Exhibit 4.2
SERIES 2003-1 SUPPLEMENTAL INDENTURE OF TRUST
by and between
NELNET EDUCATION LOAN FUNDING, INC.
and
WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION,
as Indenture Trustee
Authorizing the Issuance of
$1,030,000,000
Nelnet Education Loan Funding, Inc.
Student Loan Asset-Backed Notes
Series 2003-1
Dated as of June 1, 2003
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND USE OF PHRASES.................................................1
ARTICLE II
SERIES 2003-1 NOTE DETAILS, FORM OF SERIES 2003-1 NOTES,
REDEMPTION OF SERIES 2003-1 NOTES
AND USE OF PROCEEDS OF SERIES 2003-1 NOTES
Section 2.01. Series 2003-1 Note Details...................................4
Section 2.02. Redemption and Purchase of the Series 2003-1 Notes...........6
Section 2.03. Delivery of Series 2003-1 Notes..............................9
Section 2.04. Indenture Trustee's Authentication Certificate..............10
Section 2.05. Deposit of Series 2003-1 Note Proceeds......................10
Section 2.06. Forms of Series 2003-1 Notes................................11
Section 2.07. Conditions Precedent........................................11
ARTICLE III
2003-1 Acquisition/Redemption Account.........................................12
ARTICLE IV
MISCELLANEOUS
Section 4.01. Date of Execution...........................................12
Section 4.02. Laws Governing..............................................12
Section 4.03. Severability................................................12
Section 4.04. Exhibits....................................................12
ARTICLE V
APPLICABILITY OF INDENTURE....................................................12
APPENDIX A CERTAIN TERMS AND PROVISIONS OF THE AUCTION RATE NOTES
EXHIBIT A FORM OF SERIES 2003-1 NOTES
EXHIBIT B SERIES 2003-1 CLOSING CASH FLOW PROJECTIONS
EXHIBIT C NOTICE OF PAYMENT DEFAULT
EXHIBIT D NOTICE OF CURE OF PAYMENT DEFAULT
EXHIBIT E NOTICE OF PROPOSED CHANGE IN LENGTH OF ONE OR MORE AUCTION PERIODS
EXHIBIT F NOTICE ESTABLISHING CHANGE IN LENGTH OF ONE OR MORE AUCTION PERIODS
EXHIBIT G NOTICE OF CHANGE IN AUCTION DATE
SERIES 2003-1 SUPPLEMENTAL INDENTURE OF TRUST
THIS SERIES 2003-1 SUPPLEMENTAL INDENTURE OF TRUST (this "Supplemental
Indenture") dated as of June 1, 2003, is by and between NELNET EDUCATION LOAN
FUNDING, INC., a corporation duly organized and existing under the laws of the
State of Nebraska (the "Issuer"), and WELLS FARGO BANK MINNESOTA, NATIONAL
ASSOCIATION, a national banking association duly organized and operating under
the laws of the United States of America (together with its successors, the
"Indenture Trustee"), as trustee hereunder (all capitalized terms used in these
preambles, recitals and granting clauses shall have the same meanings assigned
thereto in Article I hereof);
W I T N E S S E T H :
WHEREAS, the Issuer has previously entered into an Indenture of Trust
dated as of June 1, 2003 (the "Original Indenture," and together with this
Supplemental Indenture, the "Indenture"), between the Issuer and the Indenture
Trustee;
WHEREAS, the Issuer desires to enter into this Supplemental Indenture in
order to issue Notes pursuant to the terms of the Original Indenture, including
Section 2.08 thereof;
WHEREAS, the Issuer represents that it is duly created as a corporation
under the laws of the State and that by proper action it has duly authorized the
issuance of $1,030,000,000 of its Student Loan Asset-Backed Notes, Series 2003-1
consisting of two Classes, designated as Senior Class A Notes and Subordinate
Class B Notes (collectively, the "Series 2003-1 Notes"), and it has by proper
corporate action authorized the execution and delivery of this Supplemental
Indenture;
WHEREAS, the Series 2003-1 Notes constitute Notes as defined in the
Indenture;
WHEREAS, the Indenture Trustee has agreed to accept the trusts herein
created upon the terms herein set forth; and
NOW, THEREFORE, it is mutually covenanted and agreed as follows:
ARTICLE I
DEFINITIONS AND USE OF PHRASES
All words and phrases defined in Article I of the Indenture and Article
I of Appendix A hereto shall have the same meaning in this Supplemental
Indenture, except as otherwise appears in this Article. In addition, the
following terms have the following meanings in this Supplemental Indenture
unless the context clearly requires otherwise:
"Acquisition Period" means, with respect to the use of proceeds of any
Subclass of the Series 2003-1 Notes in the Acquisition/Redemption Fund, the
period beginning on the Closing Date for such Subclass and ending on and
including December 10, 2003; or such later date not to exceed six months from
the July 10, 2003 Closing Date as may be provided by Issuer Order, provided that
a Rating Confirmation shall have been obtained with respect to such Issuer
Order.
"Authorized Denominations" means $50,000 and any integral multiple
thereof.
"Class A Notes" means, collectively, the Class 2003A-1 Notes, the Class
2003A-2 Notes, the Class 2003A-3 Notes, the Class 2003A-4 Notes, the Class
2003A-5 Notes, the Class 2003A-6 Notes, the Class 2003A-7 Notes, the Class
2003A-8 Notes, the Class 2003A-9 Notes, the Class 2003A-10 Notes, the Class
2003A-11 Notes and the Class 2003A-12 Notes.
"Class 2003A-1 Notes" means the $100,000,000 Nelnet Education Loan
Funding, Inc., Student Loan Asset-Backed Notes, Senior Class 2003A-1 Auction
Rate Notes.
"Class 2003A-2 Notes" means the $100,000,000 Nelnet Education Loan
Funding, Inc., Student Loan Asset-Backed Notes, Senior Class 2003A-2 Auction
Rate Notes.
"Class 2003A-3 Notes" means the $100,000,000 Nelnet Education Loan
Funding, Inc., Student Loan Asset-Backed Notes, Senior Class 2003A-3 Auction
Rate Notes.
"Class 2003A-4 Notes" means the $100,000,000 Nelnet Education Loan
Funding, Inc., Student Loan Asset-Backed Notes, Senior Class 2003A-4 Auction
Rate Notes.
"Class 2003A-5 Notes" means the $75,000,000 Nelnet Education Loan
Funding, Inc., Student Loan Asset-Backed Notes, Senior Class 2003A-5 Auction
Rate Notes.
"Class 2003A-6 Notes" means the $75,000,000 Nelnet Education Loan
Funding, Inc., Student Loan Asset-Backed Notes, Senior Class 2003A-6 Auction
Rate Notes.
"Class 2003A-7 Notes" means the $75,000,000 Nelnet Education Loan
Funding, Inc., Student Loan Asset-Backed Notes, Senior Class 2003A-7 Auction
Rate Notes.
"Class 2003A-8 Notes" means the $75,000,000 Nelnet Education Loan
Funding, Inc., Student Loan Asset-Backed Notes, Senior Class 2003A-8 Auction
Rate Notes.
"Class 2003A-9 Notes" means the $75,000,000 Nelnet Education Loan
Funding, Inc., Student Loan Asset-Backed Notes, Senior Class 2003A-9 Auction
Rate Notes.
"Class 2003A-10 Notes" means the $75,000,000 Nelnet Education Loan
Funding, Inc., Student Loan Asset-Backed Notes, Senior Class 2003A-10 Auction
Rate Notes.
"Class 2003A-11 Notes" means the $75,000,000 Nelnet Education Loan
Funding, Inc., Student Loan Asset-Backed Notes, Senior Class 2003A-11 Auction
Rate Notes.
"Class 2003A-12 Notes" means the $75,000,000 Nelnet Education Loan
Funding, Inc., Student Loan Asset-Backed Notes, Senior Class 2003A-12 Auction
Rate Notes.
"Class B Notes" means, collectively, the Class 2003B-1 Notes and the
Class 2003B-2 Notes.
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"Class 2003B-1 Notes" means the $15,000,000 Nelnet Education Loan
Funding, Inc., Student Loan Asset-Backed Notes, Subordinate Class 2003B-1
Auction Rate Notes.
"Class 2003B-2 Notes" means the $15,000,000 Nelnet Education Loan
Funding, Inc., Student Loan Asset-Backed Notes, Subordinate Class 2003B-2
Auction Rate Notes.
"Closing Date" means, (a) with respect to the Class 2003A-1 Notes, the
Class 2003A-2 Notes, the Class 2003A-3 Notes, the Class 2003A-4 Notes, the Class
2003A-5 Notes, the Class 2003A-6 Notes, the Class 2003A-7 Notes, the Class
2003A-8 Notes, the Class 2003A-9 Notes, the Class 2003A-10 Notes, the Class
2003B-1 Notes and the Class 2003B-2 Notes, July 10, 2003; and (b) with respect
to the Class 2003A-11 Notes and the Class 2003A-12 Notes, October 9, 2003 or
such other date in the month of October, 2003 as provided in an Issuer Order, in
each case the date of initial issuance and delivery of the Series 2003-1 Notes
hereunder.
"Record Date" means the Business Day immediately preceding each Interest
Payment Date.
"Series 2003-1 Notes" means, collectively, the Class A Notes and the
Class B Notes.
"Series 2003-1 Reserve Fund Requirement" means 0.25% of the Series
2003-1 Notes outstanding; provided, however, that so long as any Series 2003-1
Notes remain Outstanding there shall be at least 0.15% of the original principal
amount of the Notes ($1,545,000) on deposit in the Reserve Fund or such lower
amount as may be agreed to by the Rating Agencies as evidenced by a Rating
Confirmation.
"Servicer" means, collectively, Nelnet, Inc., a Nebraska corporation,
any other servicer approved by the Rating Agencies as evidenced by a Rating
Confirmation, and their respective successors and assigns.
"Servicing Agreement" means, collectively, (i) the Servicing Agreement
dated as of June 1, 2003, as supplemented and amended from time to time, between
the Issuer and the Servicer, (ii) the Loan Subservicing Agreement dated as of
June 1, 2003, as supplemented and amended from time to time, between the
Servicer and Nelnet Loan Services, Inc., as subservicer, and (iii) any other
servicing agreement or subservicing agreement entered into with a Servicer or a
Subservicer.
"Special Record Date" has the meaning defined in Section 2.01(a) hereof.
"Subservicer" means, collectively, Nelnet Loan Services, Inc., and any
other Subservicer approved by the Rating Agencies as evidenced by a Rating
Confirmation, and their respective successors and assigns.
"Underwriter" means, collectively, Banc of America Securities LLC and
Deutsche Bank Securities Inc.
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Words importing the masculine gender include the feminine gender. Words
importing persons include firms, associations and corporations. Words importing
the singular number include the plural number and vice versa. Additional terms
are defined in the body of this Supplemental Indenture and the Appendices
hereto.
In the event that any term or provision contained herein with respect to
the Series 2003-1 Notes shall conflict with or be inconsistent with any term or
provision contained in the Indenture, the terms and provisions of this
Supplemental Indenture shall govern.
ARTICLE II
SERIES 2003-1 NOTE DETAILS,
FORM OF SERIES 2003-1 NOTES,
REDEMPTION OF SERIES 2003-1 NOTES
AND USE OF PROCEEDS OF SERIES 2003-1 NOTES
Section 2.01. Series 2003-1 Note Details.
(a) The aggregate principal amount of the Series 2003-1 Notes
which may be initially authenticated and delivered under this
Supplemental Indenture is limited to $1,030,000,000 except for Series
2003-1 Notes authenticated and delivered upon transfer of, or in
exchange for, or in lieu of Notes pursuant to Sections 2.03 and 2.04 of
the Indenture. The Series 2003-1 Notes shall be issued in fourteen (14)
separate subclasses (each a "Subclass") consisting of the Class A Notes
and the Class B Notes. The Series 2003-1 Notes shall be issuable only as
fully registered notes in the Authorized Denominations. The Series
2003-1 Notes of each Subclass shall each be lettered "R" and shall be
numbered separately from 1 upwards, respectively. The Class A Notes
constitute Senior Notes. The Class B Notes constitute Subordinate Notes.
The Series 2003-1 Notes (collectively, the "Auction Rate Notes")
shall be dated as of their respective Closing Date and shall bear
interest from their respective Closing Date, payable on each Interest
Payment Date (as defined in Appendix A to this Supplemental Indenture),
except that Auction Rate Notes which are issued upon transfer, exchange
or other replacement shall bear interest from the most recent Interest
Payment Date to which interest has been paid, or if no interest has been
paid, from the date of the Auction Rate Notes. The Series 2003-1 Notes
shall mature on July 1, 2043. Interest on the Auction Rate Notes shall
be computed on the basis of a 360-day year and actual days elapsed. The
terms of and definitions related to the Auction Rate Notes are found in
Article I hereof and Appendix A to this Supplemental Indenture.
The principal of the Series 2003-1 Notes due at its Stated
Maturity or redemption in whole shall be payable at the Principal Office
of the Indenture Trustee, or such other location as directed by the
Indenture Trustee, or at the Principal Office of its successor in trust
upon presentation and surrender of the Series 2003-1 Notes. Payment of
interest and principal paid subject to a redemption on any Series 2003-1
Note shall be made to the Registered Owner thereof by check or draft
mailed on the Interest Payment Date by the Indenture Trustee to the
Registered Owner at his address as it last appears on the registration
books kept by the Indenture Trustee at the close of business on the
Record Date for such interest payment date, but any such interest not so
timely paid or duly provided for shall cease to be payable to the
Registered Owner thereof at the close of business on the Record Date and
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shall be payable to the Registered Owner thereof at the close of
business on a special record date (a "Special Record Date") for the
payment of any such defaulted interest. Such Special Record Date shall
be fixed by the Indenture Trustee whenever moneys become available for
payment of the defaulted interest, and notice of such Special Record
Date shall be given to the Registered Owners of the Series 2003-1 Notes
not less than 2 days prior thereto by first-class mail to each such
Registered Owner as shown on the Indenture Trustee's registration books
on the date selected by the Indenture Trustee, stating the date of the
Special Record Date and the date fixed for the payment of such defaulted
interest. Payment of interest to the Securities Depository or its
nominee shall, and at the written request addressed to the Indenture
Trustee of any other Registered Owner owning at least $1,000,000
principal amount of the Series 2003-1 Notes, payments of interest shall,
be paid by wire transfer within the United States to the bank account
number filed no later than the Record Date or Special Record Date with
the Indenture Trustee for such purpose. All payments on the Series
2003-1 Notes shall be made in lawful money of the United States of
America.
(b) Except as otherwise provided in this Section, the Series
2003-1 Notes in the form of one global note for each Stated Maturity
date shall be registered in the name of the Securities Depository or its
nominee and ownership thereof shall be maintained in book-entry form by
the Securities Depository for the account of the Agent Members.
Initially, each Series 2003-1 Note shall be registered in the name of
CEDE & Co., as the nominee of The Depository Trust Company. Except as
provided in subsection (d) of this Section, the Series 2003-1 Notes may
be transferred, in whole but not in part, only to the Securities
Depository or a nominee of the Securities Depository or to a successor
Securities Depository selected or approved by the Issuer or to a nominee
of such successor Securities Depository. Each global note shall bear a
legend substantially to the following effect: "Except as otherwise
provided in the Indenture, this global note may be transferred, in whole
but not in part, only to another nominee of the Securities Depository
(as defined in the Indenture) or to a successor Securities Depository or
to a nominee of a successor Securities Depository."
