Exhibit 99.5
(MULTICURRENCY - CROSS BORDER)
ISDA(R)
International Swaps and Derivatives, Inc.
MASTER AGREEMENT
dated as of May 18, 2006
DEUTSCHE BANK AG, ACTING THROUGH ITS and NELNET STUDENT LOAN TRUST
NEW YORK BRANCH 2006-2
("PARTY A") ("PARTY B")
have entered and/or anticipate entering into one or more transactions (each a
"Transaction") that are or will be governed by this Master Agreement, which
includes the schedule (the "Schedule"), and the documents and other confirming
evidence (each a "Confirmation") exchanged between the parties confirming those
Transactions.
Accordingly, the parties agree as follows: --
1. INTERPRETATION
(a) DEFINITIONS. The terms defined in Section 14 and in the Schedule will have
the meanings therein specified for the purpose of this Master Agreement.
(b) INCONSISTENCY. In the event of any inconsistency between the provisions of
the Schedule and the other provisions of this Master Agreement, the Schedule
will prevail. In the event of any inconsistency between the provisions of any
Confirmation and this Master Agreement (including the Schedule), such
Confirmation will prevail for the purpose of the relevant Transaction.
(c) SINGLE AGREEMENT. All Transactions are entered into in reliance on the fact
that this Master Agreement and all Confirmations form a single agreement between
the parties (collectively referred to as this "Agreement"), and the parties
would not otherwise enter into any Transactions.
2. OBLIGATIONS
(a) GENERAL CONDITIONS.
(i) Each party will make each payment or delivery specified in each
Confirmation to be made by it, subject to the other provisions of this
Agreement.
(ii) Payments under this Agreement will be made on the due date for value on
that date in the place of the account specified in the relevant
Confirmation or otherwise pursuant to this Agreement, in freely
transferable funds and in the manner customary for payments in the
required currency. Where settlement is by delivery (that is, other than
by payment), such delivery will be made for receipt on the due date in
the manner customary for the relevant obligation unless otherwise
specified in the relevant Confirmation or elsewhere in this Agreement.
(iii) Each obligation of each party under Section 2(a)(i) is subject to (1)
the condition precedent that no Event of Default or Potential Event of
Default with respect to the other party has occurred and is continuing,
(2) the condition precedent that no Early Termination Date in respect of
the relevant Transaction has occurred or been effectively designated and
(3) each other applicable condition precedent specified in this
Agreement.
(b) CHANGE OF ACCOUNT. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five
Local Business Days prior to the scheduled date for the payment or
delivery to which such change applies unless such other party gives
timely notice of a reasonable objection to such change.
(c) NETTING. If on any date amounts would otherwise be payable: --
(i) in the same currency; and
(ii) in respect of the same Transaction,
by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the other
party, replaced by an obligation upon the party by whom the larger aggregate
amount would have been payable to pay to the other party the excess of the
larger aggregate amount over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a net amount
will be determined in respect of all amounts payable on the same date in the
same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction. The election may be made
in the Schedule or a Confirmation by specifying that subparagraph (ii) above
will not apply to the Transactions identified as being subject to the election,
together with the starting date (in which case subparagraph (ii) above will not,
or will cease to, apply to such Transactions from such date). This election may
be made separately for different groups of Transactions and will apply
separately to each pairing of Offices through which the parties make and receive
payments or deliveries.
(d) DEDUCTION OR WITHHOLDING FOR TAX.
(i) GROSS-UP. All payments under this Agreement will be made without any
deduction or withholding for or on account of any Tax unless such
deduction or withholding is required by any applicable law, as modified
by the practice of any relevant governmental revenue authority, then in
effect. If a party is so required to deduct or withhold, then that party
("X") will:
(1) promptly notify the other party ("Y") of such requirement;
(2) pay to the relevant authorities the full amount required to
be deducted or withheld (including the full amount required to
be deducted or withheld from any additional amount paid by X to
Y under this Section 2(d)) promptly upon the earlier of
determining that such deduction or withholding is required or
receiving notice that such amount has been assessed against Y;
(3) promptly forward to Y an official receipt (or a certified
copy), or other documentation reasonably acceptable to Y,
evidencing such payment to such authorities; and
(4) if such Tax is an Indemnifiable Tax, pay to Y, in addition
to the payment to which Y is otherwise entitled under this
Agreement, such additional amount as is necessary to ensure that
the net amount actually received by Y (free and clear of
Indemnifiable Taxes, whether assessed against X or Y) will equal
the full amount Y would have received had no such deduction or
withholding been required. However, X will not be required to
pay any additional amount to Y to the extent that it would not
be required to be paid but for:
(A) the failure by Y to comply with or perform any
agreement contained in Section 4(a)(i), 4(a)(iii) or
4(d); or
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(B) the failure of a representation made by Y pursuant
to Section 3(f) to be accurate and true unless such
failure would not have occurred but for (I) any action
taken by a taxing authority, or brought in a court of
competent jurisdiction, on or after the date on which a
Transaction is entered into (regardless of whether such
action is taken or brought with respect to a party to
this Agreement) or (II) a Change in Tax Law.
(ii) LIABILITY. If: --
(1) X is required by any applicable law, as modified by
the practice of any relevant governmental revenue
authority, to make any deduction or withholding in
respect of which X would not be required to pay an
additional amount to Y under Section 2(d)(i)(4);
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is assessed
directly against X,
then, except to the extent Y has satisfied or then satisfies the
liability resulting from such Tax, Y will promptly pay to X the amount
of such liability (including any related liability for interest, but
including any related liability for penalties only if Y has failed to
comply with or perform any agreement contained in Section 4(a)(i),
4(a)(iii) or 4(d)).
(e) DEFAULT INTEREST; OTHER AMOUNTS. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant Transaction,
a party that defaults in the performance of any payment obligation will, to the
extent permitted by law and subject to Section 6(c), be required to pay interest
(before as well as after judgment) on the overdue amount to the other party on
demand in the same currency as such overdue amount, for the period from (and
including) the original due date for payment to (but excluding) the date of
actual payment, at the Default Rate. Such interest will be calculated on the
basis of daily compounding and the actual number of days elapsed. If, prior to
the occurrence or effective designation of an Early Termination Date in respect
of the relevant Transaction, a party defaults in the performance of any
obligation required to be settled by delivery, it will compensate the other
party on demand if and to the extent provided for in the relevant Confirmation
or elsewhere in this Agreement.
3. REPRESENTATIONS
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered into
and, in the case of the representations in Section 3(1), at all times until the
termination of this Agreement) that:
(a) BASIC REPRESENTATIONS.
(i) STATUS. It is duly organised and validly existing under the laws of
the jurisdiction of its organisation or incorporation and, if relevant
under such laws, in good standing;
(ii) POWERS. It has the power to execute this Agreement and any other
documentation relating to this Agreement to which it is a party, to
deliver this Agreement and any other documentation relating to this
Agreement that it is required by this Agreement to deliver and to
perform its obligations under this Agreement and any obligations it has
under any Credit Support Document to which it is a party and has taken
all necessary action to authorise such execution, delivery and
performance;
(iii) NO VIOLATION OR CONFLICT. Such execution, delivery and performance
do not violate or conflict with any law applicable to it, any provision
of its constitutional documents, any order or judgment of any court or
other agency of government applicable to it or any of its assets or any
contractual restriction binding on or affecting it or any of its assets;
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(iv) CONSENTS. All governmental and other consents that are required to
have been obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party have been obtained and are in
full force and effect and all conditions of any such consents have been
complied with; and
(v) OBLIGATIONS BINDING. Its obligations under this Agreement and any
Credit Support Document to which it is a party constitute its legal,
valid and binding obligations, enforceable in accordance with their
respective terms (subject to applicable bankruptcy, reorganisation,
insolvency, moratorium or similar laws affecting creditors' rights
generally and subject, as to enforceability, to equitable principles of
general application. (regardless of whether enforcement is sought in a
proceeding in equity or at law)).
(b) ABSENCE OF CERTAIN EVENTS. No Event of Default or Potential Event of Default
or, to its knowledge, Termination Event with respect to it has occurred and is
continuing and no such event or circumstance would occur as a result of its
entering into or performing its obligations under this Agreement or any Credit
Support Document to which it is a party.
(c) ABSENCE OF LITIGATION. There is not pending or, to its knowledge, threatened
against it or any of its Affiliates any action, suit or proceeding at law or in
equity or before any court, tribunal, governmental body, agency or official or
any arbitrator that is likely to affect the legality, validity or enforceability
against it of this Agreement or any Credit Support Document to which it is a
party or its ability to perform its obligations under this Agreement or such
Credit Support Document.
(d) ACCURACY OF SPECIFIED INFORMATION. All applicable information that is
furnished in writing by or on behalf of it to the other party and is identified
for the purpose of this Section 3(d) in the Schedule is, as of the date of the
information, true, accurate and complete in every material respect.
(e) PAYER TAX REPRESENTATION. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(e) is accurate and true. (f)
PAYEE TAX REPRESENTATIONS. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(f) is accurate and true.
4. AGREEMENTS
Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party: -
(a) FURNISH SPECIFIED INFORMATION. It will deliver to the other party or, in
certain cases under subparagraph (iii) below, to such government or taxing
authority as the other party reasonably directs: -
(i) any forms, documents or certificates relating to taxation specified
in the Schedule or any Confirmation;
(ii) any other documents specified in the Schedule or any Confirmation;
and
(iii) upon reasonable demand by such other party, any form or document
that may be required or reasonably requested in writing in order to
allow such other party or its Credit Support Provider to make a payment
under this Agreement or any applicable Credit Support Document without
any deduction or withholding for or on account of any Tax or with such
deduction or withholding at a reduced rate (so long as the completion,
execution or submission of such form or document would not materially
prejudice the legal or commercial position of the party in receipt of
such demand), with any such form or document to be accurate and
completed in a manner reasonably satisfactory to such other party and to
be executed and to be delivered with any reasonably required
certification,
in each case by the date specified in the Schedule or such Confirmation or, if
none is specified, as soon as reasonably practicable.
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(b) MAINTAIN AUTHORISATIONS. It will use all reasonable efforts to maintain in
full force and effect all consents of any governmental or other authority that
are required to be obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party and will use all reasonable efforts to
obtain any that may become necessary in the future.
(c) COMPLY WITH LAWS. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its ability to perform its obligations under this
Agreement or any Credit Support Document to which it is a party.
(d) TAX AGREEMENT. It will give notice of any failure of a representation made
by it under Section 3(f) to be accurate and true promptly upon learning of such
failure.
(e) PAYMENT OF STAMP TAX. Subject to Section 11, it will pay any Stamp Tax
levied or imposed upon it or in respect of its execution or performance of this
Agreement by a jurisdiction in which it is incorporated, organised, managed and
controlled, or considered to have its seat, or in which a branch or office
through which it is acting for the purpose of this Agreement is located ("Stamp
Tax Jurisdiction") and will indemnify the other party against any Stamp Tax
levied or imposed upon the other party or in respect of the other party's
execution or performance of this Agreement by any such Stamp Tax Jurisdiction
which is not also a Stamp Tax Jurisdiction with respect to the other party.
5. EVENTS OF DEFAULT AND TERMINATION EVENTS
(a) EVENTS OF DEFAULT. The occurrence at any time with respect to a party or, if
applicable, any Credit Support Provider of such party or any Specified Entity of
such party of any of the following events constitutes an event of default (an
"Event of Default") with respect to such party:
(i) FAILURE TO PAY OR DELIVER. Failure by the party to make, when due,
any payment under this Agreement or delivery under Section 2(a)(i) or
2(e) required to be made by it if such failure is not remedied on or
before the third Local Business Day after notice of such failure is
given to the party;
(ii) BREACH OF AGREEMENT. Failure by the party to comply with or perform
any agreement or obligation (other than an obligation to make any
payment under this Agreement or delivery under Section 2(a)(i) or 2(e)
or to give notice of a Termination Event or any agreement or obligation
under Section 4(a)(i), 4(a)(iii) or 4(d)) to be complied with or
performed by the party in accordance with this Agreement if such failure
is not remedied on or before the thirtieth day after notice of such
failure is given to the party;
(iii) CREDIT SUPPORT DEFAULT.
(1) Failure by the party or any Credit Support Provider of such
party to comply with or perform any agreement or obligation to
be complied with or performed by it in accordance with any
Credit Support Document if such failure is continuing after any
applicable grace period has elapsed;
(2) the expiration or termination of such Credit Support
Document or the failing or ceasing of such Credit Support
Document to be in full force and effect for the purpose of this
Agreement (in either case other than in accordance with its
terms) prior to the satisfaction of all obligations of such
party under each Transaction to which such Credit Support
Document relates without the written consent of the other party;
or
(3) the party or such Credit Support Provider disaffirms,
disclaims, repudiates or rejects, in whole or in part, or
challenges the validity of, such Credit Support Document;
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(iv) MISREPRESENTATION. A representation (other than a representation
under Section 3(e) or (f)) made or repeated or deemed to have been made
or repeated by the party or any Credit Support Provider of such party in
this Agreement or any Credit Support Document proves to have been
incorrect or misleading in any material respect when made or repeated or
deemed to have been made or repeated;
(v) DEFAULT UNDER SPECIFIED TRANSACTION. The party, any Credit Support
Provider of such party or any applicable Specified Entity of such party
(I) defaults under a Specified Transaction and, after giving effect to
any applicable notice requirement or grace period, there occurs a
liquidation of, an acceleration of obligations under, or an early
termination of, that Specified Transaction, (2) defaults, after giving
effect to any applicable notice requirement or grace period, in making
any payment or delivery due on the last payment, delivery or exchange
date of, or any payment on early termination of, a Specified Transaction
(or such default continues for at least three Local Business Days if
there is no applicable notice requirement or grace period) or (3)
disaffirms, disclaims, repudiates or rejects, in whole or in part, a
Specified Transaction (or such action is taken by any person or entity
appointed or empowered to operate it or act on its behalf);
(vi) CROSS DEFAULT. If "Cross Default" is specified in the Schedule as
applying to the party, the occurrence or existence of (1) a default,
event of default or other similar condition or event (however described)
in respect of such party, any Credit Support Provider of such party or
any applicable Specified Entity of such party under one or more
agreements or instruments relating to Specified Indebtedness of any of
them (individually or collectively) in an aggregate amount of not less
than the applicable Threshold Amount (as specified in the Schedule)
which has resulted in such Specified Indebtedness becoming, or becoming
capable at such time of being declared, due and payable under such
agreements or instruments, before it would otherwise have been due and
payable or (2) a default by such party, such Credit Support Provider or
such Specified Entity (individually or collectively) in making one or
more payments on the due date thereof in an aggregate amount of not less
than the applicable Threshold Amount under such agreements or
instruments (after giving effect to any applicable notice requirement or
grace period);
(vii) BANKRUPTCY. The party, any Credit Support Provider of such party
or any applicable Specified Entity of such party: -
(1) is dissolved (other than pursuant to a consolidation,
amalgamation or merger); (2) becomes insolvent or is unable to
pay its debts or fails or admits in writing its inability
generally to pay its debts as they become due; (3) makes a
general assignment, arrangement or composition with or for the
benefit of its creditors; (4) institutes or has instituted
against it a proceeding seeking a judgment of insolvency or
bankruptcy or any other relief under any bankruptcy or
insolvency law or other similar law affecting creditors' rights,
or a petition is presented for its winding-up or liquidation,
and, in the case of any such proceeding or petition instituted
or presented against it, such proceeding or petition (A) results
in a judgment of insolvency or bankruptcy or the entry of an
order for relief or the making of an order for its winding-up or
liquidation or (B) is not dismissed, discharged, stayed or
restrained in each case within 30 days of the institution or
presentation thereof; (5) has a resolution passed for its
winding-up, official management or liquidation (other than
pursuant to a consolidation, amalgamation or merger); (6) seeks
or becomes subject to the appointment of an administrator,
provisional liquidator, conservator, receiver, trustee,
custodian or other similar official for it or for all or
substantially all its assets; (7) has a secured party take
possession of all or substantially all its assets or has a
distress, execution, attachment, sequestration or other legal
process levied, enforced or sued on or against all or
substantially all its assets and such secured party maintains
possession, or any such process is not dismissed, discharged,
stayed or restrained, in each case within 30 days thereafter;
(8) causes or is subject to any event with respect to it which,
under the applicable laws of any jurisdiction, has an analogous
effect to any of the events specified in clauses (1) to (7)
(inclusive); or (9) takes any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any
of the foregoing acts; or
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(viii) MERGER WITHOUT ASSUMPTION. The party or any Credit Support
Provider of such party consolidates or amalgamates with, or merges with
or into, or transfers all or substantially all its assets to, another
entity and, at the time of such consolidation, amalgamation, merger or
transfer: -
(1) the resulting, surviving or transferee entity fails to
assume all the obligations of such party or such Credit Support
Provider under this Agreement or any Credit Support Document to
which it or its predecessor was a party by operation of law or
pursuant to an agreement reasonably satisfactory to the other
party to this Agreement; or
(2) the benefits of any Credit Support Document fail to extend
(without the consent of the other party) to the performance by
such resulting, surviving or transferee entity of its
obligations under this Agreement.
