Exhibit 4.2
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Third Supplemental Indenture of Trust
by and between
Education Funding Capital Trust-I
and
Fifth Third Bank,
as Indenture Trustee
and
Fifth Third Bank,
as Trust Eligible Lender Trustee
Dated as of December 23, 2002
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Third Supplemental Indenture of Trust
This Third Supplemental Indenture of Trust (this "Supplemental Indenture")
dated as of December 23, 2002 is by and between Education Funding Capital
Trust-I, a Delaware business trust (the "Issuer"), Fifth Third Bank, a banking
corporation organized under the laws of the State of Ohio, as indenture trustee
(the "Indenture Trustee"), and Fifth Third Bank, a banking corporation organized
under the laws of the State of Ohio, as Trust Eligible Lender Trustee (the
"Trust Eligible Lender Trustee"). All capitalized terms used in these preambles,
recitals and granting clauses shall have the same meanings assigned thereto in
the Indenture (defined below).
W I T N E S S E T H:
Whereas, the Issuer has previously entered into an Indenture of Trust dated
as of May 1, 2002 (the "Indenture") among the Issuer, the Indenture Trustee and
the Trust Eligible Lender Trustee;
Whereas, pursuant to Section 7.01 of the Indenture, the Issuer desires to
enter into this Supplemental Indenture to amend the Indenture as set forth
herein; and
Whereas, the Indenture Trustee has agreed to accept the trusts herein
created upon the terms herein set forth; and
WHEREAS, the Issuer and Bayerische Landesbank, acting through its New York
Branch, have entered into that certain ISDA Master Agreement and its associated
Schedule and Confirmation, each dated as of December 23, 2002 (collectively, the
"BLB Swap");
Now, Therefore, in consideration of the foregoing, the parties hereto agree
that the foregoing recitals are incorporated herein by reference and as follows:
Section 1. Until the termination of the BLB Swap in accordance with its
terms and the payment of all amounts due thereunder, Appendix A of the Indenture
is hereby amended to add the defined terms set forth below in this Section 1.
After the termination of the BLB Swap and the payment of all amounts due
thereunder, the amendments set forth in this Section 1 shall be void and of no
further force and effect.
"Subordinated Issuer Termination Payment" shall mean any early
termination payment required to be made by or on behalf of the Issuer
pursuant to a Derivative Product, excluding, however, early termination
payments required to be made by the Issuer in respect of (i) a payment
default by the Issuer under the Derivative Product (other than failure to
pay any termination payment), and (ii) the bankruptcy or insolvency of the
Issuer.
Section 2. Section 2.03 of the Indenture is hereby amended and restated in
its entirety to read as follows:
The Issuer hereby authorizes and directs the Indenture Trustee to
acknowledge and agree to any Derivative Product hereafter entered into by
the Issuer and a Counterparty under which (a) the Issuer may be required to
make, from time to time, Issuer Derivative Payments and (b) the Indenture
Trustee may receive, from time to time, Counterparty Derivative Payments
for the account of the Issuer. No Derivative Product shall be entered into
unless the Indenture Trustee shall have received a Rating Confirmation from
each Rating Agency that such Derivative
Product will not adversely affect the Rating on any of the Notes. Anything
in this Indenture to the contrary notwithstanding, any Revenues
representing Counterparty Derivative Payments of a Counterparty shall not
be available to make an Issuer Derivative Payment to another Counterparty
or to pay any other amounts owed to such Counterparty pursuant to a
Derivative Product.
No later than the fourth Business Day immediately preceding each
Derivative Payment Date the Issuer shall give written notice to the
Indenture Trustee stating (a) the amount and payer of each Counterparty
Derivative Payment, if any, due to be received by the Indenture Trustee for
the account of the Issuer on or before such Derivative Payment Date and (b)
the amount and payee of each Issuer Derivative Payment, if any, to be paid
on or before such Derivative Payment Date. If the Indenture Trustee fails
to receive such written notification from the Issuer by the end of the
third Business Day immediately preceding such Derivative Payment Date, it
shall immediately notify the Issuer of such fact in writing.