(c) Except as otherwise provided herein, the Issuer and the
Indenture Trustee shall have no responsibility or obligation with
respect to (i) the accuracy of the records of the Securities Depository
or any Agent Member with respect to any beneficial ownership interest in
the Series 2003-1 Notes, (ii) the delivery to any Agent Member,
beneficial owner of the Series 2003-1 Notes or other Person, other than
the Securities Depository, of any notice with respect to the Series
2003-1 Notes or (iii) the payment to any Agent Member, beneficial owner
of the Series 2003-1 Notes or other Person, other than the Securities
Depository, of any amount with respect to the principal of or interest
on the Series 2003-1 Notes. So long as the certificates for the Series
2003-1 Notes issued under this Supplemental Indenture are not issued
pursuant to subsection (d) of this Section the Issuer and the Indenture
Trustee may treat the Securities Depository as, and deem the Securities
Depository to be, the absolute owner of the Series 2003-1 Notes for all
purposes whatsoever, including, without limitation, (A) the payment of
principal of and interest on such Series 2003-1 Notes, (B) giving
notices of redemption and other matters with respect to such Series
2003-1 Notes and (C) registering transfers with respect to such Series
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2003-1 Notes. In connection with any notice or other communication to be
provided to the Registered Owners pursuant to this Supplemental
Indenture by the Issuer or the Indenture Trustee with respect to any
consent or other action to be taken by the Registered Owners, the Issuer
or the Indenture Trustee, as the case may be, shall establish a record
date for such consent or other action and, if the Securities Depository
shall hold all of the Series 2003-1 Notes, give the Securities
Depository notice of such record date not less than 15 calendar days in
advance of such record date to the extent possible. Such notice to the
Securities Depository shall be given only when the Securities Depository
is the sole Registered Owner.
(d) If at any time the Securities Depository notifies the Issuer
and the Indenture Trustee that it is unwilling or unable to continue as
Securities Depository with respect to any or all of the Series 2003-1
Notes or if at any time the Securities Depository shall no longer be
registered or in good standing under the Securities Exchange Act or
other applicable statute or regulation and a successor Securities
Depository is not appointed by the Issuer within 90 days after the
Issuer receives notice or becomes aware of such condition, as the case
may be, subsections (b) and (c) of this Section shall no longer be
applicable and the Issuer shall execute and the Indenture Trustee shall
authenticate and deliver certificates representing the Series 2003-1
Notes as provided below. In addition, the Issuer may determine at any
time that the Series 2003-1 Notes shall no longer be represented by
global certificates and that the provisions of subsections (b) and (c)
of this Section shall no longer apply to the Series 2003-1 Notes. In
such event, the Issuer shall execute and the Indenture Trustee shall
authenticate and deliver certificates representing the Series 2003-1
Notes as provided below. Certificates for the Series 2003-1 Notes issued
in exchange for a global certificate pursuant to this subsection shall
be registered in such names and authorized denominations as the
Securities Depository, pursuant to instructions from the Agent Members
or otherwise, shall instruct in writing to the Issuer and the Indenture
Trustee, and upon which written instructions the Indenture Trustee may
rely without investigation. The Indenture Trustee shall promptly deliver
such certificates representing the Series 2003-1 Notes to the Persons in
whose names such Notes are so registered.
Section 2.02. Redemption and Purchase of the Series 2003-1 Notes.
(a) Mandatory Redemption of Series 2003-1 Notes. Subject to the
provisions of Section 2.02(d), the Series 2003-1 Notes are subject to
mandatory redemption, in whole or in part, at a redemption price equal
to the principal balance being redeemed plus accrued interest (but no
Carry-over Amounts, if any) to the date fixed for redemption (i) on the
first Note Payment Date to occur 15 days after the end of the
Acquisition Period from amounts remaining on deposit in the 2003-1
Acquisition/Redemption Account on the last day of the Acquisition Period
representing proceeds of the Series 2003-1 Notes not used to acquire
Eligible Loans, (ii) on the first Note Payment Date occurring each month
for the Senior Notes from amounts on deposit in the 2003-1
Acquisition/Redemption Account representing Recoveries of Principal
(other than Recoveries of Principal as a result of the voluntary sale of
Financed Eligible Loans) and (iii) on the first Note Payment Date
occurring each month for the Senior Notes prior to the time the Asset
Release Test is met, as certified to the Indenture Trustee in an Issuer
6
Order upon which Issuer Order the Indenture Trustee may conclusively
rely, from moneys transferred to the Acquisition Redemption Fund from
the Collection Fund pursuant to Section 5.03(b)(viii) of the Original
Indenture, until such percentage is reached. Recoveries of Principal as
a result of the voluntary sale of Financed Eligible Loans shall be used
to redeem Series 2003-1 Notes pursuant to Section 2.02(b) below. In
addition, subject to the provisions of Section 2.02(d) hereof, the
2003-1 Notes are subject to mandatory redemption, in whole, at a
redemption price equal to the principal balance being redeemed plus
accrued interest and Carry-over Amounts, if any, to the date fixed for
redemption after a Mandatory Auction of the Financed Eligible Loans
pursuant to Section 2.02(f) hereof.
(b) Optional Redemption of Series 2003-1 Notes. Subject to the
provisions of Section 2.02(d) hereof, the Series 2003-1 Notes are
subject to redemption at the option of the Issuer, from any available
moneys in the Trust Estate, in whole or in part, on any Note Payment
Date, at a redemption price equal to the principal amount thereof being
redeemed, plus interest accrued, if any, and Carry-over Amounts, if any
and as described in Appendix A hereto, to the date of redemption.
(c) Notice of Redemption and Purchase. The Indenture Trustee
shall cause notice of any redemption or purchase to be given by mailing
a copy of the notice by first-class mail to the Registered Owner of any
Series 2003-1 Notes, and the Auction Agent, designated for redemption or
purchase in whole or in part, at their address as the same shall last
appear upon the registration books, in each case not less than 10 days
prior to the redemption or purchase date; provided, however, that
failure to give such notice, or any defect therein, shall not affect the
validity of any proceedings for the redemption or purchase date of such
Series 2003-1 Notes for which no such failure or defect occurs.
(d) Partial Redemption.
(i) If less than all of the Series 2003-1 Notes are to
be redeemed pursuant to Section 2.02(a), 2.02(b) or 2.02(e)
hereof, the Subclass of Series 2003-1 Notes to be redeemed shall
be redeemed as directed by an Issuer Order. If less than all of
the Series 2003-1 Notes of any Subclass of the Series 2003-1
Notes are to be redeemed, such Series 2003-1 Notes to be
redeemed shall be selected by lot in such manner as the
Indenture Trustee shall determine.
(ii) In case a Series 2003-1 Note is of a denomination
larger than an Authorized Denomination, a portion of such Note
(in an Authorized Denomination) may be redeemed. Upon surrender
of any Series 2003-1 Note for redemption in part only, the
Issuer shall execute and the Indenture Trustee shall
authenticate and deliver to the Registered Owner thereof, the
cost of which shall be paid by the Issuer, a new Series 2003-1
Note or Series 2003-1 Notes of the same series or Subclass,
maturity and of Authorized Denominations, in an aggregate
principal amount equal to the unredeemed portion of the Series
2003-1 Note surrendered.
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(iii) All of the Class A Notes shall be redeemed prior
to redemption of any Class B Notes; provided, however, upon the
Indenture Trustee's receipt of an Issuer Order certifying that
the ratio of the Aggregate Market Value of the Trust Estate to
the Value of the Senior Notes then Outstanding exceeds 103%, or
such other percentage that satisfies the Rating Agency
Condition, the Indenture Trustee may redeem Class B Notes while
Class A Notes remain Outstanding until the Aggregate Market
Value of the Trust Estate to the Value of the Senior Notes
equals the percentage described in this sentence after giving
effect to the redemption of Class B Notes. The Indenture Trustee
may conclusively rely upon such certification without duty to
know, determine or further examine such Issuer Order.
(e) Optional Purchase of Series 2003-1 Notes. The Issuer may,
but is not required to, sell or finance all or a portion of the Financed
Eligible Loans on the first Auction Date for any Subclass of the Series
2003-1 Notes for which the Auction Rate established on such Auction Date
exceeds the Net Loan Rate ("Optional Purchase"). If the Optional
Purchase is exercised, the Financed Eligible Loans may be financed or
sold to the Issuer or any designee of the Issuer (other than the Seller
from which the Issuer originally acquired the Financed Eligible Loan) on
the next Note Payment Date for such Subclass of the Series 2003-1 Notes,
and the proceeds of such sale or financing will be used on such Note
Payment Date to optionally redeem such Subclass of the Series 2003-1
Notes as described in Section 2.02(b) above. The purchase price for the
Optional Purchase and any Mandatory Auction as described in Section
2.02(f) below, shall equal the minimum amount that, when combined with
other available assets of the Trust Estate, is sufficient to: (i) reduce
the outstanding principal balance of such Subclass of the Series 2003-1
Notes to zero; (ii) pay to the Registered Owners of such Subclass the
interest payable on the related Interest Payment Date, including
Carry-over Amounts, if any; and (iii) pay any unpaid Program Expenses,
if any (the "Minimum Purchase Price").
(f) Mandatory Auction of Financed Eligible Loans and Mandatory
Redemption of Series 2003-1 Notes.
(i) If the Issuer does not exercise its Optional
Purchase of the Financed Eligible Loans, as described in Section
2.02(e) above, by the fifth consecutive Auction Date for any
Subclass of the Series 2003-1 Notes for which the Auction Rate
established on such Auction Date exceeds the Net Loan Rate, all
of the remaining Financed Eligible Loans shall be offered for
sale by the Indenture Trustee (or its designated agent) prior to
the next Interest Payment Date for such Subclass ("Mandatory
Auction"). The Issuer, its affiliates and unrelated third
parties (other than the Seller from which the Issuer originally
acquired the Financed Eligible Loan) may offer to finance or
purchase the Financed Eligible Loans in the Mandatory Auction.
(ii) If at least two bids are received, the Indenture
Trustee (or its designated agent) will resolicit new bids from
all participating bidders until only one bid remains or the
remaining bidders decline to resubmit bids. The Indenture
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Trustee shall accept the highest of the remaining bids if it is
equal to or in excess of both (A) the Minimum Purchase Price for
all Subclasses of Series 2003-1 Notes then Outstanding and (B)
the fair market value of such Financed Eligible Loans; provided,
however, that if the Issuer is a bidder, the Issuer's bid need
only satisfy the Minimum Purchase Price for all Subclasses of
Series 2003-1 Notes then Outstanding. The Indenture Trustee may
consult, and, at the direction of the Issuer, shall consult,
with a financial advisor, including an underwriter of the Series
2003-1 Notes or the Administrator, to determine if the fair
market value of the Financed Eligible Loans has been offered.
The proceeds of any such sale of Financed Eligible Loans shall
be used to mandatorily redeem the Series 2003-1 Notes on the
next Note Payment Date for each Subclass of Series 2003-1 Notes
then Outstanding as described in Section 2.02(a) hereof. If the
highest bid after the solicitation process is not equal to or in
excess of both (A) the Minimum Purchase Price and (B) the fair
market value of such Financed Eligible Loans (or only the
Minimum Purchase Price in the case of a bid by the Issuer), the
Indenture Trustee shall not complete the sale. If the sale is
not completed, the Indenture Trustee may, but shall not be
obligated to, solicit bids for the sale of the Financed Eligible
Loans prior to succeeding Note Payment Dates, utilizing the
procedures described above. The Indenture Trustee shall be
obligated to make such solicitations if requested to do so by
Issuer Order. If the Financed Eligible Loans are not sold
pursuant to the Mandatory Auction, all amounts on deposit in the
Collection Fund, after giving effect to all withdrawals
described in Section 5.03(b)(i)-(x) of the Original Indenture,
shall be utilized on the first Note Payment Date occurring each
month for the Senior Notes (subject to Section 2.02(d)(ii)
hereof) to make mandatory redemptions of the Series 2003-1
Notes, in whole or in part, at a redemption price equal to the
principal balance being redeemed plus accrued interest (but no
Carry-over Amounts, if any) to the date fixed for redemption. If
the Mandatory Auction is unsuccessful, the Auction Note Interest
Rate on the Series 2003-1 Notes will be the Auction Note
Interest Rate determined pursuant to the provisions of Appendix
A hereto.
(iii) The Indenture Trustee shall be entitled to be paid
by the Issuer additional reasonable compensation for its
services in connection with any Mandatory Auctions conducted
pursuant to this Section 2.02(f), whether or not successful, and
to be reimbursed for all expenses (including without limitation
the fees and expenses of counsel and of any agents designated by
the Indenture Trustee to assist it conduct the Mandatory
Auction) reasonably made or incurred in connection therewith. In
the absence of the Indenture Trustee's negligence or willful
misconduct, the Indenture Trustee shall not be liable for any
action taken, suffered or omitted or for any error of judgment
made by it in the performance of its duties under this Section
2.02(f), including without limitation any liability if the
Mandatory Auction is unsuccessful. The Indenture Trustee shall
be entitled to be indemnified, as provided in Section 7.05 of
the Original Indenture, for any loss, liability or expense
incurred by the Indenture Trustee in connection with the
performance of its duties under this Section 2.02(f).
Section 2.03. Delivery of Series 2003-1 Notes. Upon the execution and
delivery of this Supplemental Indenture, the Issuer shall execute and deliver to
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the Indenture Trustee and the Indenture Trustee shall authenticate the Series
2003-1 Notes and deliver them to The Depository Trust Company and as hereinafter
in this Section provided.
Prior to the delivery by the Indenture Trustee of any of the Series
2003-1 Notes, there shall have been filed with or delivered to the Indenture
Trustee the following:
(a) A resolution duly adopted by the Issuer, certified by the
Secretary or other Authorized Officer thereof, authorizing the execution
and delivery of the Original Indenture, this Supplemental Indenture, the
Eligible Lender Trust Agreement, the Custodian Agreement, the Servicing
Agreement, the Administration Agreement and the issuance of the Series
2003-1 Notes.
(b) Duly executed copies of the documents listed in 2.03(a)
above.
(c) Rating letters from each Rating Agency stating (i) that the
Class A Notes have been rated "AAA" by Fitch and S&P and "Aaa" by
Moody's; and (ii) that the Class B Notes have been rated "AA" by Fitch
"AA-" by S&P and "Aa" by Moody's.
(d) An opinion of Note Counsel pursuant to Section 2.08(b)(iv)
of the Original Indenture.
Section 2.04. Indenture Trustee's Authentication Certificate. The
Indenture Trustee's authentication certificate upon the Series 2003-1 Notes
shall be substantially in the form provided in Exhibit A hereto. No Series
2003-1 Note shall be secured hereby or entitled to the benefit hereof, or shall
be valid or obligatory for any purpose, unless a certificate of authentication,
substantially in such form, has been duly executed by the Indenture Trustee; and
such certificate of the Indenture Trustee upon any Series 2003-1 Note shall be
conclusive evidence and the only competent evidence that such Note has been
authenticated and delivered hereunder. The Indenture Trustee's certificate of
authentication shall be deemed to have been duly executed by it if manually
signed by an authorized officer of the Indenture Trustee, but it shall not be
necessary that the same person sign the certificate of authentication on all of
the Series 2003-1 Notes issued hereunder.
Section 2.05. Deposit of Series 2003-1 Note Proceeds.
(a) Upon the issuance and delivery of the Series 2003-1 Notes
with a Closing Date of July 10, 2003, the Indenture Trustee shall
deposit the net proceeds thereof (i.e., net of Underwriters' discount of
$1,892,000.00) as follows:
(i) an amount equal to $875,908,000 shall be deposited
to the 2003-1 Acquisition/Redemption Account of the
Acquisition/Redemption Fund; and
(ii) an amount equal to $2,200,000 shall be deposited to
the Reserve Fund.
(b) On each Closing Date thereafter, unless otherwise specified
in an Issuer Order, the net proceeds thereof (i.e., net of Underwriter's
discount of $322,500) shall be deposited as follows: (i) an amount equal
10
to 0.25% of the principal amount of each Subclass of Series 2003-1 Notes
being issued on such date shall be deposited in the Reserve Fund; and
(ii) the balance of such proceeds shall be deposited in the
Acquisition/Redemption Fund.
Section 2.06. Forms of Series 2003-1 Notes. The Series 2003-1 Notes
shall be in substantially the form set forth in Exhibit A hereto, each with such
variations, omissions and insertions as may be necessary.
Section 2.07. Conditions Precedent. Each Subclass of Series 2003-1 Notes
shall be executed, authenticated and delivered on the applicable Closing Date
for such Subclass set forth herein subject to the satisfaction of the conditions
precedent set forth in this Section 2.07.
(a) With respect to the Closing Date for the Series 2003-1 Notes
to occur on July 10, 2003, the execution, authentication and delivery of
such Series 2003-1 Notes is conditioned upon the satisfaction of the
conditions set forth in Section 2.08 of the Original Indenture and
Section 2.03 hereof.