(b) TERMINATION EVENTS. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified Entity
of such party of any event specified below constitutes an Illegality if the
event is specified in (i) below, a Tax Event if the event is specified in (ii)
below or a Tax Event Upon Merger if the event is specified in (iii) below, and,
if specified to be applicable, a Credit Event
Upon Merger if the event is specified pursuant to (iv) below or an Additional
Termination Event if the event is specified pursuant to (v) below:
(i) ILLEGALITY. Due to the adoption of, or any change in, any applicable
law after the date on which a Transaction is entered into, or due to the
promulgation of, or any change in, the interpretation by any court,
tribunal or regulatory authority with competent jurisdiction of any
applicable law after such date, it becomes unlawful (other than as a
result of a breach by the party of Section 4(b)) for such party (which
will be the Affected Party): -
(1) to perform any absolute or contingent obligation to make a
payment or delivery or to receive a payment or delivery in
respect of such Transaction or to comply with any other material
provision of this Agreement relating to such Transaction; or
(2) to perform, or for any Credit Support Provider of such party
to perform, any contingent or other obligation which the party
(or such Credit Support Provider) has under any Credit Support
Document relating to such Transaction;
(ii) TAX EVENT. Due to (x) any action taken by a taxing authority, or
brought in a court of competent jurisdiction, on or after the date on
which a Transaction is entered into (regardless of whether such action
is taken or brought with respect to a party to this Agreement) or (y) a
Change in Tax Law, the party (which will be the Affected Party) will, or
there is a substantial likelihood that it will, on the next succeeding
Scheduled Payment Date (1) be required to pay to the other party an
additional amount in respect of an Indemnifiable Tax under Section
2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii)
or 6(e)) or (2) receive a payment from which an amount is required to be
deducted or withheld for or on account of a Tax (except in respect of
interest under Section 2(e), 6(d)(ii) or 6(e)) and no additional amount
is required to be paid in respect of such Tax under Section 2(d)(i)(4)
(other than by reason of Section 2(d)(i)(4)(A) or (B));
(iii) TAX EVENT UPON MERGER. The party (the "Burdened Party") on the
next succeeding Scheduled Payment Date will either (1) be required to
pay an additional amount in respect of an Indemnifiable Tax under
Section 2(d)(i)(4) (except in respect of interest under Section 2(e),
6(d)(ii) or 6(e)) or (2) receive a payment from which an amount has been
deducted or withheld for or on account of any Indemnifiable Tax in
respect of which the other party is not required to pay an additional
amount (other than by reason of Section 2(d)(i)(4)(A) or (B)), in either
case as a result of a party consolidating or amalgamating with, or
merging with or into, or transferring all or substantially all its
assets to, another entity (which will be the Affected Party) where such
action does not constitute an event described in Section 5(a)(viii);
(iv) CREDIT EVENT UPON MERGER. If "Credit Event Upon Merger" is
specified in the Schedule as applying to the party, such party ("X"),
any Credit Support Provider of X or any applicable Specified Entity of X
consolidates or amalgamates with, or merges with or into, or transfers
all or substantially all its assets to, another entity and such action
does not constitute an event described in Section 5(a)(viii) but the
creditworthiness of the resulting, surviving or transferee entity is
materially weaker than that of X, such Credit Support Provider or such
Specified Entity, as the case may be, immediately prior to such action
(and, in such event, X or its successor or transferee, as appropriate,
will be the Affected Party); or
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(v) ADDITIONAL TERMINATION EVENT. If any "Additional Termination Event"
is specified in the Schedule or any Confirmation as applying, the
occurrence of such event (and, in such event, the Affected Party or
Affected Parties shall be as specified for such Additional Termination
Event in the Schedule or such Confirmation).
(c) EVENT OF DEFAULT AND ILLEGALITY. If an event or circumstance which would
otherwise constitute or give rise to an Event of Default also constitutes an
Illegality, it will be treated as an Illegality and will not constitute an Event
of Default.
6. EARLY TERMINATION
(a) RIGHT TO TERMINATE FOLLOWING EVENT OF DEFAULT. If at any time an Event of
Default with respect to a party (the "Defaulting Party") has occurred and is
then continuing, the other party (the "Non-defaulting Party") may, by not more
than 20 days notice to the Defaulting Party specifying the relevant Event of
Default, designate a day not earlier than the day such notice is effective as an
Early Termination Date in respect of all outstanding Transactions. If, however,
"Automatic Early Termination" is specified in the Schedule as applying to a
party, then an Early Termination Date in respect of all outstanding Transactions
will occur immediately upon the occurrence with respect to such party of an
Event of Default specified in Section 5(a)(vii)(1), (3), (5), (6) or, to the
extent analogous thereto, (8), and as of the time immediately preceding the
institution of the relevant proceeding or the presentation of the relevant
petition upon the occurrence with respect to such party of an Event of Default
specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8).
(b) RIGHT TO TERMINATE FOLLOWING TERMINATION EVENT.
(i) NOTICE. If a Termination Event occurs, an Affected Party will,
promptly upon becoming aware of it, notify the other party, specifying
the nature of that Termination Event and each Affected Transaction and
will also give such other information about that Termination Event as
the other party may reasonably require.
(ii) TRANSFER TO AVOID TERMINATION EVENT. If either an Illegality under
Section 5(b)(i)(1) or a Tax Event occurs and there is only one Affected
Party, or if a Tax Event Upon Merger occurs and the Burdened Party is
the Affected Party, the Affected Party will, as a condition to its right
to designate an Early Termination Date under Section 6(b)(iv), use all
reasonable efforts (which will not require such party to incur a loss,
excluding immaterial, incidental expenses) to transfer within 20 days
after it gives notice under Section 6(b)(i) all its rights and
obligations under this Agreement in respect of the Affected Transactions
to another of its Offices or Affiliates so that such Termination Event
ceases to exist.
If the Affected Party is not able to make such a transfer it will give
notice to the other party to that effect within such 20 day period,
whereupon the other party may effect such a transfer within 30 days
after the notice is given under Section 6(b)(i).Any such transfer by a
party under this Section 6(b)(ii) will be subject to and conditional
upon the prior written consent of the other party, which consent will
not be withheld if such other party's policies in effect at such time
would permit it to enter into transactions with the transferee on the
terms proposed.
(iii) TWO AFFECTED PARTIES. If an Illegality under Section 5(b)(i)(1) or
a Tax Event occurs and there are two Affected Parties, each party will
use all reasonable efforts to reach agreement within 30 days after
notice thereof is given under Section 6(b)(i) on action to avoid that
Termination Event.
(iv) RIGHT TO TERMINATE. If: --
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(1) a transfer under Section 6(b)(ii) or an agreement under
Section 6(b)(iii), as the case may be, has not been effected
with respect to all Affected Transactions within 30 days after
an Affected Party gives notice under Section 6(b)(i); or
(2) an Illegality under Section 5(b)(i)(2), a Credit Event Upon
Merger or an Additional Termination Event occurs, or a Tax Event
Upon Merger occurs and the Burdened Party is not the Affected
Party,
either party in the case of an Illegality, the Burdened Party in the
case of a Tax Event Upon Merger, any Affected Party in the case of a Tax
Event or an Additional Termination Event if there is more than one
Affected Party, or the party which is not the Affected Party in the case
of a Credit Event Upon Merger or an Additional Termination Event if
there is only one Affected Party may, by not more than 20 days notice to
the other party and provided that the relevant Termination Event is then
continuing, designate a day not earlier than the day such notice is
effective as an Early Termination Date in respect of all Affected
Transactions.
(c) EFFECT OF DESIGNATION.
(i) If notice designating an Early Termination Date is given under
Section 6(a) or (b), the Early Termination Date will occur on the date
so designated, whether or not the relevant Event of Default or
Termination Event is then continuing.
(ii) Upon the occurrence or effective designation of an Early
Termination Date, no further payments or deliveries under Section
2(a)(i) or 2(e) in respect of the Terminated Transactions will be
required to be made, but without prejudice to the other provisions of
this Agreement. The amount, if any, payable in respect of an Early
Termination Date shall be determined pursuant to Section 6(e).
(d) CALCULATIONS.
(i) STATEMENT. On or as soon as reasonably practicable following the
occurrence of an Early Termination Date, each party will make the
calculations on its part, if any, contemplated by Section 6(e) and will
provide to the other party a statement (1) showing, in reasonable
detail, such calculations (including all relevant quotations and
specifying any amount payable under Section 6(e)) and (2) giving details
of the relevant account to which any amount payable to it is to be paid.
In the absence of written confirmation from the source of a quotation
obtained in determining a Market Quotation, the records of the party
obtaining such quotation will be conclusive evidence of the existence
and accuracy of such quotation.
(ii) PAYMENT DATE. An amount calculated as being due in respect of any
Early Termination Date under Section 6(e) will be payable on the day
that notice of the amount payable is effective (in the case of an Early
Termination Date which is designated or occurs as a result of an Event
of Default) and on the day which is two Local Business Days after the
day on which notice of the amount payable is effective (in the case of
an Early Termination Date which is designated as a result of a
Termination Event). Such amount will be paid together with (to the
extent permitted under applicable law) interest thereon (before as well
as after judgment) in the Termination Currency, from (and including) the
relevant Early Termination Date to (but excluding) the date such amount
is paid, at the Applicable Rate. Such interest will be calculated on the
basis of daily compounding and the actual number of days elapsed.
(e) PAYMENTS ON EARLY TERMINATION. If an Early Termination Date occurs,
the following provisions shall apply based on the parties' election in
the Schedule of a payment measure, either "Market Quotation" or "Loss",
and a payment method, either the "First Method" or the "Second Method".
If the parties fail to designate a payment measure or payment method in
the Schedule, it will be deemed that "Market Quotation" or the "Second
Method", as the case may be, shall apply. The amount, if any, payable in
respect of an Early Termination Date and determined pursuant to this
Section will be subject to any Set-off.
9
(i) EVENTS OF DEFAULT. If the Early Termination Date results from an
Event of Default: -
(1) FIRST METHOD AND MARKET QUOTATION. If the First Method and
Market Quotation apply, the Defaulting Party will pay to the
Non-defaulting Party the excess, if a positive number, of (A)
the sum of the Settlement Amount (determined by the
Non-defaulting Party) in respect of the Terminated Transactions
and the Termination Currency Equivalent of the Unpaid Amounts
owing to the Non-defaulting Party over (B) the Termination
Currency Equivalent of the Unpaid Amounts owing to the
Defaulting Party.
(2) FIRST METHOD AND LOSS. If the First Method and Loss apply,
the Defaulting Party will pay to the Non-defaulting Party, if a
positive number, the Non-defaulting Party's Loss in respect of
this Agreement.
(3) SECOND METHOD AND MARKET QUOTATION. If the Second Method and
Market Quotation apply, an amount will be payable equal to (A)
the sum of the Settlement Amount (determined by the
Non-defaulting Party) in respect of the Terminated Transactions
and the Termination Currency Equivalent of the Unpaid Amounts
owing to the Non-defaulting Party less (B) the Termination
Currency Equivalent of the Unpaid Amounts owing to the
Defaulting Party. If that amount is a positive number, the
Defaulting Party will pay it to the Non-defaulting Party; if it
is a negative number, the Non-defaulting Party will pay the
absolute value of that amount to the Defaulting Party.
(4) SECOND METHOD AND LOSS. If the Second Method and Loss apply,
an amount will be payable equal to the Non-defaulting Party's
Loss in respect of this Agreement. If that amount is a positive
number, the Defaulting Party will pay it to the Non-defaulting
Party; if it is a negative number, the Non-defaulting Party will
pay the absolute value of that amount to the Defaulting Party.
(ii) TERMINATION EVENTS. If the Early Termination Date results from a
Termination Event: -
(1) ONE AFFECTED PARTY. If there is one Affected Party, the
amount payable will be determined in accordance with Section
6(e)(i)(3), if Market Quotation applies, or Section 6(e)(i)(4),
if Loss applies, except that, in either case, references to the
Defaulting Party and to the Non-defaulting Party will be deemed
to be references to the Affected Party and the party which is
not the Affected Party, respectively, and, if Loss applies and
fewer than all the Transactions are being terminated, Loss shall
be calculated in respect of all Terminated Transactions.
(2) TWO AFFECTED PARTIES. If there are two Affected Parties: -
(A) if Market Quotation applies, each party will
determine a Settlement Amount in respect of the
Terminated Transactions, and an amount will be payable
equal to (I) the sum of (a) one-half of the difference
between the Settlement Amount of the party with the
higher Settlement Amount ("X") and the Settlement Amount
of the party with the lower Settlement Amount ("Y") and
(b) the Termination Currency Equivalent of the Unpaid
Amounts owing to X less (11) the Termination Currency
Equivalent of the Unpaid Amounts owing to Y; and
(B) if Loss applies, each party will determine its Loss
in respect of this Agreement (or, if fewer than all the
Transactions are being terminated, in respect of all
Terminated Transactions) and an amount will be payable
equal to one-half of the difference between the Loss of
the party with the higher Loss ("X") and the Loss of the
party with the lower Loss ("Y").
If the amount payable is a positive number, Y will pay it to X;
if it is a negative number, X will pay the absolute value of that
amount to Y.
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(iii) ADJUSTMENT FOR BANKRUPTCY. In circumstances where an Early
Termination Date occurs because "Automatic Early Termination" applies in
respect of a party, the amount determined under this Section 6(e) will
be subject to such adjustments as are appropriate and permitted by law
to reflect any payments or deliveries made by one party to the other
under this Agreement (and retained by such other party) during the
period from the relevant Early Termination Date to the date for payment
determined under Section 6(d)(ii).
(iv) PRE-ESTIMATE. The parties agree that if Market Quotation applies an
amount recoverable under this Section 6(e) is a reasonable pre-estimate
of loss and not a penalty. Such amount is payable for the loss of
bargain and the loss of protection against future risks and except as
otherwise provided in this Agreement neither party will be entitled to
recover any additional damages as a consequence of such losses.
7. TRANSFER
Subject to Section 6(b)(ii), neither this Agreement nor any interest or
obligation in or under this Agreement may be transferred (whether by way of
security or otherwise) by either party without the prior written consent of the
other party, except that: --
(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer of all
or substantially all its assets to, another entity (but without prejudice to any
other right or remedy under this Agreement); and
(b) a party may make such a transfer of all or any part of its interest in any
amount payable to it from a Defaulting Party under Section 6(e).
Any purported transfer that is not in compliance with this Section will be void.
8. CONTRACTUAL CURRENCY
(a) PAYMENT IN THE CONTRACTUAL CURRENCY. Each payment under this Agreement will
be made in the relevant currency specified in this Agreement for that payment
(the "Contractual Currency"). To the extent permitted by applicable law, any
obligation to make payments under this Agreement in the Contractual Currency
will not be discharged or satisfied by any tender in any currency other than the
Contractual Currency, except to the extent such tender results in the actual
receipt by the party to which payment is owed, acting in a reasonable manner and
in good faith in converting the currency so tendered into the Contractual
Currency, of the full amount in the Contractual Currency of all amounts payable
in respect of this Agreement. If for any reason the amount in the Contractual
Currency so received falls short of the amount in the Contractual Currency
payable in respect of this Agreement, the party required to make the payment
will, to the extent permitted by applicable law, immediately pay such additional
amount in the Contractual Currency as may be necessary to compensate for the
shortfall. If for any reason the amount in the Contractual Currency so received
exceeds the amount in the Contractual Currency payable in respect of this
Agreement, the party receiving the payment will refund promptly the amount of
such excess.
(b) JUDGMENTS. To the extent permitted by applicable law, if any judgment or
order expressed in a currency other than the Contractual Currency is rendered
(i) for the payment of any amount owing in respect of this Agreement, (ii) for
the payment of any amount relating to any early termination in respect of this
Agreement or (iii) in respect of a judgment or order of another court for the
payment of any amount described in (i) or (ii) above, the party seeking
recovery, after recovery in full of the aggregate amount to which such party is
entitled pursuant to the judgment or order, will be entitled to receive
immediately from the other party the amount of any shortfall of the Contractual
Currency received by such party as a consequence of sums paid in such other
currency and will refund promptly to the other party any excess of the
Contractual Currency received by such party as a consequence of sums paid in
such other currency if such shortfall or such excess arises or results from any
variation between the rate of exchange at which the Contractual Currency is
converted into the currency of the judgment or order for the purposes of such
judgment or order and the rate of exchange at which such party is able, acting
in a reasonable manner and in good faith in converting the currency received
into the Contractual Currency, to purchase the Contractual Currency with the
amount of the currency of the judgment or order actually received by such party.