On or before each Derivative Payment Date and in accordance with the
written notification received from the Issuer, the Indenture Trustee shall
deposit all moneys received representing Counterparty Derivative Payments
into the Revenue Fund to be applied in accordance with the provisions of
Section 4.03 hereof. The Indenture Trustee shall notify the Issuer on such
Business Day, if (a) the amount received from any Counterparty is not equal
to the amount specified in the written notification of the Issuer, (b) no
amount is received from such Counterparty or (c) the amount received is not
received in immediately available funds.
On or before any Derivative Payment Date with respect to which an
Issuer Derivative Payment is due in accordance with the written
notification received from the Issuer or, with respect to a payment in
respect of an early termination date due from the Issuer pursuant to the
terms of a Derivative Product, the Indenture Trustee shall make payment to
the appropriate Counterparty from moneys in the Revenue Fund of the amount
of the Issuer Derivative Payment specified in such written notification of
the Issuer due on such date by the deposit or wire transfer of immediately
available funds to the credit of the account of such Counterparty specified
in such written notification of the Issuer, but only to the extent such
payment will not result in a deficiency in the amount due on the next
succeeding Payment Date to the holders of any class of Obligations having a
priority equal to or higher than the Derivative Product in respect of which
such Issuer Derivative Payment is due.
If any payment to a Counterparty described in the immediately
preceding paragraph would result in a deficiency in the amounts required to
make payments to the holders of the Obligations referred to in that
paragraph on such Payment Date, then the Indenture Trustee shall delay the
making of such payment to such Counterparty until the first date on which
no deficiency would result from such payment and the Indenture Trustee has
been notified in writing to make such payment.
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Section 3. Until the termination of the BLB Swap in accordance with its
terms and the payment of all amounts due thereunder, Section 4.03(b) of the
Indenture is hereby amended and restated in its entirety to read as set forth in
this Section 3. After the termination of the BLB Swap and the payment of all
amounts due thereunder, the amendments set forth in this Section 3 shall be void
and of no further force and effect.
(b) On the last Business Day of each month, money remaining in the
Revenue Fund shall be used and transferred to other funds or Persons in the
following order of precedence, or as otherwise specified in a Supplemental
Indenture (any money not so transferred or paid to remain in the Revenue
Fund until subsequently applied pursuant to this Section 4.03(b)):
(i) to the Class A Account of the Interest Fund, after giving
effect to any money already on deposit in the Class A Account of the
Interest Fund for such purposes, the amount necessary to pay (a) the
interest payments due in the next succeeding month in respect of each
Series of Senior Notes for which a Payment Date will occur in that
month; provided, however, that if the interest rate on such Series of
Senior Notes is unknown, the amount to be transferred shall be
calculated using the last known interest rate for such Series, (b) the
interest to accrue during the next succeeding month in respect of each
Series of Senior Notes for which a Payment Date will not occur in that
month, and (c) any Issuer Derivative Payments (excluding any
Subordinated Issuer Termination Payments) due in the next succeeding
month in respect of any Derivative Product secured on a parity with
the Senior Notes;
(ii) to the Class A Account of the Principal Fund, after giving
effect to any money already on deposit in the Class A Account of the
Principal Fund for such purpose, the amount necessary to pay the
principal of and premium, if any, on each Series of Senior Notes due
at Stated Maturity in the next succeeding month;
(iii) to the Class B Account of the Interest Fund, after giving
effect to any money already on deposit in the Class B Account of the
Interest Fund for such purposes, the amount necessary to pay (a) the
interest payments due in the next succeeding month in respect of each
Series of Subordinate Notes for which a Payment Date will occur in
that month; provided, however, that if the interest rate on such
Series of Subordinate Notes is unknown, the amount to be transferred
shall be calculated using the last known interest rate for such
Series, (b) the interest to accrue during the next succeeding month in
respect of each Series of Subordinate Notes for which a Payment Date
will not occur in that month, and (c) any Issuer Derivative Payments