(b) With respect to the Closing Date for each Subclass of Series
2003-1 Notes that is to occur on any date other than July 10, 2003, the
execution, authentication and delivery of each such Subclass of Series
2003-1 Notes is conditioned upon the following:
(i) the satisfaction of the conditions set forth in
Section 2.08 of the Original Indenture (provided that the
requirement for any legal opinions may be satisfied by "bring
down" letters relating to prior opinions);
(ii) either (A) the receipt by the Indenture Trustee
from the Issuer on or before such Closing Date of an Issuer
Order certifying that there have been no material changes with
respect to the information in the Prospectus and Prospectus
Supplement each dated June 26, 2003 (collectively, the
"Prospectus") since the delivery of the Prospectus that would
require updating the Prospectus; or (B) the delivery to the
Underwriter of a supplement to the Prospectus setting forth any
material changes with respect to the information in the
Prospectus since the delivery of the most recent Prospectus to
the Underwriter;
(iii) the receipt from the Issuer by the Indenture
Trustee on or before such Closing Date of an Issuer Order, which
Issuer Order shall include the terms of each Subclass of Series
2003-1 Notes to be issued on such Closing Date, including an
identification of each Subclass to be issued, the date of
issuance of each Subclass of Series 2003-1 Notes, the aggregate
Principal Amount of the Series 2003-1 Notes and the
denominations of each such Subclass, the Initial Rate of each
such Subclass, the initial Auction Date and Initial Rate
Adjustment Date of each such Subclass, a direction to the
Indenture Trustee to execute the certificate of authentication
for each such Series 2003-1 Note in the form provided in this
Supplemental Indenture, which, upon receipt, shall be executed
by the Indenture Trustee or the Authenticating Agent and the
Notes shall be executed by the Issuer, each in accordance with
Section 2.05 of the Original Indenture; and
11
(iv) the receipt by the Issuer and the Indenture Trustee
of evidence that each Subclass of Notes has received the ratings
of "AAA" by S&P and Fitch and "Aaa" by Moody's or, if such
ratings have been previously assigned, that Rating Confirmations
with respect to such ratings have been received.
ARTICLE III
2003-1 ACQUISITION/REDEMPTION ACCOUNT
The Indenture Trustee is hereby directed to establish an Account within
the Acquisition/Redemption Fund to be known as the "2003-1
Acquisition/Redemption Account." The Indenture Trustee shall deposit the
proceeds described in Section 2.05 to the 2003-1 Acquisition/Redemption Account
on each Closing Date. All Recoveries of Principal from the Financed Eligible
Loans acquired with the proceeds of the Series 2003-1 Notes shall be deposited
in the 2003-1 Acquisition/Redemption Account. Moneys in the 2003-1
Acquisition/Redemption Account shall be used as described in Section 5.02 of the
Indenture and (i) to mandatorily redeem the Series 2003-1 Notes pursuant to
Section 2.02(a)(i) and (ii) hereof or (ii) as otherwise directed in a
Supplemental Indenture.
ARTICLE IV
MISCELLANEOUS
Section 4.01. Date of Execution. This Supplemental Indenture for
convenience and for the purpose of reference is dated as of June 1, 2003.
Section 4.02. Laws Governing. It is the intent of the parties hereto
that this Supplemental Indenture shall in all respects be governed by the laws
of the State.
Section 4.03. Severability. If any covenant, agreement, waiver, or part
thereof in this Supplemental Indenture contained be forbidden by any pertinent
law or under any pertinent law be effective to render this Supplemental
Indenture invalid or unenforceable or to impair the lien hereof, then each such
covenant, agreement, waiver, or part thereof shall itself be and is hereby
declared to be wholly ineffective, and this Supplemental Indenture shall be
construed as if the same were not included herein.
Section 4.04. Exhibits. The terms of the Exhibits attached to this
Supplemental Indenture are incorporated herein in all particulars.
ARTICLE V
APPLICABILITY OF INDENTURE
The provisions of the Indenture are hereby ratified, approved and
confirmed, except as otherwise expressly modified by this Supplemental
Indenture. The representations, warranties and covenants contained in the
Indenture (except as expressly modified herein) are hereby reaffirmed with the
same force and effect as if fully set forth herein and made again as of the date
hereof.
12
IN WITNESS WHEREOF, the Issuer has caused this Supplemental Indenture to
be executed in its corporate name and behalf by its President, and the Indenture
Trustee by its Corporate Trust Officer, to evidence its acceptance of the trusts
hereby created, has caused this Supplemental Indenture to be executed in its
corporate name and behalf, all in multiple counterparts, each of which shall be
deemed an original, and the Issuer and the Indenture Trustee have caused this
Supplemental Indenture to be dated as of the date herein above first shown,
although actually executed on the dates shown in the acknowledgments hereafter
appearing.
NELNET EDUCATION LOAN FUNDING, INC.
By /s/ Terry J. Heimes
----------------------------------------
Terry J. Heimes
President
WELLS FARGO BANK MINNESOTA, NATIONAL
ASSOCIATION, as Indenture Trustee
By /s/ Scott E. Ulven
----------------------------------------
Scott E. Ulven, Corporate Trust Officer
13
APPENDIX A
CERTAIN TERMS AND PROVISIONS OF
THE AUCTION RATE NOTES
ARTICLE I
DEFINITIONS
Except as provided below in this Section, all terms which are defined in
Article I of the Indenture and Article I of this Supplemental Indenture shall
have the same meanings, respectively, in this Appendix A as such terms are given
in the Indenture and Article I of this Supplemental Indenture. In addition, the
following terms shall have the following respective meanings:
"All-Hold Rate" means, on any date of determination, the interest rate
per annum equal to 90% of the Applicable LIBOR Rate, rounded to the nearest one
thousandth of one percent; provided that in no event shall the All-Hold Rate be
more than the Interest Rate Limitation or less than zero.
"Applicable CP Spread," on any date of determination, means the
following percentages, based on the lowest rating assigned to the Series 2003-1
Notes:
CREDIT RATING
Applicable
S&P Moody's Fitch CP Spread
--- ------- ----- ---------
"AAA" "Aaa" "AAA" 0.75%
"AA-" to "AA+" "Aa3" to Aa1" "AA-" to AA+" 0.75
"A-" to "A+" "A3" to "A1" "A-" to "A+" 0.75
"BBB-" to BBB+" "Baa3" to "Baa1" "BBB-" to "BBB+" 1.00
Below "BBB-" Below "Baa3" Below "BBB-" 1.50
"Applicable LIBOR Rate" means, with respect to the Series 2003-1 Notes
(a) for Auction Periods of 28 days or less, One-Month LIBOR; (b) for Auction
Periods of more than 28 days but less than 91 days, Three-Month LIBOR; (c) for
Auction Periods of more than 90 days but less than 181 days, Six-Month LIBOR;
and (d) for Auction Periods of more than 180 days, One-Year LIBOR. As used in
this definition and otherwise herein, the terms "One-Month LIBOR," "Three-Month
LIBOR," "Six-Month LIBOR" or "One-Year LIBOR" mean the rate of interest per
annum equal to the rate per annum at which United States dollar deposits having
a maturity of one month, three months, six months or one year, respectively, are
offered to prime banks in the London interbank market which appear on the
Reuters Screen LIBOR Page as of approximately 11:00 a.m., London time, on the
Interest Rate Determination Date. If at least two such quotations appear,
One-Month LIBOR, Three-Month LIBOR, Six-Month LIBOR or One-Year LIBOR,
respectively, will be the arithmetic mean (rounded upwards, if necessary, to the
nearest one hundredth of one percent) of such offered rates. If fewer than two
such quotes appear, One-Month LIBOR, Three-Month LIBOR, Six-Month LIBOR or
One-Year LIBOR, respectively, with respect to such Auction Period will be
determined at approximately 11:00 a.m., London time, on such Interest Rate
Determination Date on the basis of the rate at which deposits in United States
dollars having a maturity of one month, three months, six months or one year,
respectively, are offered to prime banks in the London interbank market by four
major banks in the London interbank market selected by the Auction Agent or the
Indenture Trustee, as applicable, and in a principal amount of not less than
U.S. $1,000,000 and that is representative for a single transaction in such
market at such time. The Auction Agent or the Indenture Trustee, as applicable,
will request the principal London office of each of such banks to provide a
quotation of its rate. If at least two quotations are provided, One-Month LIBOR,
Three-Month LIBOR, Six-Month LIBOR or One-Year LIBOR, respectively, will be the
arithmetic mean (rounded upwards, if necessary, to the nearest one hundredth of
one percent) of such offered rates. If fewer than two quotations are provided,
One-Month LIBOR, Three-Month LIBOR, Six-Month LIBOR or One-Year LIBOR,
respectively, with respect to such Auction Period will be the arithmetic mean
(rounded upwards, if necessary, to the nearest one hundredth of one percent) of
the rates quoted at approximately 11:00 a.m., New York City time on such
Interest Rate Determination Date by three major banks in New York, New York
selected by the Auction Agent or the Indenture Trustee, as applicable, for loans
in United States dollars to leading European banks having a maturity of one
month, three months, six months or one year, respectively, and in a principal
amount equal to an amount of not less than U.S. $1,000,000 and that is
representative for a single transaction in such market at such time; provided,
however, that if the banks selected as aforesaid are not quoting as mentioned in
this sentence, One-Month LIBOR, Three-Month LIBOR, Six-Month LIBOR or One-Year
LIBOR, respectively, in effect for the applicable Auction Period will be
One-Month LIBOR, Three-Month LIBOR, Six-Month LIBOR or One-Year LIBOR,
respectively, in effect for the immediately preceding Auction Period.
"Applicable T-Bill Spread" means, on any date of determination, the
following percentages, based on the lowest rating assigned to the Series 2003-1
Notes as of such date:
CREDIT RATING
Applicable
Standard & Poor's Moody's Investors Service Fitch, Inc. T-Bill Spread
----------------- ------------------------- ----------- -------------
"AAA" "Aaa" "AAA" 1.25%
"AA-" to "AA+" "Aa3" to "Aa1" "AA-" to "AA+" 1.25
"A-" to "A+" "A3" to "A1" "A-" to "A+" 1.25
"BBB-" to "BBB+" "Baa3" to "Baa1" "BBB-" to "BBB+" 1.50
Below "BBB-" Below "Baa3" Below "BBB-" 2.00
"Auction" means the implementation of the Auction Procedures on an
Auction Date.
"Auction Agent" means the Initial Auction Agent under the Initial
Auction Agent Agreement unless and until a Substitute Auction Agent Agreement
becomes effective, after which "Auction Agent" shall mean the Substitute Auction
Agent.
A-1-2
"Auction Agent Agreement" means the Initial Auction Agent Agreement
unless and until a Substitute Auction Agent Agreement is entered into, after
which "Auction Agent Agreement" shall mean such Substitute Auction Agent
Agreement.
"Auction Agent Fee" has the meaning set forth in the Auction Agent
Agreement.
"Auction Date" means, initially, August 4, 2003 with respect to the
Class 2003A-1 Notes, August 4, 2003 with respect to the Class 2003A-2 Notes,
August 5, 2003 with respect to the Class 2003A-3 Notes, August 5, 2003 with
respect to the Class 2003A-4 Notes, August 12, 2003 with respect to the Class
2003A-5 Notes, August 12, 2003 with respect to the Class 2003A-6 Notes, August
13, 2003 with respect to the Class 2003A-7 Notes, August 13, 2003 with respect
to the Class 2003A-8 Notes, August 21, 2003 with respect to the Class 2003A-9
Notes, August 21, 2003 with respect to the Class 2003A-10 Notes, November 10,
2003 with respect to the Class 2003A-11 Notes, November 10, 2003 with respect to
the Class 2003A-12 Notes, August 21, 2003 with respect to the Class 2003B-1
Notes and August 21, 2003 with respect to the Class 2003B-2 Notes, unless
otherwise set forth in an Issuer Order as described in Section 2.07 of the
Supplemental Indenture; and thereafter, the Business Day immediately preceding
the first day of each Auction Period for each respective Subclass, other than:
(a) each Auction Period commencing after the ownership of the
applicable Auction Rate Notes is no longer maintained in Book-entry Form
by the Securities Depository;
(b) each Auction Period commencing after and during the
continuance of a Payment Default; or
(c) each Auction Period commencing less than two Business Days
after the cure or waiver of a Payment Default.
Notwithstanding the foregoing, the Auction Date for one or more Auction Periods
may be changed pursuant to Section 2.02(h) of this Appendix A.
"Auction Note Interest Rate" means each variable rate of interest per
annum borne by an Auction Rate Note for each Auction Period and determined in
accordance with the provisions of Sections 2.01 and 2.02 of this Appendix A.
"Auction Period" means the Interest Period applicable to the Auction
Rate Notes during which time the Interest Rate is determined pursuant to Section
2.02(a) of this Appendix A, which Auction Period (after the Initial Period for
such Subclass) initially shall consist generally of 28 days for the Series
2003-1 Notes, as the same may be adjusted pursuant to Sections 2.01 and 2.02(g)
of this Appendix A.
"Auction Period Adjustment" means an adjustment to the Auction Period as
provided in Section 2.02(g) of this Appendix A.
"Auction Procedures" means the procedures set forth in Section 2.02(a)
of this Appendix A by which the Auction Rate is determined.
A-1-3
"Auction Rate" means the rate of interest per annum that results from
implementation of the Auction Procedures and is determined as described in
Section 2.02(a)(iii)(B) of this Appendix A.
"Auction Rate Notes" means, collectively, the Series 2003-1 Notes.
"Authorized Denominations" means $50,000 and any integral multiple
thereof.
"Available Auction Rate Notes" has the meaning set forth in Section
2.02(a)(iii)(A)(1) of this Appendix A.
"Bid" has the meaning set forth in Section 2.02(a)(i)(A) of this
Appendix A.
"Bid Auction Rate" has the meaning set forth in Section 2.02(a)(iii)(A)
of this Appendix A.
"Bidder" has the meaning set forth in Section 2.02(a)(i)(A) of this
Appendix A.
"Bond Equivalent Yield" means with respect to any security with a
maturity of six months or less the rate for which is quoted in The Wall Street
Journal on a bank discount basis, a yield (expressed as a percentage) calculated
in accordance with the following formula and rounded up to the nearest
one-hundredth of one percent:
Bond Equivalent Yield = Q x N x 100
------------
360 - (T x Q)
where "Q" refers to the per annum interest rate for the security quoted on a
bank discount basis and expressed as a decimal, "N" refers to 365 or 366 (days),
as the case may be, and "T" refers to the number of days to maturity.
"Book-entry Form" or "Book-entry System" means a form or system under
which (a) the beneficial right to principal and interest may be transferred only
through a book entry, (b) physical securities in registered form are issued only
to a Securities Depository or its nominee as registered owner, with the
securities "immobilized" to the custody of the Securities Depository, and (c)
the book entry is the record that identifies the owners of beneficial interests
in that principal and interest.
"Broker-Dealer" means, collectively, Banc of America Securities LLC and
Deutsche Bank Securities Inc., or any other broker or dealer (each as defined in
the Securities Exchange Act of 1934, as amended), commercial bank or other
entity permitted by law to perform the functions required of a Broker-Dealer set
forth in the Auction Procedures that (a) is a Participant (or an affiliate of a
Participant), (b) has been appointed as such by the Issuer pursuant to Section
2.02(f) of this Appendix A, and (c) has entered into a Broker-Dealer Agreement
that is in effect on the date of reference.
A-1-4
"Broker-Dealer Agreement" means each agreement between the Auction Agent
and a Broker-Dealer, pursuant to which the Broker-Dealer agrees to participate
in Auctions as set forth in the Auction Procedures, as from time to time amended
or supplemented. Each Broker-Dealer Agreement shall be in substantially the form
of the Broker-Dealer Agreements, each dated as of June 1, 2003, among the
Issuer, Deutsche Bank Trust Company Americas, as Auction Agent, and the
Broker-Dealers.
"Broker-Dealer Fee" has the meaning set forth in the Auction Agent
Agreement.
"Broker-Dealer Fee Rate" has the meaning set forth in the Auction Agent
Agreement.
"Business Day" means any day other than a Saturday, Sunday, holiday or
other day on which the New York Stock Exchange or banks located in New York, New
York, or in the city in which the principal office of the Indenture Trustee or
the Auction Agent is located, are authorized or permitted by law or executive
order to close; provided that with respect to Auction Dates such term shall
exclude April 14 and 15 and December 30 and 31 and such other dates as may be
agreed to in writing by the Auction Agent, the Broker-Dealers and the Issuer.