The term "rate of exchange" includes, without limitation, any premiums and costs
of exchange payable in connection with the purchase of or conversion into the
Contractual Currency.
11
(c) SEPARATE INDEMNITIES. To the extent permitted by applicable law, these
indemnities constitute separate and independent obligations from the other
obligations in this Agreement, will be enforceable as separate and independent
causes of action, will apply notwithstanding any indulgence granted by the party
to which any payment is owed and will not be affected by judgment being obtained
or claim or proof being made for any other sums payable in respect of this
Agreement.
(d) EVIDENCE OF LOSS. For the purpose of this Section 8, it will be sufficient
for a party to demonstrate that it would have suffered a loss had an actual
exchange or purchase been made.
9. MISCELLANEOUS
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.
(b) AMENDMENTS. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing evidenced by
a facsimile transmission) and executed by each of the parties or confirmed by an
exchange of telexes or electronic messages on an electronic messaging system.
(c) SURVIVAL OF OBLIGATIONS. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive the
termination of any Transaction.
(d) REMEDIES CUMULATIVE. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative and
not exclusive of any rights, powers, remedies and privileges provided by law.
(e) COUNTERPARTS AND CONFIRMATIONS.
(i) This Agreement (and each amendment, modification and waiver in
respect of it) may be executed and delivered in counterparts (including
by facsimile transmission), each of which will be deemed an original.
(ii) The parties intend that they are legally bound by the terms of each
Transaction from the moment they agree to those terms (whether orally or
otherwise). A Confirmation shall he entered into as soon as practicable
and may he executed and delivered in counterparts (including by
facsimile transmission) or be created by an exchange of telexes or by an
exchange of electronic messages on an electronic messaging system, which
in each case will be sufficient for all purposes to evidence a binding
supplement to this Agreement. The parties will specify therein or
through another effective means that any such counterpart, telex or
electronic message constitutes a Confirmation.
(f) NO WAIVER OF RIGHTS. A failure or delay in exercising any right, power or
privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right, power or privilege will
not be presumed to preclude any subsequent or further exercise, of that right,
power or privilege or the exercise of any other right, power or privilege.
(g) HEADINGS. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into
consideration in interpreting this Agreement.
10. OFFICES; MULTIBRANCH PARTIES
(a) If Section 10(a) is specified in the Schedule as applying, each party that
enters into a Transaction through an Office other than its head or home office
represents to the other party that, notwithstanding the place of booking office
or jurisdiction of incorporation or organisation of such party, the obligations
of such party are the same as if it had entered into the Transaction through its
head or home office. This representation will be deemed to be repeated by such
party on each date on which a Transaction is entered into.
12
(b) Neither party may change the Office through which it makes and receives
payments or deliveries for the purpose of a Transaction without the prior
written consent of the other party.
(c) If a party is specified as a Multibranch Party in the Schedule, such
Multibranch Party may make and receive payments or deliveries under any
Transaction through any Office listed in the Schedule, and the Office through
which it makes and receives payments or deliveries with respect to a Transaction
will be specified in the relevant Confirmation.
11. EXPENSES
A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees and
Stamp Tax, incurred by such other party by reason of the enforcement and
protection of its rights under this Agreement or any Credit Support Document to
which the Defaulting Party is a party or by reason of the early termination of
any Transaction, including, but not limited to, costs of collection.
12. NOTICES
(a) EFFECTIVENESS. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice or
other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated:
(i) if in writing and delivered in person or by courier, on the date it
is delivered;
(ii) if sent by telex, on the date the recipient's answerback is
received;
(iii) if sent by facsimile transmission, on the date that transmission
is received by a responsible employee of the recipient in legible form
(it being agreed that the burden of proving receipt will be on the
sender and will not be met by a transmission report generated by the
sender's facsimile machine);
(iv) if sent by certified or registered mail (airmail, if overseas) or
the equivalent (return receipt requested), on the date that mail is
delivered or its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that electronic
message is received,
unless the date of that delivery (or attempted delivery) or that receipt, as
applicable, is not a Local Business Day or that communication is delivered (or
attempted) or received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given and
effective on the first following day that is a Local Business Day.
(b) CHANGE OF ADDRESSES. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system details at
which notices or other communications are to be given to it.
13. GOVERNING LAW AND JURISDICTION
(a) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.
(b) JURISDICTION. With respect to any suit, action or proceedings relating to
this Agreement ("Proceedings"), each party irrevocably: --
13
(i) submits to the jurisdiction of the English courts, if this Agreement
is expressed to be governed by English law, or to the non-exclusive
jurisdiction of the courts of the State of New York and the United
States District Court located in the Borough of Manhattan in New York
City, if this Agreement is expressed to be governed by the laws of the
State of New York; and
(ii) waives any objection which it may have at any time to the laying of
venue of any Proceedings brought in any such court, waives any claim
that such Proceedings have been brought in an inconvenient forum and
further waives the right to object, with respect to such Proceedings,
that such court does not have any jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the Civil
Jurisdiction and Judgments ▇▇▇ ▇▇▇▇ or any modification, extension or
re-enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
(c) SERVICE OF PROCESS. Each party irrevocably appoints the Process Agent (if
any) specified opposite its name in the Schedule to receive, for it and on its
behalf, service of process in any Proceedings. If for any reason any party's
Process Agent is unable to act as such, such party will promptly notify the
other party and within 30 days appoint a substitute process agent acceptable to
the other party. The parties irrevocably consent to service of process given in
the manner provided for notices in Section 12. Nothing in this Agreement will
affect the right of either party to serve process in any other manner permitted
by law.
(d) WAIVER OF IMMUNITIES. Each party irrevocably waives, to the fullest extent
permitted by applicable law, with respect to itself and its revenues and assets
(irrespective of their use or intended use), all immunity on the grounds of
sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to which it or its
revenues or assets might otherwise be entitled in any Proceedings in the courts
of any jurisdiction and irrevocably agrees, to the extent permitted by
applicable law, that it will not claim any such immunity in any Proceedings.
14. DEFINITIONS
As used in this Agreement:
"ADDITIONAL TERMINATION EVENT" has the meaning specified in Section 5(b).
"AFFECTED PARTY" has the meaning specified in Section 5(b).
"AFFECTED TRANSACTIONS" means (a) with respect to any Termination Event
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all
Transactions affected by the occurrence of such Termination Event and (b) with
respect to any other Termination Event, all Transactions.
"AFFILIATE" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control" of
any entity or person means ownership of a majority of the voting power of the
entity or person.
"APPLICABLE RATE" means: --
(a) in respect of obligations payable or deliverable (or which would have been
but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b) in respect of an obligation to pay an amount under Section 6(e) of either
party from and after the date (determined in accordance with Section 6(d)(ii))
on which that amount is payable, the Default Rate;
14
(c) in respect of all other obligations payable or deliverable (or which would
have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default
Rate; and
(d) in all other cases, the Termination Rate.
"BURDENED PARTY" has the meaning specified in Section 5(b).
"CHANGE IN TAX LAW" means the enactment, promulgation, execution or ratification
of, or any change in or amendment to, any law (or in the application or official
interpretation of any law) that occurs on or after the date on which the
relevant Transaction is entered into.
"CONSENT" includes a consent, approval, action, authorisation, exemption,
notice, filing, registration or exchange control consent.
"CREDIT EVENT UPON MERGER" has the meaning specified in Section 5(b).
"CREDIT SUPPORT DOCUMENT" means any agreement or instrument that is specified as
such in this Agreement.
"CREDIT SUPPORT PROVIDER" has the meaning specified in the Schedule.
"DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1 % per annum.
"DEFAULTING PARTY" has the meaning specified in Section 6(a).
"EARLY TERMINATION DATE" means the date determined in accordance with Section
6(a) or 6(b)(iv).
"EVENT OF DEFAULT" has the meaning specified in Section 5(a) and, if applicable,
in the Schedule.
"ILLEGALITY" has the meaning specified in Section 5(b).
"INDEMNIFIABLE TAX" means any Tax other than a Tax that would not be imposed in
respect of a payment under this Agreement but for a present or former connection
between the jurisdiction of the government or taxation authority imposing such
Tax and the recipient of such payment or a person related to such recipient
(including, without limitation, a connection arising from such recipient or
related person being or having been a citizen or resident of such jurisdiction,
or being or having been organised, present or engaged in a trade or business in
such jurisdiction, or having or having had a permanent establishment or fixed
place of business in such jurisdiction, but excluding a connection arising
solely from such recipient or related person having executed, delivered,
performed its obligations or received a payment under, or enforced, this
Agreement or a Credit Support Document).
"LAW" includes any treaty, law, rule or regulation (as modified, in the case of
tax matters, by the practice of any relevant governmental revenue authority) and
"LAWFUL" and "UNLAWFUL" will be construed accordingly.
"LOCAL BUSINESS DAY" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and foreign
currency deposits) (a) in relation to any obligation under Section 2(a)(i), in
the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the parties in writing or determined pursuant to provisions
contained, or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located and, if
different, in the principal financial centre, if any, of the currency of such
payment, (c) in relation to any notice or other communication, including notice
contemplated under Section 5(a)(i), in the city specified in the address for
notice provided by the recipient and, in the case of a notice contemplated by
Section 2(b), in the place where the relevant new account is to be located and
(d) in relation to Section 5(a)(v)(2), in the relevant locations for performance
with respect to such Specified Transaction.
15
"LOSS" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, the Termination Currency
Equivalent of an amount that party reasonably determines in good faith to be its
total losses and costs (or gain, in which case expressed as a negative number)
in connection with this Agreement or that Terminated Transaction or group of
Terminated Transactions, as the case may be, including any loss of bargain, cost
of funding or, at the election of such party but without duplication, loss or
cost incurred as a result of its terminating, liquidating, obtaining or
reestablishing any hedge or related trading position (or any gain resulting from
any of them). Loss includes losses and costs (or gains) in respect of any
payment or delivery required to have been made (assuming satisfaction of each
applicable condition precedent) on or before the relevant Early Termination Date
and not made, except, so as to avoid duplication, if Section 6(e)(i)(1) or (3)
or 6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and
out-of-pocket expenses referred to under Section 11. A party will determine its
Loss as of the relevant Early Termination Date, or, if that is not reasonably
practicable, as of the earliest date thereafter as is reasonably practicable. A
party may (but need not) determine its Loss by reference to quotations of
relevant rates or prices from one or more leading dealers in the relevant
markets.
"MARKET QUOTATION" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from Reference Market-makers. Each quotation will be for an amount,
if any, that would be paid to such party (expressed as a negative number) or by
such party (expressed as a positive number) in consideration of an agreement
between such party (taking into account any existing Credit Support Document
with respect to the obligations of such party) and the quoting Reference
Market-maker to enter into a transaction (the "Replacement Transaction") that
would have the effect of preserving for such party the economic equivalent of
any payment or delivery (whether the underlying obligation was absolute or
contingent and assuming the satisfaction of each applicable condition precedent)
by the parties under Section 2(a)(i) in respect of such Terminated Transaction
or group of Terminated Transactions that would, but for the occurrence of the
relevant Early Termination Date, have been required after that date. For this
purpose, Unpaid Amounts in respect of the Terminated Transaction or group of
Terminated Transactions are to be excluded but, without limitation, any payment
or delivery that would, but for the relevant Early Termination Date, have been
required (assuming satisfaction of each applicable condition precedent) after
that Early Termination Date is to be included. The Replacement Transaction would
be subject to such documentation as such party and the Reference Market-maker
may, in good faith, agree. The party making the determination (or its agent)
will request each Reference Market-maker to provide its quotation to the extent
reasonably practicable as of the same day and time (without regard to different
time zones) on or as soon as reasonably practicable after the relevant Early
Termination Date. The day and time as of which those quotations are to be
obtained will be selected in good faith by the party obliged to make a
determination under Section 6(e), and, if each party is so obliged, after
consultation with the other. If more than three quotations are provided, the
Market Quotation will be the arithmetic mean of the quotations, without regard
to the quotations having the highest and lowest values. If exactly three such
quotations are provided, the Market Quotation will be the quotation remaining
after disregarding the highest and lowest quotations. For this purpose, if more
than one quotation has the same highest value or lowest value, then one of such
quotations shall be disregarded. If fewer than three quotations are provided, it
will be deemed that the Market Quotation in respect of such Terminated
Transaction or group of Terminated Transactions cannot be determined.
"NON-DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it) if
it were to fund the relevant amount.
"NON-DEFAULTING PARTY" has the meaning specified in Section 6(a).
"OFFICE" means a branch or office of a party, which may be such party's head or
home office.
"POTENTIAL EVENT OF DEFAULT" means any event which, with the giving of notice or
the lapse of time or both, would constitute an Event of Default.
"REFERENCE MARKET-MAKERS" means four leading dealers in the relevant market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria that
such party applies generally at the time in deciding whether to offer or to make
16
an extension of credit and (b) to the extent practicable, from among such
dealers having an office in the same city. "RELEVANT JURISDICTION" means, with
respect to a party, the jurisdictions (a) in which the party is incorporated,
organised, managed and controlled or considered to have its seat, (b) where an
Office through which the party is acting for purposes of this Agreement is
located, (c) in which the party executes this Agreement and (d) in relation to
any payment, from or through which such payment is made.
"SCHEDULED PAYMENT DATE" means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.
"SET-OFF" means set-off, offset, combination of accounts, right of retention or
withholding or similar right or requirement to which the payer of an amount
under Section 6 is entitled or subject (whether arising under this Agreement,
another contract, applicable law or otherwise) that is exercised by, or imposed
on, such payer.
"SETTLEMENT AMOUNT" means, with respect to a party and any Early Termination
Date, the sum of: -
(e) the Termination Currency Equivalent of the Market Quotations (whether
positive or negative) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation is determined; and
(f) such party's Loss (whether positive or negative and without reference to any
Unpaid Amounts) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation cannot be determined or would not (in
the reasonable belief of the party making the determination) produce a
commercially reasonable result.
"SPECIFIED ENTITY" has the meanings specified in the Schedule.
"SPECIFIED INDEBTEDNESS" means, subject to the Schedule, any obligation (whether
present or future, contingent or otherwise, as principal or surety or otherwise)
in respect of borrowed money.
"SPECIFIED TRANSACTION" means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of such
party or any applicable Specified Entity of such party) and the other party to
this Agreement (or any Credit Support Provider of such other party or any
applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), (b) any combination of
these transactions and (c) any other transaction identified as a Specified
Transaction in this Agreement or the relevant confirmation.
"STAMP TAX" means any stamp, registration, documentation or similar tax.
"TAX" means any present or future tax, levy, impost, duty, charge, assessment or
fee of any nature (including interest, penalties and additions thereto) that is
imposed by any government or other taxing authority in respect of any payment
under this Agreement other than a stamp, registration, documentation or similar
tax.
"TAX EVENT" has the meaning specified in Section 5(b).
"TAX EVENT UPON MERGER" has the meaning specified in Section 5(b).
"TERMINATED TRANSACTIONS" means with respect to any Early Termination Date (a)
if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in effect
immediately before the effectiveness of the notice designating that Early
Termination Date (or, if "Automatic Early Termination" applies, immediately
before that Early Termination Date).
"TERMINATION CURRENCY" has the meaning specified in the Schedule.
17
"TERMINATION CURRENCY EQUIVALENT" means, in respect of any amount denominated in
the Termination Currency, such Termination Currency amount and, in respect of
any amount denominated in a currency other than the Termination Currency (the
"Other Currency"), the amount in the Termination Currency determined by the
party making the relevant determination as being required to purchase such
amount of such Other Currency as at the relevant Early Termination Date, or, if
the relevant Market Quotation or Loss (as the case may be), is determined as of
a later date, that later date, with the Termination Currency at the rate equal
to the spot exchange rate of the foreign exchange agent (selected as provided
below) for the purchase of such Other Currency with the Termination Currency at
or about 11:00 a.m. (in the city in which such foreign exchange agent is
located) on such date as would be customary for the determination of such a rate
for the purchase of such Other Currency for value on the relevant Early
Termination Date or that later date. The foreign exchange agent will, if only
one party is obliged to make a determination under Section 6(e), be selected in
good faith by that party and otherwise will be agreed by the parties.
