:
with a copy to
Nellie Mae Corporation
50 Braintree Hill Park, Suite 300
Braintree, Massachusetts 01284
Telephone: 781-849-2121
Telecopy: 781-380-3915
(b) in the case of FNBC, to
The First National Bank of Chicago
One First National Plaza
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Chicago, Illinois 60670
Telephone:
Telecopy:
(c) in the case of the Master Servicer, to
Nellie Mae Education Loan Corporation
1240 Pawtucket Avenue
Rumford, Rhode Island 02916
Attention: Secretary
Telephone: 401-438-4500
Telecopy:
with a copy to
Nellie Mae Corporation
50 Braintree Hill Park, Suite 300
Braintree, Massachusetts 01284
Telephone: 781-849-2121
Telecopy: 781-380-3915
(d) in the case of the Issuer, to
Nellie Mae Student Loan Trust 1999-A
c/o First Chicago Delaware, Inc.
c/o FCC National Bank
300 King Street
Wilmington, Delaware 19801
Telephone:
Telecopy
with a copy to the Eligible Lender Trustee
at the Corporate Trust Office of the
Eligible Lender Trustee;
(e) in the case of the Issuer or the Eligible Lender
Trustee, at the Corporate Trust Office of the
Eligible Lender Trustee;
(f) in the case of the Indenture Trustee, at its Corporate Trust
Office;
(g) in the case of the Administrator, to
Nellie Mae Education Loan Corporation
1240 Pawtucket Avenue
Rumford, Rhode Island 02916
Attention: Secretary
Telephone: 401-438-4500
Telecopy:
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with a copy to
Nellie Mae Corporation
50 Braintree Hill Park, Suite 300
Braintree, Massachusetts 01284
Telephone: 781-849-2121
Telecopy: 781-380-3915
(h) in the case of Fitch, to
Fitch IBCA, Inc.
One State Street Plaza
New York, New York 10004
Attention:
Telephone:
Telecopy:
(i) in the case of Moody's, to
Moody's Investors Service, Inc.
99 Church Street
New York, New York 10017
Attention:
Telephone:
Telecopy:
(j) in the case of Standard & Poor's, to
Standard & Poor's Rating Services
55 Water Street, 40th Floor
New York, New York 10041
Attention:
Telephone:
Telecopy:
or, as to each of the foregoing, at such other address as shall be designated by
written notice to the other parties.
SECTION 6.04. ASSIGNMENT. Notwithstanding anything to the contrary
contained herein, except as provided in Section 4.04, this Agreement may not be
assigned by the Seller or FNBC. This Agreement may be assigned by the Eligible
Lender Trustee only to its permitted successor pursuant to the Trust Agreement.
SECTION 6.05. LIMITATIONS ON RIGHTS OF OTHERS. The provisions of this
Agreement are solely for the benefit of the Seller, FNBC, the Issuer and the
Eligible Lender Trustee and for the benefit of the Indenture Trustee, the
Noteholders, the Certificateholders and (with respect to Section 5.01) the
Company or its designee, as third party beneficiaries, and
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nothing in this Agreement, whether express or implied, shall be construed to
give to any other Person any legal or equitable right, remedy or claim in the
Trust Estate or under or in respect of this Agreement or any covenants,
conditions or provisions contained herein.
SECTION 6.06. SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 6.07. SEPARATE COUNTERPARTS. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 6.08. HEADINGS. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 6.09. GOVERNING LAW. This Agreement shall be construed in
accordance with the laws of the State of New York, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 6.10. ASSIGNMENT TO INDENTURE TRUSTEE. The Seller hereby
acknowledges and consents to any mortgage, pledge, assignment and grant by the
Issuer to the Indenture Trustee pursuant to the Indenture for the benefit of the
Noteholders of a security interest in all right, title and interest of the
Issuer in, to and under the Trust Loans or the assignment of any or all of the
Issuer's rights and obligations hereunder to the Indenture Trustee.
SECTION 6.11. NON-PETITION COVENANTS. Notwithstanding any prior
termination of this Agreement, neither the Seller nor FNBC shall, prior to the
date which is one year and one day after the termination of this Agreement with
respect to the Issuer or the Company, acquiesce, petition or otherwise invoke or
cause the Issuer to invoke the process of any court or government authority for
the purpose of commencing or sustaining a case against the Issuer under any
federal or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Issuer or any substantial part of its property, or ordering the winding
up or liquidation of the affairs of the Issuer or the Company.
SECTION 6.12. LIMITATION OF LIABILITY OF FNBC, ELIGIBLE LENDER TRUSTEE
AND INDENTURE TRUSTEE. (a) Notwithstanding anything contained herein to the
contrary, this Agreement has been signed by FNBC not in its individual capacity
but solely in its capacity as trustee for the Seller and in no event shall FNBC
in its individual capacity or, except as expressly provided herein or in the
trust agreement between Seller and FNBC dated ______ __, 1999, as legal owner of
the Trust Loans, have any liability for representations, warranties, covenants,
agreements or other obligations of the Seller hereunder or in any of the
certificates, notices or
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agreements delivered by the Seller pursuant hereto as to all of which recourse
shall be had solely against the Seller.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been signed by The First National Bank of Chicago not in its
individual capacity but solely in its capacity as trustee for Nellie Mae
Education Loan Corporation and in its capacity as Eligible Lender Trustee of the
Issuer and in no event shall The First National Bank of Chicago in its
individual capacity or, except as expressly provided in the Trust Agreement, as
beneficial owner of the Issuer have any liability for the representations,
warranties, covenants, agreements or other obligations of the Issuer hereunder
or in any of the certificates, notices or agreements delivered pursuant hereto
as to all of which recourse shall be had solely to the assets of the Issuer.
(c) Notwithstanding anything contained herein to the contrary, this
Agreement has been accepted by State Street Bank and Trust Company not in its
individual capacity but solely as Indenture Trustee and in no event shall State
Street Bank and Trust Company have any liability for the representations,
warranties, covenants, agreements or other obligations of the Issuer hereunder
or in any of the certificates, notices or agreements delivered pursuant hereto,
as to all of which recourse shall be had solely to the assets of the Issuer.
SECTION 6.13. AGREEMENT OF SELLER AND FNBC. Each of the Seller and FNBC
agrees to execute and deliver such instruments and to take such actions as the
Eligible Lender Trustee, the Issuer or the Indenture Trustee may reasonably
request in order to effectuate the terms and carry out the purposes of this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective officers as of the day and
year first above written.
NELLIE MAE STUDENT LOAN TRUST 1999-A
By: The First National Bank of Chicago, not
in its individual capacity but solely as
Eligible Lender Trustee on behalf of the
Trust
By:
------------------------------------
Name:
Title:
NELLIE MAE EDUCATION LOAN CORPORATION
By:
--------------------------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual capacity but solely as
eligible lender trustee for Nellie Mae Education
Loan Corporation
By:
--------------------------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual capacity but
solely as Eligible Lender Trustee
for the Trust
By:
--------------------------------------------
Name:
Title:
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Acknowledged and accepted as of the day
and year first above written:
STATE STREET BANK AND TRUST COMPANY,
not in its individual capacity but
solely as Indenture Trustee
By:
--------------------------------
Name:
Title:
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EXHIBIT A
TO THE LOAN SALE AGREEMENT
BILL OF SALE
For value received, in accordance with the Loan Sale Agreement (the
"LOAN SALE AGREEMENT") dated as of ____ 1, 1999, among Nellie Mae Education Loan
Corporation, as seller (the "SELLER"), Nellie Mae Student Loan Trust 1999-A (the
"TRUST"), The First National Bank of Chicago, not in its individual capacity but
solely as trustee for the Seller ("FNBC"), and The First National Bank of
Chicago, not in its individual capacity but solely as Eligible Lender Trustee
(the "ELIGIBLE LENDER TRUSTEE"), the Seller (and, with respect to legal title to
the Initial Trust Loans, FNBC as trustee on behalf of the Seller) does hereby
sell, assign, transfer and otherwise convey unto the Issuer and, with respect to
legal title, unto the Eligible Lender Trustee on behalf of the Trust, without
recourse (subject to the obligations set forth in the Loan Sale Agreement), all
right, title and interest in and to (i) the Initial Trust Loans and all
obligations of the Obligors thereunder, together with all documents, the related
Student Loan Files and all rights and privileges related thereto, (ii) all
payments and/or collections received thereunder on and after the Cutoff Date,
(iii) all funds on deposit from time to time in the Trust Accounts, including
the Reserve Account Initial Deposit, and in all investments and proceeds thereof
(including all income thereon) and (iv) all proceeds of any and all of the
foregoing (including but not limited to proceeds derived from the voluntary or
involuntary conversion of any of the Initial Trust Loans into cash or other
liquidated property, such as proceeds from the applicable Guarantee Agreement).
The foregoing sale does not constitute and is not intended to result in any
assumption by the Eligible Lender Trustee or the Trust of any obligation of the
Seller or FNBC to the borrowers of Initial Trust Loans or any other Person in
connection with the Initial Trust Loans or any agreement or instrument relating
to any of them.
In addition, the undersigned, by execution of this instrument, hereby
endorses the promissory notes evidencing each Initial Trust Loan described in
Schedule A to the Loan Sale Agreement in favor of the Eligible Lender Trustee on
behalf of the Trust, without recourse (subject to the obligations set forth in
the Loan Sale Agreement) against the undersigned. This endorsement may be
effected by attaching a facsimile hereof to each or any of such promissory
notes.
This Bill of Sale is made pursuant to and upon the representations,
warranties and agreements on the part of the undersigned contained in the Loan
Sale Agreement and is to be governed by the Loan Sale Agreement.
Capitalized terms used but not defined herein shall have the meaning
assigned to them in Appendix A to the Administration Agreement, dated as of ____
1, 1999, among Nellie Mae Student Loan Trust 1999-A, as Issuer, Nellie Mae
Education Loan Corporation, as Administrator, and State Street Bank and Trust
Company, as Indenture Trustee, which also contains rules as to usage that shall
be applicable herein.
A-1
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Bill of Sale to be
duly executed as of ____ 1, 1999.
NELLIE MAE EDUCATION LOAN CORPORATION
By:
------------------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO,
not in its
individual capacity but
solely as eligible lender
trustee for Nellie Mae
Education Loan Corporation
By:
-----------------------------------
Name:
Title:
A-2
<PAGE>
EXHIBIT B
TO THE
LOAN SALE AGREEMENT
TRANSFER AGREEMENT
TRANSFER No. _____ of SERIAL LOANS dated as of ________ __,
____, among NELLIE MAE STUDENT LOAN TRUST 1999-A, a Delaware trust (the
"ISSUER"), NELLIE MAE EDUCATION LOAN CORPORATION, as seller (the "SELLER"), THE
FIRST NATIONAL BANK OF CHICAGO*, not in its individual capacity but solely as
eligible lender trustee of the Seller ("FNBC"), and THE FIRST NATIONAL BANK OF
CHICAGO, a national banking association, not in its individual capacity but
solely as Eligible Lender Trustee of the Issuer (the "ELIGIBLE LENDER TRUSTEE").
W I T N E S S E T H:
WHEREAS the Issuer, the Seller, FNBC and the Eligible Lender
Trustee are parties to the Loan Sale Agreement dated as of _____ 1, 1999 (as
amended or supplemented, the "LOAN SALE AGREEMENT"); and
WHEREAS the Seller, as depositor, and the Eligible Lender
Trustee are parties to the Trust Agreement dated as of _____ __, 1999 (as
amended or supplemented, the "TRUST AGREEMENT"); and
WHEREAS pursuant to the Loan Sale Agreement, the Seller wishes
to convey the Serial Loans referred to in Section 2 (the "ADDITIONAL TRUST
LOANS") to the Eligible Lender Trustee on behalf of the Issuer; and
WHEREAS in order to comply with the requirements of the Higher
Education Act, legal title to the Seller's student loan portfolio is vested in
FNBC, as trustee on behalf of the Seller as the sole beneficiary; and
WHEREAS, the Eligible Lender Trustee and the Issuer are
willing to accept such conveyance subject to the terms and conditions hereof.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. DEFINITIONS AND USAGE. Unless otherwise defined herein,
capitalized terms used herein shall have the meanings ascribed to them in
Appendix A to the Administration
- --------------------------------
* FNBC shall be replaced as a party to any Transfer Agreement by any other
eligible lender trustee under the Higher Education Act that is acting as
trustee for the Seller with respect to the Serial Loans being conveyed
pursuant to such Transfer Agreement.
B-1
<PAGE>
Agreement, dated as of _______ 1, 1999, among the Issuer, the Seller, as
Administrator, and State Street Bank and Trust Company, as Indenture Trustee,
which also contains rules of construction and usage that shall be applicable
herein.
In addition, the following terms have the following meanings:
"SUBSEQUENT CUTOFF DATE" means, with respect to each
Additional Student Loan, the date specified as such on Schedule A
hereto.
"TRANSFER DATE" means, with respect to the Additional Student
Loans, ___________ __, _______.
2. SCHEDULE OF ADDITIONAL TRUST LOANS. Attached hereto as
Schedule A is a supplement to Schedule A to the Loan Sale Agreement listing the
Additional Trust Loans to be conveyed on the Transfer Date to the Eligible
Lender Trustee on behalf of the Issuer pursuant to this Agreement.
3. CONVEYANCE OF ADDITIONAL TRUST LOANS. In consideration of
Issuer's delivery to or upon the order of the Seller of $___________ such amount
being the sum of (i) the Purchase Collateral Balance ($_____) to be paid from
amounts on deposit in the Collection Account and (ii) the Purchase Premium
Amount ($_____) to be paid on the immediately subsequent Quarterly Payment Date
from amounts on deposit in the Reserve Fund in excess of the Specified Reserve
Account Balance subject to Section 2.02(b) of the Loan Sale Agreement and
Section 2(e) of the Administration Agreement, the Seller (and, with respect to
legal title to the Additional Trust Loans, FNBC as trustee on behalf of the
Seller) does hereby sell, assign and otherwise convey, without recourse (except
as expressly provided in the Loan Sale Agreement), to the Eligible Lender
Trustee on behalf of the Issuer:
(a) all right, title and interest in and to the Additional
Trust Loans and all obligations of the Obligors thereunder, together
with all documents, the related Student Loan Files and all rights and
privileges relating thereto;
(b) all payments on or collections received thereunder, on and
after the related Subsequent Cutoff Date;
(c) all proceeds of any and all of the foregoing.
4. CONDITIONS PRECEDENT. The obligation of the Issuer to
acquire the Additional Trust Loans hereunder is subject to the satisfaction, on
or prior to the Transfer Date, of the following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties made by the Seller in Sections 3.01 and
4.01 of the Loan Sale Agreement and by FNBC in Section 4.01 of the
Loan Sale Agreement shall be true and correct as of the Transfer Date.
(b) LOAN SALE AGREEMENT CONDITIONS. Each of the conditions set
forth in Section 2.02(c) (and, if the trustee for the Seller with
respect to the Additional Trust
B-2
<PAGE>
Loans is other than FNBC, in Section 4.02) of the Loan Sale Agreement
shall have been satisfied.
(c) DELIVERY OF BILL OF SALE. The Seller and FNBC shall have
delivered a Bill of Sale substantially in the form of Annex A hereto.
(d) ADDITIONAL INFORMATION. The Seller and FNBC shall have
delivered to the Issuer such information as was reasonably requested
by the Issuer (such reasonableness to be determined solely by the
Seller) to satisfy itself as to (a) the accuracy of the
representations and warranties set forth in Sections 3.01 and 4.01 of
the Loan Sale Agreement and (ii) the satisfaction of the conditions
set forth in this Section 4.
5. RATIFICATION OF AGREEMENT. As supplemented by this
Agreement, the Loan Sale Agreement is in all respects ratified and confirmed and
the Loan Sale Agreement as so supplemented by this Agreement shall be read,
taken and construed as one and the same instrument.
6. THIRD-PARTY BENEFICIARY. The Indenture Trustee is an
express third-party beneficiary and may enforce the provisions of this Agreement
as if it were a party hereto.
7. COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which together shall constitute but one and the same instrument.
8. GOVERNING LAW. This Agreement shall be construed in
accordance with the laws of the State of New York, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
9. HEADINGS. The section headings hereof have been inserted
for convenience of reference only and shall not be construed to affect the
meaning, construction or effect of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their respective duly authorized
officers as of the day and the year first above written.
NELLIE MAE STUDENT LOAN TRUST 1999-A
By: THE FIRST NATIONAL BANK OF
CHICAGO, not in its individual capacity
but solely as Eligible Lender Trustee on
behalf of the Trust
By:
----------------------------------------
Name:
Title:
B-3
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual capacity but solely as
Eligible Lender Trustee
By:
---------------------------
Name:
Title:
NELLIE MAE EDUCATION LOAN CORPORATION, Seller
By:
---------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual
capacity but solely as
trustee for Nellie Mae
Education Loan Corporation.
By:
---------------------------
Name:
Title:
Acknowledged and accepted as
of the date first above written:
STATE STREET BANK AND TRUST COMPANY,
not in its individual capacity but solely as
Indenture Trustee
By:
-------------------------------------
Name:
Title:
B-4
<PAGE>
SCHEDULE A
TO THE TRANSFER AGREEMENT NO. ___
[List of Additional Trust Loans
and their related Subsequent Cutoff Dates]
B-5
<PAGE>
ANNEX A
TO THE TRANSFER AGREEMENT
BILL OF SALE
For value received, in accordance with the Loan Sale Agreement (the
"LOAN SALE AGREEMENT") dated as of _____ __, 1999, among Nellie Mae Education
Loan Corporation, as seller (the "SELLER"),The First National Bank of Chicago,
not in its individual capacity but solely as trustee for the Seller ("FNBC"),
Nellie Mae Student Loan Trust 1999-A (the "TRUST") and The First National Bank
of Chicago, not in its individual capacity but solely as Eligible Lender Trustee
for the Trust (the "ELIGIBLE LENDER TRUSTEE") [and as ratified by [name of
eligible lender if other than FNBC with respect to the Additional Trust Loans]
pursuant to Section 4.02 of the Loan Sale Agreement] and the Transfer Agreement
No. ____ dated as of ______ __, ____ (the "TRANSFER AGREEMENT") among the
Seller, FNBC, the Trust and the Eligible Lender Trustee, the Seller (and, with
respect to legal title to the Additional Trust Loans, FNBC as trustee on behalf
of the Seller) does hereby sell, assign, transfer and otherwise convey unto the
Issuer and, with respect to legal title, unto the Eligible Lender Trustee on
behalf of the Trust, without recourse (subject to the obligations set forth in
the Loan Sale Agreement), all right, title and interest in and to (i) the
Additional Trust Loans and all obligations of the Obligors thereunder, together
with all documents, the related Student Loan Files and all rights and privileges
related thereto, (ii) all payments and collections received thereunder, on and
after the Subsequent Cutoff Date and (iii) all proceeds of any and all of the
foregoing (including but not limited to proceeds derived from the voluntary or
involuntary conversion of any of the Additional Trust Loans into cash or other
liquidated property, such as proceeds from the applicable Guarantee Agreement).
The foregoing sale does not constitute and is not intended to result in any
assumption by the Eligible Lender Trustee or the Trust of any obligation of the
Seller or FNBC to the borrowers of the Additional Trust Loans or any other
person in connection with the Additional Trust Loans or any agreement or
instrument relating to any of them.
In addition, the undersigned, by execution of this instrument, hereby
endorses the promissory notes evidencing each Additional Trust Loan described in
Schedule A to the Transfer Agreement in favor of the Eligible Lender Trustee on
behalf of the Trust, without recourse (subject to the obligations set forth in
the Loan Sale Agreement) against the undersigned. This endorsement may be
effected by attaching a facsimile hereof to each or any of such promissory
notes.
This Assignment is made pursuant to and upon the representations,
warranties and agreements on the part of the undersigned contained in the Loan
Sale Agreement and the Transfer Agreement and is to be governed by the Loan Sale
Agreement and the Transfer Agreement.
Capitalized terms used but not defined herein shall have the meanings
assigned to them in the Transfer Agreement.
B-6
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Bill of
Sale to be duly executed as of _____ ___, _____.
NELLIE MAE EDUCATION LOAN CORPORATION, as Seller
By:
----------------------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual
capacity but solely as
eligible lender trustee for
Nellie Mae Education
Loan Corporation
By:
----------------------------------------
Name:
Title:
B-7
<PAGE>
EXHIBIT C
TO THE LOAN SALE AGREEMENT
1. CHARACTERISTICS OF THE TRUST LOANS. Each Trust Loan (A) was
originated in the United States of America, its territories, its possessions or
other areas subject to its jurisdiction by an "eligible lender" under the Higher
Education Act in the ordinary course of its business to an eligible borrower
under applicable law and agreements and was fully and properly executed by the
parties thereto, (B) was acquired or originated by the Seller in the ordinary
course of its business, (C) provides or, when the payment schedule with respect
thereto is determined, will provide for payments on a periodic basis that fully
amortizes the principal amount of such Trust Loan by its maturity, as such
maturity may be modified in accordance with any applicable deferral or
forbearance periods granted in accordance with applicable laws and restrictions,
including those of the Higher Education Act or the applicable Guarantee
Agreement, and yield interest at the rate applicable thereto, and (D) provides
that the rights with respect thereto are assignable by the lender thereunder and
its assignees without the consent of or notice to any person other than as may
be required by the Higher Education Act and such notice has been or will be
given. Each Trust Loan is guaranteed by an eligible guarantor under the Higher
Education Act and qualifies the holder thereof to receive Interest Subsidy
Payments (other than SLS Loans, unsubsidized Stafford Loans, and those
Consolidation Loans for which the related loan application was submitted prior
to January 1, 1993) and Special Allowance Payments from the Department and
Guarantee Payments from the Guarantor and qualifies the Guarantor to receive
reinsurance payments thereon from the Department. [If such Trust Loan is a
Qualified Substitute Loan and is guaranteed by an Additional Guarantor, the
aggregate principal balance of all Trust Loans guaranteed by such Additional
Guarantor (measured as of the Subsequent Cutoff Date for such Trust Loan)
following the addition of such Trust Loan to the Trust, did not exceed 5% of the
principal balance of all Trust Loans as of such date, and the aggregate
principal balance of all Trust Loans guaranteed by all Additional Guarantors
measured as of such date, following such addition, did not exceed 20% of the
principal balance of all Trust Loans as of such date]. The principal balance of
each Trust Loan is not subject to change by reason of adjustments to the related
Borrower's account after the Cutoff Date relating to matters or events occurring
prior to the Cutoff Date.
2. SCHEDULE OF TRUST LOANS. The information set forth in Schedule A to
this Agreement is true and correct in all material respects as of the opening of
business on the Cutoff Date. With respect to any Qualified Substitute Student
Loan conveyed to the Issuer after the Closing Date, information for each
category set forth in Schedule A has been provided with respect to such loan and
such information is true and correct in all material respects as of the opening
of business on the applicable Subsequent Cutoff Date. No selection procedures
believed to be adverse to the Noteholders or the Certificateholders were
utilized in selecting any Trust Loan. The computer tape regarding the Initial
Trust Loans made available to the Issuer and its assigns is true and correct in
all respects as of the Cutoff Date, and, after the Closing Date, any computer
tape regarding any Qualified Substitute Student Loan made available to the
Issuer and its assigns is true and correct in all respects as of the date of the
applicable Subsequent Cutoff Date.
C-1
<PAGE>
3. COMPLIANCE WITH LAW. Each Trust Loan complied at the time of
origination and at the time of the execution of this Agreement or the applicable
Assignment, as the case may be, in all material respects with all applicable
requirements of local, state, and federal laws, rules and regulations which
govern the making of such Trust Loan including the requirements of the
applicable Guarantee Agreement.
4. BINDING OBLIGATION. The terms and conditions of each Trust Loan are
consistent with the application of the Borrower, all signatures for the Trust
Loans are genuine and the Borrower Note evidencing each Trust Loan has been duly
executed and delivered and constitutes the legal, valid, and binding obligation
of the Borrower enforceable in accordance with its terms.
5. NO DEFENSES. No right of rescission, setoff, counterclaim, or
defense has been asserted or threatened or exists with respect to any Trust
Loan.
6. NO DEFAULT. No Initial Trust Loan has a payment that is more than
120 days overdue as of the Cutoff Date and no Additional Trust Loan has a
payment that is more than 90 days overdue as of the applicable Subsequent Cutoff
Date in the case of a Serial Loan or as of the applicable Transfer Date in the
case of a Qualified Substitute Student Loan, and, except as permitted in this
paragraph, no default, breach, violation or event permitting acceleration under
the terms of any Trust Loan has occurred; and, except for payment defaults
continuing for a period of not more than 120 days, no continuing condition that
with notice or the lapse of time or both would constitute a default, breach,
violation or event permitting acceleration under the terms of any Trust Loan has
arisen; the Seller has not waived and shall not waive any of the foregoing other
than as permitted by the Basic Documents; and not more than 20% of the Trust
Loans by outstanding principal balance are more than 30 days overdue as of
______ __, 1999.
7. TITLE. It is the intention of the Seller that the transfer and
assignment herein contemplated constitute a sale of the Trust Loans from the
Seller to the Eligible Lender Trustee on behalf of the Issuer and that the
beneficial interest in and title to such Trust Loans not be part of the estate
of the Seller in the event of the appointment of a receiver with respect to the
Seller. Immediately prior to the transfer and sale of each Trust Loan to the
Trust, each Borrower Note is owned by the Seller and the Seller has good title
to each Trust Loan, free and clear of any lien, charge, encumbrance, or other
interest therein and immediately upon the transfer and sale of such Trust Loan
to the Trust, the Eligible Lender Trustee on behalf of the Issuer will have good
title to such Trust Loan free and clear of any lien, charge, encumbrance, or
other interest therein except as contemplated by the Basic Documents.
8. ALL FILINGS MADE. All filings (including UCC filings) necessary in
any jurisdiction to give the Eligible Lender Trustee on behalf of the Issuer a
first perfected ownership interest in the Trust Loans, and to give the Indenture
Trustee a first perfected security interest therein, have been made.
9. NO BANKRUPTCIES. No Borrower of any Initial Trust Loan as of the
Cutoff Date and no borrower of any Additional Trust Loan as of the applicable
Subsequent Cutoff Date in the case of a Serial Loan or as of the Subsequent
Cutoff Date in the case of a Qualified
C-2
<PAGE>
Substitute Student Loan was noted in the related Student Loan File as being
currently involved in a bankruptcy proceeding.
10. LAWFUL ASSIGNMENT. No Trust Loan has been originated in, or is
subject to the laws of, any jurisdiction under which the origination, sale,
transfer and assignment of such Trust Loan or any Trust Loan under this
Agreement or the Indenture is unlawful, void or voidable.
11. ONE ORIGINAL. There is only one original executed copy of the
Borrower Note evidencing each Trust Loan.
12. U.S. OBLIGORS. Less than 1% of the Trust Loans are due from Persons
not having a mailing address in the United States of America.
13. ACCOUNTS. Each Trust Loan may be pledged or transferred as an
"account" as defined in the UCC.
14. INTEREST ACCRUING. Each Trust Loan is accruing interest (whether or
not such interest is being paid currently, by the Borrower or by the Department,
or is being capitalized) at the maximum interest rate permitted by the Higher
Education Act and qualifies for Special Allowance Payments, except as expressly
permitted by the Basic Documents.
15. SELLER'S REPRESENTATIONS. The representations and warranties of the
Seller contained in Section 4.01 are true and correct.
C-3
<PAGE>
EXHIBIT D
TO THE LOAN SALE AGREEMENT
1. ORGANIZATION AND GOOD STANDING. The Seller has been organized and is
existing under the General Corporation Law of the State of Delaware and is
authorized to do business in every state in which it is doing business (except
where any failure to be so authorized shall not have a material adverse effect
on either the Seller or its obligations hereunder) as well as the state in which
it is organized and incorporated.
2. POWER AND AUTHORITY OF THE SELLER. The Seller has the corporate
power and authority to execute and deliver this Agreement and to carry out its
terms; the Seller has full corporate power and authority to sell (with FNBC
conveying legal title as trustee on behalf of the Seller) and assign the
property to be sold and assigned to and deposited with the Issuer (or with the
Eligible Lender Trustee on behalf of the Issuer) and the Seller has duly
authorized such sale and assignment to the Issuer (or to the Eligible Lender
Trustee on behalf of the Issuer) by all necessary corporate action; and the
execution, delivery and performance of this Agreement have been duly authorized
by the Seller by all necessary corporate action.
3. BINDING OBLIGATION. This Agreement has been executed and delivered
by the Seller and, assuming authorization, execution, and delivery by the other
parties thereto, this Agreement constitutes a valid obligation of the Seller
enforceable against it in accordance with the express terms of this Agreement,
except as enforcement thereof may be limited by the bankruptcy, insolvency,
reorganization, moratorium, liquidation, readjustment of debt, or other federal
or state laws or equitable principles relating to or affecting the enforcement
of creditor's rights.
4. NO VIOLATION. The consummation of the transactions contemplated by
this Agreement or the Administration Agreement and the fulfillment of the terms
hereof or thereof do not conflict with, result in any breach of any of the terms
and provisions of, nor constitute (with or without notice or lapse of time or
both) a default under, the certificate of incorporation or by-laws of the
Seller, or any indenture, agreement or other instrument to which the Seller is a
party or by which it shall be bound; nor result in the creation or imposition of
any Lien upon any of its properties pursuant to the terms of any such indenture,
agreement or other instrument (other than pursuant to the Basic Documents); nor
violate any law or, to the knowledge of the Seller, any order, rule or
regulation applicable to the Seller of any court or of any federal or state
regulatory body, administrative agency or other governmental instrumentality
having jurisdiction over the Seller or its properties. The consummation of the
transactions contemplated by this Agreement or by the Administration Agreement
and the fulfillment of the terms hereof and thereof will not result in the loss
of any Guarantee Payments by the Trust or any reinsurance payments with respect
to any Trust Loans by the Guarantor.