"Carry-over Amount" means, during the Net Loan Rate Period, the excess,
if any, of (a) the amount of interest on an Auction Rate Note that would have
accrued with respect to the related Interest Period at the least of the
applicable Auction Rate and the components included in the Maximum Rate over (b)
the amount of interest on such Auction Rate Note actually accrued with respect
to such Auction Rate Note with respect to such Interest Period based on the Net
Loan Rate, together with the unreduced portion of any such excess from prior
Interest Periods; provided that any reference to "principal" or "interest" in
the Supplemental Indenture and in this Appendix A and the Auction Rate Notes
shall not include within the meanings of such words any Carry-over Amount or any
interest accrued on any Carry-over Amount. Carry-over Amount shall apply only
during the Net Loan Rate Period.
"Closing Date" means the respective Closing Dates of the Auction Rate
Notes.
"CP Cap" means, for any Auction Date, the rate (for the then current
Auction) at which the Quarterly Average Auction Rate equals the Quarterly
Average CP Rate plus the Applicable CP Spread, such rate to be determined by the
formula:
N x (C + S) - R,
Where N is the number of Auction Dates which precede the current Auction Date by
91 days or less, including the current Auction Date; C is the Quarterly Average
CP Rate; S is the Applicable CP Spread; and, R is the sum of the Auction Rates
for Auction Dates preceding the current Auction Date by 91 days or less,
excluding the current Auction.
"Effective Interest Rate" means, with respect to any Financed Eligible
Loan, the interest rate per annum payable by the borrower as of the last day of
the calendar quarter borne by such Financed Eligible Loan after giving effect to
any reduction in such interest rate pursuant to borrower incentives, (a) less
all accrued rebate fees on such Financed Eligible Loan constituting
Consolidation Loans paid during such calendar quarter expressed as a percentage
per annum and (b) plus all accrued Interest Benefit Payments and Special
Allowance Payments applicable to such Financed Eligible Loan during such
calendar quarter expressed as a percentage per annum.
A-1-5
"Eligible Carry-over Make-Up Amount" means, with respect to each
Interest Period relating to the Auction Rate Notes as to which, as of the first
day of such Interest Period, there is any unpaid Carry-over Amount, an amount
equal to the lesser of (a) interest computed on the principal balance of the
Auction Rate Notes in respect to such Interest Period at a per annum rate equal
to the excess, if any, of the Net Loan Rate over the Auction Rate, together with
the unreduced portion of any such excess from prior Interest Periods and (b) the
aggregate Carry-over Amount remaining unpaid as of the first day of such
Interest Period together with interest accrued and unpaid thereon through the
end of such Interest Period.
"Existing Owner" means (a) with respect to and for the purpose of
dealing with the Auction Agent in connection with an Auction, a Person who is a
Broker-Dealer listed in the Existing Owner Registry at the close of business on
the Business Day immediately preceding the Auction Date for such Auction and (b)
with respect to and for the purpose of dealing with the Broker-Dealer in
connection with an Auction, a Person who is a beneficial owner of Auction Rate
Notes.
"Existing Owner Registry" means the registry of Persons who are owners
of the Auction Rate Notes, maintained by the Auction Agent as provided in the
Auction Agent Agreement.
"Hold Order" has the meaning set forth in Section 2.02(a)(i)(A) of this
Appendix A.
"Initial Auction Agent" means Deutsche Bank Trust Company Americas, a
New York banking corporation, its successors and assigns.
"Initial Auction Agent Agreement" means, collectively, the Auction Agent
Agreement dated as of June 1, 2003, by and among the Issuer, the Indenture
Trustee and the Initial Auction Agent, including any amendment thereof or
supplement thereto.
"Initial Period" means, as to Auction Rate Notes, the period commencing
on the Closing Date and continuing through the day immediately preceding the
Initial Rate Adjustment Date for such Auction Rate Notes.
"Initial Rate" means for each Subclass of Series 2003-1 Notes, the per
annum rate set forth below:
A-1-6
Subclass Initial Interest Rate
-------- ---------------------
Class 2003A-1 1.17%
Class 2003A-2 1.17%
Class 2003A-3 1.17%
Class 2003A-4 1.17%
Class 2003A-5 1.17%
Class 2003A-6 1.17%
Class 2003A-7 1.17%
Class 2003A-8 1.17%
Class 2003A-9 1.17%
Class 2003A-10 1.17%
Class 2003A-11 *
Class 2003A-12 *
Class 2003B-1 1.25%
Class 2003B-2 1.25%
--------------------------------
* To be specified in an Issuer Order as described in Section 2.07 of the
Supplemental Indenture.
"Initial Rate Adjustment Date" means, for each Subclass of the Series
2003-1 Notes, the date set forth below (or if such date is not a Business Day,
the following Business Day):
Initial Interest Rate
Subclass Adjustment Date
-------- ---------------
Class 2003A-1 August 5, 2003
Class 2003A-2 August 5, 2003
Class 2003A-3 August 6, 2003
Class 2003A-4 August 6, 2003
Class 2003A-5 August 13, 2003
Class 2003A-6 August 13, 2003
Class 2003A-7 August 14, 2003
Class 2003A-8 August 14, 2003
Class 2003A-9 August 22, 2003
Class 2003A-10 August 22, 2003
Class 2003A-11 November 11, 2003*
Class 2003A-12 November 11, 2003*
Class 2003B-1 August 22, 2003
Class 2003B-2 August 22, 2003
--------------------------------
* Unless otherwise specified in an Issuer Order as described in
Section 2.07 of the Supplemental Indenture.
"Interest Payment Date" means (a) so long as Auction Rate Notes bear
interest at an Auction Note Interest Rate for an Interest Period of not greater
than 90 days, the Business Day immediately following the expiration of the
A-1-7
Initial Period for such Auction Rate Notes, and each related Auction Period
thereafter; and (b) if and for so long as Auction Rate Notes bear interest at an
Auction Note Interest Rate for an Interest Period of greater than 90 days, the
25th day of each January, April, July and October. On any Interest Payment Date
that is a designated calendar date (such as described in (b)), if the designated
date is not a Business Day, interest shall be payable on the next succeeding
Business Day in the amount accrued to but excluding the designated calendar date
and no interest shall accrue on the payment so deferred during the intervening
period. On any Interest Payment Date that is not a designated calendar date
(such as described in (a)), interest shall be payable in the amount accrued to
but excluding the date on which interest is actually paid.
"Interest Period" means, with respect to the Auction Rate Notes, the
Initial Period and each period commencing on an Interest Payment Date for such
Subclass and ending on but shall exclude (a) the next succeeding Interest
Payment Date for such Subclass or (b) the Stated Maturity of such Subclass, as
applicable.
"Interest Rate Adjustment Date" means the date on which an Auction Note
Interest Rate is effective, and means, with respect to the Auction Rate Notes,
the date of commencement of each Auction Period.
"Interest Rate Determination Date" means, with respect to the Auction
Rate Notes, the Auction Date, or if no Auction Date is applicable to such
Subclass, the Business Day immediately preceding the date of commencement of an
Auction Period.
"Interest Rate Limitation" means, on any date of determination, the
lesser of (a) the highest rate the Issuer may legally pay from time to time or
(b) 17%.
"Maximum Rate" on any date of determination means the lesser of:
(a) the Applicable LIBOR Rate plus 1.00%;
(b) the Interest Rate Limitation;
(c) for Auctions after the initial Auction Date, the T-Bill Cap;
(d) for Auctions after the initial Auction Date, the CP Cap; or
(e) during the Net Loan Rate Period, the Net Loan Rate.
"90-Day Financial Commercial Paper" means the 90-Day AA Financial
Commercial Paper rate posted on the Federal Reserve Release entitled "Commercial
Paper Rates and Outstandings," which rate may be available on the Internet at
www.federalreserve.gov/releases/cp.
"Net Loan Rate" means, with respect to any Interest Period applicable to
the Auction Rate Notes, the weighted average return on the Financed Eligible
Loans, including all Revenues derived from such Financed Eligible Loans, less
all Program Expenses expressed as a percentage of the average outstanding
A-1-8
principal balance of such Financed Eligible Loans, which percentage shall be
calculated by the Issuer on a quarterly basis, in arrears and provided to the
Indenture Trustee and the Auction Agent. In making the determination of the Net
Loan Rate, the Issuer shall take into account any Counterparty Payments received
and/or any Issuer Derivative Payments made.
"Net Loan Rate Period" means, the period commencing on the Net Loan Rate
Trigger Date and continuing until all of the Auction Rate Notes have been paid
in full; provided that such Net Loan Rate Period may be suspended with a Rating
Confirmation.
"Net Loan Rate Trigger Date" means, with respect to a Subclass of the
Auction Rate Notes, the first day of an Auction Period which immediately follows
six consecutive Auction Dates for such Subclass of the Auction Rate Notes where
the Auction Rate established on each such Auction Date for such Subclass
exceeded the Net Loan Rate.
"Non-Payment Rate" means One-Month LIBOR plus 1.50%.
"One-Month LIBOR," "Three-Month LIBOR," "Six-Month LIBOR" or "One-Year
LIBOR," means the offered rate, as determined by the Auction Agent or Indenture
Trustee, as applicable, of the Applicable LIBOR Based Rate for United States
dollar deposits which appears on Telerate Page 3750, as reported by Bloomberg
Financial Markets Commodities News (or such other page as may replace Telerate
Page 3750 for the purpose of displaying comparable rates) as of approximately
11:00 a.m., London time, on the LIBOR Determination Date; provided, that if on
any calculation date, no rate appears on Telerate Page 3750 as specified above,
the Auction Agent or Indenture Trustee, as applicable, shall determine the
arithmetic mean of the offered quotations of four major banks in the London
interbank market, for deposits in United States dollars for the respective
periods specified above to the banks in the London interbank market as of
approximately 11:00 a.m., London time, on such calculation date and in a
principal amount of not less than $1,000,000 that is representative of a single
transaction in such market and at such time, unless fewer than two such
quotations are provided, in which case, the Applicable LIBOR Based Rate shall be
the arithmetic mean of the offered quotations that leading banks in New York
City selected by the Auction Agent or Indenture Trustee, as applicable, are
quoting on the relevant LIBOR Determination Date for loans in United States
dollars to leading European banks in a principal amount of not less than
$1,000,000 that is representative of a single transaction in such market at such
time. All percentages resulting from such calculations shall be rounded upwards,
if necessary, to the nearest one-hundredth of one percent.
"Order" has the meaning set forth in Section 2.02(a)(i)(A) of this
Appendix A.
"Payment Default" means, with respect to the Auction Rate Notes, (a) a
default in the due and punctual payment of any installment of interest on such
Auction Rate Notes, or (b) a default in the due and punctual payment of any
interest on and principal of such Auction Rate Notes at their maturity.
"Potential Owner" means any Person (including an Existing Owner that is
(a) a Broker-Dealer when dealing with the Auction Agent and (b) a potential
beneficial owner when dealing with a Broker-Dealer) who may be interested in
acquiring Auction Rate Notes (or, in the case of an Existing Owner thereof, an
additional principal amount of Auction Rate Notes).
A-1-9
"PSA" means the Public Securities Association, its successors and
assigns.
"Quarterly Average Auction Rate" means the simple average of the Auction
Rates for Auction Dates preceding the current Auction Date by 91 days or less,
including the current Auction Date.
"Quarterly Average CP Rate" means the simple average of the Bond
Equivalent Yield of 90-Day Financial Commercial Paper Rates for the 91 days
preceding (but not including) the current Auction Date.
"Quarterly Average T-Bill Rate" means the simple average of the Bond
Equivalent Yield of 91-day Treasury bills auctioned in the 91 days preceding
(but not including) the current Auction Date.
"Regular Record Date" means the Business Day next preceding the
applicable Auction Date.
"S&P" means Standard & Poor's Ratings Services, a Division of The
McGraw-Hill Companies, Inc., its successors and assigns.
"Sell Order" has the meaning set forth in Section 2.02(a)(i)(A) of this
Appendix A.
"Submission Deadline" means 1:00 p.m., eastern time, on any Auction Date
or such other time on any Auction Date by which Broker-Dealers are required to
submit Orders to the Auction Agent as specified by the Auction Agent from time
to time.
"Submitted Bid" has the meaning set forth in Section 2.02(a)(iii)(A) of
this Appendix A.
"Submitted Hold Order" has the meaning set forth in Section
2.02(a)(iii)(A) of this Appendix A.
"Submitted Order" has the meaning set forth in Section 2.02(a)(iii)(A)
of this Appendix A.
"Submitted Sell Order" has the meaning set forth in Section
2.02(a)(iii)(A) of this Appendix A.
"Substitute Auction Agent" means the Person with whom the Issuer and the
Indenture Trustee enter into a Substitute Auction Agent Agreement.
"Substitute Auction Agent Agreement" means an auction agent agreement
containing terms substantially similar to the terms of the Initial Auction Agent
Agreement, whereby a Person having the qualifications required by Section
2.02(e) of this Appendix A agrees with the Indenture Trustee and the Issuer to
perform the duties of the Auction Agent under this Appendix A.
"Sufficient Bids" has the meaning set forth in Section 2.02(a)(iii)(A)
of this Appendix A.
A-1-10
"T-Bill Cap" means, for any Auction Date, the rate (for the then current
auction) at which the Quarterly Average Auction Rate equals the Quarterly
Average T-Bill Rate plus the Applicable T-Bill Spread, such rate to be
determined by the formula:
N x (T+S) - R,
where N is the number of Auction Dates which precede the current Auction Date by
91 days or less, including the current Auction Date; T is the Quarterly Average
T-Bill Rate; S is the Applicable T-Bill Spread; and R is the sum of the Auction
Rates for Auction Dates preceding the current Auction Date by 91 days or less,
excluding the current Auction.
"Variable Rate" means the variable rate of interest per annum, including
the Initial Rate, borne by each Subclass of Auction Rate Notes during the
Initial Period for such Subclass, and each Interest Period thereafter as such
rate of interest is determined in accordance with the provisions of Article II
of this Appendix A.
ARTICLE II
TERMS AND ISSUANCE
Section 2.01. Auction Rate and Carry-over Amounts. During the Initial
Period, the Auction Rate Notes shall bear interest at the Initial Rate for such
Subclass. Thereafter, and except with respect to an Auction Period Adjustment,
the Auction Rate Notes shall bear interest at an Auction Note Interest Rate
based on a 28-day Auction Period for the Auction Rate Notes, as determined
pursuant to this Section 2.01 and Section 2.02 of this Appendix A.
For the Auction Rate Notes during the Initial Period and each Auction
Period thereafter, interest at the applicable Auction Rate Notes Interest Rate
shall accrue daily and shall be computed for the actual number of days elapsed
on the basis of a year consisting of 360 days.
The Auction Note Interest Rate to be borne by the Auction Rate Notes
after such Initial Period for each Auction Period until an Auction Period
Adjustment, if any, shall be determined as described below. Unless otherwise
specified in an Issuer Order, each such Auction Period after the Initial Period
shall commence on and include the day following the expiration of the
immediately preceding Auction Period and terminate on and include the (i) Monday
(unless such day is not followed by a Business Day, in which case on the next
succeeding day that is followed by a Business Day) of the following fourth week
in the case of the Class 2003A-1 Notes, the Class 2003A-2 Notes, the Class
2003A-11 Notes and the Class 2003A-12 Notes, (ii) Tuesday (unless such day is
not followed by a Business Day, in which case on the next succeeding day that is
followed by a Business Day) of the following fourth week in the case of the
Class 2003A-3 Notes, the Class 2003A-4 Notes, the Class 2003A-5 Notes and the
Class 2003A-6 Notes, (iii) Wednesday (unless such day is not followed by a
Business Day, in which case on the next succeeding day that is followed by a
Business Day) of the following fourth week in the case of the Class 2003A-7
Notes and the Class 2003A-8 Notes, and (iv) Thursday (unless such day is not
followed by a Business Day, in which case on the next succeeding day that is
followed by a Business Day) of the following fourth week in the case of the
Class 2003A-9 Notes, the Class 2003A-10 Notes, the Class 2003B-1 Notes and the
Class 2003B-2 Notes; provided, however, that in the case of the Auction Period
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that immediately follows the Initial Period for the Auction Rate Notes, such
Auction Period shall commence on the Initial Rate Adjustment Date. The Auction
Note Interest Rate of the Auction Rate Notes for each Auction Period shall be
the Auction Rate in effect for such Auction Period as determined in accordance
with Section 2.02(a) of this Appendix A. By way of example, if an Interest
Period ordinarily would end on a Tuesday, but the following Wednesday is not a
Business Day, the Interest Period will end on that Wednesday and the new
Interest Period will begin on Thursday.