"TERMINATION EVENT" means an Illegality, a Tax Event or a Tax Event Upon Merger
or, if specified to be applicable, a Credit Event Upon Merger or an Additional
Termination Event.
"TERMINATION RATE" means a rate per annum equal to the arithmetic mean of the
cost (without proof or evidence of any actual cost) to each party (as certified
by such party) if it were to fund or of funding such amounts.
"UNPAID AMOUNTS" owing to any party means, with respect to an Early Termination
Date, the aggregate of (a) in respect of all Terminated Transactions, the
amounts that became payable (or that would have become payable but for Section
2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date and
(b) in respect of each Terminated Transaction, for each obligation under Section
2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be
settled by delivery to such party on or prior to such Early Termination Date and
which has not been so settled as at such Early Termination Date, an amount equal
to the fair market value of that which was (or would have been) required to be
delivered as of the originally scheduled date for delivery, in each case
together with (to the extent permitted under applicable law) interest, in the
currency of such amounts, from (and including) the date such amounts or
obligations were or would have been required to have been paid or performed to
(but excluding) such Early Termination Date, at the Applicable Rate. Such
amounts of interest will be calculated on the basis of daily compounding and the
actual number of days elapsed. The fair market value of any obligation referred
to in clause (b) above shall be reasonably determined by the party obliged to
make the determination under Section 6(e) or, if each party is so obliged, it
shall be the average of the Termination Currency Equivalents of the fair market
values reasonably determined by both parties.
18
IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
DEUTSCHE BANK AG, ACTING THROUGH ITS NELNET STUDENT LOAN TRUST 2006-2
NEW YORK BRANCH
By: ▇▇▇▇▇ FARGO DELAWARE TRUST COMPANY,
not in its individual capacity but
solely in its capacity as Delaware
Trustee
By:/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------ ----------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Name: ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Director Title: Vice President
Date: Date:
By:/s/ ▇ ▇ ▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇
Title: Vice President
Date:
CONFIRMATION
May __, 2006
Nelnet Student Loan Trust 2006-2
c/o Wells Fargo Delaware Trust Company
Corporate Trust Services
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Our Reference:
Subject: Euro/USD Cross Currency Swap Transaction in respect of Class A-7 Notes
Dear Sir/Madam:
The purpose of this letter agreement (this "Confirmation") is to confirm the
terms and conditions of the above referenced cross-currency swap transaction
entered into on the Trade Date specified below (the "Swap Transaction") between
Deutsche Bank AG, acting through its New York Branch ("DBAG") and Nelnet Student
Loan Trust 2006-2 (the "Trust"). This Confirmation constitutes a "Confirmation"
as referred to in the Master Agreement specified below.
The definitions and provisions contained in the 2000 ISDA Definitions, as
published by the International Swaps and Derivative Association, Inc., in effect
on the date of this Confirmation, without regard to any revision or subsequent
edition thereof (the "ISDA Definitions"), shall be incorporated into this
Confirmation. In the event of any inconsistency between the ISDA Definitions and
the Agreement or this Confirmation, the Agreement or, as the case may be, this
Confirmation shall prevail.
Unless otherwise defined in this Confirmation, terms used in this Confirmation
but not defined herein shall have the meanings ascribed to such terms in that
certain Indenture dated as of May 1, 2006 (including, but not limited to, any
and all appendices and exhibits thereto)(collectively, the "Indenture"), by and
among the Trust, Zions First National Bank, as the eligible lender trustee, and
Zions First National Bank, as the indenture trustee, as the same may be amended,
modified, supplemented, restated or replaced from time to time. In the event of
any inconsistency between the ISDA Definitions, the Master Agreement, this
Confirmation and the Indenture, the Indenture shall prevail.
This Confirmation supplements, forms part of, and is subject to, the 1992 ISDA
Master Agreement (Multicurrency - Cross Border), dated as of May 18, 2006 (the
"Master Agreement"), between you and us, as the same may be amended, modified
and supplemented from time to time. All provisions contained in, or incorporated
by reference to, the Master Agreement shall govern this Confirmation except as
expressly modified below. In the event of any inconsistency between this
Confirmation, the ISDA Definitions or the Master Agreement, as the case may be,
this Confirmation will prevail for purposes of the Swap Transaction to which
this Confirmation relates.
The terms of the particular Swap Transaction to which this Confirmation relates
are as follows:
Trade Date: May 9, 2006
Effective Date: May 18, 2006
Scheduled Termination Date: January 26, 2037
Termination Date: The earliest to occur of:
(i) the date on which the Class
A-7 Notes are remarketed or
purchased, as applicable, from
the Class A-7 Noteholders
following a successful
Remarketing or exercise of the
Call Option;
(ii) the Quarterly Distribution
Date on which the outstanding
principal balance of the Class
A-7 Notes is reduced to zero
(including as the result of the
redemption of the Class A-7
Notes); and
(iii) the Scheduled Termination
Date.
Value Before Value:
Notwithstanding any other
provision of this Confirmation,
the following provisions shall
be applicable to this Swap
Transaction:
2
(i) if, on any date, the Trust
owes a Trust Initial Exchange
Amount, LIBOR Floating Amount,
Trust Interim Exchange Amount,
Trust Final Exchange Amount or
Trust Additional Interest Amount
(each, a "Trust Payment") to
DBAG, then DBAG shall not be
required to pay the related DBAG
Initial Exchange Amount, EURIBOR
Floating Amount, DBAG Interim
Exchange Amount, DBAG Final
Exchange Amount or DBAG
Additional Interest Amount
(each, a "Related DBAG
Payment"), as applicable, to the
Trust unless DBAG has first
received the relevant Trust
Payment that the Trust owes to
DBAG;
(ii) if DBAG receives a Trust
Payment in USD from the Trust at
or before 10:00 a.m. (New York
time) on any Business Day, DBAG
shall be required to make the
Related DBAG Payment in EUR to
the Trust at or before 3:30 p.m.
(London time) on the same
Business Day;
(iii) if DBAG receives a Trust
Payment in USD from the Trust
after 10:00 a.m. (New York time)
on any Business Day, DBAG shall
be required to make the Related
DBAG Payment in EUR to the Trust
at or before 3:30 p.m. (London
time) on the following Business
Day; and
3
(iv) if, on any date, DBAG
receives any Trust Payment from
the Trust in an amount that is
less than the amount of the
payment that the Trust was
required to make on such date
under the terms of this Swap
Transaction, then a
proportionate reduction, based
upon the Constant Exchange Rate,
shall be made by the Calculation
Agent in the amount of the
Related DBAG Payment, and DBAG
shall only be required to pay
the so reduced amount of such
Related DBAG Payment to the
Trust.
Constant Exchange Rate: EUR 1.00 to USD 1.2759984688
Indenture Reset Date(s): April 25, 2016 (the "Initial
Indenture Reset Date") and, if a
Failed Remarketing occurs in
respect of the Initial Indenture
Reset Date, each subsequent
Reset Date (as defined in the
Indenture) in respect of the
Class A-7 Notes that occurs
prior to the Final Exchange
Date.
Initial Exchange:
Initial Exchange Date: Effective Date
DBAG Initial Exchange Amount: USD 450,000,000
Trust Initial Exchange Amount: EUR 352,665,000
Payment of Initial Exchange Amounts: On the Initial Exchange Date,
▇.▇. ▇▇▇▇▇▇ Securities Ltd.
shall pay the Trust Initial
Exchange Amount to HSBC Bank
plc, and HSBC Bank plc shall pay
the Trust Initial Exchange
Amount to DBAG; DBAG shall pay
the DBAG Initial Exchange Amount
to the Trust.
EURIBOR Floating Amounts:
EURIBOR Floating Rate Payer: DBAG
4
EURIBOR Floating Rate Payer
Currency Amount: As of any date, with respect to
a Calculation Period, an amount
equal to EUR 352,665,000 minus
the aggregate amount of all DBAG
Interim Exchange Amounts paid
prior to such date.
EURIBOR Floating Rate:
Except for the initial
Calculation Period,
EUR-EURIBOR-Telerate; provided,
however, that the term "TARGET
Settlement Days" shall mean any
day on which the Trans-European
Automated Real-time Gross
Settlement Express Transfer
System is open for business and
which is also a day on which
banks in New York, New York are
open for business and if for any
EURIBOR Reset Date,
EUR-EURIBOR-Telerate for the
relevant Designated Maturity
does not appear on Telerate Page
248 on the day that is two
TARGET Settlement Days prior to
that EURIBOR Reset Date and the
Reference Banks selected by the
Administrator are not providing
quotations as provided in the
definition of
"EUR-EURIBOR-Reference Banks",
the Floating Rate for the
relevant Calculation Period will
be the Floating Rate in effect
for the previous Calculation
Period.
For the initial Calculation
Period, the EURIBOR Floating
Rate will be determined by the
following formula:
x + (6/33 * (y-x)
where:
x = EUR-EURIBOR-Telerate for a
Designated Maturity of
five-months, and y =
EUR-EURIBOR-Telerate for a
Designated Maturity of
six-months.
EURIBOR Designated Maturity: Three (3) months.
EURIBOR Spread: 0.10% per annum, in respect of
each Calculation Period ending
on or before the Initial
Indenture Reset Date and
thereafter, 0.55% per annum.
5
EURIBOR Floating Rate Payer
Period End Dates: The 25th of each January, April,
July and October during the term
hereof, commencing on 25 October
2006 to and including the
Termination Date, subject to
adjustment in accordance with
the Following Business Day
Convention.
EURIBOR Floating Rate Payer
Payment Dates: Early Payment applies - three
(3) Business Days prior to the
applicable Floating Rate Payer
Period End Date.
EURIBOR Floating Rate Day Count Fraction: Actual/360.
EURIBOR Reset Dates: First day of each Calculation
Period.
EURIBOR Floating Amount Value For the avoidance of doubt, the
Before Value: obligation of DBAG to pay any
EURIBOR Floating Amount is
subject to the terms of the
Value Before Value section of
this Confirmation.
LIBOR Floating Amounts:
LIBOR Floating Rate Payer: The Trust
LIBOR Floating Rate Payer As at any date, with respect to
Currency Amount: a Calculation Period, an amount
equal to USD 450,000,000 minus
the aggregate of all Trust
Interim Exchange Amounts paid
prior to such date.
LIBOR Floating Rate: Except for the initial
Calculation Period, USD-
LIBOR-BBA; provided, however,
that the term "London Banking
Days" shall mean a Business Day
in New York and London and if
for any LIBOR Reset Date,
USD-LIBOR-BBA for the relevant
Designated Maturity does not
appear on Telerate Page 3750 on
the day that is two London
Banking Days prior to that LIBOR
Reset Date and the Reference
Banks selected by the
Administrator are not providing
quotations as provided in the
definition of
"USD-LIBOR-Reference Banks", the
Floating Rate for the relevant
Calculation Period will be the
Floating Rate in effect for the
previous Calculation Period. For
the initial Calculation Period,
the LIBOR Floating Rate will be
determined by the following
formula:
6
x + (6/33 * (y-x))
where:
x = USD-LIBOR-BBA, in respect of
a Designated Maturity for five
months and y = USD-LIBOR-BBA in
respect of Designated Maturity
for six months.
LIBOR Designated Maturity: Three (3) months.
LIBOR Spread: 0.0852% per annum, in respect of
each Calculation Period ending
on or before the Initial
Indenture Reset Date and
thereafter, 0.75% per annum.
LIBOR Floating Rate Payer The 25th of each January, April,
Period End Dates: July and October commencing on
25 October 2006 to and including
the Termination Date, subject to
adjustment in accordance with
the Following Business Day
Convention.
LIBOR Floating Rate Payer Early Payment applies - three
Payment Dates: (3) Business Days prior to each
Floating Rate Payer Period End
Date.
LIBOR Floating Rate Day Count Fraction: Actual/360.
LIBOR Reset Dates: First day of each Calculation
Period.
Interim Exchanges:
Interim Exchange Date: If a Failed Remarketing occurs
in respect of the Initial
Indenture Reset Date or any
subsequent Indenture Reset Date,
such Initial Indenture Reset
Date and each such subsequent
Indenture Reset Date, as
applicable, subject to
adjustment in accordance with
the Following Business Day
Convention.
7
Trust Interim Exchange Amount: In respect of any Interim
Exchange Date the USD amount
allocable to the Class A-7 Notes
in respect of principal for that
Interim Exchange Date and
available for payment to the
Class A-7 Noteholders pursuant
to the Indenture.
DBAG Interim Exchange Amount: In respect of any Interim
Exchange Date, an amount equal
to the Trust Interim Exchange
Amount converted to EUR using
the Constant Exchange Rate.
Payment of Interim Exchange Amounts: On the Interim Exchange Date,
the Trust shall pay the Trust
Interim Exchange Amount to DBAG,
and, subject to the terms of the
Value Before Value section of
this Confirmation, DBAG shall
pay the DBAG Interim Exchange
Amount to the Trust.
Final Exchange:
Final Exchange Date: The earliest to occur of (i) the
Indenture Reset Date on which
the Class A-7 Notes are reset
following a successful
Remarketing, (ii) the Indenture
Reset Date in respect of which
the Call Option for the Class
A-7 Notes is exercised and fully
funded, (iii) the third (3rd)
Business Day prior to the
Quarterly Distribution Date on
which the outstanding principal
balance of the Class A-7 Notes
will be reduced to zero
(provided, that if the Class A-7
Notes are being redeemed as a
result of the Trust selling the
Student Loans, the Final
Exchange Date shall be the date
designated by the Administrator
in a written notice to DBAG that
the Student Loans will be sold,
which date shall be at least one
Business Day following receipt
by DBAG of such written notice,
but prior to the Quarterly
Distribution Date) or (iv) the
third (3rd) Business Day prior
to the Scheduled Termination
Date.
8
Trust Final Exchange Amount: In respect of the Final Exchange
Date, the Trust Final Exchange
Amount shall equal the sum of
(i) the USD amount allocable to
the Class A-7 Notes in respect
of principal for that Final
Exchange Date and available for
payment to the Class A-7
Noteholders pursuant to the
Indenture plus (ii) the USD
amount (if any) received by the
Trust and allocable to the Class
A-7 Notes in respect of
principal as a result of the
successful Remarketing, the
exercise of the Option Call or
the redemption of the Class A-7
Notes, as applicable. For
avoidance of doubt, the Trust
Final Exchange Amount shall in
no event exceed the then current
LIBOR Floating Rate Payer
Currency Amount.
DBAG Final Exchange Amount: The DBAG Final Exchange Amount
shall equal the Trust Final
Exchange Amount converted to EUR
using the Constant Exchange
Rate.
Payment of Final Exchange Amounts: On the Final Exchange Date, the
Trust shall pay the Trust Final
Exchange Amount to DBAG, and,
subject to the terms of the
Value Before Value section of
this Confirmation, DBAG shall
pay the DBAG Final Exchange
Amount to the Trust.
Additional Interest:
Additional Interest Exchange Date: The Initial Indenture Reset Date.
Trust Additional Interest Amount: If the Initial Indenture Reset
Date is an Interim Exchange Date
or the Final Exchange Date,
interest on the Trust Interim
Exchange Amount or Trust Final
Exchange Amount, as applicable,
for a period of up to two (2)
Business Days, as selected by
the Trust in its sole
discretion, at a per annum
interest rate equal to the sum
of the LIBOR Floating Rate and
the LIBOR Spread for the
Calculation Period ending on
such Interim Exchange Date or
Final Exchange Date.
9
DBAG Additional Interest Amount: If the Initial Indenture Reset
Date is an Interim Exchange Date
or the Final Exchange Date,
interest on the DBAG Interim
Exchange Amount or DBAG Final
Exchange Amount, as applicable,
for the same time period covered
by the Trust Additional Interest
Amount, at a per annum interest
rate equal to the sum of the
EURIBOR Floating Rate and the
EURIBOR Spread for the
Calculation Period ending on
such Interim Exchange Date or
Final Exchange Date.
Payment of Additional Interest Amounts: On the Additional Interest
Exchange Date, the Trust shall
pay the Trust Additional
Interest Amount to DBAG, and,
subject to the terms of the
Value Before Value section of
this Confirmation, DBAG shall
pay the DBAG Additional Interest
Amount to the Trust.
Other Provisions:
Calculation Agent: DBAG
Business Days: New York, London and TARGET
Settlement Days.