(excluding any Subordinated Issuer Termination Payments) due in the
next succeeding month in respect of any Derivative Product secured on
a parity with the Subordinate Notes;
(iv) to the Class B Account of the Principal Fund, after giving
effect to any money already on deposit in the Class B Account of the
Principal Fund for such purpose, the amount necessary to pay the
principal
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of and premium, if any, on any Subordinate Notes due at Stated
Maturity in the next succeeding month;
(v) to the Reserve Fund the amount, if any, required by Section
4.06(d) hereof;
(vi) if the Parity Percentage is not at least equal to the
Required Parity Percentage, to the Class A Account of the Principal
Fund, after giving effect to any money already on deposit in the Class
A Account of the Principal Fund for such purposes, the amount
necessary to pay the principal of and premium, if any, on Senior Notes
for which an interest Payment Date will occur in the next succeeding
month, or if no Senior Notes are Outstanding, to the Class B Account
of the Principal Fund the amount necessary to pay principal of and
premium, if any, on Subordinate Notes for which an interest Payment
Date will occur in the next succeeding month; provided, however, that
during any Revolving Period, at the direction of the Issuer, amounts
remaining in the Revenue Fund after payment of all amounts required by
(i) through (v) of this Section 4.03(b) may be used for the
acquisition or origination of other Student Loans and, provided,
further, at the direction of the Issuer, such excess amounts may also
be used to acquire Add-on Consolidation Loans originated within 180
days of the origination of the related Consolidation Loan;
(vii) to the Class B Account of the Principal Fund, after giving
effect to any money already on deposit in the Class B Account of the
Principal Fund for such purpose, from amounts representing Recoveries
of Principal, the amount necessary to pay principal of and premium, if
any, on Subordinate Notes in respect of which an interest Payment Date
will occur in the next succeeding month to the extent that after such
payment the Senior Parity Percentage shall not be less than the
Required Senior Parity Percentage; otherwise to the Class A Account of
the Principal Fund to pay principal and premium, if any, on Senior
Notes in respect of which an interest Payment Date will occur in the
next succeeding month;
(viii) to the Class A Account of the Interest Fund, after giving
effect to any money already on deposit in the Class A Account of the
Interest Fund for such purpose, the amount necessary to pay interest
accrued on the interest carryover amounts of the Senior Notes and the
interest carryover amounts of the Senior Notes, and to the Class B
Account of the Interest Fund, after giving effect to any money already
on deposit in the Class B Account of the Interest Fund for such
purpose, the amount necessary to pay interest accrued on the interest
carryover amounts of the Subordinate Notes and the interest carryover
amounts of the Subordinate Notes, in that order of priority; provided,
however, on any Payment Date, any such amount shall be allocated first
to any Notes being redeemed on such Payment Date;
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(ix) to the Class A Account of the Interest Fund, after giving
effect to any money already on deposit in the Class A Account of the
Interest Fund for such purposes, the amount necessary to pay any
Subordinated Issuer Termination Payments due in the next succeeding
month in respect of any Derivative Product secured on a parity with
the Senior Notes;
(x) to the Class B Account of the Interest Fund, after giving
effect to any money already on deposit in the Class B Account of the
Interest Fund for such purposes, the amount necessary to pay any
Subordinated Issuer Termination Payments due in the next succeeding
month in respect of any Derivative Product secured on a parity with
the Subordinate Notes; and
(xi) to the Co-Owner Trustee for deposit into the Certificate
Distribution Account (as defined in the Trust Agreement) if after
giving effect to the transfer to the Co-Owner Trustee the Parity
Percentage is at least equal to the Required Parity Percentage and the
Senior Parity Percentage is at least equal to the Required Senior
Parity Percentage; if these parity requirements are not met, then any
remainder shall be retained in the Revenue Fund; provided, however,
that during any period commencing after June 1, 2022, moneys will be
transferred to the Co-Owner Trustee pursuant to this subsection (xi)
only upon receipt of a Rating Confirmation with respect to transfers
during that period, otherwise moneys remaining in the Revenue Fund
after payment of all amounts required by (i) through (x) of this
Section 4.03(b) shall be transferred to the Principal Fund.