5. NO PROCEEDINGS. There is no action, suit, claim, investigation, or
proceeding, in any such case whether pending or to the knowledge of the Seller,
threatened against the Seller before any court, governmental agency, or
arbitrator (i) asserting the invalidity of this Agreement, the Indenture or any
of the other Basic Documents, the Notes or the Certificates, (ii) seeking to
prevent the issuance of the Notes or the Certificates or the
D-1
<PAGE>
consummation of any transactions contemplated by this Agreement, the Indenture
or any of the other Basic Documents, (iii) seeking any determination or ruling
that could reasonably be expected to have a material and adverse effect on the
performance by the Seller of its obligations under, or the validity or
enforceability of, this Agreement, the Indenture, any of the other Basic
Documents, the Notes or the Certificates or (iv) seeking to affect adversely the
federal or state income tax attributes of the Issuer, the Notes or the
Certificates.
6. ALL CONSENTS. No action, including, without limitation, the granting
or issuing of any consent, permit, license, approval, or authorization which is
required to be made on or prior to the date of this Agreement in connection with
the sale of Trust Loans under this Agreement (with the possible exception of
routine filings which, if not made, will not render the Seller liable to any
material penalties or will not result in the transactions contemplated by this
Agreement being subject to challenge) is required.
D-2
<PAGE>
EXHIBIT E
TO THE LOAN SALE AGREEMENT
1. ORGANIZATION AND GOOD STANDING. FNBC is a national banking
association duly organized, validly existing and in good standing under the laws
of the United States and is an "eligible lender" for purposes of the Higher
Education Act.
2. POWER AND AUTHORITY OF THE FNBC. FNBC has authorized the execution
and delivery of this Agreement and has full legal power and authority to
consummate all transactions contemplated by this Agreement and any and all other
agreements relating hereto.
3. BINDING OBLIGATION. This Agreement has been executed and delivered
by FNBC and, assuming authorization, execution, and delivery by the other
parties thereto, this Agreement constitutes a valid obligation of FNBC
enforceable against it in accordance with the express terms of this Agreement,
except as enforcement thereof may be limited by the bankruptcy, insolvency,
reorganization, moratorium, liquidation, readjustment of debt, or other federal
or state laws or equitable principles relating to or affecting the enforcement
of creditor's rights.
4. NO VIOLATION. Compliance by FNBC with this Agreement does not in any
material respect violate any law or regulation by which FNBC or its assets are
bound, or any writ, order, judgment, or decree of any court or government
instrumentality or arbitrator in which FNBC is named, or the charter or by-laws
of FNBC or any indenture, contract, or agreement to which FNBC is a party or by
which it is or its properties are bound or affected.
5. NO PROCEEDINGS. There is no action, suit, claim, investigation, or
proceeding, in any case pending or, to the knowledge of FNBC, threatened against
FNBC before any court, governmental agency, or arbitrator which, if decided
adversely to FNBC, is likely to have a material adverse effect upon the validity
or enforceability of this Agreement.
6. ALL CONSENTS. No action, including, without limitation, the granting
or issuing of any consent, permit, license, approval, or authorization which is
required to be made on or prior to the date of this Agreement in connection with
the sale of Trust Loans under this Agreement (with the possible exception of
routine filings which, if not made, will not render FNBC liable to any material
penalties or will not result in the transactions contemplated by this Agreement
being subject to challenge) is required.
E-1
<PAGE>
EXHIBIT F
TO THE LOAN SALE AGREEMENT
ASSIGNMENT
For value received, in accordance with the Loan Sale Agreement (the
"LOAN SALE AGREEMENT") dated as of _____ 1, 1999, among Nellie Mae Education
Loan Corporation, as seller (the "SELLER"), Nellie Mae Student Loan Trust 1999-A
(the "TRUST"), The First National Bank of Chicago, not in its individual
capacity but solely as eligible lender trustee for the Seller ("FNBC"), and The
First National Bank of Chicago, not in its individual capacity but solely as
eligible lender trustee for the Trust (the "ELIGIBLE LENDER TRUSTEE"), the
Seller (and, with respect to legal title to the Initial Trust Loans, FNBC as
trustee on behalf of the Seller) does hereby sell, assign, transfer and
otherwise convey unto the Eligible Lender Trustee on behalf of the Trust,
without recourse (subject to the obligations set forth in the Loan Sale
Agreement), all right, title and interest in and to (i) the Qualified Substitute
Student Loan(s) indicated in Schedule A hereto and all obligations of the
Obligors thereunder, together with all documents, the related Student Loan Files
and all rights and privileges related thereto, (ii) all payments and/or
collections received thereunder on and after the date hereof and (iii) all
proceeds of any and all of the foregoing (including but not limited to proceeds
derived from the voluntary or involuntary conversion of any such Qualified
Substitute Student Loans into cash or other liquidated property, such as
proceeds from the applicable Guarantee Agreement). The foregoing sale does not
constitute and is not intended to result in any assumption by the Eligible
Lender Trustee or the Trust of any obligation of the Seller or FNBC to the
borrowers of such Qualified Substitute Student Loans or any other Person in
connection with such Qualified Substitute Student Loans or any agreement or
instrument relating to any of them.
In addition, the undersigned, by execution of this instrument, hereby
endorse the promissory notes evidencing each such Qualified Substitute Student
Loan in favor of the Eligible Lender Trustee on behalf of the Trust, without
recourse (subject to the obligations set forth in the Loan Sale Agreement)
against the undersigned. This endorsement may be effected by attaching a
facsimile hereof to each or any of such promissory notes.
This Assignment is made pursuant to and upon the representations,
warranties and agreements on the part of the undersigned contained in the Loan
Sale Agreement and is to be governed by the Loan Sale Agreement.
Capitalized terms used but not defined herein shall have the meaning
assigned to them in Appendix A to the Administration Agreement, dated as of
_____ 1, 1999, among the Trust, as Issuer, the Seller, as Administrator, and
State Street Bank and Trust Company, as Indenture Trustee, which also contains
rules as to usage that shall be applicable herein.
F-1
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Agreement to be
duly executed as of ___ _____.
NELLIE MAE EDUCATION LOAN CORPORATION, Seller
By:
-----------------------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual capacity but solely as
eligible lender trustee for Nellie Mae
Education Loan Corporation
By:
-----------------------------------------
Name:
Title:
F-2
<PAGE>
Exhibit 99.2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[FORM OF]
MASTER SERVICING AGREEMENT
among
NELLIE MAE STUDENT LOAN TRUST 1999-A
as Issuer,
NELLIE MAE EDUCATION LOAN CORPORATION
as Seller and Master Servicer,
and
THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual capacity but solely
as Eligible Lender Trustee
Dated as of [_____] 1, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
MASTER SERVICING AGREEMENT dated as of [_____] 1, 1999, among
NELLIE MAE STUDENT LOAN TRUST 1999-A, a Delaware trust (the "ISSUER"), NELLIE
MAE EDUCATION LOAN CORPORATION, a Delaware corporation, as master servicer and
as seller (in such respective capacities, the "MASTER SERVICER" and the
"SELLER"), and THE FIRST NATIONAL BANK OF CHICAGO, a national banking
association, solely as eligible lender trustee and not in its individual
capacity (the "ELIGIBLE LENDER TRUSTEE").
WHEREAS the Issuer desires to purchase from the Seller (and,
with respect to legal title to the student loans, FNBC as trustee on behalf of
the Seller) a portfolio of federally reinsured student loans purchased in the
ordinary course of business by the Seller; and
WHEREAS the Eligible Lender Trustee is willing to hold legal
title to, and serve as eligible lender trustee with respect to, such student
loans on behalf of the Issuer; and
WHEREAS the Master Servicer is willing to service such student
loans and undertake certain administrative functions with respect thereto.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND USAGE
Capitalized terms used but not defined herein are defined in
Appendix A to the Administration Agreement, dated as of [_____] 1, 1999, among
the Issuer, the Seller, as Administrator, and State Street Bank and Trust
Company, as Indenture Trustee, which also contains rules as to usage and
construction that shall be applicable herein.
ARTICLE II
CUSTODY OF THE TRUST LOANS
SECTION 2.01. CUSTODY OF STUDENT LOAN FILES. To assure uniform
quality in servicing the Trust Loans and to reduce administrative costs, the
Issuer hereby revocably appoints the Master Servicer, and the Master Servicer
hereby accepts such appointment, to act for the benefit of the Issuer and the
Indenture Trustee (if any Notes remain Outstanding) and the Eligible Lender
Trustee (if the Notes have been paid in full) as Custodian of the following
documents or instruments which are hereby constructively delivered to the
Indenture Trustee, as pledgee of the Issuer (or will be constructively delivered
to the Indenture Trustee, as pledgee of the Issuer, or to the Eligible Lender
Trustee, on behalf of the Issuer, as the case may be, in the case of Qualified
Substitute Student Loans, as of the date of the relevant Assignment to the
Issuer, and in the case of Serial Loans, as of the related Transfer Date) with
respect to each Trust Loan:
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(a) the original fully executed copy of the Borrower Note
evidencing the Trust Loan; and
(b) any and all other documents and computerized records
relating to such Trust Loan or any Obligor with respect thereto that
the Master Servicer shall keep on file, in accordance with the
customary procedures of custodians of student loans similar to the
Trust Loans.
SECTION 2.02. DUTIES OF MASTER SERVICER AS CUSTODIAN. (a)
SAFEKEEPING. The Master Servicer shall maintain custody of the Student Loan
Files for the benefit of the Issuer and the Indenture Trustee on behalf of the
Noteholders (if any Notes remain Outstanding) or the Eligible Lender Trustee on
behalf of the Certificateholders (if the Notes have been paid in full) and
maintain such accurate and complete accounts, records and computer systems
pertaining to each Student Loan File as shall enable the Issuer to comply with
the Basic Documents. In performing its duties as Custodian, the Master Servicer
shall act with reasonable care, using that degree of skill and attention
generally employed by custodians of student loan files relating to loans
comparable to the Trust Loans and shall ensure that such custody and safekeeping
of the Trust Loans comply with all applicable federal and state laws, including
the Higher Education Act. The Master Servicer shall promptly report to the
Issuer and the Indenture Trustee or the Eligible Lender Trustee, as the case may
be, any failure on its part to hold the Student Loan Files and maintain its
accounts, records and computer systems as herein provided and promptly take
appropriate action to remedy any such failure. Nothing herein shall be deemed to
require an initial review or any periodic review by the Issuer, the Eligible
Lender Trustee or the Indenture Trustee of the Student Loan Files.
(b) MAINTENANCE OF RECORDS. The Master Servicer shall maintain
each Student Loan File at one of the locations specified in Schedule A to this
Agreement or at such other office as shall be specified by written notice to the
Issuer and the Indenture Trustee (if any Notes remain Outstanding) or the
Eligible Lender Trustee (if the Notes have been paid in full) not later than 90
days after any change in location. Upon reasonable prior notice of not less than
three Business Days, the Master Servicer shall make available to the Issuer and
the Indenture Trustee or the Eligible Lender Trustee, as the case may be, or
their respective duly authorized representatives, attorneys or auditors a list
of locations of the Student Loan Files and the related accounts, records and
computer systems maintained by the Master Servicer.
(c) RELEASE OF DOCUMENTS. If any Notes remain Outstanding,
upon instruction from the Indenture Trustee, the Master Servicer shall, as soon
as practicable, release any Student Loan File to the Indenture Trustee, the
Indenture Trustee's agent, or the Indenture Trustee's designee, as the case may
be, at such place or places as the Indenture Trustee may designate. If the Notes
have been paid in full, the Master Servicer shall, as soon as practicable,
release any Student Loan File to the Eligible Lender Trustee, the Eligible
Lender Trustee's agent or the Eligible Lender Trustee's designee, as the case
may be, at such place or places as the Eligible Lender Trustee may designate.
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The Master Servicer shall not be liable for any losses with
respect to the servicing of a Trust Loan after any such release of the related
Student Loan File to the extent such losses are attributable to the Master
Servicer's (or the applicable subservicer's) inability to have access to such
Student Loan File.
SECTION 2.03. INSTRUCTIONS; AUTHORITY TO ACT. The Master
Servicer shall be deemed to have received proper instructions with respect to
the Student Loan Files upon its receipt of written instructions signed by a
Responsible Officer of the Indenture Trustee (if any Notes remain Outstanding)
or of the Eligible Lender Trustee (if the Notes have been paid in full).
SECTION 2.04. CUSTODIAN'S INDEMNIFICATION. The Master Servicer
as Custodian shall pay for any actual loss, liability or expense, including
reasonable attorneys' fees, that may be imposed on, incurred by or asserted
against the Issuer, the Eligible Lender Trustee or the Indenture Trustee or any
of their officers, directors, employees and agents as a result of any improper
act or omission in any way relating to the maintenance and custody by the Master
Servicer as Custodian of the Student Loan Files as required by this Agreement
where the final determination that any such improper act or omission by the
Master Servicer resulted in such loss, liability or expense is established by a
court of law, by an arbitrator, or by way of settlement agreed to by the Master
Servicer; PROVIDED, HOWEVER, that the amount of any liability with respect to
any Trust Loan shall not exceed the amount that would have been paid if such
Student Loan had been accepted and paid by the related Guarantor as a claim; and
PROVIDED, FURTHER, that the Master Servicer shall not be liable to the Eligible
Lender Trustee, for any portion of any such amount resulting from the willful
misfeasance, bad faith or negligence of the Eligible Lender Trustee, and the
Master Servicer shall not be liable to the Indenture Trustee for any portion of
any such amount resulting from the willful misfeasance, bad faith or negligence
of the Indenture Trustee. This provision shall not be construed to limit the
Master Servicer's or any other party's rights, obligations, liabilities, claims
or defenses which arise as a matter of law or pursuant to any other provision of
this Agreement.
SECTION 2.05. EFFECTIVE PERIOD AND TERMINATION. The
appointment of NMELC as Custodian shall become effective as of the Closing Date
and shall continue in full force and effect for so long as NMELC shall remain
the Master Servicer hereunder. If all the rights and obligations of NMELC shall
have been terminated under Section 6.01, the appointment of NMELC as Custodian
shall be terminated simultaneously with the effectiveness of such termination.
As soon as practicable on or after any termination of such appointment and in
any event within ninety (90) days, NMELC shall deliver, or cause to be
delivered, possession of the Student Loan Files (i) if any Notes remain
Outstanding, to the Indenture Trustee or the Indenture Trustee's agent at such
place or places as the Indenture Trustee may reasonably designate; or (ii) if
the Notes have been paid in full to the Eligible Lender Trustee or the Eligible
lender Trustee's agent at such place or places as the Eligible Lender Trustee
may reasonably designate. NMELC will continue to hold the Student Loan Files as
agent of the Indenture Trustee or the Eligible Lender Trustee, as the case may
be, until the Student Loan Files are transferred.
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ARTICLE III
ADMINISTRATION AND SERVICING OF THE TRUST LOANS
SECTION 3.01. DUTIES OF MASTER SERVICER. The Master Servicer,
for the benefit of the Issuer (to the extent provided herein) and the
Securityholders, shall manage, service, administer and make collections on the
Trust Loans with reasonable care, using that degree of skill and attention
generally employed by servicers in servicing student loans comparable to the
Trust Loans. Without limiting the generality of the foregoing or of any other
provision set forth in this Agreement and notwithstanding any other provision to
the contrary set forth herein, the Master Servicer shall manage, service,
administer and make collections with respect to the Trust Loans (other than
collection of any Interest Subsidy Payments and Special Allowance Payments,
which the Eligible Lender Trustee will perform on behalf of the Trust) in
accordance with, and otherwise comply with, all applicable federal and state
laws, including any applicable standards, guidelines and requirements of the
Higher Education Act and the applicable Guarantee Agreement, the failure to
comply with which would adversely affect the eligibility of one or more of the
Trust Loans for federal reinsurance or Interest Subsidy Payments, Special
Allowance Payments or Guarantee Payments or would have an adverse effect on the
Noteholders or the Certificateholders. The Master Servicer also hereby
acknowledges that its obligation to service the Trust Loans includes any Serial
Loans conveyed to the Issuer pursuant to Section 2.02 of the Loan Sale Agreement
and any Qualified Substitute Student Loans conveyed to the Issuer pursuant to
Section 3.02 of the Loan Sale Agreement.
The Master Servicer's duties shall include collection and
posting of all payments, responding to inquiries of Borrowers about their Trust
Loans, monitoring borrowers' status, making required disclosures to Borrowers,
investigating delinquencies, sending payment coupons to borrowers and otherwise
establishing repayment terms, reporting tax information to borrowers, if
applicable, accounting for collections and furnishing monthly and annual
statements with respect thereto to the Administrator. Subject to the provisions
of Section 3.02, in performing its duties as Master Servicer, the Master
Servicer shall follow standards, policies and procedures customarily employed by
servicers that service student loans comparable to the Trust Loans. Without
limiting the generality of the foregoing, the Master Servicer is authorized and
empowered to execute and deliver, on behalf of itself, the Issuer, the Eligible
Lender Trustee, the Indenture Trustee, the Company and the Securityholders or
any of them, instruments of satisfaction or cancellation, or partial or full
release or discharge, and all other comparable instruments, with respect to the
Trust Loans; PROVIDED, HOWEVER, that the Master Servicer agrees that it will not
(a) permit any rescission or cancellation of a Trust Loan except as ordered by a
court of competent jurisdiction or governmental authority or as otherwise
consented to in writing by the Eligible Lender Trustee and, if any Notes remain
Outstanding, the Indenture Trustee or (b) reschedule, revise, defer or otherwise
compromise with respect to payments due on any Trust Loan except pursuant to any
applicable Deferral or Forbearance periods or otherwise in accordance with all
applicable standards, guidelines and requirements with respect to the servicing
of the Trust Loans; and PROVIDED, FURTHER, that, except pursuant to an
applicable Incentive Program, the Master Servicer shall not agree to any
decrease of the interest rate on, or
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the principal amount payable with respect to, any Trust Loan. Anything to the
contrary in this Section 3.01 notwithstanding, the Master Servicer shall have
the right to write off any delinquent Trust Loan if the remaining balance of the
related Borrower's account is less than $50.00.
The Master Servicer, for the benefit of the Issuer (to the
extent provided herein), shall promptly and routinely furnish the Eligible
Lender Trustee and, if any Notes remain Outstanding, the Indenture Trustee with
copies of all material reports, records, and other documents and data as
required by this Agreement or as may otherwise be required by the Higher
Education Act. All material correspondence received by the Master Servicer
relating to individual Trust Loans shall be maintained in microcopy form or in
summary form in an automated history file established by the Master Servicer.
The Master Servicer shall furnish in good condition all forms and supplies as
specified in this Agreement and any Schedules hereto. The Eligible Lender
Trustee and the Indenture Trustee may transmit Trust Loan account data to the
Master Servicer on these forms or by any other mutually acceptable means. In
performing its duties hereunder, the Master Servicer will be guided by and
comply with the Higher Education Act and applicable requirements of the related
Guarantor. The Master Servicer agrees to produce a clear and precise audit trail
for each Trust Loan and to comply with such other reporting, servicing, and
operating standards as are contained in this Agreement.
The Eligible Lender Trustee on behalf of the Issuer hereby
grants a power of attorney and all necessary authorization to the Master
Servicer to maintain any and all collection procedures with respect to the Trust
Loans, including filing, pursuing and recovering claims against the Guarantors
for Guarantee Payments and taking any steps to enforce such Trust Loans such as
commencing a legal proceeding to enforce a Trust Loan in the name of the Issuer,
the Eligible Lender Trustee, the Indenture Trustee or the Securityholders. The
Eligible Lender Trustee or the Indenture Trustee shall, upon the written request
of the Master Servicer or the Administrator, furnish the Master Servicer or the
Administrator with any other powers of attorney and other documents reasonably
necessary or appropriate to enable the Master Servicer or the Administrator to
carry out their servicing and administrative duties hereunder.
SECTION 3.02. COLLECTION OF TRUST LOAN PAYMENTS. (a) The
Master Servicer shall make reasonable efforts (including all efforts that may be
specified under the Higher Education Act or any Guarantee Agreement) to collect
all payments called for under the terms and provisions of the Trust Loans as and
when the same shall become due and shall follow such collection procedures as
are generally employed by servicers that service student loans comparable to the
Trust Loans. The Master Servicer shall allocate collections with respect to the
Trust Loans between principal and interest in accordance with the terms of each
such loan. The Master Servicer may in its discretion waive any late payment
charge or any other fees that may be collected in the ordinary course of
servicing a Trust Loan.
(b) The Master Servicer shall make reasonable efforts to
claim, pursue and collect all Guarantee Payments from the Guarantors pursuant to
the Guarantee Agreements with respect to any of the Trust Loans as and when the
same shall become due and payable, shall comply with the Higher Education Act
and all other applicable laws and agreements with respect
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to claiming, pursuing and collecting such payments and shall follow such
practices and procedures as are generally employed by servicers with respect to
guarantee agreements comparable to the Guarantee Agreements and student loans
comparable to the Trust Loans. In connection therewith, the Master Servicer is
hereby authorized and empowered to convey to the related Guarantor the Borrower
Note and the related Student Loan File representing any Trust Loan in connection
with submitting a claim to the applicable Guarantor for a Guarantee Payment in
accordance with the terms of the applicable Guarantee Agreement.
(c) The Eligible Lender Trustee shall, with the assistance of
the Master Servicer as set forth below and on behalf of the Issuer, make
reasonable efforts to claim, pursue and collect all Interest Subsidy Payments
and Special Allowance Payments from the Department with respect to any of the
Trust Loans as and when the same shall become due and payable, shall comply with
all applicable laws and agreements with respect to claiming, pursuing and
collecting such payments and shall follow such practices and procedures as are
generally employed by servicers in servicing student loans comparable to the
Trust Loans. All amounts so collected by the Eligible Lender Trustee with
respect to Trust Loans shall constitute Monthly Available Funds for the
applicable Monthly Collection Period and Available Funds for the applicable
Collection Period, and shall be deposited into the Collection Account in
accordance with Section 4.01. In connection therewith, the Master Servicer shall
prepare and file with the Department on a timely basis all claims forms and
other documents and filings necessary or appropriate in connection with the
claiming of Interest Subsidy Payments and Special Allowance Payments on behalf
of the Eligible Lender Trustee and shall otherwise assist the Eligible Lender
Trustee in pursuing and collecting such Interest Subsidy Payments and Special
Allowance Payments from the Department. The Eligible Lender Trustee shall upon
the written request of the Master Servicer furnish the Master Servicer with any
power of attorney and other documents reasonably necessary or appropriate to
enable the Master Servicer to prepare and file such claims forms and other
documents and filings.
The Eligible Lender Trustee may permit trusts, other than the
Trust, established by the Seller to securitize student loans to use the
Department lender identification number applicable to the Trust. In such event,
the Eligible Lender Trustee may claim and collect Interest Subsidy Payments and
Special Allowance Payments with respect to Trust Loans in the Trust and student
loans in such other trusts using such common lender identification number.
Notwithstanding anything herein or in the Basic Documents to the contrary, any
amounts assessed against payments (including, but not limited to, Interest
Subsidy Payments and Special Allowance Payments) due from the Department to any
such other trust using such common lender identification number as a result of
amounts owing to the Department from the Trust will be deemed for all purposes
hereof and of the Basic Documents (including for purposes of determining amounts
paid by the Department with respect to the student loans in the Trust and such
other trust) to have been assessed against the Trust and shall be deducted by
the Eligible Lender Trustee or the Master Servicer and paid to such other trust
from any collections made by them which would otherwise have been payable to the
Collection Account for the Trust. If so specified in the master servicing
agreement applicable to any such other trust, any amounts assessed against
payments due from the Department to the Trust as a result of amounts owing to
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the Department from such other trust using such common lender identification
number will be deemed to have been assessed against such other trust and will be
deducted by the Eligible Lender Trustee or the Master Servicer from any
collections made by them which would otherwise be payable to the collection
account for such other trust and paid to the Trust.
SECTION 3.03. REALIZATION UPON TRUST LOANS. For the benefit of
the Issuer, the Master Servicer shall use reasonable efforts consistent with the
servicing practices and procedures generally employed by servicers that service
student loans comparable to the Trust Loans and including all efforts that may
be specified under the Higher Education Act or the applicable Guarantee
Agreement for servicing any delinquent Trust Loans.
SECTION 3.04. NO IMPAIRMENT. The Master Servicer shall not
impair the rights of the Issuer, the Eligible Lender Trustee, the Indenture
Trustee, the Noteholders or the Certificateholders in the Trust Loans.
SECTION 3.05. PURCHASE OF TRUST LOANS; REIMBURSEMENT. (a) Upon
the discovery by the Master Servicer, the Eligible Lender Trustee, the Indenture
Trustee or the Seller of any breach pursuant to Sections 3.01, 3.02, 3.03 or
3.04 hereof that materially and adversely affects the interests of the
Noteholders, the Certificateholders, the Issuer, the Indenture Trustee or the
Eligible Lender Trustee (it being understood that any such breach that does not
affect the related Guarantor's obligation to guarantee payment of such Trust
Loan will not be considered to have a material adverse effect for this purpose
and it being further understood that any dispute as to whether such Guarantor's
obligation has been so affected so as to create such a material adverse effect,
shall be resolved, for so long as the Notes are Outstanding, by the Indenture
Trustee, whose determination shall be dispositive, and after the Notes are no
longer Outstanding, by the Eligible Lender Trustee, whose determination shall
then be dispositive), the party discovering the breach shall give prompt written
notice to the others. In the event of such a material breach which is not
curable by reinstatement of the related Guarantor's guarantee of such Trust
Loan, the Master Servicer shall purchase the affected Trust Loan not later than
120 days following the earlier of the date of discovery of such material breach
and the date of receipt of the Guarantor reject transmittal form with respect to
such Trust Loan. In the event of a material breach with respect to such Trust
Loan which is curable by reinstatement of the Guarantor's guarantee of such
Trust Loan, unless the material breach shall have been cured within 360 days
following the earlier of the date of discovery of such material breach and the
date of receipt of the Guarantor reject transmittal form with respect to such
Trust Loan, the Master Servicer shall purchase such Trust Loan not later than
the 60th day following the end of such 360-day period.
(b) In consideration of the purchase of any such Trust Loan
pursuant to this Section 3.05, the Master Servicer shall remit, in the manner
specified in Section 4.01, the Purchase Amount and the Issuer shall execute such
assignments and other documents reasonably requested by the Master Servicer in
order to effect the transfer of such Trust Loan to the Master Servicer or its
designee; PROVIDED, HOWEVER, that the Master Servicer's total liability for
losses for rejected claims by the Guarantors for any Trust Loan based on any
breach pursuant to
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Sections 3.01, 3.02, 3.03 or 3.04 hereof will not exceed that amount which the
related Guarantor would have been obligated to pay with respect to such loan had
its obligation to guarantee payment thereof not been affected by the Master
Servicer's breach. Subject to Section 5.02, the exclusive remedy of the
Noteholders, the Certificateholders, the Issuer, the Indenture Trustee and the
Eligible Lender Trustee, and the entire liability of Master Servicer for such a
breach shall be limited to requiring the Master Servicer to purchase Trust Loans
pursuant to this Section 3.05.
SECTION 3.06. MASTER SERVICING FEE. The Master Servicing Fee
for each calendar month (the "MASTER SERVICING FEE") shall be equal to
one-twelfth of the product of [__]% times the aggregate principal balances of
the Trust Loans outstanding as of the close of business on the first day of the
preceding calendar month.
The Master Servicing Fee (together with any portion of the
Master Servicing Fee that remains unpaid from prior Monthly Payment Dates) will
be payable on each Monthly Payment Date and will be paid solely out of Monthly
Available Funds in the case of each Monthly Payment Date that is not a Quarterly
Payment Date (and out of Available Funds in the case of each Quarterly Payment
Date) and amounts on deposit in the Reserve Account on such Monthly Payment Date
(including each Quarterly Payment Date) as provided in Sections 2(d)(ii)(A),
2(d)(iii)(A) and 2(e)(iv)(A) of the Administration Agreement.
SECTION 3.07. MASTER SERVICER'S REPORT. On or before the
[______]day of each month (or, if any such day is not a Business Day, on the
next succeeding Business Day), the Master Servicer shall deliver to the
Administrator a Master Servicer's report with respect to the preceding calendar
month containing all information necessary for the Administrator to prepare the
Administrator's Certificate, referred to in Section 2(b)(ii) of the
Administration Agreement, covering such preceding calendar month.
SECTION 3.08. ANNUAL STATEMENT AS TO COMPLIANCE; NOTICE OF
DEFAULT. (a) The Master Servicer shall deliver to the Eligible Lender Trustee
(with a copy to the Seller) and, if any Notes remain Outstanding, to the
Indenture Trustee, on or before April 30 of each year beginning April 30, 2000,
an Officers' Certificate of the Master Servicer, dated as of December 31 of the
preceding year, stating that (i) a review of the activities of the Master
Servicer during the preceding 12-month period (or, in the case of the first such
certificate, during the period from the Closing Date to December 31, 1999) and
of its performance has been made under such officers' supervision and (ii) to
the best of such officers' knowledge, based on such review, the Master Servicer
has fulfilled all its obligations under this Agreement in all material respects
throughout such year (or in the case of the first such Officers' Certificate,
such shorter period) or, if there has been a default in the fulfillment of any
such obligation, specifying each such default known to such officers and the
nature and status thereof. The Indenture Trustee (if any Notes remain
Outstanding) or the Eligible Lender Trustee (if the Notes have been paid in
full) shall send a copy of each such Officers' Certificate and each report
referred to in this Section 3.08 to the Rating Agencies. A copy of each such
Officers' Certificate and each report referred to in this Section 3.08 may be
obtained by any Noteholder, Note Owner, Certificateholder or Certificate Owner
by a request in writing to the Eligible Lender Trustee
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addressed to its Corporate Trust Office, together with evidence satisfactory to
the Eligible Lender Trustee that such Person is one of the foregoing parties.
Upon the telephone request of the Eligible Lender Trustee, the Indenture Trustee
will promptly furnish the Eligible Lender Trustee a list of Noteholders as of
the date specified by the Eligible Lender Trustee.
(b) The Master Servicer shall deliver to the Eligible Lender
Trustee, the Indenture Trustee (if any Notes remain Outstanding), the Seller and
the Rating Agencies, promptly after having obtained knowledge thereof, but in no
event later than five Business Days thereafter, written notice in an Officers'
Certificate of the Master Servicer of any event which with the giving of notice
or lapse of time, or both, would become a Master Servicer Default under Section
6.01.