Certain Notifications: The Trust shall cause the
Administrator to notify
theCalculation Agent whether the
Trust has the Available Funds to
pay any LIBOR Floating Amounts,
Trust Interim Exchange Amounts
or Trust Final Exchange Amount
in full when due on or before
each Payment Date and to provide
the Calculation Agent with such
other information, reports or
notices as the Calculation Agent
may reasonably request. The
10
Calculation Agent shall notify
the other party hereto and the
Administrator of the equivalent
amount in EUR to be paid by DBAG
in respect of each LIBOR
Floating Amount, Trust Interim
Exchange Payment or Trust Final
Exchange Amounts to be made
under the Agreement on each
Floating Rate Payer Payment
Date, each Interim Exchange Date
and the Final Exchange Date, as
applicable, promptly following
receipt by the Calculation Agent
from the Trust (or the
Administrator on its behalf) of
the information required to
determine such amounts.
The Administrator shall provide
notice to DBAG five Business
Days prior to each Quarterly
Distribution Date of any amounts
it is requesting the Trustee
deposit into the Accumulation
Account for the Class A-7 Notes
as principal. Such notice shall
be for informational purposes
only.
Account Details:
Payments to DBAG:
For EUR:
Account With: Deutsche Bank AG, Frankfurt
Swift Code: ▇▇▇▇▇▇▇▇
Favor Of: Deutsche Bank AG, New York
Account Number: 958409510
For USD:
Account With: DB Trust Co. Americas, New York
Swift Code: ▇▇▇▇▇▇▇▇
Favor Of: Deutsche Bank AG, New York
Account Number: 01473969
11
Payments to the Trust:
For EUR:
Account With: HSBC Bank plc, London
SWIFT: ▇▇▇▇▇▇▇▇
Sort Code: 40-05-15
Account No: ▇▇▇▇▇▇▇▇
Account Name: Zions Bank as Trustee for Nelnet
Student Loans Trust Nelnet
Reference:
12
For USD:
Account Name: Nelnet Student Loan Trust 2006-2
Account Bank: Zions First National Bank
Account Number: 80000219
ABA: 124000054
Ref: Nelnet SLT 2006-2
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇ Tel: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ Tel: (▇▇▇) ▇▇▇-▇▇▇▇
[THE NEXT PAGE IS THE SIGNATURE PAGE.]
13
Please check this confirmation carefully and immediately upon receipt so that
errors and discrepancies can be promptly identified and rectified.
We are pleased to have executed this Swap Transaction with you.
DEUTSCHE BANK AG, acting through its New York Branch
By:/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Assistant Vice President
By:/s/ Cloris Eng
------------------------
Name: Cloris Eng
Title: Assistant Vice President
Accepted and confirmed as of the Trade Date first above written:
NELNET STUDENT LOAN TRUST 2006-2
By: ▇▇▇▇▇ FARGO DELAWARE TRUST COMPANY,
not in its individual capacity but solely in its capacity as
Delaware Trustee
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------
Name: ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
EXECUTION COPY
SCHEDULE
to the
1992 ISDA MASTER AGREEMENT
dated as of May 18, 2006
between
DEUTSCHE BANK AG, ACTING THROUGH ITS NEW YORK BRANCH
("PARTY A")
and
NELNET STUDENT LOAN TRUST 2006-2
("PARTY B")
PART 1. TERMINATION PROVISIONS
(a) "Specified Entity" means in relation to Party A for the purpose of:
Section 5(a)(v) (Default under Specified Transaction),
Not Applicable.
Section 5(a)(vi) (Cross Default), Not Applicable.
Section 5(a)(vii) (Bankruptcy), Not Applicable.
Section 5(b)(iv) (Credit Event Upon Merger), Not Applicable.
and in relation to Party B for the purpose of:
Section 5(a)(v) (Default under Specified Transaction),
Not Applicable.
Section 5(a)(vi) (Cross Default), Not Applicable.
Section 5(a)(vii) (Bankruptcy), Not Applicable.
Section 5(b)(iv) (Credit Event Upon Merger), Not Applicable.
(b) EVENTS OF DEFAULT. Notwithstanding anything in this Agreement to the
contrary, the following Events of Default shall apply to the specified
party:
-------- ---------------------------------------------------- ---------------- ----------------
Party A Party B
-------- ---------------------------------------------------- ---------------- ----------------
(i) Section 5(a)(i), Failure to Pay or Deliver Applicable Applicable
-------- ---------------------------------------------------- ---------------- ----------------
(ii) Section 5(a)(ii), Breach of Agreement Applicable Not Applicable
-------- ---------------------------------------------------- ---------------- ----------------
(iii) Section 5(a)(iii), Credit Support Default Applicable Not Applicable
-------- ---------------------------------------------------- ---------------- ----------------
(iv) Section 5(a)(iv), Misrepresentation Applicable Not Applicable
-------- ---------------------------------------------------- ---------------- ----------------
(v) Section 5(a)(v), Default Under Specified Transaction Not Applicable Not Applicable
-------- ---------------------------------------------------- ---------------- ----------------
(vi) Section 5(a)(vi), Cross Default Applicable Not Applicable
-------- ---------------------------------------------------- ---------------- ----------------
(vii) Section 5(a)(vii), Bankruptcy Applicable Applicable
-------- ---------------------------------------------------- ---------------- ----------------
(viii) Section 5(a)(viii), Merger Without Assumption Applicable Not Applicable
-------- ---------------------------------------------------- ---------------- ----------------
provided, however; that with respect to Section 5(a)(i), a comma shall be
inserted after the word "party" in the third line of such Section, and following
such comma, the words "provided, that with respect to Party B, Party B has
available, after all prior obligations of Party B, sufficient funds to make the
payment" at the end of such Section; and provided further that with respect to
Section 5(a)(vii), (i) clauses (2) and (9) shall not be applicable to Party B;
(ii) clause (4) shall not apply to the institution of any proceedings described
therein with respect to Party B, if such proceedings were instituted by Party A
or its Affiliates (but this provision shall not affect Party A's rights under
the proviso in Part 5(f) of this Schedule); (iii) in clause (6), the words
"seeks or" shall not be applicable to Party B; and (iv) for purposes of clauses
(6) and (7), the appointment of the Trustee or other secured party by Party B or
the Noteholders for the purpose of holding all or a substantial portion of the
assets of Party B for the benefit of the Noteholders or Party A does not qualify
as the appointment of a trustee, custodian or similar official under clause (6)
or as a secured party taking possession of the assets of Party B under clause
(7).
For purposes of Section 5(a)(vi), the "Cross Default" provisions shall be
amended by adding at the end thereof the following words:
"provided, however, that, notwithstanding the foregoing, an Event of
Default shall not occur under either (1) or (2) above if (A) (I) the
default, or other similar event or condition referred to in (1) or the
failure to pay referred to in (2) is a failure to pay or deliver caused
by an error or omission of an administrative or operational nature,
and(II) funds or the asset to be delivered were available to such party
to enable it to make the relevant payment or delivery when due and
(III) such payment or delivery is made within three (3) Local Business
Days following receipt of written notice from an interested party of
such failure to pay, or (B) such party was precluded from paying, or
was unable to pay, using reasonable means, through the office of the
party through which it was acting for purposes of the relevant
Specified Indebtedness, by reason of force majeure, act of State,
illegality or impossibility."
1
For purposes of Section 5(a)(vi), the definition of "Specified Indebtedness"
shall be amended in its entirety to read as follows:
"Specified Indebtedness" means any obligation (whether present or
future, contingent or otherwise) in respect of borrowed money (other
than indebtedness in respect of bank deposits received in the ordinary
course of business).
With regard to Party A, "Threshold Amount" means, at any time, 3% of its
shareholders' equity (i.e., the sum of its capital and disclosed reserves).
(c) TERMINATION EVENTS. Notwithstanding anything in this Agreement to the
contrary, the following Termination Events shall apply to the specified
party:
-------- ------------------------------------------ --------------- -----------------
Party A Party B
-------- ------------------------------------------ --------------- -----------------
(i) Section 5(b)(i), Illegality Applicable Applicable
-------- ------------------------------------------ --------------- -----------------
(ii) Section 5(b)(ii), Tax Event Applicable Applicable
-------- ------------------------------------------ --------------- -----------------
(iii) Section 5(b)(iii), Tax Event Upon Merger Applicable Not Applicable
-------- ------------------------------------------ --------------- -----------------
(iv) Section 5(b)(iv), Credit Event Upon Merger Not Applicable Not Applicable
-------- ------------------------------------------ --------------- -----------------
(d) The "AUTOMATIC EARLY TERMINATION" provisions of Section 6(a) will not
apply to Party A or to Party B.
(e) PAYMENTS ON EARLY TERMINATION. For the purpose of Section 6(e):
"MARKET QUOTATION" and "SECOND METHOD" will apply for the purpose of
Section 6(e) of this Agreement.
(f) "TERMINATION CURRENCY" means U.S. Dollars.
(g) Each of the following events shall constitute an additional "EVENT OF
DEFAULT" for purposes of Section 5(a), as to which Party B will be the
Defaulting Party:
(i) an acceleration of the principal of the Notes following an Event
of Default (as defined in the Indenture) under Section 6.01(a)
or Section 6.01(b) of the Indenture which acceleration has
become non-rescindable and non-waivable; or
(ii) an acceleration of the principal of the Notes following an Event
of Default (as defined in the Indenture) under Section 6.01(c)
of the Indenture which acceleration has become non-rescindable
and non-waivable, and pursuant to which the Trustee has
liquidated the Trust Estate, including, but not limited to, the
Financed Eligible Loans.
(h) The "ADDITIONAL TERMINATION EVENT" provisions of Section 5(b)(v) will
apply. Each of the following shall constitute an Additional Termination
Event:
(i) a Downgrade Event occurs and is continuing in respect of Party
A, in which case Party A will be the sole Affected Party and all
Transactions will be Affected Transactions. "DOWNGRADE EVENT"
means that an S&P Downgrade, an S&P Replacement Event, a ▇▇▇▇▇'▇
Downgrade, a ▇▇▇▇▇'▇ Replacement Event, a Fitch Downgrade or a
Fitch Replacement Event (each, a "Relevant Downgrade") occurs,
and Party A fails to take one of the actions required under Part
1(i) in respect of such Relevant Downgrade within the time
period specified for such action in Part 1(i);
(ii) failure by Party A to comply with or perform any agreement or
undertaking to be complied with or performed by Party A in
accordance with the Disclosure Agreement, or to secure, at its
own cost, another entity to replace Party A as party to this
Agreement on terms substantially similar to this Agreement which
entity (or a guarantor therefor) meets or exceeds the Required
Ratings (as defined below) and which satisfies the Rating Agency
Condition and which entity is able to comply with the
requirements of Item 1115 of Regulation AB, or to promptly post
collateral satisfactory to Party B in an amount sufficient to
2
reduce the signficance percentage below 20% pursuant to the
Credit Support Annex or similar agreement such that Party A is
able to comply with the Disclosure Agreement, if such failure is
not remedied on or before the fifteenth business day after
notice of such failure is given to Party A, in which case Party
A will be the sole Affected Party and all Transactions will be
Affected Transactions; and
(iii) without the prior written consent of Party A, Party B waives any
provision of, or amends or otherwise modifies the Indenture or
any other Basic Document in any manner that would adversely and
materially affect Party A under this Agreement, in which case
Party B will be the sole Affected Party and all Transactions
will be Affected Transactions.
(i) CERTAIN DOWNGRADES.
(i) In the event that any Notes rated by Standard & Poor's Rating
Services, a division of The ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc. ("S&P")
remain outstanding, if the short-term rating assigned by S&P to
the unsecured, unsubordinated debt of Party A falls below
"A-1+", or in the absence of a short-term rating, the long-term
debt rating assigned by S&P to the unsecured, unsubordinated
debt of Party A falls below "AA-" (such downgrade, an "S&P
Downgrade"), then, within thirty (30) calendar days of the date
of such S&P Downgrade, Party A shall:
(1) either (i) transfer all of its rights and obligations
under this Agreement to another entity with the
Required Ratings or whose credit support provider has
the Required Ratings, or (ii) cause an entity with
the Required Ratings to guarantee Party A's
obligations under this Agreement, such guarantee to
be subject to a Rating Confirmation from S&P; or
(2) post collateral in an amount equal to the Credit
Support Amount (as defined in the Credit Support
Annex) in accordance with the Credit Support Annex,
which shall be subject to a Rating Confirmation by
S&P. If the short-term rating assigned by S&P to the
unsecured, unsubordinated debt of Party A falls below
"A-1+", then Party A shall, in addition to posting
collateral, provide (within thirty (30) calendar days
after such downgrade) a legal opinion addressed to
S&P and Party B regarding the ability of Party B to
have timely access to the collateral following the
bankruptcy or insolvency of Party A. Such legal
opinion shall be subject to Rating Confirmation.
Without limiting the foregoing, if an S&P Downgrade occurs and
such S&P Downgrade is to a level that is more than one S&P
rating gradation (within a rating category) below the relevant
S&P Required Rating, Party A shall be required (without
duplication) to post collateral in an amount equal to Party
B's Exposure (as defined in the Credit Support Annex)(but not
the Rating Agency Amount (as defined in the Credit Support
Annex)) in accordance with the Credit Support Annex within one
(1) Business Day after such S&P Downgrade; provided that any
failure by Party A to provide collateral in accordance with
the terms of this sentence shall not constitute an Additional
Termination Event under Part 1(h) unless such failure is not
corrected within two (2) Business Days after notice from Party
B.
(ii) In the event that any Notes rated by S&P remain outstanding, if
the long-term debt rating assigned by S&P to the unsecured,
unsubordinated debt of Party A falls below "BBB-" (such
downgrade, an "S&P Replacement Event"), then, within ten (10)
Business Days of the date of such S&P Replacement Event, Party A
shall transfer all of its rights, and obligations under this
Agreement to another entity with the Required Ratings or whose
credit support provider has the Required Ratings.
(iii) In the event that any Notes rated by ▇▇▇▇▇'▇ Investors Service,
Inc. ("Moody's") remain outstanding, (x) if Party A has no
short-term rating by Moody's, the long-term debt rating assigned
by Moody's to the unsecured, unsubordinated debt of Party A
falls below "A1", or (y) if Party A has both short-term and
long-term ratings by Moody's, the short-term debt rating
assigned by Moody's to the unsecured, unsubordinated debt of
Party A falls below "P-1" or the long-term debt rating assigned
by Moody's to the unsecured, unsubordinated debt of Party A
falls below "A2" (either downgrade under the foregoing clause
(x) and (y), a "Moody's Downgrade"), then Party A shall:
3
(1) within thirty (30) Business Days of the date of the
Moody's Downgrade, post collateral in an amount equal to
the Credit Support Amount (as defined in the Credit
Support Annex) in accordance with the Credit Support
Annex; or
(2) within thirty (30) Business Days of the date of the
Moody's Downgrade, transfer all of its rights and
obligations under this Agreement to another entity with
the Required Ratings or whose credit support provider
has the Required Ratings; or
(3) within thirty (30) Business Days of the date of the
Moody's Downgrade, cause an entity with the Required
Ratings to guarantee or provide an indemnity in respect
of Party A's obligations under this Agreement in a form
and substance reasonably satisfactory to Moody's.
Without limiting the foregoing, if a Moody's Downgrade occurs
and such Moody's Downgrade is to a level that is more than one
▇▇▇▇▇'▇ rating gradation (within a rating category) below the
relevant Moody's Required Rating, Party A shall be required
(without duplication) to post collateral in an amount equal to
Party B's Exposure (as defined in the Credit Support
Annex)(but not the Rating Agency Amount (as defined in the
Credit Support Annex)) in accordance with the Credit Support
Annex within one (1) Business Day after such Moody's
Downgrade; provided that any failure by Party A to provide
collateral in accordance with the terms of this sentence shall
not constitute an Additional Termination Event under Part 1(h)
unless such failure is not corrected within two (2) Business
Days after notice from Party B.
(iv) In the event that any Notes rated by Moody's remain outstanding,
if the short-term rating assigned by Moody's to the unsecured,
unsubordinated debt of Party A falls below "P2" or the long-term
debt rating assigned by Moody's to the unsecured, unsubordinated
debt of Party A falls below "A3" (such downgrade, a "Moody's
Replacement Event"), then, within 10 Business Days of the date
of such Moody's Replacement Event, Party A shall transfer all of
its rights, and obligations under this Agreement to another
entity with the Required Ratings or whose credit support
provider has the Required Ratings.