All payments of principal on the Notes shall be made by redemption of
the Notes unless otherwise directed in a Supplemental Indenture.
Section 4. Until the termination of the BLB Swap in accordance with its
terms and the payment of all amounts due there under, Sections 4.04(a) and (b)
of the Indenture are hereby amended and restated in their entirety to read as
set forth below in this Section 4. After the termination of the BLB Swap and the
payment of all amounts due thereunder, the amendments set forth in this Section
4 shall be void and of no further force and effect.
(a) On the last Business Day of each month, the Indenture Trustee
shall transfer to the Class A Account of the Interest Fund from the Revenue
Fund amounts necessary to make the transfers required by Section 4.03(b)(i)
hereof. During the next succeeding month, the Indenture Trustee shall use
moneys transferred to the Class A Account of the Interest Fund pursuant to
Section 4.03(b)(i) hereof for the payment, on a parity basis, of interest
due on Senior Notes for which an interest Payment Date will occur during
that month and any Issuer Derivative Payments (excluding Subordinated
Issuer Termination Payments) due during that month on any Derivative
Product secured on a parity with such Senior Notes. Also during that month,
the Indenture Trustee shall use moneys transferred to the Class A Account
of the Interest Fund (i) pursuant to Section 4.03(b)(viii) to pay interest
accrued on the interest carryover amounts of Senior Notes for which an
interest Payment Date will occur during that month and
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the interest carryover amounts of such Senior Notes and (ii) pursuant to
Section 4.03(b)(ix) to pay Subordinated Issuer Termination Payments due
during that month in respect of Derivative Products secured on a parity
with the Senior Notes.
(b) On the last Business Day of each month, the Indenture Trustee
shall transfer to the Class B Account of the Interest Fund from the Revenue
Fund amounts necessary to make the transfers required by Section
4.03(b)(iii) hereof. During the next succeeding month, the Indenture
Trustee shall use moneys transferred to the Class B Account of the Interest
Fund pursuant to Section 4.03(b)(iii) hereof for the payment, on a parity
basis, of interest due on Subordinate Notes for which an interest Payment
Date will occur during that month and any Issuer Derivative Payments
(excluding Subordinated Issuer Termination Payments) due during that month
on any Derivative Product secured on a parity with such Subordinate Notes.
Also during that month, the Indenture Trustee shall use moneys transferred
to the Class B Account of the Interest Fund (i) pursuant to Section
4.03(b)(viii) to pay interest accrued on the interest carryover amounts of
Subordinate Notes for which an interest Payment Date will occur during that
month and the interest carryover amounts of such Subordinate Notes and (ii)
pursuant to Section 4.03(b)(x) to pay Subordinated Issuer Termination
Payments due during that month in respect of Derivative Products secured on
a parity with the Subordinate Notes.
Section 5. Section 4.08 of the Indenture is hereby amended and restated in
its entirety to read as follows:
Transfers from the Revenue Fund to the Co-Owner Trustee may be made in
accordance with Section 4.03(b)(xi) hereof; provided, however, that no
transfer of assets to the Co-Owner Trustee shall be made if there is not on
deposit in the Reserve Fund an amount equal to at least the Reserve Fund
Requirement; and further provided, that no transfer shall be made to the
Co-Owner Trustee unless immediately after taking into account any such
transfer, the Parity Percentage is at least equal to the Required Parity
Percentage and the Senior Parity Percentage is at least equal to the
Required Senior Parity Percentage.
The amounts so transferred to the Co-Owner Trustee shall be
distributed as provided in the Trust Agreement.