SECTION 3.09. ANNUAL INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS'
REPORT. The Master Servicer shall cause a firm of independent certified public
accountants, which may also render other services to the Master Servicer, the
Seller or their Affiliates, to deliver to the Eligible Lender Trustee (with a
copy to the Seller) and, if any Notes remain Outstanding, to the Indenture
Trustee, within 180 days after the end of the Master Servicer's regular
fiscal-year audit period, an audit report that encompasses the Master Servicer's
portion of the annual Lender Audit (as defined in the Higher Education Act), or
any successor thereto, as required of a lender under the Higher Education Act,
for the preceding year (or, in the case of the first such report, during the
period from the Closing Date to December 31, 1999. The Indenture Trustee (if any
Notes remain Outstanding) or the Eligible Lender Trustee (if the Notes have been
paid in full) shall send a copy of each such report to the Rating Agencies.
Such report will also indicate that the firm is independent of
the Master Servicer within the meaning of the Code of Professional Ethics of the
American Institute of Certified Public Accountants.
SECTION 3.10. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION
REGARDING TRUST LOANS. Upon at least three Business Days' prior notice, the
Master Servicer shall provide the Noteholders and the Certificateholders access
to the Student Loan Files in such cases where the Noteholders or the
Certificateholders shall be required by applicable statutes or regulations to
review such documentation, as demonstrated by evidence satisfactory to the
Master Servicer in its reasonable judgment. Access shall be afforded without
charge, but only upon ten (10) Business Days' advance notice and during the
normal business hours at the respective offices of the Master Servicer or the
related subservicer, as applicable. Nothing in this Section shall affect the
obligation of the Master Servicer to observe any applicable law prohibiting
disclosure of information regarding the Obligors and the failure of the Master
Servicer to provide access to information as a result of such obligation shall
not constitute a breach of this Section.
SECTION 3.11. MASTER SERVICER EXPENSES. The Master Servicer
shall be required to pay all expenses incurred by it in connection with its
activities hereunder, including fees and disbursements of independent
accountants, taxes imposed on the Master Servicer, and
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expenses incurred in connection with distributions and reports to the
Administrator, the Noteholders or the Certificateholders, as the case may be.
SECTION 3.12. APPOINTMENT OF SUBSERVICERS. The Master Servicer
hereby appoints Education Loan Servicing Center, Inc., a Delaware non-profit
corporation, and AFSA Data Corporation, a Delaware corporation, as subservicers
with respect to the Trust Loans listed in Exhibits A and B attached hereto. Each
aforesaid subservicer shall perform all the obligations of the Master Servicer
hereunder with respect to the Trust Loans subserviced by such subservicer. The
Master Servicer shall have the right to appoint additional or replacement
subservicers to perform all or any portion of its obligations hereunder;
PROVIDED, HOWEVER, that the Rating Agency Condition shall have been satisfied in
connection therewith.
Anything in this Section 3.12 to the contrary notwithstanding,
the Master Servicer shall remain obligated and be liable to the Issuer, the
Eligible Lender Trustee, the Indenture Trustee, the Noteholders and the
Certificateholders for the servicing and administering of the Trust Loans in
accordance with the provisions of this Agreement without diminution of such
obligation and liability by virtue of the appointment of any such subservicer
and to the same extent and under the same terms and conditions as if the Master
Servicer alone were servicing and administering the Trust Loans. The fees and
expenses of the subservicer shall be as agreed between the Master Servicer and
its subservicer from time to time and none of the Issuer, the Eligible Lender
Trustee, the Indenture Trustee, the Noteholders and the Certificateholders shall
have any responsibility therefor.
ARTICLE IV
DEPOSITS INTO THE COLLECTION ACCOUNT
SECTION 4.01. DEPOSITS INTO THE COLLECTION ACCOUNT. (a) The
Master Servicer shall deposit into the Collection Account (in the case of
clauses (i) and (ii) within two Business Days of receipt of freely available
funds therefor):
(i) all identifiable payments received by the Master Servicer
by or on behalf of Obligors on the Trust Loans, including any Guarantee
Payments with respect to the Trust Loans;
(ii) all Liquidation Proceeds on the Trust Loans;
(iii) with respect to Purchased Student Loans, the aggregate
Purchase Amounts, when such amounts are due, as provided in Section
3.05 hereof; and
(iv) all other amounts required to be deposited into the
Collection Account by the Master Servicer pursuant to the terms hereof.
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(b) The Eligible Lender Trustee shall deposit into the
Collection Account, within two Business Days of the receipt thereof, the
aggregate amount of Interest Subsidy Payments and Special Allowance Payments
received by it with respect to the Trust Loans.
(c) The Seller shall deposit into the Collection Account, the
aggregate Purchase Amount with respect to Purchased Student Loans and all other
amounts to be paid by the Seller under Section 3.02 and 5.01 of the Loan Sale
Agreement when such amounts are due, as provided in Section 3.03 of the Loan
Sale Agreement.
ARTICLE V
THE MASTER SERVICER
SECTION 5.01. REPRESENTATIONS OF MASTER SERVICER. The Master
Servicer makes the following representations on which the Issuer is deemed to
have relied in acquiring (through the Eligible Lender Trustee) the Trust Loans
and appointing the Master Servicer as Master Servicer hereunder. The
representations speak as of the execution and delivery of this Agreement and as
of the Closing Date in the case of the Initial Trust Loans, and will be deemed
to speak as of the relevant Assignment in the case of any Qualified Substitute
Student Loan and as of the related Transfer Date in the case of any Serial Loan,
but shall survive the sale, transfer and assignment of the Trust Loans to the
Eligible Lender Trustee on behalf of the Issuer and the pledge thereof to the
Indenture Trustee pursuant to the Indenture.
(a) ORGANIZATION AND GOOD STANDING. The Master Servicer is
duly organized and validly existing as a corporation in good standing
under the laws of the State of Delaware, with the power and authority
to own its properties and to conduct its business as such properties
are currently owned and such business is currently conducted.
(b) POWER AND AUTHORITY OF THE MASTER SERVICER. The Master
Servicer has the corporate power and authority to execute and deliver
this Agreement and to carry out its terms, and the execution, delivery
and performance of this Agreement have been duly authorized by the
Master Servicer by all necessary corporate action.
(c) BINDING OBLIGATION. This Agreement constitutes a legal,
valid and binding obligation of the Master Servicer, enforceable in
accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization and similar laws relating to creditors'
rights generally and subject to general principles of equity.
(d) NO VIOLATION. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof
or thereof do not conflict with, result in any breach of any of the
terms and provisions of, or constitute (with or without notice or lapse
of time or both) a default under, the certificate of incorporation or
by-laws of the
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Master Servicer, or any indenture, agreement or other instrument to
which the Master Servicer is a party or by which it shall be 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 or
other instrument; or violate any law or, to the knowledge of the Master
Servicer, any order, rule or regulation applicable to the Master
Servicer of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Master Servicer or its properties. Compliance by
the Master Servicer with the terms of this Agreement will not result in
the loss of any Guarantee Payments by the Trust or any reinsurance
payments with respect to any Trust Loan by the applicable Guarantor.
(e) NO PROCEEDINGS. There are no proceedings or investigations
pending against the Master Servicer or, to its best knowledge,
threatened against the Master Servicer, before any court, regulatory
body, administrative agency or other governmental instrumentality
having jurisdiction over the Master Servicer or its properties: (i)
asserting the invalidity of this Agreement or any of the other Basic
Documents to which the Master Servicer is a party, (ii) seeking to
prevent the issuance of the Notes or the Certificates or the
consummation of any of the transactions contemplated by this Agreement,
or any of the other Basic Documents, (iii) seeking any determination or
ruling that could reasonably be expected to have a material and adverse
effect on the performance by the Master Servicer of its obligations
under, or the validity or enforceability of, this Agreement, any of the
other Basic Documents, the Notes or the Certificates or (iv) seeking to
affect adversely the federal or state income tax attributes of the
Issuer, the Notes or the Certificates.
(f) ALL CONSENTS. All authorizations, consents, licenses,
orders or approvals of or registrations or declarations with any court,
regulatory body, administrative agency or other government
instrumentality required to be obtained, effected or given by the
Master Servicer in connection with the execution and delivery by the
Master Servicer of this Agreement and the performance by the Master
Servicer of its duties contemplated by this Agreement have in each case
been duly obtained, effected or given and are in full force and effect.
(g) LEGAL RIGHT TO SERVICE. The Trust Loans are serviced by an
entity that has the legal right to service student loans under the
Higher Education Act.
SECTION 5.02. INDEMNITIES OF MASTER SERVICER. The Master
Servicer shall be liable in accordance herewith only to the extent of the
obligations specifically undertaken by the Master Servicer under this Agreement.
The Master Servicer shall pay for any loss, liability or
expense, including reasonable attorneys' fees, that may be imposed on, incurred
by or asserted against the Issuer, the Eligible Lender Trustee, the Indenture
Trustee, the Seller, the Administrator, the Noteholders or the
Certificateholders or any of the officers, directors, employees and agents of
the Issuer, the
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Eligible Lender Trustee, the Indenture Trustee, the Seller or the Administrator
to the extent that such loss, liability or expense arose out of, or was imposed
upon any such Person through, the negligence, willful misfeasance or bad faith
of the Master Servicer in the performance of its obligations and duties under
this Agreement or by reason of the reckless disregard of its obligations and
duties under this Agreement, where the final determination that any such loss,
liability or expense arose out of, or was imposed upon any such Person through,
any such negligence, willful misfeasance, bad faith or recklessness on the part
of the Master Servicer is established by a court of law, by an arbitrator or by
way of settlement agreed to by the Master Servicer. Notwithstanding the
foregoing, if the Master Servicer is rendered unable, in whole or in part, by a
force outside the control of the parties hereto (including acts of God, acts of
war, fires, earthquakes and other disasters) to satisfy its obligations under
this Agreement, the Master Servicer shall not be deemed to have breached any
such obligation upon delivery of written notice of such event to the other
parties hereto, for so long as the Master Servicer remains unable to perform
such obligation as a result of such event.
For purposes of this Section, in the event of the termination
of the rights and obligations of NMELC as Master Servicer pursuant to Section
6.01, or a resignation by NMELC pursuant to this Agreement, NMELC shall be
deemed to be the Master Servicer pending appointment of a successor Master
Servicer pursuant to Section 6.02.
Liability of the Master Servicer under this Section 5.02 shall
survive the resignation or removal of the Eligible Lender Trustee or the
Indenture Trustee or the termination of this Agreement and shall include
reasonable fees and expenses of counsel and expenses of litigation. If the
Master Servicer shall have made any indemnity payments pursuant to this
Agreement and the Person to or on behalf of whom such payments are made
thereafter collects any of such amounts from others, such Person shall promptly
repay such amounts to the Master Servicer, without interest.
SECTION 5.03. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, MASTER SERVICER. The Master Servicer hereby agrees that, upon
(a) any merger or consolidation of the Master Servicer into another Person, (b)
any merger or consolidation to which the Master Servicer shall be a party
resulting in the creation of another Person or (c) any Person succeeding to the
properties and assets of the Master Servicer substantially as a whole, the
Master Servicer shall (i) cause such Person (if other than the Master Servicer)
to execute an agreement of assumption to perform every obligation of the Master
Servicer hereunder, (ii) deliver to the Eligible Lender Trustee and, if any
Notes remain Outstanding, to the Indenture Trustee an Officers' Certificate and
an Opinion of Counsel each stating that such consolidation, merger or succession
and such agreement of assumption comply with this Section and that all
conditions precedent provided for in this Agreement relating to such transaction
have been complied with, (iii) cause the Rating Agency Condition to have been
satisfied with respect to such transaction and (iv) cure any existing Master
Servicer Default or any continuing event which, after notice or lapse of time or
both, would become a Master Servicer Default. Upon compliance with the foregoing
requirements, such Person shall be the successor to the Master Servicer under
this Agreement without further act on the part of any of the parties to this
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Agreement. Notwithstanding anything herein to the contrary, compliance with
clauses (i), (ii), (iii) and (iv) above shall be conditions to the consummation
of any of the transactions referred to in clause (a), (b) or (c) above.
SECTION 5.04. LIMITATION ON LIABILITY OF MASTER SERVICER AND
OTHERS. Neither the Master Servicer nor any of the directors, officers,
employees or agents of the Master Servicer shall be under any liability to the
Issuer, the Noteholders or the Certificateholders, except as provided under this
Agreement, for any action taken or for refraining from the taking of any action
pursuant to this Agreement or for errors in judgment; PROVIDED, HOWEVER, that
this provision shall not protect the Master Servicer or any such Person against
any liability that would otherwise be imposed by reason of willful misfeasance,
bad faith or negligence in the performance of duties or by reason of reckless
disregard of obligations and duties under this Agreement. The Master Servicer
and any director, officer, employee or agent of the Master Servicer may rely in
good faith on any document of any kind PRIMA FACIE properly executed and
submitted by any person respecting any matters arising under this Agreement.
Except as provided in this Agreement, the Master Servicer
shall not be under any obligation to appear in, prosecute or defend any legal
action that shall not be incidental to its duties to service the Trust Loans in
accordance with this Agreement and that in its opinion may involve it in any
expense or liability; PROVIDED, HOWEVER, that the Master Servicer may undertake
any reasonable action that it may deem necessary or desirable in respect of this
Agreement and the other Basic Documents and the rights and duties of the parties
to this Agreement and the other Basic Documents and the interests of the
Certificateholders under the Trust Agreement and of the Noteholders under the
Indenture.
SECTION 5.05. NMELC NOT TO RESIGN AS MASTER SERVICER. Subject
to the provisions of Section 5.03, NMELC shall not resign from the obligations
and duties hereby imposed on it as Master Servicer under this Agreement except
upon determination that the performance of its duties under this Agreement shall
no longer be permissible under applicable law. Notice of any such determination
permitting the resignation of NMELC shall be communicated to the Eligible Lender
Trustee, the Indenture Trustee (if any Notes remain Outstanding) and the Rating
Agencies at the earliest practicable time (and, if such communication is not in
writing, shall be confirmed in writing at the earliest practicable time) and any
such determination shall be evidenced by an Opinion of Counsel to such effect
delivered to the Eligible Lender Trustee and the Indenture Trustee (if any Notes
remain Outstanding) concurrently with or promptly after such notice. No such
resignation shall become effective until the Indenture Trustee (if any Notes
remain Outstanding), the Eligible Lender Trustee (if the Notes have been paid in
full), or a Successor Master Servicer shall have assumed the responsibilities
and obligations of NMELC in accordance with Section 6.02.
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ARTICLE VI
DEFAULT
SECTION 6.01. MASTER SERVICER DEFAULT. If any one of the
following events (each, a "MASTER SERVICER Default") shall occur and be
continuing:
(a) if any Notes remain Outstanding, any failure by the Master
Servicer to deliver to the Indenture Trustee for deposit in any of the
Trust Accounts any payment required by the Basic Documents, which
failure continues unremedied for five Business Days after written
notice of such failure is received by the Master Servicer from the
Eligible Lender Trustee, the Indenture Trustee or the Administrator or
after discovery of such failure by an officer of the Master Servicer;
or
(b) if the Notes have been paid in full, any failure by the
Master Servicer to deliver to the Eligible Lender Trustee for deposit
in any of the Trust Accounts, any payment required by the Basic
Documents, which failure continues unremedied for five Business Days
after written notice of such failure is received by the Master Servicer
from the Eligible Lender Trustee or the Administrator or after
discovery of such failure by an officer of the Master Servicer; or
(c) any failure by the Master Servicer duly to observe or to
perform in any material respect any other covenants or agreements of
the Master Servicer set forth in this Agreement or any other Basic
Document, which failure shall (i) materially and adversely affect the
rights of Noteholders or Certificateholders and (ii) continue
unremedied for a period of sixty (60) days after the date of discovery
of such failure by an officer of the Master Servicer or on which
written notice of such failure, requiring the same to be remedied,
shall have been given (A) to the Master Servicer, by the Indenture
Trustee, the Administrator or the Eligible Lender Trustee or (B) to the
Master Servicer, the Indenture Trustee, the Administrator and the
Eligible Lender Trustee by Noteholders of Outstanding Notes or
Certificateholders of Outstanding Certificates, as applicable,
representing not less than 25% of the Outstanding Amount of the Notes
or 25% of the Certificate Balance of the Certificates; or
(d) an Insolvency Event occurs with respect to the Master
Servicer;
then, and in each and every case, so long as the Master Servicer Default shall
not have been remedied, (x) if any Notes remain Outstanding, either the
Indenture Trustee or the Noteholders of Notes evidencing not less than 75% of
the Outstanding Amount of the Notes by notice then given in writing to the
Master Servicer (and to the Indenture Trustee and the Eligible Lender Trustee if
given by Noteholders) may terminate all the rights and obligations (other than
the obligations set forth in Section 5.02) of the Master Servicer under this
Agreement; and (y) if the Notes have been paid in full, either the Eligible
Lender Trustee or Certificateholders of Outstanding Certificates evidencing not
less than 75% of the Certificate Balance by notice then give in writing to the
Master Servicer (and to the Eligible Lender Trustee if given by
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Certificateholders) may terminate all the rights and obligations set forth in
Section 5.02) of the Master Servicer under this Agreement. On or after the
receipt by the Master Servicer of such written notice, all authority and power
of the Master Servicer under this Agreement, whether with respect to the Notes,
the Certificates, the Trust Loans or otherwise, shall, without further action,
pass to and be vested in the Indenture Trustee or Eligible Lender Trustee, as
the case may be, or such successor Master Servicer as may be appointed under
Section 6.02; and, without limitation, the Indenture Trustee and the Eligible
Lender Trustee are hereby authorized and empowered to execute and deliver, for
the benefit of the predecessor Master Servicer, as attorney-in-fact or
otherwise, any and all documents and other instruments, and to do or accomplish
all other acts or things necessary or appropriate to effect the purposes of such
notice of termination, whether to complete the transfer and endorsement of the
Trust Loans and related documents, or otherwise. The predecessor Master Servicer
shall cooperate with the successor Master Servicer, the Indenture Trustee and
the Eligible Lender Trustee in effecting the termination of the responsibilities
and rights of the predecessor Master Servicer under this Agreement, including
the transfer to the successor Master Servicer for administration by it of all
cash amounts that shall at the time be held by the predecessor Master Servicer
for deposit, or shall thereafter be received by it with respect to a Trust Loan.
All reasonable costs and expenses (including attorneys' fees) incurred in
connection with transferring the Student Loan Files to the successor Master
Servicer and amending this Agreement and any other Basic Documents to reflect
such succession as Master Servicer pursuant to this Section shall be paid by the
predecessor Master Servicer upon presentation of reasonable documentation of
such costs and expenses. Upon receipt of notice of the occurrence of a Master
Servicer Default, the Eligible Lender Trustee shall give notice thereof to the
Rating Agencies.
SECTION 6.02. APPOINTMENT OF SUCCESSOR. (a) Upon receipt by
the Master Servicer of notice of termination pursuant to Section 6.01, or the
resignation by the Master Servicer in accordance with the terms of this
Agreement, the predecessor Master Servicer shall continue to perform its
functions as Master Servicer under this Agreement, in the case of termination,
only until the date specified in such termination notice or, if no such date is
specified in a notice of termination, until the successor Master Servicer shall
have accepted and assumed the responsibilities of the Master Servicer hereunder
and, in the case of resignation, until the later of (x) the date 120 days from
the delivery to the Indenture Trustee (if any Notes remain Outstanding) and the
Eligible Lender Trustee of written notice of such resignation (or written
confirmation of such notice) in accordance with the terms of this Agreement and
(y) the date upon which the predecessor Master Servicer shall become unable to
act as Master Servicer as specified in the notice of resignation and
accompanying Opinion of Counsel. In the event of the termination hereunder of
the Master Servicer, the Issuer shall appoint a successor Master Servicer
acceptable to the Indenture Trustee (if any Notes remain Outstanding), or to the
Eligible Lender Trustee (if the Notes have been paid in full), and the successor
Master Servicer shall accept its appointment by a written assumption in form
acceptable to the Indenture Trustee or the Eligible Lender Trustee, as the case
may be, and the Administrator. In the event that a successor Master Servicer has
not been appointed at the time when the predecessor Master Servicer has ceased
to act as Master Servicer in accordance with this Section, the Indenture Trustee
or the Eligible Lender Trustee, as the case may be, without further action shall
automatically be
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appointed the successor Master Servicer and the Indenture Trustee or the
Eligible Lender Trustee, as the case may be, shall be entitled to the Master
Servicing Fee. Notwithstanding the above, the Indenture Trustee or the Eligible
Lender Trustee, as the case may be, shall, if it shall be unwilling or legally
unable so to act, appoint or petition a court of competent jurisdiction to
appoint, any established institution the regular business of which shall include
the servicing of student loans, as the successor to the Master Servicer under
this Agreement; PROVIDED, HOWEVER, that such right to appoint or to petition for
the appointment of any such successor Master Servicer shall in no event relieve
the Indenture Trustee or the Eligible Lender Trustee, as the case may be, from
any obligations otherwise imposed on it under the Basic Documents until such
successor has in fact assumed such appointment.
(b) Upon appointment, the successor Master Servicer (including
the Indenture Trustee or the Eligible Lender Trustee, as the case may be, acting
as successor Master Servicer) shall be the successor in all respects to the
predecessor Master Servicer and shall be subject to all the responsibilities,
duties and liabilities placed on the predecessor Master Servicer that arise
thereafter or are related thereto and shall be entitled to an amount agreed to
by such successor Master Servicer (which shall not exceed the Master Servicing
Fee, unless such compensation arrangements will not result in a downgrading of
the Notes or the Certificates by any Rating Agency) and all the rights granted
to the predecessor Master Servicer by the terms and provisions of this
Agreement.
(c) The Master Servicer may not resign unless it is prohibited
from serving as such by law as evidenced by an Opinion of Counsel to such effect
delivered to the Indenture Trustee (if any Notes remain Outstanding) and the
Eligible Lender Trustee. Notwithstanding the foregoing or anything to the
contrary herein or in the other Basic Documents, the Indenture Trustee or the
Eligible Lender Trustee, as the case may be, to the extent it is acting as
successor Master Servicer pursuant hereto, shall be entitled to resign to the
extent a qualified successor Master Servicer has been appointed and has assumed
all the obligations of the Master Servicer in accordance with the terms of this
Agreement and the other Basic Documents.
SECTION 6.03. NOTIFICATION TO NOTEHOLDERS AND
CERTIFICATEHOLDERS. Upon any termination of, or appointment of a successor to,
the Master Servicer pursuant to this Article VI, the Indenture Trustee (if any
Notes remain Outstanding) shall give prompt written notice thereof to
Noteholders, the Administrator, the Company and the Rating Agencies and the
Eligible Lender Trustee shall give prompt written notice thereof to the
Certificateholders and, if the Notes have been paid in full, the Eligible Lender
Trustee shall give prompt written notice thereof to the Certificateholders and,
if the Notes have been paid in full, to the Administrator, the Company and the
Rating Agencies. In the case of any such appointment of a successor, notice to
the Rating Agencies shall consist of prior written notice thereof.
SECTION 6.04. WAIVER OF PAST DEFAULTS. The Noteholders of
Notes evidencing not less than a majority of the Outstanding Amount of the Notes
(or the Certificateholders of Outstanding Certificates evidencing not less than
a majority of the Certificate Balance in the case of any default that does not
adversely affect the Indenture Trustee or the Noteholders) may, on
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behalf of all Noteholders or Certificateholders, waive in writing any default by
the Master Servicer in the performance of its obligations hereunder, and any
consequences thereof, except a default in making any required deposits to or
payments from any of the Trust Accounts (or giving instructions regarding the
same) in accordance with this Agreement to the extent provided in such waiver.
Upon any such waiver of a past default, such default shall cease to exist, and
any Master Servicer Default arising therefrom shall be deemed to have been
remedied for every purpose of this Agreement. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereto.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. AMENDMENT. This Agreement may be amended by the
Master Servicer and the Eligible Lender Trustee, with the prior written consent
of the Indenture Trustee, but without the consent of any of the Noteholders or
the Certificateholders, to cure any ambiguity, to correct or supplement any
provisions in this Agreement or for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions in this Agreement or
of modifying in any manner the rights of the Noteholders or the
Certificateholders; PROVIDED, HOWEVER, that such action shall not, as evidenced
by an Opinion of Counsel delivered to the Eligible Lender Trustee and the
Indenture Trustee, adversely affect in any material respect the interests of any
Noteholder or Certificateholder.
This Agreement may also be amended from time to time by the
Master Servicer and the Eligible Lender Trustee, with the prior written consent
of the Indenture Trustee and the Noteholders of Notes evidencing not less than a
majority of the Outstanding Amount of the Notes and the consent of the
Certificateholders of Outstanding Certificates evidencing not less than a
majority of the Certificate Balance, for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of this Agreement
or of modifying in any manner the rights of the Noteholders or the
Certificateholders; PROVIDED, HOWEVER, that no such amendment shall (a) increase
or reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments with respect to Trust Loans or distributions that shall
be required to be made for the benefit of the Noteholders or Certificateholders
or (b) reduce the aforesaid percentage of the Outstanding Amount of the Notes
and the Certificate Balance, the Noteholders or Certificateholders of which are
required to consent to any such amendment, without the consent of all
outstanding Noteholders and Certificateholders.
Promptly after the execution of any such amendment or consent
(or, in the case of the Rating Agencies, 15 Business Days prior thereto), the
Eligible Lender Trustee shall furnish written notification of the substance of
such amendment or consent to each Certificateholder, to the Indenture Trustee
and each of the Rating Agencies.
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It shall not be necessary for the consent of Noteholders or
Certificateholders pursuant to this Section to approve the particular form of
any proposed amendment or consent, but it shall be sufficient if such consent
shall approve the substance thereof.
Prior to the execution of any amendment to this Agreement, the
Eligible Lender Trustee and the Indenture Trustee shall be entitled to receive
and rely upon an Opinion of Counsel stating that the execution of such amendment
is authorized or permitted by this Agreement and the Opinion of Counsel referred
to in Section 6.02(f) of the Loan Sale Agreement. The Eligible Lender Trustee
and the Indenture Trustee may, but shall not be obligated to, enter into any
such amendment which affects the Eligible Lender Trustee's or the Indenture
Trustee's, as applicable, own rights, duties or immunities under this Agreement
or otherwise.
SECTION 7.02. PROTECTION OF INTERESTS IN TRUST. (a) The Master
Servicer shall not change its name, identity or corporate structure in any
manner that would, could or might make any financing statement or continuation
statement filed in accordance with Section 6.02(a) of the Loan Sale Agreement
seriously misleading within the meaning of Section 9-402(7) of the UCC, unless
it shall have given the Eligible Lender Trustee, the Indenture Trustee and the
Rating Agencies at least five days' prior written notice thereof and shall have
promptly filed appropriate amendments to all previously filed financing
statements or continuation statements.
(b) The Master Servicer shall have an obligation to give the
Eligible Lender Trustee and the Indenture Trustee at least ten (10) days' prior
written notice of any relocation of its principal executive office if, as a
result of such relocation, the applicable provisions of the UCC would require
the filing of any amendment of any previously filed financing or continuation
statement or of any new financing statement and shall promptly file any such
amendment. The Master Servicer shall at all times maintain each office from
which it shall service Trust Loans, and its principal executive office, within
the United States of America.
(c) The Master Servicer shall maintain accounts and records of
each Student Loan accurately and in sufficient detail to permit (i) the reader
thereof to know at any time the status of such Trust Loan, including payments
and recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or recoveries on (or with respect to) each Trust
Loan and the amounts from time to time deposited in the Collection Account in
respect of such Trust Loan.
(d) The Master Servicer shall, by use of a distinct
identification code, maintain its computer systems so that, from and after the
time of sale under the Loan Sale Agreement of the Trust Loans, the Master
Servicer's master computer records (including any backup archives) that refer to
a Student Loan shall indicate clearly the interest of the Issuer, the Eligible
Lender Trustee and, if any Notes remain Outstanding, the Indenture Trustee in
such Student Loan and that such Student Loan is owned by the Eligible Lender
Trustee on behalf of the Issuer and has been pledged to the Indenture Trustee
for so long as any Notes remain Outstanding. Indication of the Issuer's, the
Eligible Lender Trustee's and the Indenture Trustee's interest in a Student
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Loan shall be deleted from or modified on the Master Servicer's computer systems
when, and only when, the related Trust Loan shall have been paid in full or
repurchased or, in the case of the Indenture Trustee's interest, when the Notes
have been paid in full.
(e) If at any time the Master Servicer shall propose to sell,
grant a security interest in, or otherwise transfer any interest in student
loans to any prospective purchaser, lender or other transferee, the Master
Servicer shall give to such prospective purchaser, lender or other transferee
computer tapes, records or printouts (including any restored from backup
archives) that, if they shall refer in any manner whatsoever to any Trust Loan,
shall indicate clearly that such Trust Loan has been sold and is owned by the
Eligible Lender Trustee on behalf of the Issuer and has been pledged to the
Indenture Trustee.
(f) The Master Servicer shall permit the Indenture Trustee and
its agents (if any Notes remain Outstanding) or the Eligible lender Trustee (if
the Notes have been paid in full) and its agents at any time during normal
business hours to inspect, audit and make copies of and abstracts from the
Master Servicer's records regarding any Trust Loan; PROVIDED, HOWEVER, that the
Master Servicer is given reasonable prior notice of at least ten Business Days.
(g) Upon request, at any time the Eligible Lender Trustee or
the Indenture Trustee shall have reasonable grounds to believe that such request
would be necessary in connection with its performance of its duties under the
Basic Documents, the Master Servicer shall furnish to the Eligible Lender
Trustee or the Indenture Trustee (in each case, with a copy to the
Administrator), within five (5) Business Days, a list of all Trust Loans (by
borrower social security number, type of loan and date of issuance) then held as
part of the Trust.