Notwithstanding the foregoing, unless otherwise specified in an Issuer
Order, if an Auction is scheduled to occur for the next Auction Period on a date
that was reasonably expected to be a Business Day, but such Auction does not
occur because such date is later not considered to be a Business Day, the
Auction shall nevertheless be deemed to have occurred, and the applicable
Auction Note Interest Rate in effect for the next Auction Period will be the
Auction Note Interest Rate in effect for the preceding Auction Period and such
Auction Period will generally be 28 days in duration, beginning on the calendar
day following the date of the deemed Auction and ending on (and including) the
applicable (i) Monday (unless such day is not followed by a Business Day, in
which case on the next succeeding day that is followed by a Business Day) of the
following fourth week in the case of the Class 2003A-1 Notes, the Class 2003A-2
Notes, the Class 2003A-11 Notes and the Class 2003A-12 Notes, (ii) Tuesday
(unless such day is not followed by a Business Day, in which case on the next
succeeding day that is followed by a Business Day) of the following fourth week
in the case of the Class 2003A-3 Notes, the Class 2003A-4 Notes, the Class
2003A-5 Notes and the Class 2003A-6 Notes, (iii) Wednesday (unless such day is
not followed by a Business Day, in which case on the next succeeding day that is
followed by a Business Day) of the following fourth week in the case of the
Class 2003A-7 Notes and the Class 2003A-8 Notes, and (iv) Thursday (unless such
day is not followed by a Business Day, in which case on the next succeeding day
that is followed by a Business Day) of the following fourth week in the case of
the Class 2003A-9 Notes, the Class 2003A-10 Notes, the Class 2003B-1 Notes and
the Class 2003B-2 Notes. If the preceding Auction Period was other than
generally 28 days in duration, the Auction Note Interest Rate for the deemed
Auction will instead be the rate of interest determined by the applicable
Broker-Dealer on equivalently rated auction securities with a comparable length
of auction period.
Notwithstanding the foregoing:
(a) if the ownership of an Auction Rate Note is no longer
maintained in Book-entry Form, the Auction Note Interest Rate on the
Auction Rate Notes for any Interest Period commencing after the delivery
of certificates representing Auction Rate Notes pursuant to this
Supplemental Indenture shall equal the Maximum Rate on the Business Day
immediately preceding the first day of such subsequent Interest Period;
or
(b) if a Payment Default shall have occurred, the Auction Note
Interest Rate on the Auction Rate Notes for the Interest Period
commencing on or immediately after such Payment Default, and for each
Interest Period thereafter, to and including the Interest Period, if
any, during which, or commencing less than two Business Days after, such
Payment Default is cured, shall equal the applicable Non-Payment Rate on
the first day of each such Interest Period.
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In accordance with Section 2.02(a)(iii)(B) and (C) of this Appendix A,
the Auction Agent shall promptly give written notice to the Indenture Trustee
and the Issuer of each Auction Note Interest Rate (unless the Auction Note
Interest Rate is the applicable Non-Payment Rate) and the Maximum Rate when such
rate is not the Auction Note Interest Rate, applicable to the Auction Rate
Notes. The Indenture Trustee shall notify the Registered Owners and the Issuer
of Auction Rate Notes of the applicable Auction Note Interest Rate applicable to
such Auction Rate Notes for each Auction Period not later than the third
Business Day of such Auction Period. Notwithstanding any other provision of the
Auction Rate Notes or this Supplemental Indenture and except for the occurrence
of a Payment Default, interest payable on the Auction Rate Notes for an Auction
Period shall never exceed for such Auction Period the amount of interest payable
at the applicable Maximum Rate in effect for such Auction Period.
If the Auction Rate for the Auction Rate Notes is greater than the
Maximum Rate, then the Variable Rate applicable to such Auction Rate Notes for
that Interest Period will be the Maximum Rate. If the Variable Rate applicable
to such Auction Rate Notes for any Interest Period is the Maximum Rate, the
Indenture Trustee shall determine the Carry-over Amount, if any, with respect to
such Auction Rate Notes for such Interest Period. Such Carry-over Amount shall
bear interest calculated at a rate equal to One-Month LIBOR (as determined by
the Auction Agent, provided the Indenture Trustee has received notice of
One-Month LIBOR from the Auction Agent, and if the Indenture Trustee shall not
have received such notice from the Auction Agent, then as determined by the
Indenture Trustee) from the Interest Payment Date for the Interest Period with
respect to which such Carry-over Amount was calculated, until paid. Any payment
in respect of Carry-over Amount shall be applied, first, to any accrued interest
payable thereon and, second, in reduction of such Carry-over Amount. For
purposes of this Supplemental Indenture and this Appendix A, any reference to
"principal" or "interest" herein shall not include within the meaning of such
words Carry-over Amount or any interest accrued on any such Carry-over Amount.
Such Carry-over Amount shall be separately calculated for each Auction Rate Note
by the Indenture Trustee during such Interest Period in sufficient time for the
Indenture Trustee to give notice to each Registered Owner of such Carry-over
Amount as required in the next succeeding sentence. Not less than four days
before the Interest Payment Date for an Interest Period with respect to which
such Carry-over Amount has been calculated by the Indenture Trustee, the
Indenture Trustee shall give written notice to each Registered Owner, the
Auction Agent and the Issuer of the Carry-over Amount applicable to each
Registered Owner's Auction Rate Note, which written notice may accompany the
payment of interest by check made to each such Registered Owner on such Interest
Payment Date or otherwise shall be mailed on such Interest Payment Date by
first-class mail, postage prepaid, to each such Registered Owner at such
Registered Owner's address as it appears on the registration records maintained
by the Registrar. In addition to such Carry-over Amount, such notice shall
state, that, unless and until an Auction Rate Note has been redeemed (other than
by optional redemption), after which redemption all accrued Carry-over Amounts
(and all accrued interest thereon) that remain unpaid shall be canceled and no
Carry-over Amount (or interest accrued thereon) shall be paid with respect to
any redeemed Auction Rate Note, (a) the Carry-over Amount (and interest accrued
thereon calculated at a rate equal to One-Month LIBOR) shall be paid by the
Indenture Trustee on an Auction Rate Note on the earliest of (i) the date of
defeasance of the Auction Rate Notes, or (ii) the first occurring Interest
Payment Date (or on the date of any optional redemption) if and to the extent
that (x) the Eligible Carry-over Make-Up Amount with respect to such subsequent
Interest Period is greater than zero, and (y) moneys are available pursuant to
the terms of the Indenture in an amount sufficient to pay all or a portion of
such Carry-over Amount (and interest accrued thereon); and (b) interest shall
accrue on the Carry-over Amount at a rate equal to One-Month LIBOR until such
Carry-over Amount is paid in full or is cancelled.
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The Carry-over Amount (and interest accrued thereon) for Auction Rate
Notes shall be paid by the Indenture Trustee on Outstanding Auction Rate Notes
on the earliest of (a) the date of defeasance of any of the Auction Rate Notes
or (b) the first occurring Interest Payment Date if and to the extent that (i)
the Eligible Carry-over Make-Up Amount with respect to such Interest Period is
greater than zero, and (ii) on such Interest Payment Date there are sufficient
moneys in the Revenue Fund to pay all interest due on the Auction Rate Notes on
such Interest Payment Date. Any Carry-over Amount (and any interest accrued
thereon) on any Auction Rate Note which is due and payable on an Interest
Payment Date, which Auction Rate Note is to be redeemed (other than by optional
redemption) on said Interest Payment Date, shall be paid to the Registered Owner
thereof on said Interest Payment Date to the extent that moneys are available
therefor in accordance with the provisions of this Appendix A; provided,
however, that any Carry-over Amount (and any interest accrued thereon) which is
not yet due and payable on said Interest Payment Date shall be cancelled with
respect to said Auction Rate Note that is to be redeemed (other than by optional
redemption) on said Interest Payment Date and shall not be paid on any
succeeding Interest Payment Date. To the extent that any portion of the
Carry-over Amount (and any interest accrued thereon) remains unpaid after
payment of a portion thereof, such unpaid portion shall be paid in whole or in
part as required hereunder until fully paid by the Indenture Trustee on the
earliest of (a) the date of defeasance of any of the Auction Rate Notes or (b)
the next occurring Interest Payment Date or Dates, as necessary, if and to the
extent that the conditions in the second preceding sentence are satisfied. On
any Interest Payment Date on which the Indenture Trustee pays only a portion of
the Carry-over Amount (and any interest accrued thereon) on Auction Rate Notes,
the Indenture Trustee shall give written notice in the manner set forth in the
immediately preceding paragraph to the Registered Owner of such Auction Rate
Note receiving such partial payment of the Carry-over Amount remaining unpaid on
such Auction Rate Note.
The Interest Payment Date or other date on which such Carry-over Amount
(or any interest accrued thereon) for Auction Rate Notes shall be paid shall be
determined by the Indenture Trustee in accordance with the provisions of the
immediately preceding paragraph, and the Indenture Trustee shall make payment of
the Carry-over Amount (and any interest accrued thereon) in the same manner as,
and from the same Fund from which, it pays interest on the Auction Rate Notes on
an Interest Payment Date. Any payment of Carry-over Amounts (and interest
accrued thereon) shall reduce the amount of Eligible Carry-Over Make-Up Amount.
In the event that the Auction Agent no longer determines, or fails to
determine, when required, the Auction Note Interest Rate with respect to Auction
Rate Notes, or, if for any reason such manner of determination shall be held to
be invalid or unenforceable, the Auction Note Interest Rate for the next
succeeding Interest Period, which Interest Period shall be an Auction Period,
for Auction Rate Notes shall be the Maximum Rate as determined by the Auction
Agent for such next succeeding Auction Period, and if the Auction Agent shall
fail or refuse to determine the Maximum Rate, the Maximum Rate shall be
determined by the securities dealer appointed by the Issuer capable of making
such a determination in accordance with the provisions of this Appendix A and
written notice of such determination shall be given by such securities dealer to
the Indenture Trustee.
A-1-14
Section 2.02. Auction Rate.
(a) Determining the Auction Rate. By purchasing Auction Rate
Notes, whether in an Auction or otherwise, each purchaser of the Auction
Rate Notes, or its Broker-Dealer, must agree and shall be deemed by such
purchase to have agreed (x) to participate in Auctions on the terms
described herein, (y) to have its beneficial ownership of the Auction
Rate Notes maintained at all times in Book-entry Form for the account of
its Participant, which in turn will maintain records of such beneficial
ownership and (z) to authorize such Participant to disclose to the
Auction Agent such information with respect to such beneficial ownership
as the Auction Agent may request.
So long as the ownership of Auction Rate Notes is maintained in
Book-entry Form by the Securities Depository, an Existing Owner may
sell, transfer or otherwise dispose of Auction Rate Notes only pursuant
to a Bid or Sell Order placed in an Auction or otherwise sell, transfer
or dispose of Auction Rate Notes through a Broker-Dealer, provided that,
in the case of all transfers other than pursuant to Auctions, such
Existing Owner, its Broker-Dealer or its Participant advises the Auction
Agent of such transfer. Auctions shall be conducted on each Auction
Date, if there is an Auction Agent on such Auction Date, in the
following manner:
(i) (A) Prior to the Submission Deadline on each Auction
Date;
(1) each Existing Owner of Auction Rate
Notes may submit to a Broker-Dealer by telephone or
otherwise any information as to:
a. the principal amount of
Outstanding Auction Rate Notes, if any,
owned by such Existing Owner which such
Existing Owner desires to continue to own
without regard to the Auction Note Interest
Rate for the next succeeding Auction Period;
b. the principal amount of
Outstanding Auction Rate Notes, if any,
which such Existing Owner offers to sell if
the Auction Note Interest Rate for the next
succeeding Auction Period shall be less than
the rate per annum specified by such
Existing Owner; and/or
c. the principal amount of
Outstanding Auction Rate Notes, if any,
owned by such Existing Owner which such
Existing Owner offers to sell without regard
to the Auction Note Interest Rate for the
next succeeding Auction Period;
and
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(2) one or more Broker-Dealers may contact
Potential Owners to determine the principal amount
of Auction Rate Notes which each Potential Owner
offers to purchase, if the Auction Note Interest
Rate for the next succeeding Auction Period shall
not be less than the rate per annum specified by
such Potential Owner.
The statement of an Existing Owner or a Potential
Owner referred to in (1) or (2) of this paragraph (A) is
herein referred to as an "Order," and each Existing Owner
and each Potential Owner placing an Order is herein
referred to as a "Bidder"; an Order described in clause
(1)a is herein referred to as a "Hold Order"; an Order
described in clauses (1)b and (2) is herein referred to as
a "Bid"; and an Order described in clause (1)c is herein
referred to as a "Sell Order."
(B) (1) Subject to the provisions of Section
2.02(a)(ii) of this Appendix A, a Bid by an
Existing Owner shall constitute an irrevocable
offer to sell:
a. the principal amount of
Outstanding Auction Rate Notes specified in
such Bid if the Auction Note Interest Rate
determined as provided in this Section
2.02(a) shall be less than the rate
specified therein; or
b. such principal amount, or a
lesser principal amount of Outstanding
Auction Rate Notes to be determined as set
forth in Section 2.02(a)(iv)(A)(4) of this
Appendix A, if the Auction Note Interest
Rate determined as provided in this Section
2.02(a) shall be equal to the rate specified
therein; or
c. such principal amount, or a
lesser principal amount of Outstanding
Auction Rate Notes to be determined as set
forth in Section 2.02(a)(iv)(B)(3) of this
Appendix A, if the rate specified therein
shall be higher than the applicable Maximum
Rate and Sufficient Bids have not been made.
(2) Subject to the provisions of Section
2.02(a)(ii) of this Appendix A, a Sell Order by an
Existing Owner shall constitute an irrevocable
offer to sell:
a. the principal amount of
Outstanding Auction Rate Notes specified in
such Sell Order; or
b. such principal amount, or a
lesser principal amount of Outstanding
Auction Rate Notes set forth in Section
2.02(a)(iv)(B)(3) of this Appendix A, if
Sufficient Bids have not been made.
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(3) Subject to the provisions of Section
2.02(a)(ii) of this Appendix A, a Bid by a
Potential Owner shall constitute an irrevocable
offer to purchase:
a. the principal amount of
Outstanding Auction Rate Notes specified in
such Bid if the Auction Note Interest Rate
determined as provided in this Section
2.02(a) shall be higher than the rate
specified in such Bid; or
b. such principal amount, or a
lesser principal amount of Outstanding
Auction Rate Notes set forth in Section
2.02(a)(iv)(A)(5) of this Appendix A, if the
Auction Note Interest Rate determined as
provided in this Section 2.02(a) shall be
equal to the rate specified in such Bid.
(ii) (A) Each Broker-Dealer shall submit in writing to the
Auction Agent prior to the Submission Deadline on each
Auction Date all Orders obtained by such Broker-Dealer and
shall specify with respect to each such Order:
(1) the name of the Bidder placing such
Order;
(2) the aggregate principal amount of
Auction Rate Notes that are the subject of such
Order;
(3) to the extent that such Bidder is an
Existing Owner:
a. the principal amount of Auction
Rate Notes, if any, subject to any Hold
Order placed by such Existing Owner;
b. the principal amount of Auction
Rate Notes, if any, subject to any Bid
placed by such Existing Owner and the rate
specified in such Bid; and
c. the principal amount of Auction
Rate Notes, if any, subject to any Sell
Order placed by such Existing Owner;
and
(4) to the extent such Bidder is a Potential
Owner, the rate specified in such Potential Owner's
Bid.
(B) If any rate specified in any Bid contains more
than three figures to the right of the decimal point, the
Auction Agent shall round such rate up to the next higher
one thousandth of 1%.