(v) In the event that any Notes rated by Fitch, Inc. d/b/a Fitch
Ratings ("Fitch") remain outstanding, if the short-term rating
assigned by Fitch to the unsecured, unsubordinated debt of Party
A falls below "F1" or the long-term debt rating assigned by
Fitch to the unsecured, unsubordinated debt of Party A falls
below "A+" (such downgrade, a "Fitch Downgrade"), then, within
thirty (30) calendar days of the date of such Fitch Downgrade,
Party A shall:
(1) either (i) transfer all of its rights and obligations
under this Agreement to another entity with the Required
Ratings or whose credit support provider has the
Required Ratings, or (ii) cause an entity with the
Required Ratings to guarantee or provide an indemnity in
respect of Party A's obligations under this Agreement in
a form and substance reasonably satisfactory to Fitch;
or
(2) post collateral in an amount equal to the Credit Support
Amount (as defined in the Credit Support Annex) in
accordance with the Credit Support Annex. If the
short-term rating assigned by Fitch to the unsecured,
unsubordinated debt of Party A falls below "F1", Party A
shall, in addition to posting collateral, provide
(within thirty (30) calendar days after such downgrade)
a legal opinion addressed to Fitch and Party B regarding
the ability of Party B to have timely access to the
collateral following the bankruptcy or insolvency of
Party A. Such legal opinion shall be subject to Rating
Confirmation.
4
Without limiting the foregoing, if a Fitch Downgrade occurs and
such Fitch Downgrade is to a level that is more than one Fitch
rating gradation (within a rating category) below the relevant
Fitch Required Rating, Party A shall be required (without
duplication) to post collateral in an amount equal to Party B's
Exposure (as defined in the Credit Support Annex)(but not the
Rating Agency Amount (as defined in the Credit Support Annex))
in accordance with the Credit Support Annex within one (1)
Business Day after such Fitch Downgrade; provided that any
failure by Party A to provide collateral in accordance with the
terms of this sentence shall not constitute an Additional
Termination Event under Part 1(h) unless such failure is not
corrected within two (2) Business Days after notice from Party
B.
(vi) In the event that any Notes rated by Fitch remain outstanding,
if the short-term rating assigned by Fitch to the unsecured,
unsubordinated debt of Party A falls below "F2" or the long-term
debt rating assigned by Fitch to the unsecured, unsubordinated
debt of Party A falls below "BBB-" (such downgrade, a "Fitch
Replacement Event"), then, within 10 business days of the date
of such Fitch Replacement Event, Party A shall transfer all of
its rights, and obligations under this Agreement to another
entity with the Required Ratings or whose credit support
provider has the Required Ratings.
For the avoidance of doubt, for purposes of this Part 1(i),
Party A shall be responsible for: (i) locating a party with
the Required Ratings to transfer (at its own cost) all its
interest in and obligations under this Agreement or to
guarantee or provide an indemnity in respect of, its
obligations under this Agreement or to post collateral in
accordance with the Credit Support Annex; and (ii) any cost
incurred by it in complying with its obligations.
For purposes of the foregoing, "REQUIRED RATINGS" shall mean:
(i) with respect to S&P, a short-term unsecured,
unsubordinated debt rating of "A-1+" from S&P or a long term
unsecured, unsubordinated debt rating of "AA-" from S&P (each,
an "S&P Required Rating"); (ii) with respect to Fitch, a
short-term unsecured, unsubordinated debt rating of "F1" from
Fitch or a long term unsecured, unsubordinated debt rating of
"A+" from Fitch (each, a "Fitch Required Rating"); and (iii)
with respect to Moody's, either (x) an unsecured,
unsubordinated short-term debt rating of "P-1" from Moody's
and unsecured, unsubordinated long-term debt rating of "A2"
from Moody's or (y) if such Person only has a long-term rating
by Moody's, then, a long term unsecured, unsubordinated debt
rating of "A1" from Moody's (each, a "Moody's Required
Rating").
(j) CERTAIN NOTICES. Party B will provide at least ten (10) Local Business
Days' prior written notice to Party A of any proposed waiver, amendment
or modification to the Indenture and the other Basic Documents, and if
Party A does not object within nine (9) Local Business Days after its
receipt of such notice, Party B shall be deemed to have agreed that such
waiver, amendment or other modification is not a material adverse
change; provided, however, that if Party A does, in good faith, make a
timely objection to any proposed waiver, amendment or modification to
the Indenture and the other Basic Documents, Party B will not waive any
provision of, or amend or otherwise modify, the Indenture or any other
Basic Document without the prior written consent of Party A if such
amendment or waiver would adversely and materially affect Party A under
this Agreement.
PART 2. TAX REPRESENTATIONS.
(a) PAYER TAX REPRESENTATIONS. For purposes of Section 3(e), Party A and
Party B each made the following representation:
It is not required by any applicable law, as modified by the practice of
any relevant governmental revenue authority, of any Relevant
Jurisdiction to make any deduction or withholding for or on account of
any Tax from any payment (other than interest under Section 2(e),
6(d)(ii) or 6(e)) to be made by it to the other party under this
Agreement. In making this representation, it may rely on (i) the
accuracy of any representations made by the other party pursuant to
5
Section 3(f), (ii) the satisfaction of the agreement of the other party
contained in Section 4(a)(i) or 4(a)(iii) and the accuracy and
effectiveness of any document provided by the other party pursuant to
Section 4(a)(i) or 4(a)(iii), and (iii) the satisfaction of the
agreement of the other party contained in Section 4(d); provided that it
shall not be a breach of this representation where reliance is placed on
clause (ii) and the other party does not deliver a form or document
under Section 4(a)(iii) by reason of material prejudice to its legal or
commercial position.
(b) PAYEE TAX REPRESENTATIONS. For the purpose of Section 3(f) of this
Agreement, Party A makes the following representations:
It is a "foreign person" within the meaning of the applicable U.S.
Treasury Regulations concerning information reporting and backup
withholding tax (as in effect on January 1, 2001), unless Party A
provides written notice to Party B that it is no longer a foreign
person. In respect of each Transaction it enters into through an
office or discretionary agent in the United States or which
otherwise is allocated for United States federal income tax
purposes to such United States trade or business, each payment
received or to be received by it under such Transaction will be
effectively connected with its conduct of a trade or business in
the United States.
For the purpose of Section 3(f), Party B makes the following
representations:
It is a statutory business trust formed under the laws of the
State of Delaware, and, for United States federal income tax
purposes, it is either treated as a partnership or, if it has a
single owner for United States federal income tax purposes, is
disregarded as an entity separate from such sole owner.
PART 3. AGREEMENT TO DELIVER DOCUMENTS.
For the purpose of Section 4(a), each party agrees to deliver the following
documents, as applicable:
(a) Tax forms, documents, or certificates to be delivered for purposes of
Section 4(a)(i) are:
-------------------------- --------------------------------------------- ------------------------------------
PARTY REQUIRED TO FORMS/DOCUMENTS/CERTIFICATES DATE BY WHICH TO BE DELIVERED
DELIVER DOCUMENT
-------------------------- --------------------------------------------- ------------------------------------
Party A United States Internal Revenue Service (i) Before the first payment is
Form W-8ECI (with all parts fully made under this Agreement, and
completed), or successor form. every three years thereafter,
(ii)promptly upon reasonable
demand by Party A;and (iii) promptly
upon learning that any such form
previously provided by Party B has
become obsolete, incorrect, or ineffective.
-------------------------- --------------------------------------------- ------------------------------------
Party B United States Internal Revenue Service Form (i) Before the first payment is
W-9, or any successor form (but if Party B made under this Agreement, and, if
is disregarded as an entity separate from such form is not IRS Form W-9,
its sole owner for United States federal every three years thereafter, (ii)
income tax purpose, United States Internal promptly upon reasonable demand by
Revenue Service ▇-▇, ▇-▇▇▇▇, ▇-▇▇▇▇ or Party B; and (iii) promptly upon
W-8IMY, as applicable, in respect of such learning that any such form
sole owner, or any applicable successor previously provided by Party A has
form) become obsolete, incorrect, or
ineffective.
-------------------------- --------------------------------------------- ------------------------------------
Party A and Party B Each party shall, as soon as practicable As soon as it can reasonably be
after demand, deliver to the other party delivered, following request.
any form or document reasonably requested
by the other party which is required to
enable such other party to make payments
hereunder without withholding for or on
account of Taxes or with such withholding
at a reduced rate.
-------------------------- --------------------------------------------- ------------------------------------
(B) Other documents to be delivered are:
6
------------------------------ ------------------------------ ---------------------------- ---------------------------
PARTY REQUIRED TO DELIVER FORM/DOCUMENT/CERTIFICATE DATE BY WHICH TO BE COVERED BY SECTION 3(D)
DOCUMENT DELIVERED REPRESENTATION
------------------------------ ------------------------------ ---------------------------- ---------------------------
Party A Certificates or other Upon execution of this Yes
documents evidencing the Agreement
authority of Party A, to
execute, deliver and perform
its obligations under this
Agreement, any Confirmation
and any Credit Support
Document, as applicable
including a certificate of
an authorized officer of
Party A as to the incumbency
and authority of the
respective officers of such
party to execute and deliver
this Agreement, any
Confirmation and any Credit
Support Document, as
applicable.
------------------------------ ------------------------------ ---------------------------- ---------------------------
Party B Each of (i) a copy of the Upon execution of this Yes
Indenture and the other Agreement
material operative documents
relating thereto and
referred to therein,
executed and delivered by
the parties thereto and the
offering circular howsoever
denominated and (ii)
certificates or other
documents evidencing the
authority of Party B in
relation to this Agreement
and the related Confirmation
and the persons acting on
behalf of Party B in
relation thereto.
------------------------------ ------------------------------ ---------------------------- ---------------------------
Party A An opinion of counsel to Upon execution of this No
such party reasonably Agreement
satisfactory in form and
substance to Party B
addressed to Party B.
------------------------------ ------------------------------ ---------------------------- ---------------------------
Party B An opinion of counsel to Upon execution of this No
such party reasonably Agreement
satisfactory in form and
substance to Party A
addressed to Party A.
------------------------------ ------------------------------ ---------------------------- ---------------------------
Party A and Party B Disclosure Agreement among Upon execution of this Yes
Party A, Party B and certain Agreement
other parties (the
"DISCLOSURE AGREEMENT")
substantially in the form
attached hereto as Exhibit A.
------------------------------ ------------------------------ ---------------------------- ---------------------------
Party A and Party B Credit Support Annex between Upon execution of this Yes
Party A and Party B Agreement
------------------------------ ------------------------------ ---------------------------- ---------------------------
7
PART 4. MISCELLANEOUS PROVISIONS.
(a) All notices to Party A shall be sent to:
All notices to Party A under Sections 5 or 6 of the Agreement
(other than notices under Section 5(a)(i)) shall be sent to:
Deutsche Bank AG, Head Office
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
Attention: Legal Department
Fax No. ▇▇▇▇▇▇▇ 36097
Telex No: 411836 or 416731 or 41233
Answerback: DBF-D
All other notices to Party A shall be sent directly to the
office through which Party A is acting for the relevant
Transaction, using the address and contact particulars
specified in the Confirmation of that Transaction or otherwise
notified.
Address for notices or communications to Party B:
▇▇▇▇▇ Fargo Delaware Trust Company Corporate Trust Services
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Phone:
▇▇▇-▇▇▇-▇▇▇▇ Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
Nelnet Student Loan Trust 2006-2
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Assistant Vice President
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
(b) PROCESS AGENT. For the purpose of Section 13(c):
Party A appoints as its Process Agent: Not Applicable
Party B appoints as its Process Agent: Not Applicable
(c) OFFICES; MULTIBRANCH PARTIES.
(1) The provisions of Section 10(a) will be applicable to this
Agreement.
8
(2) For the purpose of Section 10(c) of this Agreement:
Party A is not a Multibranch Party.
Party B is not a Multibranch Party.
(d) CALCULATION AGENT. The Calculation Agent is Party A, unless otherwise
specified in a Confirmation in relation to the relevant Transaction or
unless an Event of Default applicable to Party A has occurred and is
continuing, in which case Party B shall have the right to designate a
third party to act as the Calculation Agent by giving notice to Party
A. All determinations and calculations by the Calculation Agent shall
be (i) made in good faith and in a commercially reasonable manner and
(ii) determined, where applicable, on the basis of then prevailing
market rates or prices.
(e) GOVERNING LAW. THIS AGREEMENT AND EACH CONFIRMATION, AND ANY
CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
ANY TRANSACTION, WILL, IN ACCORDANCE WITH SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK, BE GOVERNED BY, AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
(f) WAIVER OF JURY TRIAL. EACH PARTY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ITS RIGHT TO HAVE A JURY TRIAL IN RESPECT
TO ANY PROCEEDINGS RELATED TO THIS AGREEMENT.
(g) JURISDICTION. Section 13(b) is hereby amended by: (i) deleting in the
second line of Subparagraph (i) thereof the word "non-"; and (ii)
deleting the final paragraph thereof; provided, however that this
provision shall not have any effect on any action to enforce a
judgment, which action may be brought in any suitable jurisdiction.
(h) "AFFILIATE" will have the meaning specified in Section 14, except that
it shall not apply to Party B.
(i) "NETTING OF PAYMENT." Subparagraph (ii) of Section 2(c) of this
Agreement will apply to all Transactions under this Agreement.
(j) CREDIT SUPPORT DOCUMENT. Details of any Credit Support Document:
(1) Party A: Credit Support Annex; and
(2) Party B: Not applicable.
(k) CREDIT SUPPORT PROVIDER. Credit Support Provider means:
(1) in relation to Party A: Not Applicable; and
(2) in relation to Party B: Not applicable.
PART 5. OTHER PROVISIONS.
(a) DEFINITIONS. The definitions and provisions contained in the 2000 ISDA
Definitions, as published by the International Swaps and Derivative
Association, Inc., in effect on the date of this Agreement, without
regard to any revision or subsequent edition thereof (the "ISDA
Definitions"), shall be incorporated into this Agreement. In the event
of any inconsistency between the ISDA Definitions and the Agreement or
any Confirmation, the Agreement or, as the case may be, the Confirmation
9
shall prevail. "INDENTURE" means that certain Indenture dated as of May
1, 2006 (including, but not limited to, any and all appendices and
exhibits thereto)(collectively, the "Indenture"), by and among the
Trust, Zions First National Bank, as the eligible lender trustee, and
Zions First National Bank, as the indenture trustee, as the same may be
amended, modified, supplemented, restated or replaced from time to time.
Capitalized terms used in this Schedule but not defined in the
Definitions, Section 14 of the Agreement or elsewhere herein shall have
the meanings assigned to them in the Indenture.
(b) SEVERABILITY. If any term, provision, covenant, or condition of this
Agreement, or the application thereof to any party or circumstance,
shall be held to be invalid or unenforceable (in whole or in part) for
any reason, the remaining terms, provisions, covenants, and conditions
hereof shall continue in full force and effect as if this Agreement had
been executed with the invalid or unenforceable portion eliminated, so
long as this Agreement as so modified continues to express, without
material change, the original intentions of the parties as to the
subject matter of this Agreement and the deletion of such portion of
this Agreement will not substantially impair the respective benefits or
expectations of the parties to this Agreement; provided, however, that
this severability provision shall not be applicable if any provision of
Section 1, 2, 5, 6, or 13 (or any definition or provision in Section 14
to the extent it relates to, or is used in or in connection with any
such Section) shall be so held to be invalid or unenforceable.
(c) ADDITIONAL REPRESENTATIONS. Section 3 is hereby amended by adding the
following additional Subsections:
(i) NO AGENCY. It is entering into this Agreement and each
Transaction as principal (and not as agent or in any other
capacity, fiduciary or otherwise).
(ii) ELIGIBLE CONTRACT PARTICIPANT. It is an "eligible contract
participant" as such term is defined in Section 1a(12) of the
Commodity Exchange Act, as amended.
(iii) LINE OF BUSINESS. It has entered into this Agreement (including
each Transaction evidenced hereby) in conjunction with its line
of business (including financial intermediation services) or the
financing of its business.
(iv) NO RELIANCE. It is acting for its own account, and it has made
its own independent decisions to enter into that Transaction and
as to whether that Transaction is appropriate or proper for it
based upon its own judgment and upon advice from such advisers
as it has deemed necessary. It is not relying on any
communication (written or oral) of the other party as investment
advice or as a recommendation to enter into that Transaction; it
being understood that information and explanations related to
the terms and conditions of a Transaction shall not be
considered investment advice or a recommendation to enter into
that Transaction. No communication (written or oral) received
from the other party shall be deemed to be an assurance or
guarantee as to the expected results of that Transaction.
(v) ASSESSMENT AND UNDERSTANDING. It is capable of assessing the
merits of and understanding (on its own behalf or through
independent professional advice), and understands and accepts
the terms, conditions and risks of that Transaction. It is also
capable of assuming, and assumes, the risks of that Transaction.
(vi) STATUS OF PARTIES. The other party is not acting as a fiduciary
for or an adviser to it in respect of that Transaction.