SECTION 7.03. NOTICES. Unless otherwise agreed by the
recipient, all demands, notices and communications upon or to the Seller, FNBC,
the Master Servicer, the Eligible Lender Trustee, the Indenture Trustee, the
Administrator or the Rating Agencies under this Agreement shall be in writing,
personally delivered or mailed by certified mail, return receipt requested (or
in the form of telex or facsimile notice, followed by written notice delivered
as aforesaid or postage prepaid, first class mail), and shall be deemed to have
been duly given upon receipt:
(a) in the case of the Seller, to
Nellie Mae Education Loan Corporation
1240 Pawtucket Avenue
Rumford, Rhode Island 02916
Attention: Secretary
Telephone: 401-438-4500
Telecopy:
with a copy to
Nellie Mae Corporation
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50 Braintree Hill Park, Suite 300
Braintree, Massachusetts 02184
Attention: General Counsel
Telephone: 781-849-2121
Telecopy: 781-380-3915
(b) in the case of the Master Servicer, to
Nellie Mae Education Loan Corporation
1240 Pawtucket Avenue
Rumford, Rhode Island 02916
Attention: Secretary
Telephone: 401-438-4500
Telecopy:
with a copy to
Nellie Mae Corporation
50 Braintree Hill Park, Suite 300
Braintree, Massachusetts 01284
Attention: General Counsel
Telephone: 781-849-2121
Telecopy: 781-380-3915
(c) in the case of the Issuer, to
Nellie Mae Student Loan Trust 1999-A
c/o First Chicago Delaware Inc.
c/o FCC National Bank
300 King Street
Wilmington, Delaware 19801
Telephone:
Telecopy:
with a copy to the Eligible Lender Trustee
at the Corporate Trust Office of the
Eligible Lender Trustee;
(d) in the case of the Eligible Lender Trustee, at the
Corporate Trust Office of the Eligible Lender
Trustee;
(e) in the case of the Indenture Trustee, at its
Corporate Trust Office;
(f) in the case of the Administrator, to
Nellie Mae Education Loan Corporation
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1240 Pawtucket Avenue
Rumford, Rhode Island 02916
Attention: Secretary
Telephone:
Telecopy:
with a copy to
Nellie Mae Corporation
50 Braintree Hill Park, Suite 300
Braintree, Massachusetts 02184
Attention: General Counsel
Telephone: 781-849-2121
Telecopy: 781-380-3915
(g) in the case of Fitch, to
Fitch IBCA, Inc.
One State Street Plaza
New York, New York 10004
Attention:
Telephone:
Telecopy:
(h) in the case of Moody's, to
Moody's Investors Service, Inc.
99 Church Street
New York, New York 10017
Attention:
Telephone:
Telecopy:
(i) in the case of Standard & Poor's, to
Standard & Poor's Ratings Services
55 Water Street, 40th Floor
New York, New York 10041
Attention:
Telephone:
Telcopy:
22
<PAGE>
or, as to each of the foregoing, at such other address as shall be designated by
written notice to the other parties.
SECTION 7.04. ASSIGNMENT. Notwithstanding anything to the
contrary contained herein, except as provided in the succeeding sentence, as
provided in Section 5.03 and as provided in the provisions of this Agreement
concerning the resignation of the Master Servicer, this Agreement may not be
assigned by the Master Servicer. This Agreement may only be assigned by the
Eligible Lender Trustee to its permitted successor pursuant to the Trust
Agreement.
SECTION 7.05. LIMITATIONS ON RIGHTS OF OTHERS. The provisions
of this Agreement are solely for the benefit of the Master Servicer, the Issuer
and the Eligible Lender Trustee and for the benefit of the Administrator, the
Indenture Trustee, the Noteholders and the Certificateholders, as third party
beneficiaries, and nothing in this Agreement, whether express or implied, shall
be construed to give to any other Person any legal or equitable right, remedy or
claim in the Trust Estate or under or in respect of this Agreement or any
covenants, conditions or provisions contained herein. The Indenture Trustee is
an express third-party beneficiary and may enforce the provisions of this
Agreement as if it were a party hereto.
SECTION 7.06. SEVERABILITY. Any provision of this Agreement
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
SECTION 7.07. SEPARATE COUNTERPARTS. This Agreement may be
executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall
together constitute but one and the same instrument.
SECTION 7.08. HEADINGS. The headings of the various Articles
and Sections herein are for convenience of reference only and shall not define
or limit any of the terms or provisions hereof.
SECTION 7.09. GOVERNING LAW. This Agreement shall be construed
in accordance with the laws of the State of New York, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
SECTION 7.10. NON-PETITION COVENANTS. Notwithstanding any
prior termination of this Agreement, the Master Servicer shall not, prior to the
date which is one year
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<PAGE>
and one day after the termination of this Agreement with respect to the Issuer
or the Company, acquiesce, petition or otherwise invoke or cause the Issuer or
the Company to invoke the process of any court or government authority for the
purpose of commencing or sustaining a case against the Issuer or the Company
under any federal or state bankruptcy, insolvency or similar law or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Issuer or the Company or any substantial part of their
property, or ordering the winding up or liquidation of the affairs of the Issuer
or the Company.
SECTION 7.11. LIMITATION OF LIABILITY OF ELIGIBLE LENDER
TRUSTEE AND INDENTURE TRUSTEE. (a) Notwithstanding anything contained herein to
the contrary, this Agreement has been signed by The First National Bank of
Chicago not in its individual capacity but solely in its capacity as Eligible
Lender Trustee of the Issuer and in no event shall The First National Bank of
Chicago in its individual capacity or, except as expressly provided in the Trust
Agreement, as beneficial owner of the Issuer have any liability for the
representations, warranties, covenants, agreements or other obligations of the
Issuer hereunder or in any of the certificates, notices or agreements delivered
pursuant hereto as to all of which recourse shall be had solely to the assets of
the Issuer.
(b) Notwithstanding anything contained herein to the contrary,
this Agreement has been accepted by State Street Bank and Trust Company not in
its individual capacity but solely as Indenture Trustee and in no event shall
State Street Bank and Trust Company have any liability for the representations,
warranties, covenants, agreements or other obligations of the Issuer hereunder
or in any of the certificates, notices or agreements delivered pursuant hereto,
as to all of which recourse shall be had solely to the assets of the Issuer.
24
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective officers as of the day and
year first above written.
NELLIE MAE STUDENT LOAN TRUST 1999-A,
By: THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual capacity but solely as
Eligible Lender Trustee on behalf of the Trust
By:______________________________________________
Name:
Title:
NELLIE MAE EDUCATION LOAN CORPORATION
By:______________________________________________________
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO,
not in its individual capacity but solely as Eligible
Lender Trustee
By:______________________________________________________
Name:
Title:
Acknowledged and accepted
as of the day and year first
above written:
STATE STREET BANK AND TRUST
COMPANY, not in its individual capacity
but solely as Indenture Trustee
By:______________________________________
Name:
Title:
<PAGE>
SCHEDULE A
The Master Servicer shall maintain each Student Loan File at one of the
locations listed below:
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<PAGE>
Exhibit 99.3
[FORM OF] ADMINISTRATION AGREEMENT dated as of _______ 1, 1999
among NELLIE MAE STUDENT LOAN TRUST 1999-A, a Delaware trust (the
"ISSUER"), NELLIE MAE EDUCATION LOAN CORPORATION, a Delaware
non-profit corporation, as administrator (the
"ADMINISTRATOR"), and STATE STREET BANK AND TRUST COMPANY, a
Massachusetts banking corporation, not in its individual
capacity but solely as Indenture Trustee (the "INDENTURE
TRUSTEE").
W I T N E S S E T H
WHEREAS the Issuer was formed pursuant to the Trust Agreement
dated as of ______ 1, 1999 (the "TRUST AGREEMENT") among Nellie Mae Education
Loan Corporation, as depositor, Nellie Mae Funding, LLC and The First National
Bank of Chicago, as eligible lender trustee (the "ELIGIBLE LENDER TRUSTEE"), and
is issuing the Class A-1 Floating Rate Asset-Backed Notes (the "CLASS A-1
NOTES") and the Class A-2 Floating Rate Asset-Backed Notes (the "CLASS A-2
NOTES," and together with the Class A-1 Notes, the "NOTES") pursuant to the
Indenture dated as of _______ 1, 1999 (the "INDENTURE") between the Issuer and
the Indenture Trustee, and is issuing the Floating Rate Asset-Backed
Certificates (the "CERTIFICATES") pursuant to the Trust Agreement (capitalized
terms used herein and not defined herein shall have the meanings assigned to
them in Appendix A hereto, which also contains rules of usage and construction
that shall be applicable herein); and
WHEREAS the Issuer has entered into certain agreements in
connection with the issuance of the Notes and the Certificates, including the
Loan Sale Agreement, the Master Servicing Agreement, the Note Depository
Agreement, the Certificate Depository Agreement, the Guarantee Agreements, the
Trust Agreement and the Indenture (all such agreements being collectively
referred to herein as the "RELATED AGREEMENTS"); and
WHEREAS, pursuant to the Related Agreements, the Issuer and
the Eligible Lender Trustee are required to perform certain duties in connection
with (a) the Notes and the Collateral therefor pledged pursuant to the Indenture
and (b) the Certificates; and
WHEREAS the Issuer and the Eligible Lender Trustee desire to
have the Administrator perform certain of the duties of the Issuer and the
Eligible Lender Trustee referred to in the preceding clause, and to provide such
additional services consistent with the terms of
<PAGE>
this Agreement and the Related Agreements as the Issuer and the Eligible Lender
Trustee may from time to time request; and
WHEREAS the Administrator has the capacity to provide the
services required hereby and is willing to perform such services for the Issuer
and the Eligible Lender Trustee on the terms set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:
1. REPRESENTATIONS OF THE ADMINISTRATOR. The Administrator
makes the following representations on which the Issuer and the Eligible Lender
Trustee are deemed to have relied. The representations speak as of the execution
and delivery of this Agreement and as of the Closing Date in the case of the
Initial Trust Loans, as of the applicable Transfer Date in the case of the
Serial Loans and as of the relevant date of assignment in the case of any
Qualified Substitute Student Loan, but shall survive the sale of the Trust Loans
to the Eligible Lender Trustee on behalf of the Issuer and the pledge thereof to
the Indenture Trustee pursuant to the Indenture.
(a) ORGANIZATION AND GOOD STANDING. The Administrator is duly
organized and validly existing as a corporation in good standing under the laws
of the State of Delaware, with the power and authority to own its properties and
to conduct its business as such properties are currently owned and such business
is currently conducted.
(b) POWER AND AUTHORITY OF THE ADMINISTRATOR. The
Administrator has the corporate power and authority to execute and deliver this
Agreement and to carry out its terms, and the execution, delivery and
performance of this Agreement have been duly authorized by the Administrator by
all necessary corporate action.
(c) BINDING OBLIGATION. This Agreement constitutes a legal,
valid and binding obligation of the Administrator, enforceable in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization and
similar laws relating to creditors' rights generally and subject to general
principles of equity.
(d) NO VIOLATION. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof or
thereof do not conflict with, result in any breach of any of the terms and
provisions of, nor constitute (with or without notice or lapse of time or both)
a default under, the certificate of incorporation or by-laws of the
Administrator, or any indenture, agreement or other instrument to which the
Administrator is a party or by which it shall be bound; nor result in the
creation or imposition of any Lien upon any of its properties pursuant to the
terms of any such indenture, agreement or other instrument; nor violate any law
or, to the knowledge of the Administrator, any order, rule or regulation
applicable to the Administrator of any court or of any federal or state
regulatory body, administrative agency or other governmental instrumentality
having jurisdiction over the Administrator or its properties. The consummation
by the Administrator of the transactions contemplated by this Agreement will
2
<PAGE>
not result in the loss of any Guarantee Payments by the Trust or any reinsurance
payments with respect to any Trust Loan.
(e) NO PROCEEDINGS. There are no proceedings or investigations
pending against the Administrator or, to its best knowledge, threatened against
it, before any court, regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Administrator or its
properties: (i) asserting the invalidity of this Agreement, the Indenture or any
of the other Related Agreements, the Notes or the Certificates, (ii) seeking to
prevent the issuance of the Notes or the Certificates or the consummation of any
of the transactions contemplated by this Agreement, the Indenture or any of the
other Related Agreements, (iii) seeking any determination or ruling that could
reasonably be expected to have a material and adverse effect on the performance
by the Administrator of its obligations under, or the validity or enforceability
of, this Agreement, the Indenture, any of the other Related Agreements, the
Notes or the Certificates or (iv) seeking to affect adversely the federal or
state income tax attributes of the Issuer, the Notes or the Certificates.
(f) ALL CONSENTS. All authorizations, consents, licenses,
orders or approvals of or registrations or declarations with any court,
regulatory body, administrative agency or other government instrumentality
required to be obtained, effected or given by the Administrator in connection
with the execution and delivery by the Administrator of this Agreement and the
performance by the Administrator of the transactions contemplated by this
Agreement have in each case been duly obtained, effected or given and are in
full force and effect.
2. DUTIES OF THE ADMINISTRATOR.
(a) DUTIES WITH RESPECT TO THE BASIC DOCUMENTS. The
Administrator shall perform all its duties as Administrator and the duties of
the Issuer under the Basic Documents. In addition, the Administrator shall
consult with the Eligible Lender Trustee as the Administrator deems appropriate
regarding the duties of the Issuer under the Basic Documents. The Administrator
shall monitor the performance of the Issuer and shall advise the Eligible Lender
Trustee when action is necessary to comply with the Issuer's duties under the
Basic Documents. The Administrator shall prepare for execution by the Issuer or
shall cause the preparation by other appropriate Persons of all such documents,
reports, filings, instruments, certificates and opinions as it shall be the duty
of the Issuer to prepare, file or deliver pursuant to the Basic Documents. In
furtherance of the foregoing, the Administrator shall take all appropriate
action that is the duty of the Issuer to take pursuant to the Indenture,
including such of the foregoing as are required with respect to the following
matters (references below in this subsection (a) being to sections of the
Indenture):
(A) the duty to cause the Note Registrar to keep the Note
Register and to give the Indenture Trustee prompt notice of any
appointment of a new Note Registrar and the location, or change in
location, of the Note Register (Section 2.04);
(B) the fixing or causing to be fixed of any specified record
date and the timely notification of the Indenture Trustee and
Noteholders with respect to special payment dates, if any (Section
2.07(c));
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<PAGE>
(C) the preparation of or obtaining of the documents and
instruments required for authentication of the Notes and delivery of
the same to the Indenture Trustee (Section 2.02);
(D) the preparation, obtaining or filing of the instruments,
opinions and certificates and other documents required for the release
of collateral (Section 2.09);
(E) [reserved];
(F) the duty to cause the Note Registrar to maintain on behalf
of the Issuer an office in the Borough of Manhattan, The City of New
York, for registration of transfer or exchange of the Notes (Section
3.02);
(G) the duty to cause newly appointed Paying Agents, if any,
to deliver to the Indenture Trustee the instrument specified in the
Indenture regarding funds held in trust (Section 3.03);
(H) the direction to the Paying Agents to deposit moneys with
the Indenture Trustee (Section 3.03);
(I) the obtaining and preservation of 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, the Collateral and each
other instrument and agreement included in the Indenture Trust Estate
(Section 3.04);
(J) the preparation of all supplements, amendments, financing
statements, continuation statements, instruments of further assurance
and other instruments, in accordance with Section 3.05 of the
Indenture, necessary to protect the Indenture Trust Estate (Section
3.05);
(K) the delivery by the Issuer of the Opinion of Counsel on
the Closing Date and the annual delivery of Opinions of Counsel, in
accordance with Section 3.06 of the Indenture, as to the Indenture
Trust Estate, and the annual delivery of the Officers' Certificate of
the Issuer and certain other statements, in accordance with Section
3.09 of the Indenture, as to compliance with the Indenture (Sections
3.06 and 3.09);
(L) the identification to the Indenture Trustee in an
Officers' Certificate of the Issuer of a Person with whom the Issuer
has contracted to perform its duties under the Indenture (Section
3.07(b));
(M) the notification of the Indenture Trustee and the Rating
Agencies of any Master Servicer Default pursuant to the Master
Servicing Agreement and, if such Master Servicer Default arises from
the failure of the Master Servicer to perform any of its duties under
the Master Servicing Agreement, the taking of all reasonable steps
available to remedy such failure (Section 3.07(d));
(N) the preparation and obtaining of documents and instruments
required for the release of the Issuer from its obligations under the
Indenture (Section 3.10);
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<PAGE>
(O) the prompt delivery of notice to the Indenture Trustee and
the Rating Agencies of each Event of Default, any Default under Section
5.01(iii) of the Indenture and each default by the Master Servicer
under the Master Servicing Agreement or by the Seller under the Loan
Sale Agreement (Section 3.18);
(P) the monitoring of the Issuer's obligations as to the
satisfaction and discharge of the Indenture and the preparation of an
Officers' Certificate of the Issuer and the obtaining of the Opinion of
Counsel and the Independent Certificate relating thereto (Section
4.01);
(Q) the compliance with any written directive of the Indenture
Trustee with respect to the sale of the Indenture Trust Estate in a
commercially reasonable manner if an Event of Default shall have
occurred and be continuing (Section 5.04);
(R) the preparation of any written instruments required to
confirm more fully the authority of any co-trustee or separate trustee
and any written instruments necessary in connection with the
resignation or removal of any co-trustee or separate trustee (Sections
6.08 and 6.10);
(S) the furnishing of the Indenture Trustee with the names and
addresses of Noteholders during any period when the Indenture Trustee
is not the Note Registrar (Section 7.01);
(T) the preparation and, after execution by the Issuer, the
filing with the Commission, any applicable State agencies and the
Indenture Trustee of documents required to be filed on a periodic basis
with, and summaries thereof as may be required by rules and regulations
prescribed by, the Commission and any applicable State agencies and the
transmission of such summaries to the Noteholders (Section 7.03);
(U) the opening of one or more accounts in the Issuer's name,
the preparation of Issuer Orders, Officers' Certificates of the Issuer
and Opinions of Counsel and all other actions necessary with respect to
investment and reinvestment of funds in the Trust Accounts (Sections
8.02 and 8.03);
(V) the preparation of an Issuer Request and Officers'
Certificate of the Issuer and the obtaining of an Opinion of Counsel
and Independent Certificates, if necessary, for the release of the
Indenture Trust Estate (Sections 8.04 and 8.05);
(W) the preparation of Issuer Orders and the obtaining of
Opinions of Counsel with respect to the execution of supplemental
indentures and the mailing to the Noteholders and each Rating Agency of
notices with respect to such supplemental indentures (Sections 9.01,
9.02 and 9.03);
(X) the preparation of or obtaining of the documents and
instruments required for the execution and authentication of new Notes
conforming to any supplemental indenture and the delivery of the same
to the Eligible Lender Trustee and the Indenture Trustee, respectively
(Section 9.06);
5
<PAGE>
(Y) the notification to Noteholders of redemption of the Notes
or the duty to cause the Indenture Trustee to provide such notification
(Section 10.02);
(Z) the preparation of all Officers' Certificates of the
Issuer, Opinions of Counsel and Independent Certificates with respect
to any requests by the Issuer to the Indenture Trustee to take any
action under the Indenture (Section 11.01(a));
(AA) the preparation and delivery of Officers' Certificates of
the Issuer and the obtaining of Independent Certificates, if necessary,
for the release of property from the lien of the Indenture (Section
11.01(b));
(AB) the preparation and timely delivery to Noteholders and
the Indenture Trustee of any agreements with respect to alternate
payment and notice provisions (Section 11.06);
(AC) the recording of the Indenture, if applicable (Section
11.15);
(AD) the duty to obtain a new Master Servicer as Successor
Master Servicer, and to enter into an agreement with such Successor
Master Servicer (Section 3.07(e));
(AE) the notification of the termination of the Master
Servicer and the appointment of a Successor Master Servicer (Section
3.07(f)); and
(AF) the duty to cause the Master Servicer to comply with the
Master Servicing Agreement (Section 3.14).
The Administrator shall provide to the Eligible Lender Trustee
(i) a list of jurisdictions in which the Issuer is required to be licensed and
(ii) any other information necessary for the Eligible Lender Trustee to fulfill
its obligations under Section 7.08 of the Trust Agreement.
(b) DUTIES WITH RESPECT TO THE ISSUER.
(i) In addition to the duties of the Administrator set forth
above and in the other Related Agreements, the Administrator shall perform such
calculations and shall prepare for execution by the Issuer or the Eligible
Lender Trustee or shall cause the preparation by other appropriate Persons of
all such documents, reports, filings, instruments, certificates and opinions as
it shall be the duty of the Issuer or the Eligible Lender Trustee to prepare,
file or deliver pursuant to the Related Agreements, and at the request of the
Eligible Lender Trustee shall take all appropriate action that it is the duty of
the Issuer to take pursuant to the Related Agreements. In furtherance thereof,
the Eligible Lender Trustee shall, on behalf of itself and of the Issuer,
execute and deliver to the Administrator and to each successor Administrator
appointed pursuant to the terms hereof, one or more powers of attorney
substantially in the form of Exhibit A hereto, appointing the Administrator the
attorney-in-fact of the Eligible Lender Trustee and the Issuer for the purpose
of executing on behalf of the Eligible Lender Trustee and the Issuer all such
documents, reports, filings, instruments, certificates and opinions. Subject to
Section 9 of this Agreement, and in accordance with the directions of the
Eligible Lender Trustee, the Administrator shall administer, perform or
supervise the performance of such other activities in
6
<PAGE>
connection with the Collateral (including the Related Agreements) as are not
covered by any of the foregoing provisions and as are expressly requested by the
Eligible Lender Trustee and are reasonably within the capability of the
Administrator.
(ii) Notwithstanding anything in this Agreement or the Related
Agreements to the contrary, the Administrator shall deliver to the Eligible
Lender Trustee, the Indenture Trustee, the Rating Agencies and (if the Seller is
not the Administrator) the Seller, an Officers' Certificate of the Administrator
containing all the information necessary:
(A) to pay the Department any Monthly Rebate Fees due and
payable to the Department, which Officer's Certificate shall be
delivered on that date that is three Business Days prior to the date
such fees are to be remitted to the Department;
(B) on each Transfer Date, to calculate the Purchase
Collateral Balance for Serial Loans purchased on such date, which
Officers' Certificate, in each case, shall be delivered on the Business
Day preceding such Transfer Date;
(C) to pay the Master Servicer the Servicing Fee due on each
Monthly Payment Date and each Quarterly Payment Date pursuant to
Section 2(d)(iii)(A), 2(d)(iv)(A) and 2(e)(iv)(A), which Officers'
Certificate shall be delivered on the each Determination Date; and
(D) to make all the distributions required by Sections 2(d)
and 2(e) for the Monthly Collection Period or Collection Period, as the
case may be, preceding the date of such Officers' Certificate, which
Officers' Certificate shall be delivered on each Determination Date.
(iii) [Reserved.]
(iv) Notwithstanding anything in this Agreement or the Related
Agreements to the contrary, the Administrator shall be responsible for
performance of the duties of the Eligible Lender Trustee set forth in Section
5.04 of the Trust Agreement with respect to, among other things, any tax
information or accounting report required to be distributed to Note Owners and
Certificate Owners.
(v) [Reserved.]
(vi) The Administrator shall perform the duties of the
Administrator specified in Sections 10.02 and 10.03 of the Trust Agreement
required to be performed in connection with the resignation or removal of the
Eligible Lender Trustee and the appointment of a successor Eligible Lender
Trustee, and any other duties expressly required to be performed by the
Administrator under the Trust Agreement and the other Related Agreements,
including those under Sections 6.07 and 6.08 of the Indenture.
(vii) As described in Article IX of the Trust Agreement,
notice of any termination of the Trust shall be given by the Administrator to
the Eligible Lender Trustee and the Indenture Trustee as soon as practicable
after the Administrator has received notice thereof.
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<PAGE>
(viii) In carrying out the foregoing duties or any of its
other obligations under this Agreement, the Administrator may enter into
transactions with or otherwise deal with any of its Affiliates; PROVIDED,
HOWEVER, that the terms of any such transactions or dealings shall be in
accordance with any directions received from the Issuer and shall be, in the
Administrator's opinion, no less favorable to the Issuer, the Noteholders and
the Certificateholders than would be available from unaffiliated parties.
(c) ESTABLISHMENT AND MAINTENANCE OF TRUST ACCOUNTS.
(i) The Administrator, for the benefit of the Issuer, shall
establish and maintain in the name of the Indenture Trustee an Eligible Deposit
Account (the "COLLECTION ACCOUNT"), bearing a designation clearly indicating
that the funds deposited therein are held for the benefit of the Indenture
Trustee, on behalf of the Securityholders. The Collection Account will initially
be established as a segregated trust account in the name of the Indenture
Trustee with the corporate trust department of State Street Bank and Trust
Company.
(ii) The Administrator, for the benefit of the Issuer, shall
establish and maintain in the name of the Indenture Trustee an Eligible Deposit
Account (the "RESERVE ACCOUNT"), bearing a designation clearly indicating that
the funds deposited therein are held for the benefit of the Indenture Trustee,
on behalf of the Securityholders. The Reserve Account will initially be
established as a segregated trust account in the name of the Indenture Trustee
with the corporate trust department of State Street Bank and Trust Company.
(iii) [Reserved]
(iv) [Reserved]
(v) Funds on deposit in the Collection Account and the Reserve
Account (collectively, the "TRUST ACCOUNTS") shall be invested by the Indenture
Trustee (or any custodian or designated agent with respect to any amounts on
deposit in such accounts) in Eligible Investments pursuant to written
instructions by the Administrator; PROVIDED, HOWEVER, that it is understood and
agreed that the Indenture Trustee shall not be liable for any loss arising from
such investment in Eligible Investments. All such Eligible Investments shall be
held by (or by any custodian on behalf of) the Indenture Trustee for the benefit
of the Issuer; PROVIDED, HOWEVER, that on the Business Day preceding each
Monthly Payment Date all interest and other investment income (net of losses and
investment expenses) on funds on deposit therein shall be deposited into the
Collection Account and shall be deemed to constitute a portion of the Monthly
Available Funds for each Monthly Payment Date that is not a Quarterly Payment
Date, and a portion of the Available Funds for each Quarterly Payment Date.
Other than as permitted in writing by the Rating Agencies, funds on deposit in
the Trust Accounts shall be invested in Eligible Investments that will mature so
that funds sufficient to pay the Servicing Fee and the Administration Fee will
be available in the Collection Account on the Business Day preceding each
Monthly Payment Date that is not a Quarterly Payment Date.
(vi) (A) The Indenture Trustee, on behalf the Securityholders,
shall possess all right, title and interest in all funds on
deposit from time to time in the Trust Accounts and in all
proceeds thereof (including all income thereon) and all such
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<PAGE>
funds, investments, proceeds and income shall be part of the
Trust Estate. The Trust Accounts shall be under the sole
dominion and control of the Indenture Trustee for the benefit
of the Securityholders. If, at any time, any of the Trust
Accounts ceases to be an Eligible Deposit Account, the
Indenture Trustee (or the Administrator on its behalf) agrees,
by its acceptance hereof, that it shall within ten Business
Days (or such longer period, not to exceed 30 calendar days,
as to which each Rating Agency may consent) establish a new
Trust Account as an Eligible Deposit Account and shall
transfer any cash and/or any investments to such new Trust
Account. In connection with the foregoing, the Administrator
agrees that, in the event that any of the Trust Accounts are
not accounts with the Indenture Trustee, the Administrator
shall notify the Indenture Trustee in writing promptly upon
any of such Trust Accounts ceasing to be an Eligible Deposit
Account.
(B) With respect to the Trust Account Property, the Indenture
Trustee agrees, by its acceptance hereof, that:
(1) any Trust Account Property that is held in
deposit accounts shall be held solely in
Eligible Deposit Accounts, subject to the
next to the last sentence of Section 2(c)
(vi) (A) above; and each such Eligible
Deposit Account shall be subject to the
exclusive custody and control of the
Indenture Trustee, and the Indenture Trustee
shall have sole signature authority with
respect thereto;
(2) any Trust Account Property that constitutes
Physical Property shall be Delivered to the
Indenture Trustee in accordance with
paragraph (a) of the definition of
"Delivery" and shall be held, pending
maturity or disposition, solely by the
Indenture Trustee or a "securities
intermediary" (as such term is defined in
Section 8-103(a)(14) of the UCC) acting
solely for the Indenture Trustee;
(3) any Trust Account Property that is a
book-entry security held through the Federal
Reserve System pursuant to federal
book-entry regulations shall be Delivered in
accordance with paragraph (b) of the
definition of "Delivery" and shall be
maintained by the Indenture Trustee, pending
maturity or disposition, through continued
book-entry registration of such Trust
Account Property as described in such
paragraph; and
(4) any Trust Account Property that is an
"uncertificated security" (as such term is
defined in Section 8-103(a)(18) of the UCC)
and that is not governed by Section
2(c)(B)(3) above shall be Delivered to the
Indenture Trustee in accordance with
paragraph (c) of the definition of
"Delivery" and shall be maintained by the
Indenture Trustee, pending maturity or
disposition, through continued registration
of the Indenture Trustee's (or its
nominee's) ownership of such security.
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<PAGE>
(C) The Administrator shall have the power, revocable by the
Indenture Trustee or by the Eligible Lender Trustee with the
consent of the Indenture Trustee, for cause or upon the
occurrence and during the continuance of an Administrator
Default, to instruct the Indenture Trustee to make withdrawals
and payments from the Trust Accounts for the purpose of
permitting the Master Servicer or the Eligible Lender Trustee
to carry out their respective duties under the Master
Servicing Agreement and the Trust Agreement, permitting the
Indenture Trustee to carry out its duties under the Indenture
and withdrawing any amounts deposited in error into such
accounts.
(vii) On each Determination Date, the Administrator shall
calculate all amounts required to be deposited in the Collection Account and the
Reserve Account and the amounts to be distributed therefrom on the related
Monthly Payment Date, Quarterly Payment Date or other dates from which amounts
therein are to be distributed.