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(C) If an Order or Orders covering all Outstanding
Auction Rate Notes owned by an Existing Owner is not
submitted to the Auction Agent prior to the Submission
Deadline, the Auction Agent shall deem a Hold Order to
have been submitted on behalf of such Existing Owner
covering the principal amount of Outstanding Auction Rate
Notes owned by such Existing Owner and not subject to an
Order submitted to the Auction Agent.
(D) Neither the Issuer, the Indenture Trustee nor
the Auction Agent shall be responsible for any failure of
a Broker-Dealer to submit an Order to the Auction Agent on
behalf of any Existing Owner or Potential Owner.
(E) If any Existing Owner submits through a
Broker-Dealer to the Auction Agent one or more Orders
covering in the aggregate more than the principal amount
of Outstanding Auction Rate Notes owned by such Existing
Owner, such Orders shall be considered valid as follows
and in the following order of priority:
(1) All Hold Orders shall be considered
valid, but only up to the aggregate principal
amount of Outstanding Auction Rate Notes owned by
such Existing Owner, and if the aggregate principal
amount of Auction Rate Notes subject to such Hold
Orders exceeds the aggregate principal amount of
Auction Rate Notes owned by such Existing Owner,
the aggregate principal amount of Auction Rate
Notes subject to each such Hold Order shall be
reduced pro rata so that the aggregate principal
amount of Auction Rate Notes subject to such Hold
Order equals the aggregate principal amount of
Outstanding Auction Rate Notes owned by such
Existing Owner.
(2) a. Any Bid shall be considered valid up
to an amount equal to the excess of the
principal amount of Outstanding Auction Rate
Notes owned by such Existing Owner over the
aggregate principal amount of Auction Rate
Notes subject to any Hold Order referred to
in clause (A) of this paragraph (v);
b. subject to subclause (1) of this
clause (B), if more than one Bid with the
same rate is submitted on behalf of such
Existing Owner and the aggregate principal
amount of Outstanding Auction Rate Notes
subject to such Bids is greater than such
excess, such Bids shall be considered valid
up to an amount equal to such excess;
c. subject to subclauses (1) and (2)
of this clause (B), if more than one Bid
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with different rates are submitted on behalf
of such Existing Owner, such Bids shall be
considered valid first in the ascending
order of their respective rates until the
highest rate is reached at which such excess
exists and then at such rate up to the
amount of such excess; and
d. in any such event, the amount of
Outstanding Auction Rate Notes, if any,
subject to Bids not valid under this clause
(B) shall be treated as the subject of a Bid
by a Potential Owner at the rate therein
specified; and
(3) All Sell Orders shall be considered
valid up to an amount equal to the excess of the
principal amount of Outstanding Auction Rate Notes
owned by such Existing Owner over the aggregate
principal amount of Auction Rate Notes subject to
Hold Orders referred to in clause (1) of this
paragraph (v) and valid Bids referred to in clause
(2) of this paragraph (E).
(F) If more than one Bid for Auction Rate Notes is
submitted on behalf of any Potential Owner, each Bid
submitted shall be a separate Bid with the rate and
principal amount therein specified.
(G) An Existing Owner that offers to purchase
additional Auction Rate Notes is, for purposes of such
offer, treated as a Potential Owner.
(H) Any Bid or Sell Order submitted by an Existing
Owner covering an aggregate principal amount of Auction
Rate Notes not equal to an Authorized Denomination shall
be rejected and shall be deemed a Hold Order. Any Bid
submitted by a Potential Owner covering an aggregate
principal amount of Auction Rate Notes not equal to an
Authorized Denomination shall be rejected.
(I) Any Bid specifying a rate higher than the
applicable Maximum Rate will (1) be treated as a Sell
Order if submitted by an Existing Owner and (2) not be
accepted if submitted by a Potential Owner.
(J) Any Order submitted in an Auction by a
Broker-Dealer to the Auction Agent prior to the Submission
Deadline on any Auction Date shall be irrevocable.
(iii) (A) Not earlier than the Submission Deadline on each
Auction Date, the Auction Agent shall assemble all valid
Orders submitted or deemed submitted to it by the
Broker-Dealers (each such Order as submitted or deemed
submitted by a Broker-Dealer being herein referred to
individually as a "Submitted Hold Order," a "Submitted
Bid" or a "Submitted Sell Order," as the case may be, or
as a "Submitted Order," and collectively as "Submitted
Hold Orders," "Submitted Bids" or "Submitted Sell Orders,"
as the case may be, or as "Submitted Orders") and shall
determine:
A-1-19
(1) the excess of the total principal amount
of Outstanding Auction Rate Notes over the sum of
the aggregate principal amount of Outstanding
Auction Rate Notes subject to Submitted Hold Orders
(such excess being herein referred to as the
"Available Auction Rate Notes"), and
(2) from the Submitted Orders whether:
a. the aggregate principal amount of
Outstanding Auction Rate Notes subject to
Submitted Bids by Potential Owners
specifying one or more rates equal to or
lower than the applicable Maximum Rate;
exceeds or is equal to the sum of:
b. the aggregate principal amount of
Outstanding Auction Rate Notes subject to
Submitted Bids by Existing Owners specifying
one or more rates higher than the applicable
Maximum Rate; and
c. the aggregate principal amount of
Outstanding Auction Rate Notes subject to
Submitted Sell Orders;
(in the event such excess or such equality exists,
other than because all of the Outstanding Auction
Rate Notes are subject to Submitted Hold Orders,
such Submitted Bids described in subclause a. above
shall be referred to collectively as "Sufficient
Bids"); and
(3) if Sufficient Bids exist, the Bid
Auction Rate, which shall be the lowest rate
specified in such Submitted Bids such that if:
a. (x) each Submitted Bid from
Existing Owners specifying such lowest rate
and (y) all other Submitted Bids from
Existing Owners specifying lower rates were
rejected, thus entitling such Existing
Owners to continue to own the principal
amount of Auction Rate Notes subject to such
Submitted Bids; and
b. (x) each such Submitted Bid from
Potential Owners specifying such lowest rate
and (y) all other Submitted Bids from
Potential Owners specifying lower rates were
accepted;
A-1-20
the result would be that such Existing Owners
described in subclause a. above would continue to
own an aggregate principal amount of Outstanding
Auction Rate Notes which, when added to the
aggregate principal amount of Outstanding Auction
Rate Notes to be purchased by such Potential Owners
described in subclause b. above, would equal not
less than the Available Auction Rate Notes.
(B) Promptly after the Auction Agent has made the
determinations pursuant to Section 2.02(a)(iii)(A) of this
Appendix A, the Auction Agent shall advise the Indenture
Trustee, the Broker-Dealers and the Issuer of the Maximum
Rate and the All Hold Rate and the components thereof on
the Auction Date and, based on such determinations, the
Auction Rate for the next succeeding Interest Period as
follows:
(1) if Sufficient Bids exist, that the
Auction Rate for the next succeeding Interest
Period shall be equal to the Bid Auction Rate so
determined;
(2) if Sufficient Bids do not exist (other
than because all of the Outstanding Auction Rate
Notes are subject to Submitted Hold Orders), that
the Auction Rate for the next succeeding Interest
Period shall be equal to the applicable Maximum
Rate; or
(3) if all Outstanding Auction Rate Notes
are subject to Submitted Hold Orders, that the
Auction Rate for the next succeeding Interest
Period shall be equal to the applicable All Hold
Rate.
(C) Promptly after the Auction Agent has determined
the Auction Rate, the Auction Agent shall determine and
advise the Indenture Trustee of the Auction Note Interest
Rate.
(iv) Existing Owners shall continue to own the principal
amount of Auction Rate Notes that are subject to Submitted Hold
Orders. If the Maximum Rate is equal to or greater than the Bid
Auction Rate and if Sufficient Bids have been received by the
Auction Agent, the Bid Auction Rate will be the Auction Note
Interest Rate, and Submitted Bids and Submitted Sell Orders will
be accepted or rejected and the Auction Agent will take such
other action as described below in subparagraph (A).
If the Maximum Rate is less than the Auction Rate, the
Maximum Rate will be the Auction Note Interest Rate. If the
Auction Agent has not received Sufficient Bids (other than
because all of the Outstanding Auction Rate Notes are subject to
Submitted Hold Orders), the Auction Note Interest Rate will be
the Maximum Rate. In any of the cases described above, Submitted
Orders will be accepted or rejected and the Auction Agent will
take such other action as described below in subparagraph (B).
A-1-21
(A) If Sufficient Bids have been made and the
Maximum Rate is equal to or greater than the Bid Auction
Rate, and if the Maximum Rate does not apply (in which
case the Auction Note Interest Rate shall be the Bid
Auction Rate), all Submitted Sell Orders shall be accepted
and, subject to the provisions of clauses (4) and (5) of
this Section 2.02(a)(iv), Submitted Bids shall be accepted
or rejected as follows in the following order of priority,
and all other Submitted Bids shall be rejected:
(1) Existing Owners' Submitted Bids
specifying any rate that is higher than the Auction
Note Interest Rate shall be accepted, thus
requiring each such Existing Owner to sell the
aggregate principal amount of Auction Rate Notes
subject to such Submitted Bids;
(2) Existing Owners' Submitted Bids
specifying any rate that is lower than the Auction
Note Interest Rate shall be rejected, thus
entitling each such Existing Owner to continue to
own the aggregate principal amount of Auction Rate
Notes subject to such Submitted Bids;
(3) Potential Owners' Submitted Bids
specifying any rate that is lower than the Auction
Note Interest Rate shall be accepted;
(4) Each Existing Owners' Submitted Bid
specifying a rate that is equal to the Auction Note
Interest Rate shall be rejected, thus entitling
such Existing Owner to continue to own the
aggregate principal amount of Auction Rate Notes
subject to such Submitted Bid, unless the aggregate
principal amount of Outstanding Auction Rate Notes
subject to all such Submitted Bids shall be greater
than the principal amount of Auction Rate Notes
(the "remaining principal amount") equal to the
excess of the Available Auction Rate Notes over the
aggregate principal amount of Auction Rate Notes
subject to Submitted Bids described in clauses (2)
and (3) of this Section 2.02(a)(iv)(D)(1), in which
event such Submitted Bid of such Existing Owner
shall be rejected in part, and such Existing Owner
shall be entitled to continue to own the principal
amount of Auction Rate Notes subject to such
Submitted Bid, but only in an amount equal to the
aggregate principal amount of Auction Rate Notes
obtained by multiplying the remaining principal
amount by a fraction, the numerator of which shall
be the principal amount of Outstanding Auction Rate
Notes owned by such Existing Owner subject to such
Submitted Bid and the denominator of which shall be
the sum of the principal amount of Outstanding
A-1-22
Auction Rate Notes subject to such Submitted Bids
made by all such Existing Owners that specified a
rate equal to the Auction Note Interest Rate,
subject to the provisions of Section 2.02(a)(iv)(D)
of this Appendix A; and
(5) Each Potential Owner's Submitted Bid
specifying a rate that is equal to the Auction Note
Interest Rate shall be accepted, but only in an
amount equal to the principal amount of Auction
Rate Notes obtained by multiplying the excess of
the aggregate principal amount of Available Auction
Rate Notes over the aggregate principal amount of
Auction Rate Notes subject to Submitted Bids
described in clauses (2), (3) and (4) of this
Section 2.02(a)(iv)(A) by a fraction the numerator
of which shall be the aggregate principal amount of
Outstanding Auction Rate Notes subject to such
Submitted Bid and the denominator of which shall be
the sum of the principal amount of Outstanding
Auction Rate Notes subject to Submitted Bids made
by all such Potential Owners that specified a rate
equal to the Auction Note Interest Rate, subject to
the provisions of Section 2.02(a)(iv)(D) of this
Appendix A.
(B) If Sufficient Bids have not been made (other
than because all of the Outstanding Auction Rate Notes are
subject to Submitted Hold Orders), or if the Maximum Rate
is less than the Bid Auction Rate (in which case the
Auction Note Interest Rate shall be the Maximum Rate),
subject to the provisions of Section 2.02(a)(iv)(D) of
this Appendix A, Submitted Orders shall be accepted or
rejected as follows in the following order of priority and
all other Submitted Bids shall be rejected:
(1) Existing Owners' Submitted Bids
specifying any rate that is equal to or lower than
the Auction Note Interest Rate shall be rejected,
thus entitling such Existing Owners to continue to
own the aggregate principal amount of Auction Rate
Notes subject to such Submitted Bids;
(2) Potential Owners' Submitted Bids
specifying (x) any rate that is equal to or lower
than the Auction Note Interest Rate shall be
accepted and (y) any rate that is higher than the
Auction Note Interest Rate shall be rejected; and
(3) each Existing Owner's Submitted Bid
specifying any rate that is higher than the Auction
Note Interest Rate and the Submitted Sell Order of
each Existing Owner shall be accepted, thus
entitling each Existing Owner that submitted any
such Submitted Bid or Submitted Sell Order to sell
the Auction Rate Notes subject to such Submitted
Bid or Submitted Sell Order, but in both cases only
in an amount equal to the aggregate principal
amount of Auction Rate Notes obtained by
A-1-23
multiplying the aggregate principal amount of
Auction Rate Notes subject to Submitted Bids
described in clause (2)(x) of this Section
2.02(a)(iv)(B) by a fraction, the numerator of
which shall be the aggregate principal amount of
Outstanding Auction Rate Notes owned by such
Existing Owner subject to such Submitted Bid or
Submitted Sell Order and the denominator of which
shall be the aggregate principal amount of
Outstanding Auction Rate Notes subject to all such
Submitted Bids and Submitted Sell Orders.
(C) If all Auction Rate Notes are subject to
Submitted Hold Orders, all Submitted Bids shall be
rejected.
(D) If, as a result of the procedures described in
paragraph (A) or (B) of this Section 2.02(a)(iv), any
Existing Owner would be entitled or required to sell, or
any Potential Owner would be entitled or required to
purchase, a principal amount of Auction Rate Notes that is
not equal to an Authorized Denomination, the Auction Agent
shall, in such manner as in its sole discretion it shall
determine, round up or down the principal amount of
Auction Rate Notes to be purchased or sold by any Existing
Owner or Potential Owner so that the principal amount of
Auction Rate Notes purchased or sold by each Existing
Owner or Potential Owner shall be equal to an Authorized
Denomination.
(E) If, as a result of the procedures described in
paragraph (B) of this Section 2.02(a)(iv), any Potential
Owner would be entitled or required to purchase less than
an Authorized Denomination of Auction Rate Notes, the
Auction Agent shall, in such manner as in its sole
discretion it shall determine, allocate Auction Rate Notes
for purchase among Potential Owners so that only Auction
Rate Notes in Authorized Denominations are purchased by
any Potential Owner, even if such allocation results in
one or more of such Potential Owners not purchasing any
Auction Rate Notes.
(v) Based on the result of each Auction, the Auction Agent
shall determine the aggregate principal amount of Auction Rate
Notes to be purchased and the aggregate principal amount of
Auction Rate Notes to be sold by Potential Owners and Existing
Owners on whose behalf each Broker-Dealer submitted Bids or Sell
Orders and, with respect to each Broker-Dealer, to the extent
that such aggregate principal amount of Auction Rate Notes to be
sold differs from such aggregate principal amount of Auction Rate
Notes to be purchased, determine to which other Broker-Dealer or
Broker-Dealers acting for one or more purchasers such
Broker-Dealer shall deliver, or from which other Broker-Dealer or
Broker-Dealers acting for one or more sellers such Broker-Dealer
shall receive, as the case may be, Auction Rate Notes.
A-1-24
(vi) Any calculation by the Auction Agent or the Indenture
Trustee, as applicable, of the Auction Note Interest Rate, the
Maximum Rate, the All Hold Rate and the Non-Payment Rate shall,
in the absence of manifest error, be binding on all other
parties.
(vii) Notwithstanding anything in this Appendix A to the
contrary, (A) no Auction for the Auction Rate Notes for an
Auction Period of less than 180 days will be held on any Auction
Date hereunder on which there are insufficient moneys in the
Collection Fund to pay, or otherwise held by the Indenture
Trustee under the Indenture and available to pay, the principal
of and interest due on the Auction Rate Notes on the Interest
Payment Date immediately following such Auction Date, and (B) no
Auction will be held on any Auction Date hereunder during the
continuance of a Payment Default. The Indenture Trustee shall
promptly notify the Auction Agent of any such occurrence.
(b) Application of Interest Payments for the Auction Rate Notes.