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Section 6. Section 5.02 of the Indenture is hereby amended and restated in
its entirety to read as follows:
Subject to Section 5.09 hereof, upon the happening and continuance of
any Event of Default, the Indenture Trustee personally or by its attorneys
or agents may enter into and upon and take possession of such portion of
the Trust Estate as shall be in the custody of others, and all property
comprising the Trust Estate, and each and every part thereof, and exclude
the Issuer and its agents, servants, and employees wholly therefrom, and
have, hold, use, operate, manage, and control the same and each and every
part thereof, and in the name of the Issuer or otherwise, as they shall
deem best, conduct the business thereof and exercise the privileges
pertaining thereto and all the rights and powers of the Issuer and use all
of the then existing Trust Estate for that purpose, and collect and receive
all charges, income and Revenue of the same and of every part thereof, and
after deducting therefrom all expenses incurred hereunder and all other
proper outlays herein authorized, and all payments that may be made as just
and reasonable compensation for its own services, and for the services of
its attorneys, agents, and assistants (and any other amounts due and owing
including amounts due and owing to the Owner Trustee and Co-Owner Trustee),
the Indenture Trustee shall apply the rest of the money received by the
Indenture Trustee as follows:
(a) if the principal of none of the Obligations shall have become
due, first, to the payment of the interest in default on the Senior
Notes and to the payment of all Issuer Derivative Payments (excluding
any Subordinated Issuer Termination Payments) secured on a parity with
the Senior Notes then due, in order of the maturity of the
installments thereof, with interest on the overdue installments
thereof at the same rates, respectively, as were borne by the Senior
Notes on which such interest shall be in default and any such Issuer
Derivative Payments as provided in the ISDA Master Agreement then due,
such payments to be made ratably to the parties entitled thereto
without discrimination or preference, second, to the payment of the
interest in default on the Subordinate Notes and to the payment of all
Issuer Derivative Payments (excluding any Subordinated Issuer
Termination Payments) secured on a parity with the Subordinate Notes
then due, in order of the maturity of the installments of such
interest and any such Issuer Derivative Payments, with interest on the
overdue installments thereof at the same rates, respectively, as were
borne by the Subordinate Notes on which such interest shall be in
default and any such Issuer Derivative Payments then due, such
payments to be made ratably to the parties entitled thereof without
discrimination or preference, third, to the payment of the interest in
default on any other borrowings of the Issuer, if any, secured hereby
and to the payment of all Issuer Derivative Payments (excluding any
Subordinated Issuer Termination Payments) secured on a parity with
such borrowings, if any, then due, in order of the maturity of the
installments of such interest and any such Issuer Derivative Payments,
with interest on the overdue installments thereof at the same rates,
respectively,
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as were borne by such borrowings on which such interest shall be
in default and any such Issuer Derivative Payments then due, such
payments to be made ratably to the parties entitled thereto without
discrimination or preference, and fourth, to make the transfers and
payments specified in Section 4.03 hereof in the order of precedence
specified in that Section, except as may be provided in a Supplemental
Indenture; and
(b) if the principal of any of the Obligations shall have become
due by declaration of acceleration or otherwise, first to the payment
of the interest in default on the Senior Notes and all Issuer
Derivative Payments (excluding any Subordinated Issuer Termination
Payments) secured on a parity with the Senior Notes then due, in the
order of the maturity of the installments thereof, with interest on
overdue installments thereof at the same rates, respectively, as were
borne by the Senior Notes on which such interest shall be in default
and such Issuer Derivative Payments as provided in the ISDA Master
Agreement then due, as the case may be, second, to the payment of the
principal of all Senior Notes then due and any amount owed to a
Counterparty secured on a parity with Senior Obligations under the
ISDA Master Agreement (excluding any Subordinated Issuer Termination
Payments), such payments to be made ratably to the parties entitled
thereto without discrimination or preference, third, to the payment of
the interest in default on the Subordinate Notes and all Issuer