(d) WITHDRAWALS FROM THE COLLECTION ACCOUNT. The Administrator
shall instruct the Indenture Trustee (based, in the case of clauses (ii) and
(iii) of this Section 2(d), on the information contained in the Master
Servicer's report delivered with respect to the applicable Determination Date
pursuant to Section 3.07 of the Master Servicing Agreement) to make withdrawals
from amounts deposited in the Collection Account at the following times and for
the following purposes, and the Indenture Trustee shall comply with such
instructions:
(i) from time to time during each Collection Period to pay the
Department any Monthly Rebate Fees due and payable to the Department;
(ii) on each Transfer Date to pay to the Seller, pursuant to
Section 2.02 of the Loan Sale Agreement, the aggregate Purchase Collateral
Balance for Serial Loans purchased by the Eligible Lender Trustee on behalf of
the Issuer on such date; PROVIDED , HOWEVER, that the amount paid to the Seller
for the purchase of Serial Loans on such Transfer Date plus the amount of funds
remitted for the purchase of Serial Loans on each Transfer Date since the
preceding Quarterly Payment Date shall not exceed the Net Principal Cash Flow
Amount for such Transfer Date; and PROVIDED, FURTHER, that any Purchase Premium
Amounts for Serial Loans shall be paid only out of Reserve Account Excess as set
forth in Section 2(e)(ii) below;
(iii) on each Monthly Payment Date that is not a Quarterly
Payment Date, to make the following deposits and distributions to the Persons
specified below by 11:00 a.m. (New York time), to the extent of Monthly
Available Funds for such Monthly Payment Date in the Collection Account, in the
following order of priority:
(A) to the Master Servicer, the Servicing Fee with
respect to the preceding calendar month and all unpaid
Servicing Fees from prior months; and
(B) to the Administrator, from the amount of the
Monthly Available Funds remaining after the application of
clause (A), the Administration Fee with respect to the
preceding calendar month and all unpaid Administration Fees
from prior months;
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(iv) on each Quarterly Payment Date, to make the following
deposits and distributions to the Persons or the account specified below by
11:00 a.m. (New York time), to the extent of Available Funds for such Quarterly
Payment Date in the Collection Account, in the following order of priority:
(A) to the Master Servicer, the Servicing Fee with
respect to the preceding calendar month and all unpaid
Servicing Fees from prior months;
(B) to the Administrator, from the amount of the
Available Funds remaining after the application of clause (A),
the Administration Fee with respect to the preceding calendar
month and all unpaid Administration Fees from prior months;
(C) to the Indenture Trustee for distribution
pursuant to Section 8.02(c) of the Indenture, in the following
order of priority, from the amount of the Available Funds
remaining after the application of subclauses (A) and (B): the
Class A-1 Noteholders' Interest Distribution Amount and the
Class A-2 Noteholders' Interest Distribution Amount with
respect to such Quarterly Payment Date, PRO RATA, based on the
ratio of each such amount to the total of such amounts;
(D) to the Eligible Lender Trustee for distribution
pursuant to Article V of the Trust Agreement, from the amount
of Available Funds remaining after the application of
subclauses (A), (B) and (C) above, the Certificateholders'
Return Distribution Amount for such Quarterly Payment Date;
(E) to the Indenture Trustee for distribution
pursuant to Section 8.02(c) of the Indenture, from the amount
of Available Funds remaining after the application of
subclauses (A) through (D) above, the Noteholders' Principal
Distribution Amount for such Quarterly Payment Date;
(F) to the Eligible Lender Trustee for distribution
pursuant to Article V of the Trust Agreement, from the amount
of Available Funds remaining after application of subclauses
(A) through (E) above, the Certificateholders' Balance
Distribution Amount for such Quarterly Payment Date; and
(G) to the Reserve Account, the amount of Available
Funds remaining after the application of subclauses (A)
through (F) above.
Except in the case of amounts deposited into the Reserve
Account pursuant to Section 2(d)(iv)(G) above, amounts properly calculated,
reported and withdrawn from the Collection Account and properly distributed
pursuant to this Section 2(d) in accordance with the terms hereof shall be
deemed released from the Trust Estate and the security interest therein granted
to the Indenture Trustee, and the Persons to whom such amounts are distributed
shall in no event be required to refund any such distributed amounts.
(e) RESERVE ACCOUNT.
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(i) The Issuer shall deposit the Reserve Account Initial
Deposit into the Reserve Account as required by Section 2.01 of the Loan Sale
Agreement.
(ii) With respect to any amount in the Reserve Account on any
Quarterly Payment Date (after giving effect to all deposits thereto on such
Quarterly Payment Date and to all withdrawals therefrom necessary to make the
distributions required to be made from the Available Funds on such Quarterly
Payment Date) in excess of the Specified Reserve Account Balance for such
Quarterly Payment Date (the "RESERVE ACCOUNT EXCESS"), the Administrator shall
instruct the Indenture Trustee to apply such Reserve Account Excess to the
following (in the priority indicated): (A) to pay to the Seller any unpaid
Purchase Premium Amounts for any Serial Loans purchased by the Issuer prior to
the end of the related Collection Period; (B) if such Quarterly Payment Date is
on or prior to the Parity Date, to pay to the Indenture Trustee for distribution
to Noteholders pursuant to Section 8.02(d) of the Indenture an amount equal to
the lesser of (x) the remaining amount of such excess and (y) the amount by
which the sum of (1) the aggregate principal amount of the Notes and (2) the
Certificate Balance of the Certificates, after giving effect to all other
distributions in respect of principal of the Securities on such Quarterly
Payment Date, exceeds the sum of (3) the Pool Balance as of the close of
business on the last day of the related Collection Period and (4) the amount on
deposit in the Reserve Account on such date; (C) to pay to the Indenture Trustee
for distribution to Noteholders pursuant to Section 8.02(d) of the Indenture,
out of the remaining amount of such excess, an amount equal to the aggregate
unpaid Noteholders' Interest Basis Carryover for such Quarterly Payment Date;
(D) to pay to the Eligible Lender Trustee for distribution to the
Certificateholders pursuant to Article V of the Trust Agreement the aggregate
unpaid amount of any Certificateholders' Return Carryover for such Quarterly
Payment Date; and (E) to release to the Company any remaining amount of such
excess, after application of clauses (A) through (D) of this Section 2(e)(ii);
PROVIDED, HOWEVER, that if and to the extent that (x) the amount of the Master
Servicer's unpaid repurchase obligation pursuant to Section 3.05 of the Master
Servicing Agreement exceeds $[500,000] as of the last day of the preceding
Collection Period (and such Master Servicer has not been replaced by a Successor
Master Servicer), or (y) the Department fails by the last day of such preceding
Collection Period to satisfy its obligations to reimburse or replace a Federal
Guarantor pursuant to the Higher Education Act, then any Reserve Fund Excess
remaining on such Quarterly Payment Date for distribution to Company pursuant to
the subclause (E) above shall not be so distributed and shall be retained in the
Reserve Account for application in accordance with this Agreement. Amounts
properly calculated, reported and distributed pursuant to this Section 2(e)(ii)
shall be deemed released from the Trust Estate and the security interest therein
granted to the Indenture Trustee, and the Seller and the Company shall in no
event thereafter be required to refund any such distributed amounts.
(iii) Following the payment in full of the aggregate
outstanding principal amount of the Notes, the Certificate Balance of the
Certificates and of all other amounts owing or to be distributed hereunder,
under the Indenture or under the Trust Agreement to Noteholders,
Certificateholders, the Seller, the Master Servicer or the Administrator and the
termination of the Trust (including any Noteholders' Interest Basis Carryover,
Certificateholders' Return Carryover and unpaid Purchase Premium Amounts), any
amount remaining on deposit in the Trust Accounts shall be distributed to the
Company. The Company shall in no event be required to refund any amounts
properly calculated, reported and distributed pursuant to this Section
2(e)(iii).
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(iv) (A) In the event that the Servicing Fee for any
Monthly Payment Date exceeds the amount distributed to the
Master Servicer pursuant to Section 2(d)(iii)(A) or
2(d)(iv)(A) on such Monthly Payment Date, the Administrator
shall instruct the Indenture Trustee to withdraw from the
Reserve Account on each Monthly Payment Date an amount equal
to such excess and to distribute such amount to the Master
Servicer.
(B) In the event that the Administration Fee for any
Monthly Payment Date exceeds the amount distributed to the
Administrator pursuant to Sections 2(d)(iii)(B) or 2(d)(iv)(B)
on such Monthly Payment Date, the Administrator shall instruct
the Indenture Trustee to withdraw from the Reserve Account on
such Monthly Payment Date an amount equal to such excess, to
the extent of funds available therein after giving effect to
Section 2(e)(iv)(A) above, and to distribute such amount to
the Administrator.
(C) For any Quarterly Payment Date, in the event that
the sum of the Class A-1 Noteholders' Interest Distribution
Amount, the Class A-2 Noteholders' Interest Distribution
Amount, the Certificateholders' Return Distribution Amount,
the Noteholders' Principal Distribution Amount and the
Certificateholders' Balance Distribution Amount, each for such
Quarterly Payment Date, exceeds the sum of the amounts
distributed (x) to the Indenture Trustee for distribution to
the Noteholders pursuant to Section 2(d)(iv)(C) and (E) on
such Quarterly Payment Date (y) to the Certificate Paying
Agent for distribution to the Certificateholders pursuant to
Section 2(d)(iv)(D) and (F) on such Quarterly Payment Date,
the Administrator shall instruct the Indenture Trustee to
withdraw from the Reserve Account on such Quarterly Payment
Date an amount equal to such excess, to the extent of funds
available therein after giving effect to Sections 2(e)(iv)(A)
and (B) above, and to distribute such amount as required by
Section 2(d)(iii) on such Quarterly Payment Date.
(f) [Reserved].
(g) STATEMENTS TO SECURITYHOLDERS. On each Determination Date
preceding a Quarterly Payment Date, the Administrator shall provide to the
Indenture Trustee (with a copy to the Rating Agencies) for the Indenture Trustee
to forward on such succeeding Quarterly Payment Date to each Noteholder of
record, and to the Eligible Lender Trustee for the Eligible Lender Trustee to
forward on each succeeding Quarterly Payment Date to each Certificateholder of
record, a statement substantially in the form of Exhibit B setting forth at
least the following information as to the Securities:
(A) the amount of such distribution allocable to
principal of the Securities, the amount thereof
distributable as principal of the Class A-1 Notes,
the Class A-2 Notes and the Certificates, and the
amount thereof attributable to the Class A-1
Noteholders' Principal Distribution Amount, the
amount thereof attributable to the Class A-2
Noteholders' Principal Distribution Amount, the
amount thereof attributable to the Certificate
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Balance Distribution Amount and the amount thereof
attributable to Reserve Account Excess;
(B) the amount of the distribution allocable on such
Quarterly Payment Date to interest on the Class A-1
Notes;
(C) the amount of the distribution allocable on such
Quarterly Payment Date to interest on the Class A-2
Notes;
(D) the amount of the distribution allocable on such
Quarterly Payment Date to interest return on the
Certificates;
(E) the amount, if any, of such distribution
allocable to any Noteholders' Interest Basis
Carryover and any Certificate Return Carryover,
together with any remaining outstanding amount of
each thereof;
(F) the Pool Balance as of the close of business on
the last day of the preceding Collection Period,
after giving effect to payments allocated to
principal reported under clause (A) above;
(G) the aggregate outstanding principal amount of the
Class A-1 Notes, the aggregate outstanding principal
amount of the Class A-2 Notes, the Certificate
Balance of the Certificates, the Class A-1 Note Pool
Factor, the Class A-2 Note Pool Factor and the
Certificate Pool Factor as of such Quarterly Payment
Date, after giving effect to payments allocated to
principal reported under clause (A) above;
(H) the Note Rate (as calculated by the Indenture
Trustee) applicable with respect to each distribution
referred to in clauses (B) and (C) above, indicating
(in accordance with information supplied by the
Indenture Trustee) whether such interest rate was
calculated based on the Adjusted Student Loan Rate or
based on the Note LIBOR Rate and specifying what each
such Note Rate would have been using the alternate
basis for such calculation;
(I) the Certificate Rate (as calculated by the
Indenture Trustee if any Notes are then outstanding
or by the Administrator if all the Notes have been
retired) applicable with respect to the distribution
referred to in clause (D) above, indicating (in
accordance with information supplied) by the
Indenture Trustee or the Eligible Lender Trustee, as
applicable) whether such note was calculated based on
the Adjusted Student Loan Rate or based on the
Certificate LIBOR Rate and specifying what the
Certificate Rate would have been using the alternate
basis for such calculation;
(J) the amount of the Servicing Fee paid to the
Master Servicer on such Quarterly Payment Date and on
each Monthly Payment Date
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following the immediately preceding Quarterly Payment
Date (including in such amount any previously unpaid
Servicing Fees from prior periods that were paid on
such date);
(K) the amount of the Administration Fee paid to the
Administrator on such Quarterly Payment Date and on
each Monthly Payment Date following the immediately
preceding Quarterly Payment Date (including in such
amount any previously unpaid Administration Fees from
prior periods that were paid on such date);
(L) the amount of the aggregate Realized Losses, if
any, for such Collection Period and the balance of
the Trust Loans that are delinquent in each
delinquency period as of the end of such Collection
Period;
(M) the balance of the Reserve Account on such
Quarterly Payment Date, after giving effect to
changes therein on such Quarterly Payment Date and
indicating whether on such Quarterly Payment Date or
any Monthly Payment Date since the preceding
Quarterly Payment Date any withdrawal was made
therefrom pursuant to Section 2(e)(ii), the amount of
each such withdrawal and the purpose(s) pursuant to
Section 2(e)(ii) for each such withdrawal;
(N) the principal balance and number of Serial Loans
conveyed to the Issuer during the related Collection
Period, the aggregate Loan Purchase Amounts thereof
and the portion thereof attributable to Purchase
Premium Amounts; and
(O) the number and principal balance of Trust Loans,
as of the end of the related Collection Period, that
are In-School, Grace, Repayment, Deferral or
Forbearance Loans as of the end of the related
Collection Period.
Each amount set forth pursuant to clauses (A), (B), (C), (D) and (E) above shall
be expressed as a dollar amount per $1,000 of original principal amount of a
Note or a Certificate, as applicable. A copy of the statements referred to above
may be obtained by any Note Owner by a written request to the Indenture Trustee
addressed to its Corporate Trust Office and by any Certificate Owner by an
written request to the Eligible Lender Trustee addressed to its Corporate Trust
Office.
(h) NON-MINISTERIAL MATTERS. With respect to matters that in
the reasonable judgment of the Administrator are non-ministerial, the
Administrator shall not take any action unless within a reasonable time before
the taking of such action, the Administrator shall have notified the Eligible
Lender Trustee of the proposed action and the Eligible Lender Trustee shall have
consented to it. For the purpose of the preceding sentence, "non-ministerial
matters" shall include, without limitation:
(A) the amendment of or any supplement to the Indenture;
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(B) the initiation of any claim or lawsuit by the Issuer and
the compromise of any action, claim or lawsuit brought by or against
the Issuer (other than in connection with the collection of the Trust
Loans);
(C) the amendment, change or modification of the Related
Agreements;
(D) the appointment of successor Note Registrars, successor
Paying Agents and successor Indenture Trustees pursuant to the
Indenture or the appointment of successor Administrators or Successor
Master Servicers, or the consent to the assignment by the Note
Registrar, Paying Agent or Indenture Trustee of its obligations under
the Indenture; and
(E) the removal of the Indenture Trustee.
(i) INCENTIVE LOANS AND INCENTIVE INTEREST DEPOSITS. The
Administrator may terminate or change the terms of any Incentive Program with
respect to a Trust Loan in accordance with the terms of such program, provided
such termination or change is not prohibited by the Higher Education Act, upon
notice to the Eligible Lender Trustee, and the Indenture Trustee. Until the
effective date of any termination, the Administrator shall be required to
deposit into the Collection Account the Incentive Interest Deposit with respect
to such Incentive Trust Loan as provided below. In the event that the
Administrator fails to make such deposit, the terms of such Incentive Program
shall be such that the Borrower shall be obligated to make such payment and such
Incentive Program shall terminate as to the related loan.
The Administrator shall deposit or cause to be deposited into
the Collection Account no later than the Determination Date succeeding each
Monthly Collection Period and Collection Period the aggregate Incentive Interest
Deposits with respect to Incentive Financed Student Loans in the Trust as of the
last day of such Monthly Collection Period and Collection Period. Such deposits
shall be considered deposits in respect of interest on such Incentive Trust
Loans for all purposes of the Basic Documents and shall be deemed to have been
deposited into the Collection Account for all such purposes as of such last date
of such Monthly Collection Period.
3. ANNUAL STATEMENT AS TO COMPLIANCE. (a) The Administrator
shall deliver to the Seller, the Eligible Lender Trustee and the Indenture
Trustee on or before March 31 of each year beginning March 31, 2000, an
Officers' Certificate of the Administrator dated as of December 31 of the
preceding year, stating that (i) a review of the activities of the Administrator
during the preceding 12-month period (or, in the case of the first such
certificate, during the period from the Closing Date to December 31, 1999) and
of its performance under this Agreement has been made under such officers'
supervision and (ii) to the best of such officers' knowledge, based on such
review, the Administrator has fulfilled all its obligations under this Agreement
throughout such year or, if there has been a default in the fulfillment of any
such obligation, specifying each such default known to such officers and the
nature and status thereof. The Indenture Trustee shall send a copy of each such
Officer's Certificate and each report referred to in Section 4 to the Rating
Agencies. A copy of such Officers' Certificate and each report referred to in
Section 4 may be obtained by (i) any Noteholder or Note Owner by a request in
writing to the Indenture Trustee addressed to its Corporate Trust Office,
together with
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evidence satisfactory to the Indenture Trustee that such Person is one of the
foregoing parties, and (ii) any Certificateholder or Certificate Owner by
request in writing to the Eligible Lender Trustee addressed to its Corporate
Trust Office.
(b) The Administrator shall deliver to the Eligible Lender
Trustee, the Indenture Trustee, the Master Servicer and the Rating Agencies,
promptly after having obtained knowledge thereof, but in no event later than two
Business Days thereafter, written notice in an Officers' Certificate of the
Administrator of any event which with the giving of notice or lapse of time, or
both, would become an Administrator Default under Section 12 of this Agreement.
4. ANNUAL INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REPORT.
The Administrator shall cause a firm of independent certified public
accountants, which may also render other services to the Administrator, to
deliver to the Seller, the Eligible Lender Trustee and the Indenture Trustee on
or before March 31 of each year beginning March 31, 2000, a report addressed to
the Administrator and to the Seller, the Eligible Lender Trustee and the
Indenture Trustee (which report may be combined with other reports required to
be delivered by such accountants to the Administrator, the Eligible Lender
Trustee and the Indenture Trustee under the Related Agreements), to the effect
that such firm has examined certain documents and records relating to the
administration of the Financed Student Loans and of the Trust during the
preceding fiscal year ended December 31 (or, in the case of the first such
report, during the period from the Closing Date to December 31, 1999) and that,
on the basis of the accounting and auditing procedures considered appropriate
under the circumstances, such firm is of the opinion that the administration of
the Trust was conducted in compliance with the terms of this Agreement, except
for (i) such exceptions as such firm shall believe to be immaterial and (ii)
such other exceptions as shall be set forth in such report. The Indenture
Trustee shall send a copy of each such report to the Rating Agencies.
Such report will also indicate that the firm is independent of
the Administrator within the meaning of the Code of Professional Ethics of the
American Institute of Certified Public Accountants.
5. ADMINISTRATOR EXPENSES. The Administrator shall be required
to pay all expenses incurred by it in connection with its activities hereunder,
including fees and disbursements of independent accountants, taxes imposed on
the Administrator and expenses incurred in connection with distributions and
reports to the Securityholders.
6. RECORDS. The Administrator shall maintain appropriate books
of account and records relating to services performed hereunder, which books of
account and records shall be accessible for inspection by the Issuer at any time
during normal business hours.
7. COMPENSATION. As compensation for the performance of the
Administrator's obligations under this Agreement and as reimbursement for its
expenses related thereto, the Administrator shall be entitled to the
Administration Fee payable monthly in arrears on each Monthly Payment Date which
shall be solely an obligation of the Issuer and payable solely as provided
herein.
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8. ADDITIONAL INFORMATION TO BE FURNISHED TO THE ISSUER. The
Administrator shall furnish to the Issuer from time to time such additional
information regarding the Collateral as the Issuer shall reasonably request.
9. INDEPENDENCE OF THE ADMINISTRATOR. For all purposes of this
Agreement, the Administrator shall be an independent contractor and shall not be
subject to the supervision of the Issuer or the Eligible Lender Trustee with
respect to the manner in which it accomplishes the performance of its
obligations hereunder. Unless expressly authorized by the Issuer, the
Administrator shall have no authority to act for or represent the Issuer or the
Eligible Lender Trustee in any way and shall not otherwise be deemed an agent of
the Issuer or the Eligible Lender Trustee.
10. NO JOINT VENTURE. Nothing contained in this Agreement (i)
shall constitute the Administrator and either the Issuer or the Eligible Lender
Trustee as members of any partnership, joint venture, association, syndicate,
unincorporated business or other separate entity, (ii) shall be construed to
impose any liability as such on any of them or (iii) shall be deemed to confer
on any of them any express, implied or apparent authority to incur any
obligation or liability on behalf of the others.
11. OTHER ACTIVITIES OF ADMINISTRATOR. Nothing herein shall
prevent the Administrator or its Affiliates from engaging in other businesses
or, in its sole discretion, from acting in a similar capacity as an
administrator for any other Person even though such Person may engage in
business activities similar to those of the Issuer, the Eligible Lender Trustee
or the Indenture Trustee.
12. ADMINISTRATOR DEFAULT. If any one of the following events
(an "ADMINISTRATOR DEFAULT") shall occur and be continuing:
(a) any failure by the Administrator to direct the Indenture
Trustee to make any required distributions from any of the
Trust Accounts, which failure continues unremedied for five
Business Days after written notice of such failure is received
by the Administrator from the Indenture Trustee or the
Eligible Lender Trustee or after discovery of such failure by
an officer of the Administrator; or
(b) any failure by the Administrator duly to observe or to
perform in any material respect any other covenants or
agreements of the Administrator set forth in this Agreement or
any Related Agreements, which failure shall (i) materially and
adversely affect the rights of Securityholders and (ii)
continues unremedied for a period of 60 days after the date of
discovery of such failure by an officer of the Administrator
or on which written notice of such failure, requiring the same
to be remedied, shall have been given (A) to the Administrator
by the Indenture Trustee or the Eligible Lender Trustee or (B)
to the Administrator and to the Indenture Trustee and the
Eligible Lender Trustee by Securityholders representing not
less than 25% of the outstanding principal balance of the
Securities; or
(c) an Insolvency Event occurs with respect to the
Administrator; or
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(d) any representation or warranty made by the Administrator
hereunder or under any Related Agreement, or in any
certificate furnished hereunder or under any Related
Agreement, shall prove to be untrue or incomplete in any
material respect;
then, and in each and every case, so long as the Administrator Default shall not
have been remedied, (x) if any Notes remain Outstanding, then either the
Indenture Trustee or Noteholders evidencing not less than 75% of the Outstanding
Amount of the Notes, or (y) if the Notes have been paid in full, then either the
Eligible Lender Trustee or Certificateholders evidencing not less than 75% of
the Certificate Balance of the Outstanding Certificates by notice then given in
writing to the Administrator (and to the Indenture Trustee and the Eligible
Lender Trustee if given by the Noteholders and to the Eligible Lender Trustee if
given by the Certificateholders), may terminate all the rights and obligations
(other than the obligations set forth in Section 24 hereof) of the Administrator
under this Agreement. On or after the receipt by the Administrator of such
written notice, all authority and power of the Administrator under this
Agreement, whether with respect to the Securities or the Trust Loans or
otherwise, shall, without further action, pass to and be vested in the Indenture
Trustee or such successor Administrator as may be appointed under Section 13;
and, without limitation, the Indenture Trustee (if any Notes remain Outstanding)
and the Eligible Lender Trustee are hereby authorized and empowered to execute
and deliver, for the benefit of the predecessor Administrator, as
attorney-in-fact or otherwise, any and all documents and other instruments, and
to do or accomplish all other acts or things necessary or appropriate to effect
the purposes of such notice of termination. The predecessor Administrator shall
cooperate with the successor Administrator, the Indenture Trustee (if any Notes
remain Outstanding) and the Eligible Lender Trustee in effecting the termination
of the responsibilities and rights of the predecessor Administrator under this
Agreement. All reasonable costs and expenses (including attorneys' fees and
expenses) incurred in connection with such transfer of responsibilities and
amending this Agreement to reflect such succession as Administrator pursuant to
this Section shall be paid by the predecessor Administrator upon presentation of
reasonable documentation of such costs and expenses. Upon receipt of notice of
the occurrence of an Administrator Default, the Eligible Lender Trustee shall
give notice thereof to the Rating Agencies.
13. APPOINTMENT OF SUCCESSOR. (a) Upon receipt by the
Administrator of notice of termination pursuant to Section 12, or the
resignation by the Administrator in accordance with the terms of this Agreement,
the predecessor Administrator shall continue to perform its functions as
Administrator, in the case of termination, only until the date specified in such
termination notice or, if no such date is specified in a notice of termination,
until a successor Administrator has accepted and assumed the responsibilities of
the Administrator and, in the case of resignation, until the later of (x) the
date 120 days from the delivery to the Indenture Trustee (if any Notes remain
Outstanding) and the Eligible Lender Trustee of written notice of such
resignation (or written confirmation of such notice) in accordance with the
terms of this Agreement and (y) the date upon which the predecessor
Administrator shall become legally unable to act as Administrator as specified
in the notice of resignation and accompanying Opinion of Counsel. In the event
of termination hereunder of the Administrator, the Issuer shall appoint a
successor Administrator acceptable to the Indenture Trustee if any Notes remain
Outstanding or acceptable to the Eligible Lender Trustee if the Notes have been
paid in full, and the successor Administrator shall accept its appointment by a
written assumption in form
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acceptable to the Indenture Trustee or the Eligible Lender Trustee, as the case
may be. In the event that a successor Administrator has not been appointed at
the time when the predecessor Administrator has ceased to act as Administrator
in accordance with this Section, the Indenture Trustee or the Eligible Lender
Trustee, as the case may be, without further action shall automatically be
appointed the successor Administrator and the Indenture Trustee or the Eligible
Lender Trustee, as the case may be, shall be entitled to the Administration Fee.
Notwithstanding the above, the Indenture Trustee or the Eligible Lender Trustee,
as the case may be, shall, if it shall be unwilling or legally unable so to act,
appoint or petition a court of competent jurisdiction to appoint, as the
successor to the Administrator under this Agreement and the Administration
Agreement, any established institution the regular business of which shall
include the servicing of student loans.
(b) Upon appointment, the successor Administrator (including
the Indenture Trustee or the Eligible Lender Trustee, as the case may be acting
as successor Administrator) shall be the successor in all respects to the
predecessor Administrator and shall be subject to all the responsibilities,
duties and liabilities placed on the predecessor Administrator that arise
thereafter or are related thereto and shall be entitled to an amount agreed to
by such successor Administrator (which shall not exceed the Administration Fee
unless such compensation arrangements will not result in a downgrading of the
Notes or the Certificates by any Rating Agency) and all the rights granted to
the predecessor Administrator by the terms and provisions of this Agreement.
(c) The Administrator shall be entitled to resign provided
that such resignation will not result in a downgrading o the Notes or the
Certificates by any Rating Agency and provided, further, that a qualified
successor Administrator has been appointed and has assumed all the obligations
of the Administrator in accordance with the terms of this Agreement and the
Related Agreements. Notwithstanding the foregoing or anything to the contrary
herein or in the Related Agreements, the Indenture Trustee or the Eligible
Lender Trustee, as applicable, to the extent it is acting as successor
Administrator pursuant hereto, shall be entitled to resign to the extent a
qualified successor Administrator has been appointed and has assumed all the
obligations of the Administrator in accordance with the terms of this Agreement
and the Related Agreements.
14. NOTIFICATION TO SECURITYHOLDERS. Upon any termination of,
or appointment of a successor to, the Administrator pursuant to Section 12 or 13
hereof, (a) if any Notes remain Outstanding, the Indenture Trustee shall give
prompt written notice thereof to the Securityholders and the Rating Agencies or
(b) if the Notes have been paid in full, the Eligible Lender Trustee shall give
prompt written notice thereof to the Certificateholders and the Rating Agencies.
15. WAIVER OF PAST DEFAULTS. The Noteholders of Notes
evidencing not less than a majority of the Outstanding Amount of the Notes may,
on behalf of all Noteholders, waive in writing any default by the Administrator
in the performance of its obligations hereunder and any consequences thereof,
except a default in making any required deposits to or payments from any of the
Trust Accounts (or giving instructions regarding the same) in accordance with
this Agreement. Upon any such waiver of a past default, such default shall cease
to exist, and any Administrator Default arising therefrom shall be deemed to
have been remedied for every
20
<PAGE>
purpose of this Agreement to the extent provided in such waiver. No such waiver
shall extend to any subsequent or other default or impair any right consequent
thereto.
16. NOTICES. Any notice, report or other communication given
hereunder shall be in writing (or in the form of facsimile notice, followed by
written notice) and addressed as follows:
(a) if to the Issuer, to
Nellie Mae Student Loan Trust 1999-A
c/o First Chicago Delaware Inc.
c/o FCC National Bank
300 King Street
Wilmington, Delaware 19801
Telephone:
Telecopy:
with a copy to the Eligible Lender Trustee
at the Corporate Trust Office of the
Eligible Lender Trustee
(b) if to the Eligible Lender Trustee, to
The First National Bank of Chicago
153 West 51st Street, 8th Floor
New York, New York 10019
Attention: Corporate Trust Administration
Telephone: (212) 373-1140
Telecopy: (212) 373-1383
(c) If to the Administrator, to
Nellie Mae Education Loan Corporation
1240 Pawtucket Avenue
Rumford, Rhode Island 02916
Attention: Secretary
Telephone: (401) 438-4500
Telecopy:
with a copy to
Nellie Mae Corporation
50 Braintree Hill Park, Suite 300
Braintree, Massachusetts 02184
Attention: General Counsel
Telephone: (781) 849-2121
Telecopy: (781) 380-3915
(d) if to the Indenture Trustee, to
21
<PAGE>
State Street Bank and Trust Company
Attention:
Telephone:
Telecopy:
or to such other address as any party shall have provided to the other parties
in writing. Any notice required to be in writing hereunder shall be deemed given
if such notice is mailed by certified mail, postage prepaid, or hand-delivered
to the address of such party as provided above.