(i) The Indenture Trustee shall determine not later than
2:00 p.m., eastern time, on the Business Day next succeeding an
Interest Payment Date, whether a Payment Default has occurred. If
a Payment Default has occurred, the Indenture Trustee shall, not
later than 2:15 p.m., eastern time, on such Business Day, send a
notice thereof in substantially the form of Exhibit C attached
hereto to the Auction Agent by telecopy or similar means and, if
such Payment Default is cured, the Indenture Trustee shall
immediately send a notice in substantially the form of Exhibit D
attached hereto to the Auction Agent by telecopy or similar
means.
(ii) Not later than 2:00 p.m., eastern time, on each
anniversary of the Closing Date, the Indenture Trustee shall pay
to the Auction Agent, in immediately available funds out of
amounts in the Collection Fund, an amount equal to the Auction
Agent Fee as set forth in the Auction Agent Agreement. Not later
than 2:00 p.m., eastern time, on each Auction Date, the Indenture
Trustee shall pay to the Auction Agent, in immediately available
funds out of amounts in the Collection Fund, an amount equal to
the Broker-Dealer Fee as calculated in the Broker-Dealer
Agreement. The Indenture Trustee shall, from time to time at the
request of the Auction Agent and at the direction of an
Authorized Officer, reimburse the Auction Agent for its
reasonable expenses as provided in the Auction Agent Agreement,
such expenses to be paid out of amounts in the Collection Fund.
(c) Calculation of Maximum Rate, All Hold Rate, Applicable LIBOR
Rate, and Non-Payment Rate. The Auction Agent shall calculate the
Maximum Rate, Applicable LIBOR Rate, and All Hold Rate, as the case may
be, on each Auction Date and shall notify the Indenture Trustee and the
Broker-Dealers of the Maximum Rate, Applicable LIBOR Rate and All Hold
Rate, as the case may be, as provided in the Auction Agent Agreement;
provided, that if the ownership of the Auction Rate Notes is no longer
maintained in Book-entry Form, or if a Payment Default has occurred,
then the Indenture Trustee shall determine the Maximum Rate, Applicable
A-1-25
LIBOR Rate, All Hold Rate and Non-Payment Rate for each such Interest
Period. If the ownership of the Auction Rate Notes is no longer
maintained in Book-entry Form by the Securities Depository, the
Indenture Trustee shall calculate the Maximum Rate on the Business Day
immediately preceding the first day of each Interest Period after the
delivery of certificates representing the Auction Rate Notes pursuant to
the Indenture. If a Payment Default shall have occurred, the Indenture
Trustee shall calculate the Non-Payment Rate on the Interest Rate
Determination Date for (i) each Interest Period commencing after the
occurrence and during the continuance of such Payment Default and (ii)
any Interest Period commencing less than two Business Days after the
cure of any Payment Default. The determination by the Indenture Trustee
or the Auction Agent, as the case may be, of the Maximum Rate,
Applicable LIBOR Rate, All Hold Rate and Non-Payment Rate shall (in the
absence of manifest error) be final and binding upon all parties. If
calculated or determined by the Auction Agent, the Auction Agent shall
promptly advise the Indenture Trustee of the Maximum Rate, Applicable
LIBOR Rate and All Hold Rate.
(d) Notification of Rates, Amounts and Payment Dates.
(i) By 12:00 noon, eastern time, on the Business Day
following each Regular Record Date, the Indenture Trustee shall
determine the aggregate amounts of interest distributable on the
next succeeding Interest Payment Date to the beneficial owners of
Auction Rate Notes.
(ii) At least four days prior to any Interest Payment
Date, the Indenture Trustee shall:
(A) confirm with the Auction Agent, so long as no
Payment Default has occurred and is continuing and the
ownership of the Auction Rate Notes is maintained in
Book-entry Form by the Securities Depository, (1) the date
of such next Interest Payment Date and (2) the amount
payable to the Auction Agent on the Auction Date pursuant
to Section 2.02(b)(ii) of this Appendix A;
(B) pursuant to Section 2.01 of this Appendix A,
advise the Registered Owners of a Subclass of Auction Rate
Notes of any Carry-over Amount accruing on such Auction
Rate Notes; and
(C) advise the Securities Depository, so long as
the ownership of the Auction Rate Notes is maintained in
Book-entry Form by the Securities Depository, upon
request, of the aggregate amount of interest distributable
on such next Interest Payment Date to the beneficial
owners of each Subclass of the Auction Rate Notes.
If any day scheduled to be an Interest Payment Date shall be
changed after the Indenture Trustee shall have given the notice or
confirmation referred to in clause (i) of the preceding sentence, the
Indenture Trustee shall, not later than 11:15 a.m., eastern time, on the
Business Day next preceding the earlier of the new Interest Payment Date
A-1-26
or the old Interest Payment Date, by such means as the Indenture Trustee
deems practicable, give notice of such change to the Auction Agent, so
long as no Payment Default has occurred and is continuing and the
ownership of the Auction Rate Notes is maintained in Book-entry Form by
the Securities Depository.
(e) Auction Agent.
(i) Deutsche Bank Trust Company Americas is hereby
appointed as Initial Auction Agent to serve as agent for the
Issuer in connection with Auctions. The Indenture Trustee and the
Issuer will, and the Indenture Trustee is hereby directed to,
enter into the Initial Auction Agent Agreement with Deutsche Bank
Trust Company Americas, as the Initial Auction Agent. Any
Substitute Auction Agent shall be (A) a bank, national banking
association or trust company duly organized under the laws of the
United States of America or any state or territory thereof having
its principal place of business in the Borough of Manhattan, New
York, or such other location as approved by the Indenture Trustee
in writing and having a combined capital stock or surplus of at
least $50,000,000, or (B) a member of the National Association of
Securities Dealers, Inc., having a capitalization of at least
$50,000,000, and, in either case, authorized by law to perform
all the duties imposed upon it hereunder and under the Auction
Agent Agreement. The Auction Agent may at any time resign and be
discharged of the duties and obligations created by this Appendix
A by giving at least 90 days' notice to the Indenture Trustee,
each Broker-Dealer and the Issuer. The Auction Agent may be
removed at any time by the Indenture Trustee upon the written
direction of an Authorized Officer or the Registered Owners of
51% of the aggregate principal amount of the Auction Rate Notes
then Outstanding, and if by such Registered Owners, by an
instrument signed by such Registered Owners or their attorneys
and filed with the Auction Agent, the Issuer and the Indenture
Trustee upon at least 90 days' written notice. Neither
resignation nor removal of the Auction Agent pursuant to the
preceding two sentences shall be effective until and unless a
Substitute Auction Agent has been appointed and has accepted such
appointment. If required by the Issuer, a Substitute Auction
Agent Agreement shall be entered into with a Substitute Auction
Agent. Notwithstanding the foregoing, the Auction Agent may
terminate the Auction Agent Agreement if, within 25 days after
notifying the Indenture Trustee, each Broker-Dealer and the
Issuer in writing that it has not received payment of any Auction
Agent Fee due it in accordance with the terms of the Auction
Agent Agreement, the Auction Agent does not receive such payment.
(ii) If the Auction Agent shall resign or be removed or be
dissolved, or if the property or affairs of the Auction Agent
shall be taken under the control of any state or federal court or
administrative body because of bankruptcy or insolvency, or for
any other reason, the Indenture Trustee at the direction of an
Authorized Officer, shall use its best efforts to appoint a
Substitute Auction Agent.
A-1-27
(iii) The Auction Agent is acting as agent for the Issuer
in connection with Auctions. In the absence of bad faith,
negligent failure to act or negligence on its part, the Auction
Agent shall not be liable for any action taken, suffered or
omitted or any error of judgment made by it in the performance of
its duties under the Auction Agent Agreement and shall not be
liable for any error of judgment made in good faith unless the
Auction Agent shall have been negligent in ascertaining (or
failing to ascertain) the pertinent facts.
(f) Broker-Dealers.
(i) The Auction Agent will enter into Broker-Dealer
Agreements with Banc of America Securities LLC and Deutsche Bank
Securities Inc. as the initial Broker-Dealers. An Authorized
Officer may, from time to time, approve one or more additional
persons to serve as Broker-Dealers under Broker-Dealer Agreements
and shall be responsible for providing such Broker-Dealer
Agreements to the Indenture Trustee and the Auction Agent.
(ii) Any Broker-Dealer may be removed at any time, at the
request of an Authorized Officer, but there shall, at all times,
be at least one Broker-Dealer appointed and acting as such.
(g) Changes in Auction Period or Periods and Certain Percentages.
(i) While any of the Auction Rate Notes are Outstanding,
the Issuer may, from time to time, change the length of one or
more Auction Periods (an "Auction Period Adjustment"), in order
to conform with then current market practice with respect to
similar securities or to accommodate economic and financial
factors that may affect or be relevant to the length of the
Auction Period and the interest rate borne by the Auction Rate
Notes. The Issuer shall not initiate an Auction Period Adjustment
unless it shall have received the written consent of the
applicable Broker-Dealer, which consent shall not be unreasonably
withheld, not later than nine days prior to the Auction Date for
such Auction Period. The Issuer shall initiate the Auction Period
Adjustment by giving written notice by Issuer Order to the
Indenture Trustee, the Auction Agent, the applicable
Broker-Dealer, each Rating Agency and the Securities Depository
in substantially the form of, or containing substantially the
information contained in, Exhibit E attached hereto at least 10
days prior to the Auction Date for such Auction Period.
(ii) Any such adjusted Auction Period shall not be less
than 7 days.
(iii) An Auction Period Adjustment shall take effect only
if (A) the Indenture Trustee and the Auction Agent receive, by
11:00 a.m., eastern time, on the Business Day before the Auction
Date for the first such Auction Period, an Issuer Certificate in
substantially the form attached as, or containing substantially
the same information contained in, Exhibit F attached hereto,
authorizing the Auction Period Adjustment specified in such
A-1-28
certificate along with a copy of the written consent of the
applicable Broker-Dealer and, (B) Sufficient Bids exist as of the
Auction on the Auction Date for such first Auction Period. If the
condition referred to in (A) above is not met, the applicable
Auction Note Interest Rate for the next Auction Period shall be
determined pursuant to the above provisions of this Section 2.02
and the Auction Period shall be the Auction Period determined
without reference to the proposed change. If the condition
referred to in (A) is met but the condition referred in (B) above
is not met, the applicable Auction Note Interest Rate for the
next Auction Period shall be the Maximum Rate and the Auction
Period shall be the Auction Period determined without reference
to the proposed change.
In connection with any Auction Period Adjustment, the
Auction Agent shall provide such further notice to such parties
as is specified in Section 2.03 of the Auction Agent Agreement.
(h) Changes in the Auction Date. The applicable Broker-Dealer,
with the written consent of an Authorized Officer and, if applicable,
upon receipt of the opinion of Note Counsel as required below, may
specify an earlier Auction Date (but in no event more than five Business
Days earlier) than the Auction Date that would otherwise be determined
in accordance with the definition of "Auction Date" in Section 1.01 of
this Appendix A with respect to one or more specified Auction Periods in
order to conform with then current market practice with respect to
similar securities or to accommodate economic and financial factors that
may affect or be relevant to the day of the week constituting an Auction
Date and the interest rate borne on the Auction Rate Notes. The
applicable Broker-Dealer shall deliver a written request for consent to
such change in the length of the Auction Date to the Issuer at least 14
days prior to the effective date of such change. If the Issuer shall
have delivered such written consent to the applicable Broker-Dealer,
such Broker-Dealer shall provide notice of its determination to specify
an earlier Auction Date for one or more Auction Periods by means of a
written notice delivered at least 10 days prior to the proposed changed
Auction Date to the Indenture Trustee, the Auction Agent, the Issuer,
each Rating Agency and the Securities Depository. Such notice shall be
substantially in the form of, or contain substantially the information
contained in, Exhibit G attached hereto.
In connection with any change described in this Section 2.02(h),
the Auction Agent shall provide such further notice to such parties as
is specified in Section 2.03 of the Auction Agent Agreement.
Section 2.03. Additional Provisions Regarding the Interest Rates on the
Auction Rate Notes. The determination of a Variable Rate by the Auction Agent or
any other Person pursuant to the provisions of the applicable Section of this
Article II shall be conclusive and binding on the Registered Owners of the
Auction Rate Notes to which such Variable Rate applies, and the Issuer and the
Indenture Trustee may rely thereon for all purposes.
In no event shall the cumulative amount of interest paid or payable on
the Auction Rate Notes (including interest calculated as provided herein, plus
any other amounts that constitute interest on the Auction Rate Notes under
applicable law, which are contracted for, charged, reserved, taken or received
pursuant to the Auction Rate Notes or related documents) calculated from the
Date of Closing of the Auction Rate Notes through any subsequent day during the
A-1-29
term of the Auction Rate Notes or otherwise prior to payment in full of the
Auction Rate Notes exceed the amount permitted by applicable law. If the
applicable law is ever judicially interpreted so as to render usurious any
amount called for under the Auction Rate Notes or related documents or otherwise
contracted for, charged, reserved, taken or received in connection with the
Auction Rate Notes, or if the redemption or acceleration of the maturity of the
Auction Rate Notes results in payment to or receipt by the Registered Owner or
any former Registered Owner of the Auction Rate Notes of any interest in excess
of that permitted by applicable law, then, notwithstanding any provision of the
Auction Rate Notes or related documents to the contrary, all excess amounts
theretofore paid or received with respect to the Auction Rate Notes shall be
credited on the principal balance of the Auction Rate Notes (or, if the Auction
Rate Notes have been paid or would thereby be paid in full, refunded by the
recipient thereof), and the provisions of the Auction Rate Notes and related
documents shall automatically and immediately be deemed reformed and the amounts
thereafter collectible hereunder and thereunder reduced, without the necessity
of the execution of any new document, so as to comply with the applicable law,
but so as to permit the recovery of the fullest amount otherwise called for
under the Auction Rate Notes and under the related documents.
A-1-30
EXHIBIT A
FORM OF SERIES 2003-1 NOTES
EXCEPT AS OTHERWISE PROVIDED IN THE INDENTURE, THIS GLOBAL NOTE MAY BE
TRANSFERRED, IN WHOLE BUT NOT IN PART, ONLY TO ANOTHER NOMINEE OF THE SECURITIES
DEPOSITORY (AS DEFINED IN THE INDENTURE) OR TO A SUCCESSOR SECURITIES DEPOSITORY
OR TO A NOMINEE OF A SUCCESSOR SECURITIES DEPOSITORY.
NELNET EDUCATION LOAN FUNDING, INC.
STUDENT LOAN ASSET-BACKED NOTE
SENIOR CLASS 2003A-[1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [12]
SUBORDINATE CLASS 2003B-[1] [2]
AUCTION RATE NOTES
REGISTERED NO. R-__ REGISTERED $________________
Maturity Date Interest Rate Original Issue Date CUSIP No.
July 1, 2043 Variable ___________, 2003 _________
PRINCIPAL SUM: _________________________________________ AND 00/100 DOLLARS
REGISTERED OWNER: CEDE & CO.
NELNET EDUCATION LOAN FUNDING, INC., a corporation organized under the
corporation laws of the State of Nebraska (the "Issuer," which term includes any
successor corporation under the Indenture of Trust, dated as of June 1, 2003 (as
previously amended, the "Original Indenture") and the Series 2003-1 Supplemental
Indenture of Trust dated as of June 1, 2003 (as amended, the "Series 2003-1
Supplemental Indenture," and together with the Original Indenture, the
"Indenture"), each between the Issuer and Wells Fargo Bank Minnesota, National
Association, as trustee (the "Indenture Trustee," which term includes any
successor trustee under the Indenture)) for value received, hereby promises to
pay to the Registered Owner (stated above) or registered assigns, the Principal
Sum of (stated above), but solely from the revenues and receipts hereinafter
specified and not otherwise, on the Maturity Date specified above (subject to
the right of prior redemption hereinafter described), upon presentation and
surrender of this note at the designated corporate trust office of the Indenture
Trustee, as paying agent, trustee, authenticating agent and registrar for the
Notes, or a duly appointed successor paying agent, and to pay interest in
arrears on said Principal Sum, but solely from the revenues and receipts
hereinafter specified and not otherwise, to the Registered Owner hereof from the
most recent Interest Payment Date to which interest has been paid hereon, until
the payment of said principal sum in full.