Derivative Payments (excluding any Subordinated Issuer Termination
Payments) secured on a parity with the Subordinate Notes then due, in
the order of the maturity of the installments thereof with interest on
overdue installments thereof at the same rates, respectively, as were
borne by the Subordinate Notes on which such interest shall be in
default and such Issuer Derivative Payments as provided in the ISDA
Master Agreement then due, as the case may be, fourth, to the payment
of the principal of all Subordinate Notes then due and any amount owed
to a Counterparty secured on a parity with Subordinate Obligations
(excluding any Subordinated Issuer Termination Payments) under the
ISDA Master Agreement, such payments to be made ratably to the parties
entitled thereto without discrimination or preference, fifth, to the
payment of the interest in default on all other borrowings of the
Issuer, if any, secured hereby and all Issuer Derivative Payments
(excluding any Subordinated Issuer Termination Payments) secured on a
parity with such borrowings then due, in the order of the maturity of
the installments thereof at the same rates, respectively, as were
borne by such borrowings on which such interest shall be in default
and such Issuer Derivative Payments as provided in the ISDA Master
Agreement then due, as the case may be, sixth, to the payment of the
principal of all other borrowings of the Issuer, if any, secured
hereby then due and any amount owed to a Counterparty secured on a
parity with such borrowings (excluding any Subordinated Issuer
Termination Payments) under the ISDA Master Agreement, such payments
to be made ratably to the parties entitled thereto without
discrimination or preference, and seventh, to make the transfers and
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payments specified in Section 4.03 hereof in the order of precedence
specified in that Section, except as may be provided in a Supplemental
Indenture.
Section 7. The proviso immediately following clause (o) of Section 7.01
of the Indenture is hereby amended and restated in its entirety to read as
follows:
provided however, that nothing in this Section 7.01 shall permit, or
be construed as permitting, (a) without the consent of the Noteholders
of each affected Note and each Derivative Product then Outstanding,
(i) an extension of the maturity date of the principal of or the
interest on any Obligation, or (ii) a reduction in the principal
amount of any Obligation or the rate of interest thereon, or (iii) a
privilege or priority of any Obligation or Obligations over any other
Obligation or Obligations except as otherwise provided herein, or (iv)
a reduction in the aggregate principal amount of the Obligations
required for consent to a Supplemental Indenture, or (v) the creation
of any lien other than a lien ratably securing all of the Obligations
at any time Outstanding hereunder except as otherwise provided herein
or (b) any modification of the trusts, powers, rights, duties,
remedies, immunities and privileges of the Indenture Trustee without
the prior written approval of the Indenture Trustee, which approval
shall be evidenced by execution of a Supplemental Indenture.
Section 8. The provisions of the Indenture are hereby ratified, approved
and confirmed, except as otherwise expressly modified by this Supplemental
Indenture.
[remainder of page intentionally left blank; signature page follows]
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In Witness Whereof, the Issuer has caused this Supplemental Indenture to be
executed in its name and on its behalf by the Co-Owner Trustee; the Indenture
Trustee, to evidence its acceptance of the trusts hereby created, has caused
this Supplemental Indenture to be executed in its name and behalf; and the Trust
Eligible Lender Trustee, to evidence its acceptance of the trusts hereby
created, has caused this Supplemental Indenture to be executed in its name and
behalf, all in multiple counterparts, each of which shall be deemed an original,
and the Issuer, the Indenture Trustee and the Trust Eligible Lender Trustee have
caused this Supplemental Indenture to be dated as of the date herein above first
shown, although actually executed on the dates shown in the acknowledgments
hereafter appearing.
Education Funding Capital Trust-I,
By Fifth Third Bank, not in its
individual capacity, but solely as
Co-Owner Trustee on behalf of the
Trust
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: AVP & Sr. Trust Officer
Fifth Third Bank, not in its
individual capacity but solely as
Indenture Trustee
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: AVP & Sr. Trust Officer
Fifth Third Bank, not in its
individual capacity but solely as
Trust Eligible Lender Trustee
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: AVP & Sr. Trust Officer
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