17. AMENDMENTS. This Agreement may be amended from time to
time by a written amendment duly executed and delivered by the Issuer, the
Administrator and the Indenture Trustee, with the prior written consent of the
Eligible Lender Trustee but without the consent of the Securityholders, for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement or of modifying in any manner the rights of
the Securityholders; PROVIDED, HOWEVER, that such amendment will not, as
evidenced by an Opinion of Counsel obtained on behalf of the Issuer and
satisfactory to the Indenture Trustee and the Eligible Lender Trustee,
materially and adversely affect the interest of any Securityholder. This
Agreement may also be amended by the Issuer, the Administrator and the Indenture
Trustee with the prior written consent of the Eligible Lender Trustee and the
Noteholders of at least a majority in the Outstanding Amount of the Notes for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Agreement or of modifying in any manner the rights
of Noteholders; PROVIDED, HOWEVER, that no such amendment may (i) increase or
reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments with respect to the Trust Loans or distributions that
are required to be made for the benefit of the Noteholders or (ii) reduce the
aforesaid percentage of the Noteholders which are required to consent to any
such amendment, without the consent of all Outstanding Noteholders. Prior to the
execution of any such amendment, the Administrator shall furnish written
notification of the substance of such amendment to each of the Rating Agencies.
18. ASSIGNMENT. Notwithstanding anything to the contrary
contained herein, except as provided in Section 13 or Section 25 of this
Agreement concerning the resignation of the Administrator, this Agreement may
not be assigned by the Administrator.
19. GOVERNING LAW. This Agreement shall be construed in
accordance with the laws of the State of New York, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
20. HEADINGS. The section headings hereof have been inserted
for convenience of reference only and shall not be construed to affect the
meaning, construction or effect of this Agreement.
21. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which when so executed shall together constitute but one
and the same agreement.
22. SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall be ineffective to the
extent of such prohibition or
22
<PAGE>
unenforceability without invalidating the remaining provisions hereof and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
23. NOT APPLICABLE TO NELLIE MAE EDUCATION LOAN CORPORATION IN
OTHER CAPACITIES. Nothing in this Agreement shall affect any obligation Nellie
Mae Education Loan Corporation may have in any other capacity under the Related
Agreements.
24. LIABILITY OF ADMINISTRATOR; INDEMNITIES. The Administrator
shall be liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Administrator under this Agreement.
The Administrator shall indemnify, defend and hold harmless
the Issuer, the Eligible Lender Trustee, the Indenture Trustee, the Master
Servicer and the Securityholders and any of the officers, directors, employees
and agents of the Issuer, the Eligible Lender Trustee, the Indenture Trustee and
the Master Servicer from and against any and all costs, expenses, losses,
claims, damages and liabilities to the extent that such cost, expense, loss,
claim, damage or liability arose out of, or was imposed upon any such Person
through, the negligence, willful misfeasance or bad faith of the Administrator
in the performance of its duties under this Agreement or by reason of reckless
disregard of its obligations and duties hereunder or thereunder.
The Administrator shall pay reasonable compensation to the
Indenture Trustee and shall reimburse the Indenture Trustee for all reasonable
expenses, disbursements and advances, and indemnify, defend and hold harmless
the Indenture Trustee and its officers, directors, employees and agents from and
against all costs, expenses, losses, claims, damages and liabilities, to the
extent and in the manner provided in, and subject to the limitations of, Section
6.07 of the Indenture.
For purposes of this Section, in the event of the termination
of the rights and obligations of the Administrator (or any successor thereto
pursuant to Section 25) as Administrator pursuant to Section 12 or a resignation
by such Administrator pursuant to this Agreement, such Administrator shall be
deemed to be the Administrator pending appointment of a successor Administrator
pursuant to Section 13.
Indemnification under this Section shall survive the
resignation or removal of the Eligible Lender Trustee or the Indenture Trustee
or the termination of this Agreement and shall include reasonable fees and
expenses of counsel and expenses of litigation. If the Administrator shall have
made any indemnity payments pursuant to this Agreement and the Person to or on
behalf of whom such payments are made thereafter collects any of such amounts
from others, such Person shall promptly repay such amounts to the Administrator,
without interest.
25. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, ADMINISTRATOR. Any Person (a) into which the Administrator may
be merged or consolidated, (b) which may result from any merger or consolidation
to which the Administrator shall be a party or (c) which may succeed to the
properties and assets of the Administrator substantially as a whole, shall be
the successor to the Administrator without the execution or filing of any
23
<PAGE>
document or any further act by any of the parties to this Agreement; PROVIDED,
HOWEVER, that the Administrator hereby covenants that it will not consummate any
of the foregoing transactions except upon satisfaction of the following: (i) the
surviving Administrator, if other than Nellie Mae Education Loan Corporation,
executes an agreement of assumption to perform every obligation of the
Administrator under this Agreement, (ii) immediately after giving effect to such
transaction, no representation or warranty made pursuant to Section 1 shall have
been breached and no Administrator Default, and no event that, after notice or
lapse of time or both would become an Administrator Default, shall have occurred
and be continuing, (iii) the Administrator shall have delivered to the Eligible
Lender Trustee and the Indenture Trustee an Officers' Certificate and an Opinion
of Counsel each stating that such consolidation, merger or succession and such
agreement of assumption comply with this Section and that all conditions
precedent, if any, provided for in this Agreement relating to such transaction
have been complied with, and that the Rating Agency Condition shall have been
satisfied with respect to such transaction, (iv) the surviving Administrator
shall have a consolidated net worth at least equal to that of the predecessor
Administrator, (v) such transaction will not result in a material adverse
federal or state tax consequence to the Issuer or the Securityholders, and (vi)
unless Nellie Mae Education Loan Corporation is the surviving entity, the
Administrator shall have delivered to the Eligible Lender Trustee and the
Indenture Trustee an Opinion of Counsel either (A) stating that, in the opinion
of such counsel, all financing statements and continuation statements and
amendments thereto have been executed and filed that are necessary fully to
preserve and protect the interest of the Eligible Lender Trustee and the
Indenture Trustee, respectively, in the Trust Loans and reciting the details of
such filings, or (B) stating that, in the opinion of such counsel, no such
action shall be necessary to preserve and protect such interests.
26. LIMITATION ON LIABILITY OF ADMINISTRATOR AND OTHERS.
Neither the Administrator nor any of its directors, officers, employees or
agents shall be under any liability to the Issuer, the Securityholders, the
Indenture Trustee and the Eligible Lender Trustee, except as provided under this
Agreement, for any action taken or for refraining from the taking of any action
pursuant to this Agreement or for errors in judgment; PROVIDED, HOWEVER, that
this provision shall not protect the Administrator or any such person against
any liability that would otherwise be imposed by reason of willful misfeasance,
bad faith or negligence in the performance of its duties or by reason of
reckless disregard of obligations and its duties under this Agreement. The
Administrator and any of its directors, officers, employees or agents may rely
in good faith on the advice of counsel or on any document of any kind PRIMA
FACIE properly executed and submitted by any Person respecting any matters
arising hereunder.
Except as provided in this Agreement, the Administrator shall
not be under any obligation to appear in, prosecute or defend any legal action
that shall not be incidental to its duties to administer the Trust Loans and the
Trust in accordance with this Agreement, and that in its opinion may involve it
in any expense or liability; PROVIDED, HOWEVER, that the Administrator may
undertake any reasonable action that it may deem necessary or desirable in
respect of this Agreement and the other Basic Documents and the rights and
duties of the parties to this Agreement and the Related Agreements, the
interests of the Noteholders under the Indenture and the interests of the
Certificateholders under the Trust Agreement.
27. NELLIE MAE EDUCATION LOAN CORPORATION NOT TO RESIGN AS
ADMINISTRATOR. Subject to the provisions of Section 25 of this Agreement, Nellie
Mae Education Loan
24
<PAGE>
Corporation shall not resign from the obligations and duties imposed on it as
Administrator under this Agreement except upon determination that the
performance of its duties under this Agreement shall no longer be permissible
under applicable law or shall violate any final order of a court or
administrative agency with jurisdiction over Nellie Mae Education Loan
Corporation or its properties. Notice of any such determination permitting the
resignation of Nellie Mae Education Loan Corporation shall be communicated to
the Eligible Lender Trustee and the Indenture Trustee at the earliest
practicable time (and, if such communication is not in writing, shall be
confirmed in writing at the earliest practicable time) and any such
determination shall be evidenced by an Opinion of Counsel to such effect
delivered to the Eligible Lender Trustee and the Indenture Trustee concurrently
with or promptly after such notice. No such resignation shall become effective
until the Indenture Trustee or a successor Administrator shall have assumed the
responsibilities and obligations of Nellie Mae Education Loan Corporation in
accordance with Section 13.
28. LIMITATION OF LIABILITY OF ELIGIBLE LENDER TRUSTEE AND
INDENTURE TRUSTEE. (a) Notwithstanding anything contained herein to the
contrary, this instrument has been countersigned by The First National Bank of
Chicago not in its individual capacity but solely in its capacity as Eligible
Lender Trustee of the Issuer and in no event shall The First National Bank of
Chicago in its individual capacity or any Owner of the Issuer have any liability
for the representations, warranties, covenants, agreements or other obligations
of the Issuer hereunder, as to all of which recourse shall be had solely to the
assets of the Issuer. For all purposes of this Agreement, in the performance of
any duties or obligations of the Issuer thereunder, the Eligible Lender Trustee
shall be subject to, and entitled to the benefits of, the terms and provisions
of Articles VI, VII and VIII of the Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary,
this Agreement has been countersigned by State Street Bank and Trust Company not
in its individual capacity but solely as Indenture Trustee and in no event shall
State Street Bank and Trust Company have any liability for the representations,
warranties, covenants, agreements or other obligations of the Issuer hereunder
or in any of the certificates, notices or agreements delivered pursuant hereto,
as to all of which recourse shall be had solely to the assets of the Issuer.
29. NOTICE OF TERMINATION OF TRUST. As described in Article IX
of the Trust Agreement, notice of any termination of the Trust shall be given by
the Administrator to the Eligible Lender Trustee and the Indenture Trustee as
soon as practicable after the Administrator has received notice thereof.
30. THIRD-PARTY BENEFICIARY. The Eligible Lender Trustee is a
third-party beneficiary to this Agreement and is entitled to the rights and
benefits hereunder and may enforce the provisions hereof as if it were a party
hereto.
31. CONSENTS. With respect to any action to be taken hereunder
that requires the consent of a party hereto or of the Eligible Lender Trustee,
such consent shall not be unreasonably withheld, delayed or conditioned.
25
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the day and year first above
written.
NELLIE MAE STUDENT LOAN TRUST 1999-A
By: THE FIRST NATIONAL BANK OF
CHICAGO, not in its individual capacity
but solely as Eligible Lender Trustee
By:____________________________________
Name:
Title:
STATE STREET BANK AND TRUST
COMPANY, not in its individual
capacity but solely as Indenture Trustee
By:____________________________________________
Name:
Title:
NELLIE MAE EDUCATION LOAN CORPORATION,
as Administrator
By:___________________________________________
Name:
Title:
26
<PAGE>
EXHIBIT A TO THE
ADMINISTRATION AGREEMENT
POWER OF ATTORNEY
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
KNOW ALL MEN BY THESE PRESENTS, that THE FIRST NATIONAL BANK OF
CHICAGO, a national banking association, not in its individual capacity but
solely as eligible lender trustee ("ELIGIBLE LENDER TRUSTEE") for the Nellie Mae
Student Loan Trust 1999-A (the "TRUST"), does hereby make, constitute and
appoint Nellie Mae Education Loan Corporation, as Administrator under the
Administration Agreement (as defined below), and its agents and attorneys, as
Agents and Attorneys-in-Fact to execute on behalf of Eligible Lender Trustee or
the Trust all such documents, reports, filings, instruments, certificates and
opinions as it should be the duty of Eligible Lender Trustee or the Trust to
prepare, file or deliver pursuant to the Related Documents (as defined in the
Administration Agreement) or pursuant to Section 5.04 of the Trust Agreement (as
defined in the Administration Agreement), including without limitation, to
appear for and represent Eligible Lender Trustee and the Trust in connection
with the preparation, filing and audit of any federal, state and local tax
returns pertaining to the Trust, and with full power to perform any and all acts
associated with such returns and audits that the Eligible Lender Trustee could
perform, including without limitation, the right to distribute and receive
confidential information, defend and assert positions in response to audits,
initiate and defend litigation, and to execute waivers of restriction on
assessments of deficiencies, consents to the extension of any statutory or
regulatory time limit, and settlements. For the purpose of this Power of
Attorney, the term "Administration Agreement" means the Administration Agreement
dated as of [________] 1, 1999, among the Trust, Nellie Mae Education Loan
Corporation, as Administrator, and State Street Bank and Trust Company, as
Indenture Trustee, as such may be amended from time to time.
All powers of attorney for this purpose heretofore filed or executed by
Eligible Lender Trustee are hereby revoked.
A-1
<PAGE>
EXECUTED as of the first day of [________], 1999.
THE FIRST NATIONAL BANK OF
CHICAGO, not in its individual capacity
but solely as Eligible Lender
Trustee
By:____________________________________
Name:
Title:
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
Before me, the undersigned authority, on this day personally appeared [
] known to me to be the person whose name is subscribed to the foregoing
instrument, and acknowledged to me that such person signed the same for the
purposes and considerations therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this [ ] day of [________],
1999.
-------------------------
Notary Public in and for the
State of New York
-------------------------
Printed Name of Notary Public
Commission Expires________
A-2
<PAGE>
EXHIBIT B
TO THE
ADMINISTRATION AGREEMENT
Form of Securityholders' Statement pursuant to Section 2(g) of Administration
Agreement.
Capitalized terms used herein are defined in Appendix A thereto. It should be
noted, however, that while all the information listed below shall be included in
each Securityholders' Statement, the presentation thereof may vary from that
given below.
Quarterly Payment Date:
(i) Amount of principal being paid or distributed:
<TABLE>
<CAPTION>
<S> <C> <C>
Class A-1 __________* ($_______* per $1,000
original principal amount
of the Class A-1 Notes)
Class A-2 __________* ($_______* per $1,000
original principal amount
of the Class A-2 Notes)
Certificate __________* ($_______* per $1,000
original Certificate
Balance of the
Certificates)
</TABLE>
- ---------
* Portion of each such amount attributable to Reserve Account Excess: _________.
(ii) Amount of interest being paid or distributed:
<TABLE>
<CAPTION>
<S> <C> <C>
Class A-1 __________ ($_______ per $1,000
original principal amount
of the Class A-1 Notes)
Class A-2 __________ ($_______ per $1,000
original principal amount
of the Class A-2 Notes)
Certificates __________ ($_______ per $1,000
original Certificate
Balance of the
Certificates
</TABLE>
B-1
<PAGE>
(iii) Amount of Noteholders' Interest Basis Carryover being paid or
distributed (if any) and amount remaining (if any):
(a) Distributed:__________ ($_______ per $1,000 original principal
amount of Notes)
(b) Balance:______________ ($_______ per $1,000 original)
principal amount of Notes)
(iv) Amount of Certificateholders' Return Carryover being paid or
distributed (if any) and amount remaining (if any):
(a) Distributed:__________ ($_______ per $1,000 original
Certificate Balance of the Certificates)
(b) Balance:______________ ($_______ per $1,000 original
Certificate Balance of the Certificates)
(v) Pool Balance at end of related Collection Period: __________
(vi) After giving effect to distributions on this Quarterly Payment Date:
(a) (i) outstanding principal amount of Class A-1 Notes:__________
(ii) Class A-1 Note Pool Factor:__________
(b) (i) outstanding principal amount of Class A-2 Notes:__________
(ii) Class A-2 Note Pool Factor:__________
(c) (i) Certificate Balance of the Outstanding
Certificates:__________
(ii) Certificate Pool Factor:__________
B-2
<PAGE>
(vii) Applicable Interest Rate:
In general:
(a) Three-Month LIBOR for the LIBOR Reset Period since
the previous Quarterly Payment Date was _____%; and
(b) the Adjusted Student Loan Rate for such Quarterly
Interest Period was _____%.
<TABLE>
<S> <C>
Class A-1 Note Rate:_____% (based on [Note LIBOR Rate] [Adjusted Student Loan Rate])
Class A-2 Note Rate:_____% (based on [Note LIBOR Rate] [Adjusted Student Loan Rate])
Certificate Rate: _____% (based on [Certificate LIBOR Rate] [Adjusted Student Loan
Rate])
</TABLE>
(viii) Amount of Servicing Fee for related Collection Period : _________ ($___
per $1,000 original principal amount of Notes or Certificates, as
applicable):
(ix) Amount of Administration Fee for related Collection Period:__________
($_______ per $1,000 original principal amount of Notes or
Certificates, as applicable)
(x) Aggregate amount of Realized Losses (if any) for the related Collection
Period:__________
(xi) Trust Loans delinquent at end of related Collection Period: __________;
number of delinquent loans: ________; aggregate unpaid principal
balance of delinquent loans: ___________________
(xii) Withdrawal from Reserve Account on related Quarterly Payment Date
(other than Reserve Account Excess) and on any Monthly Payment Date
since the preceding Quarterly Payment Date (list each withdrawal
separately): _______________ [purpose of each withdrawal]
Reserve Account Excess on related Quarterly Payment Date: ________
Principal balance of Notes to be paid to reach Parity Date: ___________
(xiii) Amount in the Reserve Account:__________
(xiv) Serial Loans: _______ loans with aggregate principal balances of
_______ (portion represented by Purchase Premium Amounts ) were
purchased during the related Collection Period.
B-3
<PAGE>
(xv) Trust Loans in the following categories as of the end of the related
Collection Period:
Principal
Balance
-------
STATUS TYPE:
- ------------
In-School
Grace
Repayment
Forbearance
Deferment
DELINQUENCIES:
- --------------
30-60 Days
61-90 Days
91-120 Days
More than 120 Days Delinquent
Claims Filed Awaiting Payment
LOAN TYPE:
- ----------
Stafford Loans
Unsubsidized Stafford Loans
SLS Loans
PLUS Loans
Consolidation Loans
:
B-4
<PAGE>
Exhibit 99.4
[FORM OF] APPENDIX A TO THE
ADMINISTRATION AGREEMENT
DEFINITIONS AND USAGE
USAGE
The following rules of construction and usage shall be applicable to
any instrument that is governed by this Appendix:
(a) All terms defined in this Appendix shall have the defined meanings
when used in any instrument governed hereby and in any certificate or other
document made or delivered pursuant thereto unless otherwise defined therein.
(b) As used herein, in any instrument governed hereby and in any
certificate or other document made or delivered pursuant thereto, accounting
terms not defined in this Appendix or in any such instrument, certificate or
other document, and accounting terms partly defined in this Appendix or in any
such instrument, certificate or other document to the extent not defined, shall
have the respective meanings given to them under generally accepted accounting
principles as in effect on the date of such instrument. To the extent that the
definitions of accounting terms in this Appendix or in any such instrument,
certificate or other document are inconsistent with the meanings of such terms
under generally accepted accounting principles, the definitions contained in
this Appendix or in any such instrument, certificate or other document shall
control.
(c) The words "hereof", "herein", "hereunder" and words of similar
import when used in an instrument refer to such instrument as a whole and not to
any particular provision or subdivision thereof; references in an instrument to
"Article", "Section" or another subdivision or to an attachment are, unless the
context otherwise requires, to an article, section or subdivision of or an
attachment to such instrument; and the term "including" means "including without
limitation".
(d) The definitions contained in this Appendix are equally applicable
to both the singular and plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
<PAGE>
(e) Any agreement, instrument or statute defined or referred to below
or in any agreement or instrument that is governed by this Appendix means such
agreement or instrument or statute as from time to time amended, modified or
supplemented, including (in the case of agreements or instruments) by waiver or
consent and (in the case of statutes) by succession of comparable successor
statutes and includes (in the case of agreements or instruments) references to
all attachments thereto and instruments incorporated therein. References to a
Person are also to its permitted successors and assigns.
DEFINITIONS
"ACT" has the meaning specified in Section 11.03(a) of the Indenture.
"ADDITIONAL FUNDINGS" means any expenditure of the Net Principal Cash
Flow Amount used to purchase Serial Loans pursuant to Section 2(d)(i) of the
Administration Agreement.
"ADDITIONAL GUARANTOR" means a Federal Guarantor (other than the
Initial Guarantors) of a Trust Loan (other than an Initial Trust Loan) which has
entered into a guarantee agreement with the Eligible Lender Trustee.
"ADJUSTED STUDENT LOAN RATE" means, with respect to any Quarterly
Interest Period, the interest rate equal to the product of (a) the quotient
obtained by dividing (i) 365 (366 in the case of a leap year) by (ii) the actual
number of days elapsed in such Quarterly Interest Period and (b) the percentage
equivalent of a fraction, the numerator of which is equal to the Expected
Interest Collections for such Quarterly Interest Period, less the sum of the
Servicing Fee and the Administration Fee with respect to such Quarterly Interest
Period and (ii) the denominator of which is the sum of (x) the aggregate
principal amount of the Notes and (y) the Certificate Balance of the
Certificates, each as of the last day of such Quarterly Interest Period.
"ADMINISTRATION AGREEMENT" means the Administration Agreement dated as
of 1, 1999, among the Issuer, the Administrator and the Indenture
Trustee.
"ADMINISTRATION FEE" means, with respect to each Monthly Payment Date,
an amount equal to $ .
"ADMINISTRATOR" means Nellie Mae Education Loan Corporation, a Delaware
corporation, in its capacity as administrator of the Issuer and the Trust Loans.
"ADMINISTRATOR DEFAULT" shall have the meaning set forth in Section 12
of the Administration Agreement.
"ADMINISTRATOR'S CERTIFICATE" means an Officers' Certificate of the
Administrator delivered pursuant to Section 2(g) of the Administration
Agreement, substantially in the form of Exhibit B thereto.
"AFFILIATE" means, with respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the
2
<PAGE>
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"ASSIGNMENT" means a duly executed assignment delivered pursuant to
Section 3.02 of the Loan Sale Agreement in the form set forth in Exhibit F to
such Agreement.
"AUTHORIZED OFFICER" means (i) with respect to the Issuer, any officer
of the Eligible Lender Trustee who is authorized to act for the Eligible Lender
Trustee in matters relating to the Issuer pursuant to the Basic Documents and
who is identified on the list of Authorized Officers delivered by the Eligible
Lender Trustee to the Indenture Trustee on the Closing Date (as such list may be
modified or supplemented from time to time thereafter) and (ii) with respect to
the Seller, the Master Servicer and the Administrator, any officer of the
Seller, the Master Servicer or the Administrator, respectively, who is
authorized to act for the Seller, the Master Servicer or the Administrator,
respectively, in matters relating to itself or to the Issuer and to be acted
upon by the Seller, the Master Servicer or the Administrator, respectively,
pursuant to the Basic Documents and who is identified on the list of Authorized
Officers delivered by the Seller, the Master Servicer and the Administrator,
respectively, to the Indenture Trustee on the Closing Date (as such list may be
modified or supplemented from time to time thereafter).
"AVAILABLE FUNDS" means, with respect to a Quarterly Payment Date and
the related Collection Period, the sum of the amounts specified in clauses (i)
through (v) of the definition of Monthly Available Funds for each of the three
Monthly Collection Periods included in such Collection Period; PROVIDED,
HOWEVER, that if with respect to any Quarterly Payment Date there would not be
sufficient funds, after application of the Available Funds (as defined above)
and amounts available from the Reserve Account, to pay any of the items
specified in Sections 2(d)(iii)(A),(B),(C) and (D) of the Administration
Agreement, then the Available Funds for such Quarterly Payment Date will
include, in addition to the Available Funds (as defined above), amounts on
deposit in the Collection Account on the Determination Date relating to such
Quarterly Payment Date which would have constituted the Available Funds for the
Quarterly Payment Date succeeding such Quarterly Payment Date up to the amount
necessary to pay such items, and the Available Funds for such succeeding
Quarterly Payment Date will be adjusted accordingly; and PROVIDED, FURTHER, that
the Available Funds will exclude (A) all payments and proceeds (including
Liquidation Proceeds) of any Trust Loans the Purchase Amounts of which were
included in the Available Funds for a prior Collection Period; (B) any Monthly
Rebate Fees paid during the related Collection Period by or on behalf of the
Trust; (C) any expenditure of the Net Principal Cash Flow Amount used to
purchase Serial Loans during the related Collection Period; and (D) the
Servicing Fee, all overdue Servicing Fees, the Administration Fee and all
overdue Administration Fees paid on each Monthly Payment Date that is not a
Quarterly Payment Date during the related Collection Period.
"BASIC DOCUMENTS" means the Trust Agreement, the Indenture, the Loan
Sale Agreement, the Master Servicing Agreement, the Administration Agreement,
the Note Depository Agreement, the Certificate Depository Agreement, the
Guarantee Agreements and other documents and certificates delivered in
connection with any thereof.
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"BOOK-ENTRY CERTIFICATE" means a beneficial interest in the
Certificates, ownership and transfers of which shall be made through book
entries by a Clearing Agency as described in Section ____ of the Trust
Agreement.
"BOOK-ENTRY NOTE" means a beneficial interest in the Notes, ownership
and transfers of which shall be made through book entries by a Clearing Agency
as described in Section 2.10 of the Indenture.
"BORROWER" means an individual who is the maker of a Borrower Note and
who obtains a Student Loan from an "eligible lender" in accordance with the
Higher Education Act and the policies and procedures of a Guarantor.
"BORROWER ACCOUNT" means those combined loans of a Borrower with the
same lender and branch, which loans are in the same status, are the same loan
type and which require the same processing and billing requirements. Stafford
Loans which are already in repayment and being serviced by the Master Servicer
will not be merged with new Stafford Loans for the same Borrower, and each such
Stafford Loan will be treated as a separate Borrower Account.
"BORROWER NOTE" means a promissory note of a Borrower for a Student
Loan set forth on the appropriate form furnished by the Guarantor, which
Borrower Note meets the criteria set forth by the Higher Education Act and the
policies and procedures of the Guarantor.
"BUSINESS DAY" means any day other than (i) a Saturday or a Sunday or
(ii) a day on which banking institutions or trust companies in the States of
Illinois, New York or or in the city in which the corporate trust
office of the Indenture Trustee is located are authorized or obligated by law,
regulation or executive order to remain closed.
"BUSINESS TRUST STATUTE" means Chapter 38 of Title 12 of the Delaware
Code, 12 DEL. CODE ss. 3801 ET SEQ., as the same may be amended from time to
time.
"CAPITALIZED INTEREST AMOUNT" means for any Monthly Collection Period
or other period of determination, the amount of interest that accrued on the
Trust Loans during such period but was not then payable and that has been or
will, pursuant to the terms of such Trust Loans, be capitalized and added to the
principal balances of such loans.
"CERTIFICATE" means a certificate evidencing the ownership interest of
a Certificateholder in the Trust, substantially in the form of Exhibit A to the
Trust Agreement.
"CERTIFICATE BALANCE" equals, initially, the Initial Certificate
Balance and, thereafter, equals the Initial Certificate Balance reduced by all
amounts previously distributed to Certificateholders in respect of principal
pursuant to Section 2(d)(iii)(F) of the Administration Agreement.
"CERTIFICATE DEPOSITORY AGREEMENT" means the agreement with respect to
the Certificates attached to the Trust Agreement as Exhibit .
"CERTIFICATE FINAL DISTRIBUTION DATE" means the 20 Quarterly
Payment Date.
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"CERTIFICATE LIBOR RATE" means, with respect to any Quarterly Interest
Period, Three-Month LIBOR for the related LIBOR Reset Period plus %.
"CERTIFICATE OF TRUST" means the Certificate of Trust in the form of
Exhibit B to the Trust Agreement to be filed for the Trust pursuant to Section
3810(a) of the Business Trust Statute.
"CERTIFICATE OWNER" means, with respect to a Book-Entry Certificate,
the Person who is the owner of such Book-Entry Certificate as reflected on the
books of the Clearing Agency, or on the books of a Person maintaining an account
with the Clearing Agency (directly as a Clearing Agency Participant or as an
indirect participant, in each case in accordance with the rules of the Clearing
Agency).
"CERTIFICATE POOL FACTOR" as of the close of business on a Quarterly
Payment Date means a seven-digit decimal figure equal to the Certificate Balance
of the Certificates divided by the Initial Certificate Balance of the
Certificates. The Certificate Pool Factor will be 1.0000000 as of the Closing
Date; thereafter, the Certificate Pool Factor will decline to reflect reductions
in the Certificate Balance of the Certificates.
"CERTIFICATE RATE" means, with respect to any Quarterly Payment Date
and the related Quarterly Interest Period, the interest rate per annum (computed
on the basis of the actual number of days in such Quarterly Interest Period over
a year of 360 days) equal to the lesser of (i) the Certificate LIBOR Rate for
such Quarterly Interest Period and (ii) the Adjusted Student Loan Rate for such
Quarterly Interest Period.
"CERTIFICATE REGISTER" and "CERTIFICATE REGISTRAR" means the register
mentioned and the registrar appointed pursuant to Section 3.04 of the Trust
Agreement.
"CERTIFICATEHOLDER" or "HOLDER" means a Person in whose name a
Certificate is registered in the Certificate Register.
"CERTIFICATEHOLDERS' BALANCE DISTRIBUTION AMOUNT" means, with respect
to each Quarterly Payment Date on and after which the Outstanding Amount of the
Notes has been paid in full, the sum of (a) the Principal Distribution Amount
for such Quarterly Payment Date (or, in the case of the Quarterly Payment Date
on which the Outstanding Amount of the Notes is paid in full, any remaining
Principal Distribution Amount not otherwise distributed to the Noteholders on
such Quarterly Payment Date) and (b) the Certificateholders' Balance Shortfall
as of the close of the preceding Quarterly Payment Date; PROVIDED, HOWEVER, that
the Certificateholders' Balance Distribution Amount will in no event exceed the
Certificate Balance of the Certificates outstanding on such date. In addition,
on the Certificate Final Distribution Date, the principal required to be
distributed to the Certificateholders will include the amount required to reduce
the Certificate Balance of the Certificates to zero.