(vii) ERISA REPRESENTATION. It continuously represents that it is not
(i) an employee benefit plan (hereinafter an "ERISA Plan"), as
defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), subject to Title I
of ERISA or Section 4975 of the Internal Revenue Code of 1986,
as amended, (ii) a person acting on behalf of an ERISA Plan or
(iii) a person the assets of whom constitute assets of an ERISA
Plan. It will provide notice to the other party in the event
that it is aware that it is in breach of any aspect of this
representation or is aware that with the passing of time, giving
of notice or expiry of any applicable grace period it will
breach this representation.
10
(d) NON-RECOURSE. Notwithstanding any other provision of this Agreement or
any Confirmation or Transaction, the obligations of Party B under this
Agreement are non-recourse obligations of Party B, payable solely from
the Trust Estate as applied in accordance with the priority of payments
set forth in Article V of the Indenture. Following realization, and
distribution of all proceeds of the Trust Estate as applied in
accordance with the priority of payments in Article V of the Indenture,
any and all claims of Party A arising from this Agreement, and
distribution of all proceeds, or any transactions contemplated hereby or
thereby shall be extinguished against Party B and shall not thereafter
be revived. No recourse shall be had for the payment of any amount owing
under this Agreement against any officer, member, director, employee,
securityholder or incorporator of Party B or their respective successors
or assigns for any amounts payable under this Agreement. This provision
shall survive termination of this Agreement for any reason whatsoever.
(e) DELAWARE TRUSTEE. It is expressly understood and agreed by the parties
hereto that (a) this Agreement is executed and delivered by ▇▇▇▇▇ Fargo
Delaware Trust Company, not individually or personally but solely as
Delaware Trustee of Party B, in the exercise of the powers and authority
conferred and vested in it, (b) each of the representations,
undertakings and agreements herein made on the part of Party B is made
and intended not as personal representations, undertakings and
agreements by ▇▇▇▇▇ Fargo Delaware Trust Company but is made and
intended for the purpose of binding only Party B, (c) nothing herein
contained shall be construed as creating any liability on ▇▇▇▇▇ Fargo
Delaware Trust Company, individually or personally, to perform any
covenant either expressed or implied contained herein, all such
liability, if any, being expressly waived by the parties hereto and by
any person claiming by, through or under the parties hereto and (d)
under no circumstances shall ▇▇▇▇▇ Fargo Delaware Trust Company be
personally liable for the payment of any indebtedness or expenses of
Party B or be liable for the breach or failure of any obligation,
representation, warranty or covenant made or undertaken by Party B under
this Agreement or any other related documents.
(f) NON-PETITION. Party A agrees that it will not, prior to at least one
year and one day (or if longer, the applicable preference period then in
effect) following the payment in full of all the Notes issued pursuant
to the Indenture and the expiration of all applicable preference periods
under the laws of any jurisdiction, if longer, relating to any such
payment, acquiesce, petition or otherwise invoke or cause Party B to
invoke the process of any governmental authority for the purpose of
commencing or sustaining a case (whether voluntary or involuntary)
against Party B under any bankruptcy, insolvency or similar law or
appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of Party B or any substantial
part of its property or ordering the winding-up or liquidation of the
affairs of Party B; provided, that this provision shall not
restrict or prohibit Party A from joining any other person, including,
without limitation the Trustee or the Administrator, in any bankruptcy,
reorganization, arrangement, insolvency, moratorium or liquidation
proceedings already commenced or other analogous proceedings already
commenced under applicable laws.
(g) WAIVER OF SET-OFF. Notwithstanding any provision of this Agreement or
any other existing or future agreement between Party A and Party B, each
of Party A and Party B irrevocably waives as to itself any and all
rights to counterclaim, set-off, recoupment, whether arising by
contract, operation of law or otherwise, provided that nothing herein
shall be construed as limiting the provisions contained in Section 2(c)
of this Agreement with respect to the netting of the parties respective
obligations under this Agreement. Specifically, the provision for
set-off in the last sentence of the preamble to Section 6(e) of this
Agreement shall not apply for purposes of any Transaction hereunder.
(h) AGREEMENT AMENDMENTS. Party B will deliver notice in writing to S&P,
▇▇▇▇▇'▇ and Fitch of any modification, amendment or waiver under Section
9(b). Party B will obtain, or cause to be obtained, prior written
confirmation from each Rating Agency to the effect that any proposed
amendment shall not result in a withdrawal, suspension or downgrade of
its rating assigned to any Class of Notes. Party B will provide to Party
A a copy of such Rating Confirmation promptly after receipt thereof from
each Rating Agency.
(i) TRANSFER. Section 7 is hereby deleted in its entirety and replaced by
the following:
11
"Except as stated under Section 6(b)(ii) of this Agreement and
as expressly provided herein, neither Party A nor Party B is
permitted to assign, novate or transfer (whether by way of
security or otherwise) as a whole or in part, any of its
rights, obligations or interests under this Agreement without
the prior written consent of the other party and the prior
issuance of a Rating Confirmation; provided that Party A may
transfer this Agreement to any person, including, without
limitation, another of Party A's offices, branches or
affiliates (each, a "Transferee") on five Business Days' prior
written notice to Party B and the prior issuance of a Rating
Confirmation; provided that, (i) as of the date of such
transfer, neither the Transferee nor Party B will be required
to withhold or deduct any increased amount on account of any
Taxes under this Agreement as a result of such transfer,
unless, as of the date of such transfer, (x) Party B is
entitled to additional amounts under Section 2(d)(i)(4) on
account of any such Taxes required to be deducted or withheld
by the Transferee and (y) Party B is not required to pay
Transferee additional amounts under Section 2(d)(i)(4) on
account of any such Taxes required to be deducted or withheld
by Party B, and (ii) a Termination Event or Event of Default
does not occur under this Agreement as a result of such
transfer. Upon any transfer pursuant to this Section 7 of this
Agreement, the transferring party agrees to provide the
non-transferring party with the name and address of the
transferee so that the non-transferring party may fulfill its
requirements to record the transfer on it books and records,
and, notwithstanding anything to the contrary herein, any
failure by the transferring party to do so will render the
purported transfer void."
(j) RECORDED CONVERSATIONS. Each party to this Agreement acknowledges and
agrees that the other may electronically record all telephonic
conversations between them in connection with this Agreement or any
Transaction or any other transaction between the parties and any such
recordings may be submitted in evidence in Proceedings provided that
such recording would be admissible in accordance with the applicable law
of such Proceedings.
(k) ACKNOWLEDGMENT OF SECURITY INTEREST. Party A hereby acknowledges and
consents to Party B's grant and pledge of all right, title and interest
in, to and under, in each case, whether now owned or existing, or
hereafter acquired or arising, this Agreement (including, without
limitation, its right to payments due it hereunder or with respect
hereto) pursuant to the terms of the Indenture, to the Trustee, for the
benefit of the persons identified therein.
[THE NEXT PAGE IS THE SIGNATURE PAGE.]
12
IN WITNESS WHEREOF, the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.
DEUTSCHE BANK AG, ACTING THROUGH ITS NEW YORK BRANCH
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Director
Date:
By: /s/ ▇. ▇. ▇▇▇▇
---------------------------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
Title: Vice President
Date:
NELNET STUDENT LOAN TRUST 2006-2
By: ▇▇▇▇▇ Fargo Delaware Trust Company, not in
its individual capacity but solely in its
capacity as Delaware Trustee of the Nelnet
Student Loan Trust 2006-2
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------------
Name: ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
Date:
EXHIBIT A
FORM OF DISCLOSURE AGREEMENT
DISCLOSURE AGREEMENT
THIS DISCLOSURE AGREEMENT dated May 12, 2006 (the "Disclosure
Agreement") is among Nelnet Student Loan Funding, LLC (the "Depositor"), Nelnet
Student Loan Trust ▇▇▇▇-▇ (▇▇▇ "▇▇▇▇▇▇▇ ▇▇▇▇▇▇"), Nelnet, Inc. (the "Sponsor"),
▇.▇. ▇▇▇▇▇▇ Securities Inc. and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated (together, the
"Representatives"), ▇.▇. ▇▇▇▇▇▇ Securities Ltd., ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co.
International Limited, Barclays Bank PLC, DEPFA BANK plc, Deutsche Bank AG,
London Branch, Societe Generale, London Branch, and the other underwriters
listed on Schedule A attached to the Underwriting Agreement referred to below
(each an "Underwriter", and together with the Representatives, the
"Underwriters"), and Deutsche Bank AG, acting through its New York Branch (the
"Swap Counterparty").
W I T N E S S E T H:
WHEREAS, on the Closing Date, the Issuing Entity is issuing its
Series 2006-2 Student Loan Asset-Backed Notes (the "Notes") pursuant to an
Indenture of Trust dated as of May 1, 2006 (the "Indenture") between the
Issuing Entity and Zions First National Bank, as Trustee and Eligible Lender
Trustee; and
WHEREAS, the Underwriters are acquiring the Notes from the Issuing
Entity pursuant to the Underwriting Agreement, dated May 12, 2006 (the
"Underwriting Agreement"), among the Depositor and the Underwriters; and
WHEREAS, pursuant to the Prospectus dated May 9, 2006 (the "Base
Prospectus"), the Preliminary Prospectus Supplement dated May 9, 2006 (the
"Preliminary Prospectus Supplement") and the Prospectus Supplement dated May
16, 2006 (the "Prospectus Supplement", and together with the Base Prospectus,
the Preliminary Prospectus Supplement and the Supplement to Prospectus
Supplement dated May 17, 2006, the "Offering Materials") the Underwriters are
offering for sale the Notes; and
WHEREAS, the Issuing Entity and the Swap Counterparty are entering
into a 1992 ISDA Master Agreement (Multicurrency - Cross Border), dated as of
May 18, 2006, and a related confirmation, schedule and credit support annex
(collectively, the "Currency Swap Agreement"); and
WHEREAS, the Offering Materials are required to contain certain
disclosure concerning the Swap Counterparty in accordance with the Securities
and Exchange Commission's Regulation AB ("Reg AB");
NOW, THEREFORE, in consideration of the mutual agreements hereinafter
set forth and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as
follows:
AGREEMENT
o DEFINITIONS. Capitalized terms used and not defined in this Disclosure
Agreement shall have the meanings ascribed to such terms in the
Indenture.
o SWAP COUNTERPARTY INFORMATION. The parties hereto acknowledge and agree
that the statements set forth under the heading "Currency Swap Agreements -
Currency Swap Agreement Counterparty" in the Preliminary Prospectus
Supplement and the Prospectus Supplement (including any information
described or incorporated therein by reference to the reports filed by the
A-1
Swap Counterparty with the Securities and Exchange Commission (the "SEC"))
constitute the only information furnished to the Depositor, the Issuing
Entity, the Sponsor or the Underwriters by or on behalf of the Swap
Counterparty for inclusion in the Offering Materials as of their respective
dates (the "Swap Counterparty Information") and the Swap Counterparty
hereby represents and warrants, as of the dates of the Preliminary
Prospectus Supplement and the Prospectus Supplement, that the Swap
Counterparty Information is true and correct in all material respects.
o AUTHORIZATION TO INCORPORATE BY REFERENCE ADDITIONAL SWAP COUNTERPARTY
INFORMATION. The Swap Counterparty is a foreign private issuer currently
subject to the periodic reporting requirements of Section 13(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
Pursuant to such requirements, it files an Annual Report on Form 20-F
with the SEC. The Swap Counterparty publishes Interim Reports for each
of the first three quarters of its fiscal year, each containing
unaudited interim financial statements for such quarter. Pursuant to the
Exchange Act, it submits such Interim Reports to the SEC on Reports on
Form 6-K. The Swap Counterparty transmits its Annual Reports on Form
20-F and Reports on Form 6-K to the SEC via the SEC's ▇▇▇▇▇ System, and
such reports are available on the SEC's ▇▇▇▇▇ internet site under File
Number 001-15242. So long as the Issuing Entity is required to file
reports with the SEC pursuant to Sections 13(a) or 15(d) of the Exchange
Act, if the "aggregate significance percentage" (within the meaning of
Item 1115 or Regulation AB) of all derivative instruments provided by
the Swap Counterparty and any of its affiliates to the Issuing Entity
is: (a) 10% or more, but less than 20%, the Issuing Entity is authorized
to incorporate by reference into such reports Item 3.A. of the Swap
Counterparty's most recent Annual Report on Form 20-F filed with the
SEC, or (b) 20% or more, the Issuing Entity is authorized to incorporate
by reference into such reports and the Offering Materials the
information listed as being incorporated by reference in the Prospectus
Supplement, as supplemented by the Supplement to Prospectus Supplement
dated May 17, 2006, under the heading "Currency Swap Agreements - Swap
Counterparty Information"; provided however, that if the Swap
Counterparty meets the 20% threshold in (b) above and is unable to
comply with the requirements of Item 1115(a) of Regulation AB, the Swap
Counterparty may (i) promptly post collateral satisfactory to the
Issuing Entity in an amount sufficient to reduce the aggregate
significance percentage below the 20% threshold or, (ii) at its own
cost, secure a replacement counterparty on terms substantially similar
to this Disclosure Agreement, satisfying the Rating Agency Condition and
able to comply with the reporting obligations of Item 1115(a) of
Regulation AB. To the extent necessary to comply with Regulation AB, the
Swap Counterparty agrees to use its reasonable efforts to obtain any
necessary auditor's consents related to the financial statements so
incorporated by reference and promptly to forward to the Sponsor any
such auditor consents obtained. The information authorized to be
incorporated by reference pursuant to this Section 3 is referred to as
the "Additional Information." In connection with each filing or
submission to the SEC of Additional Information incorporated by
reference pursuant to this Section 3, the Swap Counterparty will be
deemed to have represented and warranted that all such Additional
Information is true and correct in all material respects as of its
respective date.
o EXCHANGE ACT REPORTING. If as of January 1, 2007, the Notes are held of
record by less than 300 persons, and if permitted by law, the Sponsor shall
cause the Issuing Entity to file with the Securities and Exchange
Commission, by no later than January 30, 2007, a Form 15 suspending the
Issuing Entity's requirement to file reports with the Securities and
Exchange Commission pursuant to the Exchange Act. The Issuing Entity shall
notify the Swap Counterparty upon the filing of any Form 15.
INDEMNIFICATION. The Swap Counterparty hereby agrees to indemnify and hold
harmless the Depositor, the Issuing Entity, the Sponsor and each Underwriter,
the respective present and former directors, officers, employees and agents of
each of the foregoing and each person, if any, who controls the Depositor, the
Sponsor or any Underwriter within the meaning of Section 15 of the Securities
Act of 1933, as amended, or Section 20 of the Exchange Act, from and against any
and all losses, claims, damages, liabilities and expenses (or actions in respect
thereof) arising out of or are based upon the Swap Counterparty Information and
the Additional Information not being true and correct in all material respects
as of their respective dates.
A-2
o PROCEDURES. Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying
party hereunder, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not
relieve it from any liability that such indemnifying party may have to
any indemnified party under this Agreement except to the extent that
such indemnifying party has been materially prejudiced by such failure.
In case any such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein, and, to the
extent that such indemnifying party may wish, to assume (at its own
expense) the defense thereof, with counsel satisfactory to such
indemnified party (which counsel may be counsel to the indemnifying
party), and, after notice from the indemnifying party to such
indemnified party hereunder, such indemnifying party shall not be liable
for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless (i) the
indemnifying party shall have agreed in writing to the continuing
participation of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and representation of both
parties by the same counsel would, in the opinion of such counsel, be
inappropriate due to the actual or potential differing interests between
them. If the indemnifying party assumes the defense of any proceeding,
it shall be entitled to settle such proceeding with the consent of the
indemnified party, which will not be unreasonably withheld or delayed
or, if such settlement provides for release of the indemnified party in
connection with all matters relating to the proceeding which have been
asserted against the indemnified party in such proceeding by the other
parties to such settlement, without the consent of the indemnified
party.
o SURVIVAL OF TERMS. The agreements, indemnities and representations of the
parties thereto contained herein or made pursuant to this Disclosure
Agreement will remain in full force and effect, regardless of any
investigation, or statement as to the results thereof, made by or on behalf
of any parties hereto or any of the controlling persons referred to herein,
and will survive the sale of the Notes.
o GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS (OTHER THAN SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW), AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
O BENEFIT OF AGREEMENT. This Disclosure Agreement shall inure to the benefit
of and be binding upon the parties hereto and their successors and assigns
and the controlling persons referred to herein, and no other person shall
have any right or obligation hereunder. Neither this Disclosure Agreement
nor any term hereof may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by the party against
whom enforcement of the change, waiver, discharge or termination is sought.
o COUNTERPARTS. This Disclosure Agreement may be executed in counterparts,
each of which when so executed and delivered shall be considered an
original, and all such counterparts shall constitute one and the same
instrument.
o LIMITATION OF LIABILITY OF THE DELAWARE TRUSTEE. Notwithstanding anything
contained herein to the contrary, this instrument has been executed by
▇▇▇▇▇ Fargo Delaware Trust Company, not in its individual capacity but
solely in its capacity as Delaware Trustee, and in no event shall ▇▇▇▇▇
Fargo Delaware Trust Company in its individual capacity or any beneficial
owner of the Issuer have any liability for the representations, warranties,
covenants, agreements or other obligations of the Issuer hereunder, as to
which recourse shall be had solely to the assets of the Issuer.