Any capitalized words and terms used as defined words and terms in this
note and not otherwise defined herein shall have the meanings given them in the
Indenture.
This note shall bear interest at an Auction Rate, all as determined in
Appendix A of the Series 2003-1 Supplemental Indenture.
The principal of and interest on this note are payable in lawful money
of the United States of America. If the specified date for any payment of
principal or interest accrued to such specified date shall be a day other than a
Business Day then such payment may be made on the next succeeding Business Day,
with the same force and effect as if made on the specified date for such payment
without additional interest.
Interest payable on this note shall be computed on the assumption that
each year contains 360 days and actual days elapsed.
This note is one of a series of notes of the Issuer designated Student
Loan Asset-Backed Notes, [Senior Class
2003A-[1][2][3][4][5][6][7][8][9][10][11][12]] [Subordinate Class 2003B-[1][2]]
Auction Rate Notes, dated the Original Issue Date, in the aggregate original
principal amount of $_______________ (the "[Class
2003A-[1][2][3][4][5][6][7][8][9][10][11][12]] [Class 2003B-[1][2]] Notes")
which have been authorized by the Issuer under a certain resolution, and issued
by the Issuer pursuant to the Indenture. The Issuer is, simultaneously with the
[Class 2003A-[1][2][3][4][5][6][7][8][9][10][11][12]] [Class 2003B-[1][2]]
Notes, issuing $_______________ of its Student Loan Asset-Backed Notes, Senior
Class 2003A Notes in 12 subclasses (together with the Class
2003A-[1][2][3][4][5][6][7] [8][9][10][11][12] Notes, the "Class 2003A Notes")
and $____________ of its Student Loan Asset-Backed Notes, Subordinate Class
2003B-[1][2] in two subclasses (the "Class 2003B Notes," and together with the
Class 2003A Notes, the "Series 2003-1 Notes"). The proceeds of such notes have
been used by the Issuer, together with other moneys of the Issuer, for the
purpose of providing funds to finance the acquisition of student loans, fund a
reserve fund and to pay certain costs and expenses in connection with the
issuance of such notes. The Indenture provides for the issuance of additional
notes (the "Additional Notes") which may be secured on a parity with or
subordinate to the Class A Notes or the Class B Notes as determined by the
Issuer. The Class A Notes, the Class B Notes and any Additional Notes are
collectively referred to herein as the "Notes."
MANDATORY REDEMPTION, OPTIONAL REDEMPTION AND OPTIONAL PURCHASE. This
note is subject to mandatory redemption, optional redemption and optional
purchase, all as described in the Indenture.
NOTICE OF REDEMPTION OR PURCHASE. Notice of the call for redemption
shall be given by the Indenture Trustee by mailing a copy of the notice at least
10 days prior to the redemption or purchase date to the Registered Owners of the
Notes to be redeemed in whole or in part at the address of such Registered Owner
last showing on the registration books. Failure to give such notice or any
defect therein shall not affect the validity of any proceedings for the
redemption or purchase of such Auction Rate Notes for which no such failure or
defect occurs. All Notes called for redemption or purchase will cease to bear
interest after the specified redemption or purchase date, provided funds for
their payment are on deposit at the place of payment at the time. If less than
all Notes are to be redeemed or purchased, Notes shall be selected for
redemption or purchase as provided in the Indenture.
A-2
The Indenture provides that the Issuer may enter into a derivative
product between the Issuer and a derivative provider (a "Reciprocal Payor"), as
originally executed and as amended or supplemented, or other interest rate hedge
agreement between the Issuer and a Reciprocal Payor, as originally executed and
as amended or supplemented. Payments due to a Reciprocal Payor from the Issuer
pursuant to the applicable Derivative Product are referred to herein as "Issuer
Derivative Payments," and may be secured on a parity with any series of Bonds.
The principal of and interest on the Class A Notes and any Additional
Notes issued on a parity with the Class A Notes and any Issuer Derivative
Payments secured on a parity with the Class A Notes are payable on a superior
basis to such payments on the Class B Notes and any Additional Notes issued on a
parity or subordinate to the Class B Notes; provided, however, that current
principal and interest may be paid on the Class B Notes and any Additional Notes
issued on a parity with the Class B Notes or subordinate to the Class B Notes if
all principal and interest payments due and owing at such time on the Class A
Notes and any Additional Notes issued on a parity with the Class A Notes and any
Issuer Derivative Payments secured on a parity with the Class A Notes have been
previously made or provided for as provided in the Indenture.
Reference is hereby made to the Indenture, copies of which are on file
at the designated corporate trust office of the Indenture Trustee, and to all of
the provisions of which any Registered Owner of this note by his acceptance
hereof hereby assents, for definitions of terms; the description of and the
nature and extent of the security for the Notes; the Issuer's student loan
origination and acquisition program; the revenues and other money pledged to the
payment of the principal of and interest on the Notes; the nature and extent and
manner of enforcement of the pledge; the conditions upon which the Indenture may
be amended or supplemented with or without the consent of the Registered Owners
of the Notes and any Reciprocal Payor; the rights and remedies of the Registered
Owner hereof with respect hereto and thereto, including the limitations upon the
right of a Registered Owner hereof to institute any suit, action, or proceeding
in equity or at law with respect hereto and thereto; the rights, duties, and
obligations of the Issuer and the Indenture Trustee thereunder; the terms and
provisions upon which the liens, pledges, charges, trusts, and covenants made
therein may be discharged at or prior to the stated maturity or earlier
redemption of this note, and this note thereafter shall no longer be secured by
the Indenture or be deemed to be Outstanding, as defined in the Indenture,
thereunder; and for the other terms and provisions thereof.
THE NOTES ARE LIMITED OBLIGATIONS OF THE ISSUER, PAYABLE SOLELY FROM,
AND FURTHER SECURED BY, THE TRUST ESTATE, AS DEFINED IN THE INDENTURE.
No recourse, either directly or indirectly, shall be had for the payment
of the principal of and interest on this note or any claim based hereon or in
respect hereof or of the Indenture, against the Indenture Trustee, or any
incorporator, director, officer, employee, or agent of the Issuer, nor against
the State of Nebraska, or any official thereof, but the obligation to pay all
amounts required by the Indenture securing this note and the obligation to do
and perform the covenants and acts required of the Issuer therein and herein
shall be and remain the responsibility and obligation of said Issuer, limited as
herein set forth.
A-3
Subject to the restrictions specified in the Indenture, this note is
transferable on the Note Register kept for that purpose by the Indenture
Trustee, as registrar, upon surrender of this note for transfer at the
designated corporate trust office of the Indenture Trustee, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Registered Owner hereof or his attorney
duly authorized in writing, and thereupon one or more new Notes of the same
series, Stated Maturity, of authorized denominations, bearing interest at the
same rate, and for the same aggregate principal amount will be issued to the
designated transferee or transferees. At the option of the Registered Owner, any
Note may be exchanged for other Notes in authorized denominations upon surrender
of the Note to be exchanged at the designated corporate trust office of the
Indenture Trustee. Upon any such presentation for exchange, one or more new
Notes of the same series, Stated Maturity, in authorized denominations, bearing
interest at the same rate, and for the same aggregate principal amount as the
Note or Notes so surrendered will be issued to the Registered Owner of the Note
or Notes so surrendered; and the Note or Notes so surrendered shall thereupon be
cancelled by the Indenture Trustee.
Notwithstanding the foregoing, so long as the ownership of the Notes is
maintained in book-entry form by The Depository Trust Company (the "Securities
Depository") or a nominee thereof, this note may be transferred in whole but not
in part only to the Securities Depository or a nominee thereof or to a successor
Securities Depository or its nominee.
The Issuer, the Indenture Trustee, and any agent of either of them shall
treat the Person in whose name this note is registered as the Registered Owner
hereof (a) on the record date for purposes of receiving timely payment of
interest hereon, and (b) on the date of surrender of this note for purposes of
receiving payment of principal hereof at its stated maturity and (c) for all
other purposes, whether or not this note is overdue, and neither the Issuer, the
Indenture Trustee, nor any such agent shall be affected by notice to the
contrary.
To the extent permitted by the Indenture, modifications or alterations
of the Indenture and any supplemental indenture may be made with the consent of
less than all of the Registered Owners of the Notes then outstanding or without
the consent of any of such Registered Owners (by reason of a change in the Act
or Regulation or to cure ambiguities or conflicts), but such modification or
alteration is not permitted to affect the maturity date, Stated Maturity,
amount, Interest Payment Date, or rate of interest on any outstanding Notes or
affect the rights of the Registered Owners of less than all of the Notes
outstanding.
The Registered Owner hereof shall not have the right to demand payment
of this note or any interest hereon out of funds raised or to be raised by
taxation.
Any capitalized term used herein and not otherwise defined herein shall
have the same meaning ascribed to such term in the herein defined Indenture
unless the context shall clearly indicate otherwise.
It is hereby certified and recited that all acts and things required by
the laws of the State of Nebraska to happen, exist, and be performed precedent
to and in the issuance of this note, and the passage of said resolution and the
execution of said Indenture, have happened, exist and have been performed as so
required.
A-4
IN TESTIMONY WHEREOF, the Board of Directors of NELNET EDUCATION LOAN
FUNDING, INC. has caused this note to be executed by the manual or facsimile
signatures of the President and Secretary of the Issuer all as of the Original
Issue Date.
NELNET EDUCATION LOAN FUNDING, INC.
By
------------------------------------------
President
By
------------------------------------------
Secretary
A-5
CERTIFICATE OF AUTHENTICATION
This note is one of the Series 2003-1 Notes designated therein and
described in the within-mentioned Indenture.
WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION,
as Indenture Trustee
By
----------------------------------------------
Authorized Signatory
Authentication Date:
- ------------------------------
A-6
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
unto __________ (Social Security or other identifying number __________) the
within note and all rights thereunder and hereby irrevocably appoints __________
attorney to transfer the within note on the books kept for registration thereof,
with full power of substitution in the premises.
Dated: SIGNED:
------------------ ------------------------------------
NOTICE: The signature on this Assignment must
correspond with the name of the Registered Owner
as it appears on the face of the within note in
every particular.
Signature Guaranteed by:
- -----------------------------------
Signature(s) must be guaranteed by
an eligible guarantor institution
pursuant to Securities and Exchange
Commission Rule 17Ad-15 that is a
participant in a signature guarantor
program recognized by the Indenture Trustee
A-7
EXHIBIT B
SERIES 2003-1 CLOSING CASH FLOW PROJECTIONS
EXHIBIT C
NOTICE OF PAYMENT DEFAULT
NELNET EDUCATION LOAN FUNDING, INC.
STUDENT LOAN ASSET-BACKED NOTES
CLASS 2003_____
AUCTION RATE CERTIFICATE NOTES
NOTICE IS HEREBY GIVEN that a Payment Default has occurred and is
continuing with respect to the Auction Rate Notes identified above. The next
Auction for the Auction Rate Notes will not be held. The Auction Rate for the
Auction Rate Notes for the next succeeding Interest Period shall be the
Non-Payment Rate.
WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION,
as Indenture Trustee
Dated: By
----------------- ----------------------------------------------
EXHIBIT D
NOTICE OF CURE OF PAYMENT DEFAULT
NELNET EDUCATION LOAN FUNDING, INC.
STUDENT LOAN ASSET-BACKED NOTES
CLASS 2003_____
AUCTION RATE CERTIFICATE NOTES
NOTICE IS HEREBY GIVEN that a Payment Default with respect to the
Auction Rate Notes identified above has been waived or cured. The next Interest
Payment Date is __________________________ and the Auction Date is
__________________________.
WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION,
as Indenture Trustee
Dated: By
-------------------- -----------------------------------------------
EXHIBIT E
NOTICE OF PROPOSED CHANGE IN LENGTH
OF ONE OR MORE AUCTION PERIODS
NELNET EDUCATION LOAN FUNDING, INC.
STUDENT LOAN ASSET-BACKED NOTES
CLASS 2003_____
AUCTION RATE CERTIFICATE NOTES
Notice is hereby given that the Issuer proposes to change the length of
one or more Auction Periods pursuant to the Indenture of Trust, as amended (the
"Indenture") as follows:
1. The change shall take effect on _______________, the Interest Rate
Adjustment Date for the next Auction Period (the "Effective Date").
2. The Auction Period Adjustment in Paragraph 1 shall take place only if
(a) the Indenture Trustee and the Auction Agent receive, by 11:00 a.m., eastern
time, on the Business Day before the Auction Date for the Auction Period
commencing on the Effective Date, a certificate from the Issuer, as required by
the Indenture authorizing the change in length of one or more Auction Periods
and (b) Sufficient Bids exist on the Auction Date for the Auction Period
commencing on the Effective Date.
3. If the condition referred to in (a) above is not met, the Auction
Rate for the Auction Period commencing on the Effective Date will be determined
pursuant to the Auction Procedures and the Auction Period shall be the Auction
Period determined without reference to the proposed change. If the condition
referred to in (a) is met but the condition referred to in (b) above is not met,
the Auction Rate for the Auction Period commencing on the Effective Date shall
be the Maximum Rate and the Auction Period shall be the Auction Period
determined without reference to the proposed change.
4. It is hereby represented, upon advice of the Auction Agent for the
Class 2003_____ Notes described herein, that there were Sufficient Bids for such
Class 2003_____ Notes at the Auction immediately preceding the date of this
Notice.
5. Terms not defined in this Notice shall have the meanings set forth in
the Indenture entered into in connection with the Class 2003_____ Notes.
NELNET EDUCATION LOAN FUNDING, INC.
Dated: By
------------------- ---------------------------------------
EXHIBIT F
NOTICE ESTABLISHING CHANGE IN LENGTH
OF ONE OR MORE AUCTION PERIODS
NELNET EDUCATION LOAN FUNDING, INC.
STUDENT LOAN ASSET-BACKED NOTES
CLASS 2003_____
AUCTION RATE CERTIFICATE NOTES
Notice is hereby given that the Issuer hereby establishes new lengths
for one or more Auction Periods pursuant to the Indenture of Trust, as amended:
1. The change shall take effect on _______________, the Interest Rate
Adjustment Date for the next Auction Period (the "Effective Date").
2. For the Auction Period commencing on the Effective Date, the Interest
Rate Adjustment Date shall be _______________, or the next succeeding Business
Day if such date is not a Business Day.
3. For Auction Periods occurring after the Auction Period commencing on
the Effective Date, the Interest Rate Adjustment Date shall be
[_______________(date) and every ______________(number) ______________(day of
week) thereafter] [every ______________(number) ______________(day of week)
after the date set forth in paragraph 2 above], or the next Business Day if any
such day is not a Business Day; provided, however, that the length of subsequent
Auction Periods shall be subject to further change hereafter as provided in the
Indenture of Trust.
4. The changes described in paragraphs 2 and 3 above shall take place
only upon delivery of this Notice and the satisfaction of other conditions set
forth in the Indenture of Trust and our prior notice dated _______________
regarding the proposed change.
5. Terms not defined in this Notice shall have the meanings set forth in
the Indenture of Trust relating to the Class 2003_____ Notes.
NELNET EDUCATION LOAN FUNDING, INC.
Dated: By
------------------ ------------------------------------------
EXHIBIT G
NOTICE OF CHANGE IN AUCTION DATE
NELNET EDUCATION LOAN FUNDING, INC.
STUDENT LOAN ASSET-BACKED NOTES
CLASS 2003_____
AUCTION RATE CERTIFICATE NOTES
Notice is hereby given by [ ], as Broker-Dealer for the Auction Rate
Notes, that with respect to the Auction Rate Notes, the Auction Date is hereby
changed as follows:
1. With respect to Class 2003_____ Notes, the definition of "Auction
Date" shall be deemed amended by substituting "_______________(number) Business
Day" in the second line thereof and by substituting "_______________(number)
Business Days" for "two Business Days" in subsection (d) thereof.
2. This change shall take effect on _______________ which shall be the
Auction Date for the Auction Period commencing on _______________.
3. The Auction Date for the Class 2003_____ Notes shall be subject to
further change hereafter as provided in the Indenture of Trust.
4. Terms not defined in this Notice shall have the meaning set forth in
the Indenture of Trust, as amended, relating to the Class 2003_____ Notes.
[BROKER-DEALER], as Broker-Dealer
Dated: By
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