"CERTIFICATEHOLDERS' BALANCE SHORTFALL" means, as of the close of any
Quarterly Payment Date on or after which the Outstanding Amount of the Notes has
been paid in full, the excess of (i) the Certificateholders' Balance
Distribution Amount on such Quarterly Payment Date over (ii) the amount of
principal actually distributed to the Certificateholders on such Quarterly
Payment Date.
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"CERTIFICATEHOLDERS' DISTRIBUTION AMOUNT" means, with respect to any
Quarterly Payment Date, the Certificateholders' Return Distribution Amount for
such Quarterly Payment Date plus, with respect to any Quarterly Payment Date on
and after which the Outstanding Amount of the Notes has been paid in full, the
Certificateholders' Balance Distribution Amount for such Quarterly Payment Date.
"CERTIFICATEHOLDERS' RETURN CARRYOVER" means, with respect to each
Quarterly Payment Date, the amount equal to the excess, if any, of (a) the
amount of interest on the Certificates that would have accrued in respect of the
related Quarterly Interest Period had interest been calculated based on the
Certificate LIBOR Rate over (b) the amount of interest on the Certificates
actually accrued in respect of such Quarterly Interest Period based on the
Adjusted Student Loan Rate for such Quarterly Interest Period, together with the
unpaid portion of any such excess from prior Quarterly Payment Dates (and
interest accrued thereon, to the extent permitted by law, calculated based on
the Certificate LIBOR Rate); PROVIDED, HOWEVER, that, on the Certificate Final
Distribution Date, the Certificateholders' Return Carryover will be equal to the
lesser of (i) the Certificateholders' Return Carryover on such date determined
as described above and (ii) the amount of funds, if any, required and available
to be distributed to Certificateholders on such date pursuant to Sections
2(e)(ii)(D) of the Administration Agreement and Section 8.02 the Indenture.
"CERTIFICATEHOLDERS' RETURN DISTRIBUTION AMOUNT" means, with respect to
any Quarterly Payment Date, the sum of (i) the amount of interest accrued at the
Certificate Rate for the related Quarterly Interest Period on the Certificate
Balance of the Certificates outstanding on the immediately preceding Quarterly
Payment Date (after giving effect to all principal distributions to
Certificateholders on such Quarterly Payment Date) or, in the case of the first
Quarterly Payment Date, on the Closing Date, and (ii) the Certificateholders'
Return Shortfall for such Quarterly Payment Date; PROVIDED, HOWEVER, that the
Certificateholders' Return Distribution Amount will not include any
Certificateholders' Return Carryover.
"CERTIFICATEHOLDERS' RETURN SHORTFALL" means, with respect to any
Quarterly Payment Date, the excess of (i) the Certificateholders' Return
Distribution Amount on the preceding Quarterly Payment Date over (ii) the amount
of interest return actually distributed to the Certificateholders on such
preceding Quarterly Payment Date, plus interest on the amount of such excess, to
the extent permitted by law, at the then current Certificate Rate from such
preceding Quarterly Payment Date to the current Quarterly Payment Date.
"CLASS A-1 NOTE" means a Class A-1 Floating Rate Asset-Backed Note
issued pursuant to the Indenture, substantially in the form of Exhibit A-1
thereto.
"CLASS A-1 NOTE FINAL MATURITY DATE" means the 20 Quarterly
Payment Date.
"CLASS A-1 NOTE LIBOR RATE" means, with respect to any Quarterly
Interest Period, Three-Month LIBOR for the related LIBOR Reset Period plus %.
"CLASS A-1 NOTE POOL FACTOR" as of the close of business on a Quarterly
Payment Date means a seven-digit decimal figure equal to the outstanding
principal amount of the
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Class A-1 Notes divided by the original outstanding principal amount of the
Class A-1 Notes. The Class A-1 Note Pool Factor will be 1.0000000 as of the
Closing Date; thereafter, the Class A-1 Note Pool Factor will decline to reflect
reductions in the outstanding principal amount of the Class A-1 Notes.
"CLASS A-1 NOTE RATE" means, with respect to any Quarterly Interest
Period, the interest rate per annum (computed on the basis of the actual number
of days in such Quarterly Interest Period over a year of 360 days) equal to the
lesser of (i) the Class A-1 Note LIBOR Rate for such Quarterly Interest Period
and (ii) the Adjusted Student Loan Rate for such Quarterly Interest Period.
"CLASS A-1 NOTEHOLDER" means the Noteholder of a Class A-1 Note.
"CLASS A-1 NOTEHOLDERS' INTEREST BASIS CARRYOVER" means, with respect
to any Quarterly Payment Date, the amount equal to the excess, if any, of (a)
the amount of interest on the Class A-1 Notes that would have accrued in respect
of the related Quarterly Interest Period had interest been calculated based on
the Class A-1 Note LIBOR Rate over (b) the amount of interest on the Class A-1
Notes actually accrued in respect of such Quarterly Interest Period based on the
Adjusted Student Loan Rate for such Quarterly Interest Period, together with the
unpaid portion of any such excess from prior Quarterly Payment Dates (and
interest accrued thereon, to the extent permitted by law, at the applicable
Class A-1 Note LIBOR Rate); PROVIDED, HOWEVER, that, on the Class A-1 Note Final
Maturity Date, the Class A-1 Noteholders' Interest Basis Carryover will be equal
to the lesser of (i) the Class A-1 Noteholders' Interest Basis Carryover on such
date determined as described above and (ii) the amount of funds, if any,
required and available to be distributed to the Class A-1 Noteholders on such
date pursuant to Sections 2(e)(ii)(c) of the Administration Agreement and
Section 8.02 of the Indenture.
"CLASS A-1 NOTEHOLDERS' INTEREST CARRYOVER SHORTFALL" means, with
respect to any Quarterly Payment Date, the excess of (i) the Class A-1
Noteholders' Interest Distribution Amount on the preceding Quarterly Payment
Date over (ii) the amount of interest actually distributed to the Class A-1
Noteholders on such preceding Quarterly Payment Date, plus interest on the
amount of such excess, to the extent permitted by law, at the then current Class
A-1 Note Rate from such preceding Quarterly Payment Date to the current
Quarterly Payment Date.
"CLASS A-1 NOTEHOLDERS' INTEREST DISTRIBUTION AMOUNT" means, with
respect to any Quarterly Payment Date, the sum of (i) the amount of interest
accrued at the Class A-1 Note Rate for the related Quarterly Interest Period on
the outstanding principal balance of the Class A-1 Notes on the immediately
preceding Quarterly Payment Date (after giving effect to all principal
distributions to holders of Class A-1 Notes on such date) or, in the case of
first Quarterly Payment Date, on the Closing Date and (ii) the Class A-1
Noteholders' Interest Carryover Shortfall for such Quarterly Payment Date;
PROVIDED, HOWEVER, that the Class A-1 Noteholders' Interest Distribution Amount
will not include any Class A-1 Noteholders' Interest Basis Carryover.
"CLASS A-2 NOTE" means a Class A-2 Floating Rate Asset-Backed Note
issued pursuant to the Indenture, substantially in the form of Exhibit A-2
thereto.
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"CLASS A-2 NOTE FINAL MATURITY DATE" means the 20
Quarterly Payment Date.
"CLASS A-2 NOTE LIBOR RATE" means, with respect to any Quarterly
Interest Period, Three-Month LIBOR for the related LIBOR Reset Period plus %.
"CLASS A-2 NOTE POOL FACTOR" as of the close of business on a Quarterly
Payment Date means a seven-digit decimal figure equal to the outstanding
principal amount of the Class A-2 Notes divided by the original outstanding
principal amount of the Class A-2 Notes. The Class A-2 Note Pool Factor will be
1.0000000 as of the Closing Date; thereafter, the Class A-2 Note Pool Factor
will decline to reflect reductions in the outstanding principal amount of the
Class A-2 Notes.
"CLASS A-2 NOTE RATE" means, with respect to any Quarterly Payment Date
and the related Quarterly Interest Period, the interest rate per annum (computed
on the basis of the actual number of days in such Quarterly Interest Period over
a year of 360 days) equal to the lesser of (i) the Class A-2 Note LIBOR Rate for
such Quarterly Interest Period and (ii) the Adjusted Student Loan Rate for such
Quarterly Interest Period.
"CLASS A-2 NOTEHOLDER" means the Noteholder of a Class A-2 Note.
"CLASS A-2 NOTEHOLDERS' INTEREST BASIS CARRYOVER" means, with respect
to any Quarterly Payment Date, the amount equal to the excess, if any, of (a)
the amount of interest on the Class A-2 Notes that would have accrued in respect
of the related Quarterly Interest Period had interest been calculated based on
the Class A-2 Note LIBOR Rate over (b) the amount of interest on the Class A-2
Notes actually accrued in respect of such Quarterly Interest Period based on the
Adjusted Student Loan Rate for such Quarterly Interest Period, together with the
unpaid portion of any such excess from prior Quarterly Payment Dates (and
interest accrued thereon, to the extent permitted by law, at the applicable the
Class A-2 Note LIBOR Rate); PROVIDED, however, that, on the Class A-2 Note Final
Maturity Date, the Class A-2 Noteholders' Interest Basis Carryover will be equal
to the lesser of (i) the Class A-2 Noteholders' Interest Basis Carryover on such
date determined as described above and (ii) the amount of funds, if any,
required and available to be distributed to the Noteholders on such date
pursuant to Sections 2(e)(ii)(c) of the Administration Agreement and Section
8.02 of the Indenture.
"CLASS A-2 NOTEHOLDERS' INTEREST CARRYOVER SHORTFALL" means, with
respect to any Quarterly Payment Date, the excess of (i) the Class A-2
Noteholders' Interest Distribution Amount on the preceding Quarterly Payment
Date over (ii) the amount of interest actually distributed to the Class A-2
Noteholders on such preceding Quarterly Payment Date, plus interest on the
amount of such excess, to the extent permitted by law at the then current Class
A-2 Note Rate from such preceding Quarterly Payment Date to the current
Quarterly Payment Date.
"CLASS A-2 NOTEHOLDERS' INTEREST DISTRIBUTION AMOUNT" means, with
respect to any Quarterly Payment Date, the sum of (i) the amount of interest
accrued at the Class A-2 Note Rate for the related Quarterly Interest Period on
the aggregate principal amount of the Class A-2 Notes outstanding on the
immediately preceding Quarterly Payment Date (after giving effect to all
principal distributions to holders of Class A-2 Notes on such date) or, in the
case of the first
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Quarterly Payment Date, on the Closing Date and (ii) the Class A-2
Noteholders' Interest Carryover Shortfall for such Quarterly Payment Date;
PROVIDED, HOWEVER, that the Class A-2 Noteholders' Interest Distribution
Amount will not include any Class A-2 Noteholders' Interest Basis Carryover.
"CLEARING AGENCY" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act.
"CLEARING AGENCY PARTICIPANT" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"CLOSING DATE" means , 1999.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, and Treasury Regulations promulgated thereunder.
"COLLATERAL" has the meaning specified in the Granting Clause of the
Indenture.
"COLLECTION ACCOUNT" means the account designated as such, established
and maintained pursuant to Section 2(c) of the Administration Agreement, which
shall be an Eligible Deposit Account.
"COLLECTION PERIOD" means, with respect to the first Quarterly Payment
Date, the period beginning on the Cutoff Date and ending on , 1999,
and with respect to each subsequent Quarterly Payment Date, the Collection
Period means the three calendar months immediately following the end of the
previous Collection Period.
"COMMISSION" means the Securities and Exchange Commission.
"COMPANY" means Nellie Mae Funding, LLC, a Delaware limited liability
company.
"CONSOLIDATION LOAN" means a Trust Loan made pursuant to the Higher
Education Act to consolidate the related Borrower' obligations under various
federally insured student loans into a single loan.
"CORPORATE TRUST OFFICE" means (i) with respect to the Indenture
Trustee, the principal office of the Indenture Trustee at which at any
particular time its corporate trust business shall be administered, which office
at the Closing Date is located at (telephone: ;
facsimile: ) or at such other address as the Indenture Trustee may
designate from time to time by notice to the Noteholders and the Seller, or the
principal corporate trust office of any successor Indenture Trustee (the address
of which the successor Indenture Trustee will provide notice of to the
Noteholders, the Eligible Lender Trustee and the Seller); and (ii) with respect
to the Eligible Lender Trustee, the principal corporate trust office of the
Eligible Lender Trustee located at One First National Plaza, Suite 0126,
Chicago, Illinois 60670, Attention: Corporate Trust Administration (telephone:
(312) 407-1892; facsimile: (312) 407-1708); or at such other
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address as the Eligible Lender Trustee may designate by notice to the Seller or
the principal corporate trust office of any successor Eligible Lender Trustee
(the address of which the successor Eligible Lender Trustee will provide notice
of to the Certificateholders, the Indenture Trustee and the Seller).
"CUSTODIAN" means Nellie Mae Education Loan Corporation, in its
capacity as custodian of the Borrower Notes or any permitted successor
Custodian.
"CUTOFF DATE" means , 1999.
"DEFAULT" means any occurrence that is, or with notice or the lapse of
time or both would become, an Event of Default.
"DEFERRAL" means the period defined by the Higher Education Act and the
policies of the related Guarantor during which a Borrower (in Repayment) is
entitled to postpone making payments upon the submission of appropriate
documentation.
"DEFERRAL LOAN" means a Student Loan during a period of Deferral.
"DEFINITIVE CERTIFICATES" has the meaning specified in Section of
the Trust Agreement.
"DEFINITIVE NOTES" has the meaning specified in Section 2.10 of the
Indenture.
"DELAWARE TRUST" has the meaning specified in Section 10.01 of the
Trust Agreement.
"DELAWARE TRUSTEE" has the meaning set forth in Section 10.01 of the
Trust Agreement.
"DELETED STUDENT LOAN" has the meaning specified in Section 3.02 of the
Loan Sale Agreement.
"DELIVERY" when used with respect to Trust Account Property means:
(a) with respect to bankers' acceptances, commercial paper, negotiable
certificates of deposit and other obligations that constitute "instruments"
within the meaning of Section 9-105(1)(i) of the UCC and are susceptible of
physical delivery, transfer thereof to the Indenture Trustee or its nominee or
custodian by physical delivery to the Indenture Trustee or its nominee or
custodian endorsed to, or registered in the name of, the Indenture Trustee or
its nominee or custodian or endorsed in blank, and, with respect to a
certificated security (as defined in Section 8-102 of the UCC) transfer thereof
(i) by delivery of such certificated security endorsed to, or registered in the
name of, the Indenture Trustee or its nominee or custodian or endorsed in blank
to a securities intermediary (as defined in Section 8-102(14)) of the UCC) and
the making by such securities intermediary of entries on its books and records
identifying such certificated securities as belonging to the Indenture Trustee
or its nominee or custodian and the sending by such securities intermediary of a
confirmation of the purchase of such
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certificated security by the Indenture Trustee or its nominee or custodian, or
(ii) by delivery thereof to a "clearing corporation" (as defined in Section
8-102(5) of the UCC) and the making by such clearing corporation of appropriate
entries on its books reducing the appropriate securities account of the
transferor and increasing the appropriate securities account of a securities
intermediary by the amount of such certificated security, the identification by
the clearing corporation of the certificated securities for the sole and
exclusive account of the securities intermediary, the maintenance of such
certificated securities by such clearing corporation or nominee subject to the
clearing corporation's exclusive control, the sending of a confirmation by the
securities intermediary of the purchase by the Indenture Trustee or its nominee
or custodian of such securities and the making by such securities intermediary
of entries on its books and records identifying such certificated securities as
belonging to the Indenture Trustee or its nominee or custodian (all of the
foregoing, "Physical Property"), and, in any event, any such Physical Property
in registered form shall be in the name of the Indenture Trustee or its nominee
or custodian; and such additional or alternative procedures as may hereafter
become appropriate to effect the complete transfer of ownership of any such
Trust Account Property (as defined herein) to the Indenture Trustee or its
nominee or custodian, consistent with changes in applicable law or regulations
or the interpretation thereof;
(b) with respect to any securities issued by the U.S. Treasury, the
Federal Home Loan Mortgage Corporation or by the Federal National Mortgage
Association that is a book-entry security held through the Federal Reserve
System pursuant to Federal book-entry regulations, the following procedures, all
in accordance with applicable law, including applicable Federal regulations and
Articles 8 and 9 of the UCC: book-entry registration of such Trust Account
Property to an appropriate book-entry account maintained with a Federal Reserve
Bank by a securities intermediary which is also a "depository" pursuant to
applicable Federal regulations and issuance by such securities intermediary of a
deposit advice or other written confirmation of such book-entry registration to
the Indenture Trustee or its nominee or custodian of the purchase by the
Indenture Trustee or its nominee or custodian of such book-entry securities; the
making by such securities intermediary of entries in its books and records
identifying such book-entry security held through the Federal Reserve System
pursuant to Federal book-entry regulations as belonging to the Indenture Trustee
or its nominee or custodian and indicating that such custodian holds such Trust
Account Property solely as agent for the Indenture Trustee or its nominee or
custodian; and such additional or alternative procedures as may hereafter become
appropriate to effect complete transfer of ownership of any such Trust Account
Property to the Indenture Trustee or its nominee or custodian, consistent with
changes in applicable law or regulations or the interpretation thereof; and
(c) with respect to any item of Trust Account Property that is an
uncertificated security under Article 8 of the UCC and that is not governed by
clause (b) above, registration on the books and records of the issuer thereof in
the name of the securities intermediary, the sending of a confirmation by the
securities intermediary of the purchase by the Indenture Trustee or its nominee
or custodian of such uncertificated security, the making by such securities
intermediary of entries on its books and records identifying such uncertificated
certificates as belonging to the Indenture Trustee or its nominee or custodian.
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"DEPARTMENT" means the United States Department of Education, an agency
of the federal government.
"DEPOSITOR" means the Seller in its capacity as Depositor under the
Trust Agreement.
"DETERMINATION DATE" means, with respect to any Monthly Payment Date,
the third Business Day preceding such Monthly Payment Date.
"EDUCATIONAL INSTITUTION" means any institution of higher education
that participates in the guaranteed loan programs authorized by Title IV of the
Higher Education Act and which is deemed eligible by a Guarantor to participate
in such Guarantor's program.
"ELIGIBLE DEPOSIT ACCOUNT" means either (a) a segregated account with
an Eligible Institution or (b) a segregated trust account with the corporate
trust department of a depository institution organized under the laws of the
United States of America or any State, or any domestic branch of a foreign bank
having corporate trust powers and acting as trustee for funds deposited in such
account, so long as any of the securities of such depository institution have a
credit rating from each Rating Agency in one of its generic rating categories
which signifies investment grade.
"ELIGIBLE INSTITUTION" means a depository institution organized under
the laws of the United States of America or any State or any domestic branch of
a foreign bank, which (i) has either a long-term senior unsecured debt rating
acceptable to the Rating Agencies or a short-term senior unsecured debt or
certificate of deposit rating acceptable to the Rating Agencies and (ii) whose
deposits are insured by the FDIC. If so qualified, the Eligible Lender Trustee
or the Indenture Trustee may be considered an Eligible Institution.
"ELIGIBLE INVESTMENTS" means book-entry securities, negotiable
instruments or securities represented by instruments in bearer or registered
form which evidence:
(a) direct obligations of, and obligations fully guaranteed as to
timely payment by, the United States of America;
(b) demand deposits, time deposits or certificates of deposit of any
depository institution or trust company incorporated under the laws of the
United States of America or any State, or any domestic branch of a foreign bank
and subject to supervision and examination by federal or state banking or
depository institution authorities including depository receipts issued by any
such institution or trust company as custodian with respect to any obligation
referred to in clause (a) above or portion of such obligation for the benefit of
the holders of such depository receipts; PROVIDED, HOWEVER, that at the time of
the investment or contractual commitment to invest therein (which shall be
deemed to be made again each time funds are reinvested following each Quarterly
Payment Date), the commercial paper or other short-term senior unsecured debt
obligations (other than such obligations the rating of which is based on the
credit of a Person other than such depository institution or trust company)
thereof shall have a credit rating from each of the Rating Agencies in the
highest investment category granted thereby;
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(c) commercial paper having, at the time of the investment or
contractual commitment to invest therein, a rating from each of the Rating
Agencies in the highest investment category granted thereby;
(d) investments in money market funds which are registered under the
Investment Company Act of 1940, as amended, and whose shares are registered
under the Securities Act, and having a rating from each of the Rating Agencies
in the highest investment category granted thereby (including funds for which
the Indenture Trustee, the Master Servicer or the Eligible Lender Trustee or any
of their respective Affiliates is investment manager or advisor);
(e) bankers' acceptances issued by any depository institution or trust
company referred to in clause (b) above;
(f) repurchase obligations with a term not to exceed 30 days with
respect to any security that is a direct obligation of, or fully guaranteed by,
the United States of America or any agency or instrumentality thereof the
obligations of which are backed by the full faith and credit of the United
States of America, in either case entered into with a depository institution or
trust company (acting as principal) described in clause (b) above; PROVIDED,
HOWEVER, that the collateral transferred pursuant to such repurchase obligation
must be of the type described in clause (a) above and must (i) be valued daily
at current market price plus accrued interest, (ii) pursuant to such valuation,
be equal, at all times, to 102% of the cash transferred by the Indenture Trustee
in exchange for such collateral and (iii) be delivered to the Indenture Trustee
or, if the Indenture Trustee is supplying the collateral, an agent for the
Indenture Trustee, in such a manner as to accomplish perfection of a security
interest in the collateral by possession of certificated securities; and
(g) any other investment permitted by each of the Rating Agencies as
set forth in a writing delivered to the Indenture Trustee.
"ELIGIBLE LENDER TRUSTEE" means The First National Bank of Chicago, a
national banking association, not in its individual capacity but solely as
Eligible Lender Trustee under the Trust Agreement.
"EVENT OF DEFAULT" has the meaning specified in Section 5.01 of the
Indenture.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXECUTIVE OFFICER" means, with respect to any corporation, the Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer, President,
any Executive Vice President, any Senior Vice President, any Vice President, the
Secretary or the Treasurer of such corporation; and with respect to any
partnership, any general partner thereof.
"EXPECTED INTEREST COLLECTIONS" means, with respect to any Quarterly
Interest Period, the sum of (i) the amount of interest accrued with respect to
the Trust Loans for the related Student Loan Rate Accrual Period, net of accrued
Monthly Rebate Fees and other amounts required by the Higher Education Act to be
paid to the Department with respect to the Trust Loans for the related Student
Loan Rate Accrual Period (whether or not such interest is
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actually paid), (ii) all Interest Subsidy Payments and Special Allowance
Payments estimated to have accrued for such Student Loan Rate Accrual Period
whether or not actually received and (iii) Investment Earnings for such Student
Loan Rate Accrual Period.
"EXPENSES" means any and all liabilities, obligations, losses, damages,
taxes, claims, actions and suits, and any and all reasonable costs, expenses and
disbursements (including reasonable legal fees and expenses) of any kind and
nature whatsoever which may at any time be imposed on, incurred by, or asserted
against the Eligible Lender Trustee or any of its officers, directors or agents
in any way relating to or arising out of the Trust Agreement, the other Basic
Documents, the Trust Estate, the administration of the Trust Estate or the
action or inaction of the Eligible Lender Trustee under the Trust Agreement or
the other Basic Documents.
"FDIC" means the Federal Deposit Insurance Corporation.
"FEDERAL GUARANTOR" means a state or private non-profit guarantor that
guarantees the payment of principal of and interest on any of the Trust Loans,
which agency, as of the Closing Date, is reinsured by the Department under the
Higher Education Act for between 80% and 100% of the amount of default claims
paid by such Federal Guarantor for a given federal fiscal year for loans
disbursed prior to October 1, 1993, for 78% to 98% of default claims paid for
loans disbursed on or after October 1, 1993 but before October 1, 1998, for 75%
to 95% of default claims paid for loans disbursed on or after October 1, 1998
and for 100% of death, disability, bankruptcy, closed school and false
certification claims paid.
"FITCH" means Fitch IBCA, Inc. or any successor thereto.
"FNBC" means The First National Bank of Chicago or any successor
thereto, and shall also be deemed to include any eligible lender under the
Higher Education Act that agrees to be bound by the provisions of the Loan Sale
Agreement pursuant to Section 4.02 thereof.
"FORBEARANCE LOAN" means a Student Loan during a period of forbearance
of loan collections pursuant to the Higher Education Act.
"GRACE" means the initial period following reduction by the student
Borrower to less than the minimum course load required by the Higher Education
Act, during which the student Borrower is not required to make payments on the
principal amount of the related Borrower Note(s).
"GRACE LOAN" means a Student Loan during a period of Grace.
"GRANT" means mortgage, pledge, bargain, sell, warrant, alienate,
remise, release, convey, assign, transfer, create, and grant a lien upon and a
security interest in and right of set-off against, deposit, set over and confirm
pursuant to the Indenture. A Grant of the Collateral or of any other agreement
or instrument shall include all rights, powers and options (but none of the
obligations) of the Granting party thereunder, including the immediate and
continuing right to claim for, collect, receive and give receipt for principal
and interest payments in respect of the Collateral and all other moneys payable
thereunder, to give and receive notices and other communications, to make
waivers or other agreements, to exercise all rights and options, to bring
Proceedings in the name of the Granting party or otherwise and generally to do
and receive
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anything that the Granting party is or may be entitled to do or receive
thereunder or with respect thereto.
"GUARANTEE AGREEMENT" means each agreement to guarantee Student Loans
entered into by the Eligible Lender Trustee on behalf of the Trust with a
Guarantor.
"GUARANTEE PAYMENT" means any payment made by a Guarantor pursuant to a
Guarantee Agreement in respect of a Student Loan.
"GUARANTOR" means the Initial Guarantors and any Additional Guarantors.
"HIGHER EDUCATION ACT" means the Higher Education Act of 1965, as
amended, together with any rules, regulations and interpretations thereunder.
"INCENTIVE PROGRAM" means one of the following incentive programs
currently offered by the Seller to eligible student loans borrowers including
Borrowers under the Trust Loans:
O Borrowers who make their student loan payments electronically through
automatic monthly deductions from a savings or checking account may
be eligible to receive a 0.25% reduction in their interest rate,
O Borrowers who make their first 36 consecutive student loan payments
on time may be eligible to receive a 1% reduction in their interest
rate for the remaining term of their loan.
O Borrowers who make their first 48 consecutive loan payments on time
may be eligible either:
O to have their final six scheduled loan payments paid by NMELC
or
O to have their interest rate reduced by 2% for the remaining
term of their loan.
All of the above are not applicable to each Trust Loan and they may be modified
by NMELC at any time and, with the exception of the 0.25% interest rate
reduction, will be applicable to Trust Loans only if and to the extent that the
Trust receives payment from the Seller in an amount sufficient to offset the
effective yield reductions. To the extent that the Seller makes the above
benefits available to Borrowers under Trust Loans, those Borrowers may
participate in the programs described above.
"INCENTIVE TRUST LOAN" means a Trust Loan which is subject to an
Incentive Program.
"INCENTIVE INTEREST DEPOSIT" means, with respect to each Monthly
Collection Period and Collection Period and each Incentive Trust Loan, the
difference, if any, between the amount of interest or other amounts which would
have been payable with respect to such Incentive Trust Loan during such Monthly
Collection Period or Collection Period, as applicable,
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had no Incentive Program been in effect with respect to such Incentive Trust
Loan and the amount of interest and other amounts which were payable with
respect to such Incentive Trust Loan during such Monthly Collection Period or
Collection Period, as applicable, after giving effect to such Incentive Program.
"INDENTURE" means the Indenture dated as of 1, 1999,
between the Issuer and the Indenture Trustee.
"INDENTURE TRUST ESTATE" means all money, instruments, rights and other
property that are subject or intended to be subject to the lien and security
interest of the Indenture for the benefit of the Noteholders (including all
property and interests Granted to the Indenture Trustee), including all proceeds
thereof.
"INDENTURE TRUSTEE" means State Street Bank and Trust Company, a
Massachusetts banking corporation, not in its individual capacity but solely as
Indenture Trustee under the Indenture.
"INDEPENDENT" means, when used with respect to any specified Person,
that the Person (a) is in fact independent of the Issuer, any other obligor upon
the Notes, the Seller and any Affiliate of any of the foregoing Persons, (b)
does not have any direct financial interest or any material indirect financial
interest in the Issuer, any such other obligor, the Seller or any Affiliate of
any of the foregoing Persons and (c) is not connected with the Issuer, any such
other obligor, the Seller or any Affiliate of any of the foregoing Persons as an
officer, employee, promoter, underwriter, trustee, partner, director or person
performing similar functions.
"INDEPENDENT CERTIFICATE" means a certificate or opinion to be
delivered to the Indenture Trustee under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 11.01 of the
Indenture, made by an Independent appraiser or other expert appointed by an
Issuer Order and approved by the Indenture Trustee in the exercise of reasonable
care, and such opinion or certificate shall state that the signer has read the
definition of "Independent" in the Indenture and that the signer is Independent
within the meaning thereof.
"INITIAL CERTIFICATE BALANCE" means $ .
"INITIAL GUARANTORS" means the following: [list to come].
"INITIAL POOL BALANCE" means $ .
"INITIAL TRUST LOANS" means those Financed Student Loans conveyed to
the Issuer on the Closing Date and listed on the Schedule of Student Loans on
such date.
"IN-SCHOOL LOAN" means a Student Loan during the period, excluding
periods of in-school Deferral, during which a student Borrower is enrolled at an
Educational Institution for at least the minimum course load required to
maintain such student Borrower's eligibility to borrow under the education loan
programs administered by the Guarantor.
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"INSOLVENCY EVENT" means, with respect to a specified Person, (a) the
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in an
involuntary case under any applicable federal or state bankruptcy, insolvency or
other similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official for
such Person or for any substantial part of its property, or ordering the
winding-up or liquidation of such Person's affairs, and such decree or order
shall remain unstayed and in effect for a period of sixty consecutive days; or
(b) the commencement by such Person of a voluntary case under any applicable
federal or state bankruptcy, insolvency or other similar law now or hereafter in
effect, or the consent by such Person to the entry of an order for relief in an
involuntary case under any such law, or the consent by such Person to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for such Person or for any
substantial part of its property, or the making by such Person of any general
assignment for the benefit of creditors, or the failure by such Person generally
to pay its debts as such debts become due, or the taking of action by such
Person in furtherance of any of the foregoing.