[SIGNATURES COMMENCE ON FOLLOWING PAGE]
A-3
Executed as of the day and year first above written.
DEUTSCHE BANK AG, acting through its
New York Branch, as Swap Counterparty
By: ___________________________
Name:
Title:
By: ___________________________
Name:
Title:
NELNET STUDENT LOAN FUNDING, LLC,
as Depositor
By: ___________________________
Name:
Title:
NELNET, INC.,
as Sponsor
By: ___________________________
Name:
Title:
NELNET STUDENT LOAN TRUST 2006-2,
as Issuing Entity
By: ▇▇▇▇▇ FARGO DELAWARE TRUST COMPANY,
not in its individual capacity but
solely in its capacity as
Delaware Trustee
By: ___________________________
Name:
Title:
A-4
▇.▇. ▇▇▇▇▇▇ SECURITIES INC.,
acting on behalf of itself
and as Representative of the
Underwriters
By: ___________________________
Name:
Title:
▇.▇. ▇▇▇▇▇▇ SECURITIES LTD.
By: ___________________________
Name:
Title:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & CO. INCORPORATED,
acting on behalf of itself and as
Representative of the Underwriters
By: ___________________________
Name:
Title:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & CO. INTERNATIONAL
LIMITED
By: ___________________________
Name:
Title:
BARCLAYS BANK PLC
By: ___________________________
Name:
Title:
DEPFA BANK, PLC
By: ___________________________
Name:
Title:
▇-▇
▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇, ▇▇▇▇▇▇ BRANCH
By: ___________________________
Name:
Title:
By: ___________________________
Name:
Title:
SOCIETE GENERALE, LONDON BRANCH
By: ___________________________
Name:
Title:
A-6
Paragraph 13. Elections and Variables
(a) Security Interest for "Obligations". The term "Obligations" as used in
this Annex includes the following additional obligations with respect
to Party A and Party B: None.
(b) Credit Support Obligations.
(i) Delivery Amount, Return Amount, Credit Support Amount,
Exposure and Rating Agency Amount.
(A) "Delivery Amount" has the meaning specified in
Paragraph 3, except that the words "upon a demand
made by the Secured Party on or promptly following a
Valuation Date" shall be deleted from Paragraph 3(a)
and the words "on or promptly following a Valuation
Date" shall be inserted in lieu thereof.
(B) "Return Amount" has the meaning specified in
Paragraph 3.
(C) "Credit Support Amount" has the meaning specified in
Paragraph 3; provided that the words "plus the
applicable Rating Agency Amount" shall be added after
the words "the Secured Party's Exposure in clause (i)
thereof; and provided further that, consistent with
Part 1(i) of the Schedule and notwithstanding any
other provision of this Annex, calculation of the
Credit Support Amount (or any portion thereof) shall
not commence prior to the Valuation Date (if any) on
which Part 1(i) of the Schedule requires the
collateralization of Transactions to commence
pursuant to this Annex.
(D) "Exposure" has the meaning specified in Paragraph 12.
(E) "Rating Agency Amount" means with respect to Party A,
for any Valuation Date and for each Transaction in
which Party A is the Currency Swap Counterparty, the
highest of the following:
(x) if an S&P Downgrade has occurred and is
continuing, then an amount equal to the
product of the applicable VB and the EURIBOR
Floating Rate Payer Currency Amount for the
relevant Transaction, where "VB" means the
applicable Volatility Buffer (%) from Table
2 (Cross Currency Swaps) of the S&P
publication entitled "Global Interest Rate
and Currency Swaps: Calculating the
Collateral Required Amount" dated February
26, 2004, as such publication may be
modified or amended from time to time;
(y) if a ▇▇▇▇▇'▇ Downgrade has occurred and is
continuing, then an amount equal to the sum
of (i) the product of 1.00% and the EURIBOR
Floating Rate Payer Currency Amount for the
relevant Transaction and (ii) the product of
10 and DVO1, where "DVO1" means the change
in the Exposure of the relevant Transaction
resulting from a one basis point change in
the relevant swap curve, as such standards
are set forth in Table 4A (First Trigger
Calculation Amount) of the Moody's
publication entitled "Framework for
De-Linking Hedge Counterparty Risks from
Global Structured Finance Cashflow
Transactions" dated December 6, 2005, as
such publication may be modified or amended
from time to time; or
(z) if a Fitch Downgrade has occurred and is
continuing, then an amount equal to the
product of the applicable VC and the EURIBOR
Floating Rate Payer Currency Amount for the
relevant Transaction, where "VC" means the
applicable Volatility Cushion (%) for
"USD/EURO (e.v.v.) Cross Currency Swap
Interest Rate Swaps" as set forth in
Appendix 2 (Volatility Cushions for various
Swap Types: Methodology and Amounts) of the
Fitch publication entitled "Counterparty
Risk in Structured Finance Transactions:
Swap Criteria" dated September 13, 2004, as
such publication may be modified or amended
from time to time.
(ii) Eligible Collateral. The following items will qualify as
"Eligible Collateral" for Party A:
Valuation
Eligible Collateral Party A Percentage
------------------------------------------------ -------- ----------
(A) EUR Cash [X] 100%
(B) USD Cash [X] 98%
(C) Treasury Securities with a remaining maturity [X] 97%
of 52 weeks or less
(D) Treasury Securities with a remaining maturity [X] 94%
of more than 52 weeks but no more than 3 years
(E) Treasury Securities with a remaining maturity [X] 91%
of more than 3 years weeks but no more than
5 years
(F) Treasury Securities with a remaining maturity [X] 89%
of more than 5 years but no more than 7 years
(G) Treasury Securities with a remaining maturity [X] 86%
of more than 7 years but no more than 10 years
(H) Treasury Securities with a remaining maturity [X] 83%
of more than 10 years but no more than 20 years
(I) Treasury Securities with a remaining maturity [X] 79%
of more than 20 years
(iii) Other Eligible Support: Not applicable.
(iv) Thresholds.
(A) "Independent Amount" means with respect to Party A:
zero.
(B) "Threshold" means with respect to Party A: zero.
(C) "Minimum Transfer Amount" means with respect to Party A
and with respect to Party B: $100,000; provided,
however, that if such party is a Defaulting Party at the
time, "Minimum Transfer Amount" shall mean zero with
respect to such party.
(D) Rounding. The Delivery Amount and the Return Amount will
not be rounded up or down.
(c) Valuation and Timing.
(i) "Valuation Agent" means Party A, unless either (A) an Event of
Default has occurred and is continuing with respect to Party A,
or (B) a Downgrade Event has occurred and is continuing and
Party A has not yet acted under Part 1(i) to avoid posting
collateral, in which case Party B may elect to nominate a
third-party Valuation Agent by giving notice of same to Party A.
(ii) "Valuation Date" means each New York Banking Day (as defined in
the 2000 ISDA Definitions as published by the International
Swaps and Derivatives Association, Inc. ("ISDA") without regard
to any amendment after the date hereof) (the "ISDA
Definitions").
(iii) "Valuation Time" means the close of business in New York on the
New York Banking Day before the Valuation Date or before the
date of calculation, as applicable, or any time on the Valuation
Date or date of calculation, as applicable; provided that the
calculations of Value and Exposure will be made as of
approximately the same time on the same date.
12
(iv) "Notification Time" means 1:00 p.m., New York time, on a Local
Business Day.
(d) Conditions Precedent and Secured Party's Rights and Remedies. The
following Termination Events will be a "Specified Condition" for the
party specified (that party being the Affected Party if the Termination
Event occurs with respect to that party): Not Applicable.
(e) Substitution.
(i) "Substitution Date" has the meaning specified in Paragraph
4(d)(ii).
(ii) Consent. The Pledgor need not obtain the Secured Party's consent
for any substitution pursuant to Paragraph 4(d).
(f) Dispute Resolution.
(i) "Resolution Time" means 1:00 p.m., New York time, on the Local
Business Day following the date on which the notice of the
dispute is given under Paragraph 5.
(ii) Value. For the purpose of Paragraphs 5(i)(C) and 5(ii), the
Value of Posted Credit Support or of any Transfer of Eligible
Credit Support or Posted Credit Support, as the case may be,
will be calculated by the Valuation Agent in accordance with
standard market practice using third party sources (such as, by
way of example only, Bloomberg or Reuters) where available.
(iii) Alternative. The provisions of Paragraph 5 will apply.
(g) Holding and Using Posted Collateral.
(i) Eligibility to Hold Posted Collateral; Custodian.
Party B and its Custodian will be entitled to hold Posted
Collateral pursuant to Paragraph 6(b); provided that the
following conditions applicable to it are satisfied:
(A) If Party B is a Defaulting Party, it may not hold Posted
Collateral, but Posted Collateral may still be held by
Party B's Custodian in accordance with the terms of the
Indenture.
(B) Posted Collateral may be held only in the following
jurisdictions: the United States of America.
Initially, the Custodian for Party B is the Trustee.
(ii) Use of Posted Collateral. The provisions of Paragraph 6(c) will
not apply.
(h) Distributions and Interest Amount.
(i) "Interest Rate". The "Interest Rate" shall be the rate actually earned
by the Custodian on Posted Collateral in the form of Cash.
(i) Transfer of Interest Amount. The Transfer of the Interest Amount
will be made on the last Local Business Day of each calendar
month and on any Local Business Day that Posted Collateral in
the form of cash in the relevant currency is Transferred to the
Pledgor pursuant to Paragraph 3(b).
(ii) Alternative to Interest Amount. The provisions of Paragraph
6(d)(ii) will apply.
13
(iii) Additional Representation(s). None.
(j) Other Eligible Support and Other Posted Support. "Value" and "Transfer"
with respect to Other Eligible Support and Other Posted Support each
means: Not applicable.
(k) Demands and Notices.
All demands, specifications and notices to Party A under this Annex
will be made to:
Deutsche Bank AG
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Collateral Management and Valuations
and all demands, specifications and notices to Party B under this Annex
will be made to:
▇▇▇▇▇ Fargo Delaware Trust Company
Corporate Trust Services
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
Nelnet Student Loan Trust 2006-2
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Assistant Vice President
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
; provided that any demand, specification or notice may be made by
telephone ("Telephone Notice") between employees of each party if such
Telephone Notice is confirmed by a subsequent written instruction
(which may be delivered via facsimile or email) by the close of
business on the same day that such Telephone Notice is given.
(l) Addresses for Transfers.
Party A: For Cash: DBAG NY, ABA:▇▇▇▇▇▇▇▇▇, Ref: A / C# [to be provided]
For Certain Other Eligible Collateral:
Fed Eligible Settlements:
Bk of NYC/Cust/604000
Acct: Deutsche Bank AG CMV Group
DTC Eligible Settlements:
DTC# 901
A/c# 604000
Acct: Deutsche Bank AG CMV Group
Euroclear Settlements:
Euroclear # 10104
Ref: Acct: Deutsche Bank AG CMV Group 604000
Canadian Settlements:
Royal Bank of Canada
BIC Code: ▇▇▇▇▇▇▇▇
Acct: Bank of New York, Brussels
Ref: Acct: Deutsche Bank AG CMV Group 604000
14
Party B:
For USD Cash:
Zions First National Bank
Salt Lake City, UT
ABA# ▇▇▇▇▇▇▇▇▇
A/C#
Ref: Nelnet SLT 2006-2
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
For Certain Other Eligible Collateral:
DTC: DTC # 2669
Custodian Account # 17-74574 WNTC
Institutional # 27630 Institutional
Interested Party # 27630 Agent Bank
Custodian # 20290
Agent Bank Name: The Northern Trust Company
of New York
Further Credit to: Nelnet SLT 2006-2
Collection a/c#
Physical: The Northern Trust Company
of New York ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Account # 17-74574 Zions First National
Further Credit to: Nelnet SLT 2006-2
Collection a/c#
FED (Securities):NORTHERN CHGO/TRUST Agent
Bank Custodian # 20290 ABA # ▇▇▇-▇▇▇-▇▇▇
Account # 17-74574 Zions First National Bank
Further Credit to: Nelnet SLT 2006-2
Collection a/c#
(m) Other Provisions.
(i) Notwithstanding any other provision in this Agreement to the
contrary, no full or partial failure to exercise and no delay in
exercising, on the part of Party A or Party B, any right,
remedy, power or privilege permitted hereunder shall operate in
any way as a waiver thereof by such party, including without
limitation any failure to exercise or any delay in exercising to
any or to the full extent of such party's rights with respect to
transfer timing pursuant to Paragraph 4(b), regardless of the
frequency of such failure or delay.
(ii) In all cases, in order to facilitate calculation of the Delivery
Amount and the Return Amount for a particular Valuation Date in
accordance with Paragraph 3 of this Annex:
(A) Eligible Collateral;
(B) Exposure and Rating Agency Amount; and
(C) Posted Collateral
15
shall each be expressed in US Dollars. If any of these items
are expressed in a currency other than US Dollars, then they
shall be converted into US Dollar amounts at the spot exchange
rate reasonably determined by the Valuation Agent on that
Valuation Date.
(iii) Party A shall pay all costs and expenses (including any related
taxes) in respect of the Posted Collateral.
(iv) Exposure Verification. The Parties agree that in the event of a
Downgrade Event (as defined in the Schedule) relating to an
action taken by S&P, the Valuation Agent shall verify its
calculation of the Secured Party's Exposure on a weekly basis
but shall verify such valuation by seeking two quotations from
Reference Market-makers at the end of each quarter. For the
avoidance of doubt, the Valuation Agent must (i) obtain at least
two Market Quotations (as stated above) and (ii) may not obtain
the quotations referred to above from the same Reference
Market-maker in excess of four times during any 12 month period.
Furthermore, the Exposure valuations should reflect the higher
of two bids from Reference Market-makers that would be eligible
and willing to provide the market quotation in the absence of
the current provider. The collateral requirement should be based
on the greater of the internal and external market quotations.
In the event the verification procedures set forth above
indicate that there is a deficiency in the amount of Eligible
Collateral that has been posted to the Secured Party, the
Pledgor shall post the amount of Eligible Collateral necessary
to cure such deficiency to the Secured Party within three Local
Business Days.
(n) Agreement as to Single Secured Party and Pledgor. Party A and Party B
agree that, notwithstanding anything to the contrary in the recital to
this Annex, Paragraph 1(b) or Paragraph 2 or the definitions of
Paragraph 12, (a) the term "Secured Party" as used in this Annex shall
mean only Party B, (b) the term "Pledgor" as used in this Annex shall
mean only Party A, (c) only Party A makes the pledge and grant in
Paragraph 2, the acknowledgement in the final sentence of Paragraph
8(a) and the representations in paragraph 9 and (d) only Party A will
be required to make Transfers of Eligible Credit Support hereunder.
(o) Additional Definitions
"Fitch Downgrade" has the meaning specified in Part 1(i) of the
Schedule.
"Moody's Downgrade" has the meaning specified in Part 1(i) of
the Schedule.
"Rating Agencies" shall mean ▇▇▇▇▇'▇ Investors Service (and any
successor or successors thereto), Standard & Poor's Ratings
Services, a division of The ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc. (and any
successor or successors thereto), and Fitch, Inc. d/b/a Fitch
Ratings (and any successor or successors thereto).
"S&P Downgrade" has the meaning specified in Part 1(i) of the
Schedule.
"Treasury Securities" means U.S. Dollar-denominated senior debt
securities of the United States of America issued by the U.S.
Treasury Department and backed by the full faith and credit of
the United States of America.
16
IN WITNESS WHEREOF, the parties have executed this Credit Support Annex
by their duly authorized officers as of the date hereof.
DEUTSCHE BANK AG, acting through its
New York Branch
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Director
Date:
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Director
Date:
By: /s/ ▇ ▇ ▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇
Title: Vice President
Date:
NELNET STUDENT LOAN TRUST 2006-2
By: ▇▇▇▇▇ Fargo Delaware Trust Company,
not in its individual capacity but
solely in its capacity as Delaware
Trustee of the Nelnet Student Loan
Trust 2006-2
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
Date:
17