"INTEREST SUBSIDY PAYMENTS" means payments, designated as such,
consisting of interest subsidies by the Department in respect of the Trust Loans
to the Eligible Lender Trustee on behalf of the Trust in accordance with the
Higher Education Act.
"INVESTMENT EARNINGS" means, with respect to any Monthly Payment Date,
the investment earnings (net of losses and investment expenses) on amounts on
deposit in the Trust Accounts to be deposited into the Collection Account on or
prior to such Monthly Payment Date or Quarterly Payment Date, as applicable,
pursuant to Section 2(c)(v) of the Administration Agreement.
"ISSUER" means Nellie Mae Student Loan Trust 1999-A until a successor
replaces it and, thereafter, means the successor and, for purposes of any
provision contained in the Indenture and required by the TIA, each other obligor
on the Notes.
"ISSUER ORDER" and "ISSUER REQUEST" means a written order or request
signed in the name of the Issuer by any one of its Authorized Officers and
delivered to the Indenture Trustee.
"LIEN" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind, other than tax liens and any other liens, if any, which
attach to the respective Student Loan by operation of law as a result of any act
or omission by the related Obligor.
"LIQUIDATED STUDENT LOAN" means any defaulted Trust Loan liquidated by
the Master Servicer or which the Master Servicer has, after using all reasonable
efforts to realize upon such Trust Loan, determined to charge off.
"LIQUIDATION PROCEEDS" means, with respect to any Liquidated Student
Loan, all proceeds of the liquidation thereof collected in respect thereof from
whatever source, other than Recoveries, net of the sum of any reasonable
out-of-pocket expenses incurred by the Master Servicer in connection with such
liquidation and any amounts required by law to be remitted to the Borrower on
such Liquidated Student Loan.
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"LOAN SALE AGREEMENT" means the Loan Sale Agreement dated as of
1, 1999, among the Issuer, FNBC, the Seller and the Eligible Lender Trustee.
"MASTER SERVICER" means NMELC, in its capacity as Master Servicer of
the Trust Loans or any permitted Successor Master Servicer.
"MASTER SERVICER DEFAULT" means an event specified in Section 6.01 of
the Master Servicing Agreement.
"MASTER SERVICING AGREEMENT" means the Master Servicing Agreement dated
as of 1, 1999, among the Issuer, the Master Servicer, the Seller and
the Eligible Lender Trustee.
"MINIMUM PURCHASE PRICE" means, as to any Quarterly Payment Date, an
amount equal to the greater of (i) the aggregate Purchase Amounts of the
Financed Student Loans as of the end of the Collection Period immediately
preceding such Quarterly Payment Date and (ii) an amount that would be
sufficient to (A) reduce the Outstanding Amount of the Notes on such Quarterly
Payment Date to zero, (B) pay to the Noteholders the Noteholders' Interest
Distribution Amount payable on such Quarterly Payment Date, (C) reduce the
Certificate Balance of the Certificates on such Quarterly Payment Date to zero,
(D) pay to the Certificateholders the Certificateholders' Return Distribution
Amount payable on such Quarterly Payment Date, and (E) pay to the Master
Servicer and the Administrator all amounts owed to them under any of the Basic
Documents.
"MONTHLY AVAILABLE FUNDS" means, with respect to each Monthly Payment
Date that is not a Quarterly Payment Date, the sum of the following amounts with
respect to the related Monthly Collection Period: (i) all collections received
by the Master Servicer on the Trust Loans (including any Guarantee Payments
received with respect to the Trust Loans); (ii) any Interest Subsidy Payments
and Special Allowance Payments received by the Eligible Lender Trustee during
such Monthly Collection Period with respect to the Trust Loans; (iii) all
Liquidation Proceeds from any Trust Loans which became Liquidated Student Loans
during such Monthly Collection Period in accordance with the Master Servicer's
customary servicing procedures, and all Recoveries in respect of Liquidated
Student Loans which were written off in prior Monthly Collection Periods, in
each case which have been received by the Master Servicer and remitted to the
Indenture Trustee; (iv) the aggregate Purchase Amounts received for those Trust
Loans repurchased by the Seller or purchased by the Master Servicer under an
obligation which arose during the related Monthly Collection Period; (v)
Investment Earnings for such Monthly Payment Date; and (vi) with respect to each
Monthly Payment Date other than a Quarterly Payment Date and other than an
Monthly Payment Date immediately succeeding a Quarterly Payment Date, the
Monthly Available Funds remaining from the Monthly Collection Period relating to
the preceding Monthly Payment Date after giving effect to the application of
such Monthly Available Funds on such preceding Monthly Payment Date; PROVIDED,
HOWEVER, that if with respect to any Monthly Payment Date there would not be
sufficient funds, after application of the Monthly Available Funds (as defined
above) and amounts available from the Reserve Account, to pay any of the items
specified in Section 2(d)(ii) of the Administration Agreement, then the Monthly
Available Funds for such Monthly Payment Date will include, in addition to the
Monthly Available Funds (as defined above), amounts on deposit in the
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Collection Account on the Determination Date relating to such Monthly Payment
Date which would have constituted Monthly Available Funds for the Monthly
Payment Date succeeding such Monthly Payment Date up to the amount necessary to
pay such items, and the Monthly Available Funds for such succeeding Monthly
Payment Date will be adjusted accordingly; and PROVIDED, FURTHER, that the
Monthly Available Funds will exclude (A) all payments and proceeds (including
Liquidation Proceeds) of any Trust Loan the Purchase Amount of which has been
included in the Monthly Available Funds for a prior Monthly Collection Period,
(B) any Monthly Rebate Fees paid during the related Monthly Collection Period by
or on behalf of the Trust and (C) any expenditure of the Net Principal Cash Flow
Amount used to purchase Serial Loans during such Monthly Collection Period.
"MONTHLY COLLECTION PERIOD" means, with respect to any Monthly Payment
Date that is not a Quarterly Payment Date, the calendar month immediately
preceding the month of such Monthly Payment Date.
"MONTHLY PAYMENT DATE" means the th day of each month (or, if any such
date is not a Business Day, on the next succeeding Business Day) commencing
, 1999.
"MONTHLY REBATE FEE" means, for each calendar month and each
Consolidation Loan, the fee payable to the Department equal to the product of
(x) one-twelfth, (y) 1.05% and (z) the outstanding principal balance of such
Consolidation Loan plus accrued interest on such Consolidation Loan as of the
last day of such month.
"MOODY'S" means Moody's Investors Service, Inc. or any successor
thereto.
"NET PRINCIPAL CASH FLOW AMOUNT" means, as of any date, the Principal
Cash Flow Amount (calculated for the Collection Period ending in the preceding
calendar month or, if no Collection Period ended in the preceding calendar
month, calculated for each preceding calendar month during the current
Collection Period) minus the Capitalized Interest Amount for such Collection
Period or for each such preceding calendar month, as the case may be.
"NMELC" means Nellie Mae Education Loan Corporation, a Delaware
non-profit corporation.
"NOTE" means either a Class A-1 Note or a Class A-2 Note, as the case
may be.
"NOTE DEPOSITORY AGREEMENT" means the agreement with respect to the
Notes attached to the Indenture as Exhibit B.
"NOTE LIBOR RATE" means the Class A-1 Note LIBOR Rate or the Class A-2
Note LIBOR Rate , as applicable.
"NOTE OWNER" means, with respect to a Book-Entry Note, the Person who
is the owner of such Book-Entry Note as reflected on the books of the Clearing
Agency, or on the books of a Person maintaining an account with Clearing Agency
(directly as a Clearing Agency Participant or as an indirect participant, in
each case in accordance with the rules of the Clearing Agency).
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"NOTE RATE" means the Class A-1 Note Rate or the Class A-2 Note Rate,
as the case may be.
"NOTE REGISTER" and "NOTE REGISTRAR" have the respective meanings
specified in Section 2.04 of the Indenture.
"NOTEHOLDER" means the Person in whose name a Note is registered in the
Note Register.
"NOTEHOLDERS' DISTRIBUTION AMOUNT" means, with respect to any Quarterly
Payment Date, the sum of the Noteholders' Interest Distribution Amount and the
Noteholders' Principal Distribution Amount for such Quarterly Payment Date.
"NOTEHOLDERS' INTEREST BASIS CARRYOVER" means, with respect to each
Quarterly Payment Date, the Class A-1 Noteholders' Interest Basis Carryover and
the Class A-2 Noteholders' Interest Basis Carryover for such Quarterly Payment
Date.
"NOTEHOLDERS' INTEREST DISTRIBUTION AMOUNT" means, with respect to any
Quarterly Payment Date, the sum of (i) the Class A-1 Noteholders' Interest
Distribution Amount and (ii) the Class A-2 Noteholders' Interest Distribution
Amount, each for such Quarterly Payment Date; PROVIDED, HOWEVER, that the
Noteholders' Interest Distribution Amount will not include any Noteholders'
Interest Basis Carryover.
"NOTEHOLDERS' PRINCIPAL CARRYOVER SHORTFALL" means, as of the close of
any Quarterly Payment Date, the excess of (i) the Noteholders' Principal
Distribution Amount on such Quarterly Payment Date over (ii) the amount of
principal actually distributed to the Noteholders on such Quarterly Payment
Date.
"NOTEHOLDERS' PRINCIPAL DISTRIBUTION AMOUNT" means, with respect to any
Quarterly Payment Date, the Principal Distribution Amount for such Quarterly
Payment Date plus the Noteholders' Principal Carryover Shortfall as of the close
of the preceding Quarterly Payment Date; PROVIDED, HOWEVER, that the
Noteholders' Principal Distribution Amount will not exceed the Outstanding
Amount of the Notes. In addition, (i) on the Class A-1 Note Final Maturity Date,
the principal required to be distributed to Class A-1 Noteholders will include
the amount required to reduce the outstanding principal balance of the Class A-1
Notes to zero and (ii) on the Class A-2 Note Final Maturity Date, the principal
required to be distributed to the Class A-2 Noteholders will include the amount
required to reduce the outstanding principal balance of the Class A-2 Notes to
zero.
"NOTES" means, collectively, the Class A-1 Notes and the Class A-2
Notes.
"OBLIGOR" on a Student Loan means the borrower or co-borrowers of such
Student Loan and any other Person who owes payments in respect of such Student
Loan, including the Guarantor thereof and, with respect to any Interest Subsidy
Payment or Special Allowance Payment thereon, the Department.
"OFFICERS' CERTIFICATE" means (i) in the case of the Issuer, a
certificate signed by any two Authorized Officers of the Issuer, under the
circumstances described in, and otherwise
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complying with the applicable requirements of, Section 11.01 of the Indenture,
and delivered to the Indenture Trustee and (ii) in the case of the Seller, the
Master Servicer or the Administrator, a certificate signed by any two Authorized
Officers of the Seller, the Master Servicer or the Administrator, as
appropriate.
"OPINION OF COUNSEL" means (i) with respect to the Issuer, one or more
written opinions of counsel who may, except as otherwise expressly provided in
the Indenture, be employees of or counsel to the Issuer and who shall be
satisfactory to the Indenture Trustee, and which opinion or opinions shall be
addressed to the Indenture Trustee as Indenture Trustee, shall comply with any
applicable requirements of Section 11.01 of the Indenture, and shall be in form
and substance satisfactory to the Indenture Trustee and (ii) with respect to the
Seller, the Administrator, the Master Servicer or a Federal Guarantor, one or
more written opinions of counsel who may be an employee of or counsel to the
Seller, the Administrator, the Master Servicer or such Federal Guarantor, which
counsel shall be acceptable to the Indenture Trustee, the Eligible Lender
Trustee or the Rating Agencies, as applicable.
"OUTSTANDING" means, as of the date of determination, (a) with respect
to the Certificates, all Certificates theretofore executed, authenticated and
delivered under the Trust Agreement except:
(i) Certificates therefore cancelled by the Certificate Registrar or
delivered to the Certificate Registrar for cancellation; and
(ii) Certificates in exchange for or in lien of other Certificates
which have been executed, authenticated and delivered pursuant to the Trust
Agreement; and
(b) with respect to the Notes, all Notes therefore executed, authenticated
and delivered under the Indenture except:
(i) Notes theretofore cancelled by the Note Registrar or delivered to
the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in the
necessary amount has been theretofore deposited with the Indenture Trustee
or any Paying Agent in trust for the Noteholders thereof (PROVIDED,
HOWEVER, that if such Notes are to be redeemed, notice of such redemption
has been duly given pursuant to the Indenture); and
(iii) Notes in exchange for or in lieu of other Notes which have been
authenticated and delivered pursuant to the Indenture unless proof
satisfactory to the Indenture Trustee is presented that any such Notes are
held by a bona fide purchaser;
PROVIDED, HOWEVER, that in determining whether the Noteholders of the requisite
percentage of the Outstanding Amount of the Notes have given any request,
demand, authorization, direction, notice, consent or waiver hereunder or under
any other Basic Document, Notes owned by the Issuer, any other obligor upon the
Notes, the Seller or any Affiliate of any of the foregoing Persons shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Indenture Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent or waiver, only Notes
that a Responsible Officer of the
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Indenture Trustee either actually knows to be so owned or has received written
notice thereof shall be so disregarded. Notes so owned that have been pledged in
good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Indenture Trustee the pledgee's right so to act with respect
to such Notes and that the pledgee is not the Issuer, any other obligor upon the
Notes, the Seller or any Affiliate of any of the foregoing Persons.
"OUTSTANDING AMOUNT" means the aggregate principal amount of all Notes
Outstanding at the date of determination.
"PARITY DATE" means the first Quarterly Payment Date on which the sum
of (a) the aggregate principal amount of the Notes and (b) the Certificate
Balance of the Certificates, after giving effect to all distributions on such
date, is no longer in excess of the sum of (x) the Pool Balance and (y) the
amount on deposit in the Reserve Account, each as of the last day of the related
Collection Period.
"PAYING AGENT" means the Indenture Trustee or any other Person that
meets the eligibility standards for the Indenture Trustee specified in Section
6.11 of the Indenture and is authorized by the Issuer to make the payments to
and distributions from the Collection Account and payments of principal of and
interest and any other amounts owing on the Securities on behalf of the Issuer.
"PERSON" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust (including any beneficiary
thereof), unincorporated organization or government or any agency or political
subdivision thereof.
"PHYSICAL PROPERTY" has the meaning assigned to such term as the
definition of "Delivery" above.
"PLUS LOAN" means a Student Loan designated as such that is made under
the Parent Loans to Undergraduate Students Program pursuant to the Higher
Education Act.
"POOL BALANCE" means, as of the close of business on the last day of
any Collection Period, the aggregate principal balances of the Trust Loans as of
such day (including accrued interest thereon for the immediately preceding
Collection Period to the extent such interest will be capitalized upon
commencement of repayment, excluding any Purchased Student Loans and Liquidated
Student Loans).
"PREDECESSOR CERTIFICATE" means, with respect to any particular
Certificate, every previous Certificate evidencing all or a portion of the same
ownership interest in the Trust as that evidenced by such particular
Certificate; and, for the purpose of this definition, any Certificate issued and
delivered under Section __ of the Trust Agreement in lieu of a mutilated, lost,
destroyed or stolen Certificate shall be deemed to evidence the same ownership
interest as the mutilated, lost, destroyed or stolen Certificate.
"PREDECESSOR NOTE" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.05 of the
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Indenture in lieu of a mutilated, lost, destroyed or stolen Note shall be deemed
to evidence the same debt as the mutilated, lost, destroyed or stolen Note.
"PRINCIPAL CASH FLOW AMOUNT" means, with respect to any Quarterly
Payment Date, the sum of the following amounts with respect to the related
Collection Period, or with respect to any other date of determination, the sum
of the following amounts with respect to the period specified: (i) that portion
of all collections received by the Master Servicer on the Trust Loans that is
allocable to principal (including the portion of any Guarantee Payments received
that is allocable to principal of the Trust Loans); (ii) all Liquidation
Proceeds attributable to the principal amount of the Trust Loans which became
Liquidated Student Loans during such Collection Period, or such other specified
period, in accordance with the Master Servicer's customary servicing procedures
and have been received by the Master Servicer during such Collection Period,
together with all Realized Losses on such Trust Loans; (iii) to the extent
attributable to principal, the Purchase Amount received with respect to each
Trust Loan repurchased by the Seller or purchased by the Master Servicer as a
result of a breach of a representation, warranty or covenant which arose during
the related Collection Period or such other specified period; and (iv) the
Principal Distribution Adjustment; PROVIDED, HOWEVER, that the Principal Cash
Flow Amount will exclude all payments and proceeds (including Liquidation
Proceeds) of any Trust Loans the Purchase Amount of which has been included in
Available Funds for a prior Collection Period.
"PRINCIPAL DISTRIBUTION ADJUSTMENT" means, with respect to any
Quarterly Payment Date, the amount of the Available Funds on such Quarterly
Payment Date to be used to make principal distributions to the Noteholders (and,
after the Outstanding Amount of the Notes has been paid in full, to the
Certificateholders) to account for (i) the amount of any insignificant balance
remaining outstanding as of such Quarterly Payment Date on a Trust Loan after
receipt of a final payment from a Borrower or a Guarantor, when such
insignificant balances are waived in the ordinary course of business by the
Master Servicer at the direction of the Administrator in accordance with the
Master Servicing Agreement or (ii) the amount of principal collections
erroneously treated as interest collections including, without limitation, by
reason of the failure by a Borrower to capitalize interest that had been
expected to be capitalized; PROVIDED, HOWEVER, that the Principal Distribution
Adjustment for any Quarterly Payment Date shall not exceed the lesser of (x)
$100,000 and (y) the amount of any Reserve Account Excess after giving effect to
all distributions to be made therefrom on such Quarterly Payment Date other than
distributions to the Company out of such excess.
"PRINCIPAL DISTRIBUTION AMOUNT" means, with respect to any Quarterly
Payment Date, the Net Principal Cash Flow Amount for such Quarterly Payment Date
minus any funds remitted to the Seller during the preceding Collection Period
for the Purchase Collateral Balance of Serial Loans.
"PROCEEDING" means any suit in equity, action at law or other judicial
or administrative proceeding.
"PURCHASE AMOUNT" means, with respect to a Trust Loan other than a
Serial Loan to purchased from the Issuer, the amount required, as of the close
of business on the last day of a Monthly Interest Period or Quarterly Interest
Period, as applicable, to prepay in full the
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respective Trust Loan under the terms thereof including all accrued borrower
interest thereon; PROVIDED, HOWEVER, that the Purchase Amount for a Trust Loan
which is being repurchased by the Seller as a result of a breach of the
representation and warranty provided for in the last sentence of the first
paragraph of Exhibit C to the Loan Sale Agreement will be calculated without
regard to any amount which the Seller has advanced with respect to such loan and
which was not reflected by the principal balance of such loan as of the Cutoff
Date (or the applicable Subsequent Cutoff Date, as the case may be) after the
loan was sold into the Trust.
"PURCHASE COLLATERAL BALANCE" means, with respect to a Serial Loan to
be purchased by the Issuer, an amount equal, as of the related Subsequent
Cut-Off Date, to the principal balance of such loan plus accrued borrower
interest thereon if and to the extent such interest is then payable and will,
pursuant to the terms of such loan, be capitalized and added to the principal
balance of such loan.
"PURCHASE PREMIUM AMOUNT" means, with respect to a Serial Loan to be
purchased by the Issuer, an additional amount not to exceed % of the principal
balance owed by the applicable Borrower thereon.
"PURCHASED STUDENT LOAN" means a Trust Loan purchased as of the close
of business on the last day of a Monthly Collection Period or Collection Period,
as applicable, by the Master Servicer pursuant to Section 3.05 of the Master
Servicing Agreement or repurchased by the Seller pursuant to Section 3.02 of the
Loan Sale Agreement.
"QUALIFIED SUBSTITUTE STUDENT LOAN" means a Student Loan that entitles
the holder thereof to receive interest based on the same interest rate index as
the related Deleted Student Loan for which it is to be substituted, and (ii)
will not, at any level of such interest rate index, have an interest rate that
is less than that of such Deleted Student Loan.
"QUARTERLY PAYMENT DATE" means the Monthly Payment Date occurring in
each [January, April, July and October], commencing with the Monthly Payment
Date occurring in 1999.
"QUARTERLY INTEREST PERIOD" means, with respect to a Quarterly Payment
Date, the period from and including the Quarterly Payment Date immediately
preceding such Quarterly Payment Date (or in the case of the first Quarterly
Payment Date, the Closing Date) to but excluding the such Quarterly Payment
Date.
"RATING AGENCY" means Fitch, Moody's or Standard & Poor's. If no such
organization or successor is any longer in existence, "Rating Agency" shall be a
nationally recognized statistical rating organization or other comparable Person
designated by the Seller, notice of which designation shall be given to the
Indenture Trustee, the Eligible Lender Trustee and the Master Servicer.
"RATING AGENCY CONDITION" means, with respect to any action, that each
Rating Agency shall have been given ten days' prior notice thereof and that each
of the Rating Agencies shall have notified the Seller, the Master Servicer, the
Eligible Lender Trustee and the Indenture Trustee in writing that such action
will not result in and of itself in a reduction or withdrawal of the then
current rating of the Class A-1 Notes, the Class A-2 Notes or the Certificates.
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"REALIZED LOSSES" means the excess of the aggregate principal balance
of any Liquidated Student Loan plus accrued but unpaid interest thereon over
Liquidation Proceeds to the extent allocable to principal.
"RECORD DATE" means, with respect to a Quarterly Payment Date or a
Redemption Date, the close of business on the th day of the calendar month in
which such Quarterly Payment Date or Redemption Date occurs (whether or not such
date is a Business Day).
"RECOVERIES" means, with respect to any Liquidated Student Loan, all
monies in respect thereof, from whatever source, that have been received by the
Master Servicer and remitted to the Indenture Trustee during any Monthly
Collection Period or Collection Period, as applicable, following the Monthly
Collection Period or Collection Period, as applicable, in which such Financed
Student Loan became a Liquidated Student Loan.
"REDEMPTION DATE" means in the case of a payment to the Noteholders
pursuant to Section 10.01 of the Indenture, the Quarterly Payment Date specified
by the Administrator or the Issuer in the notice given pursuant to Section 10.02
of the Indenture.
"REDEMPTION PRICE" means, in the case of a payment made to the
Noteholders pursuant to Section 10.01(c) of the Indenture, the Outstanding
Amount of the Notes and the Noteholders' Interest Distribution Amount for the
Redemption Date; and in the case of a payment made to the Certificateholders
under Section 8.02A of the Trust Agreement, the Certificate Balance of the
Outstanding Certificates and the Certificateholders' Return Distribution Amount
for the Redemption Date.
"REPAYMENT" means the period of time during which a Borrower is
required to make installment payments to repay the aggregate principal amount
plus accrued interest of all amounts borrowed by virtue of the Borrower Note(s)
executed by such Borrower.
"REPAYMENT LOAN" means a Student Loan during a period of Repayment.
"RESERVE ACCOUNT" means the account designated as such, established
and maintained pursuant to Section 2(c) of the Administration Agreement,
which shall be an Eligible Account.
"RESERVE ACCOUNT EXCESS" has the meaning specified in Section 2(e)(ii)
of the Administration Agreement.
"RESERVE ACCOUNT INITIAL DEPOSIT" means $ .
"RESPONSIBLE OFFICER" means, with respect to the Indenture Trustee, any
officer within the Corporate Trust Office of the Indenture Trustee, including
any vice president, assistant vice president, assistant treasurer, assistant
secretary, or any other officer of the Indenture Trustee customarily performing
functions similar to those performed by any of the above designated officers,
with direct responsibility for the administration of the Indenture and the other
Basic Documents on behalf of the Indenture Trustee and also, with respect to a
particular matter, any other officer to whom such matter is referred because of
such officer's knowledge of and familiarity with the particular subject.
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"SCHEDULE OF TRUST LOANS" means the listing of the Trust Loans set
forth in Schedule A to the Loan Sale Agreement and to the Indenture (which
Schedule may be in the form of microfiche) as the same may be amended from time
to time.
"SECRETARY" means the Secretary of the Department, or any predecessor
or successor to the functions thereof under the Higher Education Act.
"SECURITIES" means, collectively, the Notes and the Certificates.
"SECURITIES ACT" means the federal Securities Act of 1933, as amended.
"SECURITYHOLDER" means a Noteholder or a Certificateholder or both.
"SELLER" means NMELC, in its capacity as seller of the Trust Loans.
"SERIAL LOAN" means a Student Loan which is made by an eligible lender
under the Higher Education Act to a Borrower who is also a Borrower under at
least one outstanding Initial Trust Loan and is acquired by the Trust from the
Seller.
"SERIAL LOAN PURCHASE AMOUNT" means, with respect to a Serial Loan to
be purchased from the Seller by the Issuer, an amount equal to the sum of (i)
the Purchase Collateral Balance and (ii) the Purchase Premium Amount; PROVIDED,
HOWEVER, that the Purchase Premium Amount will be payable on the next succeeding
Quarterly Payment Date from Reserve Account Excess, if any, for such Quarterly
Payment Date.
"SERVICING FEE" has the meaning specified in Section 3.06 of the Master
Servicing Agreement.
"SLS LOAN" means a Student Loan designated as such that is made under
the Supplemental Loans for Students Program pursuant to the Higher Education
Act.
"SPECIAL ALLOWANCE PAYMENTS" means payments, designated as such,
consisting of effective interest subsidies by the Department in respect of the
Financed Student Loans to the Eligible Lender Trustee on behalf of the Trust in
accordance with the Higher Education Act.
"SPECIFIED RESERVE ACCOUNT BALANCE" with respect to any Quarterly
Payment Date means the greater of: (a) % of the Pool Balance as of the close
of business on the last day of the related Collection Period, and (b) $ ;
PROVIDED, HOWEVER, that in no event shall the Specified Reserve Account Balance
exceed the sum of the Outstanding Amount of the Notes and the Certificate
Balance of the Certificates.
"STAFFORD LOAN" means a Student Loan designated as such that is made
under the Robert T. Stafford Student Loan Program in accordance with the Higher
Education Act.
"STANDARD & POOR'S" means Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc.
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"STATE" means any one of the 50 States of the United States of America,
the trust territories of the United States, or the District of Columbia.
"STUDENT LOAN" means an agreement to repay a disbursement of money to
or on behalf of an eligible student, evidenced by a Borrower Note and guaranteed
in accordance with the policies and procedures of the applicable Federal
Guarantor.
"STUDENT LOAN FILES" means the documents relating to the Trust Loans
specified in Section 2.01 of the Master Servicing Agreement.
"STUDENT LOAN RATE ACCRUAL PERIOD" means, with respect to any Quarterly
Interest Date, the Collection Period preceding such Quarterly Collateral Date.
"SUBSEQUENT CUTOFF DATE" means the date of the related Assignment of
any Qualified Substitute Student Loan and on or after which all distributions on
such loan are the property of the Issuer.
"SUBSTITUTION ADJUSTMENT AMOUNT" has the meaning specified in Section
3.02 of the Loan Sale Agreement.
"SUCCESSOR MASTER SERVICER" has the meaning specified in Section
3.07(e) of the Indenture.
"TRANSFER" means any direct or indirect transfer, sale, pledge,
hypothecation or other form of assignment of any ownership interest in a Note or
a Certificate.
"TRANSFER AGREEMENT" has the meaning provided in Section 2.03 of the
Loan Sale Agreement.
"TRANSFER DATE" means the day fixed for the transfer of any Serial
Loans by the Seller to the Issuer; PROVIDED, HOWEVER, that no Transfer Date
shall occur during the period from a Determination Date to the close of the
related Monthly Payment Date.
"TREASURY REGULATIONS" means regulations, including proposed or
temporary regulations, promulgated under the Code. References in any document or
instrument to specific provisions of proposed or temporary regulations shall
include analogous provisions of final Treasury Regulations or other successor
Treasury Regulations.
"TRUST" means the Issuer, established pursuant to the Trust Agreement.
"TRUST ACCOUNT PROPERTY" means the Trust Accounts, all amounts and
investments held from time to time in any Trust Account (whether in the form of
deposit accounts, Physical Property, book-entry securities, uncertificated
securities or otherwise), including the Reserve Account Initial Deposit and all
proceeds of the foregoing.
"TRUST ACCOUNTS" has the meaning specified in Section 2(c) of the
Administration Agreement.
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"TRUST AGREEMENT" means the Trust Agreement dated as of ,
1999, among the Depositor, the Company and the Eligible Lender Trustee.
"TRUST ESTATE" means all right, title and interest of the Trust (or the
Eligible Lender Trustee on behalf of the Trust) in and to the property and
rights assigned to the Trust pursuant to Article II of the Loan Sale Agreement
all funds on deposit from time to time in the Trust Accounts and all other
property of the Trust from time to time, including any rights of the Eligible
Lender Trustee and the Trust pursuant to the Loan Sale Agreement, the Master
Servicing Agreement and the Administration Agreement.
"TRUST INDENTURE ACT" or "TIA" means the Trust Indenture Act of 1939 as
in force on the date hereof, unless otherwise specifically provided.
"TRUST LOANS" means those Student Loans that, as of any date of
determination, have been conveyed to the Issuer, consisting of the Initial
Financed Student Loans as of the Closing Date and, thereafter, any Serial Loans
conveyed to the Issuer from the Seller as provided in Section 2.02 of the Loan
Sale Agreement and any Qualified Substitute Student Loans conveyed to the Issuer
from the Seller as provided in Section 3.02 of the Loan Sale Agreement.
"UCC" means, unless the context otherwise requires, the Uniform
Commercial Code, as in effect in the relevant jurisdiction, as amended from time
to time.
"UNITED STATES PERSON" means a citizen or resident of the United
States, a corporation, partnership or other entity created or organized in, or
under the laws of, the United States or any political subdivision thereof, or an
estate whose income is subject to United States federal income tax regardless of
its source, or a trust if a court within the United States is able to exercise
primary supervision over the administration of the trust and one or more United
States fiduciaries have the authority to control all substantial decisions of
the trust.
